================================================================================

                        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, 2003
                               ------------------

                                       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. 1-15097
                    -------


                          LYNCH INTERACTIVE CORPORATION
                          -----------------------------
             (Exact name of Registrant as specified in its charter)


            Delaware                                         06-1458056
            --------                                         ----------
State or other jurisdiction of                           (I.R.S. Employer
inforporation or organization)                           Identification No.


401 Theodore Fremd Avenue, Rye, New York                      10580
----------------------------------------                      -----
(Address of principal executive offices)                    (Zip Code)

                                 (914) 921-8821
                                 --------------
               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  by check mark  whether  the  Registrant  is an  accelerated  filer (as
defined in Rule 12b-2of the Act).Yes  No X

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, 2003
            -----                             -------------------------------
Common Stock, $.0001 par value                           2,782,151


================================================================================
<PAGE>


                                      INDEX

                 LYNCH INTERACTIVE CORPORATION AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION


Item 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets:
  -      September 30, 2003
  -      December 31, 2002
  -      September 30, 2002

Condensed Consolidated Statements of Operations:
  -      Three and nine months ended September 30, 2003 and 2002

Condensed Consolidated Statements of Cash Flows:
  -      Nine months ended September 30, 2003 and 2002

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

Item 4. Controls and Procedures

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 6. Exhibits and Reports on Form 8-K


SIGNATURE

CERTIFICATIONS















                                        i



<PAGE>



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
<TABLE>
<CAPTION>

                 LYNCH INTERACTIVE CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (In thousands, except share amounts)
                                                            September 30,   December 31,  September 30,
                                                                 2003          2002          2002
                                                            ---------------------------------------------
                                                             (Unaudited)      (Note)     (Unaudited)
<S>                                                           <C>          <C>          <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents ...............................   $  27,409    $  23,356    $  25,338
  Restricted cash .........................................        --           --         10,598
  Receivables, less allowances of $262,
    $316 and $345, respectively ...........................       8,774        8,916        9,381
  Material and supplies ...................................       3,160        3,351        3,739
  Prepaid expenses and other current assets ...............       1,334        1,451        2,472
                                                              ---------    ---------    ---------
TOTAL CURRENT ASSETS ......................................      40,677       37,074       51,528

PROPERTY, PLANT AND EQUIPMENT:
  Land ....................................................         834          807          840
  Buildings and improvements ..............................      13,308       12,741       10,952
  Machinery and equipment .................................     207,524      195,015      190,018
                                                              ---------    ---------    ---------
                                                                221,666      208,563      201,810
  Accumulated Depreciation ................................    (101,120)     (88,201)     (85,661)
                                                              ---------    ---------    ---------
                                                                120,546      120,362      116,149
GOODWILL, NET .............................................      60,884       60,884       60,889
INVESTMENTS IN AND ADVANCES TO AFFILIATED ENTITIES ........       9,993        9,343        8,223
OTHER ASSETS ..............................................      18,876       17,684       16,828
                                                              ---------    ---------    ---------
TOTAL ASSETS ..............................................   $ 250,976    $ 245,347    $ 253,617
                                                              =========    =========    =========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Notes payable to banks ..................................   $  11,537    $  12,882    $  10,744
  Trade accounts payable ..................................       3,331        1,638          801
  Accrued interest payable ................................         325          384        1,419
  Accrued liabilities .....................................      16,672       16,682       19,322
 Current maturities of long-term debt .....................      31,805       18,272       26,981
                                                              ---------    ---------    ---------
TOTAL CURRENT LIABILITIES .................................      63,670       49,858       59,267
LONG-TERM DEBT ............................................     145,814      158,349      160,632
DEFERRED INCOME TAXES .....................................       6,720        6,621        5,721
OTHER LIABILITIES .........................................         600          736          752
MINORITY INTERESTS ........................................       7,629        7,151        6,999

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
  COMMON STOCK, $0.0001 PAR VALUE-10,000,000
    SHARES AUTHORIZED; 2,824,766 ISSUED; 2,782,151,
     2,792,651 and 2,796,251 OUTSTANDING ..................        --           --           --
  ADDITIONAL PAID-IN CAPITAL ..............................      21,406       21,406       21,406
  RETAINED EARNINGS (DEFICIT) .............................       5,880        1,879         (247)
  ACCUMULATED OTHER COMPREHENSIVE INCOME ..................         682          534          181
  TREASURY STOCK, 42,615, 32,115 and 28,515 shares, at cost      (1,425)      (1,187)      (1,094)
                                                              ---------    ---------    ---------
TOTAL SHAREHOLDER'S EQUITY ................................      26,543       22,632       20,246
                                                              ---------    ---------    ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................   $ 250,976    $ 245,347    $ 253,617
                                                              =========    =========    =========
</TABLE>

Note:  The balance  sheet at December 31, 2002 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 Untied
States for complete financial statements.

See accompanying notes.

                                      -1-
<PAGE>
<TABLE>
<CAPTION>

                 LYNCH INTERACTIVE CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

               (In thousands, except per share and share amounts)

                                                             Three Months Ended           Nine Months Ended
                                                               September 30,                September 30,
                                                        ----------------------------------------------------------
                                                             2003          2002          2003           2002
                                                        ----------------------------------------------------------
<S>                                                      <C>            <C>            <C>            <C>
SALES AND REVENUES ...................................   $    22,319    $    22,983    $    64,965    $    65,055

COSTS AND EXPENSES:
Operations ...........................................        11,151         11,374         32,634         32,710
Depreciation and amortization ........................         4,994          4,857         14,822         14,448
Selling and administrative ...........................           795            861          2,663          2,305
                                                          -----------     ---------     ----------    -----------
OPERATING PROFIT .....................................         5,379          5,891         14,846         15,592
                                                          -----------     ---------     ----------    -----------

Other income (expense):
   Investment income .................................            83            162            739          1,394
   Interest expense ..................................        (2,995)        (3,240)        (9,020)        (9,911)
   Equity in earnings of affiliated companies ........           338            429          1,023            857
   Reserve for impairment in spectrum license holder .          --           (5,479)          --           (5,479)
   Gain on sale of subsidiary stock ..................          --             --             --            4,965
                                                          -----------    ----------     ----------    -----------
                                                              (2,574)        (8,128)        (7,258)        (8,174)
                                                          -----------    ----------     ----------    -----------
INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTERESTS
AND OPERATIONS OF MORGAN GROUP HOLDING CO. DISTRIBUTED
TO SHAREHOLDERS ......................................         2,805         (2,237)         7,588          7,418
(Provision) Benefit for income taxes .................        (1,158)           550         (3,109)        (3,233)
Minority Interests ...................................          (215)          (185)          (478)          (879)
                                                          -----------    ----------      ---------    -----------
INCOME (LOSS)  FROM CONTINUING OPERATIONS
                                                               1,432         (1,872)         4,001          3,306

Loss from operations of Morgan Group Holding Co.
distributed to shareholders, net of income taxes of
$-, and minority interests of $868 ...................          --             --             --           (1,888)
                                                         -----------     ----------     ----------    -----------
NET INCOME (LOSS) ....................................   $     1,432    $    (1,872)   $     4,001    $     1,418
                                                         ===========     ==========     ==========    ===========

Basic weighted average shares outstanding ............     2,782,000      2,799,000      2,787,000      2,809,000
Diluted weighted average shares outstanding ..........     2,782,000      2,799,000      2,787,000      2,809,000
BASIC EARNINGS PER SHARE
INCOME (LOSS)  FROM CONTINUING OPERATIONS ............   $      0.51    $     (0.67)   $      1.44    $      1.18
Loss from operations of Morgan Group Holding Co.
  distributed to shareholders ........................          --             --             --            (0.68)

                                                         -----------     ----------     ----------    -----------
NET INCOME (LOSS) ....................................   $      0.51    $     (0.67)   $      1.44    $      0.50
                                                         ===========     ==========     ==========    ===========


DILUTED EARNINGS PER SHARE
INCOME (LOSS) FROM CONTINUING OPERATIONS                 $      0.51    $     (0.67)   $      1.44    $      1.18

Loss from operations of Morgan Group Holding Co.
   distributed to shareholders .......................          --             --             --            (0.68)
                                                         -----------    -----------    -----------    -----------
NET INCOME (LOSS) ....................................   $      0.51    $     (0.67)   $      1.44    $      0.50
                                                         ===========    ===========    ===========    ===========
</TABLE>
      See accompanying notes.

