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

                                 AMENDMENT NO. 1
                                  FORM 10-KSB/A

(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, 2003.

[ ]      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)

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

                   ONE WINNENDEN ROAD
                   NORWICH, CONNECTICUT                          06360
         (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)              (ZIP CODE)

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

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

         TITLE OF EACH CLASS       NAME OF EACH EXCHANGE ON WHICH REGISTERED
         -------------------       -----------------------------------------
               None

              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. [ ]

The Registrant's revenues for the most recent fiscal year were $22.2 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 June 3, 2003, as reported by the OTC Bulletin Board, was $2.8
million. The number of shares of the Registrant's Common Stock outstanding as of
June 2, 2003 was 19,428,428.

         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 2003 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

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<S>                                                                                                               <C>
                                                             PART I

Item 1.    Description of Business.............................................................................    1
                  General......................................................................................    1
                  Development of the Business..................................................................    1
                  Finishing Systems............................................................................    2
                  Strategy.....................................................................................    2
                  Systems......................................................................................    3
                  inc.jet......................................................................................    6
           Marketing and Sales.................................................................................    7
           Customers...........................................................................................    7
           Manufacturing.......................................................................................    8
           Installation and Customer Service...................................................................    8
           Research and Development............................................................................    9
           Competition.........................................................................................    9
           Patents and Proprietary Rights......................................................................    9
           Employees...........................................................................................   10

Item 2.    Description of Property.............................................................................   10

Item 3.    Legal Proceedings...................................................................................   10

Item 4.    Submission of Matters to a Vote of
                  Security Holders.............................................................................   11

                                                             PART II

Item 5.    Market for Common Equity and Related
                  Stockholder Matters..........................................................................   12

Item 6.    Management's Discussion and Analysis
                  Summary Financial Data.......................................................................   14
                  Results of Operations........................................................................   15
                  Liquidity and Capital Resources..............................................................   16
                  Inflation....................................................................................   18
                  Forward Looking Statements...................................................................   18

Item 7.    Financial Statements................................................................................   18

Item 8.    Changes in and Disagreements with Accountants
                  on Accounting and Financial Disclosure.......................................................   18
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                                      (i)

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<S>                                                                                                              <C>
                                                             PART III

Item 9.    Directors, Executive Officers, Promoters and Control Persons;
           Compliance with Section 16(a) of the Exchange Act...................................................   18

Item 10.   Executive Compensation..............................................................................   19

Item 11.   Security Ownership of Certain Beneficial
           Owners and Management and Related Stockholder Matters...............................................   19

Item 12.   Certain Relationships and Related Transactions......................................................   19

Item 13.   Exhibits and Reports on Form 8-K....................................................................   19

Item 14.   Controls and Procedures.............................................................................   22

Signatures.....................................................................................................   23

Certification of Officers......................................................................................   24

Index to Financial statements..................................................................................  F-1
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                                      (ii)

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                                EXPLANATORY NOTE

         This Amendment No. 1 on Form 10-KSB/A (the "Amendment") amends Part II,
Items 6 and 7 of the Annual Report on Form 10-KSB for the year ended March 31,
2003 of Gunther International LTD. (the "Company"), as filed on June 30, 2003
(the "Original Filing"). Due to a typographical error, the Original Filing
incorrectly stated that the amount of the June 30, 2003 loan made by Gunther
Partners LLC to the Company was $200,000. The correct amount of this loan was
$2,000,000. Although each of the text references to this loan contained in the
Original Filing contained the error, the Original Filing contained as Exhibit
10.37 a true and correct copy of the $2,000,000 promissory note made by the
Company to the order of Gunther Partners LLC on June 30, 2003. In addition, the
Original Filing inadvertently omitted from Note 5 to the Company's financial
statements a reference to a $200,000 loan made to the Company on June 19, 2003.
This Amendment continues to speak as of the date of the Original Filing and the
Company has not updated any of the disclosures set forth in the Amendment to
speak to any later date.

                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS.

GENERAL

         The Company designs, develops, assembles and markets 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, in addition to system sales, also provides maintenance and
support services for customer systems on a contractual basis. A majority of the
Company's customers have some form of contracted support ranging from on-site
coverage, on-call support or telephone support.

         The Company also designs, manufactures and markets high-speed inkjet
imagers 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 packaging system 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 $2,300,000 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 ("Gunther
Partners"), 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 loaned an aggregate of $4.0 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

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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 to enter into the financing transaction, the
Company granted Gunther Partners a stock purchase warrant entitling Gunther
Partners 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
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 aggregating $800,000, plus interest. In September 1999, the
Company experienced a deficiency in operating cash flow and Gunther Partners
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.

         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 Rights Offering resulted in
Gunther Partners becoming the Company's largest stockholder. The net proceeds of
the Rights Offering were used to repay in full the notes payable to Gunther
Partners ($4.5 million) and to a stockholder and director ($500,000) and to
purchase from Gunther Partners 919,568 shares of the Company's Common Stock and
$1.9 million of notes payable previously held by the Estate 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 business strategy 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

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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. As much as 50% of the Company's system
sales in a given year have been to previous purchasers of the Company's systems
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.

         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 finishing products are the Series W
System, the Series III Billing System, the EP-4000 Electronic Publishing System
and the MS-6000 Mailing System.

         The Series W is Gunther's latest high-speed folded mail system. It is
fully adjustable, readily accommodating an extensive range of folded
applications, inserting documents from 6.5" to 11" in width and up to 14" in
length into envelope sizes ranging from monarch to bankers. Moreover, it does it
quickly and reliably, processing up to 12,000 completed envelopes an hour while
ensuring 100% processing accuracy. The Series W also allows insert feeders to be
interchangeable at the operator level. This allows the most appropriate feeder
(friction or vacuum feeder) to be utilized for each job. A feeder that is
operating poorly can be replaced with another and repaired off-line, taking
advantage of the feeder's self-contained advanced electronics and software. In
addition, a tilt feature allows greater access to the conveyor area for
maintenance, repair or simply to clear the conveyor. Other new features include:

     -   A transparent read plate that permits placement of the barcode almost
         anywhere on the primary document.

     -   A pusher design that ensures the product-to-pusher width ratio is not
         compromised providing better control of the product as it moves down
         the conveyor.

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     -   An automatic adjustment of the conveyor to accommodate the length of
         the specific paper for the job selected.

         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.

         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 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-400. The F-400 is a high speed, vacuum fed system consisting of a
hopper, feed pocket and accumulator. In the first stage, the documents are
stacked in the hopper either manually of from a continuous roll. In the second
stage, an optimum amount of paper (maintained by microprocessor and sensor
control) is delivered to the feed pocket. A Laser

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Reader or CCD camera is located in the feed pocket, where each sheet's
processing code is read and fed individually at rates of up to 30,000 sheets per
hour. In the final stage, the sheets are collected in the document set
accumulator, before being fed onto the main conveyor. The F400 can adjust to
suit a variety of sheet sizes including feeding in a landscape orientation. In
addition, the F-400 is capable of feeding paper of intermixed weights from
20-pound bond to 65-pound cover stock. Through the use of a diverter, the F-400
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 W, 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. 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 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.

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         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 the Company 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 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 Imager can be integrated into mail processing systems or
other Original Equipment Manufacturer (OEM) 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 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 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

         -        Envelope 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 January of 2003, inc.jet introduced the jet.engine(TM) Imager, which
is the most compact, powerful, and flexible OEM industrial print engine on the
market. The specification for this product was developed from years of industry
experience, and most importantly, from gathering requirements input from
numerous customers in a variety of industries. The objective of the
jet.engine(TM) Imager was to develop an OEM thermal ink jet print engine that
would maximize the capability of the HP cartridge, and provide a means to bring
this technology to any application that lends itself to HP

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thermal ink jet. This state of the art imaging technology will provide for
seamless integration into a variety of industrial applications such as
commercial printing, and packaging.

         In order to accomplish these objectives the Imager would need the
following features:

         -        Compact modular design that lends itself to integration into a
                  wide variety of devices

         -        Powerful - state of the art Motorola RISC processor

         -        Flexible - multiple data interfaces, multiple input/output,
                  flexible software, on-board or off-board RIP

         -        Reliable - integral service station to maximize print quality
                  and minimize operator intervention and down time

         -        Ability to handle wide-format printing

         -        Low cost

         The jet.engine(TM) Imager will be available in three basic
configurations; 3 Pen Manual Capping (MC), 3 Pen Automatic Cleaning (AC), and as
an OEM Component Kit to qualified OEMs. The Manual Capping and Automatic
Cleaning configurations will be able to support a fourth pen stall (AFTERBURNER)
that can be either attached to the Imager or mounted remotely.

