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 June 30, 2002
                               -------------

                                       or

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

For the transition period from            to

Commission File No.     1-15097
                        -------


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

       Delaware                                      06-1458056
       --------                                      ----------
(State or other jurisdiction of                   (I.R.S. Employer
incorporation 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 the number of shares outstanding of each of the Registrant's classes of
Common Stock, as of the latest practical date.

            Class                              Outstanding at August 1, 2002
            -----                              -----------------------------
Common Stock, $.0001 par value                           2,799,551



<PAGE>




                                      INDEX

                 LYNCH INTERACTIVE CORPORATION AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION


Item 1. Financial Statements (Unaudited)
        --------------------

Condensed Consolidated Balance Sheets:
  -      June 30, 2002
  -      December 31, 2001

Condensed Consolidated Statements of Operations:
  -      Three months ended June 30, 2002 and 2001
  -      Six months ended June 30, 2002 and 2001

Condensed Consolidated Statements of Cash Flows:
  -      Three months ended June 30, 2002 and 2001
  -      Six months ended June 30, 2002 and 2001

Notes to Condensed Consolidated Financial Statements

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

Item 3.  Quantitative and Qualitative Disclosure About Market Risk
         ---------------------------------------------------------

PART II.    OTHER INFORMATION

Item 1.  Legal Proceedings
         -----------------

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

Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------

SIGNATURE












                                        i



<PAGE>
<TABLE>



PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements
                 LYNCH INTERACTIVE CORPORATION AND SUBSIDIAIRES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (In thousands, except share amounts)
<CAPTION>
                                                                                                      June 30,   December 31,
                                                                                                         2002         2001
                                                                                                    ---------    ---------
                                                                                                   (Unaudited)      (Note)
ASSETS
CURRENT ASSETS:
<S>                                                                                                 <C>          <C>
  Cash and cash equivalents .....................................................................   $  24,291    $  23,664
  Restricted cash ...............................................................................      10,552        7,569
  Receivables, less allowances of $928 and
    $424, respectively ..........................................................................       8,982        9,963
  Material and supplies .........................................................................       3,687        3,373
  Prepaid expenses and other current assets .....................................................       2,443        1,757
  Current assets of Morgan Group Holding Co. ....................................................
      distributed to shareholders ...............................................................        --         12,757
                                                                                                    ---------    ---------
TOTAL CURRENT ASSETS ............................................................................      49,955       59,083

PROPERTY, PLANT AND EQUIPMENT:
  Land ..........................................................................................         840          840
  Buildings and improvements ....................................................................      10,918       10,858
  Machinery and equipment .......................................................................     183,979      178,110
                                                                                                    ---------    ---------
                                                                                                      195,737      189,808
  Accumulated Depreciation ......................................................................     (81,834)     (74,419)
                                                                                                    ---------    ---------
                                                                                                      113,903      115,389
GOODWILL ........................................................................................      60,889       60,889
OTHER INTANGIBLE ASSETS .........................................................................       7,515        7,906
INVESTMENTS IN AND ADVANCES TO AFFILIATED ENTITIES ..............................................      15,375       14,277
OTHER ASSETS ....................................................................................      10,148       11,563
NON CURRENT ASSETS OF MORGAN GROUP HOLDING CO
   DISTRIBUTED TO SHAREHOLDERS ..................................................................        --         10,241
                                                                                                    ---------    ---------
TOTAL ASSETS ....................................................................................   $ 257,785    $ 279,348
                                                                                                    =========    =========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Notes payable to banks ........................................................................   $  12,776    $  10,336
  Trade accounts payable ........................................................................         479          921
  Accrued interest payable ......................................................................       1,809        1,579
  Accrued liabilities ...........................................................................      17,158       15,700
  Current maturities of long-term debt, includes $10,500 of convertible notes
  due 2004, but subject to a put provision (See note G) .........................................      21,151       28,126
  Current liabilities of Morgan Group Holding Co. ...............................................
       distributed to shareholders ..............................................................        --         11,281
                                                                                                    ---------    ---------
TOTAL CURRENT LIABILITIES .......................................................................      53,373       67,943
LONG-TERM DEBT ..................................................................................     166,433      165,076
DEFERRED INCOME TAXES ...........................................................................       7,790        8,515
OTHER LIABILITIES ...............................................................................         799          887
MINORITY INTEREST ...............................................................................       6,814        6,120
NON CURRENT LIABILITIES AND MINORITY
  INTERESTS OF MORGAN GROUP HOLDING CO ..........................................................
  DISTRIBUTED TO SHAREHOLDERS ...................................................................        --          6,290

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
  COMMON STOCK, $0.0001 PAR VALUE-10,000,000
     SHARES AUTHORIZED; 2,824,766 ISSUED; 2,802,551
     and 2,820,051 outstanding ..................................................................        --           --
  ADDITIONAL PAID-IN CAPITAL ....................................................................      21,406       21,406
  RETAINED EARNINGS .............................................................................       1,625        1,800
  ACCUMULATED OTHER COMPREHENSIVE INCOME ........................................................         467        1,542
  TREASURY STOCK, 22,215 and 4,715 shares, at cost ..............................................        (922)        (231)
                                                                                                    ---------    ---------
                                                                                                       22,576       24,517
                                                                                                    ---------    ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ......................................................   $ 257,785    $ 279,348
                                                                                                    =========    =========

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

See accompanying notes.
</TABLE>
                                       1
<PAGE>
<TABLE>




                 LYNCH INTERACTIVE CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                (In thousands, except per share and share amounts)

<CAPTION>
                                                                                   Three Months Ended         Six Months Ended
                                                                                       June 30,                   June 30,
                                                                                  2002           2001         2002           2001
                                                                            -------------------------------------------------------
<S>                                                                         <C>           <C>            <C>            <C>
SALES AND REVENUES .........................................................$   21,098    $    17,451    $    42,072    $    34,660


COSTS AND EXPENSES:
Operations .................................................................    15,881         12,577         30,919         25,325
Selling and administrative .................................................       760            644          1,452          1,456
                                                                            --------------------------------------------------------
OPERATING PROFIT ............................................................    4,457          4,230          9,701          7,879

Other income (expense):
   Gain on sale of cellular partnership .....................................       --             --          4,965            --
   Investment income ........................................................      235          1,175          1,232          2,393
   Interest expense .........................................................   (3,298)        (3,417)        (6,671)        (6,832)
   Equity in earnings of affiliated companies, predominantly
     cellular operations ....................................................      224            204            428            369
                                                                            -------------------------------------------------------
                                                                                (2,839)        (2,038)           (46)        (4,070)
                                                                            -------------------------------------------------------

