SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549




                                    FORM 8-K
                                    --------




                 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


Date of Report (Date of Earliest Event Reported)   July 16, 1999
                                                   -------------


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




     INDIANA                    1-106                           38-1799862
     -------                    -----                           ----------
(State of jurisdiction       (Commission                     (I.R.S. Employer
  of Incorporation)           File Number)                  Identifications No.)



401 Theodore Fremd Avenue, Rye, New York                         10580
----------------------------------------                         -----
(Address of Principal Executive Offices)                       (Zip Code)



Registrant's telephone number, including area code:   914/921-7601
                                                      ------------

<PAGE>




Item 1.           Change in Control of Registrant

                  Not Applicable


Item 2.           Acquisition of Disposition of Assets

Acquisition of Central Scott Telephone Company

         On July 16, 1999, Lynch Telephone  Corporation IX ("LTC"), a subsidiary
of the  Registrant,  acquired,  by  merger,  all of the stock of  Central  Scott
Telephone  Company  ("CSTC") for  approximately  $28.1 million in cash. Prior to
merger, the stock of CSTC was owned by approximately 475 shareholders of record.
The acquisition was the result of arms length  negotiations  between  Registrant
(and its  representatives)  and CSTC  (and its  representatives).  There  was no
material  relationship  between Registrant and CSTC. A copy of the Agreement and
Plan of Merger is filed as Exhibit 10.1 hereto.

         CSTC is a local exchange  telephone company  headquartered in Eldridge,
Iowa. CSTC services  approximately 6,000 access lines in Scott County, Iowa. The
assets of CSTC, which primarily consist of telephone cable,  switching equipment
and the other assets used in its telephone business, will continue to be used in
the business of CSTC.  CSTC also is engaged in long distance resale and personal
communications services ("PCS").

         Registrant  borrowed $20 million from a bank for the  acquisition.  The
principal  of the Loan is  payable  over a 5 year  period  and is  secured  by a
security interest in substantially all the assets of LTC (including the stock of
CSTC)  and CSTC.  Additional  amount  will be  borrowed  under the  Registrant's
existing bank lines of credit.  The identity of banks has been omitted and filed
separately with the Securities and Exchange Commission.

         CSTC had  revenues  and net income of $4.4  million  and $1.4  million,
respectively,  for the year ended  December  31, 1998 and $3.9  million and $1.2
million, respectively, for the year ended December 31, 1997.


Item 3.           Bankruptcy of Receivership

                  Not Applicable


Item 4.           Changes in Registrant's Certifying Account

                  Not Applicable

Item 5.           Other Events

                  See Item 2





<PAGE>




Item 6.           Resignation of Registrant's Directors

                  Not Applicable

Item 7.           Financial Statements and Exhibits

   (a)      Financial Statements of businesses Acquired

      1.       Audited financial statements of Central Scott Telephone Company:
                  Independent Auditor's Report
                  Consolidated Balance Sheets - December 31, 1998 and 1997
                  Consolidated Statements of Income - For the Years Ended
                    December 31, 1998 and 1997
                  Consolidated Statements of Stochholders' Equity - For the
                    Years Ended December 31, 1998 and 1997
                  Consolidated Statements of Cash Flows - For the Years Ended
                    December 31, 1998 and 1997
               Notes to Financial Statements

      2.      Unaudited  financial  statements of Central Scott Telephone
               Company:

                  Condensed Consolidated Balance Sheet - March 31, 1999
                  Condensed Consolidated Statements of Income - Three Months
                     Ended March 31, 1999 and 1998
                  Condensed Consolidated Statements of Cash Flow - Three Months
                     Ended March 31, 1999 and 1998

   (b)      Pro Forma Financial Information

                Pro Forma Condensed Consolidating Balance Sheet -
                    March 31, 1999
                Pro Forma Condensed Consolidating Statements of Income -
                    Three Months Ended March 31, 1999 and Year Ended
                    December 31, 1998

   (c)      Exhibits

          10.1 Agreement  and Plan of  Merger  dated as of May 25,  1999,  among
               Central  Scott   Telephone   Company,   Brighton   Communications
               Corporation and Brighton Iowa Acquisition  Corporation (schedules
               ommitted).  Registrant  agrees to provide  the  schedules  to the
               Secuities and Exchange Commission upon request.


Item 8.   Change in Fiscal Year

          Not applicable

Item 9.   Sales of Equity Securities Pursuant to Regulation S

          Not applicable


<PAGE>





                                   Signatures

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

                                               LYNCH CORPORATION



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

Date: August 2, 1999


<PAGE>




                         CENTRAL SCOTT TELEPHONE COMPANY
                                 AND SUBSIDIARY
                                 ELDRIDGE, IOWA

                        CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 1998 AND 1997
                       WITH INDEPENDENT AUDITORS' REPORTS




<PAGE>





                         CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA




     CONTENTS

<TABLE>
<CAPTION>
                                                                             Page

<S>                                                                            <C>
INDEPENDENT AUDITORS' REPORT ...............................................   1

CONSOLIDATED FINANCIAL STATEMENTS:

         Consolidated Balance Sheets .......................................   2 - 3

         Consolidated Statements of Income .................................   4

         Consolidated Statements of Stockholders' Equity ...................   5

         Consolidated Statements of Cash Flows .............................   6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .................................   7 - 13

</TABLE>


<PAGE>





                          INDEPENDENT AUDITORS' REPORT





To the Board of Directors
Central Scott Telephone Company
Eldridge, Iowa

We have audited the  accompanying  consolidated  balance sheets of Central Scott
Telephone  Company (an Iowa  Corporation) and subsidiary as of December 31, 1998
and 1997,  and the  related  consolidated  statements  of income,  stockholders'
equity, and cash flows for the years then ended.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of Central  Scott
Telephone  Company  and  subsidiary  as of December  31, 1998 and 1997,  and the
results  of their  operations  and their  cash flows for the years then ended in
conformity with generally accepted accounting principles.



Kiesling Associates LLP


West Des Moines, Iowa
January 20, 1999




<PAGE>





                         CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                            December 31,
                                                       1998                1997
                                                       ----                ----
         ASSETS


CURRENT ASSETS
<S>                                                  <C>              <C>
     Cash and cash equivalents ...............       $1,225,991       $  874,710
     U.S. Treasury bills .....................        1,292,192          487,311
     Accounts receivable -
         Due from customers ..................           75,119           67,246
         Interexchange carriers ..............          356,174          328,546
         Other ...............................           10,077            8,846
     Interest receivable .....................           21,425           21,123
     Materials and supplies ..................           29,534           45,052
     Prepayments .............................           61,987           63,787
     Deferred income taxes ...................           61,119            7,474
                                                     ----------       ----------
                                                     $3,133,618       $1,904,095
                                                     ----------       ----------

OTHER NONCURRENT ASSETS
     U.S. Treasury notes .....................       $1,333,438       $1,742,900
     Other investments .......................          314,002          915,358
                                                     ----------       ----------
                                                     $1,647,440       $2,658,258
                                                     ----------       ----------


PROPERTY, PLANT AND EQUIPMENT
     Telephone plant in service ..............       $9,484,943       $8,676,208
     Other property ..........................           32,638           32,638
                                                     ----------       ----------
                                                     $9,517,581       $8,708,846
     Less accumulated depreciation ...........        4,573,953        3,965,833
                                                     ----------       ----------
                                                     $4,943,628       $4,743,013
     Plant under construction ................           23,994           62,586
                                                     ----------       ----------
                                                     $4,967,622       $4,805,599
                                                     ----------       ----------



TOTAL ASSETS .................................       $9,748,680       $9,367,952
                                                     ==========       ==========
</TABLE>




<PAGE>





                         CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                               December 31,
                                                           1998           1997
                                                           ----           ----
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable -
<S>                                                      <C>          <C>
         Interexchange carriers ......................   $   10,714   $   31,999
         Other .......................................      160,266       37,425
     Customer deposits ...............................       33,000       33,000
     Current portion of long-term debt ...............         --        120,000
     Accrued taxes ...................................      139,271      118,400
     Other ...........................................       20,207       18,420
                                                         ----------   ----------
                                                         $  363,458   $  359,244
                                                         ----------   ----------

LONG-TERM DEBT, less current portion .................   $     --     $  360,000
                                                         ----------   ----------

DEFERRED CREDITS
     Deferred investment tax credit ..................   $   55,355   $   62,395
     Deferred income taxes ...........................      420,432      339,147
     Other deferred credits ..........................         --          3,864
                                                         ----------   ----------
                                                         $  475,787   $  405,406
                                                         ----------   ----------
STOCKHOLDERS' EQUITY
     Common stock - $50 par value, 200,000
         shares authorized, 70,790 and 71,470 shares
         issued and outstanding, respectively ........   $3,539,500   $3,573,500
     Accumulated other comprehensive income
         Unrealized gains on certain investments .....      196,105      149,657
     Retained earnings ...............................    5,173,830    4,520,145
                                                         ----------   ----------
                                                         $8,909,435   $8,243,302
                                                         ----------   ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...........   $9,748,680   $9,367,952
                                                         ==========   ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       -3-

<PAGE>





                         CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                        CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                                       Years Ended December 31,
                                                       1998                1997
                                                       ----                ----

OPERATING REVENUES
<S>                                                   <C>             <C>
     Local network services ....................      $  956,712      $  844,849
     Network access services ...................       2,884,919
                                                                       2,617,027
     Long distance services ....................          96,852          55,169
     Billing and collection services ...........         116,447         131,253
     Equipment sales and other .................         339,640         242,974
                                                      ----------      ----------
                                                      $4,394,570      $3,891,272
                                                      ----------      ----------

OPERATING EXPENSES
     Plant specific operations .................      $  396,726      $  425,034
     Plant nonspecific operations ..............         140,883         112,993
     Cost of equipment sales and rental ........         202,291         148,324
     Cost of long distance .....................          86,022          55,169
     Depreciation ..............................         645,144         607,151
     Customer operations .......................         276,993         256,580
     Corporate operations ......................         389,541         315,353
     General taxes .............................         203,614         186,119
                                                      ----------      ----------
                                                      $2,341,214      $2,106,723
                                                      ----------      ----------

OPERATING INCOME ...............................      $2,053,356      $1,784,549
                                                      ----------      ----------

OTHER INCOME
     Interest and dividend income ..............      $  248,449      $  225,113
     Other, net ................................          23,902           3,506
                                                      ----------      ----------
                                                      $  272,351      $  228,619
                                                      ----------      ----------

INCOME BEFORE INCOME TAXES .....................      $2,325,707      $2,013,168

INCOME TAXES ...................................         936,050         784,967
                                                      ----------      ----------

NET INCOME .....................................      $1,389,657      $1,228,201
                                                      ==========      ==========

The accompanying notes are an integral part of these financial statements.

</TABLE>
                                       -5-

<PAGE>





                         CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                    Accumulated
                                                                                       Other
                                                  Common Stock        Retained     Comprehensive
                                             Shares       Amount      Earnings         Income         Total
                                          ------------  -----------  ------------    -----------   -----------

<S>                                          <C>       <C>            <C>            <C>           <C>
Balance at December 31, 1996 ........        71,614    $ 3,580,700    $ 3,869,202    $    90,086   $ 7,539,988

Comprehensive Income
   Net Income .......................          --             --        1,228,201           --       1,228,201
   Other Comprehensive Income
     Unrealized holding gains
       arising during the period (net
       of income taxes of $38,640) ..          --             --             --           59,571        59,571
                                                                                                   -----------
          Total Comprehensive Income           --             --             --             --     $ 1,287,772

Dividend paid ($8 per share) ........          --             --         (571,760)          --        (571,760)

Stock redeemed ......................          (144)        (7,200)         5,498           --         (12,698)
                                        -----------    -----------    -----------    -----------   -----------

Balance at December 31, 1997 ........        71,470    $ 3,573,500    $ 4,520,145    $   149,657   $ 8,243,302

Comprehensive Income
   Net Income .......................          --             --        1,389,657           --       1,389,657
   Other Comprehensive Income
     Unrealized holding gains
       arising during the period (net
       of income taxes of $31,844) ..          --             --             --           46,448        46,448
                                                                                                   -----------
          Total Comprehensive Income    $ 1,436,105

Dividend paid ($10 per share) .......          --             --         (707,900)          --        (707,900)
Stock redeemed ......................          (680)       (34,000)       (28,072)          --         (62,072)
                                        -----------    -----------    -----------    -----------   -----------

Balance at December 31, 1998 ........        70,790    $ 3,539,500    $ 5,173,830    $   196,105   $ 8,909,435
                                        ===========    ===========    ===========    ===========   ===========

The accompanying notes are an integral part of these financial statements.