                                      -2-
<PAGE>
<TABLE>
<CAPTION>

                 LYNCH INTERACTIVE CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (In thousands)

                                                                                            Nine Months Ended
                                                                                              September 30,
                                                                                     ---------------------------------
                                                                                          2003             2002
                                                                                     ---------------------------------
     <S>                                                                                      <C>              <C>
     OPERATING ACTIVITIES..................................................
     Net Income............................................................                   $4,001           $1,418
     Adjustments to reconcile net income to net cash provided by operating
     activities:...........................................................
        Depreciation and amortization......................................                   14,822           14,448
        Equity in earnings of affiliated companies.........................                   (1,023)            (857)
        Minority interests.................................................                      478              879
        Gain on sale of cellular partnership...............................                       --           (4,965)
        Reserve for impairment in spectrum license holder..................                       --            5,479
        Gain on sale of available for sale securities......................                       --              (24)
        Deferred income taxes..............................................                       --           (1,863)
        Non-cash items and changes in operating assets and liabilities
          from operations of Morgan Group Holding Co.
          distributed to shareholders......................................                       --            1,888
        Changes in operating assets and liabilities:.......................
             Receivables...................................................                      142              656
             Accounts payable and accrued liabilities......................                    1,481            3,259
             Other.........................................................                      308           (1,081)
                                                                                     --------------------------------
     NET CASH PROVIDED BY OPERATING ACTIVITIES.............................                   20,209           19,237
                                                                                     --------------------------------

     INVESTING ACTIVITIES..................................................
     Capital expenditures..................................................                  (14,701)         (14,374)
     Investment in and advances to affiliated entities.....................                     (170)             101
     Proceeds from sale of available for sale securities...................                       --              398
     Proceeds from sale of cellular partnership............................                       --            5,570
     Other.................................................................                     (700)            (202)
                                                                                     --------------------------------
     NET CASH USED IN INVESTING ACTIVITIES.................................                  (15,571)          (8,507)
                                                                                     --------------------------------

     FINANCING ACTIVITIES..................................................
     Issuance of long term debt............................................                   10,233            5,041
     Repayments of long term debt..........................................                   (9,235)         (10,652)
     Net repayments on lines of credit.....................................                   (1,345)             408
     Treasury stock transactions...........................................                     (238)            (863)
     Investment in restricted cash.........................................                       --           (3,029)
     Other.................................................................                       --               39
                                                                                     --------------------------------
     NET CASH USED IN FINANCING ACTIVITIES.................................                     (585)          (9,056)
                                                                                     --------------------------------
     Net increase in cash and cash equivalents.............................                    4,053            1,674
     Cash and cash equivalents at beginning of period......................                   23,356           23,664
                                                                                     --------------------------------
     CASH AND CASH EQUIVALENTS AT END OF PERIOD............................                  $27,409          $25,338
                                                                                     ================================

See accompanying notes.
</TABLE>
                                      -3-
<PAGE>

                  LYNCH INTERACTIVE CORPORATION & SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A.   Subsidiaries of the Registrant

As of September 30, 2003, the Subsidiaries of the Registrant are as follows:
<TABLE>
<CAPTION>

Subsidiary                                       Owned by Lynch

<S>                                                  <C>
Brighton Communications Corporation ............     100.0%
  Lynch Telephone Corporation IV ...............     100.0%
    Bretton Woods Telephone Company ............     100.0%
    World Surfer, Inc. .........................     100.0%
  Lynch Broadband Corporation ..................     100.0%
  Lynch Telephone Corporation VI ...............      98.0%
    JBN Telephone Company, Inc. ................      98.0%
      JBN Finance Corporation ..................      98.0%
      CLR Video, L.L.C .........................      98.0%
    Giant Communications, Inc. .................     100.0%
    Lynch Telephone Corporation VII ............     100.0%
      USTC Kansas, Inc. ........................     100.0%
       Haviland Telephone Company, Inc. ........     100.0%
        Haviland Finance Corporation ...........     100.0%
  DFT Communications Corporation ...............     100.0%
     DFT Telephone Holding Company, L.L.C ......     100.0%
    Dunkirk & Fredonia Telephone Company .......     100.0%
      Cassadaga Telephone Company ..............     100.0%
        Macom, Inc. ............................     100.0%
      Comantel, Inc. ...........................     100.0%
        Erie Shore Communications, Inc. ........     100.0%
        D&F Cellular Telephone, Inc. ...........     100.0%
    DFT Long Distance Corporation ..............     100.0%
    DFT Local Service Corporation ..............     100.0%
    DFT Security Services, Inc. ................     100.0%
  LMT Holding Corporation ......................     100.0%
    Lynch Michigan Telephone Holding Corporation     100.0%
        Upper Peninsula Telephone Company ......     100.0%
        Alpha Enterprises Limited ..............     100.0%
          Upper Peninsula Cellular North, Inc. .     100.0%
          Upper Peninsula Cellular South, Inc. .     100.0%

  Lynch Telephone Corporation IX ...............     100.0%
    Central Scott Telephone Company ............     100.0%
        CST Communications Inc. ................     100.0%
  Global Television, Inc. ......................     100.0%
  Inter-Community Acquisition Corporation ......     100.0%

  Lynch Telephone Corporation X ................     100.0%
     Central Utah Telephone, Inc. ..............     100.0%
        Bear Lake Communications, Inc. .........     100.0%
        Skyline Telecom ........................     100.0%
     Central Telecom Services, LLC .............     100.0%
        Cache Valley Wireless, LC ..............     100.0%
</TABLE>
                                      -4-
<page>
<TABLE>
<CAPTION>

Subsidiary                                    Owned by Lynch

<S>                                              <C>
  Lynch Entertainment, LLC .................     100.0%
  Lynch Entertainment Corporation II .......     100.0%

  Lynch Multimedia Corporation .............     100.0%

  Lynch Paging Corporation .................     100.0%

Lynch PCS Communications Corporation .......     100.0%
  Lynch PCS Corporation A ..................     100.0%
  Lynch PCS Corporation F ..................     100.0%
  Lynch PCS Corporation G ..................     100.0%
  Lynch PCS Corporation H ..................     100.0%

Lynch 3G Communications Corporation ........     100.0%

Lynch Telephone Corporation ................      83.1%
  Western New Mexico Telephone Company, Inc.      83.1%
  Interactive Networks Corporation .........      83.1%
  WNM Communications Corporation ...........      83.1%
  WNM Interactive, L.L.C ...................      83.1%
  Wescel Cellular, Inc. ....................      83.1%
    Wescel Cellular of New Mexico, L.P. ....      42.4%
  Wescel Cellular, Inc. II .................      83.1%
      Enchantment Cable Corporation ........      83.1%
Lynch Telephone II, LLC ....................     100.0%
  Inter-Community Telephone Company, LLC ...     100.0%
  Valley Communications, Inc. ..............     100.0%
Lynch Telephone Corporation III ............      81.0%
  Cuba City Telephone Exchange Company .....      81.0%
  Belmont Telephone Company ................      81.0%
</TABLE>

                                      -5-
<PAGE>

B.   Basis of Presentation

Lynch Interactive Corporation  ("Interactive" or the "Company") consolidates the
operating  results of its telephone and cable television  subsidiaries  (81-100%
owned at September 30, 2003,  December 31, 2002 and  September  30,  2002).  All
material   intercompany   transactions   and  balances  have  been   eliminated.
Investments  in affiliates in which the Company does not have a majority  voting
control are  accounted  for in accordance  with the equity  method.  The Company
accounts  for  the  following  affiliated  companies  on  the  equity  basis  of
accounting:  Coronet  Communications  Company (20% owned at September  30, 2003,
December 31, 2002 and September 30, 2002), Capital Communications  Company, Inc.
(49% owned at September  30, 2003,  December 31, 2002 and September 30, 2002; we
note,  however,  that Interactive  owns a convertible  preferred stock which, if
converted,  would increase its ownership in Capital  Communications  to 50%) and
the  cellular  partnership  operations  in New  Mexico  (17%  and 21%  owned  at
September 30, 2003, December 31, 2002 and September 30, 2002).

