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                    U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                  FORM 10-KSB
(MARK ONE)
[X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934 FOR THE FISCAL YEAR ENDED MARCH 31, 2002.

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 FOR THE TRANSITION PERIOD FROM                   TO
                        .

                        COMMISSION FILE NUMBER: 0-22994

                           GUNTHER INTERNATIONAL LTD.
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

<Table>
<S>                                              <C>
                    DELAWARE                                        51-0223195
(STATE OR OTHER JURISDICTION OF INCORPORATION OR       (I.R.S. EMPLOYER IDENTIFICATION NO.)
                  ORGANIZATION)
</Table>

<Table>
<S>                                              <C>
               ONE WINNENDEN ROAD
              NORWICH, CONNECTICUT                                    06360
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                        (ZIP CODE)
</Table>

                   ISSUER'S TELEPHONE NUMBER: (860) 823-1427

             SECURITIES REGISTERED UNDER SECTION 12(B) OF THE ACT:

<Table>
<Caption>
              TITLE OF EACH CLASS                   NAME OF EACH EXCHANGE ON WHICH REGISTERED
              -------------------                   -----------------------------------------
<S>                                              <C>
                      None
</Table>

             SECURITIES REGISTERED UNDER SECTION 12(g) OF THE ACT:

                         COMMON STOCK, $.001 PAR VALUE
                                (TITLE OF CLASS)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
[X]  No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

The Registrant's revenues for the most recent fiscal year were $20.9 million.

The aggregate market value of voting stock held by non-affiliates of the
Registrant, based upon the average of the reported closing bid and asked prices
of such stock on May 31, 2002, as reported by the OTC Bulletin Board, was $8.7
million. The number of shares of the Registrant's Common Stock outstanding as of
June 3, 2002 was 19,372,200.

  DOCUMENTS INCORPORATED BY REFERENCE.  The information required by Part III of
this Annual Report on Form 10-KSB is incorporated by reference to the
Registrant's definitive proxy statement to be distributed to stockholders in
connection with the 2002 Annual Meeting of Stockholders. Such proxy statement is
expected to be filed with the Commission within one hundred and twenty (120)
days of the close of the fiscal year.

Transitional Small Business Disclosure Format (check one): Yes [ ]  No [X]
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                               TABLE OF CONTENTS

                                     PART I

<Table>
<S>       <C>                                                           <C>
Item 1.   Description of Business.....................................    1
            General...................................................    1
            Development of the Business...............................    1
            Finishing Systems.........................................    2
            Strategy..................................................    2
            Systems...................................................    3
            Inc.jet...................................................    5
            Marketing and Sales.......................................    6
            Customers.................................................    6
            Manufacturing.............................................    7
            Installation and Customer Service.........................    7
            Research and Development..................................    8
            Competition...............................................    8
            Patents and Proprietary Rights............................    8
            Employees.................................................    9
Item 2.   Description of Property.....................................    9
Item 3.   Legal Proceedings...........................................   10
Item 4.   Submission of Matters to a Vote of Security Holders.........   10
                                  PART II
Item 5.   Market for Common Equity and Related Stockholder Matters....   11
Item 6.   Management's Discussion and Analysis or Plan of Operation
            Summary Financial Data....................................   12
            Results of Operations.....................................   13
            Liquidity and Capital Resources...........................   14
            Inflation.................................................   15
            Forward Looking Statements................................   15
Item 7.   Financial Statements........................................   16
Item 8.   Changes in and Disagreements with Accountants on Accounting
            and Financial Disclosure..................................   16
                                 PART III
Item 9.   Directors, Executive Officers, Promoters and Control
            Persons; Compliance with Section 16(a) of the Exchange
            Act.......................................................   16
Item 10.  Executive Compensation......................................   16
Item 11.  Security Ownership of Certain Beneficial Owners and
            Management................................................   16
Item 12.  Certain Relationships and Related Transactions..............   16
                                  PART IV
Item 13.  Exhibits and Reports on Form 8-K............................   17
Signatures............................................................   20
Index to Financial statements.........................................  F-1
</Table>

                                       (i)
<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

GENERAL

     The Company designs, develops, assembles, markets and services high-speed
systems that automatically assemble printed documents, fold, staple or bind the
documents, as required, and insert completed documents into appropriate
envelopes for mailing or other distribution. The Company's systems are modular,
and may be reconfigured in accordance with customer specifications, and are
controlled by Company developed software.

     The Company also designs, manufactures and markets high-speed inkjet
printers to original equipment manufacturers (OEM), who incorporate the printers
into tabletop inserters and folders, copiers, stand alone printers and other
applications. In connection with these sales, the Company sells ink to the
end-users of the printers.

DEVELOPMENT OF THE BUSINESS

     The Company was incorporated under the laws of the State of Delaware on
March 22, 1978. After an initial period of inactivity, the Company engaged,
between 1981 and 1985, with a joint venture partner, in a program to develop an
automated system for packaging for distribution of Federal food stamps. Although
the Company was unsuccessful in its efforts to obtain a Federal Government
contract, the technology it developed was applicable to other uses. In 1985,
Aetna Life and Casualty Company requested the Company to develop finishing
systems for use in the insurance business and purchased the first systems
produced by the Company in 1986.

     In 1992, the Company completed a restructuring that resulted in the
infusion of approximately $2,257,500 in equity financing in exchange for shares
of common stock, warrants to purchase common stock and convertible preferred
stock. The convertible preferred stock was fully converted into common stock
upon completion of the initial public offering of the Company, which was
completed during December 1993 and January 1994. The initial public offering
generated net proceeds of $4.6 million.

     In fiscal 1999, the Company entered into a $5.7 million comprehensive
financing transaction with its then-existing senior lender (the "Bank"), the
Estate of Harold S. Geneen (the "Estate") and Gunther Partners LLC, the proceeds
of which were utilized to restructure and replace the Company's then existing
senior line of credit, fund a full settlement with the Company's third-party
service provider and provide additional working capital to fund the Company's
ongoing business operations. Under the terms of the transaction, Gunther
Partners LLC loaned an aggregate of $4 million to the Company. At the same time,
the Bank reached an agreement with the Estate, which had guaranteed a portion of
the Company's senior line of credit, whereby the Estate consented to the
liquidation of approximately $1.7 million of collateral and the application of
the proceeds of such collateral to satisfy and repay in full a like amount of
indebtedness outstanding under the senior credit facility. The balance of the
indebtedness outstanding under the senior credit facility, approximately
$350,000, was repaid in full from the proceeds of the new financing. The Company
executed a new promissory note in favor of the Estate evidencing the Company's
obligation to repay the amount of the collateral that was liquidated by the
Bank.

     To induce Gunther Partners LLC to enter into the financing transaction, the
Company granted Gunther partners LLC a stock purchase warrant entitling Gunther
Partners LLC to purchase up to 35% of the pro forma, fully diluted number of
shares of the Common Stock of the Company, determined as of the date of
exercise. The Company's November 2001 rights offering had no effect on the
number of shares of the Company's Common Stock into which the warrants are
exercisable. The exercise price of the warrant is $1.50 per share. It is
currently scheduled to expire on May 29, 2004.

     Through June 30, 1999, the Company had made principal payments to Gunther
Partners LLC aggregating $800,000, plus interest. In September 1999, the Company
experienced a deficiency in operating cash flow and Gunther Partners LLC agreed
to lend the Company an additional $800,000 and to otherwise restructure the
payment terms of the note. On April 4, 2000, the Company borrowed an additional
$500,000 from Gunther Partners LLC.

                                        1
<PAGE>

     In November 2001, the Company consummated a Rights Offering (the "Rights
Offering"), pursuant to which the Company issued 16,000,000 shares of its Common
Stock to its existing stockholders by subscription right on a pro-rata basis at
a price of $0.50 per share. The net proceeds of the Rights Offering were used to
repay in full the notes payable to Gunther Partners LLC ($4.5 million) and to a
stockholder and director ($500,000) and to purchase from Gunther Partners LLC
919,568 shares of the Company's Common Stock and $1.9 million of notes payable
previously held by the Estate of Harold S. Geneen for an aggregate payment of
$637,935. Gunther Partners had acquired these shares and notes payable on behalf
of the Company in July 2001 for $137,935 and $500,000, respectively. In
connection with these transactions, the Company recognized an extraordinary gain
of $1.4 million on the extinguishment of debt.

FINISHING SYSTEMS

     Advances in computer technology have produced alternatives to the
traditional offset printing presses for printing of large quantities of
documents. Laser printers take data from computers and transfer the data onto a
print drum with a laser beam. Non-impact laser printing allows for variations in
the text of each document to be printed. The documents can be personalized and
modified as desired.

     Computer-directed printers are employed, in conjunction with mainframe or
personal computers, to produce documents. The largest printers most often are
placed in centralized print centers that are near mainframe computers. More
recently developed non-impact laser printers that print five to 25 sheets per
minute can be placed in any location within offices where personal computers are
concentrated. The availability of non-impact laser printers has enabled many
businesses that generate large quantities of documents to create "in-house"
printing centers. There is a large concentration of non-impact laser printers in
the insurance, finance, and banking industries, and government.

     The ability to generate large quantities of documents has created a new
need to automate the assembly, sorting, and distribution of documents, a process
referred to as "finishing". Most of these functions have been performed "off
line", that is, without intelligent or computer directed machines. This requires
substantial labor, and documents cannot be assembled with the same degree of
accuracy, completeness, and speed as allowed by intelligent machines. The
output, or finishing of documents, is referred to as post processing and
includes such functions as folding, stapling, binding, booklet making and
packaging assembled documents for mailing and other distribution. Automated
processing systems also permit quicker turnaround of documents, improve the
accuracy and completeness of assembled documents, facilitate the elimination of
large inventories of pre-printed forms and enable the operator to make changes
in the type of documents being assembled without stopping the assembly process
and without incurring the expense of designing special mainframe computer
programs.

STRATEGY

     The Company's objective is to capitalize on its position as a pioneer and
technology leader in the design and sale of intelligent document finishing and
mailing systems and leading edge, high quality, low cost ink jet solutions for
end user and OEM applications. The Company's goal is to broaden the range of
markets, applications, and customers utilizing these unique technologies while
continuing to increase its leadership position in insurance and financial
markets. Further, it is the Company's objective to leverage both its well known
customer base and the strength of its relationships/alliances with partners like
Hewlett-Packard into a dominant position in the growing marketplaces, both end
user and OEM, for low cost, high resolution ink jet printing at document
processing speeds. The Company has also targeted aggressive expansion of its
system service and consumables/supplies businesses.

     Expanded Marketing Efforts.  The Company initially relied principally on
contacts within the insurance industry, particularly among large property and
casualty insurers, and on the growing reputation of its products to generate
sales. More recently, the Company's sales and marketing efforts have actively
targeted a far broader range of applications and industries including other
types of insurance companies and customers in the banking, finance and health
care industries. The Company has continued to experience success in expanding
into other markets including government, retail distribution, outsourcing,
service bureaus, and others. The Company also continues to generate additional
sales to its existing customer base. At least 50% of the Company's system sales
in a given year have been to previous purchasers of the Company's systems and
the
                                        2
<PAGE>

Company believes that repeat sales and upgrades of existing systems will
continue to be an important source of revenue. The Company organizes user group
seminars to allow customers to discuss their system requirements with each other
and the Company and to collaborate on system design.

     System Flexibility.  The Company remains committed to the objective of
providing modular systems to meet customer needs. The Company's systems'
modularity offers customers the ability to have a custom designed system
assembled from standard components using software written for specific
requirements. Such systems are highly flexible and easily upgraded.

     Focus on Accuracy of Document Assembly.  The swift, accurate assembly of
documents is critical to customer satisfaction. The Company's systems
incorporate technology, including the ability to read various methods of coding
on each sheet included in documents, that check for proper page sequence, detect
duplicate or missing pages and verify recipients as each document moves down a
conveyor. Systems can verify that a given document has been processed properly
and maintain a record of the document. The Company continues to emphasize
document integrity in all its research, development, and marketing efforts.

     Focus on Customer Productivity and Costs.  The Company focuses its product
development efforts on further increasing customer productivity and the
reduction of system costs while maintaining the document integrity customers
require.

     Collaborative Development.  The Company will continue to collaborate with
customers (including organizing and conducting user seminars) in order to
develop a better understanding of customer needs and to offer comprehensive
solutions. The Company's newest product, the inc.jet imager, was developed as a
result of this collaborative effort.