</TABLE>
                                       -6-

<PAGE>





                         CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                               Years Ended December 31,
                                                                                  1998          1997
                                                                                  ----          ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                           <C>            <C>
     Net income ...........................................................   $ 1,389,657    $ 1,228,201
     Adjustments to reconcile net income to net
      cash provided by operating activities
         Depreciation .....................................................       645,797        607,803
         Amortization of investment tax credits ...........................        (7,040)       (12,770)
         Deferred income taxes ............................................        (8,068)        36,045
         Regulatory liability .............................................        (3,864)        (3,864)
         Equity (earnings) loss of limited partnership ....................          --           (2,462)
         Gain on sale of investments ......................................       (40,617)          --
         Changes in operating assets and liabilities:
              (Increase) Decrease in:
                  Receivables and prepayments .............................       (35,234)        32,299
                  Materials and supplies ..................................        15,518        (21,072)
                  Other deferred charges ..................................          --              750
              Increase (Decrease) in:
                  Accounts payable ........................................       105,420        (17,788)
                  Accrued taxes ...........................................        20,870          7,398
                  Other ...................................................         1,787        (26,558)
                                                                              -----------    -----------
         Net cash provided by operating activities ........................   $ 2,084,226    $ 1,827,982
                                                                              -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
     Capital expenditures .................................................   $  (807,820)   $  (583,557)
     Cost of removing plant, net of salvage ...............................          --             (418)
     Purchase of investments ..............................................      (802,376)    (1,513,788)
     Proceeds from sale of investments ....................................       647,223      1,000,672
                                                                              -----------    -----------
         Net cash used in investing activities ............................   $  (962,973)   $(1,097,091)
                                                                              -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
     Common stock reacquired ..............................................   $   (62,072)   $   (12,698)
     Dividends paid .......................................................      (707,900)      (571,760)
                                                                              -----------    -----------
         Net cash used in financing activities ............................   $  (769,972)   $  (584,458)
                                                                              -----------    -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS .................................   $   351,281    $   146,433

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ............................       874,710        728,277
                                                                              -----------    -----------

CASH AND CASH EQUIVALENTS AT END OF YEAR ..................................   $ 1,225,991    $   874,710
                                                                              ===========    ===========
</TABLE>
<PAGE>



                         CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                   Notes to Consolidated Financial Statements
                           December 31, 1998 and 1997

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The Central Scott  Telephone  Company and its  subsidiary  are providers of
telecommunications exchange and local access services, long distance,  Internet,
and  telecommunications  equipment in a service area located  primarily in Scott
County, Iowa.

     The  accounting  policies  of the  Company  and its  subsidiary  conform to
generally  accepted  accounting   principles.   Management  uses  estimates  and
assumptions in preparing its consolidated financial statements.  Those estimates
and assumptions affect the reported amounts of assets, liabilities, revenues and
expenses,  and the disclosure of contingent  assets and  liabilities.  Telephone
operations  reflect  practices  appropriate  to  the  telephone  industry.   The
accounting  records of the Company are maintained in accordance with the Uniform
System of  Accounts  for Class A and B  Telephone  Companies  prescribed  by the
Federal  Communications  Commission  as  modified  by the Iowa  State  Utilities
Division (ISUD).

Principles of Consolidation

     The consolidated financial statements include the accounts of Central Scott
Telephone  Company and its 100%- owned  subsidiary,  CST  Communications,  Inc.,
(herein referred to as "the Company").  All material  intercompany  transactions
have been eliminated in consolidation.

Investments

     Debt and  marketable  equity  securities  bought and held  principally  for
selling in the near future are  classified as trading  securities and carried at
fair  value.  Unrealized  holding  gains and  losses on trading  securities  are
reported in  earnings.  Debt and  marketable  equity  securities  classified  as
available for sale are carried at fair value with  unrealized  holding gains and
losses recorded as a separate component of stockholders' equity. Debt securities
the  Company  has the  positive  intent  and  ability  to hold to  maturity  are
classified as held to maturity.  Investments  classified as held to maturity are
carried  at  amortized  cost.  The  Company  uses the FIFO  method of  computing
realized gains and losses.

     Nonmarketable  equity  investments,  over which the Company has significant
influence  or a 20%  ownership,  are  reflected  on  the  equity  method.  Other
nonmarketable equity investments are stated at cost.

Property, Plant and Equipment

     Property, plant and equipment is capitalized at original cost including the
capitalized  cost of salaries and wages,  materials,  certain  payroll taxes and
employee benefits, and interest during the construction period.

     The Company provides for depreciation for financial  reporting  purposes on
the  straight-line  method by the  application  of rates based on the  estimated
service lives of the various  classes of depreciable  property.  These estimates
are subject to change in the near term.

     Renewals  and  betterments  of units of property  are charged to  telephone
plant in service.  When telephone plant is retired, its cost is removed from the
asset account and charged against accumulated depreciation together with removal
cost less any salvage realized.  No gains or losses are recognized in connection
with routine retirements of depreciable property.  Repairs and renewals of minor
items of property are included in plant specific operations expense.



The accompanying notes are an integral part of these financial statements.

                                       -1-

<PAGE>


                         CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                   Notes to Consolidated Financial Statements
                           December 31, 1998 and 1997




1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

     Income taxes are accounted for using a liability method and provide for the
tax effects of transactions  reported in the consolidated  financial  statements
including both taxes  currently due and deferred.  Deferred tax  liabilities are
adjusted to reflect  deferred  tax  consequences  at current  enacted tax rates.
Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities arise from property, plant and
equipment,  investments,  and  certain  payables.  The  deferred  tax assets and
liabilities  represent the future tax return  consequences of those differences,
which will either be taxable or deductible  when the assets and  liabilities are
recovered or settled.

     Investment tax credits  (ITC),  which were deferred prior to the Tax Reform
Act of 1986,  are being  amortized over the life of the plant which produced the
ITC.

Revenue Recognition

     The Company  recognizes  revenues  when earned  regardless of the period in
which they are billed.

     Local network service and internet  revenues are recognized over the period
a subscriber is connected to the telephone network.

     Network access and long distance  service revenues are derived from charges
for access to the Company's local exchange  network.  The interstate  portion of
network access revenues are received through pooling  arrangements  administered
by the National  Exchange Carrier  Association  (NECA) based on average schedule
formulas.  The intrastate  portion of access  revenues are billed based upon the
Company's  tariff for access charges filed with the ISUD. The charges  developed
from these tariffs are used to bill the  connecting  long distance  provider and
revenues are  recognized in the period the traffic is  transported  based on the
minutes of traffic carried.  Long distance revenues are recognized at the time a
call is placed  based on the  minutes  of  traffic  processed  at  tariffed  and
contracted rates.

     Other  revenues  include  contractually  determined  arrangements  for  the
provision of billing and  collecting  services and are  recognized in the period
when the services are performed.

Cash Equivalents

     All highly  liquid  investments  with a maturity of three months or less at
the time of purchase are considered cash equivalents.

Reclassifications

     Certain  reclassifications  have been made to the 1997 financial statements
to conform with the 1998 presentations.



                                       -2-

<PAGE>


                         CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                   Notes to Consolidated Financial Statements
                           December 31, 1998 and 1997



2. PROPERTY, PLANT AND EQUIPMENT

     The provisions for  depreciation  for the years ended December 31, 1998 and
1997, were distributed as follows: Years Ended December 31,

<TABLE>
<CAPTION>

                                                       1998              1997
                                                       ----              ----
<S>                                                  <C>                <C>
Operating expenses .......................           $645,144           $607,151
Other income .............................                653                652
                                                     --------           --------
                                                     $645,797           $607,803
                                                     ========           ========
</TABLE>

      Property, plant and equipment includes the following:

<TABLE>
<CAPTION>
                                            December 31,
                                          1998          1997
                                       ---------   ---------

Telephone Plant in Service -
<S>                                   <C>          <C>
     Land .........................   $   99,081   $   99,081
     Buildings ....................      750,959      748,575
     Other general support assets .      497,947      425,771
     Central office assets ........    2,545,052    2,175,731
     Cable and wire facilities ....    5,392,053    5,028,733
     Other plant and equipment ....      199,851      198,317
                                      ----------   ----------
                                      $9,484,943   $8,676,208
                                      ----------   ----------
Other Property -
     Land .........................   $    2,638   $    2,638
     Building .....................       30,000       30,000
                                      ----------   ----------
                                      $   32,638   $   32,638
                                      ----------   ----------

Total property, plant and equipment   $9,517,581   $8,708,846
                                      ==========   ==========
</TABLE>

     Application  of rates to the various  classes of plant produced a composite
rate on average  depreciable  plant for the years  ended  December  31, 1998 and
1997, of 7.2% and 7.2%, respectively.

3.    EMPLOYEE BENEFITS

     The Company has a  non-contributory,  defined benefit pension plan covering
most employees.  The  multi-employer  retirement  programs are with the National
Telephone Cooperative  Association (NTCA) and have been approved by the Internal
Revenue Service.  Pension costs,  expensed and  capitalized,  for 1998 and 1997,
were   $51,031  and  $44,842,   respectively.   The  Company   makes   quarterly
contributions to the plan equal to amounts accrued for pension expense.

     The  relative  position  of the  Company  regarding  the  accumulated  plan
benefits and plan net assets of the  multi-employer  plan is not determinable by
the Company and is not presented.

     The Company also provides an optional savings plan administered by NTCA for
its employees. The Company contributes 3% for 1998 and 1% for 1997 of employees'
salaries in addition to the voluntary contribution.  Savings plan costs expensed
and capitalized for the years ending December 31, 1998 and 1997, totaled $15,701
and $4,424, respectively.


                                       -3-

<PAGE>


                         CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                   Notes to Consolidated Financial Statements
                           December 31, 1998 and 1997


4.    INCOME TAXES

     Income taxes reflected in the Consolidated  Statements of Income consist of
the following:

<TABLE>
<CAPTION>
                                             Years Ended December 31,
                                               1998         1997
                                               ----         ----
Federal income taxes -
<S>                                          <C>          <C>
    Current tax expense ..................   $ 733,445    $ 594,865
    Deferred tax expense (benefit) .......      (4,052)      27,978
    Amortization of investment tax credits      (7,040)     (12,770)
State income taxes -
    Current tax expense ..................     213,849      166,827
    Deferred tax expense (benefit) .......        (152)       8,067
                                             ---------    ---------
        Total income tax expense .........   $ 936,050    $ 784,967
                                             =========    =========
</TABLE>

     Cash paid for income  taxes and  estimated  income  taxes for 1998 and 1997
totaled $947,000 and $735,100, respectively.

Deferred federal and state tax liabilities and assets are summarized as follows:

<TABLE>
<CAPTION>
                                          December 31,
                                        1998        1997
                                       -----        -----
Deferred Tax Liabilities

<S>                                  <C>          <C>
Federal ..........................   $ 320,594    $ 261,306
State ............................     100,435       80,200
                                     ---------    ---------
   Total Deferred Tax Liabilities    $ 421,029    $ 341,506
                                     ---------    ---------

Deferred Tax Assets
      Federal ....................   $  46,994    $   7,524
      State ......................      14,722        2,309
                                     ---------    ---------
         Total Deferred Tax Assets   $  61,716    $   9,833
                                     ---------    ---------

      Net Deferred Tax Liability .   $ 359,313    $ 331,673
                                     =========    =========

Current portion ..................   $ (61,119)   $  (7,474)
Long-term portion ................     420,432      339,147
                                     ---------    ---------
      Net Deferred Tax Liability .   $ 359,313    $ 331,673
                                     =========    =========
</TABLE>

     The tax provision  differs from the expense that would result from applying
federal  statutory  rates to income  before income taxes because of state income
taxes.

