===============================================================================
                        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, 2003
                               -------------

                                       or

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

For the transition period from            to
                               ----------   ----------------

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


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



        Delaware                                        06-1458056
        --------                                        ----------
State or other jurisdiction of                      (I.R.S. Employer
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  by check mark  whether  the  Registrant  is an  accelerated  filer (as
defined in Rule 12b-2of the Act).Yes   No X

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


           Class                              Outstanding at July 30, 2003
           -----                              ----------------------------
Common Stock, $.0001 par value                         2,782,751

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






                                      INDEX

                 LYNCH INTERACTIVE CORPORATION AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION


Item 1. Financial Statements (Unaudited)

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

Condensed Consolidated Statements of Operations:
  -      Three and six months ended June 30, 2003 and 2002

Condensed Consolidated Statements of Cash Flows:
  -      Six months ended June 30, 2003 and 2002

Notes to Condensed Consolidated Financial Statements

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

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Item 4. Controls and Procedures

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 6. Exhibits and Reports on Form 8-K


SIGNATURE

CERTIFICATIONS








                                        i



<PAGE>
<TABLE>
<CAPTION>



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

                 LYNCH INTERACTIVE CORPORATION AND SUBSIDIAIRES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (In thousands, except share amounts)

                                                                June 30,   December 31,    June 30,
                                                                  2003         2002          2002
                                                             ------------ ------------- ------------
                                                              (Unaudited)     (Note)     (Unaudited)
<S>                                                           <C>          <C>          <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents ...............................   $  25,526    $  23,356    $  24,291
  Restricted Cash .........................................        --           --         10,552
  Receivables, less allowances of $258,
    $316 and $928, respectively ...........................       8,553        8,916        8,982
  Material and supplies ...................................       3,300        3,351        3,687
  Prepaid expenses and other current assets ...............       1,290        1,451        2,443
                                                              ---------    ---------    ---------
TOTAL CURRENT ASSETS ......................................      38,669       37,074       49,955

PROPERTY, PLANT AND EQUIPMENT:
  Land ....................................................         833          807          840
  Buildings and improvements ..............................      13,332       12,741       10,918
  Machinery and equipment .................................     203,807      195,015      183,979
                                                              ---------    ---------    ---------
                                                                217,972      208,563      195,737
  Accumulated Depreciation ................................     (97,312)     (88,201)     (81,834)
                                                              ---------    ---------    ---------
                                                                120,660      120,362      113,903
GOODWILL, NET .............................................      60,884       60,884       60,889
INVESTMENTS IN AND ADVANCES TO AFFILIATED ENTITIES ........      10,100        9,343       15,375
OTHER ASSETS ..............................................      18,732       17,684       17,663
                                                              ---------    ---------    ---------
TOTAL ASSETS ..............................................   $ 249,045    $ 245,347    $ 257,785
                                                              =========    =========    =========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Notes payable to banks ..................................   $  11,623    $  12,882    $  12,776
  Trade accounts payable ..................................       3,118        1,638          479
  Accrued interest payable ................................         372          384        1,809
  Accrued liabilities .....................................      14,831       16,682       17,158
 Current maturities of long-term debt .....................      18,619       18,272       21,151
                                                              ---------    ---------    ---------
TOTAL CURRENT LIABILITIES .................................      48,563       49,858       53,373
   LONG-TERM DEBT .........................................     160,720      158,349      166,433
   DEFERRED INCOME TAXES ..................................       6,659        6,621        7,790
   OTHER LIABILITIES ......................................         645          736          799
   MINORITY INTERESTS .....................................       7,414        7,151        6,814

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
  COMMON STOCK, $0.0001 PAR VALUE-10,000,000
    SHARES AUTHORIZED; 2,824,766 ISSUED; 2,782,751,
     2,792,651 and 2,802,551 OUTSTANDING ..................        --           --           --
  ADDITIONAL PAID-IN CAPITAL ..............................      21,406       21,406       21,406
  RETAINED EARNINGS .......................................       4,448        1,879        1,625
  ACCUMULATED OTHER COMPREHENSIVE INCOME ..................         599          534          467
  TREASURY STOCK, 42,015, 32,115 and 22,215 shares, at cost      (1,409)      (1,187)        (922)
                                                              ---------    ---------    ---------
TOTAL SHAREHOLDER'S EQUITY ................................      25,044       22,632       22,576
                                                              ---------    ---------    ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................   $ 249,045    $ 245,347    $ 257,785
                                                              =========    =========    =========
</TABLE>

Note:  The balance  sheet at December 31, 2002 has been derived from the audited
financial  statements at that date, but does not include all of the  information
and footnotes required by accounting principles generally accepted in the Untied
States for complete financial statements.

See accompanying notes.