SYSTEMS

     The Company's current principal products are the Series III Billing System,
the EP-4000 Electronic Publishing System and the MS-6000 Mailing System.

     The Series III is a high-speed statement and billing system. Up to nine
inserts may be added to the primary document prior to envelope insertion. The
system features a high-speed primary document feeder/accumulator and an
up-stream folder.

     The EP-4000 processes flat mail and allows documents to be processed in a
series of individually processed subgroups. These subgroups can be stapled,
bound, matched with other documents and combined for insertion into a large,
flat envelope by the EP-4000.

     The MS-6000  processes folded documents. The MS-6000 can tri-fold up to
eight sheets and insert the documents into a No. 10 envelope, and can half-fold
up to fifteen sheets and insert the documents into a 6-by-9-inch envelope.
Postage is then automatically applied.

     These systems are typically comprised of some or all of the following
component modules:

     System Control Module, Operator Console and Reading Technology.  The System
Control Module incorporates an IBM-compatible Pentium CPU with a 2 Gigabyte hard
drive, and a ZIP drive for back-up. It performs the system's control functions
and operates the system as defined by the customized application program created
by the Company after consultations with the customer. The System Control Module
communicates with microprocessors located in each module in the system,
monitoring all system functions. Upon initiation of operation, the System
Control Module triggers the operation of a Laser Reader or a CCD (Charged
Coupled Device) Image Reader. After the resulting information is checked against
parameters contained in the system's software, a signal is sent to the Feed
Module so that the sheet can be fed into the finishing system.

     A laser reader is a scanning device which uses a laser light source to read
bar-code or OMR (Optical Mark Recognition) information. A CCD Image Reader is a
scanning device which is used to read bar-code or two dimensional information.
In the CCD Image Reader, the code being read is illuminated with ambient light
rather than a laser light source. OMR is a paper marking technology used with
mailing systems to indicate to the main system how to process the sheets that
are assembled into an envelope. The Company was the first to develop processing
systems utilizing Laser Readers to scan a bar code to identify each sheet of

                                        3
<PAGE>

paper processed. Reading the bar code at over 200 times per second, the System
Control Module requires three consecutive identical reads from the Laser Reader
before the sheets are fed into the system. Each document set is given a sequence
and completeness check from the information in the bar code prior to feeding
("read before feed"). Corrective action, if needed, is taken prior to the
assembly or packaging of the document. Systems also may incorporate CCD two
dimensional (2D) Image Readers. This reading technology returns a very precise
copy of the bar code or 2D image being scanned. The CCD Linear Image Reader
transmits the image to be processed by the System Control Module approximately
25 times a second. With this reading technology, large amounts of data can be
stored on the page, with reading accuracy and speed the equal of laser reading
technology.

     Microprocessors monitor the sensors in each module and carry out the
instructions from the System Control Module, validating that each action
initiated has been completed. If an error occurs, i.e., an operation is not
completed, a message is sent back to the Operator Console for operator action.
The Operator Console communicates all messages from the system's modules to the
operator through the use of a CRT (Cathode Ray Tube). Bar code or OMR
information, scanned by the Laser Reader or CCD Image Reader, is stored on the
System Control Module's hard disk for retrieval and auditing with the system's
performance information for reporting purposes. A printer is included with each
system to provide a hard copy audit trail and postage reports. Communications
software and a modem are provided with each system to permit remote system
diagnosis and software updates.

     2-D Code.  2-D is an improved method of coding documents, replacing more
traditional means such as bar-code or OMR. Unlike linear or one-dimensional bar
codes, 2-D code has the ability to represent large amounts of information in a
small area, thereby making the code less obtrusive and more aesthetic. Data
integrity is maintained through the use of 16 or 32 bit Cyclic Redundancy Check
(CRC), which is far more powerful than the self-checking within traditional bar
codes.

     F-300 Feeder.  The F-300 is a high speed, vacuum fed system. The first
stage of the feeder "shingle-feeds" the sheets from the bottom of the bin to the
second stage of the feeder. Optimum stack height in the second stage is
maintained by microprocessor control of the first stage. A Laser Reader or CCD
Linear Image Reader is located in the second stage, where the sheets are read
and fed individually at rates of up to 30,000 sheets per hour. In the final
stage, the sheets are collected on a conveyor and document set accumulator,
which is connected to the next module. Through the use of a diverter, the F-300
can separate particular sheets, such as banners or trailers, from the document
prior to collection on the conveyor.

     Binding Methods.  The systems can utilize a variety of binding options,
including stitching, stapling, VeloBind and Slip & Grip. Stitching and stapling
offers an inexpensive way to fasten from 2 to 100 sheets of paper. VeloBind and
Slip & Grip provide the recipient with a recloseable binding and a professional
look. Gunther system configurations commonly feature both stitching/stapling and
binding modules and make the type of binding decision based on preset
application parameters, such as document size or recipient.

     Folder.  This module may be placed up-stream, mid-stream, or down-stream in
the conveyor path, depending on the application. The folder may be adjusted to
produce C-folds, half-folds, or Z-folds and will dynamically handle 1-15 sheets
of paper.

     Friction Feeder.  The Friction Feeder is a versatile feeder which separates
and feeds material from the bottom of a stack of up to 24 inches. It efficiently
feeds a wide range of material from 20 lb. sheets up to 1/2 inch thick booklets.
The single knob separator gate adjustment allows for quick and easy set up and
material change over.

     Inc.jet(TM) Printing.  The Series III, EP-4000 and MS-6000 may be
configured with multi-head ink jet printing capability to dynamically print
envelope addresses, return addresses, specialized messages and bar codes in a
variety of font styles and sizes.

     Flat Enveloper Module.  The 10 x 13 Enveloper places the document sets in
flat pocket envelopes (flap along short side). The envelopes can range in size
from 8 to 10 inches wide to 11 1/4 inches to 13 inches long. The pre-glued,
self-sealing envelopes are placed on their short ends, open side up. They are
fed one at a time to the insertion station. The envelope is opened, and a
receiving shoe is slid into the envelope to form an easy entry for the material.
After insertion, the envelope is moved to the sealing station where the flap is
sealed.

                                        4
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The completed package is then placed onto a conveyor. This module is also
capable of exception and oversize document processing. Exception documents can
be inserted into the envelope without sealing the flap. Oversize documents can
be accumulated and placed directly onto the output conveyor.

     Flat Metering.  This module provides a means for automatically applying
postage to flat envelopes of varying thickness up to 180 sheets, thereby
avoiding the 0.25" thickness limitation of a standard postage meter. The module
applies postage to a self-stick label using a standard postage meter, after
which the label is fed to a transfer station and applied to the envelope. System
software calculates the weight of each package and automatically applies the
correct postage. The postage label can be applied in any corner of the envelope,
in either portrait or landscape orientation.

     Dual Postage Software, Interface, and Meter with Divert.  This system
component provides two postage meters for intermixed document weight groups. The
System Control Modules calculates the amount of postage for each document set
using a formula based on sheet count and insert weight previously supplied to
the system. The System Control Module transmits directions to the meters for
controlling which meter is to be used. If the postage amount is different than
the amount set on either meter, the product is deflected into the divert bin.

     Manifest Mail Software.  The most common technique used by the Company
systems to meet current United States Postal Service requirements requires the
manifest identification and postal zone information to be passed to the system
in the bar code. In addition, the customer application prints the manifest
identification on the address page, above the first line of the address, so that
it is visible through the envelope window. The manifest mail software processes
the information stored in single or multiple log files and generates reports
required by the United States Postal Service. Other alternatives are available
to print a manifest identification on the envelopes if the customer cannot print
the identification in the envelope window.

     Convertible Systems.  EP and MS systems can be configured to work in both
flat and folded modes, using a quick-connect and disconnect 10 x 13 flat
enveloper or folded mail enveloper. This feature allows a user to specify either
an EP or MS system, depending on the dominant applications, but still retain the
ability to run in both flat and folded mode.

INC.JET(TM)

     inc.jet, Inc. is a wholly owned subsidiary of Gunther International, Ltd.
that produces an exclusive, environmentally safe letter quality (600
dot-per-inch, or dpi) ink jet printer (Imager) that is designed specifically for
high resolution, high speed, low cost industrial printing applications.
Initially targeted as an envelope printer to complement the Company's line of
intelligent document automation and mail processing systems, the inc.jet(TM)
Imager provides a solution to problems that were voiced by current and
prospective customers -- high quality personalized printing on envelopes at
document automation speeds for a low cost.

     Secondary concerns were ease of use and maintenance, as well as the size
and packaging. The inc.jet(TM) Imager can be integrated into mail processing
systems or other Original Equipment Manufacturer (OEM's) devices for
applications such as envelope printing, web printing, carton marking, etc.

     The inc.jet technology is the result of a strategic partnership between the
Company and the Hewlett-Packard Company's (HP) Specialty Printing Systems
Operation (SPS). The agreement allows for cross licensing and marketing of HP's
thermal ink jet technology and the Company's inc.jet Imagers, providing
customers with a printing process that is cleaner and more reliable than current
methods, at significant cost savings.

     SPS was formed to develop industrial printing markets for its 45 Series
Thermal Ink Jet Printing Cartridges (cartridges). As part of this initiative SPS
initially licensed a select group of companies to use their technology to
develop printers specifically for industrial printing applications. The primary
development task was to create the technology to fire the cartridges in such a
way that they could remain stationary, while the product passed by at a high
rate of speed. This was in contrast to the HP desktop printers, which move the
cartridge back and forth across the page to print.

     The inc.jet Imager is a compact modular printer that fits in the palm of a
hand (5.5" x 3.5" x 4.5") and weighs under 2 pounds. The print drivers and
electronics all reside in the Imager. Commands to control the

                                        5
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Imager are communicated via a standard personal computer. These features are
very important in that they make for a printer that lends itself to integration
into a wide range of OEM products, such as small tabletop envelope-addressing
machines. Although the Imager originally started as peripheral device for the
Company's finishing systems, the vast majority of inc.jet's revenue stream is
now derived from non-Company applications and customers (i.e., OEMs and end-user
ink customers). It was decided early on that inc.jet, Inc. would be the print
engine supplier, while OEMs would be responsible for building complete systems
for the end user. This would allow inc.jet, Inc. to take advantage of its
high-margin Imager product without the additional overhead required to service
thousands of end users.

     In addition to the mail addressing market, inc.jet sells it's Imager to OEM
customers in the commercial printing and packaging markets. The inc.jet Imager
markets include:

     - Postage printing

     - Envelop printing and address labeling

     - Box and carton labeling

     - Printing of variable data on commercial web press applications

     - Tag printing

     - Spot color and anti-fraud marking of originals

     In addition to Imagers, inc.jet, Inc. is a reseller of the consumables
(cartridges) that are manufactured for industrial printing applications by SPS.
The inc.jet business model is based, in part, on creating a significant revenue
stream from annuity ink sales. In theory, ink revenues should continue to
increase monthly with the installed base of Imagers, eventually outpacing Imager
revenue. The consumables that inc.jet sells to the commercial and industrial
printing market include the following:

     - Bulk Ink Supplies (cartridges with a high capacity ink reservoir),

     - Fast-Dry-Black cartridges

     - Spot Color (red, blue, green, & yellow)

     - Versatile Black (specially formulated for coated stocks)

MARKETING AND SALES

     The Company initially relied principally on contacts within the insurance
industry, particularly among large property and casualty insurers, and on the
growing reputation of its products to generate sales. More recently the
Company's sales and marketing efforts have actively targeted a far broader range
of applications and industries including other types of insurance companies and
customers in the banking, finance and healthcare industries. The Company has
continued to experience success in expanding into other markets including
government, retail distribution, outsourcing, service bureaus, and others. The
Company also continues to generate additional sales to its existing customer
base. As much as 50% of the Company's system sales in a given year have been to
previous purchasers of the Company's system and the Company believes that repeat
sales and upgrades of existing systems will continue to be an important source
of revenue. The Company organizes user group seminars to allow customers to
discuss their system requirements with each other and the Company, and to
collaborate on system design.

     The Company is an approved Marketing Partner with major printing systems
vendors (Xerox, Oce, and IBM). Gunther products offer a strategic portion of the
total solution required by the customer base of these vendors and as such
Gunther products are often included in their sales presentations and there is a
growing amount of joint sales and marketing activity with these vendors. In
addition, the Company has other informal marketing arrangements with other
manufacturers and suppliers of related hardware and software products.