INCOME BEFORE INCOME TAXES, MINORITY INTERESTS
  AND OPERATIONS OF MORGAN GROUP HOLDING CO .................................    1,618          2,192          9,655          3,809
Provision for income taxes ..................................................     (651)        (1,066)        (3,783)        (1,905)
Minority Interests ..........................................................      (62)          (155)          (694)          (323)
                                                                            -------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS ...........................................      905            971          5,178          1,581

Income (loss) from operations of Morgan Group Holding Co. ...................
distributed to shareholders, net of income taxes of $0, $255,
$0 and $255, respectively and minority interests of $0, $(278)
$0 and $(38), respectively ..................................................       --            348         (1,888)            47
                                                                            -------------------------------------------------------
NET INCOME .................................................................$      905    $     1,319    $     3,290    $     1,628
                                                                            =======================================================

Basic weighted average shares outstanding ...................................2,809,000      2,822,000      2,813,000      2,822,000
Diluted weighted average shares outstanding - used in earnings
  per share computation (if the shares to be issued on
  conversion of the convertible note were included, fully diluted shares
  are 3,044,000; 3,057,000; 3,049,000; and 3,057,000, respectively)..........2,809,000      2,822,000      3,049,000      2,822,000

BASIC EARNINGS PER SHARE
INCOME FROM CONTINUING OPERATIONS ..........................................$     0.32    $      0.34    $      1.84    $      0.56
Income (loss) from operations of Morgan Group Holding Co. ...................
  distributed to shareholders ...............................................     0.00           0.13          (0.67)          0.02
                                                                            -------------------------------------------------------
NET INCOME .................................................................$     0.32    $      0.47    $      1.17    $      0.58
                                                                            =======================================================


DILUTED EARNINGS PER SHARE
INCOME FROM CONTINUING OPERATIONS ..........................................$     0.32    $      0.34    $      1.79    $      0.56
Income (loss) from operations of Morgan Group Holding Co. ...................
  distributed to shareholders ...............................................     0.00           0.13          (0.62)          0.02
                                                                            -------------------------------------------------------
NET INCOME .................................................................$     0.32    $       .47    $      1.17    $      0.58
                                                                            =======================================================
            See accompanying notes.
</TABLE>


                                       2
<PAGE>

<TABLE>


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

<CAPTION>
                                                                           Three Months Ended    Six Months Ended
                                                                                June 30,             June 30,
                                                                            2002        2001     2002        2001
                                                                            ----        ----     ----        ----

     OPERATING ACTIVITIES
<S>                                                                         <C>       <C>        <C>         <C>
     Net Income ..........................................................  $  905    $  1,319   $  3,290    $  1,628
     Adjustments to reconcile net income to net cash provided by
        operating activities:
        Depreciation and amortization ....................................   4,780       4,120      9,591       8,216
        Net effect of purchases and sales of trading securities ..........      --        (646)        --      (1,072)
        Equity in earnings of affiliated companies .......................    (224)       (204)      (428)       (369)
        Minority interests ...............................................      62         155        694         323
        Gain on sale of cellular partnership .............................      --          --     (4,965)         --
        Gain on sale of available for sale securities ....................      (1)       (154)       (24)       (154)
        Non-cash items  and  assets  and  operating assets
          and liabilities from operations of Morgan Group Holding Co.
          distributed to shareholders.....................................      --         380      1,888         810
        Changes in operating assets and liabilities:
             Receivables .................................................     785         (24)      1,055        682
             Accounts payable and accrued liabilities ....................  (1,737)       (867)      1,174     (2,065)
             Other .......................................................    (271)     (1,130)     (1,000)    (1,227)
                                                                           --------    --------    --------    --------
     NET CASH PROVIDED BY OPERATING ACTIVITIES ...........................   4,299       2,949      11,275      6,772
                                                                           --------    --------    --------    --------

     INVESTING ACTIVITIES
     Capital expenditures ................................................ (4,423)     (4,580)     (7,794)    (7,555)
     Investment in and advances to affiliated entities ................... (1,436)       (128)     (1,912)      (186)
     Proceeds from sale of available for sale securities .................     53         241         398        241
     Proceeds from sale of cellular partnership ..........................      --          --      5,570         --
     Acquisition of Central Utah Telephone Company (total
      cost, less debt assumed and cash equivalents acquired) .............      --     (6,889)         --     (6,889)
     Investing activities of operations of Morgan Group
       Holding Co. distributed to shareholders ...........................      --        (12)         --        (99)
     Other ...............................................................   (329)        475         (75)      (122)
                                                                           --------    --------   --------    --------

     NET CASH USED IN INVESTING ACTIVITIES ...............................  (6,135)    (10,893)     (3,813)   (14,610)
                                                                           --------    --------    --------    --------

     FINANCING ACTIVITIES
     Issuance of long term debt ..........................................   1,362         270       1,965     27,368
     Repayments of long term debt ........................................  (2,570)     (1,263)     (7,605)   (18,373)
     Net repayments (borrowings) lines of credit .........................   2,972        (171)      2,440       (733)
     Treasury stock transactions .........................................    (439)         --        (691)        --
     Investment in restricted cash .......................................     (45)         --      (2,983)        --
     Financing activities of operations of Morgan Group Holding
       Co. distributed to shareholders ...................................      --         (77)         --       (119)
     Other ...............................................................      17          --          39         --
                                                                           --------    --------    --------    --------
     NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                     1,297      (1,241)     (6,835)     8,143
                                                                           --------    --------    --------    --------
     Net increase (decrease) in cash and cash equivalents ................    (539)     (9,185)        627        305
     Cash and cash equivalents at beginning of Period ....................  24,830      34,324      23,664     24,834
                                                                          ---------    --------    --------    --------

     CASH AND CASH EQUIVALENTS AT END OF PERIOD ..........................$ 24,291    $ 25,139    $ 24,291   $ 25,139
                                                                          =========   =========   =========  ==========
See accompanying notes
</TABLE>
                                       3
<PAGE>




                  LYNCH INTERACTIVE CORPORATION & SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A.   Subsidiaries of the Registrant

As of June 30, 2002, 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 Kansas Telephone 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%
     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 Telephone Corporation ....................      83.1%
  Western New Mexico Telephone Company, Inc. ...      83.1%
  Interactive Networks Corporation .............      83.1%
  WNM Communications Corporation ...............      83.1%
  WMN 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%
    Inter-Community Telephone Company II, 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%
                                       5
</TABLE>






<PAGE>



B.   Basis of Presentation
     ---------------------

The  Company  consolidates  the  operating  results of its  telephone  and cable
television  subsidiaries (81-100% owned at June 30, 2002 and December 31, 2001).
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 June 30,  2002 and
December 31, 2001), Capital Communications  Company, Inc. (49% owned at June 30,
2002 and  December  31, 2001) and the  cellular  partnership  operations  in New
Mexico (17% to 21% owned at June 30, 2002 and December 31, 2001).

