<PAGE>

                                    FORM 10-Q



                       SECURITIES AND EXCHANGE COMMISSION



                              Washington, DC  20549



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



For quarterly period ended          DECEMBER 27, 1996
-------------------------------------------------------------------------------

Commission file number                 0-20287
-------------------------------------------------------------------------------



                              NU-KOTE HOLDING, INC.
-------------------------------------------------------------------------------
              (Exact name of registrant as specified in its charter)



              DELAWARE                                  16-1296153
-------------------------------------------------------------------------------
  (State or other jurisdiction of                   (I.R.S. Employer
   incorporation or organization)                   Identification No.)




17950 PRESTON ROAD, SUITE 690, DALLAS, TEXAS                75252
-------------------------------------------------------------------------------
(Address of principal executive offices)                  (Zip Code)




                                  (972) 250-2785
-------------------------------------------------------------------------------
               (Registrant's telephone number, including area code)


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

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

 Number of shares of common stock of registrant outstanding at February 5,
1997:

                CLASS                                   OUTSTANDING
                -----                                   -----------
  Class A common stock $.01 par value                    21,775,302


<PAGE>

                             NU-KOTE HOLDING, INC.

                             INDEX TO CONSOLIDATED
                             FINANCIAL STATEMENTS


                                                                      PAGE
                                                                      ----
PART I - FINANCIAL INFORMATION

     Consolidated Balance Sheets as of
      December 27, 1996 and March 31, 1996                              3

     Consolidated Statements of Operations and Retained
      Earnings for the Three Month Periods
      Ended December 27, 1996 and December 29, 1995                     4

     Consolidated Statements of Operations and Retained
      Earnings (Deficit) for the Nine Month Periods   
      Ended December 27, 1996 and December 29, 1995                     5

     Consolidated Statements of Cash Flows for the Nine
      Month Periods Ended December 27, 1996
       and December 29, 1995                                            6

     Notes to Consolidated Financial Statements                         7

     Management's Discussion and Analysis of Financial
      Condition and Results of Operations                              14

PART II - OTHER INFORMATION

     Other Information                                                 19

     Signature Page                                                    20


                                       2

<PAGE>

<TABLE>

                               NU-KOTE HOLDING, INC. AND SUBSIDIARIES
                                     CONSOLIDATED BALANCE SHEETS
                            (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                              (UNAUDITED)

                                                                           December 27,      March 31,
                                                                               1996            1996
                                                                           ------------      ---------
<S>                                                                            <C>              <C>
                                  ASSETS
Current assets:
  Cash and cash equivalents                                                  $  4,667        $  6,540
  Accounts receivable, net                                                     71,378          94,440
  Receivables from related parties                                              4,391           5,622
  Inventories, net                                                            108,632         115,226
  Prepaid expenses                                                             13,146           9,618
  Deferred income taxes                                                         9,266           8,122
                                                                             --------        --------

    Total current assets                                                      211,480         239,568

Property, plant, and equipment, net                                            88,073          92,402
Other assets and deferred charges                                              13,038           7,430
Assets held for sale                                                            2,065           2,065
Intangibles, net                                                               23,217          24,950
                                                                             --------        --------

    Total assets                                                             $337,873        $366,415
                                                                             --------        --------
                                                                             --------        --------

                   LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Bank loans and current portion of long-term debt                           $  1,084        $  6,358
  Accounts payable                                                             48,321          53,046
  Compensation related liabilities                                              7,321          14,563
  Other accrued liabilities                                                    35,403          47,936
                                                                             --------        --------

    Total current liabilities                                                  92,129         121,903

Long-term debt, net of current maturities                                     122,597         111,843
Other liabilities                                                              15,942          17,433
Deferred income taxes                                                           8,919          10,327
                                                                             --------        --------

    Total liabilities                                                         239,587         261,506
                                                                             --------        --------
Shareholders' equity:
  Preferred stock, $.01 par value, 10,000,000 shares authorized; none 
   issued Class A common stock, $.01 par value, 40,000,000 shares 
   authorized; 22,325,302 and 22,292,008 shares issued                            223             223
  Class B common stock, $.01 par value, 15,000,000 shares authorized; 
   none issued
  Additional paid-in capital                                                   91,589          91,178
  Retained earnings                                                             8,476          13,042
  Foreign currency translation adjustments                                     (1,776)            692
  Treasury stock, at cost, 550,000 shares                                        (226)           (226)
                                                                             --------        --------

    Total shareholders' equity                                                 98,286         104,909
                                                                             --------        --------

    Total liabilities and shareholders' equity                               $337,873        $366,415
                                                                             --------        --------
                                                                             --------        --------

       The accompanying notes are an integral part of the consolidated financial statements.