CUSTOMERS

     To date, the Company's principal customers have been property and casualty
insurance companies, which require accurate, high-speed preparation and
distribution of personalized policies and insurance certificates. The Company's
customers include many of the top insurance companies in the United States
including

                                        6
<PAGE>

Allstate Insurance Co., Chubb & Son Insurance, Fireman's Fund, GEICO, The
Hartford, Metropolitan Life, Mutual of Omaha, SAFECO and The Travelers. In
addition, the Company's systems have been purchased by Gartner Group, Moore
Business Communication Systems, Nike, Public Schools Employees Retirement
System, USAA, U.S. Census Bureau, U.S. Department of the Treasury, and Nippon
Telephone & Telegraph in Japan.

     The Company has expanded into the mutual fund, pharmaceutical and outsource
provider markets with sales to customers in each of these industries. Despite
reliance on sales in the insurance industry, the development of the business has
not been dependent upon any single or few customers. Due to the relatively high
sales price of the Company's systems, customers who place multiple machine
orders within a single year may account for more than 10% of the Company's
revenues for that year. However, the Company has not relied on any one of these
customers to maintain its level of sales from year to year.

     As of March 31, 2002, the Company had a backlog of high-speed assembly
systems aggregating approximately $1.9 million. Backlog consists of total
contract price less revenue recognized to date for all signed orders on hand.
Typically, approximately 50% of the purchase price of each system is received by
the Company at the time an order is placed by a customer and machine
specifications are completed, 40% of the purchase price is paid when the system
is approved for shipment and the last installment (typically 10% of the purchase
price) is paid within 30 days of installation. The Company recognizes revenues
on the percentage of completion method over the production period of the system.

MANUFACTURING

     The Company does not fabricate most of the hardware components of its
finishing systems and is largely dependent upon third party suppliers to
fabricate and, in some cases, assemble components and/or sub-assemblies of a
typical system. Although the Company believes that other suppliers are available
to perform the services provided by the current suppliers, the termination of
the Company's relationship with one or more of these companies may result in a
temporary interruption in the supply, and potentially the manufacture and
shipment, of the Company's systems. While several of the Company's suppliers
require cash on delivery, the Company is not aware of any material change in the
relationships with its suppliers during the past year, nor have any suppliers
indicated an intent to materially modify the terms on which they supply
materials to the Company. In the past, the Company has replaced certain
suppliers who have been unable to meet the Company's requirements with respect
to quality, delivery or pricing, and the Company in the future may replace
certain other suppliers for similar reasons.

     The Company assembles and tests each system at its facility in Norwich,
Connecticut. Each system is tested for hardware and software compliance with
each customer's unique application and media requirements, using customer
supplied materials. Upon satisfactory completion of such tests and customer
acceptance of the system, each system is disassembled for shipment and
reassembled at customer facilities, which is followed by less stringent site
acceptance testing and operator training.

INSTALLATION AND CUSTOMER SERVICE

     The Company's systems usually can be installed at a customer's facilities
in one day. The Company typically uses a systems engineer, who plans and carries
out the installation and programming of the systems. A Company employee will
remain at the customer's facilities for approximately one week to monitor the
initial operation of the system. As part of the installation, the Company trains
one to two operators at either the Company's or the customer's facilities in the
operation and maintenance of the system. The Company has monthly meetings with
customers to evaluate the performance of systems. All systems are now installed
with a modem and diagnostic software that enable the Company to monitor system
performance from a remote location. As part of each installation, the Company
includes a supply of spare parts which can be resupplied on short notice. Each
system has been designed to facilitate parts replacements. The Company typically
warrants each system for a period of 90 days after installation.

     All Gunther customers have some form of maintenance contract with the
Company. Typically, this would take the form of on-call service, although in
larger installations on-site service is required. Basic on-call

                                        7
<PAGE>

coverage comes with a four hour response time guarantee; two hour response time
is available to customers for an additional charge.

     Historically, the Company had contracted with a third-party service
provider to perform the Company's service obligations under the maintenance
agreements with its customers. During the third quarter of fiscal 1999, the
Company made a strategic decision to assume the maintenance services on
predominantly all current and future maintenance contracts. The transition of
maintenance services was completed during the year ended March 31, 2000.

     Alternatively, customers can elect to have the Company train its personnel
to maintain their systems. Such training is provided for up to three qualified
technicians for three weeks at the Company's facility prior to delivery of the
system. Under this program, a spare parts kit is purchased, and as parts are
used, they are replaced at a charge to the customer. Along with the maintenance
program, the Company also provides maintenance support of the system's software,
monthly performance meetings and telephone support for a monthly charge.

     The typical cost to a customer of an annual maintenance contract is equal
to approximately 10% of the cost of the customer's system. For the fiscal year
ended March 31, 2002, revenues from customer maintenance agreements represented
approximately 53% of the Company's net sales. The Company believes that, as it
places more systems in service, maintenance revenues will represent an
increasing percentage of its net sales.

RESEARCH AND DEVELOPMENT

     The Company's principal research and development efforts have been
conducted through software and hardware development groups located at its
facility in Norwich, Connecticut. These groups focus on improving upon and
creating new applications of the Company's technology. The Company's engineering
staff also generates the functional specifications and development schedules for
each of the Company's customers. The Company performs all material development
and engineering functions internally. The Company from time to time engages
third parties to design hardware and software components based upon
specifications developed by the Company.

     For the fiscal years ended March 31, 2002 and 2001, the Company incurred
expenses of $1.4 million and $1.6 million, respectively, for research and
development activities.

COMPETITION

     The Company's principal competitors are Pitney-Bowes and Bell & Howell.
Although the Company's total revenue is small relative to these large
competitors, the Company is nonetheless successful in many situations, primarily
due to the unique capabilities of Gunther equipment to handle effectively more
complex mailing system applications. The principal competitive factors in the
Company's business are product functionality, price/performance and reliability.
The Company believes that it competes favorably on the basis of each of these
factors. The Company also believes that it competes effectively in sales to its
existing customer base because of, among other things, its emphasis on document
integrity, its focus on customer needs and the flexibility of its systems
resulting from the application of its proprietary technology.

     Gunther's inc.jet products include several important features that set them
apart from competitive products. The inc.jet imager accomplishes the high-speed
printing of data (50 inches per second) at very high resolution (up to 600 x 600
dots per inch). The compact modular construction combined with injection molded
plastic enable this product to be produced at low cost with a low level of
maintenance.

PATENTS AND PROPRIETARY RIGHTS

     The Company has pursued an intellectual property rights strategy to protect
its proprietary product developments. The Company's policy is to file patent
applications to protect its technology, and the inventions and improvements that
may be important to the development of its business. As a further precaution,
the Company licenses, rather than sells, its proprietary system software to
customers. The Company also relies upon trade secrets, know-how, continuing
technological innovation and licensing opportunities to protect its intellectual
property rights. However, the Company does not consider its patent and other
intellectual property rights as material to its competitive position, which, it
believes, depends on the ability to adapt technology to

                                        8
<PAGE>

customer needs and in particular to modify software that controls system
functions, and, to a lesser extent, to combine modules.

     The Company has been issued eleven patents in the United States, has two
pending patent applications in the United States, and intends to continue to
file patent applications on its products and systems. All patent applications
filed by the Company are directed to salient features of the Company's systems.
The Company regards certain computer software and service applications as
proprietary. The Company relies on nondisclosure agreements with its employees
and, where the Company regards it as necessary, with customers.

     In connection with a development agreement with Connecticut Innovations,
Inc. ("CII") and as partial consideration for loans made in connection
therewith, the Company has assigned all existing, and future patents to CII as
security for the Company's performance under the development agreement. Title to
the patents will be transferred back to the Company upon the fulfillment of its
obligations under the development agreement.

     Although the Company believes that patents and other intellectual property
rights may be important to its business, there can be no assurance that patents
will issue from any applications thereof, or if patents issue, that the claims
allowed will be of adequate scope to protect the Company's technology or the
issued patents or other technology rights will not be challenged or invalidated.
The Company's business could be adversely affected by increased competition in
the event that any patent granted to it is adjudicated to be invalid or is
inadequate in scope to protect the Company's operations, or if any of the
Company's other arrangements related to technology are breached or violated.
Although the Company believes that its products and technology do not infringe
the proprietary rights of others, there can be no assurance that third parties
will not assert infringement claims in the future or that such claims will not
be successful. Furthermore, the Company could incur substantial costs in
defending itself in patent infringement suits brought by others and in
prosecuting suits against patent infringments.

     In connection with the restructuring completed by the Company in September
1992, the Company granted to Bell & Howell a nonexclusive license for read and
feed technology developed and patented by the Company. The technology previously
had been licensed by the Company to one of its component suppliers, Ascom
Holding, Inc. ("Ascom"), but was not transferable by Ascom. The license granted
to Bell & Howell was in consideration for the forgiveness of indebtedness of the
Company to Ascom and the payment by Ascom of $250,000 to CII on behalf of the
Company. The Company believes that Bell & Howell purchased the business and
assets of Ascom in 1992. The license granted to Bell & Howell is royalty-free
and coterminous with the patents with respect to the licensed technology. The
Company does not believe that the license granted to Bell & Howell has affected
the Company's competitive position. The Company does not regard the technology
itself as material to its competitive position, which depends on the Company's
ability to adapt technology to customer needs and, in particular, to modify
software that controls system functions and, to a lesser extent, to combine
modules. However, the development by Bell & Howell of a software driven system
based in part on the technology could adversely affect the Company's competitive
position.

EMPLOYEES

     At March 31, 2002, the Company had 197 (181 at March 31, 2001) full-time
employees, consisting of 62 (65 at March 31, 2001) engaged in engineering,
development and manufacturing, 19 (15 at March 31, 2001) in marketing and sales
activities, 104 (100 at March 31, 2001) in customer services and 12 (12 at March
31, 2001) in general administrative and executive functions. The Company does
not have a collective bargaining agreement with any of its employees and
considers its relationship with its employees to be good.

ITEM 2.  DESCRIPTION OF PROPERTY

     The Company's principal facilities are located at One Winnenden Road,
Norwich, Connecticut, where the Company leases approximately 75,000 square feet
of space. The Company lease requires payment of monthly rent in the amount of
$23,917 through April 30, 2006. Of the Company's space in Norwich, approximately
15,000 square feet is devoted to office and administrative uses, approximately
55,000 square feet to engineering, development and assembly activities, and
approximately 5,000 square feet to marketing,

                                        9
<PAGE>

sales and customer service functions. The Company believes that its facilities
are adequately equipped and maintained for present and planned operations.

ITEM 3.  LEGAL PROCEEDINGS.

     As previously reported, a purported class action lawsuit was filed against
the Company, its then-current chief executive officer and its then-current chief
financial officer asserting claims under the federal securities laws. The action
was filed in the United States District Court for the District of Connecticut.
Among other things, the complaint alleged that the Company's financial
statements for the first three quarters of fiscal 1998 were materially false and
misleading in violation of Section 10(b) of the Securities Exchange Act of 1934
(the "Exchange Act") and Rule 10b-5 promulgated thereunder, and Section 20(a) of
the Exchange Act. The plaintiffs were seeking compensatory damages and
reimbursement for the reasonable costs and expenses, including attorneys' fees,
incurred in connection with the action. In February 2001, the Company reached an
out-of-court settlement, which the Court approved in May 2001. Under the terms
of the settlement, the Company and the other defendants agreed to pay $595,000
to the plaintiffs, $380,000 of which was paid by the Company's directors' and
officers' liability insurance carrier and $215,000 of which was paid by the
Company.

