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 SEPTEMBER 30, 1999

                                       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                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

401 THEODORE FREMD AVENUE, RYE, NEW YORK                              10580
----------------------------------------                              -----
(Address of principal executive offices)                           (Zip Code)


                                (914) 921-7601
                                --------------
               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 OCTOBER 31, 1999
            -----                        ---------------------------------------
Common Stock, no par value                              1,412,383

<PAGE>

                                      INDEX

                       LYNCH CORPORATION AND SUBSIDIARIES

PART I.     FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

          Condensed Consolidated Balance Sheet:
          -      September 30, 1999
          -      December 31, 1998

          Condensed Consolidated Statements of Operations:
          -      Three and nine months ended September 30, 1999 and 1998

          Condensed Consolidated Statements of Cash Flows:
          -      Nine months ended September 30, 1999 and 1998

          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 6.  Exhibits and Reports on Form 8-K

SIGNATURES

<PAGE>
Part 1 - FINANCIAL INFORMATION -
Item 1 - Financial Statements
<TABLE>
                       LYNCH CORPORATION AND SUBSIDIARIES
                       ----------------------------------
                      CONDENSED CONSOLIDATED BALANCE SHEET
                      ------------------------------------
                                 (In thousands)
<CAPTION>
                                                                            September 30    December 31
                                                                                1999           1998
                                                                             (Unaudited)        (A)
ASSETS                                                                          ----           ----
CURRENT ASSETS:
<S>                                                                           <C>          <C>
   Cash and cash equivalents ..............................................   $  78,653    $   1,132
   Receivables, less allowances of $319 and $395 ..........................      24,825       25,320
   Inventories ............................................................      31,959       28,396
   Deferred income tax benefits ...........................................       9,280        9,315
   Other current assets ...................................................         760        1,787
   Net current assets of subsidiaries to be distributed to shareholders ...           0       58,047
   Net current assets of discontinued operations ..........................           0       38,625
                                                                              ---------    ---------
    TOTAL CURRENT ASSETS ..................................................     145,477      162,622

PROPERTY, PLANT AND EQUIPMENT:
   Land ...................................................................         672          672
   Buildings and improvements .............................................      11,007       12,585
   Machinery and equipment ................................................      53,821       51,306
                                                                              ---------    ---------
                                                                                 65,500       64,563
   Accumulated depreciation ...............................................     (20,873)     (17,534)
                                                                              ---------    ---------
                                                                                 44,627       47,029

EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED,NET .................      22,289       21,075
OTHER ASSETS ..............................................................      10,261        7,328
NET NON - CURRENT ASSETS OF SUBSIDIARIES TO BE
   DISTRIBUTED TO SHAREHOLDERS ............................................           0      170,295
NET NON - CURRENT ASSETS OF DISCONTINUED OPERATIONS .......................           0       71,651
                                                                              ---------    ---------
    TOTAL  ASSETS .........................................................   $ 222,654    $ 480,000
                                                                              =========    =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
   Notes payable to banks .................................................   $  20,624    $  59,686
   Trade accounts payable .................................................      17,587       18,178
   Accrued interest payable ...............................................       5,623        2,575
   Accrued liabilities ....................................................      16,714        3,580
   Customer advances ......................................................       3,174        2,406
   Current maturities of long - term debt .................................       1,383        2,027
   Net current liabilites of subsidiaries to be distributed to shareholders           0       37,240
   Net current liabilites of discontinued operations ......................           0       18,162
                                                                              ---------    ---------
    TOTAL CURRENT  LIABILITIES ............................................      65,105      143,854

LONG-TERM DEBT ............................................................     122,333      126,976
DEFERRED INCOME TAXES .....................................................       8,476        9,316
OTHER LONG TERM LIABILITIES ...............................................       1,525        2,182
MINORITY INTERESTS ........................................................      11,899        3,999
NET NON - CURRENT LIABILITIES OF SUBSIDIARIES TO BE
DISTRIBUTED TO SHAREHOLDERS ...............................................           0      147,600
NET NON - CURRENT LIABILITIES  OF DISCONTINUED OPERATIONS .................           0        6,280

SHAREHOLDERS' EQUITY
COMMON STOCK,NO PAR VALUE-10,000,000 SHARES
  AUTHORIZED; 1,471,191 shares issued (at stated value) ...................       5,139        5,139
  ADDITIONAL PAID - IN CAPITAL ............................................       8,302        8,554
  RETAINED EARNINGS .......................................................       1,078       26,771
  ACCUMULATED OTHER COMPREHENSIVE INCOME ..................................           0           59
  TREASURY STOCK OF 58,808 and 52,943 SHARES,AT COST ......................      (1,203)        (730)
                                                                              ---------    ---------
  TOTAL SHAREHOLDERS' EQUITY ..............................................      13,316       39,793
                                                                              ---------    ---------
  TOTAL  LIABILITIES AND SHAREHOLDERS' EQUITY .............................   $ 222,654    $ 480,000
                                                                              =========    =========
<FN>

(A) The Balance  Sheet at December  31,1998  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.
</FN>
</TABLE>

<PAGE>
<TABLE>

                       LYNCH CORPORATION AND SUBSIDIARIES
                       ----------------------------------
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                 ----------------------------------------------
                                   (UNAUDITED)
                      (In thousands, except share amounts)
<CAPTION>
                                                                          Three Months                    Nine Months
                                                                       Ended September 30             Ended September 30
                                                                       1999           1998           1999           1998
                                                                       ----           ----           ----           ----
SALES AND REVENUES
<S>                                                               <C>            <C>            <C>            <C>
    Manufacturing .............................................   $    51,070    $    49,824    $   144,844    $   138,390

Costs and expenses:
    Manufacturing .............................................        45,380         43,485        128,165        119,588
    Selling and administrative ................................         4,677          4,676         15,277         14,399
                                                                  -----------    -----------    -----------    -----------
OPERATING PROFIT ..............................................         1,013          1,663          1,402          4,403

Other income (expense):
    Investment Income .........................................           559              3            572            170
    Interest expense ..........................................        (3,267)        (2,104)        (7,796)        (5,933)
    Gain on sale of stock by subsidiary .......................            --          2,127             --          2,069
                                                                  -----------    -----------    -----------    -----------
                                                                       (2,708)            26         (7,224)        (3,694)
                                                                  -----------    -----------    -----------    -----------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES, MINORITY INTERESTS, DISCONTINUED OPERATIONS
AND EXTRAORDINARY ITEM ........................................        (1,695)         1,689         (5,822)           709