         The jet.engine(TM) Imager will set the standard as the premier HP based
OEM print engine and dramatically increase the available market for inc.jet
imagers, and HP thermal ink jet technology.

         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)

-        UV/IR Invisible Ink (designed to improve document aesthetics and
         security)

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 systems 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.

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 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

                                       7

<PAGE>

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, 2003, the Company had a backlog of high-speed assembly
systems aggregating approximately $0.9 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 remains 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. Each
system has been designed to facilitate parts replacements. The Company typically
warrants each system for a period of 90 days after installation.

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

         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

                                       8

<PAGE>

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, 2003, revenues from customer maintenance agreements
represented approximately 49% 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, 2003 and 2002, the Company
incurred expenses of $1.6 million and $1.4 million, respectively, for research
and development activities.

COMPETITION

         The Company's principal competitors are Pitney-Bowes and BOWE 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.

         The Company has been issued fourteen patents 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 had assigned all existing patents to CII as
security for the Company's performance under the agreement. This agreement
expired on December 31, 2002 and title to the patents will be transferred back
to the Company upon the fulfillment of the Company's remaining obligation under
this agreement.

                                       9

<PAGE>

         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 infringements.

         In connection with the restructuring completed by the Company in
September 1992, the Company granted to BOWE 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 BOWE 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 BOWE Bell & Howell
purchased the business and assets of Ascom in 1992. The license granted to BOWE
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 BOWE Bell & Howell has affected the Company's competitive position. However,
the development by BOWE 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, 2003, the Company had 194 (197 at March 31, 2002)
full-time employees, consisting of 57 (62 at March 31, 2002) engaged in
engineering, development and manufacturing, 15 (19 at March 31, 2002) in
marketing and sales activities, 106 (104 at March 31, 2002) in customer services
and 16 (12 at March 31, 2002) 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's 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, sales and customer service
functions. Except for the HVAC system, which needs to be replaced, the Company
believes that its facilities are adequately equipped and maintained for present
and planned operations. The Company is currently engaged in discussions with the
landlord regarding the replacement or repair of the HVAC system.

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

                                       10

<PAGE>

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 sought 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 Company asserted 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
denied any wrongdoing and filed a counterclaim against the Company alleging
claims for fraud, negligence, breach of contract, interpleader and
indemnification. In addition, Andersen asserted that the Class Action Final
Order interposed 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. In February 2003, the Clerk of the United States Court of
Appeals for the Second District entered an Order Voluntarily Dismissing that
appeal with Prejudice.

         As a plaintiff, the Company settled certain litigation in fiscal year
2003 realizing income of $190,000, net of related litigation expenses.

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

                  None.

                     [Rest of Page Intentionally Left Blank]

                                       11

<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 2002 and fiscal 2003, 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 - 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)

First Fiscal Quarter - 2003..................................................    0.54                    0.45
(April 1 - June 30, 2002)

Second Fiscal Quarter - 2003.................................................    0.55                    0.12
(July 1 - September 30, 2002)

Third Fiscal Quarter - 2003..................................................    0.40                    0.17
(October 1 - December 31, 2002)

Fourth Fiscal Quarter - 2003.................................................    0.64                    0.18
(January 1 - March 31, 2003)
</TABLE>

         On June 3, 2003, the high and low bid prices for the Company's Common
Stock were $0.65, as reported by the OTC Bulletin Board.

         As of June 2, 2003, there were approximately 69 record owners of the
Company's Common Stock. The Company believes there are approximately 560
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 2003 and 2002, the Company granted certain employees
stock options covering an aggregate of 70,000 and 282,000 shares, respectively,
of Common Stock at exercise prices ranging from $0.27 to $0.60 per share. The
options vest ratably over a five-year period and have a maximum duration of ten
years.

         During fiscal 2003 and 2002, the Company also credited an aggregate of
234,250 and 97,552 shares of Common Stock to the accounts of seven directors who
were participating in the Gunther International Ltd. Directors' Equity Plan

                                       12

<PAGE>

(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. Each
director elected to defer receipt of the shares credited to his account. Based
upon the formula, the following table represents the shares credited to the
Directors by quarter:

<TABLE>
<CAPTION>
                                                                    QUARTER ENDED
                           ---------------------------------------------------------------------------------------------------
                           06/30/01      09/30/01     12/31/01     03/31/02    06/30/02     09/30/02     12/31/02     03/31/02
                           --------      --------     --------     --------    --------     --------     --------     --------
<S>                        <C>           <C>          <C>          <C>         <C>          <C>          <C>          <C>
Fair Market Value          $  0.94       $   0.45     $   0.58     $   0.49    $   0.45     $   0.23     $   0.17     $   0.41
                           =======       ========     ========     ========    ========     ========     ========     ========

Shares credited             13,300         27,780       25,860       30,612      33,336       76,090       88,236       36,588
                           =======       ========     ========     ========    ========     ========     ========     ========
</TABLE>

         In fiscal 2003, a total of 56,228 shares were issued by the Company
under the Plan to two Directors who resigned from the Board in fiscal years 2002
and 2003.

         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.

                     [Rest of Page Intentionally Left Blank]

                                       13

<PAGE>

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>
                                                                             FOR THE YEARS ENDED MARCH 31,
                                                                      2003              2002              2001
                                                                  -------------    --------------    --------------
<S>                                                               <C>              <C>               <C>
Sales:
  Systems ....................................................    $   7,978,453    $    8,406,377    $   13,743,283
  Maintenance ................................................       11,315,657        11,166,347        10,161,333
  Supplies ...................................................        2,907,585         1,375,886           507,359
                                                                  -------------    --------------    --------------
    Total sales ..............................................       22,201,695        20,948,610        24,411,975
                                                                  -------------    --------------    --------------

Cost of sales:
  Systems ....................................................        6,884,554         7,419,937         9,164,764
  Maintenance ................................................        7,727,735         7,906,354         8,105,760
  Supplies ...................................................        2,432,722         1,089,614           372,484
                                                                  -------------    --------------    --------------
    Total cost of sales ......................................       17,045,011        16,415,905        17,643,008
                                                                  -------------    --------------    --------------
     Gross profit ............................................        5,156,684         4,532,705         6,768,967
                                                                  -------------    --------------    --------------

Operating expenses:
 Selling and administrative ..................................        5,675,887         5,521,234         4,555,441
 Research and development ....................................        1,590,414         1,389,544         1,639,385
                                                                  -------------    --------------    --------------
    Total operating expenses .................................        7,266,301         6,910,778         6,194,826
                                                                  -------------    --------------    --------------
Operating loss ...............................................       (2,109,617)       (2,378,073)          574,141
 Interest expense, net                                                  (71,253)         (456,469)         (679,717)
 Litigation (expense)/income .................................          190,000                 -          (178,500)
                                                                  -------------    --------------    --------------
Loss before extraordinary items ..............................       (1,990,870)       (2,834,542)         (284,076)
 Gain on extinguishment of debt ..............................                -         1,410,868                 -
                                                                  -------------    --------------    --------------
Net loss .....................................................    $  (1,990,870)   $   (1,423,674)   $     (284,076)
                                                                  =============    ==============    ==============

Per share:
Loss before extraordinary item ...............................    $       (0.10)   $        (0.30)   $        (0.07)
Extraordinary item                                                            -              0.15                 -
                                                                  -------------    --------------    --------------
Net loss .....................................................    $       (0.10)   $        (0.15)   $        (0.07)
                                                                  =============    ==============    ==============

Weighted average number of
 common shares outstanding ...................................       19,390,356         9,318,579         4,291,769
                                                                  =============    ==============    ==============
</TABLE>

<TABLE>
<CAPTION>
                                                                      2003              2002
                                                                  -------------    --------------
<S>                                                               <C>              <C>
Current Assets ...............................................    $   4,122,524     $   4,739,908
Total Assets .................................................        7,419,915         8,676,781
Current Liabilities ..........................................        5,202,048         5,598,576
Long-term debt, less current maturities ......................        1,130,110            62,078
Stockholders' equity .........................................        1,087,757         3,016,127
</TABLE>

                                       14

<PAGE>

RESULTS OF OPERATIONS

Critical Accounting Policies

         Operating results may be effected by certain accounting policies and
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 (slow moving and obsolete inventories,
accounts receivable and deferred income tax assets), and deferred maintenance
revenue recognition. Management monitors uncompleted sales contracts performing
detailed monthly analysis of costs incurred and weekly reviews of estimated
costs to complete in conjunction with measuring contract performance and
recognizing contract revenues. Management critically evaluates monthly the
likely usefulness of its inventories and the collectability of accounts
receivable and performs regular reviews of the potential realization of deferred
income tax assets. A detailed analysis of deferred maintenance revenue
recognition is performed monthly. In addition, long-lived assets, including
goodwill, are reviewed at least annually or whenever events or changes in
circumstances indicate their carrying amounts may not be recoverable.