     In April 2001, prior to the entry of the final order approving the
settlement of the Purported Class Action (the "Class Action Final Order"), the
Company commenced separate legal proceedings against Arthur Andersen, LLP
("Andersen"), its former auditor, in the Superior Court for the Judicial
District of New London, Connecticut (the "Malpractice Proceedings"). The
Malpractice Proceedings seek damages sustained by the Company as a result of
Andersen's failure to comply with professional standards in the conduct of
certain of its audits of the Company's financial statements. In May 2001,
Andersen removed the case to the United States District Court for the District
of Connecticut, but the court remanded the complaint to the state court upon the
motion of the Company. The parties are awaiting formal notice from the state
court that the case may proceed in that court. It is the Company's position in
the Malpractice Proceedings that Andersen breached its duties to the Company by,
among other things, negligently and/or intentionally misrepresenting the
Company's true financial condition to the Company, its Board of Directors and
its Audit Committee. Andersen vigorously denies any wrongdoing and filed a
counterclaim against the Company alleging claims for fraud, negligence, breach
of contract, interpleader and indemnification. In addition, Andersen has
asserted that the Class Action Final Order interposes an effective bar against
any recovery in the Malpractice Proceedings. On June 7, 2001, the Company filed
a motion to amend the Class Action Final Order to clarify that it has no
application to the Malpractice Proceedings. The court granted the Company's
motion, and Andersen appealed the Court's decision. The issue is currently
pending before the United States Court of Appeals (2nd Circuit). While the
Company's counsel is actively pursuing the Company's claims against Andersen in
the Malpractice Proceedings, the outcome of the litigation is uncertain.
Although the counterclaim is in an early stage, the Company believes that it is
unlikely that the counterclaim will result in any material liability against the
Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None.

                                        10
<PAGE>

                                    PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     The Common Stock of the Company is traded on the OTC Bulletin Board under
the symbol "SORT".

     The following table sets forth the high and low bid prices of the Company's
Common Stock for each quarter of fiscal 2001 and fiscal 2002, as reported by the
OTC Bulletin Board. These quotations represent prices between dealers and do not
include retail mark-ups, mark-downs or other fees or commissions and may not
represent actual transactions.

<Table>
<Caption>
                                                                BID PRICES
                                                              --------------
FISCAL QUARTER                                                HIGH      LOW
--------------                                                -----    -----
<S>                                                           <C>      <C>
First Fiscal Quarter - 2001.................................  $2.56    $2.19
(April 1 - June 30, 2000)

Second Fiscal Quarter - 2001................................   2.63     2.25
(July 1 - September 30, 2000)

Third Fiscal Quarter - 2001.................................   2.25     0.56
(October 1 - December 31, 2000)

Fourth Fiscal Quarter - 2001................................   0.81     0.44
(January 1 - March 31, 2001)

First Fiscal Quarter - 2002.................................   1.00     0.47
(April 1 - June 30, 2001)

Second Fiscal Quarter - 2002................................   1.29     0.41
(July 1 - September 30, 2001)

Third Fiscal Quarter - 2002.................................   0.73     0.40
(October 1 - December 31, 2001)

Fourth Fiscal Quarter - 2002................................   0.63     0.46
(January 1 - March 31, 2002)
</Table>

     On May 31, 2002, the high and low bid prices for the Company's Common Stock
were $0.45, as reported by the OTC Bulletin Board.

     As of June 3, 2002, there were approximately 70 record owners of the
Company's Common Stock. The Company believes there are approximately 570
beneficial owners of Common Stock. The Company has not paid dividends on its
Common Stock and intends for the foreseeable future to retain earnings, if any,
to finance the expansion and development of its business.

SALES OF UNREGISTERED SECURITIES

     During fiscal 2002, the Company granted certain employees stock options
covering an aggregate of 282,000 shares of Common Stock at exercise prices
ranging from $0.50 to $0.60 per share. The options vest ratably over a five-year
period and have a maximum duration of ten years.

     During fiscal 2002, the Company also credited an aggregate of 97,550 shares
of Common Stock to the accounts of six directors who were participating in the
Gunther International, Ltd. Directors' Equity Plan (the "Plan"). In accordance
with the terms of the Plan, each participating director is entitled to receive
grants of Common Stock in lieu of a quarterly cash retainer. The number of
shares which each director is entitled to receive each fiscal quarter is equal
to (a) $2,500, divided by (b) the fair market value of a share of Common Stock
as of the last business day of the quarter. Based upon this formula, 13,298
shares of Common Stock were credited in respect of the fiscal quarter ended June
30, 2001 (the fair market value of the Common Stock on the last business day of
the quarter being $0.94 per share), 27,778 shares of Common Stock were credited
in respect of the fiscal quarter ended September 30, 2001 (the fair market value
of the Common Stock on the last business day of the quarter being $0.45 per
share), 25,862 shares of Common Stock were credited in respect of the fiscal
quarter ended December 31, 2001 (the fair market value of the Common Stock on
the last

                                        11
<PAGE>

business day of the quarter being $0.58 per share) and 30,612 shares of Common
Stock were credited in respect of the fiscal quarter ended March 31, 2002 (the
fair market value of the Common Stock on the last business day of the quarter
being $0.49 per share). Each director elected to defer receipt of the shares
credited to his account.

     No underwriters were used in connection with any of the foregoing
transactions and, accordingly, there were no underwriting discounts or
commissions. The issuance of these securities was exempt from registration under
the Securities Act of 1933 in reliance upon Section 4(2) thereof and the rules
and regulations promulgated thereunder.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS.

SUMMARY FINANCIAL DATA

     The summary financial data presented below should be read in conjunction
with the information set forth in the consolidated financial statements and
notes thereto included elsewhere herein.

<Table>
<Caption>
                                                     YEAR ENDED        YEAR ENDED        YEAR ENDED
                                                   MARCH 31, 2002    MARCH 31, 2001    MARCH 31, 2000
                                                   --------------    --------------    --------------
<S>                                                <C>               <C>               <C>
Sales:
  Systems........................................   $ 9,782,263      $   14,250,642     $12,052,692
  Maintenance....................................    11,166,347          10,161,333       9,533,778
                                                    -----------      --------------     -----------
          Total sales............................    20,948,610          24,411,975      21,586,470
                                                    -----------      --------------     -----------
Cost of sales:
  Systems........................................     8,509,551           9,537,248       8,094,029
  Maintenance....................................     7,906,354           8,105,760       8,289,268
                                                    -----------      --------------     -----------
          Total cost of sales....................    16,415,905          17,643,008      16,383,297
                                                    -----------      --------------     -----------
Gross profit.....................................     4,532,705           6,768,967       5,203,173
                                                    -----------      --------------     -----------
Operating expenses:
  Selling and administrative(1)..................     5,521,234           4,555,441       4,143,774
  Research and development.......................     1,389,544           1,639,385       1,227,626
                                                    -----------      --------------     -----------
          Total operating expenses...............     6,910,778           6,194,826       5,371,400
                                                    -----------      --------------     -----------
Operating income (loss)..........................    (2,378,073)            574,141        (168,727)
Interest expense, net............................      (456,469)           (679,717)       (554,156)
Litigation expense...............................            --            (178,500)        (36,500)
                                                    -----------      --------------     -----------
Loss before extraordinary item...................    (2,834,542)           (284,076)       (758,883)
Extraordinary item - Gain on extinguishment of
  debt...........................................     1,410,868                  --              --
                                                    -----------      --------------     -----------
Net loss.........................................   $(1,423,674)     $     (284,076)    $  (758,883)
                                                    ===========      ==============     ===========
Per share:
Loss before extraordinary item...................   $     (0.30)     $        (0.07)    $    (0. 18)
Extraordinary item...............................          0.15                  --              --
                                                    -----------      --------------     -----------
Net loss.........................................   $     (0.15)     $        (0.07)    $     (0.18)
                                                    ===========      ==============     ===========
</Table>

<Table>
<Caption>
                                                         2002            2001
                                                    --------------    -----------
<S>                                                 <C>               <C>            <C>
Current assets....................................   $ 4,739,908      $ 5,553,949
Total assets......................................     8,676,781        9,554,164
Current liabilities...............................     5,738,576        6,072,998
Long-term debt, less current maturities...........        62,078        6,735,993
Stockholders' equity (deficit)....................     2,876,127       (3,254,827)
</Table>

---------------
(1) Effective April 1, 2001, the Company adopted Statement of Financial
    Accounting Standard No. 142, "Goodwill and Other Intangible Assets" ("FAS
    142"). Under FAS 142, the Company no longer

                                        12
<PAGE>

    amortizes goodwill but tests for impairment of goodwill annually. To March
    31, 2002, there have been no impairment losses. Selling and administrative
    expenses for each of the years ended March 31, 2001 and 2000 include
    goodwill amortization of $223,000.

RESULTS OF OPERATIONS

     Operating results may be affected by certain accounting estimates. The most
sensitive and significant accounting estimates in the financial statements
relate to revenue recognition under sales contracts for the Company's high-speed
assembly equipment using the percentage of completion method, asset valuation
allowances (deferred income tax assets, slow moving and obsolete inventories and
accounts receivable) and accruals for product warranty expense. The Company
recognizes revenues under sales contracts for its high-speed assembly equipment
based on the ratio of incurred costs to total estimated costs. To the extent
these estimates change, sales will be affected in the period these changes are
determined. The majority of contracts for high-speed assembly equipment are
completed over no more than two quarters. Therefore, changes in revenue
resulting from changes in estimates will be limited to a two quarter period on
any one contract. Management continuously monitors uncompleted sales contracts,
performing detailed analyses of costs incurred, and estimated costs to complete,
in conjunction with measuring contract performance and recognizing contract
revenues. Similarly, management critically evaluates the potential realization
of deferred income tax benefits as well as the likely usefulness of its
inventories and the collectibility of accounts receivable. Accruals for product
warranty are based primarily on recent historical performance.

  Fiscal Year ended March 31, 2002
  Compared to Fiscal Year ended March 31, 2001

     The net loss for fiscal 2002 was $(1.4) million, or $(0.15) per share,
compared to $(284,000), or $(0.07) per share, for fiscal 2001. The net loss
includes an extraordinary gain of $1.4 million, or $0.15 per share, resulting
from the extinguishment of debt. (See Liquidity and Capital Resources for more
information). Excluding the effects of the extraordinary item, the net loss for
fiscal 2002 would have been $(2.8) million, or $(0.30) per share. The operating
loss for fiscal 2002 was $(2.4) million, or $(0.26) per share, compared to
operating income of $574,000, or $0.13 per share, for fiscal 2001.

     Systems sales include sales of high-speed assembly systems, upgrades to
previously sold systems and inc.jet imager systems, ink and ancillary products.

     Systems sales for fiscal 2002 decreased $4.5 million, or 31.4%, to $9.8
million from $14.3 million in fiscal 2001. The decrease was due to a decrease in
high-speed assembly systems. Sales of high speed assembly systems for fiscal
2002 decreased to $6.9 million, or 41.9%, from $11.9 million in fiscal 2001. The
decrease in sales is attributable to a slowdown in orders during the last two
quarters of fiscal 2001 and the first quarter of fiscal 2002. A summary of
orders, sales and backlog for the each of the last four fiscal quarters for the
high speed assembly systems and related upgrades is as follows:

<Table>
<Caption>
                                        MARCH 31,    DECEMBER 31,    SEPTEMBER 30,    JUNE 30,
                                          2002           2001            2001           2001
                                        ---------    ------------    -------------    --------
                                                            (IN MILLIONS)
<S>                                     <C>          <C>             <C>              <C>
Backlog, beginning of period..........    $ 2.3         $ 2.5            $  .3         $ 1.3
Orders................................      1.6           2.0              3.2            .7
Sales.................................     (2.0)         (2.2)            (1.0)         (1.7)
                                          -----         -----            -----         -----
Backlog, end of period................    $ 1.9         $ 2.3            $ 2.5         $  .3
                                          =====         =====            =====         =====
</Table>

     Backlog consists of total contract price less revenue recognized to date
for all signed orders on hand. The backlog has improved as compared to the end
of the prior year but, at March 31, 2002, it is below the levels of the prior
two fiscal quarters.

     Inc.jet sales in fiscal 2002 increased to $2.9 million, or 21.6%, from $2.4
million in fiscal 2001. Inc.jet sales comprised 13.7% of total systems sales in
fiscal 2002 as compared to 16.6% in fiscal 2001. The increase in

                                        13
<PAGE>

sales is primarily due to an increase of 142.1% in ink sales, as the Company
continues to target markets for ink sales. There was a 14.8% decline in imager
sales, largely due to a decline in sales to the largest customer, which
accounted for 28% of all inc.jet imagers sold during fiscal 2002. The Company
expects sales to this customer to continue to decline but the Company believes
it is not as reliant on one customer as it was in past years due to increased
market acceptance of the imager and the increase in repeat customers in fiscal
2002 as compared to fiscal 2001.