Benefit (provision)for income taxes ...........................           700           (706)         2,337           (311)
Minority interests ............................................           378             87          1,393            224
                                                                  -----------    -----------    -----------    -----------
LOSS FROM CONTINUING OPERATIONS BEFORE
DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEM ................          (617)         1,070         (2,092)           622

DISCONTINUED OPERATIONS:
 Income (loss) from operations of Lynch Interactive
 Corporation distributed to shareholders (less income
 tax (provision) benefit of ($803), ($1,033), $3,068
 and ($2,689) and minority interests of $147, $315,
 $578, and $688 ...............................................         1,024          1,433         (7,493)         3,387

 Loss from discontinued operations of industrial tape
 segment of Spinnaker Industries (less applicable income
 tax provision of $315, $308,and $733 and minority interests
 of $403, $558, and $1,013) ...................................             0           (354)          (572)          (972)

Gain on sale of Spinnaker's Industrial tape operations (less
income tax provision of $9,495 and minority interest of $7,013)         7,431              0          7,431              0

EXTRAORDINARY ITEM
 Income on early extinguishment of debt (less income tax
 provision of $73 and minority interest of $60 ................            54              0             54              0
                                                                  -----------    -----------    -----------    -----------
NET INCOME (LOSS) .............................................   $     7,892    $     2,149    ($    2,672)   $     3,037
                                                                  ===========    ===========    ===========    ===========
  Weighted average shares outstanding .........................     1,412,000      1,418,000      1,415,000      1,418,000
                                                                  ===========    ===========    ===========    ===========
Basic and diluted earnings per share:
 Loss from continuing operations before discontinued operations        ($0.44)         $0.75         ($1.48)        ($0.44)
 Income (loss) from Lynch Interactive .........................          0.73           1.01          (5.31)          2.39
 Income (loss) from discontinued operations ...................          5.26          (0.25)          4.85          (0.69)
 Extraordinary item ...........................................          0.04           0.00           0.04           0.00
                                                                  -----------    -----------    -----------    -----------
NET INCOME (LOSS) .............................................   $      5.59    $      1.52    ($     1.89)   $      2.14
                                                                  ===========    ===========    ===========    ===========
</TABLE>

<PAGE>

<TABLE>
                               Lynch Corporation
                               -----------------
               Consendensed Consolidated Statement of Cash Flows
               -------------------------------------------------
                                   Unaudited
                                  In Thousands
<CAPTION>
                                                                         Nine Months Ended
                                                                            September 30,
                                                                          1999        1998
                                                                          ----        ----
OPERATING ACTIVITIES
<S>                                                                       <C>          <C>
Net Income (Loss) ...................................................     (2,672)      3,037
Adjustments to reconcile net income(loss) to cash
  provided by operating activities:
    Income (loss) from operations of Lynch Interactive Corporation ..      7,493      (3,387)
    Loss from operations of industrial tape segment .................        572         972
    Gain on sale of industrial tape segment .........................     (7,431)         --
    Extraodinary item ...............................................        (54)         --
    Depreciation and amortization ...................................      4,226       4,036
    Amortization of deferred financing costs ........................        630         906
    Gain on sale of stock by subsidiary corporation .................         --      (2,082)
    Deferred Taxes ..................................................       (805)        869
    Minority interests ..............................................     (1,393)       (224)
    Gain on sale of fixed assets ....................................       (854)         --
    Changes in operating assets:
      Receivables ...................................................        495       1,037
      Inventories ...................................................     (3,563)      2,366
      Accounts payable and accruals .................................      3,091      (5,933)
      Other .........................................................        418      (2,964)
                                                                        --------    --------
        Cash provided by (used in) operating activities
         of continuing operations ...................................        153      (1,367)

INVESTING ACTIVITIES
Capital Expenditures ................................................     (2,828)     (5,132)
Investment in Spinnaker Coating - Maine .............................         --     (46,907)
Proceeds from sale of industrial tape segment .......................    104,450          --
Proceeds from sale of fixed assets ..................................      2,442          --
Other ...............................................................       (737)        954
                                                                        --------    --------
       Cash provided by (used in) investing activities of
        continuing operations .......................................    103,327     (51,085)

FINANCING ACTIVITIES
Change in notes payable .............................................    (39,026)     28,801
Repayments of long-term debt ........................................     (5,100)     11,735
Deferred financing costs ............................................       (468)       (741)
Other ...............................................................     (1,662)        639
                                                                        --------    --------
       Cash provided by (used in) financing activities of
        continuing operations .......................................    (46,256)     40,434
                                                                        --------    --------
       Cash provided by (used in) activities of continuing operations     57,224     (12,018)
Cash provided by Lynch Interactive Corporation ......................     15,987       8,562
Cash provided by (used in) industrial tape segment ..................      4,310      (1,909)
                                                                        --------    --------
    Increase(decrease) in cash and cash equivalents .................     77,521      (5,365)
Cash and cash equivalents at beginning of perion ....................      1,132       6,497
                                                                        ========    ========
    Cash and cash equivalents at end of period ......................     78,653       1,132
                                                                        ========    ========
</TABLE>


<PAGE>

A.     SUBSIDIARIES OF THE REGISTRANT
--     ------------------------------

As of  September  30,  1999,  after  the  effect  of the  distribution  of Lynch
Interactive  Corporation  and  the  sale  of the  Industrial  Tape  Business  of
Spinnaker  Industries,  Inc.  (see  Notes  C and  D),  the  Subsidiaries  of the
Registrant are as follows:
<TABLE>
<CAPTION>
SUBSIDIARY                                                                      OWNED BY LYNCH
----------                                                                      --------------
<S>                                                                             <C>
 Lynch Display Technologies, Inc.                                               100.0%
  Lynch Systems, Inc.                                                            92.0%

    Lynch International Holding Corporation                                      92.0%
    Lynch-AMAV LLC                                                               69.0%

 M-tron Industries, Inc.                                                        100.0%
    M-tron Industries, Ltd.                                                     100.0%
    Spinnaker Industries, Inc.                                                  47.6%(O)/60.4%(V)

      Entoleter, Inc.                                                           47.6%(O)/60.4%(V)
      Spinnaker Coating, Inc.                                                   47.6%(O)/60.4%(V)

        Spinnaker Coating-Maine, Inc.                                           47.6%(O)/60.4%(V)
<FN>
 Notes: (V)=Percentage voting control; (O)=Percentage of equity ownership
</FN>
</TABLE>

<PAGE>

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  the  management,  all  adjustments
(consisting  of  normal  recurring  accruals)  considered  necessary  for a fair
presentation  have been  included.  Operating  results for the nine month period
ended September 30, 1999 are not necessarily  indicative of the results that may
be expected for the year ended December 31, 1999. For further information, refer
to the consolidated  financial  statements and footnotes thereto included in the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1998.