Fiscal Year ended March 31, 2003
Compared to Fiscal Year ended March 31, 2002

         The net loss for fiscal 2003 was $(2.0) million, or $(0.10) per share,
compared to $(1.4) million, or $(0.15) per share, for fiscal 2002. In fiscal
2003, a gain of $190,000, or $0.01 per share from the settlement of litigation
(net of litigation expense) is included in the net loss. Fiscal 2002 included 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 these items, the net loss for fiscal 2003
would have been $(2.2) million, or $(0.11) per share and the net loss for fiscal
2002 would have been $(2.8) million, or $(0.30) per share.

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

         Systems sales for fiscal 2003 decreased $.4 million, or 5.0%, to $8.0
million from $8.4 million in fiscal 2002. The decrease was due to a decrease in
the sales of the Company's high-speed assembly systems.

         Sales of high speed assembly systems and upgrades for fiscal 2003
decreased to $6.5 million from $6.9 million in fiscal 2002, a decrease of 5.5%.
The decrease in sales is attributable to a slowdown in orders during the last
two quarters of fiscal 2003 primarily as a result of the current economic
conditions. A summary of orders, sales and backlog for each of the last four
fiscal quarters for the high speed assembly systems and related upgrades is as
follows:

<TABLE>
<CAPTION>
                                                                           2002
                                               2003        --------------------------------------
                                             MARCH 31      DECEMBER 31    SEPTEMBER 30    JUNE 30
                                             --------      -----------    ------------    -------
                                                                 (IN MILLIONS)
<S>                                          <C>           <C>            <C>             <C>
Backlog, beginning of period ...........     $   0.5         $  1.3          $  3.2        $  1.9
Orders .................................         0.8            0.8             1.1           2.8
Revenues recognized ....................        (0.4)          (1.6)           (3.0)         (1.5)
                                             -------         ------          ------        ------
Backlog, end of period .................     $   0.9         $  0.5          $  1.3        $  3.2
                                             =======         ======          ======        ======
</TABLE>

         Backlog includes high speed assembly systems and upgrades and consists
of total contract price less revenue recognized to date for all signed orders on
hand. The backlog at March 31, 2003 has decreased substantially from March 31,
2002, and is well below the levels of the first two fiscal quarters.

         Inc.jet imager sales in fiscal 2003 decreased to $1.4 million, or 8.4%,
from $1.5 million in fiscal 2002. Inc.jet sales comprised 17.3% of total systems
sales in fiscal 2003 as compared to 13.7% in fiscal 2002. The decrease in sales
is

                                       15

<PAGE>

primarily due to customers delaying imager purchases until the debut of the
jet.engine which was introduced in October of 2002 and began to ship in January
2003.

         Maintenance sales increased $150,000, or 1.3%, to $11.3 million in
fiscal 2003 from $11.2 million in fiscal 2002 as a result of an increase of
systems under service contract as a result of system sales during the year as
well as minor price increases. The increase in contract revenues was offset
somewhat by a reduction in non-contracted services in fiscal 2003 compared to
the prior fiscal year.

         Supply sales consist of inc.jet ink cartridge and miscellaneous supply
sales. Sales of ink has increased substantially from fiscal 2002, with revenues
of $2.9 million in fiscal 2003 compared to $1.4 million in fiscal 2002, an
increase of 117%. This increase is the result of increased marketing efforts and
deeper penetration into the distributor/dealer channels.

         The gross margin as a percentage of sales of systems increased to 12.9%
in fiscal 2003 as compared to 11.7% in fiscal 2002. The increase in gross margin
as a percentage of sales was attributable to increases in gross margin in high
speed assembly systems offset slightly by lower gross margin rates for inc.jet
imagers.

         Overhead costs were reduced by 12% throughout the year as part of an
ongoing effort to reduce overall manufacturing costs as well as lower high-speed
assembly system production. Offsetting the gains made in high speed assembly
systems gross margins and as result of the drop-off in imager sales mentioned
above, inc.jet imager gross margin decreased, from 68.4% to 61.3%.

          The gross margin percentage on maintenance sales increased in fiscal
2003 to 31.7% from 29.2% as compared to fiscal 2002. Eliminating the $705,000
benefit from the usage of spare parts acquired at minimal cost referred to in
the inventories section of Note 2 to the consolidated financial statements,
maintenance gross margin decreased to 25.5%. This was primarily the result of
price pressure.

         Selling and administrative expenses increased $155,000, or 2.8%, to
$5.7 million in fiscal 2003 from $5.5 million in fiscal 2002. Selling and
administrative expenses, as a percentage of total revenues, for fiscal 2003 and
2002 were 25.6% and 26.4%, respectively. The increase in selling and
administrative expenses is primarily attributable to an increase in health
insurance costs. In September of 2002, the Company changed from a self-insured
health plan to a fully insured plan. As a result of higher claims experience
under the self-insured plan prior to the change, the run-out costs associated
with the old plan were significantly higher than anticipated and resulted in
additional benefit costs of $300,000 over the prior year. Offsetting the
additional medical costs, one-time expenses related to information systems
training of $100,000 were incurred in fiscal 2002 which were not required in
fiscal 2003.

         Research and development expenses increased $201,000, or 14.5%, to $1.6
million in fiscal 2003 from $1.4 million in fiscal 2002. Research and
development expenses, as a percentage of total revenues, for fiscal 2003 and
2002 were 7.2% and 6.6%, respectively. Research and development expenses in
fiscal 2003 were primarily attributable to the Series W system, including
documentation for the production of the Series W ($419,000), development of new
operating software for high-speed assembly systems ($170,000) and development of
the jet.engine imager ($426,000).

         Interest expense decreased $385,000, from $456,000 in fiscal 2002 to
$71,000 in fiscal 2003. The decrease was due substantially to most of the
Company's debt being paid from the proceeds of the Rights Offering completed in
November 2001. (See Liquidity and Capital Resources for more information.)

         In fiscal 2003, the gain from litigation settlement resulted from the
settlement of the lawsuit against Arthur Andersen LLP. The Company received
$350,000 under the settlement, realizing a net gain of $190,000 after litigation
costs. (See Item 3. Legal Proceedings for more information.) The gain on
extinguishment of debt in fiscal 2002 of $1.4 million is derived from the
Company's purchase from Gunther Partners of $1.9 million of notes payable
previously held by the Estate of Harold S. Geneen for $500,000. (See Item 1.
Development of the Business for more information.)

LIQUIDITY AND CAPITAL RESOURCES

         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

                                       16

<PAGE>

(including customer deposits), financing arrangements with banks and other third
parties (including affiliates) and, from time-to-time, sales of its equity
securities.

         Under the Company's normal sales policy pertaining to high-speed
inserter assembly systems, approximately 50% of the sales price of each
high-speed assembly system is received by the Company within 30 days from the
time an order is placed; approximately 40% is received at the time the system is
shipped 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 general, the Company's cash flows from
operating activities are significantly affected by the timing of the billings of
customer receivables and the payments to vendors for systems under production.

         For the fiscal year, the Company incurred a net loss of $2.0 million
and used cash of $1.6 million in operating activities. At March 31, 2003, the
Company had a deficiency in working capital of $2.2 million. The Company's
liquidity position throughout fiscal 2003 was adversely affected by several
factors. The most significant factor was the slowdown in the number of orders
received as a result of the economic conditions. Through the end of fiscal 2003,
the Company had received five fewer orders for high speed assembly systems than
during the previous fiscal year. Also, the Company, as of September 1, 2002,
converted from a self-insured employee medical plan to a fully insured plan.
Since then, the Company has incurred $300,000 of additional costs as a result of
higher claims experience and the run-out of claims under the prior plan as well
as funding the current premiums under the new plan. Additionally, as a result of
the increase in inc.jet sales volume, the Company's cash flow has been adversely
effected by the additional funding of inc.jet inventories and receivables
required to support the growth of the inc.jet business.