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 as of December 31, 2001 and for the three and
six  months  ended  June  30,  2002  and  2001,  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 the management,  all adjustments  (consisting of normal recurring
accruals)  considered  necessary  for a fair  presentation  have been  included.
Operating  results  for the  three-month  period  ended  June  30,  2002 are not
necessarily  indicative  of the results that may be expected for the year ending
December 31, 2002.  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 effect the amounts
reported in the financial  statements  and  accompanying  notes.  Actual results
could differ from those estimates.

Certain 2001 amounts have been restated to conform to the 2002 presentation.

C.   Recent Accounting Pronouncements

In June 2001,  the Financial  Accounting  Standards  Board issued  Statements of
Financial  Accounting  Standards No. 141,  Business  Combinations,  and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Statement 141 required that the purchase method of accounting
be used for all business  combinations  initiated after June 30, 2001. Statement
141 also  includes  guidance  on the  initial  recognition  and  measurement  of
goodwill  and  other  intangible  assets  arising  from  business   combinations
completed  after June 30, 2001.  Statement  142 prohibits  the  amortization  of
goodwill and assets with  indefinite  lives.  Statement  142 requires that these
assets be reviewed for  impairment  at least  annually.  Intangible  assets with
finite lives will continue to be amortized over their estimated useful lives.

The Company tests goodwill for impairment using the two-step process  prescribed
in Statement 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 the  required  impairment  tests  of  goodwill  and  indefinite  lived
intangible  assets as of  January  1,  2002 in the  second  quarter  of 2002 and
determined that there are no impairments at the current time.


                                       6
<PAGE>



The  application  of the  non-amortization  provisions  of Statement No. 142 has
increased net income in the second quarter of 2002 by approximately $0.7 million
($0.24 per basic share) whereas the similar  amortization charge for the quarter
in 2001 was  approximately  $0.5 million  ($0.18 per basic  share).  For the six
months ended June 30, 2002 and 2001, the amounts were $1.3 million,  or $0.45 in
basic earning per share, and $1.0 million,  or $0.37 in basic earning per share,
respectively.

The  following  table  discloses  what the  effects of the  non-amortization  of
goodwill  and  indefinite  lived  intangible  assets would be for income and per
share amounts for the periods displayed:
<TABLE>

<CAPTION>
                                                                                Three Months Ended   Six Months Ended
                                                                                     June 30,            June 30,
                                                                                 2002      2001      2002       2001
                                                                                ------    -------  ------    -------
As reported: ................................................................        (000s)              (000s)
<S>                                                                             <C>     <C>       <C>        <C>
    Income from continuing operations .......................................   $ 905   $   971   $ 5,178    $ 1,581
    Income (loss) from operations of Morgan .................................      --       348    (1,888)        47
                                                                                -------  -------   -------    -------

    Net Income ..............................................................     905   $ 1,319   $ 3,290    $ 1,628
                                                                                ======= ========  ========   ========


    Adjustment from non-amortization Continuing operations net of income taxes
        of $0, $72, $0, $147 and minority interest
        of $0, $15, $0, $31, respectively...................................       --   $   522        --     $1,041
        Operations of Morgan net of minority
           interest and income taxes........................................       --   $    62        --     $  141

    As adjusted:
        Income from continuing operations...................................    $ 905   $ 1,493   $ 5,178     $2,622
        Income (loss) from operations of Morgan.............................       --       410    (1,888)       188
                                                                                -------  -------   -------    -------
    Net income..............................................................    $ 905   $ 1,903   $ 3,290     $2,810
                                                                                ======= ========  ========    ========

    Basic earnings per share
        Income from continuing operations...................................    $0.32   $  0.53   $  1.84     $ 0.93
        Income (loss) from operations of Morgan.............................       --      0.14     (0.67)      0.06
                                                                                ------- --------  --------    --------

        Net income..........................................................    $0.32     $0.67   $  1.17      $0.99
                                                                                ======= ========  ========    ========

    Diluted earnings per share
        Income from continuing operations...................................    $0.32     $0.53   $  1.79       $0.93
        Income (loss) from operations of Morgan.............................       --      0.14     (0.62)       0.06
                                                                                ------- --------  --------    --------

        Net income..........................................................    $0.32     $0.67   $  1.17       $0.99
                                                                                ======= ========  ========    ========
</TABLE>

The following tables display the details of goodwill and intangible assets as of
the dates shown.

<TABLE>
<CAPTION>

                                                                                              (000s)
                                                                                June 30, 2002            December 31, 2001
                                                                                -------------            -----------------

                                                                                        Accumulated                Accumulated
Intangible assets subject to amortization:                                      Assets  Amortization     Assets    Amortization
                                                                                ------  ------------     ------    ------------

<S>                                                                             <C>           <C>        <C>             <C>
Subscriber lists .............................................................. $7,594        $1,774     $7,194          $  983
</TABLE>
                                       7
<PAGE>

<TABLE>
<CAPTION>

                                         2002     2001
                                         ----   ------
<S>                                      <C>    <C>
Total amortization expense for

  the three months ended June 30 .....   $405   $  617
                                         ====   ======
Total amortization expense for the six
  months  ended June 30 ..............   $808   $1,227
                                         ====   ======
</TABLE>
<TABLE>
<CAPTION>

                                     2003     2004    2005    2006   2007
                                   ------   ------   -----   -----   ----
<S>                                <C>      <C>      <C>     <C>     <C>
Estimated aggregate amortization
 expense by year ................   $1,679   $1,568   $ 268   $ 213   $213
</TABLE>
<TABLE>

<CAPTION>
                                                      June 30,      December 31,
                                                        2002           2001
                                                      -------       -----------
<S>                                                   <C>             <C>
Intangible assets not subject to amortization:
    Goodwill - net ................................   $60,889         $60,889
    Cellular licenses .............................     1,695           1,695
</TABLE>


