SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
---------
(Mark One)

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

For the quarterly period ended September 30, 2001
------------------

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

For the transition period from to

Commission File No. 1-106
-----

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

Indiana 38-1799862
- ------------------------------- ---------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)

50 Kennedy Plaza, Suite 1250, Providence, Rhode Island 02903
- ------------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)

(401) 453-2007
--------------
Registrant's telephone number, including area code

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

Yes X No
----- ----

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

Class Outstanding at November 1, 2001
----- -------------------------------
Common Stock, no par value 1,497,883

INDEX

LYNCH CORPORATION AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION
- ------- ---------------------

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets:
- September 30, 2001
- December 31, 2000

Condensed Consolidated Statements of Operations:
- Three and nine months ended
September 30, 2001 and 2000

Condensed Consolidated Statements of Cash Flows:
- Nine months ended September 30, 2001 and 2000

Notes to Condensed Consolidated Financial Statements:

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

Item 3. Quantitative and Qualitative Disclosure About Market Risk

PART II. OTHER INFORMATION
- ------- -----------------

Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K

SIGNATURES
- ----------

Part 1 - FINANCIAL INFORMATION -
Item 1 - Financial Statements
LYNCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)

September 30, December 31,
2001 2000
(unaudited) (A)
------------- -----------
ASSETS
CURRENT ASSETS

Cash and cash equivalents ....................................... $ 7,621 $ 10,543
Restricted cash ................................................. -- 6,500
Receivables, less allowances of $135 and $1,582 ................. 5,449 35,019
Inventories ..................................................... 6,823 35,139
Deferred income taxes ........................................... 617 7,624
Other current assets ............................................ 732 1,807
--------- ---------
TOTAL CURRENT ASSETS ............................................ 21,242 96,632

PROPERTY, PLANT AND EQUIPMENT
Land ............................................................ 291 797
Buildings and improvements ...................................... 4,156 11,076
Machinery and equipment ......................................... 12,293 56,951
--------- ---------
16,740 68,824
Accumulated Depreciation ........................................ (11,008) (27,713)
--------- ---------
5,732 41,111

EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED, NET ........... -- 21,589
OTHER ASSETS ......................................................... 619 3,488
--------- ---------
TOTAL ASSETS ..................................................... $ 27,593 $ 162,820
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Notes payable to banks .......................................... $ 2,190 $ 30,288
Trade accounts payable .......................................... 2,394 19,251
Accrued interest payable ........................................ 14 1,185
Accrued liabilities ............................................. 4,572 15,234
Customer advances ............................................... 2,379 3,916
Current maturities of long-term debt ............................ 274 1,376
--------- ---------
TOTAL CURRENT LIABILITIES ....................................... 11,823 71,250

LONG TERM DEBT ....................................................... 772 61,350
DEFERRED INCOME TAXES ................................................ 261 6,752
OTHER LONG TERM LIABILITIES .......................................... 1,561 4,223
MINORITY INTERESTS ................................................... -- 3,813
--------- ---------
TOTAL LIABILITIES ............................................... 14,417 147,388

LOSS IN EXCESS OF INVESTMENT ......................................... 19,420 --

SHAREHOLDERS' EQUITY (DEFICIT)
COMMON STOCK NO PAR OR STATED VALUE - 10,000,000
SHARES AUTHORIZED 1,513,191 SHARES ISSUED ........................ 5,139 5,139
ADDITIONAL PAID-IN CAPITAL ........................................ 10,403 10,403
(ACCUMULATED DEFICIT) RETAINED EARNINGS ........................... (21,257) 405
OFFICER'S NOTE RECEIVABLE ......................................... -- (382)
ACCUMULATED OTHER COMPREHENSIVE LOSS .............................. (71) (71)
TREASURY STOCK OF 15,308 AND 3,008 SHARES, AT COST ............... (458) (62)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) .............................. (6,244) 15,432
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) .............. $ 27,593 $ 162,820
========= =========
<FN>
(A) The Balance Sheet at December 31, 2000 has been derived from the audited
financial statements at that date, but does not include all of the
information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements.
</FN>

See accompanying notes

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

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

Three Months Nine Months
Ended September 30, Ended September 30,
---------------------- ----------------------
2001 2000 2001 2000
--------------------- -----------------------