     Other  Deferred  Credits  includes a  regulatory  liability at December 31,
1997, of  approximately  $3,846.  This liability  represents the excess deferred
taxes  on  depreciable  assets,  resulting  primarily  from  reductions  in  the
statutory federal income tax rate. This amount is being amortized over the lives
of the related depreciable assets in accordance with the average rate assumption
method as required by income tax  regulations.  The regulatory  liabilities have
been increased to reflect future revenue requirement levels.




                                       -4-

<PAGE>


                         CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                   Notes to Consolidated Financial Statements
                           December 31, 1998 and 1997




5.    INVESTMENTS

     The amortized cost and fair value of available for sale securities are:

<TABLE>
<CAPTION>
                                                     Gross
                                    Amortized      Unrealized    Unrealized       Fair
                                       Cost           Gains         Losses        Value
                                       ----           -----         ------        -----
December 31, 1998
<S>                                 <C>            <C>           <C>          <C>
    Equity securities ...........   $       44     $     9,004   $     --     $    9,048
    U.S. Treasury notes and bills    2,304,495         321,135         --      2,625,630
                                     ---------      ----------   ----------   ----------
    Total .......................   $2,304,539     $   330,139         --     $2,634,678
                                     =========      ==========   ==========   ==========

December 31, 1997
    Equity securities ...........   $      200     $    23,776  $      --     $   23,976
    U.S. Treasury notes and bills    2,002,140         228,071         --      2,223,211
                                     ---------      ----------   ----------   ----------
    Total .......................   $2,002,340     $   251,847  $      --     $ 2,54,187
                                     =========      ==========   ==========   ===========
</TABLE>


        Equity securities are included in other investments at December 31, 1998
and 1997.

     Proceeds from sales of available for sale securities  totaled $18,936 and $
-0- in 1998 and 1997, respectively.

     The gross realized gains on sales of available for sale securities  totaled
$18,780 and $ -0- in 1998 and 1997, respectively.

     There were no realized  losses on sales of  available  for sale  securities
during 1998 and 1997.

     Marketable debt securities mature as follows:

<TABLE>
<CAPTION>
                              Maturity       Amortized
        Description             Date           Cost
        -----------             ----           ----

<S>                           <C>          <C>
   U.S. Treasury bill         4/22/99       $  395,190
   U.S. Treasury bill         4/29/99          394,505
   U.S. Treasury note         8/15/99          499,670
   U.S. Treasury note        11/15/21        1,015,130
                                             ---------
                                             $2,304,495
                                             ==========
</TABLE>

     Investments also include $39,525 at December 31, 1998 and 1997,  related to
Rural Telephone Bank (RTB) Class B stock.  Such RTB stock was purchased from the
RTB as a condition  of  obtaining  long-term  financing.  Holders of RTB Class B
stock are entitled to  patronage  dividends  in the form of  additional  Class B
stock. However, such stock must be held until the related RTB loan is repaid and
may be redeemed only after all shares of Class A stock have been retired, at the
discretion of the board of directors of RTB.


                                       -5-

<PAGE>


                        CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                   Notes to Consolidated Financial Statements
                           December 31, 1998 and 1997

6. INVESTMENTS IN AFFILIATES

     Central Scott Telephone Company owned 6.4% of the partners' capital of Iowa
LP 136 (a development  stage limited  partnership) at December 31, 1997. Iowa LP
136 was liquidated in 1998. The Company  accounted for this investment using the
equity method because of its involvement in the management of this  partnership.
The partnership  was formed in 1995 to compete for licenses to provide  Personal
Communications  Services  (PCS) in selected  Basic Trading Areas (BTAs) in Iowa,
South Dakota,  Nebraska and Illinois.  In 1997 Iowa LP 136 acquired  licenses in
selected  BTAs in Iowa and  subsequently  sold the  licenses in 1998.  The sales
proceeds  resulted in returning  to each  partner its  original net  partnership
investment,  its share of certain licensing costs previously  expensed,  and its
share of investment income since inception.  Following is a summary of financial
position and results of operations of this affiliate:

<TABLE>
<CAPTION>
                                                   1998             1997
                                                   ----             ----
<S>                                            <C>               <C>
Current assets .............................   $          --     $ 3,580,100
Other assets ...............................              --       8,108,039
                                               ---------------   -----------
     Total Assets ..........................   $          --     $11,688,139
                                               ===============   ===========

Current liabilities ........................   $          --     $   666,955
Long-term debt .............................              --       2,537,080
Partners' capital ..........................              --       8,484,104
                                               ---------------   -----------
     Total Liabilities and Partners' Capital   $          --     $11,688,139
                                               ===============   ===========

Operating Revenues .........................              --            --

Net Income .................................   $       336,138   $    35,698
                                               ===============   ===========
</TABLE>

     Central  Scott  Telephone  Company  owned 6.4% of the capital  stock of ITC
Management Company,  Inc. (a development stage C-corporation who was the general
partner of Iowa LP 136) at December 31, 1997. ITC Management  Company,  Inc. was
liquidated in 1998. The Company  accounted for this investment  using the equity
method  because  of its  involvement  in the  management  of  this  corporation.
Following is a summary of financial  position and results of  operations of this
affiliate:
<TABLE>
<CAPTION>
                                                     1998        1997
                                                     ----        ----
<S>                                                <C>         <C>
Other assets ...................................   $    --     $334,273
                                                   ---------   --------
     Total Assets ..............................   $    --     $334,273
                                                   =========   ========

Stockholders' Equity ...........................   $    --     $334,273
                                                   =========   ========

Operating Revenues .............................        --         --

Net Income .....................................   $  12,458   $  1,446
                                                   =========   ========
Company's Share of Affiliates' Equity or Capital
ITC Management Company, Inc. ...................   $    --     $ 21,429

Iowa LP 136 ....................................        --      271,788
                                                   ---------   --------

     Total Investments in Affiliates ...........   $    --     $293,217
                                                   =========   ========
</TABLE>

     The liquidation of Iowa LP 136 and ITC Management  Company,  Inc., resulted
in a net gain of $21,837 during 1998.


                                       -6-

<PAGE>


                         CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                   Notes to Consolidated Financial Statements
                           December 31, 1998 and 1997



7. LONG-TERM DEBT

      Long-term debt consists of:
<TABLE>
<CAPTION>
                                          December 31,
                                        1998         1997
                                     ---------   --------

<S>                                  <C>         <C>
Note payable to Iowa L.P. 136 - 7%   $    --     $480,000
    Less current portion .........        --      120,000
                                     ---------   --------
                                     $    --     $360,000
                                     =========   ========
</TABLE>

The note was liquidated in connection  with the sale of Iowa LP 136 during 1998.
No interest was paid in 1998 or 1997.


8.    REVOLVING LINE OF CREDIT

     On August 15, 1994,  the Company  entered into an agreement  with the Rural
Telephone Finance  Cooperative (RTFC) for an unsecured  revolving line of credit
of $500,000.  The unpaid balance will bear interest at a rate per annum equal to
or lesser than the prevailing  bank "prime"  interest rate plus one and one-half
percent. Interest paid during 1998 and 1997 totaled $-0-.

9.    CONCENTRATIONS OF CREDIT RISK

     The  Company  grants  credit to local  service  customers,  all of whom are
located in the franchised  service area, and  telecommunications  intrastate and
interstate long distance carriers.

     The Company has received  approximately 66% of its operating  revenues from
access revenues and assistance  provided by the Federal  Universal Service Fund.
The manner in which access  revenues are  determined  by  regulatory  bodies and
universal  service  funding  is  determined  for  qualifying   organizations  is
currently being modified as a result of the Telecommunications Act of 1996.

     Financial   instruments   that   potentially   subject   the   Company   to
concentrations of credit risk consist principally of cash and cash equivalents.

     Of the  Company's  cash and cash  equivalents,  $1,019,922  and $714,550 at
December  31,  1998  and  1997,   respectively,   are  maintained  at  financial
institutions  in accounts  in excess of the amounts  insured by an agency of the
federal government.

10.   COMMITMENT

     The Company has entered into an agreement with Northern Telecom to purchase
software upgrades during the years ended December 31,  1996-1999,  for an annual
fee of $40,500 to be paid in January of each year.



                                       -7-

<PAGE>



                         CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                           Note to Unaudited Condensed
                          Interim Financial Statements


The accompanying  unaudited  condensed  interim  financial  statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information.  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)  considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 1999
are not necessarily  indicative of the results that may be expected for the year
ended  December 31, 1999.  For further  information,  refer to the  consolidated
financial  statements  and  footnotes  thereto  included in the  audited  annual
financial statements for the year ended December 31, 1998.






<PAGE>



                        CENTRAL SCOTT TELEPHONE COMPANY
                CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
                               AT MARCH 31, 1999
                                 (IN THOUSANDS)

<TABLE>

ASSETS

CURRENT ASSETS

<S>                                                                      <C>
CASH ..........................................................          $ 1,260
U.S. TREASURY BILLS ...........................................            1,895
ACCOUNTS RECEIVABLE ...........................................              463
MATERIALS & SUPPLIES ..........................................               30
DEFERRED INCOME TAXES .........................................               61
PREPAID EXPENSES ..............................................               46
                                                                         -------
  TOTAL CURRENT ASSETS ........................................            3,755
U.S. TREASURY NOTES AND OTHER INVESTMENTS .....................            1,647
PROPERTY, PLANT & EQUIPMENT....................................            4,902
                                                                         -------
      TOTAL ASSETS ............................................          $10,304
                                                                         =======


LIABILITIES & STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
ACCOUNTS PAYABLE & ACCRUALS ...................................          $   164
ACCRUED TAXES .................................................              334
OTHER .........................................................               20
                                                                         -------
   TOTAL CURRENT LIABILITIES ..................................              518

DEFERRED TAXES ................................................              468

STOCKHOLDERS' EQUITY:
   COMMON STOCK ...............................................            3,540
   COMPREHENSIVE INCOME .......................................              196
   RETAINED EARNINGS ..........................................            5,582
                                                                         -------
TOTAL STOCKHOLDERS' EQUITY ....................................            9,318
                                                                         -------
      TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ................          $10,304
                                                                         =======
</TABLE>


SEE NOTE TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

<PAGE>


                        CENTRAL SCOTT TELEPHONE COMPANY
              CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
               FOR THE THREE MONTHS ENDED MARCH 31,1999 AND 1998
                                  IN THOUSANDS
<TABLE>
<CAPTION>
                                                               MARCH 31,
                                                       1999              1998
                                                       -------------------------

<S>                                                  <C>                <C>
REVENUES .................................           $ 1,179            $ 1,092
OPERATING EXPENSES: ......................               606                565
                                                      ------             ------
    OPERATING INCOME .....................               573                527
INVESTMENT INCOME ........................                69                 72
                                                      ------             ------
    PRETAX INCOME ........................               642                599
INCOME TAX PROVISION .....................              (234)              (204)
                                                      ------             ------
    NET INCOME ...........................           $   408            $   395
                                                     =======            =======

SEE NOTE TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
</TABLE>





<PAGE>


                        CENTRAL SCOTT TELEPHONE COMPANY
           CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED)
               FOR THE THREE MONTHS ENDED MARCH 31,1999 AND 1998
                                  IN THOUSANDS

<TABLE>
<CAPTION>
                                                                 MARCH 31,
                                                            1999         1998
OPERATING ACTIVITIES                                     -----------------------

<S>                                                       <C>           <C>
NET INCOME .........................................      $   408       $   395
ADJUSTMENTS TO REFLECT NON-CASH ITEMS:
    DEPRECIATION AND AMORTIZATION ..................          174           159
    DEFERRED INCOME TAXES ..........................           (7)            0
CHANGES IN OPERATING ASSETS:
    ACCOUNTS RECEIVABLE ............................            0             6
    PREPAID ASSETS .................................           16            18
    OTHER ASSETS ...................................            0            (2)
    ACCOUNTS PAY AND ACCRUALS ......................          (39)          (19)
    ACCRUED TAXES ..................................          194           165
                                                            -----         -----
                                                              746           722
                                                            -----         -----
INVESTING ACTIVITIES