In October 2001, the FASB issued Statement of Financial  Accounting Standard No.
144,  Accounting for Impairment or Disposal of Long-Lived Assets,  effective for
fiscal years  beginning  after  December 15, 2001. The FASB's new rules on asset
impairment  supersede FASB  Statement No. 121,  Accounting for the Impairment of
Long-Lived  Assets and for  Long-Lived  Assets to be Disposed  of, and provide a
single  accounting  model for  long-lived  assets to be  disposed  of.  Although
retaining many of the fundamental recognition and measurement provisions of FASB
Statement  No. 121, the new rules  significantly  change the criteria that would
have to be met to  classify an asset as  held-for-sale.  The new rules also will
supersede the  provisions of APB Opinion 30 with regard to reporting the effects
of a disposal  of a segment  of a  business  and will  require  expected  future
operating  losses from  discontinued  operations to be displayed in discontinued
operations  in the periods in which the losses are  incurred  (rather than as of
the  measurement  date as  presently  required  by APB 30).  In  addition,  more
dispositions  will qualify for discontinued  operations  treatment in the income
statement.  The Company has determined that there is no effect of FASB Statement
No. 144 on the earnings and financial position of the Company.

D.   Acquisitions and Dispositions

On June 22, 2001,  Lynch  Telephone  Corporation X, a subsidiary of Interactive,
acquired Central Utah Telephone, Inc. and its subsidiaries,  and Central Telecom
Services,  LLC, a related entity,  for  approximately  $15.6 million in cash and
notes. The Company has recorded approximately $11.5 million in goodwill.

The above  acquisition  was accounted for as a purchase,  and  accordingly,  the
assets  acquired and  liabilities  assumed were recorded at their estimated fair
market values on the date of acquisition.

The operating  results of the acquired  companies are included in the Statements
of Operations  from the  acquisition  date.  The  following  unaudited pro forma
information  shows  the  results  of the  Company's  operations  as  though  the
acquisition of Central Utah and related  entities and the distribution of Morgan
were made at the beginning of 2001.  The unaudited pro forma  information is not
necessarily indicative of the results of operations that would have occurred had
the  transactions  been made at this date nor is it  necessarily  indicative  of
future results of operations. (In thousands of dollars, except per share data).

                                       8
<PAGE>

<TABLE>
<CAPTION>



                                               Three Months    Six Months
                                                  Ended           Ended
                                                 June 30,       June 30,
                                                  2001            2001
                                               ------------    -----------
<S>                                            <C>             <C>
Sales and revenues ........................... $   19,842      $   38,387
Income from continuing operations ............      1,088           1,726
Basic earnings per share .....................       0.39            0.61
Diluted earnings per share ...................       0.39            0.61
</TABLE>


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.

E.   Sunshine Rights Offering

In February 2002,  Sunshine PCS Corporation issued rights to its shareholders to
purchase up to 1,531,593  shares of its Class A Common Stock at a price of $1.00
per share.  On May 3,  2002,  the rights  offering  expired  and on May 7, 2002,
Sunshine announced that the rights offering was oversubscribed. As the holder of
235,294  shares of  Sunshine,  Interactive  exercised  its  rights  (but did not
oversubscribe)  to purchase  58,824 shares of Class A Common Stock in the rights
offering.

F.   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.  Morgan's  revenues were
$34.4 million ($5.4 million to date of spin-off) in the first six months of 2002
and $53.0  million  in the first six  months of 2001.  The net  assets of Morgan
distributed at the spin-off were approximately $3.5 million.

Accordingly, prior period financial statements have been restated to reflect the
amounts for Morgan on a one-line basis as "distributed to shareholders."

The report of Ernst & Young LLP, Morgan's independent auditors,  with respect to
its financial  statements as of December 31, 2001 and 2000,  and for each of the
three years in the period  ended  December  31, 2001  contained  an  explanatory
paragraph which expresses  substantial  doubt as to Morgan's ability to continue
as a going concern.

G.   Indebtedness

The parent company maintains a short-term line of credit facility totaling $10.0
million.  Borrowings  under this  facility were $9.9 million and $7.6 million at
June 30, 2002 and December 31, 2001, respectively.  This facility will expire on
August 31, 2002, unless extended. Long-term debt consists of (all interest rates
are at June 30, 2002):

                                       9
<PAGE>
<TABLE>
<CAPTION>
                                                                                                              June 30,
                                                                                                                2002    December 31,
                                                                                                            (Unaudited)    2001
                                                                                                            ---------    ---------
                                                                                                                 (In thousands)
<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% (4.9%
weighted average at June 30, 2002), secured by assets of the telephone
companies of $149.5 million .............................................................................   $  55,239    $  55,499

Bank Credit facilities utilized by certain telephone and telephone holding
companies through 2016, $32.1 million at fixed interest rates averaging 7.9%
and $51.9 million at variable interest rates averaging 4.8%  ............................................      84,060       87,127

Unsecured  notes issued in connection with  acquisitions  through 2006, at fixed
interest rates of 10.0% .................................................................................      34,397       34,512

Convertible  subordinated  note due in December 2004 at a fixed interest rate of ........................      10,000       10,000
  6%

Other ...................................................................................................       3,888        6,064
                                                                                                            ---------    ---------
                                                                                                              187,584      193,202
Current maturities ......................................................................................     (21,151)     (28,126)
                                                                                                            ---------    ---------
                                                                                                            $ 166,433    $ 165,076
                                                                                                            =========    =========
</TABLE>

On December  12,  1999,  the Company  completed  the private  placement of a $25
million 6% five-year note,  convertible into Interactive  common stock at $42.50
per share.  At that time,  to assist the Company  with the private  placement to
Cascade  Investment LLC ("Cascade"),  the Chairman and CEO of Interactive agreed
to give the  acquirer  of the note a one-time  option to sell the note to him at
105% of the principal amount thereof.  The exercise period was from November 15,
2000 to December 1, 2000.  The  obligation of the Chairman  under this option to
sell  agreement  was secured by a bank  letter of credit,  which,  in turn,  was
secured by a pledge of certain  securities  of the  Chairman.  The Company  also
agreed to  reimburse  the Chairman for the cost of the letter of credit plus his
counsel fees in connection  with the option to sell  agreement and obtaining the
letter of credit.