SALES AND REVENUES ........................... $ 31,982 $ 56,192 $ 130,883 $ 161,674

Costs and expenses:
Manufacturing cost of sales .............. 29,321 47,926 122,535 139,701
Selling and administrative ............... 5,477 7,758 16,066 19,554
Asset impairment and restructuring charges 211 -- 38,272 527
Gain on deconsolidation (Note B) ............. 27,406 -- 27,406 --
----------- ----------- ----------- -----------
OPERATING PROFIT (LOSS) ...................... 24,379 508 (18,584) 1,892

Other income (expense):
Investment Income ........................ 83 335 400 1,296
Interest expense ......................... (2,353) (2,471) (7,590) (8,412)
----------- ----------- ----------- -----------
(2,270) (2,136) (7,190) (7,116)
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS BEFORE INCOME
TAXES, MINORITY INTERESTS AND
EXTRAORDINARY ITEM ........................ 22,109 (1,628) (25,774) (5,224)

Benefit from income taxes .................... 950 796 82 1,875
Minority interests ........................... 23 1,058 4,031 2,951
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM ...... 23,082 226 (21,661) (398)

EXTRAORDINARY ITEM
Gain on early extinguishment of debt
(less income tax provision of
$1,577 and minority interest of $1,381) -- -- -- 2,245
----------- ----------- ----------- -----------
NET INCOME (LOSS) ............................ $ 23,082 $ 226 ($ 21,661) $ 1,847
=========== =========== =========== ===========
Weighted average shares outstanding ....... 1,503,000 1,510,000 1,508,000 1,485,000
=========== =========== =========== ===========
Basic and diluted earnings per share:

Income (loss) before extraordinary item .. $ 15.36 $ 0.15 ($ 14.36) $ 0.27
Extraordinary item ....................... -- -- -- 1.51
----------- ----------- ----------- -----------
NET INCOME (LOSS) ............................ $ 15.36 $ 0.15 ($ 14.36) $ 1.24
=========== =========== =========== ===========

See accompanying notes

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

Nine Months Ended
September 30,
-----------------------
2001 2000
---------- -----------
OPERATING ACTIVITIES

Net income (loss) ................................... $(21,661) $ 1,847
Adjustment to reconcile net income (loss) to
net cash provided by operating activities:
Net loss of Spinnaker ......................... 53,929 --
Gain on deconsolidation ....................... (27,406) --
Extraordinary item .......................... -- (2,245)
Depreciation and amortization ............... 1,037 4,968
Amortization of deferred financing costs .... -- 1,168
Deferred taxes .............................. 516 (615)
Minority interests .......................... (4,031) (480)
Changes in operating assets and liabilities:
Receivables ............................ 10,262 (12,274)
Inventories ............................ 2,901 (5,600)
Accounts payable and accrued liabilities (7,916) (15,318)
Other .................................. 140 208
-------- --------
Cash provided by operating activities ............... 7,771 2,295
-------- --------
INVESTING ACTIVITIES

Capital expenditures ................................ (626) (2,317)
Restricted cash ..................................... -- 56,026
Other ............................................... (20) 75
-------- --------

Cash provided by (used in) investing activities ..... (646) 53,784
-------- --------
FINANCING ACTIVITIES

Change in notes payable ............................. (1,651) 1,353
Repayment & repurchases of long-term debt ........... (721) (53,986)
Deferred financing costs ............................ -- (69)
Sale of common stock ................................ -- 3,000
Other ............................................... (516) (256)
-------- --------
Cash used in financing activities ................... (2,888) (49,958)
-------- --------
Net increase in cash and cash equivalents ........... 4,237 6,121
Cash and cash equivalents at beginning of
period (excluding Spinnaker in 2001) ............. 3,384 13,106
-------- --------
Cash and cash equivalents at end of period .......... $ 7,621 $ 19,227
======== ========
See accompanying notes

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A. Subsidiaries of the Registrant

As of September 30, 2001, the Subsidiaries of the Registrant are as follows:

