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SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



|[X] |  |  | QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|--- |  |  | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2002

or



|[   ] |  |  | TRANSITION REPORT PURSUANT TO
SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|----- |  |  | ----------------------------------------------------------------------------------------

For the transition period from      to

Commission File No. 1-106

LYNCH CORPORATION

---

(Exact name of Registrant as specified in its charter)

|                                                               |  |                                    
|-------------------------------------------------------------- |  | -----------------------------------
|Indiana                                                        |  | 38-1799862                         
|                                                               |  |                                    
|(State or other jurisdiction of
incorporation or organization) |  | I.R.S. Employer
Identification No.)
|                                                               |  |                                    
|50 Kennedy Plaza, Suite 1250,
Providence, Rhode Island         |  | 02903                              
|                                                               |  |                                    
|(Address of principal executive offices)                       |  | (Zip Code)                         

(401) 453-2007

---



Registrants telephone number, including area code

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes   X                 No
         

Indicate the number of shares outstanding of each of the Registrants classes
of Common Stock, as of the latest practical date.

|                           |  |                           
|-------------------------- |  | --------------------------
|Class                      |  | Outstanding at May 1, 2002
|                           |  |                           
|Common Stock, no par value |  | 1,497,883                 



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TABLE OF CONTENTS



|                                                                                                                        |                                                                                                |  |  |  |  |  |  | 
|----------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                                                                                                                        | Part 1  FINANCIAL INFORMATION - Item 1  Financial Statements                                
|LYNCH CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands except share amounts)           
|                                                                                                                        | PART I  FINANCIAL INFORMATION Item 1  Financial Statements                                  
|LYNCH CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, except share amounts)
|LYNCH CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (In Thousands)                       
|                                                                                                                        | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                          
|                                                                                                                        | Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|                                                                                                                        | Item 3. Quantitative and Qualitative Disclosure About Market Risk                             
|                                                                                                                        | PART II. OTHER INFORMATION                                                                    
|                                                                                                                        | Item 4. Submission of Matters to a Vote of Security Holders                                   
|                                                                                                                        | Item 6. Exhibits and Reports on Form 8-K                                                      
|SIGNATURES                                                                                                             
|Ex-3.(c)  Articles of Amend. of the Restated...                                                                        



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##### Table of Contents



INDEX

LYNCH CORPORATION AND SUBSIDIARIES

|                                                                                               |                                                       |                                             
|---------------------------------------------------------------------------------------------- | ----------------------------------------------------- | --------------------------------------------
|PART I.  FINANCIAL INFORMATION                                                                
|                                                                                               |                                                       |                                             
|Item 1.  Financial Statements (Unaudited)                                                     
|                                                                                               |                                                       |                                             
|                                                                                               | Condensed Consolidated Balance Sheets:               
|                                                                                               |                                                       |                                             
|                                                                                               |                                                       | - March 31, 2002                            
|                                                                                               |                                                       | - December 31, 2001                         
|                                                                                               |                                                       |                                             
|                                                                                               | Condensed Consolidated Statements of Operations:     
|                                                                                               |                                                       |                                             
|                                                                                               |                                                       | - Three months ended March 31, 2002 and 2001
|                                                                                               |                                                       |                                             
|                                                                                               | Condensed Consolidated Statements of Cash Flows:     
|                                                                                               |                                                       |                                             
|                                                                                               |                                                       | - Three months ended March 31, 2002 and 2001
|                                                                                               |                                                       |                                             
|                                                                                               | Notes to Condensed Consolidated Financial Statements:
|                                                                                               |                                                       |                                             
|Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                                                               |                                                       |                                             
|Item 3.  Quantitative and Qualitative Disclosure About Market Risk                            
|                                                                                               |                                                       |                                             
|PART II.  OTHER INFORMATION                                                                   
|                                                                                               |                                                       |                                             
|Item 4.  Submission of Matters to a Vote of Security Holders                                  
|                                                                                               |                                                       |                                             
|Item 6.  Exhibits and Reports on Form 8-K                                                     
|                                                                                               |                                                       |                                             
|SIGNATURES                                                                                    

2



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##### Table of Contents






Part 1  FINANCIAL INFORMATION -
Item 1  Financial Statements




LYNCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)