         The shortfall in liquidity necessitated the borrowing of funds
throughout fiscal 2003. On July 3, August 7, September 26 and November 19, 2002
the Company borrowed $700,000, $100,000, $200,000 and $200,000, respectively,
from Mr. Robert Spiegel, a shareholder and member of the Board of Directors, to
alleviate cash deficiencies. These borrowings were evidenced by 8% notes payable
which were originally due on or before December 31, 2002. The Company repaid the
$100,000 note on October 10, 2002. Prior to December 31, 2002, the Company
consolidated the remaining notes aggregating $1,100,000 into a single note with
interest at 8% and a due date of December 31, 2003. On January 31, 2003, Mr.
Spiegel assigned this note to Gunther Partners LLC, a stockholder. Effective
June 19, 2003, Gunther Partners LLC extended the maturity date of this note, so
it is currently due and payable on demand at any time on or after April 1, 2004,
and committed to lend the Company an additional $1,000,000, if necessary,
through March 31, 2004. On May 6, 2003, Mr. Spiegel loaned the Company an
additional $500,000 under an 8% note due December 31, 2003. Effective June 19,
2003 Mr. Spiegel agreed to extend the maturity date of the note, so it is
currently due and payable on demand at any time on or after April 1, 2004. On
June 19, 2003, Mr. Spiegel loaned the Company an additional $200,000 under an 8%
note due and payable on demand at any time on or after April 1, 2004. On June
30, 2003, Gunther Partners LLC loaned the Company $2,000,000 under an 8% note
due and payable on demand at any time on or after April 1, 2004.

         In connection with the September 1992 recapitalization of the Company,
the Company entered into separate royalty agreements with seven founding
stockholders (the "Founders"), pursuant to which the Company is obligated to pay
the Founders an aggregate royalty equal to 1% of all the Company's sales (as
defined) up to a maximum of $12.0 million (of which approximately $1.5 million
has been paid as of the date hereof). See note 8 to the Consolidated Financial
Statements of the Company. In May and June 2003, four of the Founders who
collectively held a 67.3% interest in the aggregate royalty (the "Selling
Founders") approached the Company and offered to release their future interest
in the royalty in exchange for a discounted lump-sum payment. Based on their
combined interest in the aggregate royalty, the Selling Founders' would have
been entitled to receive future royalty payments aggregating approximately
$7,091,211, but the Selling Founders offered to release their future interest in
the royalty for a lump-sum payment of $571,377. The Company did not have
sufficient cash reserves to take advantage of this opportunity, so Gunther
Partners accommodated the transaction by purchasing the royalties from the
Selling Founders in exchange for the lump-sum payment and transferring them to
the Company in exchange for promissory notes with an aggregate principal amount
exactly equal to the lump-sum payment. The notes bear interest at 8% per annum
and provide for principal and interest payments in an amount equal to the amount
that otherwise would have been due and payable under the retired royalty
agreements. Thus, while these agreements will have no effect on short-term
liquidity, the Company will realize significant savings over the term that the
royalty agreements otherwise would have remained outstanding. The maximum
remaining royalty that may be required to be paid to the remaining founders is
$3,400,000.

         On a going forward basis, management believes that the Company's
operating results will improve in fiscal

                                       17

<PAGE>

2004. Subsequent to the end of the fiscal year 2003 through May 31, 2003, the
Company received orders for an additional 3 machines for over $1.4 million and
has several short term sales prospects that could result in additional sales.
Additionally, spending reductions planned in fiscal 2004 include about $300,000
less in health care costs due to the adoption of a fully insured plan. If
necessary, the Company may extend the payment of its trade obligations, which it
reduced by almost $500,000 in fiscal 2003. Lastly, planned and necessary
additions to equipment and leasehold improvements in fiscal 2003 are less than
$100,000.

         As referred to above, since March 31, 2003 through June 30, 2003, the
Company has borrowed $2,700,000 which is due and payable on demand on or after
April 1, 2004. As a result, the Company believes that it has sufficient
liquidity to enable it to fund its obligations as they become due in the
ordinary course of business through March 31, 2004.

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 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.

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
2003 Annual Meeting of Stockholders, which is currently scheduled to be held in
September 2003. 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.

                                       18

<PAGE>

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
2003 Annual Meeting of Stockholders, which is currently scheduled to be held in
September 2003. 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
                  AND RELATED STOCKHOLDER MATTERS

                  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 2003 Annual Meeting of Stockholders, which is currently
scheduled to be held in September 2003. 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 2003 Annual Meeting of Stockholders, which is currently
scheduled to be held in September 2003. 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 13.          EXHIBITS AND REPORTS ON FORM 8-K

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

          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 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).

                                       19

<PAGE>

          10.6    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).

          10.7    Royalty Agreement, dated September 3, 1992, between the
                  Company and Robert Wallace (filed as Exhibit 10(y) 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).

         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    Non-exclusive License Agreement By and Between the
                  Hewlett-Packard Company and the registrant 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).

         10.17    Warrant Agreement, dated October 2, 1998, by and between
                  Gunther Partners, LLC 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).

         10.18    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).

         10.19    Gunther International Ltd. Directors' Equity Plan (filed as
                  Appendix A to the registrant's annual meeting proxy statement
                  dated July 29, 1999, as amended on September 12, 2002 and
                  incorporated herein by reference).

         10.20    Gunther International Ltd. 2002 Stock Option Plan (filed as
                  Appendix A to the registrant's annual meeting proxy statement
                  dated July 29, 2002 and incorporated herein by reference).

         10.21    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).

         10.22    Letter agreement between the registrant and John K. Carpenter
                  dated June 14, 2002 (filed as Exhibit 10.4 to the Company's
                  Quarterly Report on Form 10-QSB dated August 13, 2002 and
                  incorporated herein by reference).

                                       20

<PAGE>

         10.23    Amended and restated promissory note, dated December 31, 2002,
                  made by the registrant to the order of Robert Spiegel (filed
                  as Exhibit 10.2 to the Company's Quarterly Report on Form
                  10-QSB dated February 6, 2003 and incorporated herein by
                  reference).

         10.24    Assignment of amended and restated promissory note from Robert
                  Spiegel to Gunther Partners LLC dated January 31, 2003 (filed
                  as Exhibit 10.3 to the Company's Quarterly Report on Form
                  10-QSB dated February 6, 2003 and incorporated herein by
                  reference).

         10.25    Promissory Note, dated May 6, 2003, made by the registrant to
                  the order of Robert Spiegel (filed as Exhibit 10.25 to the
                  registrant's annual report on Form 10-KSB filed on June 30,
                  2003, and incorporated herein by reference).

         10.26    Assignment and Consent Agreement by and among the registrant,
                  William H. Gunther, Jr., and Gunther Partners LLC, dated May
                  14, 2003 (filed as Exhibit 10.26 to the registrant's annual
                  report on Form 10-KSB filed on June 30, 2003, and incorporated
                  herein by reference).

         10.27    Assignment and Consent Agreement by and among the registrant,
                  Christine E. Gunther, Jr., and Gunther Partners LLC, dated May
                  14, 2003 (filed as Exhibit 10.27 to the registrant's annual
                  report on Form 10-KSB filed on June 30, 2003, and incorporated
                  herein by reference).

         10.28    Transfer and assignment of Agreement dated May 14, 2003
                  between Gunther Partners LLC and the registrant (filed as
                  Exhibit 10.28 to the registrant's annual report on Form 10-KSB
                  filed on June 30, 2003, and incorporated herein by reference).

         10.29    Promissory Note, dated May 14, 2003 made by the registrant to
                  the order of Gunther Partners LLC (filed as Exhibit 10.29 to
                  the registrant's annual report on Form 10-KSB filed on June
                  30, 2003, and incorporated herein by reference).

         10.30    Assignment and Consent Agreement by and among the registrant,
                  William H. Gunther III and Gunther Partners LLC, dated June
                  11, 2003 (filed as Exhibit 10.30 to the registrant's annual
                  report on Form 10-KSB filed on June 30, 2003, and incorporated
                  herein by reference).