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




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

               (In thousands, except per share and share amounts)

                                                             Three Months Ended            Six Months Ended
                                                                  June 30,                     June 30,
                                                        ----------------------------------------------------------
                                                             2003          2002          2003           2002
                                                        ----------------------------------------------------------
<S>                                                      <C>            <C>            <C>            <C>
SALES AND REVENUES ...................................   $    21,343    $    21,098    $    42,646    $    42,072

COSTS AND EXPENSES:
Operations, exclusive of depreciation and amortization        10,637         11,104         21,483         21,335
Depreciation and amortization ........................         4,913          4,780          9,828          9,591
Selling and administrative ...........................         1,100            757          1,868          1,445
                                                           ---------      ---------     ----------    -----------
OPERATING PROFIT .....................................         4,693          4,457          9,467          9,701
                                                           ---------      ---------     ----------    -----------

Other income (expense):
   Investment income .................................            98            235            656          1,232
   Interest expense ..................................        (2,999)        (3,298)        (6,025)        (6,671)
   Equity in earnings of affiliated companies ........           425            224            685            428
   Gain on sale of subsidiary stock ..................          --             --             --            4,965
                                                            ---------      ---------    ----------     ----------
                                                              (2,476)        (2,839)        (4,684)          (46)
                                                            ---------      ---------    ----------     ----------
INCOME BEFORE INCOME TAXES, MINORITY INTERESTS AND
OPERATIONS OF MORGAN GROUP HOLDING CO. DISTRIBUTED TO
SHAREHOLDERS
                                                               2,217          1,618          4,783          9,655
Provision for income taxes ...........................          (875)          (651)        (1,951)        (3,783)
Minority Interests ...................................          (186)           (62)          (263)          (694)
                                                            ---------      ---------    ----------     ----------
INCOME  FROM CONTINUING OPERATIONS ...................         1,156            905          2,569          5,178

Loss from operations of Morgan Group Holding Co.
distributed to shareholders, net of income taxes of
$-, and minority interests of $868 ...................          --             --             --           (1,888)
                                                            ---------      --------     ----------     ----------
NET INCOME ...........................................   $     1,156    $       905    $     2,569    $     3,290
                                                            =========     =========     ==========     ==========

Basic weighted average shares outstanding ............     2,787,000      2,809,000      2,789,000      2,813,000
Diluted weighted average shares outstanding ..........     2,787,000      2,809,000      2,789,000      3,049,000
BASIC EARNINGS PER SHARE
INCOME  FROM CONTINUING OPERATIONS ...................   $      0.41    $      0.32    $      0.92    $      1.84
Loss from operations of Morgan Group Holding Co.
  distributed to shareholders ........................          --             --             --            (0.67)
                                                           ---------      ---------     ----------     ----------
NET INCOME ...........................................   $      0.41    $      0.32    $      0.92    $      1.17
                                                           =========      =========     ==========     ==========

DILUTED EARNINGS PER SHARE
INCOME FROM CONTINUING OPERATIONS ....................   $      0.41    $      0.32    $      0.92    $      1.79
Loss from operations of Morgan Group Holding Co.
distributed to shareholders...........................          --             --             --            (0.62)
                                                           ---------     ----------     ----------     ----------
NET INCOME ...........................................   $      0.41    $      0.32    $      0.92    $      1.17
                                                           =========     ==========     ==========     ==========
</TABLE>
See accompanying notes.

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



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

                                                                             Six Months Ended
                                                                                 June 30,
                                                                        ----------------------
                                                                            2003        2002
                                                                        ----------------------
<S>                                                                     <C>         <C>
OPERATING ACTIVITIES
Net Income ..........................................................   $  2,569    $  3,290
Adjustments to reconcile net income to net cash provided by operating
activities:
   Depreciation and amortization ....................................      9,828       9,591
   Equity in earnings of affiliated companies .......................       (685)       (428)
   Minority interests ...............................................        263         694
   Gain on sale of cellular partnership .............................       --        (4,965)
   Gain on sale of available for sale securities ....................       --           (24)
   Non-cash items and changes in operating assets and liabilities
     from operations of Morgan Group Holding Co.
     distributed to shareholders ....................................       --         1,888
   Changes in operating assets and liabilities:
        Receivables .................................................        363       1,055
        Accounts payable and accrued liabilities ....................       (476)      1,174
        Other .......................................................        212      (1,000)
                                                                        --------    --------
NET CASH PROVIDED BY OPERATING ACTIVITIES ...........................     12,074      11,275
                                                                        --------    --------

INVESTING ACTIVITIES
Capital expenditures ................................................     (9,927)     (7,794)
Investment in and advances to affiliated entities ...................       (546)     (1,912)
Proceeds from sale of available for sale securities .................       --           398
Proceeds from sale of cellular partnership ..........................       --         5,570
Other ...............................................................       (668)        (75)
                                                                        --------    --------
NET CASH USED IN INVESTING ACTIVITIES ...............................    (11,141)     (3,813)
                                                                        --------    --------