|                                       |                                                                                                                          |                                                              |        |             |         |              |        |         |         |  
|-------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------ | ------ | ----------- | ------- | ------------ | ------ | ------- | ------- | -
|                                       |                                                                                                                          |                                                              |        | March 31,   |         | December 31,
|                                       |                                                                                                                          |                                                              |        | 2002        |         | 2001        
|                                       |                                                                                                                          |                                                              |        | (unaudited) |         | (A)         
|                                       |                                                                                                                          |                                                              |        |             |         |             
|ASSETS                                 |                                                                                                                          |                                                              |        |             |         |              |        |        
|CURRENT ASSETS                         |                                                                                                                          |                                                              |        |             |         |              |        |        
|                                       |                                                                                                                          | Cash and cash equivalents                                    |        | $           | 2,312   |              |        | $       | 4,247   |  
|                                       |                                                                                                                          | Restricted cash                                              |        |             | 4,943   |              |        |         | 4,703   |  
|                                       |                                                                                                                          | Investments-marketable securities                            |        |             | 590     |              |        |         |        |  
|                                       |                                                                                                                          | Trade accounts receivables, less allowances of $117 and $118 |        |             | 8,732   |              |        |         | 9,818   |  
|                                       |                                                                                                                          | Inventories                                                  |        |             | 5,661   |              |        |         | 5,260   |  
|                                       |                                                                                                                          | Deferred income taxes                                        |        |             | 988     |              |        |         | 988     |  
|                                       |                                                                                                                          | Prepaid expense                                              |        |             | 1,158   |              |        |         | 836     |  
|                                       |                                                                                                                          |                                                              |        |             |         |              |        |        
|                                       |                                                                                                                          | TOTAL CURRENT ASSETS                                         |        |             | 24,384  |              |        |         | 25,852  |  
|                                       |                                                                                                                          |                                                              |        |             |         |              |        |        
|PROPERTY, PLANT AND EQUIPMENT          |                                                                                                                          |                                                              |        |             |         |              |        |        
|                                       |                                                                                                                          | Land                                                         |        |             | 291     |              |        |         | 291     |  
|                                       |                                                                                                                          | Buildings and improvements                                   |        |             | 4,158   |              |        |         | 4,158   |  
|                                       |                                                                                                                          | Machinery and equipment                                      |        |             | 11,985  |              |        |         | 11,949  |  
|                                       |                                                                                                                          |                                                              |        |             |         |              |        |        
|                                       |                                                                                                                          |                                                              | 16,434 |             |         |              | 16,398 |        
|                                       |                                                                                                                          | Less: accumulated depreciation                               |        |             | (11,201 | )            |        |         | (10,942 | )
|                                       |                                                                                                                          |                                                              |        |             |         |              |        |        
|                                       |                                                                                                                          |                                                              | 5,233  |             |         |              | 5,456  |        
|                                       |                                                                                                                          |                                                              |        |             |         |              |        |        
|OTHER ASSETS                           |                                                                                                                          |                                                              | 487    |             |         |              | 537    |        
|                                       |                                                                                                                          |                                                              |        |             |         |              |        |        
|                                       | TOTAL ASSETS                                                                                                             |                                                              | $      | 30,104      |         |              | $      | 31,845  |        
|                                       |                                                                                                                          |                                                              |        |             |         |              |        |        
|LIABILITIES AND SHAREHOLDERS DEFICIT  |                                                                                                                          |                                                              |        |             |         |              |        |        
|CURRENT LIABILITIES:                   |                                                                                                                          |                                                              |        |             |         |              |        |        
|                                       |                                                                                                                          | Notes payable to banks                                       |        | $           | 1,331   |              |        | $       | 1,086   |  
|                                       |                                                                                                                          | Trade accounts payable                                       |        |             | 1,726   |              |        |         | 1,717   |  
|                                       |                                                                                                                          | Accrued liabilities                                          |        |             | 6,010   |              |        |         | 6,196   |  
|                                       |                                                                                                                          | Customer advances                                            |        |             | 5,551   |              |        |         | 6,781   |  
|                                       |                                                                                                                          | Current maturities of long-term debt                         |        |             | 405     |              |        |         | 521     |  
|                                       |                                                                                                                          |                                                              |        |             |         |              |        |        
|                                       |                                                                                                                          | TOTAL CURRENT LIABILITIES                                    |        |             | 15,023  |              |        |         | 16,301  |  
|                                       |                                                                                                                          |                                                              |        |             |         |              |        |        
|LONG TERM DEBT                         |                                                                                                                          |                                                              | 1,549  |             |         |              | 1,678  |        
|DEFERRED INCOME TAXES                  |                                                                                                                          |                                                              | 578    |             |         |              | 578    |        
|OTHER LONG TERM LIABILITIES            |                                                                                                                          |                                                              | 1,245  |             |         |              | 1,319  |        
|                                       |                                                                                                                          |                                                              |        |             |         |              |        |        
|                                       |                                                                                                                          | TOTAL LIABILITIES                                            |        |             | 18,395  |              |        |         | 19,876  |  
|                                       |                                                                                                                          |                                                              |        |             |         |              |        |        
|LOSS IN EXCESS OF INVESTMENT           |                                                                                                                          |                                                              | 19,420 |             |         |              | 19,420 |        
|                                       |                                                                                                                          |                                                              |        |             |         |              |        |        
|COMMITMENTS AND CONTINGENCIES (NOTE L) |                                                                                                                          |                                                              |        |             |         |              |        |        
|                                       |                                                                                                                          |                                                              |        |             |         |              |        |        
|SHAREHOLDERS DEFICIT                  |                                                                                                                          |                                                              |        |             |         |              |        |        
|                                       | COMMON STOCK NO PAR OR STATED VALUE - 10,000,000 SHARES
AUTHORIZED 1,513,191 SHARES ISSUED; 1,497,883 SHARES OUTSTANDING |                                                              |        | 5,139       |         |              |        | 5,139   |        
|                                       | ADDITIONAL PAID-IN CAPITAL                                                                                               |                                                              |        | 10,403      |         |              |        | 10,403  |        
|                                       | ACCUMULATED DEFICIT                                                                                                      |                                                              |        | (22,825     | )       |              |        | (22,533 | )      
|                                       | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)                                                                            |                                                              |        | 30          |         |              |        | (2      | )      
|                                       | TREASURY STOCK OF 15,308 SHARES, AT COST                                                                                 |                                                              |        | (458        | )       |              |        | (458    | )      
|                                       |                                                                                                                          |                                                              |        |             |         |              |        |        
|                                       | TOTAL SHAREHOLDERS DEFICIT                                                                                              |                                                              |        | (7,711      | )       |              |        | (7,451  | )      
|                                       |                                                                                                                          |                                                              |        |             |         |              |        |        
|                                       | TOTAL LIABILITIES AND SHAREHOLDERS DEFICIT                                                                              |                                                              | $      | 30,104      |         |              | $      | 31,845  |        
|                                       |                                                                                                                          |                                                              |        |             |         |              |        |        



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|(A) |  | The Balance Sheet at December 31, 2001 has been derived from the audited
financial statements at that date, but does not include all of the
information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See accompanying notes

Effective September 30, 2001, the Companys ownership and voting interest
of Spinnaker Industries, Inc. was reduced to 41.8% and 49.5%, respectively, due
to the disposition of shares of Spinnaker. As a result, effective September
30, 2001, the Company relinquished control of Spinnaker and has deconsolidated
Spinnaker and prospectively accounts for its ownership of Spinnaker using the
equity method of accounting. See Note B.

3



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##### Table of Contents






PART I  FINANCIAL
INFORMATION
Item 1  Financial Statements




LYNCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except share amounts)

|                                                |                                            |   |                    |       |      |   |           |        |  
|----------------------------------------------- | ------------------------------------------ | - | ------------------ | ----- | ---- | - | --------- | ------ | -
|                                                |                                            |   | Three Months Ended
|                                                |                                            |   | March 31          
|                                                |                                            |   |                   
|                                                |                                            |   | 2002               |       | 2001
|                                                |                                            |   |                    |       |     
|SALES AND REVENUES                              |                                            | $ | 7,003              |       |      | $ | 53,548    |       
|                                                |                                            |   |                    |       |      |   |           |       
|Cost and expenses:                              |                                            |   |                    |       |      |   |           |       
|                                                | Manufacturing cost of sales                |   |                    | 4,854 |      |   |           | 48,553 |  
|                                                | Selling and administrative                 |   |                    | 2,549 |      |   |           | 5,604  |  
|                                                | Asset impairment and restructuring charges |   |                    |      |      |   |           | 36,484 |  
|                                                |                                            |   |                    |       |      |   |           |       
|OPERATING LOSS                                  |                                            |   | (400               | )     |      |   | (37,093   | )     
|                                                |                                            |   |                    |       |      |   |           |       
|Other income (expense):                         |                                            |   |                    |       |      |   |           |       
|                                                | Investment Income                          |   |                    | 39    |      |   |           | 179    |  
|                                                | Interest expense                           |   |                    | (40   | )    |   |           | (2,704 | )
|                                                |                                            |   |                    |       |      |   |           |       
|                                                |                                            |   | (1                 | )     |      |   | (2,525    | )     
|                                                |                                            |   |                    |       |      |   |           |       
|LOSS BEFORE INCOME TAXES AND MINORITY INTERESTS |                                            |   | (401               | )     |      |   | (39,618   | )     
|                                                |                                            |   |                    |       |      |   |           |       
|(Provision) benefit from income taxes           |                                            |   | 109                |       |      |   | (570      | )     
|Minority interests                              |                                            |   |                   |       |      |   | 4,118     |       
|                                                |                                            |   |                    |       |      |   |           |       
|NET LOSS                                        |                                            |   | ($292              | )     |      |   | ($36,070  | )     
|                                                |                                            |   |                    |       |      |   |           |       
|Weighted average shares outstanding             |                                            |   | 1,497,900          |       |      |   | 1,510,200 |       
|                                                |                                            |   |                    |       |      |   |           |       
|BASIC AND DILUTED LOSS PER SHARE:               |                                            | $ | (0.19              | )     |      | $ | (23.88    | )     
|                                                |                                            |   |                    |       |      |   |           |       

See accompanying notes

Effective September 30, 2001, the Companys ownership and voting interest of Spinnaker Industries Inc.
was reduced to 41.8% and 49.5% respectively, due to the disposition of shares of Spinnaker. As a result,
effective September 30, 2001, the Company relinquished control of Spinnaker and has deconsolidated
Spinnaker and prospectively accounts for its ownership of Spinnaker using the equity method of accounting.
See Note B.