On January 24, 2002, Interactive spun off its interest in The Morgan Group, Inc.
("Morgan"),  its  only  services  subsidiary,  via a  tax-free  dividend  to its
shareholders  of the stock of Morgan Group Holding Co., a  corporation  that was
formed to serve as a holding company for Interactive's  controlling  interest in
Morgan.  Morgan  Group  Holding Co. is now a public  company.  Accordingly,  the
amounts  for  Morgan  are  reflected  on  a  one-line  basis  in  the  condensed
consolidated  financial statements for the nine months ended September 30, 2002,
as amounts "distributed to shareholders."

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States for interim  financial  information  and with the  instructions to
Form 10-Q and Articles 10 and 11 of  Regulation  S-X.  Accordingly,  they do not
include all of the information and footnotes  required by accounting  principles
generally  accepted in the United States 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 and nine month periods ended September 30, 2003
are not necessarily  indicative of the results that may be expected for the year
ending December 31, 2003. The preparation of consolidated  financial  statements
in conformity with accounting principles generally accepted in the United States
requires  management to make estimates and  assumptions  that affect the amounts
reported in the financial  statements  and  accompanying  notes.  Actual results
could differ from those estimates.

As noted,  in Note H, in the first  quarter of 2003,  the Company  issued  stock
options to its President and Chief Operating Officer. The Company has elected to
account  for these  options  under the  provisions  of FASB  Statement  No.  123
"Accounting and Disclosure of Stock-Based  Compensation"  and FASB Statement No.
148  "Accounting for  Stock-Based  Compensation - Transition and Disclosure,  an
amendment  of FASB  Statement  No.  123."  Under  the  provisions  of these  two
statements, stock options are valued at fair value on the date of grant and such
amount is  amortized  to  expense  over the  vesting  period.  During the second
quarter of 2003, the President left the Company, and all options were forfeited.
The $50,000 of expense that was recognized in the first quarter, was reversed in
the second quarter of 2003.
                                      -6-
<PAGE>

In June 2001,  the FASB issued SFAS No. 143,  "Accounting  for Asset  Retirement
obligations." This standard provides  accounting  guidance for legal obligations
associated  with the  retirement  of  long-lived  assets  that  result  from the
acquisition,  construction  or  development  and (or) normal  operation  of that
asset.  According  to the  standard,  the  fair  value  of an  asset  retirement
obligation  (ARO  liability)  should be  recognized  in the period in which (1)a
legal  obligation to retire a long-lived  asset exists and (2) the fair value of
the  obligation  based on  retirement  cost and  settlement  date is  reasonably
estimable.  Upon initial  recognition  of the ARO  liability,  the related asset
retirement  cost should be capitalized by increasing the carrying  amount of the
related  long-lived  asset. The Company adopted SFAS No. 143 on January 1, 2003.
Although the Company  generally has had no legal  obligation  to remove  assets,
depreciation rates of certain assets  established by regulatory  authorities for
the  Company's  telephone  operations  subject to SFAS No. 71 have  historically
included  a  component  for  removal  costs in excess of the  related  estimated
salvage value.  SFAS No. 71 requires the Company to not remove this  accumulated
liability  for removal  costs in excess of salvage value even though there is no
legal obligation to remove the assets. For the Company's  operations not subject
to SFAS No. 71 the Company has not accrued a liability for  anticipated  removal
costs in the past and will  continue to expense the costs of removal as incurred
since there is no legal  obligation  to remove  such  assets.  Accordingly,  the
adoption of SFAS No. 143 had no impact on the Company's financial statements.

In  January   2003,   the  FASB  issued   Interpretation   No.  46  ("FIN  46"),
"Consolidation of Variable Interest Entities,  an Interpretation of ARB No. 51."
FIN 46 requires  certain  variable  interest  entities to be consolidated by the
primary  beneficiary of the entity if the equity  investors in the entity do not
have the  characteristics  of a  controlling  financial  interest or do not have
sufficient  equity at risk for the  entity to  finance  its  activities  without
additional  subordinated  financial  support  from  other  parties.  FIN  46  is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to  February  1, 2003,  the  provisions  of FIN 46 must be applied for the first
interim or annual  period  ending after  December 15,  2003.  Management  of the
Company is still  evaluating  the impact that FIN 46 will have on the  Company's
consolidated financial position, results of operations or cash flows.

Certain 2002 amounts have been reclassified to conform to the 2003 presentation.

C.   Acquisitions and Dispositions

The Company has agreed to acquire a 37%  interest in an entity  whose  principal
assets consist of a $6.0 million  subordinated note and a 17% equity interest in
Lynch Telephone  Corporation,  which is an 83% owned  subsidiary of the Company.
The acquisition cost of this interest will be $5.0 million, which will be funded
through the issuance of a five-year amortizing subordinated note of the parent.

A subsidiary  of the Company is in the process of  acquiring a cable  television
operation at a cost of $0.4 million.

In March 2002,  the Company sold its 20.8%  interest in the New Mexico  cellular
partnership,  RSA #1B, to Verizon  Wireless for $5.6 million ($5 million pre-tax
gain) and repaid $2.6 million of outstanding indebtedness to Verizon.

D.   Spin-off of Morgan

On January 24,  2002,  Interactive  spun off its  interest in The Morgan  Group,
Inc., its only services subsidiary,  via a tax-free dividend to its shareholders
of the stock of Morgan Group Holding Co., a corporation that was formed to serve
as a holding company for Interactive's controlling interest in The Morgan Group,
Inc. Morgan Group Holding Co. is now a public company.

                                      -7-
<PAGE>

E.   Investments in Affiliated Companies

Interactive has equity  investments in both broadcasting and  telecommunications
companies.

Summarized  financial  information  for  companies  accounted  for by the equity
method as of and for the three and nine months ended September 30, 2003 and 2002
and as of December 31, 2002 is as follows (000's):

<TABLE>
<CAPTION>
                                                        Broadcasting Combined Information
                                                    September 30, December 31,  September 30,
                                                       2003        2002            2002
                                                   (Unaudited)                 (Unaudited)
                                                   ------------------------------------------

<S>                                                <C>            <C>            <C>
Current assets .................................   $  5,382       $  6,181       $  5,483
Property, plant & equipment, intangibles & other      9,866         11,260         11,556
                                                   --------       --------       --------
Total assets ...................................   $ 15,248       $ 17,441       $ 17,039
                                                   ========       ========       ========

Current liabilities ............................   $  3,227       $  3,790       $  4,322
Long term liabilities ..........................     16,844         18,069         17,942
Equity .........................................     (4,823)        (4,418)        (5,225)
                                                   --------       --------       --------
Total liabilities & equity .....................   $ 15,248       $ 17,441       $ 17,039
                                                   ========       ========       ========

Three months ended

Revenues .......................................   $  2,484                      $  3,047
Gross profit ...................................        510                         1,041
Net (Loss) Profit ..............................       (183)                          132

 Nine Months Ended

Revenues .......................................   $  8,222                      $  8,628
Gross profit ...................................      1,965                         2,678
Net Loss .......................................       (395)                          (19)
</TABLE>

At September 30, 2003,  December 31, 2002,  and September 30, 2002 the Company's
investment  in  Coronet  Communications  Company  ("Coronet")  was  carried at a
negative $798,000,  a negative $791,000,  and a negative $894,000  respectively,
due to the  Company's  guarantee of $3.8 million of Coronet's  third party debt.
Long-term debt of Coronet, at September 30, 2003, totaled $10.3 million due to a
third party  lender  which is due  quarterly  through  December  31,  2005.  The
Company's investment in Capital Communications Company was carried at $0 for all
periods.