The accompanying  unaudited condensed  consolidated financial statements reflect
the  Spin  Off of  Lynch  Interactive  Corporation  ("Interactive")  from  Lynch
Corporation ("Lynch") that occurred in the third quarter of 1999 (see Note D).

<PAGE>

C.    DISCONTINUED OPERATIONS
--    -----------------------

In the third  quarter of 1999,  the Company's  48% owned  subsidiary,  Spinnaker
Industries,  Inc. sold its two industrial tape units,  Central  Products Company
and  Spinnaker  Electrical,  which  comprise  its  industrial  tape  segment  to
Intertape Polymer Group, Inc. ("Intertape").  The consideration for the sale was
approximately  $105 million and 300,000 five-year warrants to purchase shares of
Intertape  common  stock at  $29.50  each.  Spinnaker  recognized  a gain on the
transactions  of $24 million before tax and the Registrant  recognized a similar
gain  before  tax and  minority  interests.  The  agreement  to  sell  Spinnaker
Electrical  was  completed  on July 30, 1999 and the  agreement  to sell Central
Products was completed on August 10, 1999. As a result, the Company's industrial
tape segment is being reported as  discontinued  operations in the  accompanying
condensed consolidated financial statements.  Accordingly,  operating results of
the industrial tape segment have been segregated from continuing  operations and
reported as a separate line item on the statement of operations.

Lynch has restated its prior year financial  statements to present the operating
results  of  the  industrial  tape  segment  as a  discontinued  operation.  The
industrial tape segment's net sales were $10.7 million and $31.5 million for the
three-month period ended September 30, 1999 and 1998 and $69.5 million and $89.3
million  for  the  nine  month  period  ended   September  30,  1999  and  1998,
respectively,  and $121.8  million,  $119.7  million and $124.1  million for the
fiscal years ended December 31, 1998, 1997, and 1996, respectively.

The assets and  liabilities  of the  industrial  tape  businesses  of  Spinnaker
included in the accompanying  condensed  consolidated  balance sheet at December
31, 1998 consist of the following (in thousands):
<TABLE>
<CAPTION>
                                                                      DECEMBER 31, 1998
                                                                      -----------------
<S>                                                                      <C>
Accounts receivable, net ........................................        $14,815
Inventories, net ................................................         18,167
Prepaids and other ..............................................          5,643
                                                                         -------
Current assets of discontinued operations .......................        $38,625
                                                                         =======

Property, plant and equipment, net ..............................        $48,312
Goodwill and other assets .......................................         23,339
                                                                         -------
Non-current assets of discontinued operations ...................        $71,651
                                                                         =======

Accounts payable ................................................        $13,720
Accrued liabilities .............................................          4,442
                                                                         -------

Current liabilities of discontinued operations ..................        $18,162
                                                                         =======

Non-current liabilities of discontinued operations ..............        $ 6,280
                                                                         =======
</TABLE>



<PAGE>
D.   SPIN OFF
--   --------

On August 12, 1999,  the Board of Directors  approved a plan to  distribute  the
stock  of  Lynch  Interactive  Corporation  on  a  one  for  one  basis  to  the
shareholders of Lynch Corporation  ("spin off"). Lynch completed the spin off of
Lynch Interactive  Corporation on September 1, 1999 to stockholders of record on
August 23, 1999.  Pursuant to the spin off, each Lynch shareholder  received one
share of Interactive  stock for each share of Lynch owned.  Lynch had received a
private letter ruling from the Internal  Revenue Service that the spin off would
be tax free to Lynch  shareholders.  Interactive is listed on the American Stock
Exchange under the symbol "LIC."

Interactive owns all of what was Lynch's multimedia and service businesses while
Lynch  retains the  manufacturing  businesses.  Interactive  owns the  telephone
companies,  television  interests and PCS  interests,  as well as the 55% equity
interest of The Morgan Group, Inc. In addition,  Interactive owns a 13.6% equity
interest in Spinnaker  Industries,  Inc.  Lynch owns a 47.6% equity  interest in
Spinnaker (60.4% of voting  interest),  as well as M-tron  Industries,  Inc. and
Lynch Systems,  Inc. As a result, the Company's multimedia and services segments
are being reported as operations distributed to shareholders in the accompanying
condensed consolidated financial statements.  Accordingly,  operating results of
Lynch  Interactive  Corporation have been segregated from continuing  operations
and reported as a separate line item on the statement of operations.

Lynch has restated its prior year financial  statements to present the operating
results  of  Lynch  on a  comparable  basis.  Interactive's  net  sales  for the
three-month  period were $52.9 million and $53.3 million and $155.8  million and
$155.1  million for the nine month  period  ended  September  30, 1999 and 1998,
respectively,  and $205.1  million,  $194.1  million and $106.8  million for the
fiscal years ended December 31, 1998, 1997, and 1996 respectively.

Lynch  Interactive  and Lynch have  entered into  certain  agreements  governing
various ongoing relationships, including the provision of support services and a
tax  allocation  agreement.  The  tax  allocation  agreement  provides  for  the
allocation of tax  attributes  to each company as if it had actually  filed with
the respective  tax  authority.  At the Spin Off, the employees of the corporate
office of Lynch Corp.  became the employees of Lynch Interactive Corp. and Lynch
Interactive  Corp.  will provide  corporate  management  service to Lynch Corp.,
which will be charged a management fee for these services.

