<PAGE>
                                 
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q


(Mark  One)

[X] Quarterly Report pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934 For the quarterly period ended September 30, 1997, or

[ ]  Transition  Report  pursuant  to  Section  13 or 15 (d)  of the  Securities
Exchange Act of 1934 For the transition period from ___________ to _________



                         Commission file number: 0-13459

                       Axiohm Transaction Solutions, Inc.
             (Exact name of registrant as specified in its charter)


California                                                            94-2917470
(State or other jurisdiction of                                 (I.R.S. Employer
incorporation or organization)                               Identification No.)



              15070 Avenue of Science, San Diego, California 92128
                     (Address of principal executive office)

       Registrant's telephone number, including area code: (619) 451-3485




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

As of October 31, 1997, there were 6,512,926  shares of the registrant's  Common
Stock outstanding.


<PAGE>


               AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES

                                      INDEX


PART I.  FINANCIAL INFORMATION                                        PAGE NO.

     ITEM 1 - Financial Statements

         Condensed Consolidated Balance Sheets                             
         September 30, 1997 and December 31, 1996                          1

         Condensed Consolidated Statements of Operations
         Three Months and Nine Months Ended
         September 30, 1997 and September 30, 1996                         2

         Condensed Consolidated Statements of Cash Flows
         Nine Months Ended September 30, 1997 and
         September 30, 1996                                                3

         Notes to Condensed Consolidated Financial Statements              4

     ITEM 2 - Management's Discussion and Analysis of
     Financial Condition and Results of Operations                         8


PART II.  OTHER INFORMATION

     Item 2 - Changes in Securities                                       17

     Item 6 - Exhibits and Reports on Form 8-K                            17


SIGNATURES                                                                19


EXHIBITS INDEX                                                            20




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<TABLE>
<CAPTION>



                                             PART 1 - FINANCIAL INFORMATION
                                                ITEM 1 - Financial Statements
                                   AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
                                          Condensed Consolidated Balance Sheets
                                                     (In thousands)
<S>                                                                             <C>                    <C>  

                                                                                 September 30,            December 31,
                                                                                -----------------      -------------------
                                                                                      1997                    1996
                                                                                -----------------      -------------------
                                                                                  (Unaudited)

                                                         ASSETS

Current assets:
     Cash and cash equivalents                                                            36,248                    1,839
     Restricted cash                                                                       8,594                       --
     Accounts receivable, net                                                             32,295                   10,552
     Inventories                                                                          28,523                   13,900
     Prepaid expenses and other current assets                                             9,487                    3,286
                                                                                -----------------      -------------------
         Total current assets                                                            115,147                   29,577
     Fixed assets, net of accumulated depreciation                                        20,928                   11,235
     Intangible assets                                                                    86,839                    2,606
     Other assets                                                                          5,240                      560
                                                                                ----------------       ------------------
        Total assets                                                                     228,154                   43,978
                                                                                =================      ===================

                                     LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:
     Accounts payable                                                                     15,082                    7,480
     Current portion of long-term debt                                                     4,060                    2,322
     Accrued payroll, payroll taxes and benefits                                           4,877                       --
     Accrued expenses and other current liabilities                                        7,529                    5,703
     Income taxes payable                                                                  3,140                       --
     Deferred revenue                                                                        493                       --
                                                                                -----------------      -------------------
        Total current liabilities                                                         35,181                   15,505
Non-current liabilities:
     Senior subordinated debt                                                            187,800                       --
     Other long-term debt and long-term liabilities                                       15,919                   10,483
     Deferred tax liability                                                                1,627                    1,557
                                                                                -----------------      -------------------
        Total liabilities                                                                240,527                   27,545
                                                                                -----------------      -------------------
Shareholders' equity (deficit):
     Preferred shares, no par value
        Authorized: 1,000,000 shares, none issued                                             --                       --
     Common shares:
        Common stock, authorized: 28,500,000
        shares; issued and outstanding:
        6,512,926 shares in 1997 and 1996                                                 23,851                    4,167
     Foreign currency translation adjustment                                                (107)                     117
     Retained earnings (accumluated deficit)                                             (36,117)                  12,149
                                                                                -----------------      -------------------
        Total shareholders' equity (deficit)                                             (12,373)                  16,433
                                                                                -----------------      -------------------
        Total liabilities and shareholders' equity                                       228,154                   43,978
                                                                                =================      ===================
                                                                          