ADDITIONS TO PLANT .................................         (109)         (167)
NET CHANGE IN U.S. TREASURY BILLS ..................         (603)         (403)
                                                            -----         -----
    NET CASH USED IN INVESTING ACTITITIES ..........         (712)         (570)
                                                            -----         -----

FINANCING ACTIVITIES

PURCHASE OF TREASURY STOCK .........................            0           (55)
                                                            -----         -----
    NET CASH USED BY FINANCING ACTIVITIES ..........            0           (55)
                                                            -----         -----
NET INCREASE IN CASH AND CASH EQUIVALENTS ..........           34            97
CASH AND CASH EQUIVALENTS AT
    BEGINING OF PERIOD .............................        1,226           875
                                                            -----         -----
CASH AND CASH EQUIVALENTS AT
    END  OF PERIOD .................................      $ 1,260       $   972
                                                          =======       =======

SEE NOTE TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

</TABLE>

<PAGE>



              LYNCH CORPORATION AND CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                        Pro Forma Condensed Consolidating
                        Financial Statements (Unaudited)



The following pro forma condensed consolidating balance sheet at March 31, 1999,
and pro forma condensed consolidating  statements of income for the three months
ended  March 31,  1999 and year ended  December  31,  1998,  give  effect to the
acquisition of 100% of the outstanding shares of Central Scott Telephone Company
by Lynch Telephone  Corporation IX, a subsidiary of Lynch  Corporation.  The pro
forma  information  is based on the historical  financial  statements of Central
Scott Telephone Company and Lynch  Corporation  giving effect to the transaction
under the purchase  method of  accounting  and the  assumption  and  adjustments
described in the accompanying notes to the pro forma financial statements.

The pro forma  statements  have been  prepared by Lynch  Corporation  management
based upon the financial  statements of Central Scott Telephone  Company.  These
pro forma  statements  may not be indicative of the results that actually  would
have occurred if the  combination  had been in effect on the dates  indicated or
which may be obtained in the future.  The pro forma financial  statements should
be read in  conjunction  with the historical  financial  statements and notes of
Central Scott Telephone Company and Lynch Corporation.






<PAGE>



                               LYNCH CORPORATION
                PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
                               AT MARCH 31, 1999
         ADJUSTED TO REFLECT THE ACQUISITION OF CENTRAL SCOTT TELEPHONE
          COMPANY AS IF THE TRANSACTION HAD OCCURRED ON MARCH 31, 1999
                                  IN THOUSANDS
                                  (UNAUDITED)
<TABLE>
<CAPTION>

                                                        CENTRAL
                                                         SCOTT                   PRO FORMA    NOTES TO
                                           LYNCH       TELEPHONE    PRO FORMA      LYNCH      PRO FORMA
                                         CORPORATION    COMPANY     ADJUSTMENTS  CORPORATION  ADJUSTMENTS
                                         ---------------------------------------------------------------
ASSETS
<S>                                        <C>            <C>         <C>         <C>           <C>
CURRENT ASSETS
CASH & MARKETABLE SECURITIES ...........     $17,995       $3,155        --        $21,150
ACCOUNTS RECEIVABLE ....................      44,882          463        --         45,345
MATERIALS & SUPPLIES ...................      31,795           30        --         31,825
DEFERRED INCOME TAXES ..................      13,580           61        --         13,641
OTHER CURRENT ASSETS ...................       7,844           46        --          7,890
NET CURRENT ASSETS OF
    DISCONTINUED OPERATIONS ............      33,642           --        --         33,642
                                             -------      -------     -------      -------
    TOTAL CURRENT ASSETS ...............     149,738        3,755        --        153,493

PROPERTY, PLANT, & EQUIPMENT - NET .....     136,839        4,902        --        141,741

INVESTMENT IN & ADVANCES TO PCS ENTITIES      11,060         --          --         11,060

GOODWILL ...............................      69,710         --        18,782       88,492       A
OTHER ASSETS ...........................      14,451        1,647        --         16,098
NET NON-CURRENT ASSETS OF
    DISCONTINUED OPERATIONS ............      70,823         --          --         70,823
                                             -------      -------     -------      -------

    TOTAL ASSETS .......................   $ 452,621      $10,304     $18,782     $481,707
                                           =========      =======     =======     ========
LIABILITIES & SHAREHOLDERS EQUITY

CURRENT LIABILITIES
NOTES PAYABLE TO BANKS .................     $51,328         --       $ 8,100       59,428       B
ACCOUNTS PAYABLE & ACCRUALS ............      58,848          518        --         59,366
CURR. PORTION OF LONG-TERM DEBT ........      10,020         --           768       10,788       B
NET CURRENT LIABILITIES OF
    DISCONTINUED OPERATIONS ............      16,573         --          --         16,573
                                             -------      -------     -------      -------
   TOTAL CURRENT LIABILITIES ...........     136,769          518       8,868      146,155

LONG-TERM DEBT .........................     244,680         --        19,232      263,912       B
DEFERRED TAXES .........................      16,818          468        --         17,286
OTHER LIABILITIES ......................       6,891         --          --          6,891
MINORITY INTERESTS .....................      12,652         --          --         12,652
NET NON-CURRENT LIABILITIES OF
    DISCONTINUED OPERATIONS ............       6,280         --          --          6,280

SHAREHOLDERS' EQUITY:
   COMMON STOCK ........................       5,139        3,540      (3,540)       5,139       C
   PAID-IN CAPITAL .....................       8,300         --          --          8,300
   COMPREHENSIVE INCOME ................          42          196        (196)          42       C
   RETAINED EARNINGS (DEFICIT) .........      15,780        5,582      (5,582)       15,78       C
   TREASURY STOCK ......................        (730)        --          --           (730)
                                             -------      -------     -------      -------
TOTAL SHAREHOLDERS' EQUITY .............      28,531        9,318      (9,318)      28,531
                                             -------      -------     -------      -------
      TOTAL LIABILITIES & EQUITY .......   $ 452,621      $10,304     $18,782     $481,707
                                           =========      =======     =======     ========
<FN>

NOTES
A - TO RECORD GOODWILL  RECOGNIZED IN CONNECTION WITH THE ACQUISITION OF CENTRAL
    SCOTT.
B - TO RECORD THE  ISSUANCE OF DEBT TO FINANCE THE  ACQUISITION.
C - TO ELIMINATE THE SHAREHOLDERS' EQUITY OF CENTRAL SCOTT.
</FN>


SEE NOTES TO PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)

</TABLE>



<PAGE>


                                LYNCH CORPORATION
             PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF INCOME
                   FOR THE THREE MONTHS ENDED MARCH 31, 1999
         ADJUSTED TO REFLECT THE ACQUISITION OF CENTRAL SCOTT TELEPHONE
       COMPANY AS IF THE ACQUISITION HAD OCCURRED ON JANUARY 1, 1998 AND
            TO REFLECT THE DISPOSITION OF CERTAIN BUSINESS SEGMENTS
                    IN THOUSANDS (EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>


                                                                     CENTRAL
                                                                      SCOTT                     PRO FORMA     NOTES TO
                                                       LYNCH        TELEPHONE       PRO FORMA     LYNCH       PRO FORMA
                                                    CORPORATION      COMPANY       ADJUSTMENTS  CORPORATION  ADJUSTMENTS
                                                    -------------------------------------------------------------------
<S>                                                    <C>               <C>            <C>         <C>         <C>
REVENUES ......................................       $95,123         $1,179           --         $ 96,302
OPERATING EXPENSES:
   COST OF SALES ..............................        83,668            606            188         84,462       A
   SELLING & ADMINISTRATIVE ...................         8,193           --             --            8,193
                                                      -------        -------        -------        -------
OPERATING INCOME ..............................         3,262            573           (188)         3,647

OTHER INCOME(EXPENSE):
    INVESTMENT INCOME/(EXPENSE)................           827             69           --              896
    INTEREST EXPENSE ..........................        (4,885)          --             (537)        (5,422)      B
    EQUITY IN EARNINGS OF AFFILATED COMPANIES .            59           --             --               59
    RESERVE FOR IMPAIRMENT OF INVESTMENT
        IN  PCS LICENSEHOLDERS ................       (15,406)          --             --          (15,406)
    GAIN ON SALE OF SUBSIDIARY STOCK &
        OTHER ASSETS ..........................          --             --             --                0
                                                      -------        -------        -------        -------
       TOTAL OTHER INCOME(EXPENSE) ............       (19,405)            69           (537)       (19,873)

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
    TAXES AND  MINORITY INTERESTS .............       (16,143)           642           (725)       (16,226)
PROVISION FOR INCOME TAXES ....................         5,533           (234)           215          5,514       C
MINORITY INTERESTS ............................           330           --             --              330
                                                      -------        -------        -------        -------
    INCOME (LOSS) FROM CONTINUING OPERATIONS ..     ($ 10,280)       $   408       ($   510)     ($ 10,382)
                                                    =========        =======       ========      =========
WEIGHTED AVERAGE SHARES O/S ...................     1,418,000                                    1,418,000
BASIC AND DILUTED EARNINGS PER SHARE
    FROM CONTINUING OPERATIONS ................     ($   7.25)                                   ($   7.32)
                                                    =========                                    =========

<FN>
NOTES
A - TO RECORD  AMORTIZATION  OF GOODWILL (25 YEAR PERIOD)
B - TO REFLECT INTEREST EXPENSE ON DEBT ISSUED FOR ACQUISITION
C - NET TAX EFFECT OF ABOVE ADJUSTMENTS
</FN>


SEE NOTES TO PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
</TABLE>


<PAGE>



                                LYNCH CORPORATION
             PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF INCOME
                      FOR THE YEAR ENDED DECEMBER 31, 1998
         ADJUSTED TO REFLECT THE ACQUISITION OF CENTRAL SCOTT TELEPHONE
       COMPANY AS IF THE ACQUISITION HAD OCCURRED ON JANUARY 1, 1998 AND
            TO REFLECT THE DISPOSITION OF CERTAIN BUSINESS SEGMENTS
                    IN THOUSANDS (EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 CENTRAL
                                                                  SCOTT                      PRO FORMA      NOTES TO
                                                   LYNCH        TELEPHONE     PRO FORMA        LYNCH        PRO FORMA
                                                 CORPORATION     COMPANY      ADJUSTMENTS   CORPORATION     ADJUSTMENT
                                                 ---------------------------------------------------------------------

<S>                                                 <C>              <C>           <C>          <C>          <C>
REVENUES ....................................   $   392,720    $     4,395          --      $   397,115
OPERATING EXPENSES:
   COST OF SALES ............................       339,104          2,341         752          342,197        A
   SELLING & ADMINISTRATIVE .................        32,864           --            --           32,864
                                                  ---------      ---------     ---------      ---------
OPERATING INCOME ............................        20,752          2,054          (752)        22,054

OTHER INCOME(EXPENSE):
    INVESTMENT INCOME/(EXPENSE)..............         2,064            272           --           2,336
    INTEREST EXPENSE ........................       (18,334)          --          (2,127)       (20,461)       B
    EQUITY IN EARNINGS OF AFFILATED COMPANIES           317           --            --              317
    RESERVE FOR IMPAIRMENT OF INVESTMENT ....          --             --            --                0
        IN  PCS LICENSEHOLDERS
    GAIN ON SALE OF SUBSIDIARY STOCK & ......         4,778           --            --            4,778
                                                  ---------      ---------     ---------      ---------
        OTHER ASSETS
        TOTAL OTHER INCOME(EXPENSE) .........       (11,175)           272        (2,127)       (13,030)
INCOME (LOSS) FROM CONTINUING OPERATIONS
    BEFORE TAXES AND  MINORITY INTERESTS ....         9,577          2,326        (2,879)         9,024
PROVISION FOR INCOME TAXES ..................        (3,912)          (936)          851         (3,997)       C
MINORITY INTERESTS ..........................          (476)          --            --             (476)
                                                  ---------      ---------     ---------      ---------
    INCOME (LOSS) FROM CONTINUING OPERATIONS    $     5,189    $     1,390   ($    2,028)   $     4,551
                                                ===========    ===========   ===========    ===========
WEIGHTED AVERAGE SHARES O/S .................     1,418,000                                   1,418,000
BASIC AND DILUTED EARNINGS PER SHARE
    FROM CONTINUING OPERATIONS ..............   $      3.66                                 $      3.21
                                                ===========                                 ===========
<FN>
NOTES
A - TO RECORD  AMORTIZATION  OF GOODWILL (25 YEAR PERIOD)
B - TO REFLECT INTEREST EXPENSE ON DEBT ISSUED FOR ACQUISITION
C - NET TAX EFFECT OF ABOVE ADJUSTMENTS
</FN>