The  net  assets  of  Interactive   included  in  the   accompanying   condensed
consolidated balance sheets as of December 31, 1998 consist of the following:
<TABLE>
<CAPTION>
                                                                     DECEMBER 31, 1998
(IN THOUSANDS)                                                       -----------------
<S>                                                                     <C>
Cash, cash equivalents and marketable securities .................      $ 27,988
Accounts receivable, net .........................................        18,853
Deferred income taxes ............................................         4,265
Prepaids and other ...............................................         6,941
                                                                        --------
Current assets of subsidiaries to be distributed to ..............      $ 58,047
  shareholders                                                          ========

Property, plant and equipment, net ...............................      $ 91,183
Goodwill .........................................................        47,740
Investment in and advances to PCS license
  holders ........................................................        23,360
Other Assets .....................................................         8,012
                                                                        --------
Non-current assets of subsidiaries to be distributed to ..........      $170,295
  shareholders                                                          ========

Notes payable ....................................................      $  2,037
Accounts payable .................................................         4,662
Accrued liabilities ..............................................        21,902
Current portion of long term debt ................................         8,639
                                                                        --------
Current liabilities of subsidiaries to be distributed to .........      $ 37,240
  shareholders                                                          ========
Long term debt ...................................................      $119,024
Deferred income tax ..............................................        13,062
Other long term debt .............................................         4,987
Minority interest ................................................        10,527
                                                                        --------
Non-current liabilities and minority interest
  of subsidiaries to be distributed to shareholders ..............      $147,600
                                                                        ========
</TABLE>
Net assets of approximately $23 million were distributed to Lynch Interactive at
the Spin Off.

<PAGE>

E.   ACQUISITIONS
--   ------------

On July 30, 1998, the Company's subsidiary,  Spinnaker Industries, Inc. acquired
tesa tape,  inc.'s  pressure  sensitive  electrical  tape  product  line and its
Carbondale,  Illinois  manufacturing  plant (the "tesa tape  Acquisition").  The
purchase  price  totaled  $10.7  million plus  transaction  costs,  comprised of
200,000 shares of Spinnaker common stock (subject to adjustment)  valued at $3.7
million,  $4.5 million in term debt,  $2.0  million in cash,  and a $0.5 million
subordinated note. The acquired business produces electrical tape for insulating
motors coils and transformers  for customers in Europe,  Canada and the U.S. See
Note C concerning sale of industrial tape businesses.

On March 18, 1998, Spinnaker Coating-Maine, Inc. acquired the pressure sensitive
adhesive-backed  label stock  business of S.D.  Warren.  The purchase  price was
approximately $51.8 million,  plus the assumption of certain liabilities and was
funded by issuing the seller a  convertible  subordinated  note of $7.0  million
with the remainder funded by Spinnaker's  revolving credit facility. As a result
of this  transaction,  the Registrant  recorded  approximately  $21.3 million in
goodwill which is being amortized over 30 years.

All of the above acquisitions were accounted for as purchases,  and accordingly,
the assets  acquired and  liabilities  assumed were recorded at their  estimated
fair market values.

The operating results of the S.D. Warren's  adhesive-backed label stock business
are included in the  Consolidated  Statement of Operations  from its acquisition
date.  The following  unaudited  proforma  information  shows the results of the
Registrant's   operations   as  though   the   acquisition   of  S.D.   Warren's
adhesive-backed label stock business had been made at the beginning of 1998.
<TABLE>
<CAPTION>
                                                                 NINE MONTHS ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA)                             SEPTEMBER 1998
                                                                 ----------------
<S>                                                                   <C>
Sales and Revenues ...........................................        $ 150,534
Operating Profit .............................................            5,046

Income (Loss) from Continuing Operations Before

  Income Taxes and Minority Interest .........................           (1,676)

Net Income (Loss) from Continuing Operations .................             (460)
Net Income (Loss) from Continuing
  Operations Per Share .......................................        $   (0.32)
</TABLE>


F.   INVENTORIES
--   -----------

Inventories  are stated at the lower of cost or market  value.  At September 30,
1999, inventories were valued by three methods: last-in, first-out (LIFO) - 21%,
specific identification - 77%, and first-in,  first-out (FIFO) - 2%. At December
31, 1998, the respective percentages were 15%, 82%, and 3%.

<PAGE>
<TABLE>
<CAPTION>
(IN THOUSANDS)

                                                      SEPTEMBER 30,    DECEMBER 31,
                                                         1999             1998
                                                       ----------       ----------
<S>                                                     <C>              <C>
Raw material and supplies ....................          $ 9,302          $ 7,711
Work in process ..............................            2,779            1,273
Finished goods ...............................           19,878           19,412
                                                        -------          -------
  Total Inventories ..........................          $31,959          $28,396
                                                        =======          =======
</TABLE>

G.   INDEBTEDNESS
--   ------------

Spinnaker   Industries,   Inc.  maintains  revolving  lines  of  credit  at  its
subsidiaries which total $40 million, of which $17.9 million was outstanding and
$12.2  million was  available as of September 30, 1999.  These  facilities  were
refinanced  in  conjunction  with the sale of  Central  Products  and  Spinnaker
Electrical.

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 Registrant.
<TABLE>

LONG TERM DEBT CONSISTS OF:
<CAPTION>
                                           SEPTEMBER 30,   DECEMBER 31,
                                               1999           1998
                                          -----------    -----------
<S>                                        <C>          <C>
Spinnaker Industries, Inc. 10.75% Senior
 Secured Notes due 2006 .................   $ 114,000    $ 115,000

Unsecured notes issued in connection
with  acquisitions at fixed interest rates
averaging 9.6% with maturities
through 2000 ............................        --          7,500

Other ...................................       9,716        6,503
                                            ---------    ---------
                                              123,716      129,003
Current Maturities ......................      (1,383)      (2,027)
                                            ---------    ---------
                                            $ 122,333    $ 126,976
                                            =========    =========
</TABLE>

Proceeds  from  the  sale of  Central  Products  Company  were  used to  satisfy
transaction costs and repay  approximately  $18.2 million of the working capital
revolver  debt.  The  balance of the  proceeds  are  available  to invest in any
business,   capital  expenditure  or  other  tangible  asset  in  the  Permitted
Businesses, as defined in the Indenture. Any proceeds not so invested within 270
days  after  the  closing  of  the  sale  or  not  used  to  permanently  reduce
indebtedness  (other than  subordinated  debt) shall be used to  repurchase  the
Senior Notes on a pro rata basis as required by the Indenture.