</TABLE>


                                                 3

<PAGE>

                     NU-KOTE HOLDING, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                             AND RETAINED EARNINGS
              FOR THE THREE MONTH PERIODS ENDED DECEMBER 27, 1996
                              AND DECEMBER 29, 1995
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                         (Unaudited)
                                                ----------------------------
                                                December 27,    December 29,
                                                   1996             1995
                                               ------------     ------------ 

Net sales                                      $     82,923     $    104,660
Cost of sales                                        67,568           74,252
                                               ------------     ------------
      Gross margin                                   15,355           30,408

Selling, general and administrative expenses         15,387           18,128
Research and development expenses                     2,517            2,117
Restructuring expense                                 2,031            5,457
                                               ------------     ------------

      Operating income (loss)                        (4,580)           4,706

Interest expense                                      1,990            1,879
Other (income) expense items, net                       158             (230)
                                               ------------     ------------

Income (loss) before income taxes                    (6,728)           3,057 
Provision (benefit) for income taxes                 (2,699)           1,037 
                                               ------------     ------------

      Net income (loss)                              (4,029)           2,020 
Retained earnings - Beginning of period              12,505            6,641 
                                               ------------     ------------

Retained earnings - End of period              $      8,476     $      8,661 
                                               ------------     ------------
                                               ------------     ------------

Net income (loss) per share of common stock    $      (0.19)    $       0.09 
                                               ------------     ------------
                                               ------------     ------------

Weighted average shares outstanding              21,775,302       22,693,394
                                               ------------     ------------
                                               ------------     ------------

                 The accompanying notes are an integral part of 
                      the consolidated financial statements.



                                      4

<PAGE>

                     NU-KOTE HOLDING, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                        AND RETAINED EARNINGS (DEFICIT)
              FOR THE NINE MONTH PERIODS ENDED DECEMBER 27, 1996
                              AND DECEMBER 29, 1995
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                            (Unaudited)
                                                    --------------------------
                                                    December 27,  December 29,
                                                       1996           1995
                                                   ------------   ------------

Net sales                                          $    256,621   $    311,592
Cost of sales                                           195,331        220,597
                                                   ------------   ------------

      Gross margin                                       61,290         90,995

Selling, general and administrative expenses             48,413         55,619
Research and development expenses                         7,648          6,923
Restructuring expense                                     7,811          9,684
                                                   ------------   ------------

      Operating income (loss)                            (2,582)        18,769

Interest expense                                          6,014          5,598

Other (income) items, net                                  (935)          (769)
                                                   ------------   ------------

Income (loss) before income taxes                        (7,661)        13,940
Provision (benefit) for income taxes                     (3,095)         5,184
                                                   ------------   ------------

      Net income (loss)                                  (4,566)         8,756

Retained earnings (deficit) - Beginning of period        13,042            (95)
                                                   ------------   ------------

Retained earnings - End of period                  $      8,476   $      8,661
                                                   ------------   ------------
                                                   ------------   ------------

Net income (loss) per share of common stock        $      (0.21)  $       0.39
                                                   ------------   ------------
                                                   ------------   ------------

Weighted average shares outstanding                  21,764,239     22,587,499
                                                   ------------   ------------
                                                   ------------   ------------

              The accompanying notes are an integral part of the
                       consolidated financial statements.



                                      5 
<PAGE>


                        NU-KOTE HOLDING, INC. AND SUBSIDIARIES
                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                  FOR THE NINE MONTH PERIODS ENDED DECEMBER 27, 1996
                                 AND DECEMBER 29, 1995
                    (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
                                                                            (Unaudited)
                                                                    ---------------------------
                                                                    December 27,   December 29,
                                                                        1996           1995
                                                                    ------------   ------------
<S>                                                                      <C>           <C>
Cash flows from operating activities:
  Net income (loss)                                                  $ (4,566)       $  8,756
  Adjustments to reconcile net income to net cash provided by
   (used in) operating activities:
    Exchange gains                                                     (1,066)           (503)
    Depreciation and amortization                                       9,849          10,123
    Deferred income taxes                                                 (82)         (2,827)
    Tax benefit from exercise of stock options                             75           1,536
    Other                                                              (5,187)          1,491
  Changes in working capital:
    Accounts receivable                                                24,293          (3,031)
    Inventories                                                         6,594          (9,338)
    Prepaid expenses                                                   (3,528)         (3,989)
    Accounts payable                                                   (4,725)         (8,439)
    Compensation related liabilities                                   (7,242)         (1,759)
    Other accrued liabilities                                          (6,429)          4,687
    Cash paid for restructuring                                        (8,572)        (13,198)
                                                                     --------        --------

      Net cash used in operating activities                              (586)        (16,491)
                                                                     --------        --------

Cash flows from investing activities:
  Purchase of property, plant and equipment                            (8,065)         (8,139)
  Sale of property, plant and equipment                                   715
  Acquisition of business                                                              (6,107)
                                                                     --------        --------

      Net cash used in investing activities                            (7,350)        (14,246)
                                                                     --------        --------