         10.31    Assignment and Consent Agreement by and among the registrant,
                  Susan G. Hotkowski, and Gunther Partners LLC, dated June 11,
                  2003 (filed as Exhibit 10.31 to the registrant's annual report
                  on Form 10-KSB filed on June 30, 2003, and incorporated herein
                  by reference).

         10.32    Transfer and assignment of Agreement dated June 11, 2003
                  between Gunther Partners LLC and the registrant (filed as
                  Exhibit 10.32 to the registrant's annual report on Form 10-KSB
                  filed on June 30, 2003, and incorporated herein by reference).

         10.33    Promissory Note, dated June 11, 2003 made by the registrant to
                  the order of Gunther Partners LLC (filed as Exhibit 10.33 to
                  the registrant's annual report on Form 10-KSB filed on June
                  30, 2003, and incorporated herein by reference).

         10.34    Extension of Note dated May 6, 2003 made by Robert Spiegel to
                  the registrant (filed as Exhibit 10.34 to the registrant's
                  annual report on Form 10-KSB filed on June 30, 2003, and
                  incorporated herein by reference).

         10.35    Extension of Note dated December 31, 2003 and commitment
                  letter made by Gunther Partners LLC to the registrant (filed
                  as Exhibit 10.35 to the registrant's annual report on Form
                  10-KSB filed on June 30, 2003, and incorporated herein by
                  reference).

         10.36    Promissory Note dated June 19, 2003 made by the registrant to
                  the order of Robert Spiegel (filed as Exhibit 10.36 to the
                  registrant's annual report on Form 10-KSB filed on June 30,
                  2003, and incorporated herein by reference).

         10.37    Promissory Note dated June 30, 2003 made by the registrant to
                  the order of Gunther Partners LLC (filed as Exhibit 10.37 to
                  the registrant's annual report on Form 10-KSB filed on June
                  30, 2003, and incorporated herein by reference).

         21.1     List of Subsidiaries of the Company (filed as Exhibit 21.1 to
                  the registrant's annual report on Form 10-KSB dated June 29,
                  2001 and incorporated herein by reference).

         24.1     Power of Attorney (Previously filed)

         99.1     Certification of Marc I. Perkins, Chief Executive Officer, and
                  John K. Carpenter, Chief Financial Officer pursuant to 18
                  U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

B.       Reports on Form 8-K.
         None.

                                       21

<PAGE>

ITEM 14.          CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures -

         We maintain a system of disclosure controls and procedures designed to
provide reasonable assurance that required material information is included in
our published financial statements and other disclosures included in this
report. Within the 90 day period prior to the date of this report, we evaluated
the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Rule 13a-14 adopted under the Securities Exchange Act of
1934. Based upon that evaluation, our Chief Executive Officer and our Chief
Financial Officer concluded that our disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company (including subsidiaries) that is required to be included in this annual
report on Form 10-KSB.

Changes in internal controls -

         There have been no significant changes in our internal controls or in
other factors which could significantly affect internal controls subsequent to
the date that we carried out our evaluation.

                                       22

<PAGE>

                                   SIGNATURES

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

                                  GUNTHER INTERNATIONAL LTD.

Dated: July 8, 2003               By: /s/ John K. Carpenter
                                      ---------------------
                                  John K. Carpenter
                                  Senior Vice President, Chief Financial Officer
                                  and Treasurer (on behalf of the registrant and
                                  as Principal Financial and Accounting Officer)

                                       23

<PAGE>

                            RULE 13a-14 CERTIFICATION

                                  CERTIFICATION

I, Marc I. Perkins, certify that:

                  1.       I have reviewed this annual report on Form 10-KSB/A
         of Gunther International Ltd.

                  2.       Based on my knowledge, this annual report does not
         contain any untrue statement of a material fact or omit to state a
         material fact necessary to make the statements made, in light of the
         circumstances under which such statements were made, not misleading
         with respect to the period covered by this annual report;

                  3.       Based on my knowledge, the financial statements, and
         other financial information included in this annual report, fairly
         present in all material respects the financial condition, results of
         operations and cash flows of the registrant as of, and for, the periods
         presented in this annual report;

                  4.       The registrant's other certifying officers and I are
         responsible for establishing and maintaining disclosure controls and
         procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
         registrant and we have:

                                    a.       designed such disclosure controls
                  and procedures to ensure that material information relating to
                  the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this annual report is being
                  prepared;

                                    b.       evaluated the effectiveness of the
                  registrant's disclosure controls and procedures as of a date
                  within 90 days prior to the filing date of this annual report
                  (the "Evaluation Date"); and

                                    c.       presented in this annual report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures based upon our evaluation as of the Evaluation
                  Date;

                  5.       The registrant's other certifying officers and I have
         disclosed, based on our most recent evaluation, to the registrant's
         auditors and the audit committee of the registrant's board of directors
         or persons performing the equivalent functions:

                                    a.       all significant deficiencies in the
                  design or operation of internal controls which could adversely
                  affect the registrant's ability to record, process, summarize
                  and report financial data and have identified for the
                  registrant's auditors any material weaknesses in internal
                  controls; and

                                    b.       any fraud, whether or not material,
                  that involves management or other employees who have a
                  significant role in the registrant's internal controls; and

                  6.       The registrant's other certifying officers and I have
         indicated in this annual report whether or not there were significant
         changes in internal controls or in other factors which could
         significantly affect internal controls subsequent to the date of our
         most recent evaluation, including any corrective actions with regard to
         significant deficiencies and material weaknesses.

             Date: July 8, 2003

                                                   /s/  Marc I. Perkins
                                                   --------------------
                                                   Marc I. Perkins
                                                   Chief Executive Officer

                                       24

<PAGE>

                            RULE 13a-14 CERTIFICATION

                                  CERTIFICATION

I, John K. Carpenter, certify that:

                  1.       I have reviewed this annual report on Form 10-KSB/A
         of Gunther International Ltd.

                  2.       Based on my knowledge, this annual report does not
         contain any untrue statement of a material fact or omit to state a
         material fact necessary to make the statements made, in light of the
         circumstances under which such statements were made, not misleading
         with respect to the period covered by this annual report;

                  3.       Based on my knowledge, the financial statements, and
         other financial information included in this annual report, fairly
         present in all material respects the financial condition, results of
         operations and cash flows of the registrant as of, and for, the periods
         presented in this annual report;

                  4.       The registrant's other certifying officers and I are
         responsible for establishing and maintaining disclosure controls and
         procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
         registrant and we have:

                                    a.       designed such disclosure controls
                  and procedures to ensure that material information relating to
                  the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this annual report is being
                  prepared;

                                    b.       evaluated the effectiveness of the
                  registrant's disclosure controls and procedures as of a date
                  within 90 days prior to the filing date of this annual report
                  (the "Evaluation Date"); and

                                    c.       presented in this annual report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures based upon our evaluation as of the Evaluation
                  Date;

                  5.       The registrant's other certifying officers and I have
         disclosed, based on our most recent evaluation, to the registrant's
         auditors and the audit committee of the registrant's board of directors
         or persons performing the equivalent functions:

                                    a.       all significant deficiencies in the
                  design or operation of internal controls which could adversely
                  affect the registrant's ability to record, process, summarize
                  and report financial data and have identified for the
                  registrant's auditors any material weaknesses in internal
                  controls; and

                                    b.       any fraud, whether or not material,
                  that involves management or other employees who have a
                  significant role in the registrant's internal controls; and

                  6.       The registrant's other certifying officers and I have
         indicated in this annual report whether or not there were significant
         changes in internal controls or in other factors which could
         significantly affect internal controls subsequent to the date of our
         most recent evaluation, including any corrective actions with regard to
         significant deficiencies and material weaknesses.

            Date: July 8, 2003

                                          /s/  John K. Carpenter
                                          -----------------------
                                          John K. Carpenter
                                          Senior Vice President, Chief Financial
                                          Officer, Treasurer and Secretary

                                       25

<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S>                                                                                                               <C>
Report of Ernst & Young LLP, Independent Auditors..............................................................   F-2

Consolidated Balance Sheets as of March 31, 2003 and 2002......................................................   F-3

Consolidated Statements of Operations for the Years Ended March 31, 2003 and 2002..............................   F-4

Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended March 31, 2003 and 2002..........   F-5

Consolidated Statements of Cash Flows for the Years Ended March 31, 2003 and 2002..............................   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, 2003 and 2002, 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, 2003 and 2002, 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.