              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>



                                                         AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
                                                           Condensed Consolidated Statements of Operations
                                                                (In thousands, except per share data)

<S>                                                                 <C>             <C>              <C>             <C>   

                                                                         Three Months Ended                 Nine Months Ended
                                                                            September 30,                      September 30,
                                                                    -----------------------------    -----------------------------
                                                                        1997            1996             1997            1996
                                                                    -----------------------------    -----------------------------
                                                                            (Unaudited)                        (Unaudited)

Net sales                                                                $42,943         $25,556          $99,558         $71,965
Cost of net sales                                                         28,176          18,216           66,978          49,792
                                                                    -------------   -------------    -------------   -------------
Gross margin                                                              14,767           7,340           32,580          22,173

Operating expenses:
     Selling, general and administrative                                   8,179           2,928           13,878           8,303
     Research and development                                              2,575           1,645            6,198           4,702
     In-process technology                                                50,831              --           50,831              --
                                                                    -------------   -------------    -------------   -------------
Total operating expenses                                                  61,585           4,573           70,907          13,005

Income (loss) from operations                                            (46,818)          2,767          (38,327)          9,168

Interest and other income                                                    327              23              390           1,229
Interest and other expense                                                 2,715             267            3,077             946
                                                                    -------------   -------------    -------------   -------------

Income (loss) before income taxes                                        (49,206)          2,523          (41,014)          9,451

Income taxes                                                               2,272             967            5,484           3,657
                                                                    -------------   -------------    -------------   -------------

Net income (loss)                                                       ($51,478)         $1,556         ($46,498)         $5,794
                                                                    =============   =============    =============   =============


Net income (loss) per share                                               ($7.90)          $0.24           ($7.14)          $0.93


Weighted average number of shares outstanding
Per share (primary and fully diluted):                                     6,513           6,513            6,513           6,243


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


                                   AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
                                    Condensed Consolidated Statements of Cash Flows
                                                    (In thousands)
<S>                                                                                 <C>                <C> 

                                                                                              Nine Months Ended
                                                                                                 September 30,
                                                                                    ------------------------------------
                                                                                          1997              1996
                                                                                    ------------------------------------
                                                                                                 (Unaudited)


Cashflows from operating activities:
   Net income (loss)                                                                        ($46,498)            $5,794
   Adjustments to reconcile net income (loss) to net cash provided by operations:
     Write off of acquired in-process technology                                              50,831                 --
     Depreciation and amortization                                                             5,369              2,008
     Other non-cash charges                                                                      450                939
   Changes in assets and liabilities, net of effects of acquisition of business:
     Accounts receivable                                                                      (8,909)            (4,851)
     Inventory                                                                                (1,323)             1,738
     Prepaid expenses and other assets                                                         4,819               (501)
     Accounts payable and accrued expenses                                                     3,962              4,466
                                                                                    ----------------- ------------------

Net cash provided by operating activities                                                      8,701              9,593

Cashflows from investing activities:
   Payment for acquisition of business, net of cash acquired                                (148,074)                --
   Capital expenditures                                                                       (3,670)            (2,532)
                                                                                    ----------------- ------------------

Net cash used in investing activities                                                       (151,744)            (2,532)

Cashflows from financing activities:
   Proceeds from tender financing                                                            186,979                 --
   Net repayment under line of credit                                                         (1,051)              (759)
   Principal repayments on long term debt                                                     (5,000)            (8,216)
   Dividends                                                                                  (1,768)              (411)
   Proceeds from stock issuance, net of issuance costs                                            --              3,807
   Debt issuance costs                                                                        (2,799)                --
   Loans to related parties                                                                    1,713               (388)
                                                                                    ----------------- ------------------