FINANCING ACTIVITIES
Issuance of long term debt ..........................................      8,748       1,965
Repayments of long term debt ........................................     (6,030)     (7,605)
Net repayments on lines of credit ...................................     (1,259)      2,440
Treasury stock transactions .........................................       (222)       (691)
Investment in restricted cash .......................................       --        (2,983)
Other ...............................................................       --            39
                                                                        --------    --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES .................      1,237      (6,835)
                                                                        --------    --------
Net increase in cash and cash equivalents ...........................      2,170         627
Cash and cash equivalents at beginning of period ....................     23,356      23,664
                                                                        --------    --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ..........................   $ 25,526    $ 24,291
                                                                        ========    ========
</TABLE>

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




                  LYNCH INTERACTIVE CORPORATION & SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A.   Subsidiaries of the Registrant

As of June 30, 2003, the Subsidiaries of the Registrant are as follows:

Subsidiary                                       Owned by Lynch

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

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

  Lynch Telephone Corporation X ................     100.0%
     Central Utah Telephone, Inc. ..............     100.0%
     Central Telecom Services, LLC .............     100.0%
        Cache Valley Wireless, LC ..............     100.0%
</TABLE>

                                      -4-
<page>
<TABLE>
<CAPTION>

Subsidiary                                   Owned by Lynch



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

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

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

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

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

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






                                      -5-
<PAGE>



B.   Basis of Presentation

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

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

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States for interim  financial  information  and with the  instructions to
Form 10-Q and Articles 10 and 11 of  Regulation  S-X.  Accordingly,  they do not
include all of the information and footnotes  required by accounting  principles
generally  accepted in the United States for complete financial  statements.  In
the opinion of  management,  all  adjustments  (consisting  of normal  recurring
accruals)  considered  necessary  for a fair  presentation  have been  included.
Operating  results for the three-month and six-month periods ended June 30, 2003
are not necessarily  indicative of the results that may be expected for the year
ending December 31, 2003. The preparation of consolidated  financial  statements
in conformity with accounting principles generally accepted in the United States
requires  management to make estimates and  assumptions  that affect the amounts
reported in the financial  statements  and  accompanying  notes.  Actual results
could differ from those estimates.

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

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

                                      -6-
<page>
In  January   2003,   the  FASB  issued   Interpretation   No.  46  ("FIN  46"),
"Consolidation of Variable Interest Entities,  an Interpretation of ARB No. 51."
FIN 46 requires  certain  variable  interest  entities to be consolidated by the
primary  beneficiary of the entity if the equity  investors in the entity do not
have the  characteristics  of a  controlling  financial  interest or do not have
sufficient  equity at risk for the  entity to  finance  its  activities  without
additional  subordinated  financial  support  from  other  parties.  FIN  46  is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to  February  1, 2003,  the  provisions  of FIN 46 must be applied for the first
interim or annual  period  beginning  after  June 15,  2003.  Management  of the
Company is still  evaluating  the impact that FIN 46 will have on the  Company's
consolidated financial position, results of operations or cash flows.

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

C.   Intangibles

The  application  of the  non-amortization  provisions  of  Statement  No.  142,
Goodwill and Other  Intangible  Assets,  has  increased  net income for both the
three months  ended June 30, 2003 and 2002 by $0.7 million  ($0.24 per basic and
diluted  share) and  approximately  $1.3 million  ($0.45 per basic and $0.44 per
diluted  share) for the six months  ended June 30, 2002 and  approximately  $1.3
million  ($.045 per basic and diluted  share) for the six months  ended June 30,
2003.

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

<TABLE>
<CAPTION>
                                                  June 30,   December 31,  June 30,
                                                    2003        2002         2002
                                                  ---------------------------------
                                                 (Unaudited)            (Unaudited)
                                                  ---------------------------------
                                                              (000s)

<S>                                              <C>         <C>         <C>
Intangible assets subject to amortization:
  Subscriber lists ...........................   $  7,702    $  7,284    $  7,594
  Accumulated amortization ...................     (2,665)     (2,370)     (1,774)
                                                 --------    --------    --------
                                                 $  5,037    $  4,914    $  5,820
                                                 ========    ========    ========

Amortization expense for three months ended ..   $    147                $    405
Amortization expense for six months ended ....   $    295                $    808
Intangible assets not subject for amortization
  Goodwill ...................................   $ 60,884    $ 60,884    $ 59,916
  Cellular Licenses ..........................      1,650       1,650       1,650
</TABLE>

Estimated aggregate  amortization  expense by year for Intangible assets subject
to amortization:
<TABLE>
<CAPTION>

                                   (000's)
                                   -------

                             <S>    <C>
                             2003   $552
                             2004   $552
                             2005   $547
                             2006   $547
                             2007   $547
</TABLE>
                                      -7-
<page>
D.   Acquisitions and Dispositions

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.   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.