     Maintenance sales increased $1.0 million, or 9.9%, to $11.2 million in
fiscal 2002 from $10.2 million in fiscal 2001 as a result of a larger number of
systems under service contract from shipments during the year, an increase in
non-contract services and inflationary price increases in service contracts
between the periods.

     The gross margin as a percentage of sales of systems decreased to 13.0% in
fiscal 2002 as compared to 33.1% in fiscal 2001. The decrease in gross margin as
a percentage of sales was primarily because of the low volume in production
during the period due to the low order level. Overhead costs during the year
remained at a level needed to sustain higher production levels that were
anticipated. In an effort to not jeopardize future production, certain overhead
costs were not reduced in response to the low volume of production. The gross
margin on maintenance sales increased 58.6% in fiscal 2002 as compared to fiscal
2001. The gross margin as a percentage of maintenance sales increased to 29.2%
in fiscal 2002 from 20.2% in fiscal 2001. The increase in the gross margin on
maintenance sales is primarily attributable to a decrease in overall maintenance
costs of 2.5% while revenues increased by 9.9%. The reduction in maintenance
costs was primarily due to a decrease in service parts expense and a decrease in
personnel costs.

     Selling and administrative expenses increased $966,000, or 21.2%, to $5.5
million in fiscal 2002 from $4.6 million in fiscal 2001. Selling and
administrative expenses, as a percentage of total revenues, for fiscal 2002 and
2001 were 26.4% and 18.7%, respectively. Selling and administrative expenses for
fiscal 2001 include goodwill amortization expense of $223,000. Effective April
1, 2001, the Company adopted new rules on accounting for goodwill and other
intangible assets. (See Note 2 to the Consolidated Financial Statements.) The
increase in selling and administrative expenses is primarily attributable to an
increase in selling expenses associated with inc.jet sales, an increase in
health insurance costs and an increase in personnel costs and marketing expenses
associated with the sales of high-speed assembly systems. Further, costs related
to special information systems training of $100,000 were incurred in fiscal 2002
for training completed.

     Research and development expenses decreased $250,000, or 15.2%, to $1.4
million in fiscal 2002 from $1.6 million in fiscal 2001. Research and
development expenses, as a percentage of total revenues, for fiscal 2002 and
2001 were 6.6% and 6.7%, respectively. Research and development expenses in
fiscal 2002 were primarily attributable to the new Series W system introduced at
the industry trade show during the third fiscal quarter, documentation for the
production of the Series W, development of new operating software for high-
speed assembly systems and development of the next line of inc.jet imagers.
Research and development expenses related to the Series W system were
approximately $250,000 in fiscal 2002.

     Interest expense decreased $224,000 to $456,000 in fiscal 2002 from
$680,000 in fiscal 2001. The decrease was due to substantially all of the debt
being paid from the proceeds of the Rights Offering completed in November 2001.
(See Liquidity and Capital Resources for more information.) Future interest
expense is expected to be less than $20,000 in a year.

     The extraordinary item -- gain on extinguishment of debt of $1.4 million is
derived from the purchase from Gunther Partners LLC of $1.9 million of notes
payable previously held by the Estate of Harold S. Geneen for $500,000. (See
Liquidity and Capital Resources for more information.)

LIQUIDITY AND CAPITAL RESOURCES

     For fiscal 2002 and 2001, the Company incurred net losses of $(1.4) million
and $(284,076), respectively. For fiscal 2002, cash of $1.2 million was used for
operations while in fiscal 2001 cash provided by operations was $744,304. At
March 31, 2002, the Company has a deficiency in working capital of $1.0 million.
At March 31, 2002, backlog for high-speed assembly system and upgrade orders,
consisting of total contract

                                        14
<PAGE>

price less revenue recognized to date for all signed orders on hand, was $1.9
million as compared to $1.3 million at March 31, 2001 and $4.2 million at March
31, 2000.

     The Company's primary need for liquidity is to fund operations while it
endeavors to increase sales and achieve consistent profitability. Historically,
the Company has derived liquidity through systems and maintenance sales
(including customer deposits), financing arrangements with banks and other third
parties and, from time to time, sales of its equity securities.

     Under the Company's normal sales pricing policy, approximately 50% of the
sales price of each system is received by the Company within 30 days from the
time an order is placed by a customer; approximately 40% is received at the time
the system is shipped to the customer and the remaining 10% is received
approximately 30 days after delivery of the system. As a result, the Company
receives a significant cash flow benefit from the receipt of new orders.

     In November 2001, the Company consummated a rights offering (the "Rights
Offering"), pursuant to which the Company issued 16,000,000 shares of its Common
Stock to its existing stockholders by subscription right on a pro-rata basis at
a price of $0.50 per share. The net proceeds of the Rights Offering were used to
repay in full the notes payable to Gunther Partners LLC ($4.5 million) and to a
stockholder and director ($500,000) and to purchase for an aggregate of $637,935
from Gunther Partners LLC, 919,568 shares of the Company's Common Stock and $1.9
million of notes payable previously held by the Estate of Harold S. Geneen.
Gunther Partners had acquired these shares and notes payable on behalf of the
Company in July 2001 for $137,935 and $500,000, respectively. In connection with
these transactions, the Company recognized an extraordinary gain of $1.4 million
on the extinguishment of debt. Currently, the Company has total debt outstanding
as of March 31, 2002 of less than $100,000, with principal payments due of
$28,000 during the next twelve months.

     On a going forward basis management believes that the Company's operating
results will improve in fiscal 2003. In any event, management believes that the
Company has sufficient cash as of March 31, 2002 coupled with planned spending
reductions in fiscal 2003 to meet its operating obligations without such
improvement. Such spending reductions include about $250,000 less in research
and development (R&D) because of the completion of the development of the Series
W system, and about $100,000 less in costs related to information systems
training also completed in fiscal 2002. If necessary, the Company may extend the
payment of its trade obligations, which it reduced by almost $500,000 in fiscal
2002, and reduce staff beyond that resulting from normal attrition if system
sales approaching that of fiscal 2001 are not achieved. Further, in fiscal 2003
the Company expects to realize proceeds of about $250,000 from the consummation
of a sales of equipment included in long-term assets for which there is
presently a signed contract from an existing, financially sound customer.
Lastly, planned and necessary additions to equipment and leasehold improvements
in fiscal 2003 are less than $100,000, a reduction of approximately $400,000
from fiscal 2002. The Company's cash needs may be affected by a number of
factors, however, many of which are beyond the control of management. See
"Forward Looking Statements," below. Thus, there can be no assurance that the
Company will not need significantly more cash than is presently forecasted by
management or that the Company's current and expected sources of cash will be
sufficient to fund the Company's ongoing operations.

INFLATION

     The effect of inflation on the Company has not been significant during the
last two fiscal years.

FORWARD-LOOKING STATEMENTS

     This report contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. In general, any
statements contained in this report that are not statements of historical fact
may be deemed to be forward-looking statements within the meaning of Section
21E. Without limiting the generality of the foregoing, the words "believes,"
"anticipates," "plans," "expects," and other similar expressions are intended to
identify forward-looking statements. Investors should be aware that such
forward-looking statements are based on the current expectations of management
and are inherently subject to a number of risks and uncertainties that could
cause the actual results of the Company to differ
                                        15
<PAGE>

materially from those reflected in the forward-looking statements. Some of the
important factors which could cause actual results to differ materially from
those projected include, but are not limited to, the following: general economic
conditions and growth rates in the finishing and related industries; competitive
factors and pricing pressures; changes in the Company's product mix;
technological obsolescence of existing products and the timely development and
acceptance of new products; inventory risks due to shifts in market demands;
component constraints and shortages; the ramp-up and expansion of manufacturing
capacity; and the continued availability of financing. The Company does not
undertake to update any forward-looking statement made in this report or that
may from time-to-time be made by or on behalf of the Company.

ITEM 7.  FINANCIAL STATEMENTS.

     The financial statements required by this item are presented on pages F-1
through F-14 immediately after the signature page of this report.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     None.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT.

     The information required by Item 9 is hereby incorporated by reference to
the Company's Proxy Statement that will be distributed in connection with the
2001 Annual Meeting of Stockholders, which is currently scheduled to be held in
September 2002. Such proxy statement will be filed with the Commission within
one hundred and twenty (120) days of the close of the fiscal year, or this
Annual Report on Form 10-KSB will be amended to include the requisite
information.

ITEM 10.  EXECUTIVE COMPENSATION.

     The information required by Item 10 is hereby incorporated by reference to
the Company's Proxy Statement that will be distributed in connection with the
2002 Annual Meeting of Stockholders, which is currently scheduled to be held in
September 2002. Such proxy statement will be filed with the Commission within
one hundred and twenty (120) days of the close of the fiscal year, or this
Annual Report on Form 10-KSB will be amended to include the requisite
information.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information required by Item 11 is hereby incorporated by reference to
the Company's Proxy Statement that will be distributed in connection with the
2002 Annual Meeting of Stockholders, which is currently scheduled to be held in
September 2002. Such proxy statement will be filed with the Commission within
one hundred and twenty (120) days of the close of the fiscal year, or this
Annual Report on Form 10-KSB will be amended to include the requisite
information.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required by Item 12 is hereby incorporated by reference to
the Company's Proxy Statement that will be distributed in connection with the
2002 Annual Meeting of Stockholders, which is currently scheduled to be held in
September 2002. Such proxy statement will be filed with the Commission within
one hundred and twenty (120) days of the close of the fiscal year, or this
Annual Report on Form 10-KSB will be amended to include the requisite
information.

                                        16
<PAGE>

                                    PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

     A.  Exhibits required by Item 601 of Regulation S-B:

<Table>
<C>    <S>
 3.1   Restated Certificate of Incorporation of the Company (filed
       as Exhibit 3.1 to the Company's Quarterly Report on Form
       10-QSB for the fiscal quarter ended September 30, 2001 and
       incorporated herein by reference).
 3.2   Certificate of Amendment to the Registrant's Restated
       Certificate of Incorporation dated as of October 22, 2001
       (filed as Exhibit 3.1 to the Company's Quarterly Report on
       Form 10-QSB for the fiscal quarter ended September 30, 2001
       and incorporated herein by reference).
 3.3   By-Laws of the Company, as amended (filed as Exhibit 3(iv)
       to the Company's Quarterly Report on Form 10-QSB for the
       fiscal quarter ended December 31, 1998, Commission File No.
       33-70052-B, and incorporated herein by reference).
10.1   Royalty Agreement, dated September 3, 1992, between the
       Company and William H. Gunther, Jr. (filed as Exhibit 10(s)
       to the Company's Registration Statement on Form SB-2,
       Commission File No. 33-70052-B, and incorporated herein by
       reference).
10.2   Royalty Agreement, dated September 3, 1992, between the
       Company and William H. Gunther III (filed as Exhibit 10(t)
       to the Company's Registration Statement on Form SB-2,
       Commission File No. 33-70052-B, and incorporated herein by
       reference).
10.3   Royalty Agreement, dated September 3, 1992, between the
       Company and Joseph E. Lamborghini (filed as Exhibit 10(u) to
       the Company's Registration Statement on Form SB-2,
       Commission File No. 33-70052-B, and incorporated herein by
       reference).
10.4   Royalty Agreement, dated September 3, 1992, between the
       Company and Rufus V. Smith (filed as Exhibit 10(v) to the
       Company's Registration Statement on Form SB-2, Commission
       File No. 33-70052-B, and incorporated herein by reference).
10.5   Royalty Agreement, dated September 3, 1992, between the
       Company and Christine E. Gunther (filed as Exhibit 10(w) to
       the Company's Registration Statement on Form SB-2,
       Commission File No. 33-70052-B, and incorporated herein by
       reference).
10.6   Royalty Agreement, dated September 3, 1992, between the
       Company and Susan G. Hotkowski (filed as Exhibit 10(x) to
       the Company's Registration Statement on Form SB-2,
       Commission File No. 33-70052-B, and incorporated herein by
       reference).
10.7   Form of Employee Stock Option Plan and Founders Option Plan
       (filed as Exhibit 10(kkk) to the Company's Registration
       Statement on Form SB-2, Commission File No. 33-70052-B, and
       incorporated herein by reference).
10.8   Warrant, dated October 20, 1993, to purchase 40,000 shares
       of Common Stock issued to Mark Fisher (filed as Exhibit
       10(vvv) to the Company's Registration Statement on Form
       SB-2, Commission File No. 33-70052-B, and incorporated
       herein by reference).
10.9   Warrant, dated January 9, 1995, to purchase 13,333 shares of
       Common Stock issued to Mark Fisher (filed as Exhibit 10.49
       to the Company's Annual Report on Form 10-KSB/A dated June
       26, 1995, and incorporated herein by reference).
10.10  Warrant, dated January 12, 1995, to purchase 10,000 shares
       of Common Stock issued to Michael Jesselson and Linda
       Jesselson Trustees UIT 3/27/84 FOB Samuel Joseph Jesselson
       (filed as Exhibit 10.51 to the Company's Annual Report on
       Form 10-KSB/A dated June 26, 1995, and incorporated herein
       by reference).
</Table>