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##### Table of Contents



PART I  FINANCIAL INFORMATION
ITEM 1  Financial Statements




LYNCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)

|                                                                            |                                          |   |                    |        |      |   |         |        |  
|--------------------------------------------------------------------------- | ---------------------------------------- | - | ------------------ | ------ | ---- | - | ------- | ------ | -
|                                                                            |                                          |   | Three Months Ended
|                                                                            |                                          |   | March 31,         
|                                                                            |                                          |   |                   
|                                                                            |                                          |   | 2002               |        | 2001
|                                                                            |                                          |   |                    |        |     
|OPERATING ACTIVITIES                                                        |                                          |   |                    |        |      |   |         |       
|Net loss                                                                    |                                          | $ | (292               | )      |      | $ | (36,070 | )     
|Adjustments to reconcile net loss to net cash used in operating activities: |                                          |   |                    |        |      |   |         |       
|Depreciation                                                                |                                          |   | 259                |        |      |   | 1,426   |       
|Amortization of goodwill and other assets                                   |                                          |   | 50                 |        |      |   | 262     |       
|Amortization of deferred financing charges                                  |                                          |   |                   |        |      |   | 225     |       
|Impairment of assets                                                        |                                          |   |                   |        |      |   | 36,053  |       
|Deferred taxes                                                              |                                          |   |                   |        |      |   | 321     |       
|Minority interests                                                          |                                          |   |                   |        |      |   | (4,118  | )     
|Changes in operating assets and liabilities:                                |                                          |   |                    |        |      |   |         |       
|                                                                            | Receivables                              |   |                    | 1,086  |      |   |         | 4,018  |  
|                                                                            | Inventories                              |   |                    | (401   | )    |   |         | 699    |  
|                                                                            | Accounts payable and accrued liabilities |   |                    | (2,065 | )    |   |         | (3,368 | )
|                                                                            | Other                                    |   |                    | (36    | )    |   |         | (309   | )
|                                                                            |                                          |   |                    |        |      |   |         |       
|Net cash used in operating activities                                       |                                          |   | (1,399             | )      |      |   | (861    | )     
|                                                                            |                                          |   |                    |        |      |   |         |       
|INVESTING ACTIVITIES                                                        |                                          |   |                    |        |      |   |         |       
|Capital expenditures                                                        |                                          |   | (36                | )      |      |   | (561    | )     
|Restricted cash                                                             |                                          |   | (240               | )      |      |   | 604     |       
|Purchases of available-for-sale securities                                  |                                          |   | (260               | )      |      |   |        |       
|Other                                                                       |                                          |   |                   |        |      |   | 22      |       
|                                                                            |                                          |   |                    |        |      |   |         |       
|Cash provided by (used in) investing activities                             |                                          |   | (536               | )      |      |   | 65      |       
|                                                                            |                                          |   |                    |        |      |   |         |       
|FINANCING ACTIVITIES                                                        |                                          |   |                    |        |      |   |         |       
|Net borrowings of notes payable                                             |                                          |   | 245                |        |      |   | 2,352   |       
|Repayment of long-term debt                                                 |                                          |   | (245               | )      |      |   | (116    | )     
|Proceeds of long-term debt                                                  |                                          |   |                   |        |      |   | 289     |       
|Other                                                                       |                                          |   |                   |        |      |   | 107     |       
|                                                                            |                                          |   |                    |        |      |   |         |       
|Cash provided by financing activities                                       |                                          |   |                   |        |      |   | 2,632   |       
|                                                                            |                                          |   |                    |        |      |   |         |       
|Increase (decrease) in cash and cash equivalents                            |                                          |   | (1,935             | )      |      |   | 1,836   |       
|Cash and cash equivalents at beginning of period                            |                                          |   | 4,247              |        |      |   | 10,543  |       
|                                                                            |                                          |   |                    |        |      |   |         |       
|Cash and cash equivalents at end of period                                  |                                          | $ | 2,312              |        |      | $ | 12,379  |       
|                                                                            |                                          |   |                    |        |      |   |         |       

See accompanying notes

On September 30, 2001, the Companys ownership and voting interest of
Spinnaker Industries, Inc. was reduced to 41.8% and 49.5%, respectively, due to
the disposition of shares of Spinnaker. As a result, effective September 30,
2001, the Company relinquished control of Spinnaker and has deconsolidated
Spinnaker and will prospectively account for its ownership of Spinnaker using
the equity method of accounting. See Note B.

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##### Table of Contents






NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A. Subsidiaries of the Registrant

As of March 31, 2002, the Subsidiaries of the Registrant are as follows:

|                                        |                                         |                         |                                   |               |       |               |              
|--------------------------------------- | --------------------------------------- | ----------------------- | --------------------------------- | ------------- | ----- | ------------- | -------------
|Subsidiary                              |                                         | Owned By Lynch         
|                                        |                                         |                        
|Lynch Display Technologies, Inc.        |                                         |                         | 100.0                             | %            
|Lynch Systems, Inc.                     |                                         |                         | 100.0                             | %            
|                                        | Lynch International Holding Corporation |                         |                                   | 100.0         | %    
|                                        | Lynch-AMAV LLC                          |                         |                                   | 75.0          | %    
|                                        | M-tron Industries, Inc.                 |                         |                                   | 100.0         | %    
|                                        |                                         | M-tron Industries, Ltd. |                                   |               | 100.0 | %            
|Spinnaker Industries, Inc. (see Note B) |                                         |                         | 41.8                              | %(O)/49.5%(V)
|                                        |                                         | Entoleter, Inc.         |                                   |               | 41.8  | %(O)/49.5%(V)
|                                        |                                         | Spinnaker Coating, Inc. |                                   |               | 41.8  | %(O)/49.5%(V)
|                                        |                                         |                         | Spinnaker Coating-Maine, Inc.     |               |       | 41.8          | %(O)/49.5%(V)
|                                        |                                         |                         | Spinnaker Electrical Tape Company |               |       | 41.8          | %(O)/49.5%(V)



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| |  | Notes: (O)=Percentage of equity ownership; (V)=Percentage voting control.
| |  | -------------------------------------------------------------------------

B. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three month
period ended March 31, 2002 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2002.

The balance sheet at December 31, 2001 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.

For further information, refer to the consolidated financial statements
and footnotes thereto included in the Registrant Company and Subsidiaries
annual report on Form 10-K for the year ended December 31, 2001.

Prior to September 30, 2001, the Company owned 47.6% of the equity of
Spinnaker Industries, Inc. (60.4% voting control), an entity engaged in the
manufacture of adhesive-backed material; as such, under accounting principles
generally accepted in the United States, Spinnaker was a consolidated entity
and Lynch (the Company) was required to record all of the losses of Spinnaker
since the non-Company interests were not required to absorb their share of the
losses (52.4%) after their investment was fully absorbed by losses (which
occurred in the first quarter of 2001).