Cash flows from financing activities:
  Borrowings on long-term debt and other loans                        100,139          46,315
  Payments on long-term debt and other loans                          (91,632)        (26,149)
  Exercise of stock options                                               338           1,838
                                                                     --------        --------

      Net cash provided by financing activities                         8,845          22,004
                                                                     --------        --------

Effect of exchange rate changes on cash                                (2,782)            177
                                                                     --------        --------

Net decrease in cash                                                   (1,873)         (8,556)

Cash and cash equivalents at beginning of period                        6,540          17,049
                                                                     --------        --------

Cash and cash equivalents at end of period                           $  4,667        $  8,493
                                                                     --------        --------
                                                                     --------        --------

       The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>


                                            6

<PAGE>

                       NU-KOTE HOLDING, INC. AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (UNAUDITED)
                    (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)



1.  THE COMPANY

    Nu-kote Holding, Inc. ("Nu-kote") and its wholly-owned subsidiaries are 
    referred to collectively as the "Company".  The Company is one of the 
    leading independent manufacturers and distributors of impact and 
    non-impact imaging supplies for office and home printing devices, 
    including the manufacture and distribution of a full line of typewriter 
    and printer ribbons, thermal fax ribbons, cartridges and toners for laser 
    printers, facsimile machines and copiers, cartridges and ink for ink jet 
    printers, specialty papers, calculator ink rolls, and carbon paper.

    The Company sells products primarily in the United States and Europe, 
    directly to wholesale and retail markets, and  also to original equipment 
    manufacturers and distributors for resale under their brand names or 
    private labels.  The Company distributes through virtually all major 
    office supply marketing channels, including wholesale distributors, 
    office products dealers, direct mail catalogs, office supply "super 
    stores", warehouse clubs, information processing specialists, value added 
    resellers, and mass market retailers.

    The consolidated balance sheet as of December 27, 1996 and the related 
    consolidated statements of operations and retained earnings (deficit) for 
    the three and nine month periods and consolidated statements of cash 
    flows for the nine month periods ended December 27, 1996 and December 29, 
    1995 are unaudited. However, in the opinion of management, all 
    adjustments (consisting only of normal recurring accruals) necessary for 
    a fair presentation of such financial statements have been included.  
    Interim results are not necessarily indicative of results for a full year.

    The financial statements and notes are presented as permitted by Form 
    10-Q, and do not contain all financial disclosures and details included 
    in the Company's annual financial statements and notes.

2.  NET INCOME (LOSS) PER SHARE OF COMMON STOCK

    Net income (loss) per share of common stock for the three and nine month 
    periods ended December 27, 1996 and December 29, 1995 is based on the 
    weighted average number of common shares outstanding during the period 
    and the effect of considering common stock equivalents (stock options) 
    under the treasury stock method.  Primary and fully diluted net income 
    (loss) per share of common stock are the same and, therefore, are not 
    shown separately.


                                       7

<PAGE>

3.  ACCOUNTS RECEIVABLE

    Accounts receivable are reflected net of allowances for doubtful accounts 
    of $4,129 and $3,933 at December 27, 1996 and March 31, 1996, 
    respectively.

4.  INVENTORIES

    Inventories consist of the following:



                                              December 27,     March 31,
                                                  1996            1996
                                              ------------     ---------
    Raw materials                              $ 42,834        $ 42,291
    Work-in-process                              13,751          18,341
    Finished goods                               52,047          54,594
                                               --------        --------
      Total                                    $108,632        $115,226
                                               --------        --------
                                               --------        --------


    Since physical inventories taken during the year do not necessarily 
    coincide with the end of a quarter, management has estimated the 
    composition of inventories with respect to raw materials, work-in-process 
    and finished goods. It is management's opinion that this estimate 
    represents a reasonable approximation of the inventory levels at December 
    27, 1996.  The amounts at March 31, 1996 are based upon the audited 
    balance sheet at that date.

5.  PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment is stated at cost and consists of the 
    following components:

                                                      December 27,  March 31,
                                                          1996         1996
                                                      ------------  ---------
    Land                                                $  4,606     $  5,323
    Buildings and improvements                            22,701       22,742
    Machinery and equipment                               93,727       90,827
                                                        --------     --------

                                                         121,034      118,892
    Less accumulated depreciation and impairment 
     provision                                           (32,961)     (26,490)
                                                        --------     --------

         Total                                          $ 88,073     $ 92,402
                                                        --------     --------
                                                        --------     --------


    Depreciation expense amounted to $2,486 and $3,182 for the three month 
    periods and $7,656 and $8,183 for the nine month periods ended December 
    27, 1996 and December 29, 1995, respectively.