Subsidiary Owned By Lynch
- ---------- --------------

Lynch Display Technologies, Inc. ........................................ 100.0%
Lynch Systems, Inc. ..................................................... 100.0%
Lynch International Holding Corporation ............................ 100.0%
Lynch-AMAV LLC ..................................................... 75.0%
M-tron Industries, Inc. ................................................. 100.0%
M-tron Industries, Ltd. ............................................ 100.0%
Spinnaker Industries, Inc. .............................................. 41.8%(O)/49.5%(V)
Entoleter, Inc. ............................................... 41.8%(O)/49.5%(V)
Spinnaker Coating, Inc. ....................................... 41.8%(O)/49.5%(V)
Spinnaker Coating-Maine, Inc. ........................... 41.8%(O)/49.5%(V)
Spinnaker Electrical Tape Company .......................... 41.8%(O)/49.5%(V)
<FN>
Notes: (O)=Percentage of equity ownership; (V)=Percentage voting control
</FN>

B. Basis of Presentation

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 Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals and those required to
record deconsolidation of Spinnaker Industries, Inc.) considered necessary for a
fair presentation have been included. Operating results for the three and nine
month periods ended September 30, 2001 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2001. For further
information, refer to the consolidated financial statements and footnotes
included in the Registrant's Annual Report on Form 10-K for the year ended
December 31, 2000.

Prior to September 30, 2001, the Company owned 48% of the equity of Spinnaker
(60% voting control); as such, under accounting principles generally accepted in
the United States, the Company was required to record all of the losses of
Spinnaker since the non-Company interests were not required to absorb their
share of the losses (52%) after their investment was fully absorbed by losses.

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

Accordingly, the Company's results of operations include the operating results
of Spinnaker through 9/30/01 (date of deconsolidation). The balance sheet at
September 30, 2001 does not contain the assets and liabilities of Spinnaker due
to the deconsolidation. This deconsolidation resulted in a non-cash gain of
$27,406,000 being recorded on September 30, 2001 to reduce the Company's
negative investment in Spinnaker to $19,420,000, which represents the Company's
interest in Spinnaker's accumulated deficit at the date of deconsolidation. This
remaining interest represents losses in excess of investment, which has been
recorded as a deferred credit on the Company's balance sheet until such time as
Spinnaker achieves profitability or the Company disposes of its remaining
interests in Spinnaker. Note that the Company will not record any additional
losses from Spinnaker as the company has no further obligations to Spinnaker.

C. Summarized Financial Information of Unconsolidated Investee

At September 30, 2001, the Company has a 41.8% interest in Spinnaker and
accounts for its investment using the equity method. The Spinnaker results of
operations are disclosed in Note G, Segment Information, and described as
"Adhesive-Backed Label Stock." As a result of the deconsolidation of Spinnaker
(see Note B), selected Spinnaker balance sheet information is presented as
follows:

September 30, December 31,
2001 2000
------------ -----------

Current Assets ...... $ 36,881 $ 59,496
Total Assets ........ 54,902 119,031
Current Liabilities . 38,759 49,409
Long-Term Debt ...... 61,239 60,310
Shareholder's Deficit (46,460) (7,468)

D. Inventories

Inventories are stated at the lower of cost or market value. At September 30,
2001, inventories were valued by two methods: last-in, first-out (LIFO) - 76%,
and first-in, first-out (FIFO) - 24%. At December 31, 2000, inventories were
valued by three methods: LIFO - 28%, Specific Identification - 71%, and FIFO
- -1%.

September 30, December 31,
2001 2000
------------ ------------

Raw materials ..... $ 1,550 $10,172
Work in process ... 1,116 2,796
Finished goods .... 4,157 22,171
------- -------
Total Inventories $ 6,823 $35,139
======= =======

E. Indebtedness

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

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

September 30, December 31,
2001 2000
------------ ------------

Spinnaker Industries, Inc. 10.75% Senior Secured

Note due 2006 ......................................... $ -- $ 51,135

Spinnaker Industries, Inc. 14% Subordinated Note
With PIK interest and principal due on January 31, 2003 -- 9,172

Other .................................................... 1,046 2,419
-------- --------
1,046 62,726
Current Maturities ....................................... (274) (1,376)
-------- --------
$ 772 $ 61,350
======== ========

F. Earnings per share
------------------

Basic earnings per common share amounts are based on the average number of
common shares outstanding during each period, excluding the dilutive effects of
options, warrants, and convertible securities of which there were none.