SEE NOTES TO PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)

</TABLE>
[{"type": "8-K", "sequence": "1", "description": "ACQUISITION CENTRAL SCOTT TELEPHONE COMPANY", "secsgml_size_bytes": 73036}]
{"company-data": {"conformed-name": "LYNCH CORP", "cik": "0000061004", "assigned-sic": "4213", "irs-number": "381799862", "state-of-incorporation": "IN", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-00106", "film-number": "99675628"}, "business-address": {"street1": "401 THEODORE FREMD AVENUE", "city": "RYE", "state": "NY", "zip": "10580", "phone": "914-921-7601"}, "mail-address": {"street1": "401 THEODORE FREMD AVENUE", "city": "RYE", "state": "NY", "zip": "10580"}}
SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K
                                    --------

                 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported)   July 16, 1999
                                                   -------------

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

     INDIANA                    1-106                           38-1799862
     -------                    -----                           ----------
(State of jurisdiction       (Commission                     (I.R.S. Employer
  of Incorporation)           File Number)                  Identifications No.)

401 Theodore Fremd Avenue, Rye, New York                         10580
----------------------------------------                         -----
(Address of Principal Executive Offices)                       (Zip Code)

Registrant's telephone number, including area code:   914/921-7601
                                                      ------------
Item 1.           Change in Control of Registrant

                  Not Applicable

Item 2.           Acquisition of Disposition of Assets

Acquisition of Central Scott Telephone Company

         On July 16, 1999, Lynch Telephone  Corporation IX ("LTC"), a subsidiary
of the  Registrant,  acquired,  by  merger,  all of the stock of  Central  Scott
Telephone  Company  ("CSTC") for  approximately  $28.1 million in cash. Prior to
merger, the stock of CSTC was owned by approximately 475 shareholders of record.
The acquisition was the result of arms length  negotiations  between  Registrant
(and its  representatives)  and CSTC  (and its  representatives).  There  was no
material  relationship  between Registrant and CSTC. A copy of the Agreement and
Plan of Merger is filed as Exhibit 10.1 hereto.

         CSTC is a local exchange  telephone company  headquartered in Eldridge,
Iowa. CSTC services  approximately 6,000 access lines in Scott County, Iowa. The
assets of CSTC, which primarily consist of telephone cable,  switching equipment
and the other assets used in its telephone business, will continue to be used in
the business of CSTC.  CSTC also is engaged in long distance resale and personal
communications services ("PCS").

         Registrant  borrowed $20 million from a bank for the  acquisition.  The
principal  of the Loan is  payable  over a 5 year  period  and is  secured  by a
security interest in substantially all the assets of LTC (including the stock of
CSTC)  and CSTC.  Additional  amount  will be  borrowed  under the  Registrant's
existing bank lines of credit.  The identity of banks has been omitted and filed
separately with the Securities and Exchange Commission.

         CSTC had  revenues  and net income of $4.4  million  and $1.4  million,
respectively,  for the year ended  December  31, 1998 and $3.9  million and $1.2
million, respectively, for the year ended December 31, 1997.

Item 3.           Bankruptcy of Receivership

                  Not Applicable

Item 4.           Changes in Registrant's Certifying Account

                  Not Applicable

Item 5.           Other Events

                  See Item 2
Item 6.           Resignation of Registrant's Directors

                  Not Applicable

Item 7.           Financial Statements and Exhibits

   (a)      Financial Statements of businesses Acquired

      1.       Audited financial statements of Central Scott Telephone Company:
                  Independent Auditor's Report
                  Consolidated Balance Sheets - December 31, 1998 and 1997
                  Consolidated Statements of Income - For the Years Ended
                    December 31, 1998 and 1997
                  Consolidated Statements of Stochholders' Equity - For the
                    Years Ended December 31, 1998 and 1997
                  Consolidated Statements of Cash Flows - For the Years Ended
                    December 31, 1998 and 1997
               Notes to Financial Statements

      2.      Unaudited  financial  statements of Central Scott Telephone
               Company:

                  Condensed Consolidated Balance Sheet - March 31, 1999
                  Condensed Consolidated Statements of Income - Three Months
                     Ended March 31, 1999 and 1998
                  Condensed Consolidated Statements of Cash Flow - Three Months
                     Ended March 31, 1999 and 1998

   (b)      Pro Forma Financial Information

                Pro Forma Condensed Consolidating Balance Sheet -
                    March 31, 1999
                Pro Forma Condensed Consolidating Statements of Income -
                    Three Months Ended March 31, 1999 and Year Ended
                    December 31, 1998

   (c)      Exhibits

          10.1 Agreement  and Plan of  Merger  dated as of May 25,  1999,  among
               Central  Scott   Telephone   Company,   Brighton   Communications
               Corporation and Brighton Iowa Acquisition  Corporation (schedules
               ommitted).  Registrant  agrees to provide  the  schedules  to the
               Secuities and Exchange Commission upon request.

Item 8.   Change in Fiscal Year

          Not applicable

Item 9.   Sales of Equity Securities Pursuant to Regulation S

          Not applicable
Signatures

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

                                               LYNCH CORPORATION

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

Date: August 2, 1999
CENTRAL SCOTT TELEPHONE COMPANY
                                 AND SUBSIDIARY
                                 ELDRIDGE, IOWA

                        CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 1998 AND 1997
                       WITH INDEPENDENT AUDITORS' REPORTS
CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

     CONTENTS
Page
INDEPENDENT AUDITORS' REPORT ...............................................   1

CONSOLIDATED FINANCIAL STATEMENTS:

         Consolidated Balance Sheets .......................................   2 - 3

         Consolidated Statements of Income .................................   4

         Consolidated Statements of Stockholders' Equity ...................   5

         Consolidated Statements of Cash Flows .............................   6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .................................   7 - 13
INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Central Scott Telephone Company
Eldridge, Iowa

We have audited the  accompanying  consolidated  balance sheets of Central Scott
Telephone  Company (an Iowa  Corporation) and subsidiary as of December 31, 1998
and 1997,  and the  related  consolidated  statements  of income,  stockholders'
equity, and cash flows for the years then ended.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of Central  Scott
Telephone  Company  and  subsidiary  as of December  31, 1998 and 1997,  and the
results  of their  operations  and their  cash flows for the years then ended in
conformity with generally accepted accounting principles.

Kiesling Associates LLP

West Des Moines, Iowa
January 20, 1999
CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                           CONSOLIDATED BALANCE SHEETS
December 31,
                                                       1998                1997
                                                       ----                ----
         ASSETS

CURRENT ASSETS
Cash and cash equivalents ...............       $1,225,991       $  874,710
     U.S. Treasury bills .....................        1,292,192          487,311
     Accounts receivable -
         Due from customers ..................           75,119           67,246
         Interexchange carriers ..............          356,174          328,546
         Other ...............................           10,077            8,846
     Interest receivable .....................           21,425           21,123
     Materials and supplies ..................           29,534           45,052
     Prepayments .............................           61,987           63,787
     Deferred income taxes ...................           61,119            7,474
                                                     ----------       ----------
                                                     $3,133,618       $1,904,095
                                                     ----------       ----------

OTHER NONCURRENT ASSETS
     U.S. Treasury notes .....................       $1,333,438       $1,742,900
     Other investments .......................          314,002          915,358
                                                     ----------       ----------
                                                     $1,647,440       $2,658,258
                                                     ----------       ----------

PROPERTY, PLANT AND EQUIPMENT
     Telephone plant in service ..............       $9,484,943       $8,676,208
     Other property ..........................           32,638           32,638
                                                     ----------       ----------
                                                     $9,517,581       $8,708,846
     Less accumulated depreciation ...........        4,573,953        3,965,833
                                                     ----------       ----------
                                                     $4,943,628       $4,743,013
     Plant under construction ................           23,994           62,586
                                                     ----------       ----------
                                                     $4,967,622       $4,805,599
                                                     ----------       ----------

TOTAL ASSETS .................................       $9,748,680       $9,367,952
                                                     ==========       ==========
CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                           CONSOLIDATED BALANCE SHEETS
December 31,
                                                           1998           1997
                                                           ----           ----
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable -
Interexchange carriers ......................   $   10,714   $   31,999
         Other .......................................      160,266       37,425
     Customer deposits ...............................       33,000       33,000
     Current portion of long-term debt ...............         --        120,000
     Accrued taxes ...................................      139,271      118,400
     Other ...........................................       20,207       18,420
                                                         ----------   ----------
                                                         $  363,458   $  359,244
                                                         ----------   ----------

LONG-TERM DEBT, less current portion .................   $     --     $  360,000
                                                         ----------   ----------

DEFERRED CREDITS
     Deferred investment tax credit ..................   $   55,355   $   62,395
     Deferred income taxes ...........................      420,432      339,147
     Other deferred credits ..........................         --          3,864
                                                         ----------   ----------
                                                         $  475,787   $  405,406
                                                         ----------   ----------
STOCKHOLDERS' EQUITY
     Common stock - $50 par value, 200,000
         shares authorized, 70,790 and 71,470 shares
         issued and outstanding, respectively ........   $3,539,500   $3,573,500
     Accumulated other comprehensive income
         Unrealized gains on certain investments .....      196,105      149,657
     Retained earnings ...............................    5,173,830    4,520,145
                                                         ----------   ----------
                                                         $8,909,435   $8,243,302
                                                         ----------   ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...........   $9,748,680   $9,367,952
                                                         ==========   ==========
The accompanying notes are an integral part of these financial statements.