                                      -8-
<PAGE>
<TABLE>
<CAPTION>


                                                        Telecommunications Combined Information
                                                 September 30, December 31,  September 30,
                                                 -----------------------------------------------
                                                    2003         2002           2002
                                                  (Unaudited)               (Unaudited)
                                                 -----------------------------------------------
                                                                 (000`s)
<S>                                                <C>          <C>          <C>
Current assets .................................   $13,337      $13,996      $12,396
Property, plant & equipment, intangibles & other    27,643       28,320       28,306
                                                   -------      -------      -------
Total assets ...................................   $40,980      $42,316      $40,702
                                                   =======      =======      =======

Current liabilities ............................   $ 5,928      $ 9,243      $ 8,731
Long term liabilities ..........................    10,459       11,869       13,056
Equity .........................................    24,593       21,204       18,915
                                                   -------      -------      -------
Total liabilities & equity .....................   $40,980      $42,316      $40,702
                                                   =======      =======      =======
Three months ended

Revenues .......................................   $12,110                   $11,342
Gross profit ...................................     4,215                     3,392
Net income .....................................     3,102                     2,481

Nine months ended

Revenues .......................................   $34,091                   $32,279
Gross profit ...................................    11,795                     9,228
Net income .....................................     8,781                     6,876
</TABLE>

During  the  year  ended  December  31,  2000,  the  Company  made  loans to and
investments in PTPMS  Communications,  LLC II,  totaling $6.1 million.  PTPMS II
acquired wireless spectrum in an auction conducted by the Federal Communications
Commission  in 2000 called the 700 MHz Guard Band  Auction.  In a  FCC-conducted
auction for similar  spectrum,  which ended on September 18, 2002, the Lower 700
MHz Band Auction, the price per MHz per population was materially lower than the
price paid by PTPMS II in 2000.  Accordingly,  during the third quarter of 2002,
Interactive  provided a reserve for impairment for its investment in PTPMS II of
$5.5 million, resulting in a remaining net book value of $0.7 million.

F.   Indebtedness

Interactive  maintains  a  short-term  line of credit  facility  totaling  $10.0
million.  This  facility  was  renewed  during  the  Third  Quarter  of 2003 and
currently  expires on August 31, 2004.  Borrowings under this facility were $7.9
million,  $10.0 million and $7.9 million at September 30, 2003, and December 31,
2002,  and  September  30, 2002  respectively.  Long-term  debt consists of (all
interest rates are at September 30, 2003):

                                      -9-
<PAGE>
<TABLE>
<CAPTION>

                                                                                September 30,                    September 30,
                                                                                    2003        December 31,         2002
                                                                                (Unaudited)         2002         (Unaudited)
                                                                                ----------------------------------------------
                                                                                               (In thousands)
<C>                                                                                <C>          <C>          <C>
Rural Electrification Administration (REA) and Rural Telephone Bank (RTB) notes
payable through 2027 at fixed interest rates ranging from 2% to 7.5%. (5%
weighted average, secured by assets of the telephone companies of
$152.8 million) ................................................................   $  59,472    $  58,119    $  57,379

Bank Credit facilities utilized by certain telephone and telephone holding
companies through 2016, $28.2 million at fixed interest rates averaging 7.9% and
$52.5 million at
variable interest rates averaging 4.1%  ........................................      80,684       80,166       82,007

Unsecured  notes  issued  in  connection  with acquisitions
through 2006, at fixed interest rates of 10.0% .................................      34,515       34,749       34,903

Convertible  note due in  December  2007 at a fixed  interest
rate of 10% ....................................................................        --           --         10,000

Other ..........................................................................       2,948        3,587        3,324
                                                                                   ---------    ---------    ---------
                                                                                     177,619      176,621      187,613
Current maturities .............................................................     (31,805)     (18,272)     (26,981)
                                                                                   ---------    ---------    ---------
                                                                                   $ 145,814    $ 158,349    $ 160,632
                                                                                   =========    =========    =========
</TABLE>


A subsidiary of the Company has $6.4 million of unsecured notes that were coming
due on December 8, 2003.  The holders of the notes have agreed to rollover  $6.3
million of their notes for five years at 8% interest  per annum  compared to 10%
currently. The notes being rolled over have been classified as noncurrent in the
accompanying Condensed Consolidated Balance Sheet at September 30, 2003 and were
classified as current at December 31, 2002.

A  subsidiary  of the  Company  has a term  note,  with  outstanding  balance at
September 30, 2003 of $16.2 million,  coming due in July 2004. The financing was
a five-year facility that was put in place in 1999 as part of the acquisition of
Central Scott Telephone  Company.  The Company is in discussions with the lender
to extend the note.  While the lender has not yet finalized the  extension,  the
Company expects to complete a three-year  renewal in the fourth quarter of 2003.
The debt is classified  as current on the  accompanying  Condensed  Consolidated
Balance Sheet at September 30, 2003.

A subsidiary of the Company is in default on a $1.8 million debt  facility.  The
lender has given the  Company  until  December  31,  2003 to cure the default or
replace the facility.  The Company  expects to negotiate a new facility with the
current or another lender by that time.

Another  subsidiary with a bank credit facility of $3.1 million at September 30,
2003  was not in  compliance  with  their  finance  debt  covenant  based on the
September 30, 2003 results. The Company is working with the lender to waive such
non-compliance and expects to be in compliance by December 31, 2003.

                                      -10-

<PAGE>

G.   Stock Options

The Company has a stock option plan which calls for 83,000 options to be issued,
a maximum  option term of ten years and vesting at the  discretion of the Option
Committee.

On February  10,  2003,  the  Company  issued  stock  options to its newly hired
President and Chief  Operating  Officer,  covering  55,000 shares.  The exercise
prices were as follows: 20,000 at $26.06 (market price at date of grant), 20,000
at $36.06 and 15,000 at $46.06.  These options  vested at one year,  three years
and four years from  February  10, 2003 and were due to expire on  February  10,
2008.  The  estimated  fair  value of  these  options  at the date of grant  was
$650,000,  using the  Black-Scholes  Option  Pricing  model  with the  following
assumptions:  risk free interest rate of 3%, dividend yield of 0% and volatility
factor of the estimated  market price of the Company's  common stock of .582 and
an expected life of the options of five years. $50,000 of expense was recognized
in the first quarter of 2003 for these options - $30,000 net of tax.  During the
second  quarter of 2003,  the President  left the Company,  and all options were
forfeited and the expense,  recognized in the first  quarter,  was reversed into
income.

H.   Comprehensive Income

Balances of accumulated other  comprehensive  income, net of tax, which consists
of unrealized  gains (losses) on available for sale of securities,  at September
30,  2003,  December  31,  2002  and  September  30,  2002  are as  follows  (in
thousands):
<TABLE>
<CAPTION>

                                Unrealized
                                   Gain      Tax Effect     Net

<S>                               <C>         <C>         <C>
Balance at December 31, 2002 ...   $  915     $ (381)     $  534
Current period unrealized losses      247        (99)        148
                                   ------     ------      ------
  Balance at September 30, 2003    $1,162     $ (480)     $  682
                                   ======     ======      ======
  Balance at September 30, 2002    $  307     $ (126)     $  181
</TABLE>

Comprehensive income, for the three month and nine month periods ended September
30, 2003 and 2002 are as follows (in thousands):
<TABLE>
<CAPTION>

                                               Three Months Ended   Nine Months Ended
                                                  September 30,       September 30,
                                             ----------------------------------------
                                              2003      2002       2003      2002
                                             ----------------------------------------

<S>                                         <C>       <C>        <C>       <C>
Net income (loss) for the period ........   $ 1,432   $(1,872)   $ 4,001   $ 1,418
Reclassification adjustment-net of income
  tax benefit of $--, $-- and -- and $146
  respectively ..........................      --        --         --        (228)
Unrealized losses on available for sale
  securities - net of income tax expense
  (benefit), of  $(60), $206, $(99), and
  $785 respectively.....................         83      (286)       148    (1,133)
                                             -------   -------    -------   -------
  Comprehensive income (loss) ...........   $ 1,515   $(2,158)   $ 4,149   $    57
                                            =======   =======    =======   =======

</TABLE>


                                      -11-
<PAGE>

I.   Sunshine PCS Corporation

Sunshine PCS  Corporation,  in which  Interactive  has  investments of preferred
stock,  common stock and warrants,  has agreed to sell its three PCS licenses to
Cingular  Wireless  for a total  of  $13.75  million.  As  part  of  this  sale,
Interactive  has agreed to accept $7.2 million in exchange for all its preferred
stock of  Sunshine.  At  September  30,  2003,  all such  preferred  stock had a
liquidation  value of $26.4  million.  Interactive's  current book value is $3.6
million as a result of previously  recorded reserves for impairments.  The final
accounting for this  transaction  will be recorded when the sale of the licenses
is consummated and will take into account the proceeds  received by Interactive.
In  connection  with the sale  transaction,  Interactive  has  agreed to provide
Cingular Wireless with customary indemnification, including an indemnity for any
losses  to  Sunshine  resulting  from  litigation   described  in  Note  L  with
Interactive's  indemnification  liability  not to  exceed $8  million.  The sale
transaction is conditioned upon FCC approval which  Interactive  expects will be
obtained, if granted, no later than the first quarter of 2004.