                                       8

<PAGE>

6.  INTANGIBLE ASSETS

    Intangible assets consist of amounts allocated as a result of purchases 
    of existing businesses and are summarized as follows:

                                      Amortization    December 27,    March 31,
                                         Period           1996          1996
                                      ------------    ------------    ---------
    Goodwill                            20 years        $ 9,880        $ 9,880
    Covenants-not-to-compete           3-5 years          6,642          6,642
    Trademark                           40 years         11,306         11,306
    Technology license                   8 years          1,272          1,272
                                                        -------        -------

                                                         29,100         29,100
    Less accumulated amortization                        (5,883)        (4,150)
                                                        -------        -------

    Total                                               $23,217        $24,950
                                                        -------        -------
                                                        -------        -------

    Covenant-not-to-compete agreements have been recorded at their net 
    present value using estimated discount rates of 7% and 16%.  The 
    trademark has been recorded at its estimated value based upon royalty 
    rates charged for its use, discounted at an estimated rate of return of 
    35%.  The technology license has been recorded at its estimated fair 
    value based on forecasted discounted cash flows using a 16% discount rate.

7.  LINE OF CREDIT

    The Company has a line of credit in Colombia in the amount of $1,450. 
    Borrowings against the line of credit amounted to $687 and $681 at 
    December 27, 1996 and March 31, 1996, respectively.  The line bears 
    interest at the prevailing Colombia interest rate plus 2 percentage 
    points.  Average interest rates at December 27, 1996 and March 31, 1996 
    were 17.6% and 22.6%, respectively.

8.  LONG-TERM DEBT

    Long-term debt of the Company consists of the following:

                                               December 27,       March 31,
                                                   1996             1996
                                               ------------       ---------
    Revolving lines of credit                    $122,336         $ 75,919
    Term loan                                                       40,000
    Other items                                     1,345            1,601
                                                 --------         --------
                                                  122,994          117,520
    Less current portion                             (397)          (5,677)
                                                 --------         --------

    Long-term debt, net of current portion       $122,597         $111,843
                                                 --------         --------
                                                 --------         --------


                                       9

<PAGE>


    The Company has amended and restated its credit facilities dated February 
    24, 1995 (the "Original Credit Agreement").  The Amended and Restated 
    Credit Agreement (the "Amended Credit Agreement") dated October 15, 1996 
    consists of a five-year $200 million revolving credit arrangement.  The 
    Amended Credit Agreement is comprised of a $150 million Domestic (U.S. 
    dollar denominated) facility and two multi-currency European facilities 
    (the "Multi-Currency Facilities").  The Multi-Currency Facilities are 
    denominated in Swiss Francs, British Pound Sterling, Deustchmarks and 
    U.S. dollars.  The Amended Credit Agreement provides for affirmative and 
    negative covenants customary in an agreement of this nature and 
    consistent with the Original Credit Agreement. Interest rates and the 
    collateral structure for the Amended Credit Agreement are also 
    substantially the same as the Original Credit Agreement.

    As of December 27, 1997, the Company was in technical default of its 
    Amended Credit Agreement. The technical default involved the failure to 
    meet the required ratio of Consolidated Total Debt to Consolidated 
    EBITDA (calculated on a cumulative basis for the last four fiscal 
    quarters).  The Company has obtained a waiver of the technical default, 
    including an amendment limiting borrowings under the Company's credit 
    facilities to $140 million and increasing the interest rate on libor 
    borrowings, effective for the period December 27, 1996 to March 30, 1997.
    The Company is currently in discussions with its lenders regarding 
    further amendments to the terms of the Amended Credit Agreement, and 
    expects to finalize such amendments prior to March 30, 1997.

9.  INCOME TAXES

    Following are the approximate effective blended tax rates for significant 
    jurisdictions:

                        North America                 40%
                        Switzerland                   22%
                        Germany                       64%
                        United Kingdom                33%


    The above resulted in a worldwide effective blended tax rate of 40% for 
    both the three and nine month periods ended December 27, 1996, 
    respectively.

10. CONTINGENCIES

    Three original equipment manufacturers filed lawsuits against Nu-kote 
    International, Inc. ("NII") alleging that certain NII ink jet replacement 
    cartridges, refill inks and packaging infringe their trademarks, trade 
    dress and patents and alleging, among other things, unfair competition 
    and misleading representations.  The plaintiffs are seeking injunctive 
    relief, monetary damages, court costs and attorney's fees. The complaint 
    in one of the cases has been amended to name Nu-kote and Pelikan 
    Produktions A.G. as defendants.  All of the cases are being vigorously 
    contested, and in each case the Company or NII has asserted affirmative 
    defenses and counterclaims and has requested damages and affirmative 
    injunctive relief.  All of the lawsuits are in the discovery stage.  In 
    management's opinion, 


                                      10

<PAGE>


    the ultimate resolution of these lawsuits will not have a material 
    adverse effect on the Company's financial position, results of future 
    operations or liquidity.