Net cash provided by (used in) financing activities                                          178,074             (5,967)

Effect of exchange rate changes on cash                                                         (622)                12

Net increase in cash and cash equivalents                                                     34,409              1,106

Cash and cash equivalents at beginning of period                                               1,839                636
                                                                                    ----------------- ------------------

Cash and cash equivalents at end of period                                                   $36,248             $1,742
                                                                                    ================= ==================

Supplemental Cashflow Disclosures:
   Interest paid                                                                                $488               $848
   Income taxes paid net of refunds                                                           $4,723             $2,224

Schedule of non-cash investing and financing activities:
   Acquisition of business:
      Fair value of assets acquired, net of cash acquired                                   $134,480                 --
      In process technology                                                                  $50,831                 --
      Liabilities assumed                                                                   ($17,995)                --
      Fair value of non-tendered stock                                                      ($19,242)                --
                                                                                    ----------------- ------------------
      Cash paid, net of cash acquired                                                       $148,074                 --

   During 1996,  the Company  financed  certain  capital  expenditures  totaling
   $163,000 through the incurrence of capital lease obligations.


                                 The accompanying notes are an integral part of these
                                      condensed consolidated financial statements
</TABLE>
<PAGE>

     

               AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                        (September 30, 1997 - Unaudited)


Note 1:  Unaudited Interim Financial Statements


The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of only normal recurring accruals)  considered necessary for a fair presentation
have been included. Operating results for the three and nine month periods ended
September  30, 1997 are not  necessarily  indicative of the results which may be
expected for the year ended December 31, 1997 or any other period.  Reference is
made to the Consolidated  Financial Statements and Notes thereto included in the
AX  Acquisition  Corporation's  Schedule  14D-1 filing dated July  16,1997,  for
further information.

Note 2:  Basis of Presentation


On August 21, 1997, pursuant to an Agreement and Plan of Merger dated as of July
14, 1997 (the  "Agreement of Merger"),  AX  Acquisition  Corporation  ("AX"),  a
wholly-owned subsidiary of Axiohm S.A., acquired approximately 88%, or 7,000,000
shares, of the outstanding Common Stock of DH Technology, Inc. ("DH Technology")
through a public tender offer to the shareholders of DH Technology at a price of
$25 per share (the "Tender Offer").

On October 2, 1997, pursuant to the Agreement of Merger, AX acquired 100% of the
outstanding  Common Stock of Axiohm S.A. in exchange for 5,518,524  shares of DH
Technology  Common Stock and $12.2 million in cash (the "Share Exchange Offer").
Simultaneous  with the Share Exchange Offer, DH Technology  purchased all of the
outstanding  shares of AX in exchange for the assumption of  approximately  $190
million of debt (the  "Acquisition  Financing")  incurred  by AX to finance  the
Tender Offer. Immediately after the Share Exchange Offer, AX was merged with and
into DH Technology (the "Merger"),  the surviving legal entity,  and the company
changed its name from "DH Technology,  Inc." to "Axiohm  Transaction  Solutions,
Inc".  Immediately  after  the  Merger,  approximately  85%  of DH  Technology's
outstanding Common Stock was held by the former  shareholders of Axiohm S.A. and
15% was held by the former public  shareholders  of DH Technology,  Inc.  Axiohm
S.A. and its subsidiaries and DH Technology and its subsidiaries are hereinafter
referred to collectively as the "Company".

The Tender Offer,  the Share  Exchange  Offer and the Merger  (collectively  the
"Acquisition") have been accounted for as a reverse acquisition, in which Axiohm
S.A. was treated as the  acquiror  for  accounting  purposes.  Accordingly,  the
historical financial  information for periods prior to August 31, 1997 are those
of Axiohm S.A. The effective date of the Acquisition and Merger of DH Technology
for  accounting  purposes was August 31,  1997,  and,  accordingly,  the capital
structure of the Company has been  retroactively  restated to reflect the number
of shares outstanding as a result of the Acquisition.  The results of operations
for the three and nine month  periods  ended  September  30,  1997  include  the
operations of DH Technology for the month of September 1997.