J.   Earnings per share

Basic and dilutive  earnings per share are based on the average  weighted number
of shares  outstanding.  On December 13, 1999,  Lynch  Interactive  issued a $25
million 6%  convertible  promissory  note,  which was  convertible  into 588,235
shares of the Company's  common stock.  In January 2001, $15 million of the note
was repaid.  The remaining $10 million  convertible  note was  convertible  into
235,294  shares of the Company's  common stock.  In November 2002, the remaining
$10 million was repaid.  This  security was  excluded  from the  calculation  of
dilutive  earnings  (loss) per share in all periods  presented,  since  assuming
conversion would have been anti-dilutive.

During the nine months ended  September 30, 2003, the Company  purchased  10,500
shares of its common stock for treasury.

K. Segment Information

The Company is engaged in one business segment:  multimedia. All operating units
are located  domestically,  and  substantially  all revenues are  domestic.  The
Company's  operations  include local  telephone  companies,  a cable TV company,
investment in PCS entities and investment in two  network-affiliated  television
stations.  The Company's  primary  operations are located in the states of Iowa,
Kansas,  Michigan,  New Hampshire,  New Mexico, New York, North Dakota, Utah and
Wisconsin.  75%  of the  Company's  telephone  customers  are  residential.  The
remaining customers are businesses.

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 a  widely
accepted  financial  indicator  of value and ability to incur and service  debt.
Management  uses EBITDA to evaluate the operating  performance  of the Company's
operations.  EBITDA is not a substitute for operating  income or cash flows from
operating activities in accordance with accounting principles generally accepted
in the United States.

Operating  profit  is equal  to  revenues  less  operating  expenses,  including
unallocated general corporate expenses and excluding, interest and income taxes.
The  Company  allocates  a portion  of its  general  corporate  expenses  to its
operating  segment,  such  allocation  was  $348,000  and $327,000 for the three
months ended  September 30, 2003 and 2002,  respectively;  and  $1,013,000  from
$982,000 for the nine months ended September 30, 2003 and 2002 respectively.

                                      -12-
<page>
<TABLE>
<CAPTION>

                                                            Three Months Ended      Nine Months Ended
                                                                September 30,          September 30,
                                                             2003         2002       2003        2002
                                                            --------------------------------------------
                                                                             (000's)
<S>                                                         <C>         <C>         <C>         <C>
Sales and revenues: .....................................   $ 22,319    $ 22,983    $ 64,965    $ 65,055
                                                            ========    ========    ========    ========

EBITDA (before corporate allocation):
  Operations ............................................   $ 11,168    $ 11,579    $ 32,331    $ 32,316
  Corporate expenses, gross .............................       (795)       (831)     (2,663)     (2,276)
                                                            --------    --------    --------    --------
   Combined total .......................................   $ 10,373    $ 10,748    $ 29,668    $ 30,040
                                                            ========    ========    ========    ========

Operating profit:
  Operations ............................................   $  5,826    $  6,429    $ 16,500    $ 16,928
  Corporate expenses, net ...............................       (447)       (538)     (1,654)     (1,336)
                                                            --------    --------    --------    --------
   Combined total .......................................   $  5,379    $  5,891    $ 14,846    $ 15,592
                                                            ========    ========    ========    ========

Operating profit ........................................   $  5,379    $  5,891    $ 14,846    $ 15,592
  Other income (expense):
  Investment income .....................................         83         162         739       1,394
  Interest expense ......................................     (2,995)     (3,240)     (9,020)     (9,911)
  Equity in earnings of affiliated companies ............        338         429       1,023         857

  Gain on sale of subsidiary stock ......................       --          --          --         4,965
  Reserve for impairment in spectrum license holder .....       --        (5,479)       --        (5,479)
                                                            --------    --------    --------    --------
Income (loss) before income taxes, minority interests and
  operations of Morgan Group Holding Co. distributed to
  shareholders ..........................................   $  2,805    $ (2,237)   $  7,588    $  7,418
                                                            ========    ========    ========    ========
</TABLE>

During the nine months  ended  September  30, 2002,  the Company  wrote off $0.9
million of receivables,  classified as a "Selling and Administrative  Expenses,"
relating to the bankruptcy of MCI/Worldcom and Global Crossing,  $0.2 million of
which was written off during the three months ended September 30, 2002.  Under a
court  settlement  approved on October 31, 2003, the Company  expects to recover
approximately  $0.3  million  in  cash  and  securities  of  amounts  previously
written-off.  The  recovery is expected to be recorded in the fourth  quarter of
2003 or the first quarter of 2004.

L.   Litigation

Interactive and several other parties,  including our Chief  Executive  Officer,
and  Fortunet  Communications,   L.P.,  which  was  Sunshine  PCS  Corporation's
predecessor-in-interest,  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.  The complaint was
filed under seal with the court on February 14, 2001.  At the  initiative of one
of the  defendants,  the seal was lifted on January  11,  2002.  Under the False
Claims Act, a private plaintiff,  termed a "relator," may file a civil action on
the U.S. government's behalf against another party for violation of the statute.
In  return,  the  relator  receives a  statutory  bounty  from the  government's
litigation proceeds if he is successful.

The relator in this lawsuit is R.C.  Taylor III, an individual  who, to the best
of our knowledge, has no relationship to any of the entities and affiliates that
have been named parties in this  litigation.  Indeed at the time of his filings,
and to the best of our knowledge,  Mr. Taylor was a lawyer at Gardner,  Carton &
Douglas.  Thereafter,  we believe he was a lawyer with a Washington,  D.C.,  law
firm. We do not know his current status.  We issued a press release dealing with
this litigation on January 16, 2002.

                                      -13-

<PAGE>



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  certain  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.

Interactive strongly believes that this lawsuit is completely without merit, and
intends to defend  the suit  vigorously.  The U.S.  Department  of  Justice  has
notified the court that it has declined to intervene in the case.  Nevertheless,
we cannot predict the ultimate outcome of the litigation, nor can we predict the
effect  that the  lawsuit or its  outcome  will have on our  business or plan of
operation.

Interactive  was  formally  served  with  the  complaint  on July 10,  2002.  On
September  19,  2002,  Interactive  filed two  motions  with the  United  States
District Court for the District of Columbia: a motion to dismiss the lawsuit and
a motion  to  transfer  the  action to the  Southern  District  of New York.  On
November  25,  2002,  the  relator  filed an  opposition  reply to our motion to
dismiss  and on December  5, 2002,  Interactive  filed a reply in support of its
motion to  dismiss.  On  September  30,  2003,  the Court  granted our motion to
transfer the action to the Southern District of New York.

In addition to the litigation described above, Interactive is a party to routine
litigation incidental to its business. Based on information currently available,
Interactive  believes  that none of this  ordinary  routine  litigation,  either
individually  or in the aggregate,  will have a material effect on its financial
condition and results of operations.

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

Sales and Revenues

Sales and Revenues for the three months ended  September  30, 2003  decreased by
$0.7 million, or 2.9%, to $22.3 million from the third quarter of 2002. Revenues
decreased primarily as a result of lower inter-state access revenues, which were
due to changes in the amount of  regulatory  true-ups  between the two quarters,
and  lower  intra-state  access  revenues,  which  were  due to the  effects  of
regulatory  initiatives in certain state jurisdictions.  Non-regulated  revenues
(security, CLEC, ISP, etc.) were up by $0.5 million during the quarter.

During  a given  year,  telecommunications  providers,  who  participate  in the
National Exchange Carrier Association ("NECA") pools and who are regulated based
upon a rate of return model,  estimate their inter-state access revenue streams.
During the next year,  the estimate is "trued-up" to actual  financial  data and
filed with the NECA. The adjustments  reflecting the "true-up" are then recorded
in the third  quarter of the following  year.  During the third quarter of 2003,
Interactive  recognized  $0.7 million of "true-up"  revenue  whereas  during the
third quarter of 2002 Interactive recognized $1.1 million of true-up revenue.

Revenues for the nine months ended September 30, 2003, were essentially the same
as the nine months ended  September 30, 2002.  Intra-state  revenues in 2003 are
lower than 2002 in both the three  month and nine month  periods,  but the lower
inter-state  revenues that occurred in the third  quarter,  due to the "true-up"
effect was offset in the nine month period by higher inter-state revenues due to
the rate of return  effect for companies  that have  recently  made  significant
capital  expenditures.  Non-regulated  revenues  increased  by only $0.3 million
between  the  two  periods  because,   included  in  the  2002  revenues,   were
approximately  $0.8 million in revenues  associated with a discontinued  product
line at one subsidiary.