Effective September 30, 2001, the Company donated 430,000 shares of
Spinnaker Class A common stock to a university on whose board several of the
Companys executives serve as Trustees, thereby relinquishing control of such
securities. This resulted in the reduction of the Companys ownership and
voting interests in Spinnaker to 41.8% and 49.5%, respectively. As a result,
effective September 30, 2001, the Company deconsolidated Spinnaker and
prospectively accounts for its ownership of Spinnaker using the equity method
of accounting.

Accordingly, the Companys first quarter 2002 results of operations do not
include the operating results of Spinnaker and the balance sheet at March 31,
2002 and December 31, 2001 does not contain the assets and liabilities of
Spinnaker, due to the deconsolidation. This deconsolidation resulted in a
non-cash gain of $27,406,000 being recorded on September 30, 2001 to reduce the
Companys negative investment in Spinnaker to $19,420,000, which represents the
Companys interest in Spinnakers accumulated deficit at the date of
deconsolidation. This remaining interest represents losses in excess of
investment, which has been recorded as a deferred credit on the Companys
balance sheet. The Company will not record any additional losses from
Spinnaker as the company has no further obligations to Spinnaker.

6



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##### Table of Contents



On March 28, 2002, Spinnaker Industries (excluding Entoleter) was acquired
by S P Acquisition LLC (an entity of WR Capital Partners) for $25.8 million.
On March 26, 2002, an auction was held with a subsequent hearing on March 28,
2002 for the Bankruptcy Court which approved the sale of Entoleter to Welton,
LLC for approximately $0.9 million plus certain assumed obligations.

In each case, no return to equity holders is anticipated. Therefore, as a
result, the Company anticipates eliminating its remaining interest in Spinnaker
and its subsidiaries upon conclusion of the bankruptcy proceedings expected to
occur in the second quarter of 2002. At that time, the $19,420,000 loss in
excess of investment on the Companys March 31, 2002 balance sheet will become
a non-cash income item and increase shareholders equity. If this event would
have occurred on March 31, 2002, the Companys pro-forma equity would have been
$11,709,000, not the reported deficit amount of ($7,711,000).

C. Adoption of Accounting Pronouncements

The company does not have any indefinite-lived intangible assets;
accordingly, the adoption of FAS 142 had no material impact during the first
quarter.

D. Investments

The following is a summary of available for-sale securities held by the
Company (in Thousands):

|                              |  |      |     |       |  |            |    |            |  |           |   |  |  |   |     | 
|----------------------------- |  | ---- | --- | ----- |  | ---------- | -- | ---------- |  | --------- | - |  |  | - | --- | 
|                              |  |      |     |       |  | Gross      |    | Gross      |  | Estimated
|                              |  |      |     |       |  | Unrealized |    | Unrealized |  | Fair     
|March 31, 2001                |  | Cost |     | Gains |  | Losses     |    | Value     
|                              |  |      |     |       |  |            |    |           
|Equity Securities             |  | $    | 558 |       |  | $          | 32 |            |  |           |  |  |  | $ | 590 | 
|                              |  |      |     |       |  |            |    |            |  |           |   |  |  |   |     | 
|Total included in Investments |  |      |     |       |  |            |    |            |  |           |   |  |  | $ | 590 | 
|                              |  |      |     |       |  |            |    |            |  |           |   |  |  |   |     | 

E. Inventories

Inventories are stated at the lower of cost or market value. At March 31,
2002, inventories were valued by two methods: last-in, first-out (LIFO)  60%,
and first-in, first-out (FIFO)  40%. At December 31, 2001, inventories were
valued by the same two methods: LIFO  70%, and FIFO -30%.

|                |                   |   |                |       |              |   |       |       | 
|--------------- | ----------------- | - | -------------- | ----- | ------------ | - | ----- | ----- | 
|                |                   |   | March 31,      |       | December 31,
|                |                   |   | 2002           |       | 2001        
|                |                   |   |                |       |             
|                |                   |   | (In Thousands)
|Raw materials   |                   | $ | 1,675          |       |              | $ | 1,844 |      
|Work in process |                   |   | 2,705          |       |              |   | 2,003 |      
|Finished goods  |                   |   | 1,281          |       |              |   | 1,413 |      
|                |                   |   |                |       |              |   |       |      
|                | Total Inventories |   | $              | 5,661 |              |   | $     | 5,260 | 
|                |                   |   |                |       |              |   |       |      

Current costs exceed LIFO value of inventories by $1,009,000 and $991,000
respectively at March 31, 2002 and December 31, 2001.

F. Indebtedness

Lynch Systems, Inc. and M-tron Industries, Inc. maintain their own credit
facilities that are not guaranteed by the parent company.

In general, the credit facilities are secured by property, plant and
equipment, inventory, receivables and common stock of certain subsidiaries and
contain certain covenants restricting distributions to the Company.

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Notes payable to banks and long-term debt consists of:

|                                                                                             |  |                |       |              |  |   |       |  
|-------------------------------------------------------------------------------------------- |  | -------------- | ----- | ------------ |  | - | ----- | -
|                                                                                             |  | March 31,      |       | December 31,
|                                                                                             |  |                |       |             
|                                                                                             |  | 2002           |       | 2001        
|                                                                                             |  |                |       |             
|                                                                                             |  | (In Thousands)
|Notes payable:                                                                               |  |                |       |              |  |   |       |  
|M-tron bank revolving loan at variable interest rates (4.5% at March 31, 2002), due May 2002 |  | $              | 1,331 |              |  | $ | 1,086 |  
|                                                                                             |  |                |       |              |  |   |       |  
|Long-term debt:                                                                              |  |                |       |              |  |   |       |  
|M-tron term loan at variable interest rates (5.0% at March 31, 2002), due September 2004     |  | $              | 1,121 |              |  | $ | 1,259 |  
|Lynch Systems term loan at a fixed interest rate of 8.0%, due August 2003                    |  |                | 600   |              |  |   | 607   |  
|Other debt at a fixed rate of 8.0%                                                           |  |                | 233   |              |  |   | 333   |  
|                                                                                             |  |                |       |              |  |   |       |  
|                                                                                             |  |                | 1,954 |              |  |   | 2,199 |  
|Current maturities                                                                           |  |                | (405  | )            |  |   | (521  | )
|                                                                                             |  |                |       |              |  |   |       |  
|                                                                                             |  | $              | 1,549 |              |  | $ | 1,678 |  
|                                                                                             |  |                |       |              |  |   |       |  

G. Earnings Per Share and Stockholders Equity

The Companys basic and diluted earnings per share are equivalent as the
Company has no dilutive securities.

On December 10, 2001, the Board of Directors approved, subject to
shareholder approval at the May 2002 Annual Meeting, the 2001 Equity Incentive
Plan and the issuance of up to 300,000 options to purchase shares of Company
common stock to certain employees of the Company, of which 228,000 options were
granted (subject to shareholder approval) at $17.50 per share on December 10,
2001. As the grants required shareholder approval, they are not considered
issued until the approval is received. As a result, the Company may be
required to record a non-cash charge associated with these options if the
market price of the Companys stock exceeds $17.50 at the approval date. If
approved, 180,000 of these options would be fully vested, with the remaining
options vesting quarterly over the next three years. (See Footnote M.)