                                       -3-
CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                        CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
                                                       1998                1997
                                                       ----                ----

OPERATING REVENUES
Local network services ....................      $  956,712      $  844,849
     Network access services ...................       2,884,919
                                                                       2,617,027
     Long distance services ....................          96,852          55,169
     Billing and collection services ...........         116,447         131,253
     Equipment sales and other .................         339,640         242,974
                                                      ----------      ----------
                                                      $4,394,570      $3,891,272
                                                      ----------      ----------

OPERATING EXPENSES
     Plant specific operations .................      $  396,726      $  425,034
     Plant nonspecific operations ..............         140,883         112,993
     Cost of equipment sales and rental ........         202,291         148,324
     Cost of long distance .....................          86,022          55,169
     Depreciation ..............................         645,144         607,151
     Customer operations .......................         276,993         256,580
     Corporate operations ......................         389,541         315,353
     General taxes .............................         203,614         186,119
                                                      ----------      ----------
                                                      $2,341,214      $2,106,723
                                                      ----------      ----------

OPERATING INCOME ...............................      $2,053,356      $1,784,549
                                                      ----------      ----------

OTHER INCOME
     Interest and dividend income ..............      $  248,449      $  225,113
     Other, net ................................          23,902           3,506
                                                      ----------      ----------
                                                      $  272,351      $  228,619
                                                      ----------      ----------

INCOME BEFORE INCOME TAXES .....................      $2,325,707      $2,013,168

INCOME TAXES ...................................         936,050         784,967
                                                      ----------      ----------

NET INCOME .....................................      $1,389,657      $1,228,201
                                                      ==========      ==========

The accompanying notes are an integral part of these financial statements.
-5-
CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated
                                                                                       Other
                                                  Common Stock        Retained     Comprehensive
                                             Shares       Amount      Earnings         Income         Total
                                          ------------  -----------  ------------    -----------   -----------
Balance at December 31, 1996 ........        71,614    $ 3,580,700    $ 3,869,202    $    90,086   $ 7,539,988

Comprehensive Income
   Net Income .......................          --             --        1,228,201           --       1,228,201
   Other Comprehensive Income
     Unrealized holding gains
       arising during the period (net
       of income taxes of $38,640) ..          --             --             --           59,571        59,571
                                                                                                   -----------
          Total Comprehensive Income           --             --             --             --     $ 1,287,772

Dividend paid ($8 per share) ........          --             --         (571,760)          --        (571,760)

Stock redeemed ......................          (144)        (7,200)         5,498           --         (12,698)
                                        -----------    -----------    -----------    -----------   -----------

Balance at December 31, 1997 ........        71,470    $ 3,573,500    $ 4,520,145    $   149,657   $ 8,243,302

Comprehensive Income
   Net Income .......................          --             --        1,389,657           --       1,389,657
   Other Comprehensive Income
     Unrealized holding gains
       arising during the period (net
       of income taxes of $31,844) ..          --             --             --           46,448        46,448
                                                                                                   -----------
          Total Comprehensive Income    $ 1,436,105

Dividend paid ($10 per share) .......          --             --         (707,900)          --        (707,900)
Stock redeemed ......................          (680)       (34,000)       (28,072)          --         (62,072)
                                        -----------    -----------    -----------    -----------   -----------

Balance at December 31, 1998 ........        70,790    $ 3,539,500    $ 5,173,830    $   196,105   $ 8,909,435
                                        ===========    ===========    ===========    ===========   ===========

The accompanying notes are an integral part of these financial statements.
-6-
CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
                                                                                  1998          1997
                                                                                  ----          ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...........................................................   $ 1,389,657    $ 1,228,201
     Adjustments to reconcile net income to net
      cash provided by operating activities
         Depreciation .....................................................       645,797        607,803
         Amortization of investment tax credits ...........................        (7,040)       (12,770)
         Deferred income taxes ............................................        (8,068)        36,045
         Regulatory liability .............................................        (3,864)        (3,864)
         Equity (earnings) loss of limited partnership ....................          --           (2,462)
         Gain on sale of investments ......................................       (40,617)          --
         Changes in operating assets and liabilities:
              (Increase) Decrease in:
                  Receivables and prepayments .............................       (35,234)        32,299
                  Materials and supplies ..................................        15,518        (21,072)
                  Other deferred charges ..................................          --              750
              Increase (Decrease) in:
                  Accounts payable ........................................       105,420        (17,788)
                  Accrued taxes ...........................................        20,870          7,398
                  Other ...................................................         1,787        (26,558)
                                                                              -----------    -----------
         Net cash provided by operating activities ........................   $ 2,084,226    $ 1,827,982
                                                                              -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
     Capital expenditures .................................................   $  (807,820)   $  (583,557)
     Cost of removing plant, net of salvage ...............................          --             (418)
     Purchase of investments ..............................................      (802,376)    (1,513,788)
     Proceeds from sale of investments ....................................       647,223      1,000,672
                                                                              -----------    -----------
         Net cash used in investing activities ............................   $  (962,973)   $(1,097,091)
                                                                              -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
     Common stock reacquired ..............................................   $   (62,072)   $   (12,698)
     Dividends paid .......................................................      (707,900)      (571,760)
                                                                              -----------    -----------
         Net cash used in financing activities ............................   $  (769,972)   $  (584,458)
                                                                              -----------    -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS .................................   $   351,281    $   146,433

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ............................       874,710        728,277
                                                                              -----------    -----------

CASH AND CASH EQUIVALENTS AT END OF YEAR ..................................   $ 1,225,991    $   874,710
                                                                              ===========    ===========
CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                   Notes to Consolidated Financial Statements
                           December 31, 1998 and 1997

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The Central Scott  Telephone  Company and its  subsidiary  are providers of
telecommunications exchange and local access services, long distance,  Internet,
and  telecommunications  equipment in a service area located  primarily in Scott
County, Iowa.

     The  accounting  policies  of the  Company  and its  subsidiary  conform to
generally  accepted  accounting   principles.   Management  uses  estimates  and
assumptions in preparing its consolidated financial statements.  Those estimates
and assumptions affect the reported amounts of assets, liabilities, revenues and
expenses,  and the disclosure of contingent  assets and  liabilities.  Telephone
operations  reflect  practices  appropriate  to  the  telephone  industry.   The
accounting  records of the Company are maintained in accordance with the Uniform
System of  Accounts  for Class A and B  Telephone  Companies  prescribed  by the
Federal  Communications  Commission  as  modified  by the Iowa  State  Utilities
Division (ISUD).

Principles of Consolidation

     The consolidated financial statements include the accounts of Central Scott
Telephone  Company and its 100%- owned  subsidiary,  CST  Communications,  Inc.,
(herein referred to as "the Company").  All material  intercompany  transactions
have been eliminated in consolidation.

Investments

     Debt and  marketable  equity  securities  bought and held  principally  for
selling in the near future are  classified as trading  securities and carried at
fair  value.  Unrealized  holding  gains and  losses on trading  securities  are
reported in  earnings.  Debt and  marketable  equity  securities  classified  as
available for sale are carried at fair value with  unrealized  holding gains and
losses recorded as a separate component of stockholders' equity. Debt securities
the  Company  has the  positive  intent  and  ability  to hold to  maturity  are
classified as held to maturity.  Investments  classified as held to maturity are
carried  at  amortized  cost.  The  Company  uses the FIFO  method of  computing
realized gains and losses.

     Nonmarketable  equity  investments,  over which the Company has significant
influence  or a 20%  ownership,  are  reflected  on  the  equity  method.  Other
nonmarketable equity investments are stated at cost.

Property, Plant and Equipment

     Property, plant and equipment is capitalized at original cost including the
capitalized  cost of salaries and wages,  materials,  certain  payroll taxes and
employee benefits, and interest during the construction period.

     The Company provides for depreciation for financial  reporting  purposes on
the  straight-line  method by the  application  of rates based on the  estimated
service lives of the various  classes of depreciable  property.  These estimates
are subject to change in the near term.

     Renewals  and  betterments  of units of property  are charged to  telephone
plant in service.  When telephone plant is retired, its cost is removed from the
asset account and charged against accumulated depreciation together with removal
cost less any salvage realized.  No gains or losses are recognized in connection
with routine retirements of depreciable property.  Repairs and renewals of minor
items of property are included in plant specific operations expense.

The accompanying notes are an integral part of these financial statements.

                                       -1-
CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                   Notes to Consolidated Financial Statements
                           December 31, 1998 and 1997

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

     Income taxes are accounted for using a liability method and provide for the
tax effects of transactions  reported in the consolidated  financial  statements
including both taxes  currently due and deferred.  Deferred tax  liabilities are
adjusted to reflect  deferred  tax  consequences  at current  enacted tax rates.
Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities arise from property, plant and
equipment,  investments,  and  certain  payables.  The  deferred  tax assets and
liabilities  represent the future tax return  consequences of those differences,
which will either be taxable or deductible  when the assets and  liabilities are
recovered or settled.

     Investment tax credits  (ITC),  which were deferred prior to the Tax Reform
Act of 1986,  are being  amortized over the life of the plant which produced the
ITC.

Revenue Recognition

     The Company  recognizes  revenues  when earned  regardless of the period in
which they are billed.

     Local network service and internet  revenues are recognized over the period
a subscriber is connected to the telephone network.

     Network access and long distance  service revenues are derived from charges
for access to the Company's local exchange  network.  The interstate  portion of
network access revenues are received through pooling  arrangements  administered
by the National  Exchange Carrier  Association  (NECA) based on average schedule
formulas.  The intrastate  portion of access  revenues are billed based upon the
Company's  tariff for access charges filed with the ISUD. The charges  developed
from these tariffs are used to bill the  connecting  long distance  provider and
revenues are  recognized in the period the traffic is  transported  based on the
minutes of traffic carried.  Long distance revenues are recognized at the time a
call is placed  based on the  minutes  of  traffic  processed  at  tariffed  and
contracted rates.

     Other  revenues  include  contractually  determined  arrangements  for  the
provision of billing and  collecting  services and are  recognized in the period
when the services are performed.

Cash Equivalents

     All highly  liquid  investments  with a maturity of three months or less at
the time of purchase are considered cash equivalents.

Reclassifications

     Certain  reclassifications  have been made to the 1997 financial statements
to conform with the 1998 presentations.

                                       -2-
CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                   Notes to Consolidated Financial Statements
                           December 31, 1998 and 1997

2. PROPERTY, PLANT AND EQUIPMENT

     The provisions for  depreciation  for the years ended December 31, 1998 and
1997, were distributed as follows: Years Ended December 31,
1998              1997
                                                       ----              ----
Operating expenses .......................           $645,144           $607,151
Other income .............................                653                652
                                                     --------           --------
                                                     $645,797           $607,803
                                                     ========           ========
Property, plant and equipment includes the following:
December 31,
                                          1998          1997
                                       ---------   ---------

Telephone Plant in Service -
Land .........................   $   99,081   $   99,081
     Buildings ....................      750,959      748,575
     Other general support assets .      497,947      425,771
     Central office assets ........    2,545,052    2,175,731
     Cable and wire facilities ....    5,392,053    5,028,733
     Other plant and equipment ....      199,851      198,317
                                      ----------   ----------
                                      $9,484,943   $8,676,208
                                      ----------   ----------
Other Property -
     Land .........................   $    2,638   $    2,638
     Building .....................       30,000       30,000
                                      ----------   ----------
                                      $   32,638   $   32,638
                                      ----------   ----------

Total property, plant and equipment   $9,517,581   $8,708,846
                                      ==========   ==========
Application  of rates to the various  classes of plant produced a composite
rate on average  depreciable  plant for the years  ended  December  31, 1998 and
1997, of 7.2% and 7.2%, respectively.

3.    EMPLOYEE BENEFITS

     The Company has a  non-contributory,  defined benefit pension plan covering
most employees.  The  multi-employer  retirement  programs are with the National
Telephone Cooperative  Association (NTCA) and have been approved by the Internal
Revenue Service.  Pension costs,  expensed and  capitalized,  for 1998 and 1997,
were   $51,031  and  $44,842,   respectively.   The  Company   makes   quarterly
contributions to the plan equal to amounts accrued for pension expense.

     The  relative  position  of the  Company  regarding  the  accumulated  plan
benefits and plan net assets of the  multi-employer  plan is not determinable by
the Company and is not presented.

     The Company also provides an optional savings plan administered by NTCA for
its employees. The Company contributes 3% for 1998 and 1% for 1997 of employees'
salaries in addition to the voluntary contribution.  Savings plan costs expensed
and capitalized for the years ending December 31, 1998 and 1997, totaled $15,701
and $4,424, respectively.

                                       -3-
CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                   Notes to Consolidated Financial Statements
                           December 31, 1998 and 1997

4.    INCOME TAXES

     Income taxes reflected in the Consolidated  Statements of Income consist of
the following:
Years Ended December 31,
                                               1998         1997
                                               ----         ----
Federal income taxes -
Current tax expense ..................   $ 733,445    $ 594,865
    Deferred tax expense (benefit) .......      (4,052)      27,978
    Amortization of investment tax credits      (7,040)     (12,770)
State income taxes -
    Current tax expense ..................     213,849      166,827
    Deferred tax expense (benefit) .......        (152)       8,067
                                             ---------    ---------
        Total income tax expense .........   $ 936,050    $ 784,967
                                             =========    =========
Cash paid for income  taxes and  estimated  income  taxes for 1998 and 1997
totaled $947,000 and $735,100, respectively.