G. Segment Information

Prior to September 30, 2001, the Company was engaged in the manufacture of
adhesive-backed label stock, frequency control devices and other manufacturing.
The Company measures performance of its segments primarily by revenues,
operating profit and EBITDA (operating profit before income taxes, depreciation,
amortization and allocated corporate expenses). Identifiable assets of each
segment changed materially at September 30, 2001, as a result of the
deconsolidation of Spinnaker Industries described in Section B, Basis of
Presentation.

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

Operating profit (loss) is equal to revenues less operating expenses, excluding
interest and income taxes.

Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -----------------------
2001 2000 2001 2000
---------- ---------- ----------- ----------
Revenues:

Adhesive-backed label stock ............. $ 21,403 $ 35,756 $ 90,163 $ 113,374
Frequency control devices ............... 2,999 10,900 18,803 29,384
Other Manufacturing ..................... 7,580 9,536 21,917 18,916
--------- --------- --------- ---------
Consolidated Total ...................... 31,982 56,192 130,883 161,674
--------- --------- --------- ---------
EBITDA
Adhesive-backed label stock ............. (977) 609 (4,755) 4,577
Frequency control devices (a) ........... (769) 1,391 (386) 3,885
Deferred incentive compensation -
Frequency control devices ........... -- (420) -- (420)
Other manufacturing ..................... 972 1,296 3,913 1,911
Corporate manufacturing expenses ........ (308) (313) (1,065) (1,454)
--------- --------- --------- ---------
Total manufacturing ..................... (1,082) 2,563 (2,293) 8,499

Corporate expenses ...................... (183) (356) (818) (1,112)
Restructuring charges - Spinnaker ....... (211) -- (1,520) (527)
--------- --------- --------- ---------
Consolidated Total ...................... (1,476) $ 2,207 (4,631) 6,860
--------- --------- --------- ---------
Operating Profit (Loss)
Adhesive-backed label stock ............. (1,778) (734) (7,860) 682
Frequency control devices (a) ........... (988) 1,214 (1,028) 3,373
Deferred incentive compensation -
frequency control devices ............. -- (420) -- (420)
Other manufacturing ..................... 809 1,161 3,425 1,510
Corporate manufacturing expenses ........ (308) (282) (1,065) (1,389)
--------- --------- --------- ---------
Total manufacturing .................... (2,265) 939 (6,528) 3,756

Unallocated corporate expenses .......... (551) (431) (1,190) (1,337)
Asset impairment and Restructuring ...... (211) -- (38,272) (527)
Charge - Spinnaker
Gain on deconsolidation ................. 27,406 -- 27,406 --
--------- --------- --------- ---------
Consolidated Total ..................... 24,379 508 (18,584) 1,892
--------- --------- --------- ---------
Total Operating Profit (Loss) of reportable
segments................................ 24,379 508 (18,584) 1,892

Other profit or loss
Investment income ...................... 83 335 400 1,296
Interest expense ....................... (2,353) (2,471) (7,590) (8,412)
--------- --------- --------- ---------
Loss from continuing operations
Before income taxes, minority
Interest and extraordinary items ....... $ 22,109 $ (1,628) $ (25,774) $ (5,224)
========= ========= ========= =========

Total Assets September 30, 2001 December 31, 2000
---------------------- ------------------------

Adhesive-backed label stock $ -- $116,746
Frequency control devices ............. 9,461 18,210
Other manufacturing ................... 16,140 20,193
General Corporate ..................... 1,992 7,671
-------- --------
Consolidated Total .................... $ 27,593 $162,820
======== ========

Note: a) Includes one-time write-offs and reversals, as follows:

Three Months Ended Nine Months ended
September 30, 2001 September 30, 2001
------------------ ------------------
Write-off of Deferred Rights

Offering Expense ..................... -- $ 300
Reversal of Bonus Accrual ............... -- (367)
Severance Expenses ...................... -- 47
Inventory Write-Down .................... -- 375
----- -----
Total Cost ............................... -- $ 355
===== =====

H. Asset Impairment and Restructuring Charges

Three Months Ended Nine Months Ended
September 30, 2001 September 30, 2001
------------------ ------------------

Restructuring charges and asset impairment:

Severance .......................... $ 211 $ 1,520
Asset impairment ................... -- 36,752
------- -------

Total asset impairment and restructuring $ 211 $38,272
======= =======

Inventory write-down ................... -- $ 3,482
------- -------
Total Cost .......................... $ 211 $41,754
======= =======

As discussed in the Spinnaker Annual Report on Form 10-K for the year ended
December 31, 2000, Spinnaker recognized certain restructuring charges, primarily
affiliated with its Spinnaker Coating and Spinnaker Coating - Maine business. To
better concentrate on Coating's strengths and market niche, a decision was made
by its management to reorganize and realign the business in the fourth quarter
of 2000 and going forward in 2001.