Note 3: Acquisition

The  acquisition  of DH  Technology  has been  accounted  for using the purchase
method of accounting.  The aggregate  purchase price of $208.6 million consisted
of cash paid for DH Technology shares, DH Technology stock options,  transaction
costs, and the fair value of DH Technology non-tendered shares and was allocated
based on the fair values of tangible and intangible assets acquired. The Company
expects that the final purchase price  allocation  will be known by December 31,
1997 and  could  differ  from  the  preliminary  allocation.  A  summary  of the
preliminary purchase price allocation is as follows:

         Net tangible assets acquired               $76,152,000
         In-process research and development         50,831,000
         Goodwill and other intangibles              81,646,000
                                                     ----------

         Total                                     $208,629,000
                                                   ============


The purchased in-process research and development had not reached  technological
feasibility,  had  no  probable  tentative  future  uses,  and  was  charged  to
operations upon acquisition.  Goodwill and other intangibles are being amortized
over three years using the straight line method.

Of the cash paid for the DH Technology stock options, $8.6 million was funded to
a Rabbi trust and is reflected on the balance sheet as restricted cash.

The  Acquisition  Financing  consisted of $166.2 million of senior  indebtedness
under a credit facility with an institutional  lender and $24 million of interim
preferred stock financing.  Both of these amounts were fully repaidon October 2,
1997 with the proceeds from a private placement of $120 million of 9-3/4% Senior
Subordinated  Notes  due  2007  and  borrowings  under  an  $85  million  Credit
Agreement.  See  Note  5  of  the  Notes  to  Condensed  Consolidated  Financial
Statements.

The following  unaudited pro forma  information has been prepared  assuming that
the Acquisition  and the Acquisition  Financing had occurred at the beginning of
the periods presented. Pro forma adjustments included increased amortization for
the  purchase  price in excess  of  assets  acquired;  in-process  research  and
development expense;  increased interest expense from the Acquisition Financing;
and related income tax effects.  The pro forma  information does not reflect any
potential cost savings from combining the operations of DH Technology and Axiohm
S.A.

                                                   Nine Months Ended
                                      September 30, 1997      September 30, 1996
                                      ------------------      ------------------

         Net sales                         $158,289,000             $159,222,000

         Net loss                           $69,239,000              $67,156,000

         Net loss per share                      $10.63                   $10.76
         
         Weighted average number of
         shares outstanding                   6,512,926                6,242,926


The pro forma information is provided for information purposes only and does not
purport to be  indicative  of the  Company's  results of  operations  that would
actually have been achieved had the Acquisition  and the Acquisition  Financings
been completed at the beginning of the periods presented, or results that may be
obtained for the year ended December 31, 1997 or for any other period.  See Note
5 of the Notes to Condensed Consolidated Financial Statements.


Note 4:  Inventories

The  composition  of inventories at September 30, 1997 and December 31, 1996 was
as follows:

                                        September 30, 1997     December 31, 1996
       
         Raw materials                       $32,612,000             $13,345,000
         Work in process                         512,000                 949,000
         Finished goods                        3,015,000               1,793,000

         Totals                              $36,139,000             $16,087,000
                                            ============             ===========


Note 5: Subsequent Events

Senior Subordinated Notes

On October 2, 1997,  the Company  completed a private  placement  (the  "Initial
Notes  Offering")  of $120 million of its 9-3/4% Senior  Subordinated  Notes due
2007 (the "Initial  Notes").  The Initial Notes were placed with Lehman Brothers
Inc. as initial purchaser (the "Initial Purchaser") and were subsequently resold
by the  Initial  Purchaser  in the  United  States to  "qualified  institutional
buyers" in reliance on Rule 144A under the  Securities  Act of 1933, as amended,
(the "Securities Act") and outside of the United States in offshore transactions
to foreign  investors in reliance on Regulation S under the Securities  Act. The
underwriting discount to the Initial Purchaser was 2.75% of the principal amount
of the Initial Notes purchased (or an aggregate of $3.3 million).