On January  16,  2001,  the option to sell  agreement  between  Cascade  and the
Company's   Chairman  was  modified  and  extended.   As  a  condition  to  such
modification  and extension,  Cascade demanded and obtained the right to sell up
to $15  million of the notes back to the  Chairman  at any time prior to January
31,  2001 and the right to sell the  remaining  $10  million of the notes to the
Chairman  between  November 15 and December 1, 2002 (the  "Put").  The Put is at
105% of principal amount sold plus accrued and unpaid interest and is secured by
a fully collateralized letter of credit.

In order to induce  the  Chairman  to grant  the Put,  Company  entered  into an
agreement in December  2000 with its  Chairman  whereby it agreed (i) to pay for
and acquire,  on the same terms and conditions,  any portion of the note sold by
Cascade  under  the Put,  (ii) to  reimburse  the  Chairman  for the  costs  for
extending and  maintaining the letter of credit and (iii) to pay the Chairman or
his assigns a  collateral  maintenance  fee of 10% per annum for any  collateral
provided by them.

During January 2001, Cascade exercised the Put with regard to the $15 million of
the notes and on February 14, 2001,  the Company  transferred  $15.9  million to
Cascade,  including the 5% premium plus accrued and unpaid interest, in exchange
for $15.0 million of the notes held by Cascade.


                                       10
<PAGE>



The  option to sell the  remaining  $10  million  continues  to be  secured by a
collateralized  letter of credit.  Until March 31, 2002, all or a portion of the
collateral for the letter of credit was provided by an affiliate of the Chairman
and, as noted  above,  the  Company had agreed to pay all legal fees,  letter of
credit  fees and a 10% per annum  collateral  fee on the  amount  of  collateral
provided.  As the Company has always had the right to substitute  its collateral
for that  provided,  as of March 31,  2002,  the Company had replaced all of the
$10.5  million of the  collateral  provided by an affiliate of the Chairman with
$10.5 million of the Company's U.S.  Treasury Bills,  which have been pledged to
the issuers of the letter of credit and are classified as  "Restricted  Cash" on
the Company's balance sheet.

The balance of the  convertible  subordinated  note is  classified as current at
June 30, 2002,  and  December 31, 2001,  as the holder has the ability to demand
payment of such  amount,  plus the $0.5 million  premium,  prior to December 31,
2002.  Management is currently unaware of Cascade's intention with regard to its
potential exercise of the Put with respect to the remaining $10 million of notes
outstanding.

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 June 30,
2002 and December 31, 2001 are as follows (in thousands):
<TABLE>
<CAPTION>

                                                                     Unrealized
                                                                     Gain (Loss)   Tax Effect Net
<S>                                                                     <C>        <C>        <C>
Balance at December 31, 2001 ........................................   $ 2,599    $(1,057)   $ 1,542
Reclassification adjustment .........................................      (374)       146       (228)
Current period unrealized losses ....................................    (1,426)       579       (847)
                                                                        -------    -------    -------
Balance at June 30, 2002 ..........................................     $   799    $  (332)   $   467
                                                                        =======    =======    =======
</TABLE>

The comprehensive  income (loss), for the three and six month periods ended June
30, 2002 and 2001 are as follows (in thousands):
<TABLE>
<CAPTION>
                                                                                      Three Months Ended
                                                                                           June 30,
                                                                                           -------
                                                                                     2002       2001
                                                                                   -------    -------
<S>                                                                               <C>         <C>
Net income for the period                                                         $   905     $ 1,319
Reclassification  adjustment-net  of income tax benefit  (expense)  of $20
 and ($4) ................................................................            (32)        132
Unrealized (losses) on available for sale securities - net of income tax
benefit of $307 and $6 ...................................................           (447)         (9)
                                                                                   -------     -------
  Comprehensive income ................................................... ....   $   426     $ 1,442
                                                                                   =======     =======
</TABLE>
<TABLE>
<CAPTION>

                                                                                      Six Months Ended
                                                                                         June 30,
                                                                                   2002               2001
                                                                              ----------------   ---------------

<S>                                                                                    <C>              <C>
Net income for the period                                                              $3,290           $ 1,628
Reclassification  adjustment-net  of  income  tax  benefit  of $146 and $804,
respectively                                                                            (228)           (1,108)
Unrealized (losses) on available for sale securities - net of income tax
  benefit of $579 and $6, respectively                                                  (847)               (9)

                                                                              ----------------   ---------------
  Comprehensive income                                                                 $2,215             $ 511
                                                                              ================   ===============
</TABLE>


                                       11
<PAGE>



I.   Earnings per share

The following table set forth the computation of basic and diluted  earnings per
share for the periods indicated:  During the six months ended June 30, 2002, the
Company purchased 17,500 shares of its common stock for treasury.  Subsequent to
June 30,  2002,  the Company  purchased an  additional  3,000 shares of Treasury
stock.
<TABLE>
<CAPTION>

                                                                                Three Months Ended        Six Months Ended
                                                                                      June 30,                 June 30,
                                                                                  2002         2001         2002         2001
                                                                            ----------   ----------   ----------   ----------
Basic earnings per share
------------------------
<S>                                                                         <C>          <C>          <C>          <C>
Numerator:
      Net Income ........................................................   $  905,000   $1,319,000   $3,290,000   $1,628,000
Denominator:
      Weighted average shares outstanding ...............................    2,809,000    2,822,000    2,813,000    2,822,000
Earnings per share:
      Net income ........................................................   $     0.32   $     0.47   $     1.17   $     0.58
                                                                            ==========   ==========   ==========   ==========

Diluted earnings per share
Numerator:
     Net Income .........................................................   $  905,000   $1,319,000   $3,290,000   $1,628,000
     Interest saved on assumed conversion of
        convertible  notes - net of tax .................................         --           --        274,000         --
                                                                            ----------   ----------   ----------   ----------

     Net Income .........................................................   $  980,000   $1,319,000   $3,564,000   $1,628,000
                                                                            ----------   ----------   ----------   ----------

Denominator:
      Weighted average shares outstanding ...............................    2,809,000    2,822,000    2,813,000    2,822,000
      Shares issued on assumed conversion of
         convertible note ...............................................         --           --        236,000         --
                                                                            ----------   ----------   ----------   ----------
Weighted average shares and share
         equivalents ....................................................    2,809,000    2,822,000    3,049,000    2,822,000
                                                                            ----------   ----------   ----------   ----------

Earnings per share:
      Net income ........................................................   $     0.32   $     0.47   $     1.17   $     0.58
                                                                            ==========   ==========   ==========   ==========
</TABLE>
For the three  months ended June 30, 2002 and 2001 and the six months ended June
30,  2001,  the  236,000  shares  to be  issued  on  conversion  of the  Company
convertible note have been excluded from the computation of diluted earnings per
share because their inclusion would be anti-dilutive.