On May 15, 2001, Spinnaker announced that it intended to close its Spinnaker
Coating - Maine, Inc. ("Coating - Maine") facility in Westbrook, Maine. The
Company's decision to close this facility was made after reviewing the first
quarter of 2001 operating losses at Maine and assessing the probability of
returning the Maine operations to profitability in light of the substantial new
capacity being added to the industry. As a result of the decision, Spinnaker
will focus its entire efforts on the Spinnaker Coating operations in Troy, Ohio
where it principally manufactures specialty-coated products. In connection with
the closing, Spinnaker has recorded as of September 30, 2001, non-cash
write-downs of $36.7 million to reflect the significantly reduced value of the
related long-lived assets. Separately, Spinnaker announced it sold selected
assets from its Maine facility to Fasson Roll North America, a division of Avery
Dennison Corporation.

The asset impairments resulted from the write-down to estimated fair market
value of fixed assets to be taken out of service and held for sale or disposal.
The majority of this charge is related to the impairment of goodwill associated
with the acquisition of Coating - Maine in 1998. In conjunction with the closing
and included in restructuring charges, Spinnaker has incurred severance and
related costs totaling $1.5 million for the nine months ended September 30,
2001.

I. Equity Transactions

Effective July 31, 2001, Louis A. Guzzetti, Jr. resigned from the Board of
Directors of the Company. In connection with Mr. Guzzetti's resignation, on
August 9, 2001, the Company purchased 12,300 shares of its Common Stock from Mr.
Guzzetti for a purchase price of $396,204. Such purchase price was equal to the
outstanding principal amount and unpaid interest on the loans made by the
Company to Mr. Guzzetti on June 5, 2000 and September 20, 2000 to finance his
original purchase of such Common Stock (the "Guzzetti Loans"). The Company
surrendered the promissory note evidencing the Guzzetti Loans to Mr. Guzzetti in
full payment of the outstanding principal amount and unpaid interest on the
loans.

On August 17, 2001, Ralph R. Papitto replaced Mario J. Gabelli as Chairman and
Chief Executive Officer of Lynch Corporation (the "Company") and Mr. Gabelli was
appointed Vice Chairman. In connection with Mr. Papitto's appointment, the Board
of Directors' approved, subject to shareholder ratification, the grant of an
option to Mr. Papitto to purchase up to 374,471 shares of the Company's Common
Stock at an exercise price of $30 per share (subject to customary anti-dilution
adjustments) (the "Option").

As of November 13, 2001, no options have been granted under this plan.

J. Subsequent Events

On November 13, 2001, Spinnaker announced that it commenced voluntary
proceedings under Chapter 11 of the U. S. Bankruptcy Code for the purpose of
facilitating and accelerating the financial restructuring it previously was
pursuing. Spinnaker filed its petition in the United States Bankruptcy Court for
the Southern District of Ohio, Western Division, in Dayton. The Chapter 11
filing includes Spinnaker Coating, Inc. and certain other affiliates.

Spinnaker also announced that it reached agreement, subject to Court approval,
with its existing lenders to provide up to $30 million in debtor-in possession
(DIP) financing. This funding will allow Spinnaker to continue operating its
Spinnaker Coating and other business units in their ordinary and customary
manner.

As a result of Lynch's previously discussed deconsolidation of Spinnaker, these
events are not expected to affect the Company's financial statements.

On October 15, 2001, the Lynch Corporation Board of Directors elected Richard E.
McGrail and Raymond H. Keller to the Registrant's Board. Mr. McGrail and Mr.
Keller were also named respectively to the positions of Chief Operating Officer
and Chief Financial Officer.