    In connection with Nu-kote's acquisition of the Office Supplies Division 
    and the International Business Forms Division of Unisys Corporation 
    ("Unisys"), Unisys agreed to retain all liabilities resulting from or 
    arising out of any environmental conditions existing on or before January 
    16, 1987 at the Company's Rochester, Macedon and Bardstown facilities 
    and, additionally, to indemnify the Company for such.  State 
    environmental agencies have alleged that environmental contamination 
    exists at all three sites.  To date Unisys has handled all remediation 
    efforts related to these properties.  As a result of the indemnification 
    from Unisys, in the opinion of management, the ultimate cost to resolve 
    these environmental matters will not have a material adverse effect on 
    the Company's financial position, results of future operations or 
    liquidity.

    In addition, the Company is involved in various routine legal matters.  
    In the opinion of the Company's management, the ultimate cost to resolve 
    these matters will not have a material adverse effect on the Company's 
    financial position, results of future operations or liquidity.

    This note contains various "forward looking statements" within the 
    meaning of Section 27A of the Securities Act of 1933 and Section 21E of 
    the Securities and Exchange Act of 1934, which represent the Company's 
    expectations or beliefs concerning the possible outcome of the various 
    litigation matters described herein and estimates of the Company's 
    liabilities associated with identified environmental matters.  The 
    Company cautions that the actual outcome of the various litigation 
    matters could be affected by a number of factors beyond its control, 
    including, without limitation, judicial interpretations of applicable 
    laws, rules and regulations, the uncertainties and risks inherent in any 
    litigation, particularly a jury trial, the nature and extent of any 
    counter claims, and the scope of insurance coverage, and that the final 
    resolution of such matters could differ materially from the Company's 
    current evaluation of such matters.  The Company further cautions that 
    the statements regarding identified environmental matters are qualified 
    by important factors that could cause the Company's actual liabilities to 
    differ materially from those in the forward looking statements, 
    including, without limitation, the following:  (i) the actual nature and 
    extent of contamination, if any; (ii) the remedial action selected; (iii) 
    the actual cleanup level required; (iv) changes in regulatory 
    requirements; (v) the ability of other responsible parties, if any, to 
    pay their respective shares; and (vi) any insurance recoveries.




                                      11

<PAGE>

11.  RESTRUCTURING EXPENSE

     As a result of the Pelikan Hardcopy Division acquisition, the Company 
     merged certain of its operations with those of the Pelikan Hardcopy 
     Division. The plan to integrate the Pelikan Hardcopy Division's operations
     included, among other things, closure of the Company's manufacturing, 
     distribution and administration facility in Bardstown, Kentucky and merger
     of its operations into the Pelikan Hardcopy Division's facility in 
     Franklin, Tennessee; termination of contract manufacturing and other 
     contracts; closure of the Company's manufacturing facility in Deeside, 
     Wales and merger of its operations with the Pelikan Hardcopy Division's 
     operations in Scotland; consolidation of certain toner manufacturing 
     operations of ICMI's Connellsville, Pennsylvania facility and the Pelikan
     Hardcopy Division's Derry, Pennsylvania facility; and consolidation of 
     sales and administrative organizations of the two companies.  The Company 
     substantially completed the merger activities in fiscal 1996 and 
     anticipates completion in fiscal 1997.

     Activity related to accrued restructuring costs during the quarters ended
     December 27, 1996 and December 29, 1995 are as follows:

                                       Amount                      Amount     
                                     Accrued at    Amount         Accrued at  
           Description of              End of      Paid in       Beginning of 
        Restructuring Expense         Quarter      Quarter         Quarter    
        ---------------------        ----------    -------       ------------ 

     Quarter Ended December 27,
           1996:
        Severance                    $   1,755     $    938      $   2,693
        Lease cancellations                201          184            385
        Facility maintenance
           and other                       194           15            209
                                     ---------     --------      ---------

                                     $   2,150     $  1,137      $   3,287
                                     ---------     --------      ---------
                                     ---------     --------      ---------

                                       Amount                      Amount     
                                     Accrued at    Amount         Accrued at  
           Description of              End of      Paid in       Beginning of 
        Restructuring Expense         Quarter      Quarter         Quarter    
        ---------------------        ----------    -------       ------------ 

     Quarter Ended December 27,
           1995:
        Severance                    $    (424)    $    434      $      10
        Lease cancellations              1,075           45          1,120
        Termination of contract
          manufacturing and
          other contracts                1,006           75          1,081
        Facility maintenance
          and other                       (146)         405            259
                                     ---------     --------      ---------

                                     $   1,511     $   9,59      $   2,470
                                     ---------     --------      ---------
                                     ---------     --------      ---------


                                     12 
<PAGE>

     Activity related to accrued restructuring costs during the nine month 
     periods ended December 27, 1996 and December 29, 1995 are as follows:

<TABLE>
                                       Amount                                 Amount    
                                     Accrued at    Amount                   Accrued at  
           Description of              End of      Paid in   Additional    Beginning of 
        Restructuring Expense          Period      Period    Provision        Period
        ---------------------        ----------    -------   ------------  ------------ 
     <S>                             <C>           <C>        <C>           <C>
     Nine Months Ended December 
           27, 1996:
        Severance                    $   1,755     $  1,009    $    2,693     $     71
        Lease cancellations                201          224                        425
        Facility maintenance
           and other                       194          190                        384
                                     ---------     --------    ----------     --------