                                        17
<PAGE>
<Table>
<C>    <S>
10.11  Warrant, dated January 12, 1995, to purchase 10,000 shares
       of Common Stock issued to Michael Jesselson and Linda
       Jesselson Trustees UIT 3/27/84 FOB Roni Aron Jesselson
       (filed as Exhibit 10.52 to the Company's Annual Report on
       Form 10-KSB/A dated June 26, 1995, and incorporated herein
       by reference).
10.12  Warrant, dated January 12, 1995, to purchase 10,000 shares
       of Common Stock issued to Michael Jesselson and Linda
       Jesselson Trustees UIT 3/27/84 FOB Jonathan Judah Jesselson
       (filed as Exhibit 10.53 to the Company's Annual Report on
       Form 10-KSB/A dated June 26, 1995, and incorporated herein
       by reference).
10.13  Warrant, dated January 12, 1995, to purchase 10,000 shares
       of Common Stock issued to Michael Jesselson and Linda
       Jesselson Trustees UIT 3/27/84 FOB Maya Ariel Ruth Jesselson
       (filed as Exhibit 10.54 to the Company's Annual Report on
       Form 10-KSB/A dated June 26, 1995, and incorporated herein
       by reference).
10.14  Warrant, dated January 12, 1995, to purchase 13,333 shares
       of Common Stock issued to Michael Jesselson and Linda
       Jesselson Trustees UIT 3/27/84 FOB Maya Ariel Ruth Jesselson
       (filed as Exhibit 10.55 to the Company's Annual Report on
       Form 10-KSB/A dated June 26, 1995, and incorporated herein
       by reference).
10.15  Non-exclusive License Agreement between the Company and Bell
       & Howell (filed as Exhibit 10(qaii) to the Company's
       Registration Statement on Form SB-2, Commission File No.
       33-70052-B, and incorporated herein by reference).
10.16  Xerox Worldwide Printing Systems Partners Program
       Partnership Guide dated August 1990 (filed as Exhibit 10.64
       to the Company's Annual Report on Form 10-KSB/A dated June
       26, 1995, and incorporated herein by reference).
10.17  Amendment and Restatement of Development Agreement made as
       of December 31, 1995 between the Company and CII (filed as
       Exhibit 10.2 to the Company's Quarterly Report on Form
       10-QSB dated February 12, 1996 and incorporated herein by
       reference).
10.18  Non-exclusive License Agreement By and Between the
       Hewlett-Packard Company and Gunther International
       Incorporated for Envelope Printing Technology dated May 6,
       1997 (filed as Exhibit 10.38 to the Company's Annual Report
       on Form 10-KSB dated July 14, 1998, and incorporated herein
       by reference).
10.19  Warrant Agreement, dated October 2, 1998, by and between the
       Lender and the registrant (filed as Exhibit 99.10 to the
       registrant's Current Report on Form 8-K dated October 7,
       1998 and incorporated herein by this reference).
10.20  Non-Qualified Stock Option Agreement, dated as of October 5,
       1998, between Marc I. Perkins and the registrant (filed as
       Exhibit 10.14 to the registrant's Quarterly Report on Form
       10-QSB dated February 12, 1999 and incorporated herein by
       this reference).
10.21  Employment Agreement, dated as of October 7, 1998, between
       the registrant and Michael M. Vehlies (filed as Exhibit
       10.15 to the registrant's Quarterly Report on Form 10-QSB
       dated February 12, 1999 and incorporated herein by this
       reference).
10.22  Non-Qualified Stock Option Agreement, dated as of October
       29, 1998, between Michael M. Vehlies and the registrant
       (filed as Exhibit 10.16 to the registrant's Quarterly Report
       on Form 10-QSB dated February 12, 1999 and incorporated
       herein by this reference).
10.23  Employment Agreement, dated October 3, 1999, between the
       Registrant and Marc I. Perkins (filed as Exhibit 10.9 to the
       registrant's Quarterly Report on Form 10-QSB dated February
       22, 2000, and incorporated herein by this reference).
</Table>

                                        18
<PAGE>
<Table>
<C>    <S>
10.24  Recapitalization Agreement, dated June 22, 2001, by and
       among the registrant, June H. Geneen, Phil E. Gilbert, Jr.
       and the United States Trust Company of New York, as
       Co-executors of the Estate of Harold S. Geneen, late of New
       York, New York (the "Estate"), Gunther Partners LLC, Park
       Investment Partners ("Park") and Gerald H. Newman
       ("Newman").
10.25  Building lease between the Company and UNC, Incorporated,
       dated May 1, 2001 (filed as Exhibit 10.1 to the Company's
       Quarterly Report on Form 10-QSB dated August 14, 2001 and
       incorporated herein by reference).
21.1   List of Subsidiaries of the Company.
24.1   Power of Attorney pursuant to which this Annual Report on
       Form 10-KSB dated June 28, 2001 was executed.
</Table>

     B.  Reports on Form 8-K.

         None.

                                        19
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                          GUNTHER INTERNATIONAL LTD.

                                          By: /s/ MARC I. PERKINS
                                            ------------------------------------

                                             President, Chief Executive Officer
                                                and Chief Financial Officer
                                              (On Behalf of the Registrant as
                                             Principal Executive Officer and as
                                             Principal Financial and Accounting
                                                           Officer)

Date: June 28, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and dates indicated.

<Table>
<Caption>
                    SIGNATURE:                          TITLE:       DATE:
                    ----------                          ------       -----
<C>                                                    <S>       <C>
                /s/ MARC I. PERKINS                              June 28, 2002
---------------------------------------------------
               Attorney-in-Fact for:

                  Marc I. Perkins                      Director  June 28, 2002

               James A. Cotter, Jr.                    Director  June 28, 2002

                J. Kenneth Hickman                     Director  June 28, 2002

               Steven S. Kirkpatrick                   Director  June 28, 2002

                 Gerald H. Newman                      Director  June 28, 2002

                  Robert Spiegel                       Director  June 28, 2002

                Thomas M. Steinberg                    Director  June 28, 2002
</Table>

                                        20
<PAGE>

                         INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
                                                              PAGE
                                                              NO.
                                                              ----
<S>                                                           <C>
Report of Ernst & Young LLP, Independent Auditors...........  F-2

Consolidated Balance Sheets as of March 31, 2002 and 2001...  F-3

Consolidated Statements of Operations for the Years Ended
 March 31, 2002 and 2001....................................  F-4

Consolidated Statements of Stockholders' Equity (Deficit)
 for the Years Ended March 31, 2002 and 2001................  F-5

Consolidated Statements of Cash Flows for the Years Ended
 March 31, 2002 and 2001....................................  F-6

Notes to Consolidated Financial Statements..................  F-7
</Table>

                                       F-1
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

Stockholders of Gunther International Ltd.

     We have audited the accompanying consolidated balance sheets of Gunther
International Ltd. and its subsidiary as of March 31, 2002 and 2001, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall 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 Gunther
International Ltd. and its subsidiary at March 31, 2002 and 2001, and the
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States.

                                                  ERNST & YOUNG LLP

Hartford, Connecticut
May 17, 2002

                                       F-2
<PAGE>

                           GUNTHER INTERNATIONAL LTD.

                          CONSOLIDATED BALANCE SHEETS
                            MARCH 31, 2002 AND 2001

<Table>
<Caption>
                                                                  2002            2001
                                                              ------------    ------------
<S>                                                           <C>             <C>
Assets
Current Assets:
  Cash......................................................  $  1,119,790    $    759,393
  Restricted cash...........................................       100,054              --
  Accounts receivable, less allowance.......................       849,059       2,002,398
  Costs and estimated earnings in excess of billings on
    uncompleted contracts...................................       776,278         601,068
  Inventories...............................................     1,666,462       1,936,538
  Prepaid expenses..........................................       228,265         254,552
                                                              ------------    ------------
    Total current assets....................................     4,739,908       5,553,949
                                                              ------------    ------------
Equipment and Leasehold Improvements:
  Machinery and equipment...................................     2,230,914       1,811,895
  Furniture and fixtures....................................       505,939         469,737
  Leasehold improvements....................................       135,962         128,377
                                                              ------------    ------------
                                                                 2,872,815       2,410,009
  Accumulated depreciation and amortization.................    (1,518,098)     (1,006,350)
                                                              ------------    ------------
                                                                 1,354,717       1,403,659
                                                              ------------    ------------
Other Assets:
  Goodwill..................................................     2,551,429       2,551,429
  Other.....................................................        30,727          45,127
                                                              ------------    ------------
                                                                 2,582,156       2,596,556
                                                              ------------    ------------
                                                              $  8,676,781    $  9,554,164
                                                              ============    ============
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
  Current maturities of long-term debt -- other.............  $     27,842    $     17,045
  Accounts payable..........................................     1,977,539       2,440,437
  Accrued expenses..........................................     1,328,462       1,507,965
  Billings in excess of costs and estimated earnings on
    uncompleted contracts...................................       515,903         325,085
  Deferred service contract revenue.........................     1,888,830       1,782,466
                                                              ------------    ------------
    Total current liabilities...............................     5,738,576       6,072,998
                                                              ------------    ------------
Long-term debt, less current maturities:
  Related parties...........................................            --       6,676,593
  Other.....................................................        62,078          59,400
                                                              ------------    ------------
         Total long-term debt...............................        62,078       6,735,993
                                                              ------------    ------------
    Total liabilities.......................................     5,800,654      12,808,991
                                                              ------------    ------------
Commitments and contingencies (Note 8)
Stockholders' Equity (Deficit):
  Preferred Stock, $.001 par value; 500,000 shares
    authorized; none issued.................................            --              --
  Common Stock, $.001 par value; 32,000,000 shares
    authorized; 20,291,769 shares issued in 2002 and
    4,291,769 shares issued in 2001, including shares held
    in treasury.............................................        20,292           4,292
  Treasury stock, at cost (919,569 shares)..................      (137,935)             --
  Additional paid-in capital................................    19,865,119      12,188,556
  Accumulated deficit.......................................   (16,871,349)    (15,447,675)
                                                              ------------    ------------
    Total Stockholders' Equity (Deficit)....................     2,876,127      (3,254,827)
                                                              ------------    ------------
                                                              $  8,676,781    $  9,554,164
                                                              ============    ============
</Table>

                            See accompanying notes.
                                       F-3
<PAGE>

                           GUNTHER INTERNATIONAL LTD.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                  FOR THE YEARS ENDED MARCH 31, 2002 AND 2001

<Table>
<Caption>
                                                                 2002           2001
                                                              -----------    -----------
<S>                                                           <C>            <C>
Sales:
  Systems...................................................  $ 9,782,263    $14,250,642
  Maintenance...............................................   11,166,347     10,161,333
                                                              -----------    -----------
     Total sales............................................   20,948,610     24,411,975
                                                              -----------    -----------
Cost of sales:
  Systems...................................................    8,509,551      9,537,248
  Maintenance...............................................    7,906,354      8,105,760
                                                              -----------    -----------
     Total cost of sales....................................   16,415,905     17,643,008
                                                              -----------    -----------
       Gross profit.........................................    4,532,705      6,768,967
                                                              -----------    -----------
Operating expenses:
  Selling and administrative................................    5,521,234      4,555,441
  Research and development..................................    1,389,544      1,639,385
                                                              -----------    -----------
     Total operating expenses...............................    6,910,778      6,194,826
                                                              -----------    -----------
Operating loss..............................................   (2,378,073)       574,141
  Interest expense, net.....................................     (456,469)      (679,717)
  Litigation expense........................................           --       (178,500)
                                                              -----------    -----------
Loss before extraordinary item..............................   (2,834,542)      (284,076)
  Extraordinary item -- gain on extinguishment of debt......    1,410,868             --
                                                              -----------    -----------
Net loss....................................................  $(1,423,674)   $  (284,076)
                                                              ===========    ===========
Loss per share:
Loss before extraordinary item..............................  $     (0.30)   $     (0.07)
Extraordinary item..........................................         0.15             --
                                                              -----------    -----------
       Net loss.............................................  $     (0.15)   $     (0.07)
                                                              ===========    ===========
Weighted average number of common shares outstanding........    9,318,579      4,291,769
                                                              ===========    ===========
</Table>

                            See accompanying notes.
                                       F-4
<PAGE>

                           GUNTHER INTERNATIONAL LTD.