J.   Segment Information

As a result of the decision to spin-off its  investment  in Morgan (see Note F),
the Company is engaged in one business segment:  multimedia.  All businesses 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.
EBITDA is not a substitute  for  operating  income or cash flows from  operating
activities in accordance with generally accepted accounting principles.


                                       12
<PAGE>



Operating profit (loss) is equal to revenues less operating expenses,  including
unallocated general corporate expenses and excluding, interest and income taxes.
The  Registrant  allocates  a portion of its general  corporate  expenses to its
operating  segment.  Such  allocation  was  $328,000  and $326,000 for the three
months ended June 30, 2002 and 2001,  respectively and $655,000 and $652,000 for
the six months ended June 30, 2002 and 2001, respectively.
<TABLE>
<CAPTION>

                                                                                Three Months Ended             Six Months Ended
                                                                                    June 30,                       June 30,
                                                                                 2002        2001                2002        2001
                                                                                --------    --------           --------    --------
                                                                                    Unaudited                       Restated
                                                                                                   (In thousands)

<S>                                                                             <C>         <C>                <C>         <C>
Sales and revenues: .........................................................   $ 21,098    $ 17,451           $ 42,072    $ 34,660
                                                                                ========    ========           ========    ========

EBITDA (before corporate allocation):
  Operations ................................................................   $  9,994    $  9,068           $ 20,737    $ 17,670
  Corporate expenses, gross .................................................      (758)       (718)             (1,445)     (1,575)
                                                                                --------    --------           --------    --------
  Combined total ............................................................   $  9,236    $  8,350           $ 19,292    $ 16,095
                                                                                ========    ========           ========    ========

Operating profit:
  Operations ................................................................   $  4,890    $  4,613           $ 10,499    $  8,782
  Corporate expenses, net ...................................................       (433)       (383)              (798)       (903)
                                                                                --------    --------           --------    --------
  Combined total ............................................................   $  4,457    $  4,230           $  9,701    $  7,879
                                                                                ========    ========           ========    ========

Operating profit ............................................................   $  4,457    $  4,230           $  9,701    $  7,879
  Other income (expense):
  Gain on sale of cellular partnership ......................................         --          --              4,965          --
  Investment income .........................................................        235       1,175              1,232       2,393
  Interest expense ..........................................................     (3,298)     (3,417)            (6,671)     (6,832)
  Equity in earnings of affiliated companies ................................        224         204                428         369
                                                                                --------    --------            --------    --------
Income before income taxes, minority interests
 and operations of Morgan Group Holding Co.
 distributed to shareholders ................................................   $  1,618    $  2,192            $  9,655   $  3,809
                                                                                =======     ========             ========    =======
</TABLE>

K.   Litigation

Taylor  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.
                                       13
<PAGE>

The relater in this lawsuit is R.C.  Taylor III, an individual  who, to the best
of  our  knowledge,  has no  relationship  to any  of  the  Lynch  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. Interactive
has until September 5, 2002, to answer,  move to dismiss or otherwise respond to
the complaint.

L.   Write-off of Uncollectible Receivables

During the three months ended June 30, 2002,  the Company wrote off $0.7 million
of receivables relating to the bankruptcy of MCI/Worldcom and Global Crossing.

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

Overview

On January 24, 2002,  Interactive  spun off its  investment 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.  Note:  The Company
retains  234,294  shares of Morgan Group Holding Co. in escrow to be provided to
the holder(s) of the Company's  convertible notes at the time of the conversion.
Accordingly,  the amounts for Morgan are  reflected  on a one-line  basis in the
condensed  financial  statements  as of December 31,  2001,  and for the periods
ended June 30, 2002 and 2001 as "distributed to shareholders."

Sales And Revenues

Revenues for the three  months ended June 30, 2002  increased by $3.6 million to
$21.1 million from the second  quarter of 2001.  Revenues grew  primarily due to
acquisitions.   The  acquisition  of  Central  Utah  Telephone,   Inc.  and  its
subsidiaries, and Central Telecom Services, L.L.C., a related entity, which were
acquired on June 22,  2001,  contributed  $2.6  million to the  increase and the
acquisition  of American  Alarm acquired on November 30, 2001 added $0.7 million
to the increase.  The balance of the increased revenues can be attributed to the
growth in both  regulated  telco  services and the provision of  non-traditional
telephone  services such as: Internet,  long distance service and local exchange
carrier service.
                                       14
<PAGE>

For the six months ended June 30, 2002, revenues were $42.1 million, an increase
of $7.4 million from the $34.7 million recorded in the first six months of 2001.
The  inclusion of Central Utah  Telephone  Company  contributed  $5.2 million in
revenues and the inclusion of American Alarm contributed $1.4 million.

The Company  anticipates  that  increases  in revenues in the second half of the
year will be lower than the  increases in the first half as Central Utah will be
included in both periods.

In addition, as a result of certain regulatory initiatives in some of the states
in which  our  companies  operate,  it is  possible  that  revenues  at  certain
telecommunication operations may be reduced in the near future.

Operating Profit

Operating  profit for the three  months  ended June 30, 2002  increased  by $0.2
million to $4.5  million from the second  quarter of 2001.  The  acquisition  of
Central Utah added $0.7 million to operating profit during the quarter while the
acquisition  of American Alarm reduced  operating  profit by $0.2 million during
the  quarter  due to the  amortization  of customer  contracts  of $0.3  million
recorded during the quarter. The absence of $0.6 million of amortization expense
as a result of  implementing  of SFAS 142 also improved the  quarter's  results.
Also,  during the quarter the Company  recorded  $0.7 million in  allowance  for
doubtful accounts  associated with the recent  bankruptcies of two long distance
carriers.  The Company also notes that additional  revenues will be lost for the
first three weeks of July prior to the Worldcom filing.  The bankruptcy  filings
may adversely impact the interstate  revenues pools administered by the National
Exchange Carrier  Association  ("NECA") of which all of its telephone  operating
subsidiaries  participate.  If the  Company  access  settlements  from  NECA are
reduced,  the  Company's  operating  results in the  remainder  of 2002 could be
materially affected.