Interest on the Initial Notes is payable semi-annually on April 1 and October 1,
commencing  on April 1, 1998,  until  maturity  on October 1, 2007.  The Initial
Notes are  redeemable at the option of the Company,  in whole or in part, at any
time on or after October 1, 2002 at various premiums to original face value. The
Company's  payment  obligation  under the Initial Notes is jointly and severally
guaranteed  on a  senior  subordinated  basis  by  each  of the  Company's  U.S.
subsidiaries  ("the  Guarantors").  The  proceeds  from the sale of the  Initial
Notes,  together with  borrowings  under the $85 million  Credit  Agreement (see
below) and existing cash were used to repay principal and accrued interest under
the Acquisition Financing.

Pursuant  to  a  Registration  Rights  Agreement  dated  October  2,  1997  (the
"Registration  Rights  Agreement")  among the Company,  certain of the Company's
U.S. subsidiaries, as Guarantors, and the Initial Purchaser, the Company and the
Guarantors  have  agreed  to use  their  best  efforts  to  file a  registration
statement no later than 60 days after the closing of the Initial Notes Offering,
with  respect  to an  offer  to  exchange  the  Initial  Notes  for  new  senior
subordinated  notes of the  Company  (the  "New  Notes")  registered  under  the
Securities Act, with terms identical to those of the Initial Notes, and to cause
such registration statement to become effective no later than 120 days after the
closing of the Initial Notes  Offering.  The Initial Notes and the New Notes are
hereinafter  referred to collectively  as the "Notes".  The holders of the Notes
are  entitled  to  certain  penalty  payments  from the  Company  under  certain
circumstances if the Company and the Guarantors are not in compliance with their
obligations under the Registration Rights Agreement.

Senior Bank Credit Agreement

On October 2, 1997,  the Company  entered into a Credit  Agreement  (the "Credit
Agreement")  with a  syndicate  of banks  (the  "Banks"),  led by Union Bank and
Lehman  Brothers  which acted as agent.  Pursuant to the Credit  Agreement,  the
Banks  have  extended  the  Company a two  tranche  amortizing  term loan in the
original principal amount of $50 million (the "Term Loan") and established a $35
million  revolving line of credit (the "Revolver")  available through October 2,
2002. The Term Loan consists of a Tranche A term loan in an aggregate  principal
amount of $35 million,  which has a maturity of five years, and a Tranche B term
loan in an aggregate  principal  amount of $15 million,  which has a maturity of
six years. The Term Loan and Revolver are secured by a lien on substantially all
of the real and personal property of the Company and certain of its subsidiaries
and a pledge of capital stock of certain of its  subsidiaries  (provided that no
lien was or will be granted on the assets of Foreign  Subsidiaries  (as defined)
and no capital stock of Foreign  Subsidiaries will be pledged to the extent that
the  granting  of such  lien  or the  making  of such  pledge  would  result  in
materially  adverse United States federal income tax consequences to the Company
or would violate  applicable law). The proceeds of the Term Loan and the initial
advance  under the  Revolver  were used by the  Company to repay  principal  and
accrued  interest under the  Acquisition  Financing.  Both the Term Loan and the
Revolver  have  interest  rate options  including an interest  rate based on the
Eurodollar  Rate plus a margin of between  2.5% to 3%.  Such  margins  will vary
depending upon the relationship  between the Company's earnings before interest,
taxes,  depreciation  and  amortization  ("EBITDA") and the then aggregate total
debt  outstanding.  The  Company is required to pay a fee of 0.375% per annum on
the unused portion of the Revolver.  Under the Credit Agreement,  the Company is
required  to enter into  arrangements  to provide  interest  protection  for $20
million of this floating rate debt for two years.