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

Sales and Revenues/Gross Margin

Revenues for the third quarter of 2001 decreased by $24.2 million or 43.1%, to
$32.0 million, from the third quarter of 2000. Reflecting decreased order
in-flow, revenues for the nine months ended September 30, 2001 were $130.9
million, $30.8 million or 19.0% below the comparable prior year period.

Spinnaker's net sales for the quarter ended September 30, 2001 were $22.6
million, compared to $37.3 million in the corresponding 2000 period. The
decrease in net sales for 2001 is attributed to lower sales volumes and lower
selling prices in most pressure-sensitive products. As a part of Spinnaker's
restructuring program, the elimination of non-pressure sensitive product lines
in 2000 caused volumes to be lower. Another contributing factor is the shutdown
of Spinnaker's facility in Maine.

Spinnaker's gross margin as a percentage of net sales for the quarter ended
September 30, 2001 was down 4.2% from the corresponding 2000 period. The primary
reason for the lower margin in 2001 was continued price erosion within the
pressure sensitive market due to competitive pressures, excess capacity in the
industry, and overall sluggish economic conditions.

Spinnaker's net sales for the nine months ended September 30, 2001 were $93.4
million, compared to $117.6 million in the corresponding 2000 period. The
decrease in net sales for 2001 is mainly attributable to lower selling prices
due to excess capacity and depressed demand caused by the weakened general
economy.

On a comparable basis, Spinnaker's gross margin as a percentage of revenues for
the nine months ended September 30, 2001 was down 5.6% from the first nine
months of 2000. Contributing to the decline in gross margin, were higher
material costs along with continued selling price erosion and volume declines.
Consistent with recent trends in the industry, over capacity and sluggish
economic conditions have impaired Spinnaker's operating performance. Also
contributing to the nine months 2001 decrease in gross margin was a one-time
write-down to inventory of approximately $3.5 million recorded in the second
quarter.

Revenues at M-tron decreased by $7.9 million or 72.5% to $3.0 million for the
third quarter of 2001 due to the continuation of weak demand from the
infrastructure segment of the telecommunications industry which is still working
through the overcapacity caused by the Internet bubble. M-tron's revenues for
the first nine months of 2001 decreased $10.6 million or 36.0% to $18.8 million
due to the same factors.

Lynch Systems' revenues for the third quarter of 2001 declined by $1.6 million
from the corresponding 2000 period to $6.4 million due mainly to customer
delivery schedules for glass press machines. However, order backlog of $17.8
million at September 30, 2001 remains strong and was comparable to the backlog
last September. Lynch Systems revenues for the first nine months of 2001
increased $4.0 million or 27.4% from the corresponding 2000 period to $18.6
million reflecting increased orders and sales of glass press machines.

M-tron's gross margin as a percentage of net sales for the three and nine month
periods of 2001 were down 25.2% and 13.0% respectively from the same periods of
2000. The previously described sales decline of 72.5% in the quarter and 36.0%
year-to-date caused the significant reduction in gross margin.

Lynch Systems gross margin as a percentage of net sales for the three and nine
month periods of 2001 were up 2.2% and 5.2% respectively from the same periods
of 2000. The year-to-date sales increase of 27.1% and better absorption of
manufacturing overhead were the primary reasons for the margin improvements.

Operating Profit (Loss)

Operating profit for the third quarter 2001 was $24.4 million compared to the
third quarter 2000 operating profit of $0.5 million or a positive swing of $23.9
million. For the first nine months of 2001 operating loss was $18.6 million
compared to the corresponding 2000 period's operating profit of $1.9 million.
The quarter and year-to-date operating profit includes a $27.4 million gain
recorded in the deconsolidation of Spinnaker (see Note B to the condensed
consolidated financial statements).

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

Accordingly, the Company's results of operations include the operating results
of Spinnaker through September 30, 2001 (date of deconsolidation). This
deconsolidation resulted in a non-cash gain of $27,406,000 being recorded on
September 30, 2001 to reduce the Company's negative investment in Spinnaker to
$19,420,000, which represents the Company's interest in Spinnaker's accumulated
deficit at the date of deconsolidation. This remaining interest represents
losses in excess of investment, which has been recorded as a deferred credit on
the Company's balance sheet until such time as Spinnaker achieves profitability
or the Company disposes of its remaining interests in Spinnaker. Note that the
Company will not record any additional losses from Spinnaker as the Company has
no further obligations to Spinnaker.