For the six months  ended June 30,  2002,  operating  profits  increased by $1.8
million to $9.7  million,  with  Central Utah  contributing  $1.7 million to the
increase,  American Alarm reduced operating profits by $0.4 million,  due to the
amortization of customer contracts of $0.7 million and the  non-amortization  of
goodwill  adding $1.2 million.  The recording of $0.7 million of allowances  for
doubtful accounts also affected the six month activity.

Other Income (Expense)

The  Company  has  investments  in two  affiliates  who have  acquired  wireless
Spectrum  in two  separate  auctions  conducted  by the  Federal  Communications
Commission in 2000,  the 700 MHz Guardband  Auction and the 39 GHz Auction.  The
Company's  investments in these two  affiliates are $6.2 and $1.5  respectively.
While trading in the public markets for companies that own and operate  wireless
Spectrum has declined substantially since the end of these Auctions, there is no
indication  that the value of this  Spectrum has  declined  due in part,  to the
limited trading of these  licenses.  On August 27, 2002, the FCC is scheduled to
commence a 700 MHz  Auction  which  Spectrum  is very  analogous  to the 700 MHz
Guardband  Auction noted above.  The Company will closely monitor the results of
the Auction and will provide a reserve for impairment in the second half of 2002
should the results warrant.

Investment  income for the quarter ended June 30, 2002 decreased by $0.9 million
from the prior year period primarily due to the unrealized gains recorded in the
second  quarter of 2001 in  connection  with Tremont  Advisers,  Inc. All of the
Company's interest in Tremont was sold in October 2001. For the six month period
ended June 30, 2002,  investment income decreased by $1.2 million from the prior
year period again due to gains in 2001 in Tremont Advisers, Inc.

During the quarter,  the Company sold its interest in a cellular  partnership in
New Mexico (RSA 1 (North) ) for $5.6 million resulting in a pre-tax gain of $5.0
million.
                                       15
<PAGE>

Interest expense is approximately the same as the prior year periods at $3.3 and
$6.7 million respectively, as increased levels of borrowing were offset by lower
interest rates.

Income Tax Provision

The income tax provision  includes federal as well as state and local taxes. The
tax  provision  for the six  months  ended  June 30,  2002 and  2001,  represent
effective  tax  rates  of 39.2%  and  50.0%,  respectively.  The  causes  of the
difference  from the federal  statutory rate are principally the effect of state
income  taxes,  including  the effect of  earnings  and losses  attributable  to
different state jurisdictions,  and the amortization of non-deductible  goodwill
in 2001.

Minority Interest

Minority interest  decreased earnings by $62,000 for the three months ended June
30, 2002 versus $155,000 a year earlier due to the minority interest  associated
with the acquisition of American Alarm.

For the six months ended June 30, 2002,  minority interest decreased earnings by
$0.7  million  versus  $0.3  million  for the period  last year due to  minority
interest  associated  with the gain from the sale of RSA 1 (North) in New Mexico
offset by minority interest associated with the acquisition of American Alarm.

Net Income

Income from continuing  operations was $0.9 million,  $0.32 per share (basic and
diluted),  for the second  quarter of 2002  compared to income  from  continuing
operations  for the same  period last year of $1.0  million,  or $0.34 per share
(basic and diluted).  The  acquisition  of Central Utah and the cessation of the
amortization of goodwill ($0.5 million) offset lower investment income.

For the six months  ended June 30, 2002 income from  continuing  operations  was
$5.2 million, or $1.84 per share (basic,  $1.79 diluted),  as compared to income
from  continuing  operations in 2001 of $1.6 million,  or $0.56 per share (basic
and diluted). Factors contributing to this increase were: the gain from the sale
of RSA 1  (North)  in New  Mexico,  the  acquisition  of  Central  Utah  and the
cessation of the amortization of goodwill ($1.0 million).

Net income for the three  months  ended June 30, 2002 was $0.9  million or $0.32
per share  (basic and  diluted) as compared  to net income of $1.3  million,  or
$0.47 per share (basic and diluted),  in the previous years' three-month period.
For the six months  ended June 30, 2002 net income was $3.3 million or $1.17 per
share (basic, $1.17 per share diluted), as compared to $1.6 million or $0.58 per
share in the previous year. In addition to the factors influencing the change in
income from continuing  operations,  the operating result of Morgan impacted the
net income results.

FINANCIAL CONDITION

Liquidity/ Capital Resources

As of June 30, 2002, the Company had current assets of $50.0 million and current
liabilities  of $53.4  million.  Working  capital  deficiency was therefore $3.4
million  as  compared  to $10.3  million at  December  31,  2001,  net of Morgan
amounts.

For the six months,  capital  expenditures were $7.8 million in 2002 versus $7.6
million in 2001.
                                       16
<PAGE>

At June 30, 2002,  total debt was $200.4  million,  which was $3.1 million lower
than the $203.5  million at the end of 2001. At June 30, 2002,  there was $133.5
million of fixed interest rate debt averaging 7.0% and $66.9 million of variable
interest rate debt averaging 4.8%. Debt at year-end 2001 included $137.1 million
of fixed  interest  rate debt, at an average  interest  rate of 7.0%,  and $66.4
million of variable interest rate debt, at an average interest rate of 4.8%.

On December  12,  1999,  the Company  completed  the private  placement of a $25
million 6% five-year note,  convertible into Interactive  common stock at $42.50
per share.  At that time,  to assist the Company  with the private  placement to
Cascade  Investment LLC ("Cascade"),  the Chairman and CEO of Interactive agreed
to give the  acquirer  of the note a one-time  option to sell the note to him at
105% of the principal amount thereof.  The exercise period was from November 15,
2000 to December 1, 2000.  The  obligation of the Chairman  under this option to
sell  agreement  was secured by a bank  letter of credit,  which,  in turn,  was
secured by a pledge of certain  securities  of the  Chairman.  The Company  also
agreed to  reimburse  the Chairman for the cost of the letter of credit plus his
counsel fees in connection  with the option to sell  agreement and obtaining the
letter of credit.

On January  16,  2001,  the option to sell  agreement  between  Cascade  and the
Company's   Chairman  was  modified  and  extended.   As  a  condition  to  such
modification  and extension,  Cascade demanded and obtained the right to sell up
to $15  million of the notes back to the  Chairman  at any time prior to January
31,  2001 and the right to sell the  remaining  $10  million of the notes to the
Chairman  between  November 15 and December 1, 2002 (the  "Put").  The Put is at
105% of principal amount sold plus accrued and unpaid interest and is secured by
a fully collateralized letter of credit.