Deferred federal and state tax liabilities and assets are summarized as follows:
December 31,
                                        1998        1997
                                       -----        -----
Deferred Tax Liabilities
Federal ..........................   $ 320,594    $ 261,306
State ............................     100,435       80,200
                                     ---------    ---------
   Total Deferred Tax Liabilities    $ 421,029    $ 341,506
                                     ---------    ---------

Deferred Tax Assets
      Federal ....................   $  46,994    $   7,524
      State ......................      14,722        2,309
                                     ---------    ---------
         Total Deferred Tax Assets   $  61,716    $   9,833
                                     ---------    ---------

      Net Deferred Tax Liability .   $ 359,313    $ 331,673
                                     =========    =========

Current portion ..................   $ (61,119)   $  (7,474)
Long-term portion ................     420,432      339,147
                                     ---------    ---------
      Net Deferred Tax Liability .   $ 359,313    $ 331,673
                                     =========    =========
The tax provision  differs from the expense that would result from applying
federal  statutory  rates to income  before income taxes because of state income
taxes.

     Other  Deferred  Credits  includes a  regulatory  liability at December 31,
1997, of  approximately  $3,846.  This liability  represents the excess deferred
taxes  on  depreciable  assets,  resulting  primarily  from  reductions  in  the
statutory federal income tax rate. This amount is being amortized over the lives
of the related depreciable assets in accordance with the average rate assumption
method as required by income tax  regulations.  The regulatory  liabilities have
been increased to reflect future revenue requirement levels.

                                       -4-
CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                   Notes to Consolidated Financial Statements
                           December 31, 1998 and 1997

5.    INVESTMENTS

     The amortized cost and fair value of available for sale securities are:
Gross
                                    Amortized      Unrealized    Unrealized       Fair
                                       Cost           Gains         Losses        Value
                                       ----           -----         ------        -----
December 31, 1998
Equity securities ...........   $       44     $     9,004   $     --     $    9,048
    U.S. Treasury notes and bills    2,304,495         321,135         --      2,625,630
                                     ---------      ----------   ----------   ----------
    Total .......................   $2,304,539     $   330,139         --     $2,634,678
                                     =========      ==========   ==========   ==========

December 31, 1997
    Equity securities ...........   $      200     $    23,776  $      --     $   23,976
    U.S. Treasury notes and bills    2,002,140         228,071         --      2,223,211
                                     ---------      ----------   ----------   ----------
    Total .......................   $2,002,340     $   251,847  $      --     $ 2,54,187
                                     =========      ==========   ==========   ===========
Equity securities are included in other investments at December 31, 1998
and 1997.

     Proceeds from sales of available for sale securities  totaled $18,936 and $
-0- in 1998 and 1997, respectively.

     The gross realized gains on sales of available for sale securities  totaled
$18,780 and $ -0- in 1998 and 1997, respectively.

     There were no realized  losses on sales of  available  for sale  securities
during 1998 and 1997.

     Marketable debt securities mature as follows:
Maturity       Amortized
        Description             Date           Cost
        -----------             ----           ----
U.S. Treasury bill         4/22/99       $  395,190
   U.S. Treasury bill         4/29/99          394,505
   U.S. Treasury note         8/15/99          499,670
   U.S. Treasury note        11/15/21        1,015,130
                                             ---------
                                             $2,304,495
                                             ==========
Investments also include $39,525 at December 31, 1998 and 1997,  related to
Rural Telephone Bank (RTB) Class B stock.  Such RTB stock was purchased from the
RTB as a condition  of  obtaining  long-term  financing.  Holders of RTB Class B
stock are entitled to  patronage  dividends  in the form of  additional  Class B
stock. However, such stock must be held until the related RTB loan is repaid and
may be redeemed only after all shares of Class A stock have been retired, at the
discretion of the board of directors of RTB.

                                       -5-
CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                   Notes to Consolidated Financial Statements
                           December 31, 1998 and 1997

6. INVESTMENTS IN AFFILIATES

     Central Scott Telephone Company owned 6.4% of the partners' capital of Iowa
LP 136 (a development  stage limited  partnership) at December 31, 1997. Iowa LP
136 was liquidated in 1998. The Company  accounted for this investment using the
equity method because of its involvement in the management of this  partnership.
The partnership  was formed in 1995 to compete for licenses to provide  Personal
Communications  Services  (PCS) in selected  Basic Trading Areas (BTAs) in Iowa,
South Dakota,  Nebraska and Illinois.  In 1997 Iowa LP 136 acquired  licenses in
selected  BTAs in Iowa and  subsequently  sold the  licenses in 1998.  The sales
proceeds  resulted in returning  to each  partner its  original net  partnership
investment,  its share of certain licensing costs previously  expensed,  and its
share of investment income since inception.  Following is a summary of financial
position and results of operations of this affiliate:
1998             1997
                                                   ----             ----
Current assets .............................   $          --     $ 3,580,100
Other assets ...............................              --       8,108,039
                                               ---------------   -----------
     Total Assets ..........................   $          --     $11,688,139
                                               ===============   ===========

Current liabilities ........................   $          --     $   666,955
Long-term debt .............................              --       2,537,080
Partners' capital ..........................              --       8,484,104
                                               ---------------   -----------
     Total Liabilities and Partners' Capital   $          --     $11,688,139
                                               ===============   ===========

Operating Revenues .........................              --            --

Net Income .................................   $       336,138   $    35,698
                                               ===============   ===========
Central  Scott  Telephone  Company  owned 6.4% of the capital  stock of ITC
Management Company,  Inc. (a development stage C-corporation who was the general
partner of Iowa LP 136) at December 31, 1997. ITC Management  Company,  Inc. was
liquidated in 1998. The Company  accounted for this investment  using the equity
method  because  of its  involvement  in the  management  of  this  corporation.
Following is a summary of financial  position and results of  operations of this
affiliate:
1998        1997
                                                     ----        ----
Other assets ...................................   $    --     $334,273
                                                   ---------   --------
     Total Assets ..............................   $    --     $334,273
                                                   =========   ========

Stockholders' Equity ...........................   $    --     $334,273
                                                   =========   ========

Operating Revenues .............................        --         --

Net Income .....................................   $  12,458   $  1,446
                                                   =========   ========
Company's Share of Affiliates' Equity or Capital
ITC Management Company, Inc. ...................   $    --     $ 21,429

Iowa LP 136 ....................................        --      271,788
                                                   ---------   --------

     Total Investments in Affiliates ...........   $    --     $293,217
                                                   =========   ========
The liquidation of Iowa LP 136 and ITC Management  Company,  Inc., resulted
in a net gain of $21,837 during 1998.

                                       -6-
CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                   Notes to Consolidated Financial Statements
                           December 31, 1998 and 1997

7. LONG-TERM DEBT

      Long-term debt consists of:
December 31,
                                        1998         1997
                                     ---------   --------
Note payable to Iowa L.P. 136 - 7%   $    --     $480,000
    Less current portion .........        --      120,000
                                     ---------   --------
                                     $    --     $360,000
                                     =========   ========
The note was liquidated in connection  with the sale of Iowa LP 136 during 1998.
No interest was paid in 1998 or 1997.

8.    REVOLVING LINE OF CREDIT

     On August 15, 1994,  the Company  entered into an agreement  with the Rural
Telephone Finance  Cooperative (RTFC) for an unsecured  revolving line of credit
of $500,000.  The unpaid balance will bear interest at a rate per annum equal to
or lesser than the prevailing  bank "prime"  interest rate plus one and one-half
percent. Interest paid during 1998 and 1997 totaled $-0-.

9.    CONCENTRATIONS OF CREDIT RISK

     The  Company  grants  credit to local  service  customers,  all of whom are
located in the franchised  service area, and  telecommunications  intrastate and
interstate long distance carriers.

     The Company has received  approximately 66% of its operating  revenues from
access revenues and assistance  provided by the Federal  Universal Service Fund.
The manner in which access  revenues are  determined  by  regulatory  bodies and
universal  service  funding  is  determined  for  qualifying   organizations  is
currently being modified as a result of the Telecommunications Act of 1996.

     Financial   instruments   that   potentially   subject   the   Company   to
concentrations of credit risk consist principally of cash and cash equivalents.

     Of the  Company's  cash and cash  equivalents,  $1,019,922  and $714,550 at
December  31,  1998  and  1997,   respectively,   are  maintained  at  financial
institutions  in accounts  in excess of the amounts  insured by an agency of the
federal government.

10.   COMMITMENT

     The Company has entered into an agreement with Northern Telecom to purchase
software upgrades during the years ended December 31,  1996-1999,  for an annual
fee of $40,500 to be paid in January of each year.

                                       -7-
CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                           Note to Unaudited Condensed
                          Interim Financial Statements

The accompanying  unaudited  condensed  interim  financial  statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information.  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)  considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 1999
are not necessarily  indicative of the results that may be expected for the year
ended  December 31, 1999.  For further  information,  refer to the  consolidated
financial  statements  and  footnotes  thereto  included in the  audited  annual
financial statements for the year ended December 31, 1998.
CENTRAL SCOTT TELEPHONE COMPANY
                CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
                               AT MARCH 31, 1999
                                 (IN THOUSANDS)

ASSETS

CURRENT ASSETS
CASH ..........................................................          $ 1,260
U.S. TREASURY BILLS ...........................................            1,895
ACCOUNTS RECEIVABLE ...........................................              463
MATERIALS & SUPPLIES ..........................................               30
DEFERRED INCOME TAXES .........................................               61
PREPAID EXPENSES ..............................................               46
                                                                         -------
  TOTAL CURRENT ASSETS ........................................            3,755
U.S. TREASURY NOTES AND OTHER INVESTMENTS .....................            1,647
PROPERTY, PLANT & EQUIPMENT....................................            4,902
                                                                         -------
      TOTAL ASSETS ............................................          $10,304
                                                                         =======

LIABILITIES & STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
ACCOUNTS PAYABLE & ACCRUALS ...................................          $   164
ACCRUED TAXES .................................................              334
OTHER .........................................................               20
                                                                         -------
   TOTAL CURRENT LIABILITIES ..................................              518

DEFERRED TAXES ................................................              468

STOCKHOLDERS' EQUITY:
   COMMON STOCK ...............................................            3,540
   COMPREHENSIVE INCOME .......................................              196
   RETAINED EARNINGS ..........................................            5,582
                                                                         -------
TOTAL STOCKHOLDERS' EQUITY ....................................            9,318
                                                                         -------
      TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ................          $10,304
                                                                         =======
SEE NOTE TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
CENTRAL SCOTT TELEPHONE COMPANY
              CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
               FOR THE THREE MONTHS ENDED MARCH 31,1999 AND 1998
                                  IN THOUSANDS
MARCH 31,
                                                       1999              1998
                                                       -------------------------
REVENUES .................................           $ 1,179            $ 1,092
OPERATING EXPENSES: ......................               606                565
                                                      ------             ------
    OPERATING INCOME .....................               573                527
INVESTMENT INCOME ........................                69                 72
                                                      ------             ------
    PRETAX INCOME ........................               642                599
INCOME TAX PROVISION .....................              (234)              (204)
                                                      ------             ------
    NET INCOME ...........................           $   408            $   395
                                                     =======            =======

SEE NOTE TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
CENTRAL SCOTT TELEPHONE COMPANY
           CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED)
               FOR THE THREE MONTHS ENDED MARCH 31,1999 AND 1998
                                  IN THOUSANDS
MARCH 31,
                                                            1999         1998
OPERATING ACTIVITIES                                     -----------------------
NET INCOME .........................................      $   408       $   395
ADJUSTMENTS TO REFLECT NON-CASH ITEMS:
    DEPRECIATION AND AMORTIZATION ..................          174           159
    DEFERRED INCOME TAXES ..........................           (7)            0
CHANGES IN OPERATING ASSETS:
    ACCOUNTS RECEIVABLE ............................            0             6
    PREPAID ASSETS .................................           16            18
    OTHER ASSETS ...................................            0            (2)
    ACCOUNTS PAY AND ACCRUALS ......................          (39)          (19)
    ACCRUED TAXES ..................................          194           165
                                                            -----         -----
                                                              746           722
                                                            -----         -----
INVESTING ACTIVITIES

ADDITIONS TO PLANT .................................         (109)         (167)
NET CHANGE IN U.S. TREASURY BILLS ..................         (603)         (403)
                                                            -----         -----
    NET CASH USED IN INVESTING ACTITITIES ..........         (712)         (570)
                                                            -----         -----

FINANCING ACTIVITIES

PURCHASE OF TREASURY STOCK .........................            0           (55)
                                                            -----         -----
    NET CASH USED BY FINANCING ACTIVITIES ..........            0           (55)
                                                            -----         -----
NET INCREASE IN CASH AND CASH EQUIVALENTS ..........           34            97
CASH AND CASH EQUIVALENTS AT
    BEGINING OF PERIOD .............................        1,226           875
                                                            -----         -----
CASH AND CASH EQUIVALENTS AT
    END  OF PERIOD .................................      $ 1,260       $   972
                                                          =======       =======

SEE NOTE TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
LYNCH CORPORATION AND CENTRAL SCOTT TELEPHONE COMPANY
                                 ELDRIDGE, IOWA

                        Pro Forma Condensed Consolidating
                        Financial Statements (Unaudited)

The following pro forma condensed consolidating balance sheet at March 31, 1999,
and pro forma condensed consolidating  statements of income for the three months
ended  March 31,  1999 and year ended  December  31,  1998,  give  effect to the
acquisition of 100% of the outstanding shares of Central Scott Telephone Company
by Lynch Telephone  Corporation IX, a subsidiary of Lynch  Corporation.  The pro
forma  information  is based on the historical  financial  statements of Central
Scott Telephone Company and Lynch  Corporation  giving effect to the transaction
under the purchase  method of  accounting  and the  assumption  and  adjustments
described in the accompanying notes to the pro forma financial statements.