Spinnaker's loss from operations for the three months ended September 30, 2001
was $2.0 million excluding an impairment charge of approximately $0.2 million
associated with the closing of the Coating - Maine facility as compared to a $.9
million loss from operations in the third quarter of 2000.

Spinnaker's loss from continuing operations excluding impairment and
restructuring charges for the nine months ended September 30, 2001 was
approximately $5.5 million, compared to a $.5 million loss in the corresponding
2000 period. Spinnaker's operating results reflect lower operating margins that
were partially offset by reductions in selling and administrative costs that are
primarily the result of the restructuring initiated late last year.

Spinnaker also recognized charges of $41.7 million in the first nine months of
2001. The charge relates to the continued restructuring efforts that began in
the fourth quarter of 2000 and a write-down of assets affiliated with Coating -
Maine. Spinnaker's restructuring and asset impairment charges were: (in
thousands)

Nine Months ended
September 30, 2001
------------------
Restructuring charges:

Severance ............................ $ 1,520
Asset impairment ..................... 36,752

Total restructuring and
asset impairment.................... 38,272
Inventory write-down ................... 3,482
-------
TOTAL COST ........................ $41,754
=======

For the 2001 third quarter M-tron had an operating loss of $1.0 million compared
to an operating profit of $1.2 million in the third quarter of 2000 due to
dramatically decreased sales volumes mentioned above. For the first nine months
of 2001, M-tron's operating loss was $1.0 million compared to an operating
profit for the corresponding 2000 period of $3.4 million due mainly to the 36%
reduction in revenue factors mentioned above. Included in M-tron's results for
the nine month period of 2001 are the following one-time costs:

Nine Months Ended
September 30, 2001
------------------

Write-off of deferred rights offering expenses.... $ 300
Reversal of bonus accrual ........................ (367)
Severance expenses ............................... 47
Inventory write-down ............................. 375
-----
Total $ 355
=====

For the 2001 third quarter, Lynch Systems had an operating profit of $0.8
million compared to an operating profit of $1.0 million in the third quarter of
2000. For the first nine month period of 2001 Lynch Systems had an operating
profit of $3.4 million compared to an operating profit of $1.3 million in the
comparable period in 2000. The significant $2.1 million nine month improvement
at Lynch Systems is due to primarily the increased sales mentioned above and
better absorption of overhead.

Other Income (Expense), Net

Investment income decreased for the three and nine months ended September 30,
2001 due to the buy back of debt with the net proceeds of the 2000 sale of
Spinnaker's industrial tape units, which were invested in short term investments
during the earlier 2000 periods, and lower market rates on invested funds.

Interest expense was $2.4 million for the third quarter 2001 which was
comparable to the corresponding period in 2000. Nine-month 2001 interest expense
of $7.6 million represented a $0.8 million reduction from the corresponding
period in 2000. This reduction was primarily due to Spinnaker's repurchase of
its Senior Notes in the later part of 2000 and lower cost of funds.

Tax Benefit (Provision)

The income tax benefit (provision) includes federal, as well as state, local,
and foreign taxes. The quarter and nine month 2001 net tax benefit is the result
of operating losses.

Minority Interest

Minority interests of $4.0 million contribution to nine months 2001 net income
is the result of the absorption of Spinnaker losses in the first quarter of 2001
by minority interests to the extent of their investment. This benefit was
reduced to a small extent by profits at a 75% owned foreign subsidiary of Lynch
Systems.

Net Income (Loss)

Net income for the third quarter 2001 was $23.1 million compared to a net income
of $0.2 million in the year earlier. The $22.9 million positive swing is
primarily due to a $27.4 gain on deconsolidation that was reduced by operating
losses at M-tron and Spinnaker. Fully diluted third quarter earnings per share
were $15.36 compared to $0.15 per share in third quarter 2000. Net loss for the
nine months ended September 30, 2001 was $21.7 million, or $(14.36) per share,
as opposed to net income of $1.8 million, or $1.24 per share last year-to-date.

Backlog/New Orders

Total backlog of manufactured products of consolidated subsidiaries at September
30, 2001 was $19.9 million, a reduction of $6.0 million from the backlog at
December 31, 2000, but an improvement of $1.8 million since June 30, 2001.
Decreased purchases by infrastructure suppliers to the telecommunications
industry caused a significant reduction of M-tron's backlog at September 30,
2001. Lynch Systems' backlog increased by $4.3 million from December 31, 2000 to
September 30, 2001.