In order to induce  the  Chairman  to grant  the Put,  Company  entered  into an
agreement in December  2000 with its  Chairman  whereby it agreed (i) to pay for
and acquire,  on the same terms and conditions,  any portion of the note sold by
Cascade  under  the Put,  (ii) to  reimburse  the  Chairman  for the  costs  for
extending and  maintaning  the letter of credit and (iii) to pay the Chairman or
his assigns a  collateral  maintenance  fee of 10% per annum for any  collateral
provided by them.

During January 2001, Cascade exercised the Put with regard to the $15 million of
the notes and on February 14, 2001,  the Company  transferred  $15.9  million to
Cascade,  including the 5% premium plus accrued and unpaid interest, in exchange
for $15.0 million of the notes held by Cascade.

The  option to sell the  remaining  $10  million  continues  to be  secured by a
collateralized  letter of credit.  Until March 31, 2002, all or a portion of the
collateral for the letter of credit was provided by an affiliate of the Chairman
and, as noted  above,  the  Company had agreed to pay all legal fees,  letter of
credit  fees and a 10% per annum  collateral  fee on the  amount  of  collateral
provided.  As of March 31, 2002,  the Company  eliminated  the collateral fee by
replacing all of the $10.5 million of the collateral provided by an affiliate of
the Chairman with $10.5 million of the Company's U.S. Treasury Bills, which have
been  pledged  to the  issuers of the  letter of credit  and are  classified  as
"Restricted Cash" on the Company's balance sheet.

The balance of the  convertible  subordinated  note is  classified as current at
June 30, 2002,  and  December 31, 2001,  as the holder has the ability to demand
payment of such  amount,  plus the $0.5 million  premium,  prior to December 31,
2002.  Management is currently unaware of Cascade's intention with regard to its
potential exercise of the Put with respect to the remaining $10 million of notes
outstanding.

As of June 30, 2002, Interactive, the parent company, had $0.1 million available
under a $10 million short-term line of credit facility,  which expires on August
31,  2002.  The  Company  has been  negotiating  with the lender and expects the
facility to be renewed for one year.
                                       17
<PAGE>

Lynch  has  not  paid  any  cash  dividends  on its  common  stock  since  1989.
Interactive  does not expect to pay cash  dividends  on its Common  Stock in the
foreseeable  future.  Interactive  currently intends to retain its earnings,  if
any,  for use in its  business.  Future  financings  may limit or  prohibit  the
payment of dividends.

Interactive  has a high degree of financial  leverage.  As of June 30, 2002, the
ratio of total debt to equity was 8.8 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 respective parent of the subsidiaries.

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  resources  to  enable  the  Company  to meet its
obligations,  there is no  assurance  that such can be  readily  obtained  or at
reasonable costs.

The Company is obligated under long-term debt provisions 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   1 - 3 years 4 - 5 years After 5 years
                                                                            -------- -------- ----------- ----------- -------------

<S>                                                                      <C>        <C>       <C>         <C>         <C>
Long-term Debt (a) ....................................................  $187,584   $ 21,151  $ 45,647    $ 44,628    $ 76,158

Operating Leases ......................................................     1,306        321       564         321         100
                                                                         --------   --------   --------   --------   ---------

Total Contractual Cash Obligations ....................................  $188,890   $ 21,472   $ 46,211   $ 44,949   $ 76,258
                                                                         ========   ========   ========   ========   ========
</TABLE>


(a)  Does not  include  interest  payments on debt

(b)  Contains $10 million of convertible subordinated debt due in 2004, that has
     a put  option  that if  exercised,  would  accelerate  the debt to the last
     quarter of 2002.

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:
<TABLE>
<CAPTION>

                                                                                     Amount of Commitment Expiration
                                                                                                 Per Period
                                                                                              (In thousands)
                                                                       Total
                                                                      Amounts   Less than
Other Commercial Commitments........................................ Committed   1 year   1 - 3 years   4 - 5 years   Over 5 years
                                                                     ---------  --------- -----------   -----------   ------------
<S>                                                                   <C>        <C>
Lines of Credit ....................................................  $12,776    $12,776          --            --             --

Standby Letter of Credit ...........................................   10,500     10,500          --            --             --

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

Total Commercial Commitments ......................................   $23,276    $23,276          --            --             --
                                                                      =======   ========  ===========   ===========   ============


</TABLE>
                                       18
<PAGE>



The Company has initiated an effort to monetize certain of its assets, including
selling a portion or all of certain in vestment  and/or certain of its operating
entities.  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 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.

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 intrastate  access is generally  billed monthly in arrears based on
intrastate 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.
                                       19
<PAGE>

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 2001, the Company has
acquired twelve  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.

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  ($34.8  million at June 30,
2002 and $31.2 million at December 31, 2001).

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 June 30, 2002, approximately $66.9 million, or 33% 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 2002  average  interest  rate under  these
borrowings,  it is estimated that the Company's 2002 six-month  interest expense
would have changed by less than $0.4 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.

                                       20

<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.

                                       21
<PAGE>



PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Taylor  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 relater in this lawsuit is R.C.  Taylor III, an individual  who, to the best
of  our  knowledge,  has no  relationship  to any  of  the  Lynch  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. Interactive
has until September 5, 2002, to answer,  move to dismiss or otherwise respond to
the complaint.

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

At the Annual  Meeting of  Stockholders  of the Company held on May 9, 2002, the
following persons were elected as Directors with the following votes:
<TABLE>
<CAPTION>

      Name             Votes For   Votes Withheld
      ----             ---------   --------------

<S>                    <C>             <C>
Paul J. Evanson ....   2,264,804       9,741
John C. Ferrara ....   2,268,199       6,346
Mario J. Gabelli ...   2,208,401      66,144
Daniel R. Lee ......   2,269,279       5,266
David C. Mitchell ..   2,269,279       5,266
Salvatore Muoio ....   2,268,209       6,336
Ralph R. Papitto ...   2,268,199       6,346
Vincent S. Tese ....   2,269,279       5,266

</TABLE>

                                       22
<PAGE>



Also at such  Annual  Meeting,  a proposal to amend the bylaws of the Company to
require  that the  exercise  price  for all stock  options  be no less than fair
market value of the time of the grant was approved with the following votes:
<TABLE>
<CAPTION>


Number of Votes
---------------
<S>               <C>
For ...........   2,216,373
Against .......      50,608
Abstaining ....       7,564
</TABLE>

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibit 99.1 - Section 906 Certifications.

(b)  None.


                                       23

<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)

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

August 14, 2002

                                       24