                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                  FOR THE YEARS ENDED MARCH 31, 2002 AND 2001

<Table>
<Caption>
                                     COMMON STOCK
                                   $.001 PAR VALUE         TREASURY STOCK      ADDITIONAL
                                 --------------------   --------------------     PAID-IN     ACCUMULATED
                                   SHARES     AMOUNT     SHARES     AMOUNT       CAPITAL       DEFICIT         TOTAL
                                 ----------   -------   --------   ---------   -----------   ------------   -----------
<S>                              <C>          <C>       <C>        <C>         <C>           <C>            <C>
Balance, March 31, 2000........   4,291,769   $ 4,292         --   $      --   $12,188,556   $(15,163,599)  $(2,970,751)
Net loss.......................          --        --         --          --            --       (284,076)     (284,076)
                                 ----------   -------   --------   ---------   -----------   ------------   -----------
Balance, March 31, 2001........   4,291,769     4,292         --          --    12,188,556    (15,447,675)   (3,254,827)
Sale of Common Stock...........  16,000,000    16,000         --          --     7,741,033             --     7,757,033
Purchase of treasury stock.....          --        --   (919,569)   (137,935)           --             --      (137,935)
Discharge of related party
  debt.........................          --        --         --          --       (64,470)            --       (64,470)
Net loss.......................          --        --         --          --            --     (1,423,674)   (1,423,674)
                                 ----------   -------   --------   ---------   -----------   ------------   -----------
Balance, March 31, 2002........  20,291,769   $20,292   (919,569)  $(137,935)  $19,865,119   $(16,871,349)  $ 2,876,127
                                 ==========   =======   ========   =========   ===========   ============   ===========
</Table>

                                       F-5
<PAGE>

                           GUNTHER INTERNATIONAL LTD.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                  FOR THE YEARS ENDED MARCH 31, 2002 AND 2001

<Table>
<Caption>
                                                                 2002           2001
                                                              -----------    -----------
<S>                                                           <C>            <C>
Operating activities:
  Net loss..................................................  $(1,423,674)   $  (284,076)
     Adjustments to reconcile net loss to net cash provided
      by (used for) operating activities:
     Depreciation and amortization..........................      607,380        693,043
     Provision for doubtful accounts........................       49,196         53,000
     Interest accrued on related party debt.................       42,456        265,144
     Deferred directors' compensation.......................       55,000         47,500
     Gain on extinguishment of debt.........................   (1,410,868)            --
     Loss on disposal of equipment..........................       32,787         10,248
     Changes in operating assets and liabilities:
       Accounts receivable..................................    1,104,143      1,260,385
       Inventories..........................................      270,076       (138,332)
       Prepaid expenses.....................................       26,287         26,322
       Accounts payable.....................................     (462,898)       (61,794)
       Accrued expenses.....................................     (234,503)        75,399
       Deferred service contract revenue....................      106,364        (74,508)
       Billings, costs and estimated earnings on uncompleted
        contracts -- net....................................       15,608     (1,128,026)
                                                              -----------    -----------
          Net cash provided by (used for) operating
             activities.....................................   (1,222,646)       744,305
                                                              -----------    -----------
Investing activities:
  Acquisitions of equipment and leasehold improvements......     (540,994)      (698,890)
                                                              -----------    -----------
          Net cash used for investing activities............     (540,994)      (698,890)
                                                              -----------    -----------
Financing activities:
  Repayment of notes payable and long-term debt.............   (5,695,007)      (673,158)
  Proceeds from notes payable and long-term debt............      300,000      1,300,000
  Proceeds from sale of Common Stock........................    7,757,033             --
  Purchase of treasury stock................................     (137,935)            --
  Transfer to restricted cash...............................     (100,054)            --
                                                              -----------    -----------
          Net cash provided by financing activities.........    2,124,037        626,842
                                                              -----------    -----------
Change in cash..............................................      360,397        672,257
Cash, beginning of year.....................................      759,393         87,136
                                                              -----------    -----------
Cash, end of year...........................................  $ 1,119,790    $   759,393
                                                              ===========    ===========
Supplemental Cash Flow Information:
  Cash paid for interest....................................  $   394,428    $   436,771
  Cash paid for income taxes................................       27,028         13,531
Supplemental Disclosure of Non-Cash Investing Activities:
  Property and equipment acquired for notes payable.........  $    35,831    $    70,740
</Table>

                            See accompanying notes.

                                       F-6
<PAGE>

                           GUNTHER INTERNATIONAL LTD.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            MARCH 31, 2002 AND 2001

1.  BUSINESS:

     Gunther International Ltd. and its subsidiary (the "Company") operate as a
single business segment. The Company designs, develops, assembles, markets and
services high speed systems that automatically assemble printed documents, fold,
staple or bind the documents and insert completed documents into appropriate
envelopes for mailing or other distribution. These products are dependent upon
proprietary technology and require specially skilled engineers and technicians
to design, enhance and produce them to meet customer needs. The Company was
incorporated in Delaware in 1978 and currently operates from leased facilities
located in Norwich, Connecticut.

2.  ACCOUNTING POLICIES:

  Principles of consolidation -

     The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, inc.jet, Inc. All intercompany
activity has been eliminated from the consolidated financial statements.

  Revenue recognition -

     The Company recognizes revenues under sales contracts for its high-speed
assembly equipment using the percentage of completion method based on the ratio
of incurred costs to total estimated costs. Changes in estimated earnings
thereon are recognized in the period determined. Sales of inc.jet Imagers and
related consumables are recognized when the products are delivered. Service
contract revenue is recognized over the term of the contract; amounts applicable
to future periods are deferred.

  Allowance for doubtful accounts -

     The Company evaluates the collectibility of accounts receivable on an
ongoing basis and makes allowances for credit losses ($83,356 at March 31, 2002
and $58,500 at March 31, 2001).

  Inventories -

     Inventories, consisting primarily of purchased parts used in the assembly
and repair of the Company's products, are stated at the lower of cost,
determined by the first-in, first-out method, or market.

  Equipment and leasehold improvements -

     Depreciation of equipment is computed using the straight-line method over
the estimated useful lives of the respective assets as follows: machinery and
equipment -- 3 to 7 years; and furniture and fixtures -- 7 years. Amortization
of leasehold improvements is computed over the useful life of the improvement or
lease term, whichever is shorter. Amortization of production tooling is computed
over the useful life of the product that the tooling was designed to produce.
Depreciation expense was $593,000 and $455,000 for fiscal 2002 and 2001,
respectively.

  Goodwill -

     In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
("FAS 142"). Under FAS 142, goodwill is no longer amortized but is subjected to
annual impairment tests. Other intangible assets with definitive useful lives
will continue to be amortized over those lives. The Company does not have
significant other intangible assets.

                                       F-7
<PAGE>

     The Company adopted FAS 142 for goodwill and other intangible assets
effective April 1, 2001. To March 31, 2002, there have been no impairment
losses. Had the provisions of FAS 142 been applied to the year ended March 31,
2001, the net loss for that year would have been $(61,000), or ($0.01) per
share.

  Shipping and handling costs -

     Expenses associated with shipping and handling are included in cost of
sales in the accompanying statements of operations.

  Research and development -

     Expenses associated with research and development activities are expensed
as incurred.

  Product warranties -

     The Company provides a warranty on each high-speed system for a period of
90 days after installation. Warranty expense for fiscal 2002 and 2001, was
approximately $173,000 and $297,000, respectively.

  Deferred income taxes -

     Deferred income taxes are provided on temporary differences between the
financial statement and income tax basis of assets and liabilities and on net
operating loss and research and development tax credit carryforwards using
enacted tax rates in effect in the years in which differences are expected to
reverse. A valuation allowance is recorded for the amount of deferred income tax
assets for which realization is uncertain (see Note 6).

  Royalty expense -

     The Company has royalty agreements with Connecticut Innovations, Inc. and
with certain stockholders (see Note 8). Royalties due under these agreements are
expensed as incurred.

  Loss per share -

     The denominators used for purposes of computing the loss per share consist
of the weighted average number of common shares outstanding of 19,372,200 and
4,291,769 for fiscal 2002 and 2001, respectively. Common stock equivalents are
not used when their effect is anti-dilutive. Options and warrants outstanding at
March 31, 2002 and 2001 were anti-dilutive.

  Use of estimates -

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

  Reclassifications -

     Certain fiscal 2001 amounts previously reported have been reclassified to
conform to the fiscal 2002 presentation.

                                       F-8
<PAGE>

3.  INVENTORIES:

     Inventories consist of:

<Table>
<Caption>
                                                                     2002          2001
                                                                  ----------    ----------
    <S>                                                           <C>           <C>
    Raw materials...............................................  $1,678,458    $1,820,402
    Work-in-process.............................................     366,722       374,666
                                                                  ----------    ----------
                                                                   2,045,180     2,195,068
    Valuation allowance.........................................    (378,718)     (258,530)
                                                                  ----------    ----------
                                                                  $1,666,462    $1,936,538
                                                                  ==========    ==========
</Table>

4.  COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS:

     The following schedule reflects the costs incurred, estimated earnings and
billings to date on uncompleted contracts:

<Table>
<Caption>
                                                                     2002           2001
                                                                  -----------    -----------
    <S>                                                           <C>            <C>
    Costs incurred..............................................  $ 1,275,902    $ 1,831,150
    Estimated earnings..........................................      270,604        532,887
                                                                  -----------    -----------
                                                                    1,546,506      2,364,037
    Billings to date............................................   (1,286,131)    (2,088,054)
                                                                  -----------    -----------
                                                                  $   260,375    $   275,983
                                                                  ===========    ===========
    Included in the accompanying balance sheets under the
      following captions:
    Costs and estimated earnings in excess of billings on
      uncompleted contracts.....................................  $   776,278    $   601,068
    Billings in excess of costs and estimated earnings on
      uncompleted contracts.....................................     (515,903)      (325,085)
                                                                  -----------    -----------
                                                                  $   260,375    $   275,983
                                                                  ===========    ===========
</Table>

5.  LONG-TERM DEBT AND RECAPITALIZATION:

     Long-term debt consists of:

<Table>
<Caption>
                                                                2002         2001
                                                              --------    ----------
<S>                                                           <C>         <C>
Notes payable to related parties (stockholders):
  Gunther Partners LLC, less unamortized debt discount of
     $172,500 at March 31, 2001, at an effective interest
     rate of 9.8% (Paid prior to maturity.).................  $     --    $4,327,500
  Estate of Harold S. Geneen, less unamortized debt discount
     of $264,097 at March 31, 2001, at an effective interest
     rate of 10.5% (Paid prior to maturity.)................        --     1,678,637
  Stockholder and Director, due and payable by November 2001
     with interest..........................................        --       500,000
  Estate of Harold S. Geneen, including accrued interest of
     $20,456, at an effective interest rate of 5.44% (Paid
     prior to maturity.)....................................        --       170,456
                                                              --------    ----------
                                                                    --     6,676,593
Other.......................................................    89,920        76,445
                                                              --------    ----------
                                                                89,920     6,753,038
Current maturities of long-term debt -- other...............   (27,842)      (17,045)
                                                              --------    ----------
                                                              $ 62,078    $6,735,993
                                                              ========    ==========
</Table>

                                       F-9
<PAGE>

     In November 2001, the Company consummated a rights offering (the "Rights
Offering"), pursuant to which the Company issued 16,000,000 shares of its Common
Stock to its existing stockholders by subscription right on a pro-rata basis at
$0.50 per share. The net proceeds of the Rights Offering were used to repay in
full the notes payable to Gunther Partners LLC ($4.5 million) and to a
stockholder and director ($500,000) and to purchase from Gunther Partners LLC
for an aggregate of $637,935, 919,568 shares of the Company's Common Stock and
$1.9 million of notes payable previously held by the Estate of Harold S. Geneen.
Gunther Partners, LLC had acquired these shares and notes payable on behalf of
the Company in July 2001 for $137,935 and $500,000, respectively. In connection
with these transactions, the Company recognized an extraordinary gain of $1.4
million on the extinguishment of debt.