                                     $   2,150     $  1,423    $   26,93$          880
                                     ---------     --------    ----------     --------
                                     ---------     --------    ----------     --------
</TABLE>


                                       Amount                      Amount     
                                     Accrued at    Amount         Accrued at  
           Description of              End of      Paid in       Beginning of 
        Restructuring Expense          Period      Period           Period
        ---------------------        ----------    -------       ------------ 

     Nine Months Ended December 
           29, 1995:
        Severance                    $    (424)    $  3,595      $   3,171
        Lease cancellations              1,075          135          1,210
        Termination of contract
          manufacturing and
          other contracts                1,006        1,344          2,350
        Facility maintenance
          and other                       (146)       1,780          1,634
                                     ---------     --------      ---------

                                     $   1,511     $  6,854      $   8,365
                                     ---------     --------      ---------
                                     ---------     --------      ---------





                                     13

<PAGE>

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

     QUARTER ENDED DECEMBER 27, 1996 COMPARED TO QUARTER ENDED DECEMBER 29, 1995

          Net sales for the quarter ended December 27, 1996 were $82.9 million,
          a decline of $21.7 million (20.8%) over the quarter ended December 29,
          1995. For the quarter ended December 27, 1996, sales in North America
          amounted to $43.1 million, a decline of 20% as compared to sales of 
          $54.0 million during the previous year period, and sales in Europe 
          amounted to $39.0 million as compared to $49.7 million during the 
          previous year period, a decline of 22%.  All of the net sales decline
          experienced in North America ($10.9 million) was due to a 40% decline
          in sales of impact products, whereas the decline in sales in Europe
          ($10.7 million) was due to a decline in sales of both impact and 
          non-impact products of 24% and 20%, respectively.

          Worldwide sales of non-impact supplies accounted for 58% of total
          worldwide sales for the quarter ended December 27, 1996, compared to
          50% for the previous year period.  Sales of non-impact product as a
          percentage of worldwide sales increased because sales of impact 
          products declined by $17.1 million (33%).  In North America, sales
          of non-impact supplies amounted to $25.1 million as compared to $24.0
          million in the previous year period and represented 58% and 44%, 
          respectively, of total North American sales.  Sales of non-impact
          products as a percentage of North American sales increased because
          North American sales of non-impact products increased by $1.1 million
          (4.6%) and sales of impact products declined by $12.0 million (40%).
          Sales of non-impact supplies in Europe amounted to $23.1 million for
          the quarter ended December 27, 1996 as compared to $28.9 million and
          represented 59% of total European sales.

          Management expects that world-wide sales of impact products will 
          continue to decline as the migration to the use of non-impact printing
          devices accelerates.  In addition, even though revenue from sales of
          non-impact products is growing, management is evaluating its 
          non-impact products with the intent of re-defining the core product 
          base and eliminating unprofitable product categories.

          Cost of sales were $67.6 million (81.5% of net sales) for the quarter
          ended December 27, 1996, compared to $74.3 million (70.9% of net 
          sales) in the prior year period.  The increase in cost of sales as
          a percentage of net sales was due primarily to the decline in net 
          sales of impact and toner products and the related effect on 
          absorption of manufacturing overhead costs associated therewith.  In
          addition, as was experienced in the previous quarter, sales of 
          Pelikan "Easy-Click" and Nu-kote "Cartridge Plus" systems, 


                                     14

<PAGE>

          which have a higher initial product cost, also contributed to the 
          decline in gross profit margins.

          The Company expects to reduce its world-wide manufacturing costs for
          impact products by shifting the manufacturing of such products to 
          Mexico and China.  The Company also expects that in the future, the
          gross profit margin for Pelikan "Easy-Click" and Nu-kote "Cartridge
          Plus" systems will improve due to (a) an increase in the sales 
          volume of such products due in part from customer re-orders of refill
          tanks associated with these products and (b) a reduction in the 
          raw material cost of these products resulting from the Company's 
          recently initiated used ink jet cartridge recovery program.

          Research and development expenses were $2.5 million, an increase of
          $0.4 million over the previous year period.  The increase in expenses
          is directly attributed to ink jet development activities in North 
          America.

          Selling, general and administrative expenses were $15.4 million 
          (18.6% of net sales) for the quarter ended December 27, 1996, a 
          reduction of $2.7 million, as compared to $18.1 million (17.3% of net
          sales) for the previous year period.  The decrease in actual 
          expenditures resulted from the implementation of worldwide expense
          reduction programs.

          Restructuring cost, related primarily to the down sizing of impact 
          product production in Europe, amounted to $2.0 million as compared 
          to $5.5 million in the previous year period.

          Interest expense was $2.0 million, compared to $1.9 million for the
          previous year period.