                                               /s/ Ernst & Young LLP

Hartford, Connecticut
May 18, 2003, except for the references to the June 19 and 30, 2003 matters in
Note 5 as to which the dates are also June 19 and 30, 2003

                                      F-2

<PAGE>

                           GUNTHER INTERNATIONAL LTD.
                           CONSOLIDATED BALANCE SHEETS
                                 AS OF MARCH 31

<TABLE>
<CAPTION>
                                                                                  2003            2002
                                                                              ------------    ------------
<S>                                                                           <C>             <C>
Assets
Current Assets:
     Cash .................................................................   $    405,540    $  1,119,790
     Restricted cash ......................................................        101,862         100,054
     Accounts receivable, less allowance ..................................        905,450         849,059
     Costs and estimated earnings in excess of billings on uncompleted
          contracts .......................................................         56,409         776,278
     Inventories ..........................................................      2,489,349       1,666,462
     Prepaid expenses .....................................................        163,914         228,265
                                                                              ------------    ------------
         Total current assets .............................................      4,122,524       4,739,908
                                                                              ------------    ------------
Equipment and Leasehold Improvements:
    Machinery and equipment ...............................................      1,403,050       2,230,914
    Furniture and fixtures ................................................        446,256         505,939
    Leasehold improvements ................................................        128,494         135,962
                                                                              ------------    ------------
                                                                                 1,977,800       2,872,815
Accumulated depreciation and amortization .................................     (1,248,165)     (1,518,098)
                                                                              ------------    ------------
                                                                                   729,635       1,354,717
                                                                              ------------    ------------

Other Assets:
    Goodwill ..............................................................      2,551,429       2,551,429
    Other .................................................................         16,327          30,727
                                                                              ------------    ------------
                                                                                 2,567,756       2,582,156
                                                                              ------------    ------------
                                                                              $  7,419,915    $  8,676,781
                                                                              ============    ============
Liabilities and Stockholders' Equity

Current Liabilities:
   Current maturities of long-term debt - other ...........................   $     31,264    $     27,842
   Accounts payable .......................................................      1,508,965       1,977,539
   Accrued expenses .......................................................      1,124,337       1,188,462
   Billings in excess of costs and estimated earnings on uncompleted
          contracts .......................................................        195,027         515,903
   Deferred service contract revenue ......................................      2,342,455       1,888,830
                                                                              ------------    ------------
       Total current liabilities ..........................................      5,202,048       5,598,576
                                                                              ------------    ------------
Long-Term Debt:
   Related party ..........................................................      1,100,000               -
   Other, less current maturities .........................................         30,110          62,078
                                                                              ------------    ------------
                                                                                 1,130,110          62,078
                                                                              ------------    ------------
       Total liabilities ..................................................      6,332,158       5,660,654
                                                                              ------------    ------------

Commitments and contingencies (Note 8)
Stockholders' Equity:
   Preferred Stock, $.001 par value: 500,000 shares authorized; none issued              -               -
   Common Stock, $.001 par value: 32,000,000 shares authorized; 20,347,997
      shares issued at March 31, 2003 and 20,291,769 shares issued
      at March 31 2002, including shares held in treasury .................         20,348          20,292
   Treasury Stock, at cost (919,569 shares) ...............................       (137,935)       (137,935)
   Additional paid-in capital .............................................     20,067,563      20,005,119
   Accumulated deficit ....................................................    (18,862,219)    (16,871,349)
                                                                              ------------    ------------
       Total Stockholders' Equity .........................................      1,087,757       3,016,127
                                                                              ------------    ------------
                                                                              $  7,419,915    $  8,676,781
                                                                              ============    ============
</TABLE>

                             See accompanying notes.

                                       F-3

<PAGE>

                           GUNTHER INTERNATIONAL LTD.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                          FOR THE YEARS ENDED MARCH 31,

<TABLE>
<CAPTION>
                                                                 2003           2002
                                                            ------------    ------------
<S>                                                         <C>             <C>
Sales:
  Systems .........................................         $  7,978,453    $  8,406,377
  Maintenance .....................................           11,315,657      11,166,347
  Supplies ........................................            2,907,585       1,375,886
                                                            ------------    ------------
    Total sales ...................................           22,201,695      20,948,610
                                                            ------------    ------------

Cost of sales:
  Systems .........................................            6,884,554       7,419,937
  Maintenance .....................................            7,727,735       7,906,354
  Supplies ........................................            2,432,722       1,089,614
                                                            ------------    ------------
    Total cost of sales ...........................           17,045,011      16,415,905
                                                            ------------    ------------
     Gross profit .................................            5,156,684       4,532,705
                                                            ------------    ------------

Operating expenses:
 Selling and administrative .......................            5,675,887       5,521,234
 Research and development .........................            1,590,414       1,389,544
                                                            ------------    ------------
   Total operating expenses .......................            7,266,301       6,910,778
                                                            ------------    ------------
Operating loss ....................................           (2,109,617)     (2,378,073)
 Interest expense, net ............................              (71,253)       (456,469)
 Litigation settlement, net .......................              190,000               -
                                                            ------------    ------------
Loss before extraordinary items ...................           (1,990,870)     (2,834,542)
 Gain on extinguishment of debt ...................                    -       1,410,868
                                                            ------------    ------------
Net loss ..........................................         $ (1,990,870)   $ (1,423,674)
                                                            ============    ============

Loss per share:
Loss before extraordinary item ....................         $      (0.10)   $      (0.30)
Extraordinary item ................................                    -            0.15
                                                            ------------    ------------
Net loss ..........................................         $      (0.10)   $      (0.15)
                                                            ============    ============
Weighted average number of common shares
 outstanding ......................................           19,390,356       9,318,579
                                                            ============    ============
</TABLE>

                             See accompanying notes.

                                       F-4

<PAGE>

                           GUNTHER INTERNATIONAL LTD.
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                   FOR THE YEARS ENDED MARCH 31, 2003 AND 2002

<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, 2001:
 As reported ......................   4,291,769 $   4,292         -  $        -  $ 12,188,556  $(15,447,675) $ (3,254,827)
 Adjustment .......................                                                    85,000                      85,000
                                     ---------- ---------  --------  ----------  ------------  ------------  ------------
 As restated ......................   4,291,769     4,292         -           -    12,273,556   (15,447,675)   (3,169,827)
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)
Directors' Equity Plan ............                                                    55,000                      55,000
Net Loss ..........................           -         -         -           -             -    (1,423,674)   (1,423,674)
                                     ---------- ---------  --------  ----------  ------------  ------------  ------------
Balance, March 31, 2002 ...........  20,291,769    20,292  (919,569)   (137,935)   20,005,119   (16,871,349)    3,016,127
Issuance of Common Stock ..........      56,228        56         -           -           (56)            -             -
Directors' Equity Plan ............                                                    62,500                      62,500
Net Loss ..........................           -         -         -           -             -    (1,990,870)   (1,990,870)
                                     ---------- ---------  --------  ----------  ------------  ------------  ------------
Balance, March 31, 2003 ...........  20,347,997 $  20,348  (919,569) $ (137,935) $ 20,067,563  $(18,862,219) $  1,087,757
                                     ========== =========  ========  ==========  ============  ============  ============
</TABLE>

                             See accompanying notes.