Financial Condition - Excluding Spinnaker

Liquidity/Capital Resources

As of September 30, 2001, the consolidated companies had current assets of $21.2
million and current liabilities of $11.8 million. Working capital was therefore
$9.4 million and the ratio of current assets to current liabilities was 1.80 to
1.00, in comparison to 1.34 to 1.00 at December 31, 2000.

First nine months capital expenditures were $0.6 million in 2001 and $1.6
million in full year 2000. The Company plans to spend approximately $0.8 million
on capital expenditures for the year and anticipates that it will have
sufficient cash flow from operations and borrowing availability under various
credit facilities at its subsidiaries to fund such capital expenditure plans.

At September 30, 2001, total debt was $3.2 million, which was $2.4 million less
than the $5.6 million at the end of 2000. The reduction is primarily due to
principal repayments.

The Company does not at present have credit facilities at the parent company
level and there is presently no parent guaranteed debt. The Company believes
that existing cash and cash equivalents, cash generated from operations and
available borrowings under its subsidiaries lines of credit will be sufficient
to meet its on-going working capital and capital expenditure requirements for
the foreseeable future.

The Company may from time to time make acquisitions which would probably be
financed with a significant component of debt. This acquisition debt as well as
current debt outstanding would contain restrictions on the amount of readily
available funds that can be transferred to the Company from its subsidiaries.

Subsequent Events

As a result of Lynch's previously discussed deconsolidation of Spinnaker, these
events are not expected to affect the Company's financial statements.

Market Risk

There has been no significant change in market risk since December 31, 2000. The
Company is exposed to market risk relating to changes in the general level of
U.S. interest rates. Changes in interest rates affect the amounts of interest
earned on the Company's cash equivalents and short-term investments
(approximately $6.2 million at September 30, 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 by borrowing on a fixed long-term basis. The Company
does not use derivative financial instruments for trading or speculative
purposes. Management does not foresee any significant changes in the strategies
used to manage interest rate risk in the near future, although the strategies
may be reevaluated as market conditions dictate.

Forward Looking Information

Included in this Management Discussion and Analysis of Financial Condition and
Results of Operations are certain forward looking financial and other
information, including without limitation matters relating to Spinnaker and
Market Risk. It should be recognized that such information are projections,
estimates or forecasts based on various assumptions, including without
limitation, meeting its assumptions regarding expected operating performance and
other matters specifically set forth, as well as the expected performance of the
economy as it impacts the Company's businesses, government and regulatory
actions and approvals, and tax consequences, and the risk factors and cautionary
statements set forth in reports filed by the Company and Spinnaker with the
Securities and Exchange Commission. As a result, such information is subject to
uncertainties, risks and inaccuracies, which could be material.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

See "Market Risk" under Item 2 above.

PART II OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits - None
(b) Reports on Form 8-K

A report on Form 8-K was filed during the quarter ended
September 30, 2001. The report that was filed on August 24
described the following events. No financial statements were
filed.

On August 17, 2001, Ralph R. Papitto replaced Mario J.
Gabelli as Chairman and Chief Executive Officer of Lynch
Corporation (the "Company") and Mr. Gabelli was appointed
Vice Chairman. In connection with Mr. Papitto's appointment,
the Board of Directors' approved, subject to shareholder
ratification, the grant of an option to Mr. Papitto to
purchase up to 374,471 shares of the Company's Common Stock
at an exercise price of $30 per share (subject to customary
anti-dilution adjustments) (the "Option").

Also on August 17, 2001, Anthony T. Castor, III, and Robert
E. Dolan resigned as directors. There are now three
vacancies on the Board (Louis A. Guzzetti, Jr., resigned on
July 31) and it is contemplated that three new directors who
are acceptable to Mr. Papitto and the remaining Board will
fill such vacancies. (See Note J - Item 1 - of the condensed
consolidated financial statements.)

SIGNATURES

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

LYNCH CORPORATION
(Registrant)

By: /s/Raymont H. Keller
-----------------
Raymond H. Keller
Chief Financial Officer
November 14, 2001