The proceeds from the sale of Spinnaker Electrical,  an unrestricted  subsidiary
under the Indenture,  were used to repay  approximately  $6.9 million of certain
term debt and working  capital  revolver  debt  collateralized  by the assets of
Spinnaker  Electrical.  The  remaining  net  proceeds  will be used for  general
purposes,  which may include  purchasing Senior Notes in the open market.  Other
options include acquisitions, capital expenditures, and /or repurchase shares of
Spinnaker stock.

Interest  expense  from  continuing  operations  is subject  to certain  matters
associated  with the use of the net proceeds from the sales of CPC and Spinnaker
Electrical,  including  retirement of senior debt or "permitted  investments" as
defined under the Indenture.  As a result,  interest expense,  as presented on a
historical  basis,  may not  necessarily  be indicative  of interest  expense of
continuing operations for the year ended December 31, 1999.

In  conjunction  with  the  Spin  Off of  Lynch  Interactive,  lines  of  credit
facilities of $20 million were transferred from the Registrant to Interactive.

<PAGE>

H.   GAIN ON SALE OF SUBSIDIARY STOCK
--   --------------------------------

On July 31, 1998,  Spinnaker  Industries,  Inc. completed the acquisition of the
electrical  tape division of tesa tape,  inc. Part of the purchase price was the
issuance of 200,000 shares,  subject to certain adjustments of Spinnaker's Class
A Common Stock. As a result of this issuance,  the Registrant recorded a gain on
sale of  subsidiary  stock of $2.1 million in the third quarter of 1998, or $1.2
million ($0.87 per share) after tax.

I.   EARNINGS PER SHARE
--   ------------------

Basic  earnings  per common  share  amounts are based on the  average  number of
common shares outstanding during each period,  excluding the dilutive effects of
options, warrants, and convertible securities.

J.   SEGMENT INFORMATION
--   -------------------

After  the  distribution  to  shareholders  of the  stock of  Lynch  Interactive
Corporation,  the Company is engaged in the manufacture of adhesive backed label
stock and other manufacturing.  The Company measures performance of its segments
primarily by revenues,  operating profit and EBITDA before corporate  allocation
(operating profit before income taxes, depreciation,  amortization and allocated
corporate  expenses).  Identifiable  assets  of each  segment  have not  changed
materially since December 31, 1998.

EBITDA  (before  corporate  allocation)  for  operating  segments  is  equal  to
operating  profit  before  interest,  taxes,   depreciation,   amortization  and
allocated corporate expenses.  EBITDA is presented because it is widely accepted
financial indicator of value and ability 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,  excluding
interest  and income  taxes.  Prior to the Spin Off of Lynch  Interactive  Lynch
allocated a portion of its general corporate expenses to its operating segments.
Subsequent to the Spin Off, Lynch Interactive is providing corporate  management
services to the Registrant and charging a corporate overhead management fee.

General  corporate  office  expenses  related  to  finance  and   administrative
functions  including  public  company  compliance  reporting,  bank and investor
relations,  taxes and other  than  income  taxes and  holding  company  payroll,
historically  allocated and charged to the industrial tape segment were reversed
and allocated back to continuing operations.  These expenses were not considered
to be directly attributed to discontinued operations. Expenses allocated back to
continuing  operations  totaled  $0.2  million and $1.0 million in the three and
nine months periods ended September 30, 1999 and 1998.
<PAGE>

<TABLE>
<CAPTION>

                                                 THREE MONTHS ENDED           NINE MONTHS ENDED
                                                    SEPTEMBER 30,                SEPTEMBER 30
                                                  1999          1998           1999       1998
                                               ----------     -----------   ----------  ----------
Revenues:
Manufacturing:
<S>                                              <C>          <C>          <C>          <C>
  Adhesive-backed label stock ................   $  39,535    $  41,221    $ 116,191    $ 110,594
  Other manufacturing ........................      11,535        8,603       28,653       27,796
                                                 ---------    ---------    ---------    ---------
  Total manufacturing ........................   $  51,070    $  49,824    $ 144,844    $ 138,390
                                                 ---------    ---------    ---------    ---------
EBITDA (before corporate allocation):
Manufacturing:
  Adhesive-backed label stock ................   $   1,714    $   3,701    $   6,553    $   9,432
  Other manufacturing ........................       1,458           76        1,208          829
  Corporate manufacturing expenses ...........        (498)        (621)      (1,511)      (1,776)
                                                 ---------    ---------    ---------    ---------
  Total manufacturing ........................       2,674        3,156        6,250        8,485
Corporate expenses, gross ....................        (230)         (54)        (622)        (414)
                                                 ---------    ---------    ---------    ---------
Consolidated total ...........................   $   2,444    $   3,102    $   5,628    $   8,071
                                                 =========    =========    =========    =========

Operating profit (loss):
Manufacturing:
  Adhesive-backed label stock ................   $   1,469    $   2,555    $   3,562    $   6,616
  Other manufacturing ........................         389          (90)         343           81
  Corporate manufacturing expenses ...........        (690)        (836)      (2,116)      (2,127)
                                                 ---------    ---------    ---------    ---------
  Total manufacturing ........................       1,168        1,629        1,789        4,570
Unallocated corporate expense ................        (155)          34         (389)        (167)
                                                 ---------    ---------    ---------    ---------
Consolidated total ...........................   $   1,013    $   1,663    $   1,402    $   4,403
                                                 =========    =========    =========    =========
Total operating profit for reportable
   segments ..................................   $   1,013    $   1,663    $   1,402    $   4,403
Other profit or loss:
  Investment income ..........................         559            3          572          170
  Interest expense ...........................      (3,267)      (2,104)      (7,796)      (5,933)
                                                 ---------    ---------    ---------    ---------
Income (loss) from continuing operations
before income taxes, minority interests
and discontinued operations extraordinary item   $  (1,695)   $    (438)   $  (5,822)   $  (1,360)
                                                 =========    =========    =========    =========
</TABLE>





<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.