H. Other Comprehensive Loss

Total comprehensive loss was $260,000 and $36,070,000 for the three
months ended 3/31/02 and 3/31/01 respectively, including other comprehensive
income of $32,000 in the first quarter of 2002 resulting from gains on available for sale securities.

I. Segment Information

The Company has four reportable business segments. The largest is
Spinnaker Coatings adhesive backed label stock for labels and related
applications. The second largest segment is Lynch Systems glass manufacturing
equipment business. Frequency control devices (quartz crystals and
oscillators) manufactured and sold by M-tron is the third segment. Entoleter
(subsidiary of Spinnaker Industries, Inc.) manufactures and sells industrial
process equipment and is the fourth segment. Spinnaker Coating and Entoleter
results are shown only for the three month period ending March 31, 2001
pursuant to the deconsolidation of Spinnaker on September 30, 2001 (see Note
B). All four businesses are located domestically.

EBITDA (after corporate allocation) is equal to operating profit before
interest, taxes, depreciation, amortization, and non-cash restructuring
charges. EBITDA is presented because it is a widely accepted financial
indicator of value and ability to incur and service debt. EBITDA is not a
substitute for operating income or cash flows from operating activities in
accordance with generally accepted accounting principles.

Operating profit (loss) is equal to revenues less operating expenses,
unallocated general corporate expenses, and restructuring charges. The Company
allocates a portion of its general corporate expenses to its operation
segments. Such allocation was $50,000 and $75,000 in the first quarter of 2002
and 2001 respectively. Identifiable assets of each industry segment are the
assets used by the segment in its operations excluding general corporate
assets. General corporate assets are principally cash and cash equivalents,
short-term investments and certain other investments and receivables.

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I. Segment Information (continued)

|                                    |                                  |  |                    |       |      |  |   |         |  
|----------------------------------- | -------------------------------- |  | ------------------ | ----- | ---- |  | - | ------- | -
|                                    |                                  |  | Three Months Ended
|                                    |                                  |  | March 31          
|                                    |                                  |  |                   
|                                    |                                  |  | 2002               |       | 2001
|                                    |                                  |  |                    |       |     
|                                    |                                  |  | (In Thousands)    
|Revenues                            |                                  |  |                    |       |      |  |   |        
|                                    | Adhesive-backed label stock      |  | $                  |      |      |  | $ | 37,133  |  
|                                    | Glass manufacturing equipment    |  |                    | 4,315 |      |  |   | 5,546   |  
|                                    | Frequency control devices        |  |                    | 2,688 |      |  |   | 10,042  |  
|                                    | Industrial process equipment     |  |                    |      |      |  |   | 827     |  
|                                    |                                  |  |                    |       |      |  |   |        
|                                    | Consolidated Total               |  | $                  | 7,003 |      |  | $ | 53,548  |  
|                                    |                                  |  |                    |       |      |  |   |        
|EBITDA (after corporate allocation) |                                  |  |                    |       |      |  |   |        
|                                    | Adhesive-backed label stock      |  |                    |      |      |  |   | (258    | )
|                                    | Glass manufacturing equipment    |  |                    | 821   |      |  |   | 1,107   |  
|                                    | Frequency control devices        |  |                    | (635  | )    |  |   | 973     |  
|                                    | Industrial process equipment     |  |                    |      |      |  |   | (107    | )
|                                    | Corporate manufacturing expense  |  |                    |      |      |  |   | (325    | )
|                                    |                                  |  |                    |       |      |  |   |        
|                                    | Total manufacturing              |  |                    | 186   |      |  |   | 1,390   |  
|                                    | Corporate expenses, net          |  |                    | (277  | )    |  |   | (311    | )
|                                    | Restructuring charge  Spinnaker |  |                    |      |      |  |   | (431    | )
|                                    |                                  |  |                    |       |      |  |   |        
|                                    | Consolidated Total               |  | $                  | (91   | )    |  | $ | 648     |  
|                                    |                                  |  |                    |       |      |  |   |        
|Operating Profit                    |                                  |  |                    |       |      |  |   |        
|                                    | Adhesive-backed label stock      |  | $                  |      |      |  | $ | (1,576  | )
|                                    | Glass manufacturing equipment    |  |                    | 726   |      |  |   | 1,003   |  
|                                    | Frequency control devices        |  |                    | (799  | )    |  |   | 792     |  
|                                    | Industrial process equipment     |  |                    |      |      |  |   | (140    | )
|                                    | Corporate manufacturing expense  |  |                    |      |      |  |   | (300    | )
|                                    |                                  |  |                    |       |      |  |   |        
|                                    | Total manufacturing              |  | $                  | (73   | )    |  | $ | (221    | )
|                                    | Unallocated Corporate expenses   |  |                    | (327  | )    |  |   | (388    | )
|                                    | Restructuring charge  Spinnaker |  |                    |      |      |  |   | (36,484 | )
|                                    |                                  |  |                    |       |      |  |   |        
|                                    | Consolidated Total               |  | $                  | (400  | )    |  | $ | (37,093 | )
|                                    |                                  |  |                    |       |      |  |   |        
|Depreciation and Amortization       |                                  |  |                    |       |      |  |   |        
|                                    | Adhesive-backed label stock      |  | $                  |      |      |  | $ | 1,318   |  
|                                    | Glass manufacturing equipment    |  |                    | 120   |      |  |   | 129     |  
|                                    | Frequency control devices        |  |                    | 189   |      |  |   | 206     |  
|                                    | Industrial process equipment     |  |                    |      |      |  |   | 33      |  
|                                    | Corporate manufacturing expenses |  |                    |      |      |  |   | 2       |  
|                                    |                                  |  |                    |       |      |  |   |        
|                                    | Consolidated Total               |  | $                  | 309   |      |  | $ | 1,688   |  
|                                    |                                  |  |                    |       |      |  |   |        
|Capital expenditures                |                                  |  |                    |       |      |  |   |        
|                                    | Adhesive-backed label stock      |  | $                  |      |      |  | $ | 200     |  
|                                    | Glass manufacturing equipment    |  |                    | 9     |      |  |   | 53      |  
|                                    | Frequency control devices        |  |                    | 27    |      |  |   | 308     |  
|                                    | Industrial process equipment     |  |                    |      |      |  |   |        |  
|                                    |                                  |  |                    |       |      |  |   |        
|                                    | Consolidated Total               |  | $                  | 36    |      |  | $ | 561     |  
|                                    |                                  |  |                    |       |      |  |   |        