                                      -14-

<PAGE>

Operating Profit

Operating  profit for the three months ended  September  30, 2003,  decreased by
$0.5  million to $5.4 million from the third  quarter of 2002.  The  above-noted
lower revenues were the primary cause of the decrease. Offsetting that decrease,
last year's third quarter  included a $0.2 million bad debt expense  provided in
connection with the bankruptcies of MCI/Worldcom and Global  Crossings.  Under a
recently approved court settlement, the Company expects to recover approximately
$0.3  million in cash and  securities  of amounts  previously  written-off.  The
recovery is  expected to be recorded in the fourth  quarter of 2003 or the first
quarter of 2004. The Company's  security  operation in upstate New York recorded
$0.3  million  less  amortization  expense  during the third  quarter of 2003 as
compared to the third quarter of 2002 as it changed the  amortization  period of
customer  lists  from three to ten years in the  fourth  quarter  of 2002.  This
decreased  amortization  was offset by  increased  depreciation  expense of $0.4
million. With regard to corporate expenses,  the Company recorded a $0.2 million
bonus accrual in the third quarter of 2003 in  accordance  with its  shareholder
approved  executive  compensation plan. No accrual was made in the third quarter
of 2002.


For the nine months ended September 30, 2003, operating profit decreased by $0.7
million to $14.8 million from the nine months ended  September 30, 2002,  due to
higher  depreciation  expense and the nine month accrual of $0.5 million in 2003
under the shareholder approved executive  compensation plan versus zero in 2002.
Last  year's  nine  months  results  included a $0.9  million  bad debt  expense
provided  in  connection  with  the  bankruptcies  of  MCI/Worldcom  and  Global
Crossing.

The Company had previously  announced that it expected that Operating Profit for
the year ended  December  31,  2003,  would be about $20 million and that EBITDA
would be about  $40  million,  $44  million  being  generated  by our  operating
subsidiaries, net of $4 million of expenses of the Corporate Office. We continue
to expect our  actual  results to be in line or  slightly  below this  forecast.
Accordingly, current year's fourth quarter results are expected to increase from
the previous year's fourth quarter results.  We note that the difference between
Operating  Profit and EBITDA is $20  million of  depreciation  and  amortization
expense. EBITDA is presented because it is a widely accepted financial indicator
of  transaction  values and the ability to incur and service  debt.  Interactive
utilizes EBITDA as one of its metrics for valuing potential acquisitions. EBITDA
is not a substitute for operating profit determined in accordance with generally
accepted accounting principles.

Other Income (Expense)

For the three months ended  September  30, 2003,  investment  income was down by
$0.1  million  from the same  period in the prior  year due to lower  investment
balances.  For the nine months ended September 30, 2003,  investment  income was
down by $0.7 million due to lower  investment  balances,  the absence of certain
realized gains on available for sale  securities and lower dividend  income from
bank stock.

Interest expense decreased by $0.2 million in the third quarter of 2003 from the
prior year due  primarily to lower  variable  interest  rates.  In addition,  in
November 2002, the Company  repurchased a $10 million convertible note for which
we previously accrued and paid an interest rate of 6% per annum. These decreases
were offset by higher interest expense at certain telephone  companies that drew
on debt facilities to fund major capital expenditure programs.

Interest  expense  decreased by $0.9 million for the nine months ended September
30, 2003, as compared to the prior year for the same reasons as the above.

                                      -15-

<PAGE>

During  the  year  ended  December  31,  2000,  the  Company  made  loans to and
investments in PTPMS  Communications,  LLC II,  totaling $6.1 million.  PTPMS II
acquired wireless spectrum in an auction conducted by the Federal Communications
Commission  in 2000 called the 700 MHz Guard Band  Auction.  In a  FCC-conducted
auction for similar  spectrum,  which ended on September 18, 2002, the Lower 700
MHz Band Auction, the price per MHz per population was materially lower than the
price paid by PTPMS II in 2000.  Accordingly,  during the third quarter of 2002,
Interactive  provided a reserve for impairment for its investment in PTPMS II of
$5.5 million, resulting in a remaining net book value of $0.7 million.

During the first  quarter of 2002,  the Company sold its minority  interest in a
cellular  telecommunications  operation  in New Mexico (RSA 1 (North))  for $5.6
million resulting in a pre-tax gain of $5.0 million.

Equity in earnings of affiliates for the three-month  ending September 30, 2003,
decline slightly from the same period in the previous year due to lower earnings
at the  Company's  New  Mexico  cellular  operation  (RSA 3 and 5). For the nine
months  ending  September  30,  2003,  equity in earnings of  affiliates  was up
slightly,  and here  again the  variance  was  primarily  due to the New  Mexico
cellular operations.

Income Tax Provision

The income tax provision  includes federal as well as state and local taxes. The
tax provision for the nine months ended  September 30, 2003 and 2002,  represent
effective tax rates of 41.0% and 43.6%,  respectively.  The  difference  between
these effective rates and the federal statutory rate is principally due to state
income  taxes,  including  the effect of  earnings,  including  the  reserve for
impairment  on a  spectrum  license  holder,  attributable  to  different  state
jurisdictions.

Minority Interests

Minority  interests  decreased  earnings by $215,000  for the three months ended
September 30, 2003, as compared to $185,000 for the three months ended September
30, 2002. The change was due to the absence of minority  interest affects on the
losses incurred in 2003 on the Company's security operation in upstate New York.
For the nine months  ended  September  30,  2003,  minority  interest  decreased
earnings by $478,000 as compared to $879,000 in the nine months ended  September
30, 2002 primarily due to minority  interest  recorded on the gain from the sale
of the cellular property.

Income from Continuing Operations and Net Income(Loss)

Net income for the three months ended  September 30, 2003, was $1.4 million,  or
$0.51 per share (basic and diluted),  compared to a net loss for the same period
last year of $1.9 million, or $0.67 per share (basic and diluted), which was due
to the reserve for impairment on spectrum  license holder  recorded in the third
quarter of 2002.

Income from continuing  operations for the nine months ended September 30, 2003,
was $4.0 million,  or $1.44 per share (basic and  diluted),  as compared to $3.3
million,  or $1.18 per share  (basic  and  diluted)  for the nine  months  ended
September  30,  2002.  The  increase is  primarily  due to the net effect to the
reserve for impairment on spectrum  license holder recorded in the third quarter
of 2002 partially  offset by the $5.0 million gain from the sale of the cellular
property recorded in the first quarter of 2002.

Net income for the nine months ended  September 30, 2003,  was $4.0 million,  or
$1.44 per share (basic and diluted),  as compared to net income of $1.4 million,
or $0.50 per share  (basic and  diluted),  in the same  period  last  year.  The
increase is due to the operating losses of Morgan of $1.9 million,  or $0.68 per
basic share, in the first quarter of 2002.

                                      -16-
<PAGE>



FINANCIAL CONDITION

Liquidity/ Capital Resources

As of September  30, 2003,  the Company had current  assets of $40.7 million and
current  liabilities of $63.7 million.  The working capital deficiency was $23.0
million as compared to $12.8 million at December 31, 2002. The  reclassification
of $16.2  million  of term  notes  which  come due in July 2004 (see  discussion
below) was the primary cause of the increase in the working capital deficiency.

A subsidiary of the Company has $6.4 million of unsecured  notes were coming due
on  December 8, 2003.  The  holders of the notes have  agreed to  rollover  $6.3
million of their notes for five years at 8% interest  per annum  compared to 10%
currently.  This debt is being  classified  as  noncurrent  in the  accompanying
Condensed Consolidated Balance Sheet at September 30, 2003 and was classified as
current at December 31, 2002.

A  subsidiary  of the  Company  has a term  note,  with  outstanding  balance at
September 30, 2003 of $16.2 million,  coming due in July 2004. The financing was
a five-year facility that was put in place in 1999 as part of the acquisition of
Central Scott Telephone  Company.  The Company is in discussions with the lender
to extend the note.  While the lender has not yet finalized the  extension,  the
Company expects to complete a three-year  renewal in the fourth quarter of 2003.
The debt is classified  as current on the  accompanying  Condensed  Consolidated
Balance Sheet at September 30, 2003.