          For the quarter ended December 27, 1996, the Company recognized a net
          loss of $4.0 million compared to net income of $2.0 million (1.9% of
          net sales) for the previous year period.  The decrease in net income
          is directly attributable to the decrease in sales and the increased 
          cost of goods sold discussed above.

     NINE MONTHS ENDED DECEMBER 27, 1996 COMPARED TO NINE MONTHS ENDED 
     DECEMBER 31, 1995

          Net sales for the nine months ended December 27, 1996 were $256.6
          million, a decrease of $55.0 million (17.6%) over the nine months
          ended December 29, 1995.  For the nine months ended December 27,
          1996, sales in North America amounted to $129.5 million, a decline
          of 10% as compared to the previous year period.  All of the net 
          sales decline experienced in North America ($15.0 million) was due
          to a 29% ($22.0 million) decline in sales of impact products, as 
          sales of non-impact products have increased $7.0 million (10%) over
          the previous year period.  For the nine month period ended 
          December 27, 1996, sales in Europe amounted to $124.6 million, a
          decline of 24% as compared to the previous year period.  Sales of
          impact products in Europe declined $18.0 million (26%),


                                     15

<PAGE>

          while sales of non-impact products declined $21.0 million (22%) as
          compared to the previous year period.

          As a percentage of total sales, worldwide sales of non-impact 
          supplies accounted for 57% of total sales for the nine months ended
          December 27, 1996, compared to 49% of total sales in the nine months
          ended December 29, 1995.  Sales of non-impact products as a percentage
          of worldwide sales increased because sales of impact products declined
          $40.0 million (27%), while sales of non-impact products declined 
          $14.0 million (9%).

          Management expects that world-wide sales of impact products will 
          continue to decline as the migration to the use of non-impact printing
          devices accelerates.  In addition, management is evaluating its 
          non-impact products with the intent of re-defining the core product 
          base and eliminating non-profitable product categories.

          Cost of sales were $195.3 million (76.1% of net sales) for the nine 
          months ended December 27, 1996 compared to $220.6 million (70.8% of
          net sales) in the prior period.  As previously indicated, the increase
          in cost of sales percentage was due primarily to: (1) the decline in
          net sales of impact and toner products and the related effect on 
          absorption of manufacturing overhead costs associated therewith;  
          (2) sales of Pelikan "Easy-Click" and Nu-kote "Cartridge Plus" 
          systems, which have a higher initial product cost; and (3) price 
          reductions initiated in Europe which have not been offset by increased
          volumes.  The Company expects to reduce its world-wide manufacturing
          costs as it shifts the manufacturing of such products to Mexico and
          China.  The Company also expects that in the future, the gross profit
          margin for Pelikan "Easy-Click" and Nu-kote "Cartridge Plus" systems
          will improve due to (a) an increase in the sales volume of such 
          products in part from customer re-orders of refill tanks associated 
          with these products and (b) a reduction in the raw material cost of
          these products resulting from the Company's recently initiated used
          ink jet cartridge recovery program.

          Research and development expenses were $7.6 million, up $0.7 million
          as compared to the previous year period.  The increase in expenses is
          directly attributed to increased ink jet technology spending in North
          America.

          Selling, general and administrative expenses were $48.4 million (18.9%
          of net sales) for the nine months ended December 27, 1996, a reduction
          of $7.2 million, as compared to $55.6 million (17.9% of net sales) for
          the previous year period.  The decrease in actual expenditures 
          resulted from the implementation of worldwide expense reduction 
          programs.

          Other income, primarily due to exchange gains in Europe amounted to 
          $0.9 million and $0.8 million, respectively.

          Restructuring cost, related primarily to the down sizing of world-wide
          impact product production, amounted to $7.8 million and $9.7 million,
          respectively.

          Interest expense was $6.0 million, compared to $5.6 million for the 
          prior period.


                                     16

<PAGE>

          For the nine months ended December 27, 1996, the Company recognized
          a net loss of $4.6 million compared to net income of $8.8 million 
          (2.8% of net sales) for the prior period.  The decrease in net income
          is directly attributable to the decrease in sales and the increased 
          cost of goods sold discussed above.

     EFFECT OF CURRENCY EXCHANGE RATES AND EXCHANGE RATE RISK MANAGEMENT

          Because the Company conducts business in many countries, fluctuations
          in foreign currency exchange rates affect the Company's financial 
          position and results of operations.  It is the Company's policy to 
          monitor currency exposures and enter into hedging arrangements to 
          manage the company's exposure to currency fluctuations.  As a result,
          the Company reported $1.1 million and $0.5 million, respectively, 
          in exchange gains, in the nine month periods reported.

     LIQUIDITY AND CASH FLOW

          For the nine months ended December 27, 1996, cash used by operations,
          primarily to fund restructuring expenses and increased working capital
          needs, amounted to $0.6 million.  Capital expenditures, primarily 
          related to the purchase of ink jet manufacturing equipment, were 
          $8.1 million.