F.   Investments in Affiliated Companies

Interactive has equity  investments in both broadcasting and  telecommunications
companies.

Summarized  financial  information  for  companies  accounted  for by the equity
method as of and for the three and six months  ended June 30,  2003 and 2002 and
as of December 31, 2002 is as follows (000's):
<TABLE>
<CAPTION>

                                                     Broadcasting Combined Information
                                                     June 30,  December 31, June 30,
                                                      2003        2002       2002
                                                   (Unaudited)            (Unaudited)
                                                   -------------------------------------

<S>                                                <C>         <C>         <C>
Current assets .................................   $  5,404    $  6,181    $  5,145
Property, plant & equipment, intangibles & other     10,103      11,260      12,494
                                                   --------    --------    --------
Total assets ...................................   $ 15,507    $ 17,441    $ 17,639
                                                   ========    ========    ========

Current liabilities ............................   $  3,127    $  3,790    $  4,140
Long term liabilities ..........................     17,020      18,069      18,856
Equity .........................................     (4,640)     (4,418)     (5,357)
                                                   --------    --------    --------
Total liabilities & equity .....................   $ 15,507    $ 17,441    $ 17,639
                                                   ========    ========    ========

Three months ended

Revenues .......................................   $  2,900                $  2,958
Gross profit ...................................        782                     954
Net (Loss) Profit ..............................         (7)                     73

 Six Months Ended

Revenues .......................................   $  5,738                $  5,581
Gross profit ...................................      1,455                   1,637
Net Loss .......................................       (212)                   (151)
</TABLE>

At June 30, 2003, December 31, 2002, and June 30, 2002 the Company's  investment
in  Coronet  Communications  Company  ("Coronet")  was  carried  at  a  negative
$793,000, a negative $791,000, and a negative $930,000 respectively,  due to the
Company's  guarantee of $3.8 million of  Coronet's  third party debt.  Long-term
debt of Coronet,  at June 30, 2003,  totaled  $10.4 million due to a third party
lender  which  is  due  quarterly  through  December  31,  2005.  The  Company's
investment in Capital Communications Company was carried at $0 for all periods.

                                      -8-
<PAGE>


<TABLE>
<CAPTION>





                                             Telecommunications Combined Information
                                                  June 30,  December 31,  June 30,
                                                 ---------------------------------
                                                    2003      2002      2002
                                                 (Unaudited)         (Unaudited)
                                                 ----------------------------------
                                                             (000`s)
<S>                                                <C>       <C>       <C>
Current assets .................................   $11,597   $13,996   $11,544
Property, plant & equipment, intangibles & other    27,343    28,320    28,124
                                                   -------   -------   -------
Total assets ...................................   $38,940   $42,316   $39,668
                                                   =======   =======   =======

Current liabilities ............................   $ 5,372   $ 9,243   $ 8,836
Long term liabilities ..........................    11,061    11,869    13,517
Equity .........................................    22,507    21,204    17,315
                                                   -------   -------   -------
Total liabilities & equity .....................   $38,940   $42,316   $39,668
                                                   =======   =======   =======

Three months ended

Revenues .......................................   $11,570             $11,104
Gross profit ...................................     4,152               3,277
Net income .....................................     3,178               2,481

Six months ended

Revenues .......................................   $21,981             $20,937
Gross profit ...................................     7,580               5,836
Net income .....................................     5,679               4,395
</TABLE>

G.   Indebtedness

The parent company maintains a short-term line of credit facility totaling $10.0
million.  Borrowings  under this facility  were $8.3 million,  $10.0 million and
$9.9  million  at June 30,  2003,  and  December  31,  2002,  and June 30,  2002
respectively.  This  facility  will expire on August 31,  2003.  Long-term  debt
consists of (all interest rates are at June 30, 2003):

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

                                                          June 30,                   June 30,
                                                           2003       December 31,     2002
                                                        (Unaudited)      2002       (Unaudited)
                                                        ---------------------------------------
                                                                   (In thousands)
<S>                                                      <C>          <C>          <C>
Rural Electrification Administration (REA) and Rural
 Telephone Bank (RTB) notes payable through 2027 at
 fixed interest rates ranging from 2% to 7.5%. (5%
 weighted average, secured by assets of the telephone
 companies of $152.8 million) ........................   $  58,878    $  58,119    $  55,239

Bank Credit facilities utilized by certain telephone
 and telephone holding companies through 2016, $28.9
 million at fixed interest rates averaging 7.9% and
 $53.8 million at variable interest rates averaging
 4.1%  ..............................................       82,681       80,166       84,060

Unsecured  notes  issued  in  connection  with
 acquisitions through 2006, at fixed interest rates
 of 10.0% ...........................................       34,634       34,749       34,397