A subsidiary of the Company is in default on a $1.8 million debt  facility.  The
lender has given the  Company  until  December  31,  2003 to cure the default or
replace the facility.  The Company  expects to negotiate a new facility with the
current or another lender.

Another  subsidiary with a bank credit facility of $3.1 million at September 30,
2003 was not in compliance  with a finance debt covenant  based on the September
30,  2003  results.  The  Company  is  working  with the  lender  to waive  such
non-compliance and expects to be in compliance by December 31, 2003.

The Company has agreed to acquire a 37%  interest in an entity  whose  principal
assets consist of a $6.0 million  subordinated note and a 17% equity interest in
Lynch Telephone  Corporation,  which is an 83% owned  subsidiary of the Company.
The acquisition cost of this interest will be $5.0 million, which will be funded
through the issuance of a five-year amortizing subordinated note of the parent.

A subsidiary  of the Company is in the process of  acquiring a cable  television
operation at a cost of $0.4 million.

For the nine months ended September 30, 2003,  capital  expenditures  were $14.7
million  versus $14.4  million for the same period last year.  Full year capital
expenditures are estimated at $21 million for 2003 versus $23.8 million in 2002,
approximately $23 million are expected in 2004.

At September  30, 2003,  total debt was $189.2  million,  which was $0.3 million
lower than the $189.5  million at the end of 2002. At September 30, 2003,  there
was $123.3  million of fixed interest rate debt averaging 7.0% and $65.9 million
of variable  interest rate debt averaging  4.2%.  Debt at year-end 2002 included
$124.7 million of fixed interest rate debt, at an average interest rate of 7.1%,
and $64.8 million of variable interest rate debt, at an average interest rate of
4.4%.

As of September  30, 2003,  Interactive,  the parent  company,  had $2.1 million
available under a $10 million short-term line of credit facility,  which expires
on  August  31,  2004.  Management  currently  expects  that this line of credit
facility will be renewed annually but there is no assurance that it will be.


                                      -17-
<PAGE>



Sunshine PCS  Corporation,  in which  Interactive  has  investments of preferred
stock,  common stock and warrants,  has agreed to sell its three PCS licenses to
Cingular  Wireless  for a total  of  $13.75  million.  As  part  of  this  sale,
Interactive  has agreed to accept $7.2 million in exchange for all its preferred
stock of  Sunshine.  At  September  30,  2003,  all such  preferred  stock had a
liquidation  value of $26.4  million.  Interactive's  current book value is $3.6
million as a result of previously  recorded  reserves for impairments.  The sale
transaction is conditioned upon FCC approval,  which Interactive expects will be
obtained,  if  granted,  no later  than the  first  quarter  of 2004.  The final
accounting for this  transaction  will be recorded when the sale of the licenses
is consummated  and will take into account the proceeds  received by Interactive
as  well as  certain  indemnification  obligations.  There  will  be a  sizeable
economic loss when our  investment in Sunshine's  preferred  stock is sold,  but
because we provided a reserve for  impairment  for $17 million of our costs,  we
will recognize a book profit of up to $3.6 million.

Interactive and its  predecessor  have not paid any cash dividends on its common
stock since 1989.  The Company  intends to reexamine  its  dividend  policy more
frequently in light of changing dynamics.  While it is currently  constrained by
capital needs,  if it is able to recapitalize  its balance sheet,  resources may
become available to pay dividends.  Future  financings may limit or prohibit the
payment of dividends.

Interactive has a high degree of financial  leverage.  As of September 30, 2003,
the ratio of total debt to equity was 7.1 to 1. Certain  subsidiaries  also have
high  debt to equity  ratios.  In  addition,  the debt at  subsidiary  companies
contains  restrictions  on the  amount of  readily  available  funds that can be
transferred to the parent company.

The Company has a need for resources  primarily to fund future  long-term growth
objectives.   Interactive  considers  various  alternative  long-term  financing
sources:  debt, equity, or sale of an investment asset. While management expects
to obtain  adequate  financing  to enable the  Company to meet its  obligations,
there is no assurance that such financing will be readily obtained at reasonable
costs.

The Company is  obligated  under  long-term  debt and lease  agreements  to make
certain cash  payments  over the term of the  agreements.  The  following  table
summarizes these contractual obligations for the period shown:
<TABLE>
<CAPTION>

                                                                    Payments Due by Period
                                                                         (In thousands)
                                                Less than
                                      Total      1 year       2 - 3 years  4 - 5 years  After 5 years
                                      ---------------------------------------------------------------

<S>                                  <C>        <C>        <C>        <C>        <C>     <C>
Long-term Debt (a) ...............   $177,619     $ 31,805     $ 33,577     $ 34,469     $ 77,768

Operating Leases .................      1,076          317          497          262         --
                                     --------     --------     --------     --------     --------

Total Contractual Cash Obligations   $178,695     $ 32,122     $ 34,074     $ 34,731     $ 77,768
                                     ========     ========     ========     =========    ========
</TABLE>

(a)  Does not include interest payments on debt

The Company has certain  financing  commitments  from banks and other  financial
institutions  that  provide  liquidity.   The  following  table  summarizes  the
expiration of these commitments for the periods shown:

                                      -18-
<PAGE>
<TABLE>
<CAPTION>

                                                     Amount of Commitment Expiration
                                                            Per Period
                                                          (In thousands)
                                       Total
                                      Amount     Less than
Other Commercial Commitments          Committed  1 year      1 - 3 years   4 - 5 years   Over 5 years
                                     ----------------------------------------------------------------
<S>                                  <C>          <C>          <C>            <C>          <C>
Lines of Credit ............         $11,537      $11,537            --            --            --

Guarantees .................           3,750        3,750            --            --            --

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

Total Commercial Commitments         $15,287      $15,287            --            --            --
                                     =======      =======       =======       =======       =======
</TABLE>

At September  30,  2003,  the  Company's  investment  in Coronet  Communications
Company was carried at a negative  $798,000,  due to the Company's  guarantee of
$3.8 million of Coronet's  third-party debt. The Company's investment in Capital
Communications  Company was carried at $0 for all periods. Based upon a multiple
of ten times broadcast cash flow, plus cash,  less debt,  Interactive  estimates
its value in these  stations  at almost $10  million as compared to the net book
value  of  these  investments  of a  negative  $0.8  million.  There  can  be no
assurance,  however,  that the results of these  stations  will  continue at the
current  level or that they  could be sold at ten  times  broadcast  cash  flow.
Nevertheless,  we believe  this is a  conservative  metric that  applies to this
industry  because it does not reflect the additional  earnings power,  above the
current anemic  results,  of the  network-affiliated  stations in the event that
cross  ownership  and  duopolies  are  allowed  by  the  Federal  Communications
Commission,  therefore,  the intrinsic value of the stations could be materially
higher.

The Company has initiated an effort to monetize certain of its assets, including
selling a portion or all of certain  investments and/or certain of its operating
entitis.  These may include minority interest in network affiliated  television
stations and certain  telephone  operations where growth  opportunities  are not
readily apparent. There is no assurance that all or any part of this program can
be  effectuated on acceptable  terms.  In March 2002, the Company sold its 20.8%
interest in the New Mexico cellular property, RSA 1 (North), to Verizon Wireless
for $5.6 million and repaid certain outstanding indebtedness to Verizon.

Critical Accounting Policies and Estimates

General

Interactive's  discussion and analysis of its financial condition and results of
operations are based upon its condensed consolidated financial statements, which
have been prepared in accordance with accounting  principles  generally accepted
in the United States.  The  preparation of these financial  statements  requires
Interactive to make estimates and judgments that affect the reported  amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets  and  liabilities.   On  an  ongoing  basis,  Interactive  evaluates  its
estimates, including those related to revenue recognition, carrying value of its
investments  in the spectrum  entities and  long-lived  assets,  purchase  price
allocations,  and contingencies and litigation.  Interactive bases its estimates
on historical  experience and on various other  assumptions that are believed to
be reasonable under the  circumstances,  the results of which form the basis for
making  judgments about the carrying  values of assets and liabilities  that are
not readily  apparent from other  sources.  Actual results may differ from these
estimates under different assumptions or conditions.


                                      -19-
<PAGE>



Interactive  believes the following critical accounting policies affect its more
significant  judgments and estimates used in the preparation of its consolidated
financial statements.