The pro forma  statements  have been  prepared by Lynch  Corporation  management
based upon the financial  statements of Central Scott Telephone  Company.  These
pro forma  statements  may not be indicative of the results that actually  would
have occurred if the  combination  had been in effect on the dates  indicated or
which may be obtained in the future.  The pro forma financial  statements should
be read in  conjunction  with the historical  financial  statements and notes of
Central Scott Telephone Company and Lynch Corporation.
LYNCH CORPORATION
                PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
                               AT MARCH 31, 1999
         ADJUSTED TO REFLECT THE ACQUISITION OF CENTRAL SCOTT TELEPHONE
          COMPANY AS IF THE TRANSACTION HAD OCCURRED ON MARCH 31, 1999
                                  IN THOUSANDS
                                  (UNAUDITED)
CENTRAL
                                                         SCOTT                   PRO FORMA    NOTES TO
                                           LYNCH       TELEPHONE    PRO FORMA      LYNCH      PRO FORMA
                                         CORPORATION    COMPANY     ADJUSTMENTS  CORPORATION  ADJUSTMENTS
                                         ---------------------------------------------------------------
ASSETS
CURRENT ASSETS
CASH & MARKETABLE SECURITIES ...........     $17,995       $3,155        --        $21,150
ACCOUNTS RECEIVABLE ....................      44,882          463        --         45,345
MATERIALS & SUPPLIES ...................      31,795           30        --         31,825
DEFERRED INCOME TAXES ..................      13,580           61        --         13,641
OTHER CURRENT ASSETS ...................       7,844           46        --          7,890
NET CURRENT ASSETS OF
    DISCONTINUED OPERATIONS ............      33,642           --        --         33,642
                                             -------      -------     -------      -------
    TOTAL CURRENT ASSETS ...............     149,738        3,755        --        153,493

PROPERTY, PLANT, & EQUIPMENT - NET .....     136,839        4,902        --        141,741

INVESTMENT IN & ADVANCES TO PCS ENTITIES      11,060         --          --         11,060

GOODWILL ...............................      69,710         --        18,782       88,492       A
OTHER ASSETS ...........................      14,451        1,647        --         16,098
NET NON-CURRENT ASSETS OF
    DISCONTINUED OPERATIONS ............      70,823         --          --         70,823
                                             -------      -------     -------      -------

    TOTAL ASSETS .......................   $ 452,621      $10,304     $18,782     $481,707
                                           =========      =======     =======     ========
LIABILITIES & SHAREHOLDERS EQUITY

CURRENT LIABILITIES
NOTES PAYABLE TO BANKS .................     $51,328         --       $ 8,100       59,428       B
ACCOUNTS PAYABLE & ACCRUALS ............      58,848          518        --         59,366
CURR. PORTION OF LONG-TERM DEBT ........      10,020         --           768       10,788       B
NET CURRENT LIABILITIES OF
    DISCONTINUED OPERATIONS ............      16,573         --          --         16,573
                                             -------      -------     -------      -------
   TOTAL CURRENT LIABILITIES ...........     136,769          518       8,868      146,155

LONG-TERM DEBT .........................     244,680         --        19,232      263,912       B
DEFERRED TAXES .........................      16,818          468        --         17,286
OTHER LIABILITIES ......................       6,891         --          --          6,891
MINORITY INTERESTS .....................      12,652         --          --         12,652
NET NON-CURRENT LIABILITIES OF
    DISCONTINUED OPERATIONS ............       6,280         --          --          6,280

SHAREHOLDERS' EQUITY:
   COMMON STOCK ........................       5,139        3,540      (3,540)       5,139       C
   PAID-IN CAPITAL .....................       8,300         --          --          8,300
   COMPREHENSIVE INCOME ................          42          196        (196)          42       C
   RETAINED EARNINGS (DEFICIT) .........      15,780        5,582      (5,582)       15,78       C
   TREASURY STOCK ......................        (730)        --          --           (730)
                                             -------      -------     -------      -------
TOTAL SHAREHOLDERS' EQUITY .............      28,531        9,318      (9,318)      28,531
                                             -------      -------     -------      -------
      TOTAL LIABILITIES & EQUITY .......   $ 452,621      $10,304     $18,782     $481,707
                                           =========      =======     =======     ========
NOTES
A - TO RECORD GOODWILL  RECOGNIZED IN CONNECTION WITH THE ACQUISITION OF CENTRAL
    SCOTT.
B - TO RECORD THE  ISSUANCE OF DEBT TO FINANCE THE  ACQUISITION.
C - TO ELIMINATE THE SHAREHOLDERS' EQUITY OF CENTRAL SCOTT.
SEE NOTES TO PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
LYNCH CORPORATION
             PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF INCOME
                   FOR THE THREE MONTHS ENDED MARCH 31, 1999
         ADJUSTED TO REFLECT THE ACQUISITION OF CENTRAL SCOTT TELEPHONE
       COMPANY AS IF THE ACQUISITION HAD OCCURRED ON JANUARY 1, 1998 AND
            TO REFLECT THE DISPOSITION OF CERTAIN BUSINESS SEGMENTS
                    IN THOUSANDS (EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
CENTRAL
                                                                      SCOTT                     PRO FORMA     NOTES TO
                                                       LYNCH        TELEPHONE       PRO FORMA     LYNCH       PRO FORMA
                                                    CORPORATION      COMPANY       ADJUSTMENTS  CORPORATION  ADJUSTMENTS
                                                    -------------------------------------------------------------------
REVENUES ......................................       $95,123         $1,179           --         $ 96,302
OPERATING EXPENSES:
   COST OF SALES ..............................        83,668            606            188         84,462       A
   SELLING & ADMINISTRATIVE ...................         8,193           --             --            8,193
                                                      -------        -------        -------        -------
OPERATING INCOME ..............................         3,262            573           (188)         3,647

OTHER INCOME(EXPENSE):
    INVESTMENT INCOME/(EXPENSE)................           827             69           --              896
    INTEREST EXPENSE ..........................        (4,885)          --             (537)        (5,422)      B
    EQUITY IN EARNINGS OF AFFILATED COMPANIES .            59           --             --               59
    RESERVE FOR IMPAIRMENT OF INVESTMENT
        IN  PCS LICENSEHOLDERS ................       (15,406)          --             --          (15,406)
    GAIN ON SALE OF SUBSIDIARY STOCK &
        OTHER ASSETS ..........................          --             --             --                0
                                                      -------        -------        -------        -------
       TOTAL OTHER INCOME(EXPENSE) ............       (19,405)            69           (537)       (19,873)

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
    TAXES AND  MINORITY INTERESTS .............       (16,143)           642           (725)       (16,226)
PROVISION FOR INCOME TAXES ....................         5,533           (234)           215          5,514       C
MINORITY INTERESTS ............................           330           --             --              330
                                                      -------        -------        -------        -------
    INCOME (LOSS) FROM CONTINUING OPERATIONS ..     ($ 10,280)       $   408       ($   510)     ($ 10,382)
                                                    =========        =======       ========      =========
WEIGHTED AVERAGE SHARES O/S ...................     1,418,000                                    1,418,000
BASIC AND DILUTED EARNINGS PER SHARE
    FROM CONTINUING OPERATIONS ................     ($   7.25)                                   ($   7.32)
                                                    =========                                    =========
NOTES
A - TO RECORD  AMORTIZATION  OF GOODWILL (25 YEAR PERIOD)
B - TO REFLECT INTEREST EXPENSE ON DEBT ISSUED FOR ACQUISITION
C - NET TAX EFFECT OF ABOVE ADJUSTMENTS
SEE NOTES TO PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)
LYNCH CORPORATION
             PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF INCOME
                      FOR THE YEAR ENDED DECEMBER 31, 1998
         ADJUSTED TO REFLECT THE ACQUISITION OF CENTRAL SCOTT TELEPHONE
       COMPANY AS IF THE ACQUISITION HAD OCCURRED ON JANUARY 1, 1998 AND
            TO REFLECT THE DISPOSITION OF CERTAIN BUSINESS SEGMENTS
                    IN THOUSANDS (EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
CENTRAL
                                                                  SCOTT                      PRO FORMA      NOTES TO
                                                   LYNCH        TELEPHONE     PRO FORMA        LYNCH        PRO FORMA
                                                 CORPORATION     COMPANY      ADJUSTMENTS   CORPORATION     ADJUSTMENT
                                                 ---------------------------------------------------------------------
REVENUES ....................................   $   392,720    $     4,395          --      $   397,115
OPERATING EXPENSES:
   COST OF SALES ............................       339,104          2,341         752          342,197        A
   SELLING & ADMINISTRATIVE .................        32,864           --            --           32,864
                                                  ---------      ---------     ---------      ---------
OPERATING INCOME ............................        20,752          2,054          (752)        22,054

OTHER INCOME(EXPENSE):
    INVESTMENT INCOME/(EXPENSE)..............         2,064            272           --           2,336
    INTEREST EXPENSE ........................       (18,334)          --          (2,127)       (20,461)       B
    EQUITY IN EARNINGS OF AFFILATED COMPANIES           317           --            --              317
    RESERVE FOR IMPAIRMENT OF INVESTMENT ....          --             --            --                0
        IN  PCS LICENSEHOLDERS
    GAIN ON SALE OF SUBSIDIARY STOCK & ......         4,778           --            --            4,778
                                                  ---------      ---------     ---------      ---------
        OTHER ASSETS
        TOTAL OTHER INCOME(EXPENSE) .........       (11,175)           272        (2,127)       (13,030)
INCOME (LOSS) FROM CONTINUING OPERATIONS
    BEFORE TAXES AND  MINORITY INTERESTS ....         9,577          2,326        (2,879)         9,024
PROVISION FOR INCOME TAXES ..................        (3,912)          (936)          851         (3,997)       C
MINORITY INTERESTS ..........................          (476)          --            --             (476)
                                                  ---------      ---------     ---------      ---------
    INCOME (LOSS) FROM CONTINUING OPERATIONS    $     5,189    $     1,390   ($    2,028)   $     4,551
                                                ===========    ===========   ===========    ===========
WEIGHTED AVERAGE SHARES O/S .................     1,418,000                                   1,418,000
BASIC AND DILUTED EARNINGS PER SHARE
    FROM CONTINUING OPERATIONS ..............   $      3.66                                 $      3.21
                                                ===========                                 ===========
NOTES
A - TO RECORD  AMORTIZATION  OF GOODWILL (25 YEAR PERIOD)
B - TO REFLECT INTEREST EXPENSE ON DEBT ISSUED FOR ACQUISITION
C - NET TAX EFFECT OF ABOVE ADJUSTMENTS
SEE NOTES TO PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (UNAUDITED)