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

Other ...............................................        3,146        3,587        3,888
                                                         ---------    ---------    ---------
                                                           179,339      176,621      187,584
Current maturities ..................................      (18,619)     (18,272)     (21,151)
                                                         ---------    ---------    ---------
                                                         $ 160,720    $ 158,349    $ 166,433
                                                         =========    =========    =========
</TABLE>

H.   Stock Options

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

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


                                      -10-
<PAGE>



I.   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,
2003, December 31, 2002 and June 30, 2002 are as follows (in thousands):
<TABLE>
<CAPTION>

                                  Unrealized
                                     Gain      Tax Effect   Net
<S>                                <C>          <C>       <C>
Balance at December 31, 2002 ...   $  915       $ (381)   $  534
Current period unrealized losses      104          (39)       65
                                   ------       ------    ------
  Balance at June 30, 2003 .....   $1,019       $ (420)   $  599
                                   ======       ======    ======
  Balance at June 30, 2002 .....   $  799       $ (332)   $  467
</TABLE>

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

                                               Three Months Ended     Six Months Ended
                                                    June 30,             June 30,
                                             -------------------------------------------
                                                 2003        2002      2003      2002
                                             -------------------------------------------

<S>                                            <C>       <C>        <C>       <C>
Net income for the period                      $ 1,156   $   905    $ 2,569   $ 3,290
Reclassification adjustment-net of income
  tax  benefit  of $--,  $20 and -- and $146
respectively ...............................      --         (32)      --        (228)
Unrealized losses on available for sale
  securities - net of income tax benefit
  as of ($87),$307,($39) and $579
respectively................................       131      (447)        65      (847)
                                               -------    -------   -------   -------
  Comprehensive income .....................   $ 1,287   $   426    $ 2,634   $ 2,215
                                               =======   =======    =======   =======
</TABLE>


J.   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, 2003, the
Company  purchased  9,900  shares of its common stock for  treasury.  During the
period there were stock  options  outstanding  that have been  excluded from the
earnings  per  share  computation   because  their  inclusion  would  have  been
anti-dilutive.

                                      -11-
<PAGE>
<TABLE>
<CAPTION>




                                                     Three Months Ended     Six Months Ended
                                                        June 30,                June 30,
                                                   2003         2002        2003         2002
                                                ------------------------------------------------
<S>                                            <C>          <C>          <C>          <C>
Basic earnings per share
Numerator:
      Net Income ...........................   $1,156,000   $  905,000   $2,569,000   $3,290,000
Denominator:
      Weighted average shares outstanding ..    2,787,000    2,809,000    2,789,000    2,813,000
                                               ----------   ----------   ----------   ----------
Earnings per share:
      Net income ...........................   $     0.41   $     0.32   $     0.92   $     1.17
                                               ==========   ==========   ==========   ==========

Diluted earnings per share
Numerator:
     Net Income ............................   $1,156,000   $  905,000   $2,569,000   $3,290,000
     Interest  saved on  assumed  conversion
     of convertible notes - net of tax......         --           --           --        274,000
                                                ----------   ----------   ----------   ----------

     Net Income ............................   $1,156,000   $  905,000   $2,569,000   $3,564,000
                                               ----------   ----------   ----------   ----------

Denominator:
      Weighted average shares outstanding ..    2,787,000    2,809,000    2,789,000    2,813,000
      Shares issued on assumed conversion of
         convertible note ..................         --           --           --        236,000
                                               ----------   ----------   ----------   ----------
      Weighted average shares and share
         Equivalents .......................    2,787,000    2,809,000    2,789,000    3,049,000
                                               ----------   ----------   ----------   ----------

Earnings per share:
      Net Income ...........................   $     0.41   $     0.32   $     0.92   $     1.17
                                               ==========   ==========   ==========   ==========
</TABLE>

K.   Segment Information

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

EBITDA  (before  corporate  allocation)  for  operating  segments  is  equal  to
operating  profit  before  interest,  taxes,   depreciation,   amortization  and
allocated  corporate  expenses.  EBITDA  is  presented  because  it is a  widely
accepted  financial  indicator  of value and ability to incur and service  debt.
Management  uses EBITDA to evaluate the operating  performance  of the Company's
operations.  EBITDA is not a substitute for operating  income or cash flows from
operating activities in accordance with accounting principles generally accepted
in the United States.

Operating  profit  is equal  to  revenues  less  operating  expenses,  including
unallocated general corporate expenses and excluding, interest and income taxes.
The  Company  allocates  a portion  of its  general  corporate  expenses  to its
operating  segment,  such  allocation  was  $332,000  and $328,000 for the three
months ended June 30, 2003 and 2002,  respectively;  and $665,000  from $655,000
for the six months ended June 30, 2003 and 2002 respectively.