SALES AND REVENUES
------------------

The accompanying  unaudited condensed  consolidated financial statements reflect
the  Spin  Off  of  Lynch  Interactive  Corporation   (Interactive)  from  Lynch
Corporation (Lynch)  (Registrant) that occurred in the third quarter of 1999 and
also  the  sale  by  Spinnaker  Industries,  Inc.  (Spinnaker),  a  consolidated
subsidiary of the Registrant, of its two industrial tape units, Central Products
Company and  Spinnaker  Electrical  that also  occurred in the third  quarter of
1999. Accordingly,  the operating results of both Interactive and the industrial
tape segment have been segregated  from continuing  operations of the Registrant
and  are  reported  as  separate  line  items  on the  financial  statements  as
discontinued  operations.  The  comparative  amounts  for 1998  have  also  been
restated to reflect the above  transactions.  The  ensuing  narrative  considers
these changes and only includes discussions of the Registrant as ti is currently
composed.

Revenues for the third  quarter of 1999  increased  by $1.2 million or 2.5%,  to
$51.1  million,  from the third  quarter of 1998.  Revenues  for the nine months
ended  September  30, 1999  increased by $6.5 million from the  comparable  1998
period reflecting the S.D. Warren acquisition noted below.

Revenues from Spinnaker  Industries,  Inc.  continuing  operations  fell by $1.2
million  between  the two  quarters  due to  product  technology  transition  in
pressure  sensitive label stock and changes in the ordering  pattern of pressure
sensitive  stamps  partially  offset by higher sales at Entoleter.  The market's
rapid  transition  from EDP to thermal  transfer  paper stock  technologies  has
exceeded  management's   expectations  and  as  a  result  caused  Spinnaker  to
experience  lower volumes and average  selling prices at  Coating-Maine,  as the
market balances  quality and performance  against lower priced  solutions.  Unit
sales of pressure  sensitive  postage paper stock continue to be impacted by the
uneven ordering  pattern of the Bureau of Printing and Engraving.  Unit sales of
pressure sensitive postage paper stock for the third quarter of 1999 slowed from
the earlier 1999 period and the corresponding 1998 period,  however on an annual
basis is still anticipated to approximate prior year volumes. For the nine-month
period ended  September 30, 1999,  sales  increased by $5.0  million.  Spinnaker
completed the acquisition of S.D.  Warren's pressure  sensitive  adhesive-backed
label stock business on March 18, 1998, revenues of this operation in 1998 prior
to Spinnaker's  acquisition were $12.1 million.  Increased volume as a result of
this  acquisition  offset  the  revenue  decline  as a  result  of  the  product
technology  transition  discussed  above.  Revenues at M-tron  increased by $1.3
million  for  the   three-month   period  due  to  increased   demand  from  the
telecommunications  industry and increased  sales of new products.  Revenues for
the  nine-month  period  increased  $2.5 million due to the same factors.  Lynch
Systems' revenues for the third quarter  increased by $1.2 million,  but for the
nine months fell by $1.1 million reflecting lack of orders for extra-large glass
press machines which were not offset by orders for other products.

Operating  profit for the third  quarter 1999  declined by $0.7 million from the
operating  profit in the prior year.  Spinnaker's  operating  profit declined by
$0.8 million due to lower volume,  reduction in gross margins as a result of the
lower  pricing  noted above as well as the effect of  increased  Asian  imports.
These factors also affected the nine month period where operating profit fell by
$2.4 million,  but were offset by gains on sale of fixed assets ($0.8  million).
M-tron's  operating profit increased by $0.3 million due to increased volume and
Lynch Systems' operating loss decreased during the third quarter by $0.1 million
due to sale of lower margined  products,  and for the nine month period also due
to sales of lower  margined  products but  predominantly  due to a short-fall in
order activity.

OTHER INCOME (EXPENSE), NET
---------------------------

Interest  income  increased for both the three and nine month periods due to the
net  proceeds  after  payment of certain  debt  instruments,  approximately  $75
million, which are currently invested in short term instruments.

Interest  expense was $3.3 million for the quarter and increased  from the prior
year  due to  allocations  of a  portion  of the  interest  associated  with the
Spinnaker  10.75% Senior Secured Notes Due 2006 to the  discontinued  industrial
tape segment until the time of their sale.  During the  nine-month  period ended
September  30, 1999,  interest  expense also  increased by increased  debt level
resulting from  Spinnaker's  acquisition  of S.D.  Warren's  pressure  sensitive
adhesive-backed label stock business on March 17, 1998.
<PAGE>

Interest  expense  from  continuing  operations  is subject  to certain  matters
associated  with the use of the net  proceeds  from the sales of the  industrial
tape units of  Spinnaker,  including  retirement  of senior  debt or  "permitted
investments" as defined under the Indenture.  As a result,  interest expense, as
presented on a historical  basis,  may not necessarily be indicative of interest
expense of continuing operations for the year ended December 31, 1999.

TAX PROVISION
-------------

The income tax provision  (benefit) includes federal, as well as state and local
taxes. The tax provision  (benefit) for the nine months ended September 30, 1999
and  1998,  represents  effective  tax  rates of (40%)  for  both  periods.  The
differences from the federal statutory rate are principally due to the effect of
state income taxes and amortization of non-deductible goodwill.

MINORITY INTEREST
-----------------

Minority  interests  contribution  to the net income  (loss)  increased  by $0.3
million  and $1.2  million for the three and nine month  periods,  respectively,
from the prior year periods of 1998 due to the increased  losses from continuing
operations  at Spinnaker and the January 1, 1999  repurchase of M-tron  minority
interest.

DISCONTINUED OPERATIONS
-----------------------

On August 12, 1999,  the Board of Directors  approved a plan to  distribute  the
stock  of  Lynch  Interactive  Corporation  on  a  one  for  one  basis  to  the
shareholders of Lynch Corporation  ("spin off"). Lynch completed the spin off of
Lynch Interactive  Corporation on September 1, 1999 to stockholders of record on
August 23, 1999.  Pursuant to the spin off, each Lynch shareholder  received one
share of Interactive  stock for each share of Lynch owned.  Lynch had received a
private letter ruling from the Internal  Revenue Service that the spin off would
be tax free to Lynch  shareholders.  Interactive  has  listed  its  stock on the
American Stock Exchange.(LIC)

Interactive owns all of what was Lynch's multimedia and service businesses while
Lynch  retains the  manufacturing  businesses.  Interactive  owns the  telephone
companies,  television  interests and PCS  interests,  as well as the 55% equity
interest of The Morgan Group, Inc. In addition,  Interactive owns a 13.6% equity
interest  in  Spinnaker  Industries,  Inc.  Lynch owns a 48% equity  interest in
Spinnaker  after the spin  off,  as well as M-tron  Industries,  Inc.  and Lynch
Systems, Inc.