          As of February 6, 1996, borrowings outstanding under the Company's 
          credit facilities amounted to $131.0 million, up $13.5 million from 
          March 31, 1996.  The Company has $9.0 million available for future 
          borrowings under its credit facilities.

          As of December 27, 1997, the Company was in technical default of its
          Amended and Restated Credit Agreement (the "Amended Credit 
          Agreement"), as described in Note 8 of Notes to Consolidated Financial
          Statements. The technical default involved the failure to meet the 
          required ratio of Consolidated Total Debt to Consolidated EBITDA 
          (calculated on a cumulative basis for the last four fiscal quarters).
          The Company has obtained a waiver of the technical default, including
          an amendment limiting borrowings under the Company's credit facilities
          to $140 million and increasing the interest rate on libor borrowings,
          effective for the period December 27, 1996 to March 30, 1997. The 
          Company is currently in discussions with its lenders regarding 
          further amendments to the terms of the Amended Credit Agreement, and 
          expects to finalize such amendments prior to March 30, 1997.

          If the Company is unable to amend the terms of its Amended Credit 
          Agreement, it is likely that it will continue to be in technical 
          default of the EBITDA covenant beyond the March 30, 1997
          expiration date of the current waiver.  No assurance can be given 
          that satisfactory amendments, modifications or waivers to the 
          terms of the Amended Credit Agreement can be negotiated.

          Assuming the current level of operations and the continued 
          availability of the Company's credit facilities, as amended to 
          date, the Company believes it will have sufficient funds available
          to meet its liquidity requirements for the next 12 months.

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<PAGE>

     CAUTIONARY STATEMENT

          The foregoing "Management's Discussion and Analysis of Financial 
          Condition and Results of Operations" section contains various 
          "forward looking statements" within the meaning of Section 27A of
          the Securities Act of 1933 and Section 21E of the Securities 
          Exchange Act of 1934, which represent the Company's expectations or
          beliefs concerning, among other things, future operating results 
          and various components thereof and the adequacy of future operations
          to provide sufficient liquidity.  The Company cautions that such 
          matters necessarily involve significant risks and uncertainties that
          could cause actual operating results and liquidity needs to differ 
          materially from such statements, including, without limitation, 
          general economic conditions, product demand and industry capacity,
          competitive products and pricing, manufacturing efficiencies, new 
          product development, availability of raw materials and critical
          manufacturing equipment, and the regulatory and trade environment.








                                     18


<PAGE>

                         PART II - OTHER INFORMATION


ITEM 1 -     LEGAL PROCEEDINGS

             See Item 3 - Legal Proceedings in the registrant's Annual Report 
             on Form 10-K for the fiscal year ended March 31, 1996 and Note 10 
             of Notes to Consolidated Financial Statements for the three and 
             nine month periods ended December 27, 1996 and December 29, 1995 
             included elsewhere in this report.

ITEM 2 -     INAPPLICABLE

ITEM 3 -     DEFAULTS UPON SENIOR SECURITIES

             As of December 27, 1997, the Company was in technical default of 
             its Amended and Restated Credit Agreement (the "Amended Credit 
             Agreement"), as described in Note 8 of Notes to Consolidated 
             Financial Statements.  The technical default involved the 
             failure to meet the required ratio of Consolidated Total Debt to 
             Consolidated EBITDA (calculated on a cumulative basis for the 
             last four fiscal quarters).  The Company has obtained a 
             waiver of the technical default, including an amendment limiting
             borrowings under the Company's credit facilities to $140 million
             and increasing the interest rate on libor borrowings, effective 
             for the period December 27, 1996 to March 30, 1997.  The Company
             is currently in discussions with its lenders regarding further 
             amendments to the terms of the Amended Credit Agreement, and 
             expects to finalize such amendments prior to the March 30, 1997.
             See Note 8 of Notes to Consolidated Financial Statements and 
             Part I, Item 2. Management's Discussion and Analysis of Financial
             Condition and Results of Operations - Liquidity and Cash Flow.

ITEMS 4 - 5  INAPPLICABLE

ITEM 6 -     EXHIBITS AND REPORTS ON FORM 8-K

            (a) Exhibits.

                Exhibit 10.36a - First Amendment to Amended and Restated
                                 Credit Agreement and Waiver

                Exhibit 11.1   - Statement regarding computation of per share 
                                 earnings.

                Exhibit 27     - Financial Data Schedule

            (b) Reports on Form 8-K.

                The registrant filed no reports on Form 8-K during the
                quarterly period ended December 27, 1996.


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<PAGE>


                                  SIGNATURES


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

Date   February 7, 1996                /s/   DAVID F. BRIGANTE
    --------------------------         ----------------------------------
                                       David F. Brigante
                                       Chairman of the Board and
                                       Chief Executive Officer




Date   February 7, 1996                /s/   DANIEL M. KERRANE
    --------------------------         ----------------------------------
                                       Daniel M. Kerrane
                                       Executive Vice President and
                                       Chief Financial Officer






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