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I. Segment Information (continued)

|                                             |                                                 |   |                    |        |      |   |         |         |  
|-------------------------------------------- | ----------------------------------------------- | - | ------------------ | ------ | ---- | - | ------- | ------- | -
|                                             |                                                 |   | Three Months Ended
|                                             |                                                 |   | March 31          
|                                             |                                                 |   |                   
|                                             |                                                 |   | 2002               |        | 2001
|                                             |                                                 |   |                    |        |     
|                                             |                                                 |   | (In Thousands)    
|Total Assets                                 |                                                 |   |                    |        |      |   |         |        
|                                             | Adhesive-backed label stock                     |   | $                  |       |      |   | $       | 77,838  |  
|                                             | Glass manufacturing equipment                   |   |                    | 21,238 |      |   |         | 14,828  |  
|                                             | Frequency control devices                       |   |                    | 7,598  |      |   |         | 16,618  |  
|                                             | Industrial process equipment                    |   |                    |       |      |   |         | 2,392   |  
|                                             | General Corporate                               |   |                    | 1,268  |      |   |         | 9,822   |  
|                                             |                                                 |   |                    |        |      |   |         |        
|                                             | Consolidated Total                              |   | $                  | 30,104 |      |   | $       | 121,498 |  
|                                             |                                                 |   |                    |        |      |   |         |        
|Total operating profit of reporting segments |                                                 | $ | (400               | )      |      | $ | (37,093 | )      
|Other profit or loss:                        |                                                 |   |                    |        |      |   |         |        
|                                             | Investment income                               |   |                    | 39     |      |   |         | 179     |  
|                                             | Interest expense                                |   |                    | (40    | )    |   |         | (2,704  | )
|                                             |                                                 |   |                    |        |      |   |         |        
|                                             | Loss before income taxes and minority
interests |   | $                  | (401   | )    |   | $       | (39,618 | )
|                                             |                                                 |   |                    |        |      |   |         |        

J. Asset Impairment and Restructuring Charges

Prior to the deconsolidation of Spinnaker on September 30, 2001 (see
Note B), the Company recognized certain restructuring charges in the first
quarter of 2001 related to Spinnaker, totaling $36.5 million of which
$36.1 million was a non-cash charge. The charges resulted from (a) the
write-down to estimated fair market value of fixed assets to be taken out
of service and held for sale or disposal; (b) impairment of goodwill
associated with the acquisition of Coating  Maine in 1998; and (c)
severance and related costs.

K. Spinnaker Chapter 11 Reorganization Proceedings

On November 13, 2001 (the Filing Date), Spinnaker and its Spinnaker
Coating, Inc., Spinnaker Coating-Maine, Inc. and Entoleter, Inc.
subsidiaries filed voluntary petitions for relief under Chapter 11 of the
United States Bankruptcy Code (11 U.S.C. & 101 et. al.) in the United
States Bankruptcy Court for the Southern District of Ohio, Dayton Division
(the Court). The cases are being jointly administered under Case No.
01-38066. Effective December 28, 2001, Spinnakers Common Stock and Class
A Common Stock were de-listed from the American Stock Exchange. Spinnaker
has also filed a Form 15 with the Securities and Exchange Commission to
terminate its obligations to file periodic reports under the Securities
Exchange Act of 1934.

On December 31, 2001, Spinnaker entered into a letter of intent (the
Letter of Intent) with WR Capital Partners, LLC (WR Capital) whereby
SP Acquisition LLC (SP Acquisition), and its acquisition entity
established by WR Capital, agreed to purchase substantially all of
Spinnakers (and its subsidiaries) assets (and assumption of substantial
liabilities) for an amount not to exceed $25,763,000 (including assumed
obligations), subject to adjustment. Entoleters assets are not included
in the sale. On January 4, 2002, Spinnaker filed a motion with the Court
to approve the sale of substantially all of its assets, subject to higher
and better offers, to SP Acquisition. On January 17, 2002, the Court
entered an order (i) approving bid procedures, including a break-up fee
and expense reimbursement, (ii) setting an auction date of March 4, 2002,
and (iii) setting a date to issue an order approving the sale of such
assets for March 5, 2002.

On January 18, 2002, Spinnaker entered into that certain Asset
Purchase Agreement (the Asset Purchase Agreement) with SP Acquisition as
contemplated by the Letter of Intent. On March 6, 2002, the Court entered
an order approving the sale of substantially all of Spinnakers assets to
SP Acquisition.

The closing of the Asset Purchase Agreement occurred on March 28,
2002. Spinnaker estimates that, pursuant to a plan of liquidation, there
will be a minimal distribution to unsecured creditors and no return to
Spinnakers equity holders. As a result, management believes that the
Companys investment in Spinnaker is worthless.

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On March 28, 2002, the Court approved the sale of substantially all
of Entoleters assets to Welton LLC for $920,000 in cash plus certain
assumed obligations. The closing of the sale occurred on April 16, 2002.
Spinnaker estimates that, pursuant to a plan of liquidation, there will be
a minimal distribution to unsecured creditors and no return to Spinnaker,
Entoleters sole equity holder.

Therefore, as a result, the Company anticipates eliminating its
remaining interest in Spinnaker and its subsidiaries upon conclusion of
the bankruptcy proceedings expected to occur in the second quarter of
2002. At that time, the $19,420,000 loss in excess of investment on the
Companys March 31, 2002 balance sheet will become a non-cash income item
and increase shareholders equity. If this event would have occurred on
March 31, 2002, the Companys pro-forma equity would have been
$11,709,000, not the reported deficit amount of ($7,711,000).

L. Commitments and Contingencies

In the normal course of business, subsidiaries of the Company are
defendants in certain product liability, worker claims and other
litigation in which the amounts being sought may exceed insurance coverage
levels. The resolution of these matters is not expected to have a
material effect on the Companys financial condition or operations.

The Company, Lynch Interactive Corporation (Interactive), and
several other parties have been named as defendants in a lawsuit brought
under the so-called qui tam provisions of the federal False Claims Act
in the United States District Court for the District of Columbia.
Although the complaint was filed under seal and with the court on February
14, 2001, and the seal was lifted on January 11, 2002, the defendants have
yet to be formally served with the complaint. The main allegation in the
case is that the defendants participated in the creation of sham bidding
entities that allegedly defrauded the federal Treasury by improperly
participating in Federal Communications Commission spectrum auctions
restricted to small businesses, as well as obtaining bidding credits in
other spectrum auctions allocated to small and very small businesses.
The lawsuit seeks to recover an unspecified amount of damages, which would
be subject to mandatory trebling under the statute.

The U.S. Department of Justice has notified the court that it has
declined to intervene in the case. The defendants strongly believe that
the lawsuit is completely without merit and intend to defend the suit
vigorously. Furthermore, the Company believes that, under the separation
agreement between the Company and Interactive pursuant to which
Interactive was spun-off to the Companys shareholders on September 1,
1999, Interactive would be obligated to indemnify the Company for any
losses or damages incurred by the Company as a result of this lawsuit.

M. Subsequent Events

The annual meeting of shareholders of Lynch Corporation was held on
Thursday, May 2, 2002, at 2:00 p.m.

At that time, Lynch shareholders approved the 2001 Equity Incentive
Plan and the issuance of up to 300,000 options to purchase shares of
Company common stock to certain employees of the Company, of which 228,000
options were granted at $17.50 per share on December 10, 2001. Pursuant
to the receipt of shareholder approval, the 228,000 stock options are now
considered issued. The market price of the Company stock of $15.25 per
share on the approval date was $2.25 per share below the grant price,
therefore no compensation charge is required. At the approval date,
180,000 of these options vested immediately with the remaining options
vesting quarterly over the next three years.




Item 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.

Results of Operations

First Quarter 2002 Compared to
First Quarter 2001 (including Results of
Spinnaker for the three months ended March 31, 2001)

Effective September 30, 2001, the Companys ownership and voting interest
of Spinnaker Industries, Inc. was reduced to 41.8% and 49.5% respectively, due
to the disposition of shares of Spinnaker. As a result, effective September
30, 2001, the Company relinquished control of Spinnaker and has deconsolidated
Spinnaker and will prospectively account for its ownership of Spinnaker using
the equity method of accounting. See Note B  Basis of Presentation included
elsewhere herein. Accordingly, Spinnaker results of operations will only be
included for nine months in 2001.