As a result,  the Company's  multimedia and services segments are being reported
as  operations   distributed  to  shareholders  in  the  accompanying  condensed
consolidated  financial  statements.  Accordingly,  operating  results  of Lynch
Interactive  Corporation  have been segregated  from  continuing  operations and
reported as a separate line item on the statement of operations.


<PAGE>

Lynch has restated its prior year financial  statements to present the operating
results of Lynch Interactive on a comparable basis. Interactive's net sales were
$155.8 million and $155.1 million for the nine month period ended  September 30,
1999 and 1998,  respectively,  and $205.1  million,  $194.1  million  and $160.8
million  for  the  fiscal  years  ended   December  31,  1998,   1997,  ad  1996
respectively.

A Lynch  Interactive  subsidiary  has loans to and a 49.9%  limited  partnership
interest in Fortunet Communications,  L.P. ("Fortunet").  Fortunet's only assets
consist of three 15Mhz personal  communications licenses covering an area with a
population  of 785,000  that were  acquired in the C-Block  auction  held by the
Federal  Communications  Commission ("FCC"). In that auction,  Fortunet acquired
30Mhz licenses in these markets,  but on June 9, 1998,  under FCC  restructuring
options,  it returned 15Mhz of the original 30Mhz  acquired.  On April 15, 1999,
the FCC completed  the reauction of all the C-Block  licenses that were returned
to it since the original  C-Block  auction,  including the three 15Mhz  licenses
that Fortunet returned.  In that reauction,  the successful bidders paid a total
of $2.7 million for the three licenses as compared to the $18,7 million carrying
amount of Lynch's investment in Fortunet.  Accordingly, during the quarter ended
March 31, 1999,  Lynch  recorded a write down of $15.4 million in its investment
in Fortunet to reflect  the amount bid for  similar  licenses in the  reauction,
plus an additional $0.7 million of capitalized expenses and interest, to leave a
carrying  value of $3.4  million.  This write down offset by  operating  profits
caused the loss for the nine months ended September 30, 1999.

In the third  quarter of 1999,  Spinnaker  sold its two  industrial  tape units,
Central Products Company and Spinnaker Electrical, which comprise its industrial
tape segment. Accordingly, operating results of the industrial tape segment have
been  segregated  from  continuing  operations  and reported  separately  in the
statement  of  operations.  In  addition,  the  Company has  restated  its prior
financial  statements to present the operating  results of the  industrial  tape
segment as a discontinued operation.

Lynch has restated its prior year financial  statements to present the operating
results  of  the  industrial  tape  segment  as a  discontinued  operation.  The
industrial tape segment's net sales were $10.7 million and $31.5 million for the
three-month period ended September 30, 1999 and 1998 and $69.5 million and $89.3
million  for  the  nine  month  period  ended   September  30,  1999  and  1998,
respectively,  and $121.8  million,  $119.7  million and $124.1  million for the
fiscal years ended December 31, 1998, 1997, and 1996, respectively.

NET INCOME/LOSS
---------------

Net loss for the nine months ended  September  30, 1999 was $(2.7)  million,  or
$(1.89) per share,  as compared  to a net income of $3.0  million,  or $2.14 per
share in the nine month period ended September 30, 1998.

Net income for the three months ended  September 30, 1999 was $7.9  million,  or
$5.59 per share, higher than net income of $2.1 million, or $1.52 per share, for
the  same  period  of 1998  due  primarily  to  Spinnaker's  gain on sale of its
industrial tape units.

BACKLOG/NEW ORDERS
------------------

Total backlog of manufactured  products from continuing  operations at September
30, 1999 was $30.7 million,  which  represents an increase of $20.9 million from
the  backlog  of  $9.8  million  at  December  31,  1998.  All  operating  units
contributed significant increases to the backlog at September 30, 1999. Included
in the backlog for both periods is a $2.4 million cancellation provision,  which
the customer  paid,  on an earlier  glass press order at Lynch Systems which was
subsequently canceled. The customer can use this amount for future orders and if
not utilized, reverts to Lynch Systems. Included in the backlog at September 30,
1999 is a $14 million order for large glass press machines at Lynch Systems.  In
connection  with this order,  Lynch Systems has to obtain a  substantial  credit
facility to protect advances by the customer and for working capital.


<PAGE>

FINANCIAL CONDITION
LIQUIDITY/CAPITAL RESOURCES
---------------------------

As of September 30, 1999,  the Company had current  assets of $145.4 million and
current  liabilities  of $65.1  million.  Working  capital was  therefore  $80.3
million as  compared to $18.4  million at December  31,  1998.  The  increase is
primarily due to the sale ofthe industrial tape units. Proceeds from the sale of
Spinnaker  Industrial Tape Business were used to satisfy  transaction  costs and
repay  approximately  $18.2 million of the working  capital  revolver  debt. The
balance  of  proceeds  from the  Central  Products  Company,  approximately  $60
million,  are available to invest in any business,  capital expenditure or other
tangible asset in the Permitted  Businesses,  as defined in the  Indenture.  Any
proceeds  not so invested  within 270 days after the  closing of the  Industrial
Tape  Sale  or  not  used  to  permanently  reduce   indebtedness   (other  than
subordinated  debt) shall be used to  repurchase  the Senior Notes on a pro rata
basis as required by the Indenture.

Net proceeds from the sale of Spinnaker Electrical,  an unrestricted subsidiary,
were used to repay  approximately  $6.9 million of term debt and revolving debt.
The balance is available for general purposes,  which may include purchasing the
Senior Notes in the open market.  Other options  include  acquisitions,  capital
expenditures to support remaining  subsidiaries,  and/or repurchase of Spinnaker
common stock.

First  nine  months  capital  expenditures  were $2.8  million  in 1999 and $5.1
million in 1998.