                                      -12-
<PAGE>
<TABLE>
<CAPTION>




                                                                      Three Months Ended        Six Months Ended
                                                                         June 30,                  June 30,
                                                                        2003        2002        2003        2002
                                                                    -----------------------------------------------
                                                                                         (000's)
<S>                                                                   <C>         <C>         <C>         <C>
Sales and revenues: ...............................................   $ 21,343    $ 21,098    $ 42,646    $ 42,072
                                                                      ========    ========    ========    ========

EBITDA (before corporate allocation):
  Operations ......................................................   $ 10,706    $  9,993    $ 21,163    $ 20,737
  Corporate expenses, gross .......................................     (1,100)       (757)     (1,868)     (1,445)
                                                                      --------    --------    --------    --------
   Combined total .................................................   $  9,606    $  9,236    $ 19,295    $ 19,292
                                                                      ========    ========    ========    ========

Operating profit:
  Operations ......................................................   $  5,463    $  4,890    $ 10,674    $ 10,499
  Corporate expenses, net .........................................       (770)       (433)     (1,207)       (798)
                                                                      --------    --------    --------    --------
   Combined total .................................................   $  4,693    $  4,457    $  9,467    $  9,701
                                                                      ========    ========    ========    ========

Operating profit ..................................................   $  4,693    $  4,457    $  9,467    $  9,701
  Other income (expense):
  Investment income ...............................................         98         235         656       1,232
  Interest expense ................................................     (2,999)     (3,298)     (6,025)     (6,671)
  Equity in earnings of affiliated companies ......................        425         224         685         428

  Gain on sale of subsidiary stock ................................       --          --          --         4,965
                                                                      --------    --------    --------    --------
Income before income taxes,  minority  interests and  operations of
Morgan Group Holding Co. distributed to shareholders ..............   $  2,217    $  1,618    $  4,783    $  9,655
                                                                      ========    ========    ========    ========
</TABLE>

L.   Litigation

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

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

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.


                                      -13-
<PAGE>



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

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

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

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

Sales and Revenues

Sales and Revenues  for the three  months ended June 30, 2003  increased by $0.2
million or 1.2%, to $21.3 million from the second quarter of 2002.  Increases in
the current quarter are primarily the result of additional inter-state regulated
telephone  revenues  from the  Company's  telephone  operations  that are in the
process of significant  capital upgrade  programs.  Notwithstanding  the overall
increase in revenues for the period, lower intra-state revenues were recorded by
certain operations during the second quarter of 2003.

Revenues  for the six months  ended June 30, 2003  increased  by $0.6 million or
1.4% from the six months  ended June 30,  2002.  Here  again,  high  inter-state
revenues have offset lower intra-state revenues.

Operating Profit

Operating  profit for the three  months  ended June 30, 2003  increased  by $0.2
million to $4.7  million  from the second  quarter  of 2002.  Last years  second
quarter  included a $0.7 million  allowance  for doubtful  accounts  provided in
connection with the  bankruptcies of MCI/Worldcom and Global  Crossings.  Absent
this allowance,  operating profit decreased as a result of the above noted lower
intra-state revenues and higher depreciation associated with significant capital
spending  programs,  as compared to the previous  year.  The Company's  security
operation in upstate New York recorded $250,000 less amortization expense during
the second  quarter  of 2003 as  compared  to the  second  quarter of 2002 as it
changed the amortization period of customer lists from three to ten years in the
fourth quarter of 2002. With regard to corporate expenses,  the Company recorded
a $0.3 million  bonus accrual in the second  quarter of 2003 in accordance  with
its shareholder approved executive compensation plan. No accrual was made in the
second quarter of 2002.

For the six month  ended  June 30,  2003,  operating  profit  decreased  by $0.2
million form the six months ended June 30, 2003 basically  reflecting all of the
above factors.

Other Income (Expense)

For the three  months  ended June 30,  2003  investment  income was down by $0.1
million from the same period in the prior year due to lower investment  balances
and absence of certain realized gains on available for sale securities.  For the
six months ended June 30, 2003,  investment  income was down by $0.6 million for
the same reasons.
                                      -14-
<page>
Interest  expense  decreased by $0.3 million in the second  quarter of 2003 from
the prior year due primarily to lower variable  interest rates. In addition,  in
November 2002, the Company  repurchased a $10 million convertible note for which
we previously accrued and paid an interest rate of 6% per annum. These decreases
were offset by higher interest expense at certain  telephone  companies who drew
on debt facilitates to fund major capital expenditure program.

Interest  expense  decreased  by $0.6  million for the six months ended June 30,
2003 as compared to the prior year for the same reasons as the above.

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

Equity in earnings of affiliates for both the three-month and six-month  periods
ending June 30, 2003 increased due to significant  earnings at the Company's New
Mexico cellular operation (RSA 3 and 5).

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,  2003 and  2002,  represent
effective tax rates of 40.8% and 39.2%,  respectively.  The  difference  between
these effective rates and the federal statutory rate is principally due to state
income  taxes,  including  the effect of  earnings  and losses  attributable  to
different state jurisdictions.