11



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Sales and Revenues/Gross Margin

Revenues for the first quarter of 2002 decreased by $46.5 million to $7.0
million due mainly to the previously described deconsolidation of Spinnaker.
Accordingly, Spinnakers net sales for the quarter ended March 31, 2001 of
$38.0 million represented 82 percent of the year over year unfavorable revenue
variance.

First quarter 2002 gross margin as a percent of revenues improved to 30.7%
from 9.3% in the first quarter of 2001 due mainly to the deconsolidation of
Spinnaker. Spinnakers gross margin as a percentage of revenues for the three
months ended March 31, 2001 was only 1.2% as a result of higher material costs,
selling price erosion, and reduced sales.

Revenues at M-tron decreased by $7.3 million or 73.2% to $2.7 million for
the first quarter of 2002 due to the continuation of weak demand from the
infrastructure segment of the telecommunications industry which is still
working through the overcapacity caused by the Internet bubble.

Lynch Systems revenues for the first quarter of 2002 declined by $1.2
million from the corresponding 2001 period to $4.3 million due mainly to
customer delivery schedules for glass press machines. However, order backlog
of $9.2 million at March 31, 2002 remains strong and was virtually equal to the
backlog last March.

M-trons gross margin as a percentage of net sales for the three month
period of 2002 was down 17.1% to 7.9% from the same periods of 2001. The
previously described sales decline of 73.2% in the quarter caused the
significant reduction in gross margin.

Lynch Systems gross margin as a percentage of net sales for the three
month period of 2002 improved 8.2% to 44.9% from the same periods of 2001.
This improvement was the result of an 8.1% increase in gross margin on Glass
Machinery sales which accounted for 69.7% of 2002 sales and 55.1% of first
quarter 2001 volume.

Operating Loss

Operating loss for the first quarter 2002 was $0.4 million compared to the
first quarter 2001 operating loss of $37.1 million, or a positive swing of
$36.7 million.

On September 30, 2001, the Companys ownership interest and voting control
of Spinnaker Industries, Inc. (Spinnaker) was reduced to 41.8% and 49.5%,
respectively, due to the disposition of shares of Spinnaker. As a result,
effective September 30, 2001, the Company has deconsolidated Spinnaker and will
prospectively account for its ownership of Spinnaker using the equity method of
Accounting.

Accordingly, the Companys first quarter 2001 results of operations
include the operating results of Spinnaker. Spinnakers loss from operations
for the three months ended March 31, 2001 was $38.5 million including an
impairment charge of $36.5 million associated with the closing of the Coating -
Maine facility. Spinnakers first quarter 2001 loss from continuing operations
excluding impairment and restructuring charges was approximately $2.0 million
reflecting lower margins caused by lower prices, less volume, and higher
materials costs.

For the first quarter of 2002 M-tron had an operating loss of $0.8 million
compared to an operating profit of $0.8 million in the first quarter of 2001
due mainly to the dramatically decreased sales volumes mentioned above. In
spite of a 54 percent reduction in head count and a further curtailment in
hours worked, M-tron could not compensate for the 73 percent reduction in
volume and lower selling prices.

For the 2002 first quarter, Lynch Systems had an operating profit of $0.7
million compared to an operating profit of $1.0 million in the first quarter of
2001. Although Lynch Systems operating profit rate was 16.8%, and gross margin
as a percent to sales improved eight points, the company could not fully
compensate for the 22 percent volume decline.

For the first quarter of 2002, Lynchs corporate headquarters incurred
unallocated expenses of $0.3 million as compared to $0.4 million in the first
quarter of 2001. As a result, the corporations first quarter 2002 operating
loss was $0.4 million and the first quarter 2001 operating profit (excluding
Spinnaker) was $1.4 million.

12



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Other Income (Expense), Net

Investment income decreased $140,000 for the three months ended March 31,
2002 due to the deconsolidation of Spinnaker, which accounted for $174,000 of
first quarter 2001 investment income.

Interest expense was $40,000 for the first quarter 2002 and was $2,664,000
less than the first quarter of 2001 which included interest expense of
$2,609,000 applicable to Spinnaker.

Tax Benefit (Provision)

The income tax benefit (provision) includes federal, as well as state,
local, and foreign taxes. The first quarter 2002 net tax benefit is the result
of operating losses incurred which are expected to be realized during the
remainder of the year.

Minority Interest

Minority interests contributed $4.1 million to first quarter 2001 net
income as the result of the absorption of Spinnaker losses by minority
interests to the extent of their investment.

Net Loss

Net loss for the first quarter of 2002 was $0.3 million compared to a net
loss of $36.1 million in the quarter ending March 31, 2001. The $35.8 million
positive swing is primarily due to the deconsolidation of Spinnaker which had
accounted for a loss of $36.8 million in first quarter 2001. Fully diluted
first quarter 2002 loss per share was $0.19 compared to a loss of $23.88 per
share in first quarter 2002.

Backlog/New Orders

Total backlog of manufactured products (excluding Spinnaker in both years)
at March 31, 2002 was $11.0 million, a reduction of $2.4 million from the
backlog at December 31, 2001, and $6.9 million less than the balance at March
31, 2001. Decreased purchases by infrastructure suppliers to the
telecommunications industry which started in March of 2001 continue to depress
M-trons backlog. Lynch Systems backlog is also down moderately from last
March due to the timing of large glass machine orders.

Financial Condition 
Excluding Spinnaker

The discussion below excludes the impact of Spinnaker, which was
deconsolidated at September 30, 2001 as discussed in Note B to the condensed
consolidated financial statements included elsewhere herein. Thus, the
discussion below reflects liquidity and capital resource matters for the
Companys remaining consolidated subsidiaries at March 31, 2002.

At March 31, 2002, the Company has current assets of $24.4 million and
current liabilities of $15.0 million. Working capital was therefore $9.4
million as compared to $9.6 million at December 31, 2001 and $9.9 million at
March 31, 2001. The ratio of current assets to current liabilities was 1.62 to
1.00 at March 31, 2002; 1.59 to 1.00 at December 31, 2001; and 1.52 to 1.00
ratio at March 31, 2001.

Cash used in operating activities was approximately $1.4 million in first
quarter 2002 compared to cash provided of approximately $2.1 million in the
first quarter of 2001. The year over year unfavorable change in operational
cash flow was mainly the result of $1.0 million less net profits and a $2.2
million difference in cash provided (used) in working capital. Capital
expenditures were $36,000 in first quarter 2002 compared to $360,000 in the
period ending March 31, 2001.

Total debt of $3.3 million at March 31, 2002 was equal to the amount
outstanding at December 31, 2001 and $3.2 million less than the debt at March
31, 2001. The year over year reduction in debt is primarily due to reductions
in the revolving credit loans. Debt outstanding at March 31, 2002 included
$833 thousand of fixed interest rate debt at an 8.0% interest rate, and $2.5
million of variable interest rate debt at a March 31, 2002 average rate of
4.7%.