                                       F-5

<PAGE>

                           GUNTHER INTERNATIONAL LTD.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                          FOR THE YEARS ENDED MARCH 31,

<TABLE>
<CAPTION>
                                                                     2003           2002
                                                                  -----------    -----------
<S>                                                               <C>            <C>
Operating activities:
   Net loss ...................................................   $(1,990,870)   $(1,423,674)
       Adjustments to reconcile net loss to net cash
        used for operating activities:
       Depreciation and amortization ..........................       593,060        607,380
       Provision for doubtful accounts ........................        43,170         49,196
       Interest accrued on related party debt .................             -         42,456
       Directors' compensation ................................        62,500         55,000
       Gain on extinguishment of debt .........................             -     (1,410,868)
       Loss on disposal of equipment ..........................         2,598         32,787
       Changes in operating assets and liabilities:
        Accounts receivable ...................................       (99,561)     1,104,143
        Inventories ...........................................      (690,887)       270,076
        Prep aid expenses .....................................        64,351         26,287
        Accounts payable ......................................      (468,574)      (462,898)
        Accrued expenses ......................................       (64,125)      (234,503)
        Deferred service contract revenue .....................       453,625        106,364
        Billings, costs and estimated earnings on
         uncompleted contracts - net ..........................       398,993         15,608
                                                                  -----------    -----------
         Net cash used for operating activities ...............    (1,695,720)    (1,222,646)
                                                                  -----------    -----------

Investing activities:
    Acquisitions of equipment and leasehold improvements.......       (88,176)      (540,994)
                                                                  -----------    -----------
         Net cash used for investing activities ...............       (88,176)      (540,994)
                                                                  -----------    -----------

Financing activities:
    Repayment of notes payable and long-term debt .............      (128,546)    (5,695,007)
    Proceeds from notes payable and long-term debt ............     1,200,000        300,000
    Proceeds from sale of Common Stock ........................             -      7,757,033
    Purchase of Treasury Stock ................................             -       (137,935)
    Transfer to restricted cash ...............................        (1,808)      (100,054)
                                                                  -----------    -----------
         Net cash provided by financing activities ............     1,069,646      2,124,037
                                                                  -----------    -----------
Change in cash ................................................      (714,250)       360,397
Cash, beginning of year .......................................     1,119,790        759,393
                                                                  -----------    -----------
Cash, end of year .............................................   $   405,540    $ 1,119,790
                                                                  ===========    ===========

Supplemental Cash Flow Information:
    Cash paid for interest ....................................   $    10,211    $   394,428
                                                                  ===========    ===========
    Cash paid for income taxes ................................   $         -    $    27,028
                                                                  ===========    ===========
Supplemental Disclosure of Non-Cash Investing Activities:
    Property and equipment acquired for notes payable .........   $         -    $    35,831
                                                                  ===========    ===========
</TABLE>

                             See accompanying notes.

                                       F-6

<PAGE>

                           GUNTHER INTERNATIONAL LTD.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2003 AND 2002

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 and accounts receivable --

         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. Related accounts
receivable are recognized as billings are rendered under the terms of the sales
contract. Changes in estimated earnings are recognized in the period determined.
Sales and related accounts receivable of inc.jet Imagers and consumables are
recognized when the products are delivered and the customer takes ownership.
Accounts receivable for service contracts are recognized when billed and related
revenue is recognized over the term of the contract; amounts applicable to
future periods are deferred.

         The Company makes allowances for credit losses ($125,308 at March 31,
2003 and $83,356 at March 31, 2002). In connection therewith, the Company
evaluates the collectability of accounts receivable on an ongoing basis based on
an assessment of the customers' current financial condition, general economic
conditions and past experience. The Company ages its accounts receivable based
on the date of the related invoice. As of March 31, 2003, accounts receivable of
less than $1,000 were 90 days past due; $213,000 as of March 31, 2002.

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. During fiscal year
2003, the Company was able to obtain for a nominal cost and use certain spare
parts previously sold to customers. As a result, maintenance cost of sales was
about $705,000 lower for the fiscal year ended March 31, 2003 than it otherwise
would have been.

Equipment and leasehold improvements -

         Equipment and leasehold improvements are stated at cost. 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 using the
straight-line method over the useful life of the product that the tooling was
designed to produce. Fully depreciated assets no longer used in operations are
written off. Depreciation of equipment and amortization of leasehold
improvements was $579,000 and $593,000 in fiscal 2003 and 2002, respectively.

                                      F-7

<PAGE>

Goodwill and other intangible assets -

         Effective April 1, 2001 the Company adopted Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets ("FAS 142").
Under FAS 142, goodwill is no longer amortized, but instead tested at least
annually for impairment or whenever indicators of impairment are identified. The
Company applies a fair value based test for purposes of performing the
impairment analysis. Through March 31, 2003, there have been no impairment
losses. Other intangible assets with definitive useful lives continue to be
amortized over those lives. The Company does not have significant amounts of
other intangible assets.

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 warranty -

         The Company provides a warranty on each high-speed system for a period
of 90 days after installation. Product warranty expense was not significant for
either fiscal 2003 or 2002.

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 not likely (see Note 6).

Stock- based compensation -

         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 2003 or 2002.

         Pro forma information required by FAS 123, Accounting for Stock-Based
Compensation, as if the Company had applied fair value recognition provisions
follows:

<TABLE>
<CAPTION>
                                                                            2003                2002
                                                                       --------------      --------------
<S>                                                                    <C>                 <C>
Net loss as reported ...............................................   $   (1,990,870)     $   (1,423,674)
Stock-based compensation expense based on fair value ...............           68,724             170,326
                                                                       --------------      --------------
Pro forma net loss .................................................   $   (2,059,594)     $   (1,594,000)
                                                                       ==============      ==============

Net loss per share - as reported ...................................   $        (0.10)     $        (0.15)
                                                                       ==============      ==============
Net loss per share - pro forma .....................................   $        (0.11)     $        (0.17)
                                                                       ==============      ==============
</TABLE>

                                       F-8

<PAGE>

         Fair value was estimated using a Black-Scholes option-pricing model. In
both years the weighted-average risk-free interest rate was 3% and the
weighted-average expected life assumption was five years. The volatility factor
was 153% for 2003 and 107% for 2002. There was no dividend yield for either
year.

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 -

         Common stock equivalents consist of options and warrants and were not
used to compute the loss per share because their effect was 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.

Restatement and reclassifications -

         Additional paid-in capital has been restated from the amounts
previously reported for directors' compensation accrued in fiscal 2002 of
$55,000 and in prior fiscal years of $85,000 and included in accrued expenses.
Also, certain fiscal 2002 amounts previously reported have been reclassified to
conform to the fiscal 2003 presentation. In addition, a "series W" system, with
a carrying value of $132,000 that was included in machinery and equipment at
March 31, 2002 was reclassified to inventories as of June 30, 2002 to reflect
its intended purpose.

3.       INVENTORIES:

<TABLE>
<CAPTION>
                                   2003           2002
                                -----------    -----------
<S>                             <C>            <C>
Raw materials .............     $ 1,880,070    $ 1,268,016
Work-in-process ...........         253,588        366,722
Finished goods ............         642,428        410,442
                                -----------    -----------
                                  2,776,086      2,045,180
Valuation allowance .......        (286,737)      (378,718)
                                -----------    -----------
                                $ 2,489,349    $ 1,666,462
                                ===========    ===========
</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>
                               2003            2002
                           -----------     -----------
<S>                        <C>             <C>
Costs incurred ..........  $   750,741     $ 1,275,902
Estimated earnings ......       17,361         270,604
                           -----------     -----------
                               768,102       1,546,506
Billings to date ........     (906,720)     (1,286,131)
                           -----------     -----------
                           $  (138,618)    $   260,375
                           ===========     ===========
</TABLE>

                                       F-9

<PAGE>

         Included in the accompanying balance sheets under the following
         captions:

<TABLE>
<CAPTION>
                                                                                   2003             2002
                                                                                -----------     -----------
<S>                                                                             <C>             <C>
Costs and estimated earnings in excess of billings on
 uncompleted contracts ......................................................   $    56,409     $   776,278
Billings in excess of costs and estimated earnings on
 uncompleted contracts ......................................................      (195,027)       (515,903)
                                                                                -----------     -----------
                                                                                $  (138,618)    $   260,375
                                                                                ===========     ===========
</TABLE>

5.       LONG-TERM DEBT AND RECAPITALIZATION:

         Long-term debt consists of:

<TABLE>
<CAPTION>
                                                                                   2003             2002
                                                                                -----------     -----------
<S>                                                                             <C>             <C>
Note payable to related party - Gunther Partners LLC ........................   $ 1,100,000     $         -
Other .......................................................................        61,374          89,920
                                                                                -----------     -----------
                                                                                  1,161,374          89,920
Current maturities of long-term debt - other ................................       (31,264)        (27,842)
                                                                                -----------     -----------
                                                                                $ 1,130,110     $    62,078
                                                                                ===========     ===========
</TABLE>

On July 3, August 7, September 26 and November 19, 2002 the Company borrowed
$700,000, $100,000, $200,000 and $200,000, respectively, from Mr. Robert
Spiegel, a shareholder and member of the Board of Directors. These borrowings
were evidenced by 8% notes that were due on or before December 31, 2002. The
Company repaid the $100,000 note on October 10, 2002. Prior to December 31,
2002, the Company consolidated the remaining notes aggregating $1,100,000 into a
single note with interest at 8% and a due date of December 31, 2003. On January
31, 2003, Mr. Spiegel assigned this note to Gunther Partners LLC, a stockholder.
Effective June 19, 2003, Gunther Partners LLC extended the maturity date of this
note, so it is currently due and payable on demand at any time on or after April
1, 2004, and committed to lend the Company an additional $1,000,000, if
necessary, through March 31, 2004. On May 6, 2003, Mr. Spiegel loaned the
Company an additional $500,000 under an 8% note due December 31, 2003. Effective
June 19, 2003, Mr. Spiegel agreed to extend the maturity date of the note, so it
is currently due and payable on demand at any time on or after April 1, 2004. On
June 19, 2003, Mr. Spiegel loaned the Company an additional $200,000 under an 8%
note due and payable on demand at any time on or after April 1, 2004. On
June 30, 2003, Gunther Partners LLC loaned the Company $2,000,000 under an 8%
note due and payable on demand at any time on or after April 1, 2004.