Minority Interests

Minority  interests  decreased  earnings by $186,000  for the three months ended
June 30, 2003 as compared to $62,000 for the three  months  ended June 30, 2002.
The change was due to the  absence of  minority  interest  affects on the losses
incurred in 2003 on the company's  security  operation in upstate New York.  For
the six months  ended June 30,  2003  minority  interest  decreased  earnings by
$263,000 as compared to $694,000 in the six months ended June 30, 2002 primarily
due to  minority  interest  recorded  on the gain from the sale of the  cellular
property.

Income from Continuing Operations and Net Income

Income from continuing operations and net income for the three months ended June
30, 2003 of $1.2 million,  or $0.41 per share (basic and  diluted),  compared to
income from continuing operations for the same period last year of $0.9 million,
or $0.32 per share (basic and diluted)  absence of the  allowance  for bad debts
associated  with  MCI/WorldCom  Global Crossing in 2002 was the primary cause of
the increase.

Income from  continuing  operations  for the six months  ended June 30, 2003 was
$2.6  million or $0.92 per share  (basic and diluted) as reduced from the Income
from  continuing  operations  for the six  months  ended  June 30,  2002 of $5.2
million,  or $1.84 per basic share ($1.79 per diluted  share).  The reduction is
primarily due to the $2.5 million or $0.89 per basic share gain from the sale of
the cellular property.
                                      -15-
<page>
Net income for the six months ended June 30, 2003 was $2.6 million, or $0.92 per
share (basic and diluted),  as compared to net income of $3.3 million,  or $1.17
per share (basic and diluted), in the same period last year. The increase is due
to the Operating losses of Morgan of $1.9 million,  or $0.67 per basic share, in
the  first  quarter  of 2002,  offset  by the  gain on the sale of the  cellular
property.



<PAGE>



FINANCIAL CONDITION

Liquidity/ Capital Resources

As of June 30, 2003, the Company had current assets of $38.7 million and current
liabilities  of $48.6  million.  Working  capital  deficiency was therefore $9.9
million as compared to $12.8 million at December 31, 2002.  The addition of $8.7
million of long-term debt was the primary cause of the decrease.

For the six months ended June 30, 2003,  capital  expenditures were $9.9 million
versus  $7.8  million  for  the  same  period  last  year.   Full  year  capital
expenditures are estimated at $22 million versus $23.8 million in 2002.

At June 30, 2003,  total debt was $191.0 million,  which was $1.5 million higher
than  the  $189.5  million  at the end of  2002.  At June 30,  2003,  there  was
$123.6million  of fixed  interest rate debt  averaging 7.0% and $67.3 million of
variable  interest  rate debt  averaging  4.2%.  Debt at year-end  2002 included
$124.7 million of fixed interest rate debt, at an average interest rate of 7.1%,
and $64.8 million of variable interest rate debt, at an average interest rate of
4.4%.

As of June 30, 2003, Interactive, the parent company, had $1.7 million available
under a $10 million short-term line of credit facility,  which expires on August
31, 2003. Management currently expects that this line of credit facility will be
renewed but there is no assurance it will be.

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

Interactive  has a high degree of financial  leverage.  As of June 30, 2003, the
ratio of total debt to equity was 7.6 to 1. Certain  subsidiaries also have high
debt to equity ratios. In addition,  the debt at subsidiary  companies  contains
restrictions on the amount of readily available funds that can be transferred to
the parent company.

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

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

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

<S>                                  <C>        <C>        <C>        <C>        <C>
Long-term Debt (a) ...............   $179,339   $ 18,619   $ 46,923   $ 40,645   $ 73,152

Operating Leases .................      1,163        329        520        314       --
                                     --------   --------   --------   --------   --------

Total Contractual Cash Obligations   $180,502   $ 18,948   $ 47,443   $ 40,959   $ 73,152
                                     ========   ========   ========   ========   ========
</TABLE>

(a)  Does not include interest payments on debt


                                      -16-
<PAGE>



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
                              Committed   1 year   1 - 3 years   4 - 5 years   Over 5 years
                               -------   -------   -----------   -----------   ------------
<S>                            <C>       <C>             <C>           <C>           <C>
Other Commercial Commitments
Lines of Credit ............   $11,623   $11,623          --            --             --

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

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

Total Commercial Commitments   $15,373   $15,373          --            --             --
                               =======   =======   ===========   ===========   ============
</TABLE>

At June 30, 2003,  the Company's  investment in Coronet  Communications  Company
("Coronet") was carried at a negative $793,000,  due to the Company's  guarantee
of $3.8 million of  Coronet's  third party debt.  The  Company's  investment  in
Capital  Communications  Company was carried at $0 for all periods. Based upon a
multiple of ten times  broadcast cash flow,  plus cash,  less debt,  Interactive
estimates  its value in these  stations at almost $12 million as compared to the
net book  value of these  investments  of a  negative  $0.8  million.  It is not
assured that the results of these stations will continue at the current level or
that they could be sold at ten times cash flow.