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Lynch Systems is finalizing negotiations leading to a new loan with its
present lender. The incumbent lender has committed to provide a $7 million
line-of-credit which can be used entirely for stand-by Letters of Credit or up
to $2 million for domestic revolving credit within the $7 million line.

The Company does not at present have credit facilities at the parent
company level. The Company believes that existing cash and cash equivalents,
cash generated from operations and available borrowings under its subsidiaries
lines of credit will be sufficient to meet its on-going working capital and
capital expenditure requirements for the foreseeable future.

Subsequent Events

The annual meeting of shareholders of Lynch Corporation was held on
Thursday, May 2, 2002, at 2:00 p.m.

At that time, Lynch shareholders approved the 2001 Equity Incentive
Plan and the issuance of up to 300,000 options to purchase shares of
Company common stock to certain employees of the Company, of which 228,000
options were granted at $17.50 per share on December 10, 2001. Pursuant
to the receipt of shareholder approval, the 228,000 stock options are now
considered issued. The market price of the Company stock of $15.25 per
share on the approval date was $2.25 per share below the grant price,
therefore no compensation charge is required. At the approval date,
180,000 of these options vested immediately with the remaining options
vesting quarterly over the next three years.

Adoption of Accounting Pronouncements

The Company does not have any indefinite-lived intangible assets;
accordingly the adoption of FAS 142 had no material impact during the first
quarter.

Market Risk

The Company is exposed to market risk relating to changes in the general
level of U.S. interest rates. Changes in interest rates affect the amounts of
interest earned on the Companys cash equivalents and short-term investments
(approximately $7.3 million at March 31, 2002). The Company generally finances
the debt portion of the acquisition of long-term assets with fixed rate,
long-term debt. The Company generally maintains the majority of its debt in
nature by borrowing on a fixed long-term basis. The Company does not use
derivative financial instruments for trading or speculative purposes.
Management does not foresee any significant changes in the strategies used to
manage interest rate risk in the near future, although the strategies may be
reevaluated as market conditions dictate. There has been no significant change
in market risk since March 31, 2002.

At March 31, 2002, approximately $2.5 million of the Companys debt bears
interest at variable rates. Accordingly, the Companys earnings and cash
flows are only slightly affected by changes in interest rates. Assuming the
current level of borrowings for variable rate debt, and assuming a two
percentage point increase in the 2002 average interest rate under these
borrowings, it is estimated that the Companys interest expense would change by
only $0.1 million.

Risk Factors

Certain subsidiaries and business segments of the Company sell to
industries that are subject to cyclical economic changes. Any downturns in the
economic environment would have a financial impact on the Company and its
consolidated subsidiaries and may cause the reported financial information
herein not to be indicative of future operating results, financial condition or
cash flows.

Future activities and operating results may be adversely affected by
fluctuating demand for capital goods such as large glass presses, delay in the
recovery of demand for components used by telecommunications infrastructure
manufacturers, disruption of foreign economies and the inability to renew or
obtain new financing for expiring loans.

Forward Looking Information

Included in this Management Discussion and Analysis of Financial Condition
and Results of Operations are certain forward looking financial and other
information, including without limitation matters relating to Risks. It
should be recognized that such information are projections, estimates or
forecasts based on various assumptions,

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including without limitation, meeting
its assumptions regarding expected operating performance and other matters
specifically set forth, as well as the expected performance of the economy as
it impacts the Companys businesses, government and regulatory actions and
approvals, and tax consequences, and the risk factors and cautionary statements
set forth in reports filed by the Company and Spinnaker with the Securities and
Exchange Commission. As a result, such information is subject to
uncertainties, risks and inaccuracies, which could be material.




Item 3. Quantitative and Qualitative Disclosure About Market Risk

See Market Risk under Item 2 above.




PART II. OTHER INFORMATION




Item 4. Submission of Matters
to a Vote of Security Holders

At the Annual Meeting of Stockholders of the Registrant held on May 2,
2002:

(a)  The following persons were elected as Directors with the following
votes:

|                     |  |           |           |                |  |  |        | 
|-------------------- |  | --------- | --------- | -------------- |  |  | ------ | 
|Name                 |  | Votes For |           | Votes Withheld
|                     |  |           |           |               
|E. Val Cerutti       |  |           | 1,258,178 |                |  |  | 81,993 | 
|Avrum Gray           |  |           | 1,258,288 |                |  |  | 81,883 | 
|Mario J. Gabelli     |  |           | 1,253,678 |                |  |  | 86,493 | 
|Raymond H. Keller    |  |           | 1,253,589 |                |  |  | 86,582 | 
|Richard E. McGrail   |  |           | 1,250,360 |                |  |  | 89,811 | 
|Ralph R. Papitto     |  |           | 1,253,583 |                |  |  | 86,588 | 
|Anthony R. Pustorino |  |           | 1,258,178 |                |  |  | 81,993 | 

(b)  The Lynch Corporation 2001 Equity Incentive Plan, as described in Item
2 of the Proxy Statement for the Annual Meeting (Equity Incentive Plan), was
approved by the Stockholders by the following votes: Votes for  842,612;
Votes Against  117,408; Votes Abstain  9,954; and Broker Non-Vote  370,197.
The Equity Incentive Plan reserves 300,000 shares of Common Stock of Registrant
for issuance to employees of Registrant and its subsidiaries and other persons
who are in a position to make a significant contribution to the success of the
Registrant and its subsidiaries.

(c)  The Stockholders approved the grant of certain stock options under the
Equity Incentive Plan, as described in Item 3 of the Proxy Statement for the
Annual Meeting, by the following votes: Votes For  828,878; Votes Against -
134,042; Votes Abstain  7,054; and Broker Non-Vote  370,197. The Stock
Options approved included (1) an option for 180,000 shares to Ralph R. Papitto,
Chairman and Chief Executive Officer of Registrant; (2) an option for 24,000
shares to Raymond H. Keller, Chief Financial Officer of Registrant; and (3) an
option for 24,000 shares to Richard E. McGrail, President and Chief Operating
Officer of Registrant, all at an exercise price of $17.50 per share.

(d)  The Stockholders approved an amendment to the Restated Articles of
Incorporation of Registrant (Amendment), as described in Item 4 of the Proxy
Statement for the Annual Meeting, by the following votes: Votes For -
1,328,969; Votes Against  7,349; and Votes Abstain  3,853. The Amendment,
which became effective on May 3, 2002, effected a change of all 10,000,000
shares of Registrants authorized Common Stock from shares without par value
into shares having a par value of $0.01 per share for all purposes, without
otherwise changing the designations, rights, preferences, or limitations of
such shares and without increasing or decreasing the number of such shares.




Item 6. Exhibits and Reports on Form 8-K



| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | (a) Exhibits filed herewith:                                                              
|
| | 3(c) Articles of Amendment of the Restated Articles of
Incorporation of Lynch Corporation.
|
| | (b) Reports on Form 8-K:                                                                  
|
| | No reports on Form 8-K were filed during the quarter ended March
31, 2002.                

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



| | LYNCH CORPORATION
(Registrant)By: /s/ Raymond H. Keller
| | -------------------------------------------------------

| | 
Raymond H. Keller
Chief Financial Officer
| | --------------------------------------------------------------

May 13, 2002

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