     As of March 31, 2002, aggregate annual maturities of long-term debt for the
next five fiscal years are:

<Table>
<Caption>
FISCAL YEAR
ENDING MARCH 31,                                              AMOUNT
----------------                                              -------
<S>                                                           <C>
2003........................................................  $27,842
2004........................................................   31,266
2005........................................................   25,754
2006........................................................    3,803
2007........................................................    1,255
                                                              -------
                                                              $89,920
                                                              =======
</Table>

6.  DEFERRED INCOME TAXES:

     Significant components of the Company's deferred income tax assets
(liabilities) are:

<Table>
<Caption>
                                                               2002           2001
                                                            -----------    -----------
<S>                                                         <C>            <C>
Equipment and leasehold improvements......................  $   (69,906)   $   (76,853)
Accrued expenses..........................................      225,070        226,116
Inventories...............................................      187,581        143,630
Allowance for doubtful accounts...........................       31,653         22,823
Research and development tax credit carryforwards.........      378,914         97,181
Net operating loss carryforwards..........................      885,080      3,995,100
                                                            -----------    -----------
Net total deferred income tax asset.......................    1,616,272      4,407,998
Valuation allowance.......................................   (1,616,272)    (4,407,998)
                                                            -----------    -----------
Net deferred income tax asset.............................  $        --    $        --
                                                            ===========    ===========
</Table>

     At March 31, 2002, the Company has federal and state net operating loss
carryforwards of $2.5 million and $1.6 million, respectively, which are
scheduled to expire in varying amounts from 2003 to 2022. The reduction in net
operating loss carryforwards from the prior year is due to a limitation of
$100,000 annually on the utilization of past net operating loss carryforwards.
The limitation involves a change in control of the Company, resulting from the
consummation of the Rights Offering. The valuation allowance at March 31, 2000
was $4.7 million.

7.  WARRANTS, COMMON STOCK PURCHASE OPTIONS AND CAPITAL STOCK:

     In connection with the October 1998 financial restructuring involving
Gunther Partners LLC, the Company granted Gunther Partners LLC a warrant to
purchase up to 35% of the pro forma, fully diluted number of shares of the
Company's Common Stock, determined as of the date of exercise, at any time
through November 2003 at an exercise price of $1.50 a share (2,190,390 shares at
March 31, 2002). The Rights Offering had no effect on the number of shares of
the Company's Common Stock into which the warrants are exercisable. In November
2000, the Company agreed to extend the expiration date of the warrant by one
calendar day for each calendar day from and after April 1, 2001 that any
principal or interest owed

                                       F-10
<PAGE>

under the Stockholder and Director debt remains unpaid. The new expiration date
is May 29, 2004. In addition, at March 31, 2002, warrants were outstanding to
purchase 106,666 shares of the Company's Common Stock for $4.00 a share. These
warrants expire in October 2003.

     The Company has stock option plans. The Executive Compensation/Stock Option
Committee of the Board of Directors determines the prices and terms at which
options may be granted. Options vest over periods ranging from three to five
years and may be exercisable up to ten years from the date of grant.

     A summary of stock option activity follows:

<Table>
<Caption>
                                                        2002                          2001
                                             --------------------------    --------------------------
                                                            WEIGHTED                      WEIGHTED
                                                            AVERAGE                       AVERAGE
                                              SHARES     EXERCISE PRICE     SHARES     EXERCISE PRICE
                                             --------    --------------    --------    --------------
<S>                                          <C>         <C>               <C>         <C>
Outstanding, beginning of year.............   322,500        $ 1.79         345,000        $ 2.13
Granted....................................   282,000          0.55           9,000          1.49
Cancelled..................................   (15,500)        (1.67)        (31,500)        (5.37)
                                             --------        ------        --------        ------
Outstanding, end of year...................   589,000        $ 1.36         322,500        $ 1.79
                                             ========        ======        ========        ======
Exercisable, end of year...................   255,100        $ 1.71         224,333        $ 1.65
                                             ========        ======        ========        ======
Weighted average fair value of options
  granted..................................  $   0.43                      $   1.30
                                             ========                      ========
</Table>

     At March 31, 2002, exercise prices ranged from $0.50 to $3.22 and the
weighted average remaining contractual life was 6 years. Also at March 31, 2002,
406,000 options were available for future grants.

     The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees", and related interpretations to recognize
compensation expense under its stock option plan. As such, no expense is
recognized if, at the date of grant, the exercise price of the option is at
least equal to the fair market value of the Company's Common Stock. No
compensation expense was recognized in fiscal 2002 or 2001.

     If compensation expense for the Company's stock option plans had been
determined using the fair value method under FAS 123, "Accounting for Stock
Based Compensation", the Company would have reported a net loss of $1,594,000
($.17 per share) in fiscal 2002 and $430,000 ($.10 per share) in fiscal 2001. In
connection therewith, the Company used the Black-Scholes option pricing model
with the following weighted average assumptions:

<Table>
<Caption>
                                                            2002       2001
                                                           -------    ------
<S>                                                        <C>        <C>
Risk free interest rate..................................     5.00%     5.00%
Expected dividend yield..................................     None      None
Expected lives...........................................        5         5
                                                             Years     Years
Expected volatility......................................      107%   68-199%
</Table>

     The Company also has a directors' equity plan (the Equity Plan). Under the
Equity Plan, the Company grants shares of its Common Stock with an aggregate
fair value equal to two times director's customary quarterly cash retainer for
services of $1,250. The issuance of such shares may be deferred at the election
of the director. In fiscal 2002 and 2001, rights with respect to 97,550 and
48,758 shares were granted with an aggregate fair value of $55,000 and $47,500
and their issuance deferred. To March 31, 2002, rights with respect to an
aggregate of 160,987 shares have been granted and deferred.

     In conjunction with the Rights Offering, the Company increased its
authorized shares to 32,500,000 shares of capital stock consisting of 32,000,000
shares of Common Stock and 500,000 shares of Preferred Stock, each with a par
value of $.001 a share. The Board of Directors is authorized to determine the
powers, preferences, rights and restrictions of the Preferred Stock. At March
31, 2002 and 2001, there were no issued

                                       F-11
<PAGE>

and outstanding shares of Preferred Stock. At March 31, 2002, 3,453,043 shares
of the Company's Common Stock were reserved for issuance.

8.  COMMITMENTS AND CONTINGENCIES:

  Development Agreement -

     The Company has a development agreement with Connecticut Innovations, Inc.
("CII"), which requires the Company to pay CII a royalty equal to .67%
(sixty-seven hundredths of a percent) of all systems sales through December 31,
2002. Such agreement provides for minimum payments of $137,500 for fiscal 2002
and $131,250 for fiscal 2003.

     If, during any quarter, the royalty computation does not exceed the minimum
payment referred to above, the minimum payment would be made instead of the
actual computed royalty amount. Total royalty expense was $137,500 and $125,000
for fiscal 2002 and 2001, respectively. CII has a security interest in all of
the Company's patents, trademarks and other assets as collateral for the payment
of the royalty obligations, but CII has agreed to subordinate its security
interest (except for its security interest in patents and trademarks) in the
event that the Company enters into a financing arrangement with an institutional
lender. Until the transactions contemplated by the Recapitalization Agreement is
effectuated, CII has subordinated its security interest in all tangible and
intangible personal property to Gunther Partners LLC.

  Contingencies -

     In fiscal 1999, two purported class action lawsuits were filed against the
Company, its then-current chief executive officer and its then-current chief
financial officer asserting claims under the federal securities law. In February
2001, the Company reached an out-of-court settlement, agreeing to pay $215,000
towards the settlement. Of this amount, $178,500 was expensed in the first
quarter of fiscal 2001 and $36,500 was expensed in the fourth quarter of fiscal
2000. The Court approved the settlement in May 2001. Legal fees associated with
the claim were expensed as incurred, net of insurance proceeds. No additional
expenses are anticipated with respect to this matter.

     The Company is a party to various other legal proceedings arising in the
ordinary course of business which management believes, after consultation with
legal counsel, will not have a material adverse effect on the Company's
financial position, operating results or cash flows.

  Other commitments -

     The Company has a royalty agreement with certain founding stockholders
whereby the Company pays an amount equal to 1% of all the Company's sales (as
defined). An additional royalty of .5% will be paid on all the Company's sales
provided that the payment of additional royalties does not reduce the Company's
after-tax profits below 9% of sales for the period. The Company's obligations
under this agreement terminate upon the payment of royalties aggregating
$12,000,000. For fiscal 2002 and 2001, royalties expensed under this agreement
were $195,000 and $242,000, respectively. Total royalties expensed under this
agreement were $1,360,000 through March 31, 2002.

     The Company had an agreement related to the development and use of certain
inkjet technology. The agreement required the Company to pay royalties of 1% of
inkjet sales up to a maximum of $5,000,000 through March 31, 2008. In fiscal
2002, the Company paid $75,000 to satisfy all past and future obligations under
the agreement. For fiscal 2001, royalties expensed under this agreement were
approximately $24,000.

  Leases -

     The Company leases its office and manufacturing facility under an operating
lease that provides for monthly rental of $23,917 through April 2006. Under this
agreement, the Company is responsible for all operating costs, real estate taxes
and maintenance. The Company also leases certain office equipment under

                                       F-12
<PAGE>

operating lease agreements. Lease expense for fiscal 2002 and 2001 was
approximately $380,000 and $364,000, respectively.

     As of March 31, 2002, future minimum payments for non-cancelable operating
leases follow:

<Table>
<Caption>
FISCAL YEAR
ENDING MARCH 31,                                                AMOUNT
----------------                                              ----------
<S>                                                           <C>
2003........................................................  $  329,969
2004........................................................     296,648
2005........................................................     290,244
2006........................................................     287,274
2007........................................................      23,917
                                                              ----------
                                                              $1,228,052
                                                              ==========
</Table>

9.  EMPLOYEE BENEFIT PLANS:

     The Company has a defined contribution benefit plan (the "Plan") covering
substantially all employees. The Plan is intended to comply with Section 401(k)
of the Internal Revenue Code. Each year eligible participants may elect to make
salary reduction contributions on their behalf up to a maximum of the lesser of
15% of compensation or the annual maximum established by the Internal Revenue
Service. Participants may also make voluntary after-tax contributions to the
Plan. The Company does not make contributions to the Plan but does pay certain
expenses of the Plan.

10.  SIGNIFICANT CUSTOMERS AND BUSINESS CONCENTRATION:

     Due to the nature of the Company's products, a significant portion of the
Company's revenues in all periods is generally derived from a few customers. The
majority of the Company's customers are property and casualty insurance
companies. During fiscal 2002, sales to one customer were 21% of sales and
during fiscal 2001, sales to two customers were 31% of sales. No other customers
accounted for more than 10% of sales in either year.

11.  FAIR VALUE OF FINANCIAL INSTRUMENTS:

     The carrying value of financial instruments (accounts receivable, accounts
payable and debt) as of March 31, 2002 and 2001 approximate fair value. Fair
value was based on cash flows and current market conditions.

12.  LIQUIDITY

     On a going forward basis management believes that the Company's operating
results will be improved in fiscal 2003. In any event, management believes that
the Company has sufficient cash as of March 31, 2002 coupled with planned
spending reductions in fiscal 2003 to meet its operating obligations without
such improvement. Such spending reductions include about $250,000 less in
research and development (R&D) because of the completion of the Series W system,
and about $100,000 less in costs related to information systems training also
completed in fiscal 2002. If necessary, the Company may extend the payment of
its trade obligations, which it reduced by almost $500,000 in fiscal 2002, and
reduce staff beyond that resulting from normal attrition if system sales
approaching that of fiscal 2001 are not achieved. Further, in fiscal 2003 the
Company expects to realize proceeds of about $250,000 in cash from the
consummation of a sale of equipment included in long-term assets for which there
is presently a signed contract from an existing, financially sound customer.
Lastly, planned and necessary additions to equipment and leasehold improvements
in fiscal 2003 are less than $100,000. In summary, management believes that the
Company will have sufficient liquidity to pay its obligations in the normal
course of business through March 31, 2003.

                                       F-13