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

In the first quarter of 2003,  the Company issued stock options to its President
and Chief  Operating  Officer.  The  Company  has  elected to account  for these
options  under  the  provisions  of  FASB  Statement  No.  123  "Accounting  and
Disclosure of Stock-Based  Compensation"  and FASB Statement No. 148 "Accounting
for Stock-Based  Compensation - Transition and Disclosure,  an amendment of FASB
Statement No. 123." Under the provisions of these two  statements  stock options
are valued at fair value on the date of the grant and such  amount is  amortized
as an expense over the vesting period.

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.
                                      -17-
<page>
Interactive  believes the following critical accounting policies affect its more
significant  judgments and estimates used in the preparation of its consolidated
financial statements.

Revenue Recognition

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

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

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

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

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

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

Purchase Price Allocation

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

Depreciation and Amortization

The  calculation  of  depreciation  and  amortization  expense  is  based on the
estimated economic useful lives of the underlying property,  plant and equipment
and intangible  assets.  Although  Interactive  believes it is unlikely that any
significant  changes to the useful  lives of its tangible or  intangible  assets
will occur in the near term, rapid changes in technology,  the discontinuance of
accounting under SFAS No. 71 by the Company's wireline subsidiaries,  or changes
in market  conditions  could result in revisions  to such  estimates  that could
materially  affect the carrying  value of these assets and the Company's  future
consolidated operating results.
                                      -18-
<page>
Annually,  the Company tests goodwill for impairment  using the two-step process
prescribed in SFAS No. 142. The first step is a screen for potential impairment,
while the second step  measures  the amount of  impairment,  if any. The Company
performed  the first of its  required  annual  impairment  tests of goodwill and
other indefinite lived intangible assets.

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  ($25.5  million at June 30,
2003 and $23.4 million at December 31, 2002).

The Company generally  finances the debt portion of the acquisition of long-term
assets with fixed rate,  long-term  debt.  The Company  generally  maintains the
majority  of its debt 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,  2003,  approximately  $67.3  million,  or 35%,  of the  Company's
long-term debt and notes payable bears interest at variable rates.  Accordingly,
the Company's earnings and cash flows are affected by changes in interest rates.
Assuming the current level of  borrowings  for variable rate debt and assuming a
one  percentage  point  change in the 2003  average  interest  rate under  these
borrowings, it is estimated that the Company's 2003 three-month interest expense
would have changed by less than $0.1 million.  In the event of an adverse change
in interest rates,  management would likely take actions to further mitigate its
exposure. However, due to the uncertainty of the actions that would be taken and
their  possible  effects,  the analysis  assumes no such actions.  Further,  the
analysis  does not  consider  the  effects of the change in the level of overall
economic activity that could exist in such an environment.

Item 4. Controls and Procedures


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




                                      -19-
<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.

                                      -20-
<PAGE>



PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

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

The  main  allegation  in the case is that the  defendants  participated  in the
creation  of "sham"  bidding  entities  that  allegedly  defrauded  the  Federal
Treasury  by  improperly   participating   in  certain  Federal   Communications
Commission  spectrum  auctions  restricted  to  small  businesses,  as  well  as
obtaining  bidding credits in other spectrum  auctions  allocated to "small" and
"very small"  businesses.  The lawsuit seeks to recover an unspecified amount of
damages, which would be subject to mandatory trebling under the statute.

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

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

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


                                      -21-
<PAGE>



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

At the Annual  Meeting of  Stockholders  of the Company held on May 8, 2003, the
following persons were elected as Directors of with the following votes:
<TABLE>
<CAPTION>

Name                  Votes For   Votes Withheld
----                  ---------   --------------
<S>                   <C>             <C>
Paul J. Evanson ...   2,579,770       8,496
John C. Ferrara ...   2,579,760       8,506
Mario J. Gabelli ..   2,579,770       8,496
Marc J. Gabelli ...   2,579,750       8,516
Daniel R. Lee .....   2,579,748       8,518
David C. Mitchell .   2,579,970       8,296
Salvatore Muoio ...   2,579,960       8,306
Frederic V. Salerno   2,579,424       8,842
Vincent S. Tese ...   2,579,718       8,548
</TABLE>

Item 6. Exhibits and Reports on Form 8-K

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

               Exhibit 31.2 - Chief Financial Officer Section 302 Certification

               Exhibit 32.1 - Chief Executive Officer Section 906 Certification

               Exhibit 32.2 - Chief Financial Officer Section 906 Certification.

          (b)  Current  Reports on Form 8-K filed on April 30, 2003,  and on May
               16, 2003,  reporting  earnings for the first  quarter ended March
               31, 2003.



                                      -22-
<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 13, 2003



                                      -23-