Revenue Recognition

The  principal  business  of  Interactive's  telephone  companies  is to provide
telecommunications  services.  These  services fall into four major  categories:
local  network,   network   access,   long  distance  and  other   non-regulated
telecommunications  services. Toll service to areas outside franchised telephone
service territory is furnished  through switched and special access  connections
with intrastate and interstate long distance networks.

Local  service  revenues are derived from  providing  local  telephone  exchange
services.  Local  service  revenues are based on rates filed with various  state
telephone regulatory bodies.

Revenues from long distance network services are derived from providing  certain
long distance  services to the Company's local exchange  customers and are based
on rates filed with various state regulatory bodies.

Revenue from intra-state  access is generally billed monthly in arrears based on
intra-state access rates filed with various state regulatory bodies. Interactive
recognizes  revenue from  intrastate  access service based on an estimate of the
amounts  billed to  interexchange  carriers in the subsequent  month.  Estimated
revenues are adjusted monthly as actual revenues become known.

Revenue from  interstate  access is derived from  settlements  with the National
Exchange Carrier Association ("NECA"). NECA was created by the FCC to administer
interstate  access rates and revenue  pooling on behalf of small local  exchange
carriers  who  elect  to  participate  in  a  pooling  environment.   Interstate
settlements are determined based on the various  subsidiaries' cost of providing
interstate  telecommunications service. Interactive recognizes interstate access
revenue  based on an  estimate of the current  year cost of  providing  service.
Estimated  revenue is adjusted to actual upon the  completion of cost studies in
the subsequent period.

Other ancillary revenues derived from the provision of directory advertising and
billing  and  collection  services  are  billed  monthly  based on  rates  under
contract.

Purchase Price Allocation

Interactive's business development strategy is to expand its existing operations
through internal growth and acquisition. From 1989 through 2002, the Company has
acquired fourteen telephone companies.  Significant  judgments and estimates are
required to allocate the  purchase  price of  acquisitions  to the fair value of
tangible  assets  acquired and  identifiable  intangible  assets and liabilities
assumed.  Any excess  purchase  price over the above fair values is allocated to
goodwill.  Additional  judgments  and  estimates  are  required to  determine if
identified  intangible  assets have finite or indefinite lives and the period of
their lives.

Depreciation and Amortization

The  calculation  of  depreciation  and  amortization  expense  is  based on the
estimated economic useful lives of the underlying property,  plant and equipment
and intangible  assets.  Although  Interactive  believes it is unlikely that any
significant  changes to the useful  lives of its tangible or  intangible  assets
will occur in the near term, rapid changes in technology,  the discontinuance of
accounting under SFAS No. 71 by the Company's wireline subsidiaries,  or changes
in market  conditions  could result in revisions  to such  estimates  that could
materially  affect the carrying  value of these assets and the Company's  future
consolidated operating results.


                                      -20-
<PAGE>

Annually,  the Company tests goodwill for impairment  using the two-step process
prescribed in SFAS No. 142. The first step is a screen for potential impairment,
while the second step  measures  the amount of  impairment,  if any. The Company
performed  the first of its  required  annual  impairment  tests of goodwill and
other indefinite lived intangible assets.

The Company is creating  the Office of the  Chairman  consisting  of Frederic V.
Salerno (current Chairman), Mario J. Gabelli (current Vice Chairman and CEO) and
Marc J. Gabelli (currently a director).  The objective is to combine the role of
the CEO and the Chairman.

Item 3. Quantitative and Qualitative Disclosure About 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 and cash  equivalents  ($27.4 million at September
30,  2003,  $23.4  million at December  31, 2002 and $25.3  million at September
30,2002).

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 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, 2003,  approximately  $65.9  million,  or 35%, 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 2003  average  interest  rate under  these
borrowings, it is estimated that the Company's 2003 three-month 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.

Item 4. Controls and Procedures

Our Chief  Executive  Officer and Chief  Financial  Officer have  evaluated  the
effectiveness of the Company's disclosure controls and procedures (as defined in
Rules  13a-15(e)  and  15d-15(e)  of the  Securities  Exchange  Act of 1934 (the
"Act"))  as of the end of the  period  covered  by this  report.  Based  on that
evaluation,  the Chief Executive  Officer and Chief Financial  Officer concluded
that the  Company's  disclosure  controls  and  procedures  as of the end of the
period covered by this report were designed and were functioning  effectively to
provide  reasonable  assurance that the information  required to be disclosed by
the Company in reports  filed under the Act is recorded,  processed,  summarized
and reported within the time periods specified in the SEC's rules and forms. The
Company  believes  that a  controls  system,  no matter  how well  designed  and
operated,  cannot provide absolute assurance that the objectives of the controls
system are met, and no  evaluation  of controls can provide  absolute  assurance
that all control  issues and instances of fraud,  if any,  within a company have
been detected.

                                      -21-

<PAGE>




                           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,  the Company's  effort to monetize
certain  assets,  Liquidity and Capital  Resources and Market Risk. It should be
recognized  that such  information are estimates or forecasts based upon various
assumptions, including the matters, risks, and cautionary statements referred to
therein, as well as meeting the Registrant's  internal  performance  assumptions
regarding  expected  operating  performance and the expected  performance of the
economy  and  financial  markets as it  impacts  Registrant's  businesses.  As a
result,  such information is subject to  uncertainties,  risks and inaccuracies,
which could be material.

                                      -22-
<PAGE>



PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Interactive and several other parties,  including our Chief  Executive  Officer,
and  Fortunet  Communications,   L.P.,  which  was  Sunshine  PCS  Corporation's
predecessor-in-interest,  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.  The complaint was
filed under seal with the court on February 14, 2001.  At the  initiative of one
of the  defendants,  the seal was lifted on January  11,  2002.  Under the False
Claims Act, a private plaintiff,  termed a "relator," may file a civil action on
the U.S. government's behalf against another party for violation of the statute.
In  return,  the  relator  receives a  statutory  bounty  from the  government's
litigation proceeds if he is successful.

The relator in this lawsuit is R.C.  Taylor III, an individual  who, to the best
of our knowledge, has no relationship to any of the entities and affiliates that
have been named parties in this  litigation.  Indeed at the time of his filings,
and to the best of our knowledge,  Mr. Taylor was a lawyer at Gardner,  Carton &
Douglas.  Thereafter,  we believe he was a lawyer with a Washington,  D.C.,  law
firm. We do not know his current status.  We issued a press release dealing with
this litigation on January 16, 2002.

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  certain  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.

Interactive strongly believes that this lawsuit is completely without merit, and
intends to defend  the suit  vigorously.  The U.S.  Department  of  Justice  has
notified the court that it has declined to intervene in the case.  Nevertheless,
we cannot predict the ultimate outcome of the litigation, nor can we predict the
effect  that the  lawsuit or its  outcome  will have on our  business or plan of
operation.

Interactive  was  formally  served  with  the  complaint  on July 10,  2002.  On
September  19,  2002,  Interactive  filed two  motions  with the  United  States
District Court for the District of Columbia: a motion to dismiss the lawsuit and
a motion  to  transfer  the  action to the  Southern  District  of New York.  On
November  25,  2002,  the  relator  filed an  opposition  reply to our motion to
dismiss  and on December  5, 2002,  Interactive  filed a reply in support of its
motion to  dismiss.  On  September  30,  2003,  the Court  granted our motion to
transfer the action to the Southern District of New York.

In addition to the litigation described above, Interactive is a party to routine
litigation incidental to its business. Based on information currently available,
Interactive  believes  that none of this  ordinary  routine  litigation,  either
individually  or in the aggregate,  will have a material effect on its financial
condition and results of operations.

                                      -23-
<PAGE>




Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibit 31.1 - Chief Executive Officer Section 302 Certification

     Exhibit 31.2 - Chief Financial Officer Section 302 Certification

     Exhibit 32.1 - Chief Executive Officer Section 906 Certification

     Exhibit 32.2 - Chief Financial Officer Section 906 Certification.

(b)  Current Report on Form 8-K filed on August 15, 2003, reporting earnings for
     the second quarter ended June 30, 2003.

                                      -24-
<PAGE>



                                    SIGNATURE


     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 INTERACTIVE CORPORATION
                                   (Registrant)

                                   /s/ Robert E. Dolan
                                   ---------------------
                                   Robert E. Dolan
                                   Chief Financial Officer

November 14, 2003



                                      -25-