         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 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 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, 2003, aggregate annual maturities of long-term debt
are:

<TABLE>
<CAPTION>
                                                            Amount
                                                         -----------
<S>                                                      <C>
2004 ................................................    $    31,264
2005 ................................................      1,125,504
2006 ................................................          3,351
2007 ................................................          1,255
                                                         -----------
                                                         $ 1,161,374
                                                         ===========
</TABLE>

                                      F-10

<PAGE>

6.       DEFERRED INCOME TAXES:

         Significant components of deferred income tax assets (liabilities) are:

<TABLE>
<CAPTION>
                                                            2003            2002
                                                       -------------    ------------
<S>                                                    <C>              <C>
Equipment and leasehold improvements ................  $     (85,894)   $    (69,906)
Accrued expenses ....................................        131,133         225,070
Inventories .........................................        165,961         187,581
Allowance for doubtful accounts .....................         48,870          31,653
Research and development ............................        241,179         378,914
Net operating loss carryforwards ....................      2,048,437         885,080
                                                       -------------    ------------
Net total deferred income tax asset .................      2,549,686       1,638,392
Valuation allowance .................................     (2,549,686)     (1,638,392)
                                                       -------------    ------------

Net deferred income taxes                              $           -    $          -
                                                       =============    ============
</TABLE>

         At March 31, 2003, the Company has federal and state net operating loss
(NOL) carryforwards of $5.7 million and $3.6 million, respectively, which are
scheduled to expire in varying amounts from 2003 to 2023. In connection with a
change in control during 2002, resulting from the consummation of the Rights
Offering, the annual amount of NOL carryforward attributable to the period prior
to the change in control that may be used in any given year is limited. The
federal NOL of $5.7 million includes losses of $2.1 million prior to the change
in control and $3.6 million of losses after the change in control. The valuation
allowance at March 31, 2001 was $4.4 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 (2,183,928 shares at
March 31, 2003). 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 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 two stock option plans: the Gunther International Ltd.
1993 Stock Option Plan (which expires in October, 2003) and the 2002 Gunther
International Ltd. Stock Option Plan. 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>
                                                              2003                 2002
                                                     ---------------------  ------------------
<S>                                                  <C>           <C>      <C>        <C>
Outstanding, beginning of year ....................      589,500   $  1.36   322,500   $  1.79
Granted ...........................................       70,000   $  0.27   282,500   $  0.55
Cancelled .........................................      (82,000)  $ (1.08)  (15,500)  $ (4.67)
                                                     -----------   -------  --------   -------
Outstanding, end of year ..........................      577,500   $  1.10   589,500   $  1.36
                                                     ===========   =======  ========   =======
Exercisable, March 31, 2003 .......................      292,900   $  1.61   255,100   $  1.71
                                                     ===========   =======  ========   =======
Weighted Average fair value .......................  $      0.19            $   0.43
                                                     ===========            ========
</TABLE>

         At March 31, 2003, exercise prices ranged from $0.27 to $3.22 and the
weighted average remaining contractual life was 6 years. Also, at March 31,
2003, 383,000 options were available for future grants.

                                      F-11

<PAGE>

         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 each director's customary quarterly retainer for services of
$2,500. The issuance of such shares may be deferred at the election of the
director. In fiscal 2003 and 2002, 234,250 and 97,550 shares were granted with
an aggregate fair value of $62,500 and $50,000. In fiscal 2003, as a result of
the resignations of certain directors, 56,228 shares were issued by the Company
under the plan. Through March 31, 2003, an aggregate of 395,235 shares have been
granted with 339,007 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, 2003 and 2002, there were no issued and outstanding shares of Preferred
Stock. At March 31, 2003, 3,645,829 shares of the Company's Common Stock were
reserved for future issuance.

8.       COMMITMENTS AND CONTINGENCIES:

Development Agreement -

         The Company had a development agreement with Connecticut Innovations,
Inc. ("CII"), which required the Company to pay CII a royalty equal to .67%
(sixty-seven hundredths of a percent) of all systems sales through December 31,
2002. Total royalty expense under this agreement was $131,250 and $137,500 for
fiscal 2003 and 2002, respectively. CII has a continuing security interest in
all of the Company's patents, trademarks and other assets as collateral until
such time as the remaining accrued royalty obligations are paid. Title to these
assets will then be transferred back to the Company.

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 operating lease agreements. Lease expense for fiscal 2003 and 2002 was
approximately $336,000 and $380,000, respectively.

         As of March 31, 2003, future minimum payments for non-cancelable
operating leases follow:

<TABLE>
<CAPTION>
FISCAL YEAR
  ENDING
 MARCH 31,                                                              AMOUNT
-----------                                                          -----------
<S>                                                                  <C>
  2004 ...........................................................   $   309,912
  2005 ...........................................................       309,463
  2006 ...........................................................       309,463
  2007 ...........................................................        46,380
  2008 ...........................................................        16,847
                                                                     -----------
                                                                     $   992,065
                                                                     -----------
</TABLE>

Other commitments -

         The Company has entered into royalty agreements with seven founding
stockholders pursuant to which the Company is obligated to pay 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 these agreements terminate upon the
payment of royalties aggregating $12,000,000. For fiscal 2003 and 2002,
royalties expensed under this agreement were $222,000 and $209,000,
respectively. Total royalties expensed under this agreement were $1,685,000
through March 31, 2003.

         Subsequent to March 31, 2003, Gunther Partners LLC reached agreements
with four of the founding

                                      F-12

<PAGE>

stockholders (holding an aggregate interest in the royalties equal to
approximately 67.3334% of the total royalty obligation) to purchase their future
interest in the royalties for $571,377. These agreements are effective with the
fiscal 2003 royalty payments. In turn, Gunther Partners LLC has transferred and
assigned the rights to the acquired royalties to the Company in exchange for
promissory notes in the aggregate amount of $571,377 (the aggregate amount paid
by Gunther Partners to acquire the royalties) bearing interest at 8% with
principal and interest repayments equivalent to the amounts that would have been
due and payable under the cancelled royalty agreements. After giving effect to
the above transactions relating to Gunther Partners LLC and the founding
stockholders, the maximum remaining royalty that may be required to be paid to
the remaining three founding stockholders for royalties is $3,400,000.

         The Company had an agreement related to the development and use of
certain ink jet 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.

Contingencies -

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

         As a plaintiff, the Company settled certain litigation in 2003
realizing income of $190,000, net of related expenses.

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 which are not material.

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 2003, sales to one customer were 14% of sales, in
fiscal 2002 sales to one customer were 21% 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, 2003 and 2002 approximate fair value.
Fair value was based on cash flows and current market conditions.

12.      LIQUIDITY:

         For fiscal 2003, the Company incurred a net loss of $2.0 million and
used cash of $1.7 million in operating activities. At March 31, 2003, the
Company had a deficiency in working capital of $2.2 million. Subsequent to March
31, 2003, the Company received orders for machines aggregating $1.4 million. In
addition, the Company has planned spending reductions in fiscal 2004. Further,
as referred to in Note 5 above, effective June 19, 2003, Gunther Partners LLC
committed to lend the Company an additional $1.0 million, if necessary, through
March 31, 2004. Also, as referred to in Note 5, subsequent to March 31, 2003,
Mr. Spiegel loaned the Company $700,000 that is due and payable on demand on or
after April 1, 2004. On June 30, 2003, Gunther Partners LLC loaned the Company
$2,000,000 under an 8% note due and payable at any time on or after April 1,
2004. As a result, the Company believes it has sufficient sources of liquidity
to enable it to fund its obligations as they become due in the ordinary course
of business through March 31, 2004.

                                      F-13