At September 30, 1999,  total debt was $144.3  million,  which was $44.4 million
less than the  $188.7  million  at the end of 1998  primarily  due to  principal
repayments. Debt at September 30, 1999 included $123.7 million of fixed interest
rate  debt,  at an  average  cash  interest  rate of 10.7% and $20.6  million of
variable interest rate debt at an average interest rate of 8%. Additionally, the
Company had unused  lines of credit  facilities  of which the  Spinnaker  Credit
Facility is a major portion.  The Spinnaker Credit Facility is available to fund
acquisitions  and  support  periodic  fluctuations  in working  capital.  Credit
availability   under  the  Spinnaker  Credit  Facility  is  subject  to  certain
variables,  such as  inventory  and  receivables  eligible to be included in the
borrowing  base.  The  Company is charged  an unused  credit fee every  month of
0.375% per annum. Outstanding borrowings bear interest at variable rates related
to the prime  interest  rate or LIBOR.  At  September  30,  1999,  the  combined
effective  interest rate was 8%. In conjunction  with the industrial  tape sale,
the Spinnaker  Credit  Facility was  refinanced  and the aggregate  facility was
decreased from $60 million to $40 million.  The Refinanced  Credit Facility will
expire December 31, 2001. As of September 30, 1999, aggregate availability under
the  Refinanced  Credit  Facility  was  approximately  $30.1  million,  of which
approximately $17.9 million was outstanding.
<PAGE>

In  conjunction  with  the  Spin  Off of  Lynch  Interactive,  lines  of  credit
facilities of $20 million were transferred from the Registrant to Interactive.

The Company has a significant  need for resources to fund the  operations of the
holding company and fund future growth.  Lynch is currently  considering various
alternative  long and short-term  financing  arrangements.  One such alternative
could be to sell a portion or all of certain  investments in operating  entities
either  directly or through an  exchangeable  debt  instrument.  Additional debt
and/or equity financing vehicles at corporate and/or subsidiaries are also being
considered.  While management expects to obtain adequate financing  resources to
enable the company to meet its obligations,  there is no assurance that such can
be readily obtained or at reasonable costs.

YEAR 2000

The Company has  initiated a  comprehensive  review of its  computer  systems to
identify  the  systems  that could be  affected  by the "Year 2000" issue and is
developing and conducting an implementation  plan to resolve the issue. The Year
2000 problem is the result of computer  programs  being written using two digits
(rather than four) to define the applicable year. Any of the Company's  programs
or programs utilized by vendors to the Company that have time-sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a major system  failure or  miscalculation.  The Company's  Year
2000  review is being  performed  primarily  by internal  staff,  and in certain
operations is supplemented  by outside  consultants.  The principal  Information
Technology  (IT) systems for the  Company's  manufacturing  companies  are sales
order entry, shop floor control, inventory control and accounting. The Year 2000
may also impact various non-IT  systems,  including  among other things security
systems, HVAC, elevator systems, and communications  systems. In addition,  each
of the Company's  businesses may be impacted by the Year 2000 readiness of third
party vendors/suppliers.

The assessment phase for the Company's manufacturing businesses is approximately
99% complete.  Based upon its identification and assessment efforts to date, the
Company  has  determined  that  certain of its  computer  and  software  used in
manufacturing and accounting systems require  replacement or modification.  Such
replacements and  modifications are ongoing and estimated to be 90% complete and
are  expected  to be 100%  complete  in  1999.  The  total  cost  of  Year  2000
remediation for the  manufacturing  businesses is estimated to be  approximately
$0.2  million,  of which  approximately  $0.1  million has been spent to date. A
comprehensive  contingency  plan  has not  been  completed  at this  time but is
expected to be completed in the fourth quarter of 1999.

The estimated  costs and projected  dates of completion  for the Company's  Year
2000  program  are based on  management's  estimates  and were  developed  using
numerous  assumptions of future  events,  some of which are beyond the Company's
control.  The Company  presently  believes that with  modifications  to existing
software  and  converting  to new  software,  the Year 2000  issue will not pose
significant  operational  problems for the Company as a whole.  However, if such
modifications and conversions are not completed timely or are ineffective, or if
key third parties,  suppliers or customers  experience  Year 2000 problems,  the
Year 2000 issue may  materially  and adversely  impact the  Company's  financial
condition, results of operations and cash flows.
<PAGE>

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  $78.6  million at September  30,  1999).  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
as fixed rate in nature either by borrowing on a fixed  long-term basis or, on a
limited basis, entering into interest rate swap agreements. 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.

At September  30, 1999,  approximately  $20.6  million,  or 14% of the Company's
long-term debt and notes payable bears interest at variable rates.  Accordingly,
the Company's earnings and cash flows are affected by changes in interest rates.
Assuming the current level of  borrowings  for variable rate debt and assuming a
one  percentage  point  change in the 1999  average  interest  rate under  these
borrowings,  it is estimated  that the  Company's  third  quarter 1999  interest
expense would have changed by less than $0.1 million. In the event of an adverse
change in  interest  rates,  management  would  likely  take  actions to further
mitigate its exposure. However, due to the uncertainty of the actions that would
be taken and their  possible  effects,  the  analysis  assumes no such  actions.
Further,  the analysis  does not consider the effects of the change in the level
of overall economic activity that could exist in such an environment.

                            ------------------------

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 Spinnaker,  Year
2000 matters and Market Risk. It should be recognized that such  information are
projections,  estimates or  forecasts  based on various  assumptions,  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 Registrant's businesses, government
and regulatory actions and approvals, and tax consequences, and the risk factors
and cautionary statements set forth in reports filed by Registrant 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 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits
                  27 - Financial Data Schedule

         (b)      Reports on Form 8-K

                    Reports on form 8-K were dated (i) July 16,  1999  (relating
                    to the acquisition of Central Scott Telephone Company), (ii)
                    July 30, 1999 (relating to the sale by Spinnaker of its tape
                    operations),  (iii)  September 1, 1999 (relating to the Spin
                    Off of Lynch  Interactive  Corporation)  and (iv) October 6,
                    1999 (relating to Lynch Systems' settlement of a lawsuit and
                    receipt of an order for large glass press machines.


                             SIGNATURES

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

                                  LYNCH CORPORATION
                                  (Registrant)


                                  BY: S/ROBERT E. DOLAN

                                        Robert E. Dolan
                                        Chief Financial Officer

November 15, 1999