Note 6:  Shareholders Equity

On June 24,  1996,  Axiohm  received net proceeds of $3.8 million from a private
placement  of 421,200  shares of Common  Stock to an  employee of Axiohm and two
institutional investors.

On June 24,  1996,  Axiohm  declared a cash  dividend of $0.4  million on Common
Stock which was paid to shareholders of record on June 24, 1996.

On May 14, 1997, Axiohm declared a cash dividend of $1.8 million on Common Stock
which was paid to shareholders of record on May 14, 1997.


Note 7:  Commitments and Contingencies

In connection  with the August 1994  acquisition  by DH Technology of all of the
outstanding  stock of  Cognitive  Solutions,  Inc.  ("Cognitive"),  a  designer,
manufacturer and marketer of thermal bar code printers and  complementary  label
media for use in automatic data collection systems,  the Company is obligated to
pay $0.5 million on August 15 in each of 1998 and 1999.  The Company also may be
required to make additional payments,  not to exceed $3.0 million, to the former
shareholder of Cognitive,  based upon net sales of a specified Cognitive product
line.

In  connection  with  the  December  1994  acquisition  by  Axiohm  S.A.  of the
transaction  printer  business of NCR Corporation  ("NCR"),  now known as Axiohm
IPB, for up to $30.6 million,  of which $15.6 million was paid at closing,  $0.5
million has been paid to date in earn-out  payments and a final payment of up to
$5.0 million may be paid in additional  earn-out payments based upon 1997 sales.
The Company  estimates  that the final  payment will be less than  approximately
$1.5  million  and is  anticipated  to be paid in  1998.  Axiohm  S.A.  recorded
approximately  $3.0  million of goodwill in  connection  with this  acquisition,
which was accounted for using the purchase method of accounting.

In connection with the March 1997 acquisition by DH Technology of certain assets
and  liabilities  of  American  Magnetics   Corporation   ("AMC"),  a  designer,
manufacturer,  and marketer of card reader modules and stand-alone card readers,
and a  wholly-owned  subsidiary  of Group 4 Securitas  Holdings,  a  Netherlands
company,  for $5.7  million,  of which $4.85  million  was paid at  closing,  an
additional $0.8 million will become payable in the years of 2000 and 2001. Based
upon  attainment  of specified net sales,  an  additional  $1.6 million may also
become payable.

In connection with the purchase and improvement of  manufacturing  facilities in
France,  Axiohm S.A.  negotiated in 1994 a $1.6 million grant (the "Grant") from
various agencies of the French government. The Company is contingently liable to
those agencies for the repayment, in whole or in part, of the Grant in the event
that the Company  does not meet the  requirements  of the Grant,  which  include
minimum  employment  levels  through  1997,  minimum  capital  expenditures  and
continued use of the building throughout the lease term.

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

This Quarterly Report on Form 10-Q contains "forward-looking  statements" within
the meaning of Section 21E of the  Securities  Exchange Act of 1934, as amended,
including,  without  limitation,  statements that include the words  "believes,"
"expects,"  anticipates" and similar  expressions  relating to: anticipated cost
savings following the Merger; expected sales activity based on seasonal factors;
estimated levels of selling,  general and administrative  expense after non-cash
charges related to the Acquisition;  expected trends in research and development
expenses  and  interest  income;  and  plans to meet  requirements  for  working
capital, capital expenditures and debt service. Such forward-looking  statemetns
involve known and unknown risks,  uncertainties and other factors that may cause
actual results,  performance or achievements of the Company to differ materially
from those expressed or implied by such forward-looking statements. Although the
Company believes that its plans,  intentions and expectations  reflected in such
forward-looking  statements are  reasonable,  it can give no assurance that such
plans, intentions or expectations will be achieved. Important factors that could
cause actual results to differ materially from the Company's expectation are set
forth below under the caption "Certain Factors That May Affect Future Results."

The  following  discussion  should  be read in  conjunction  with the  Company's
Condensed Consolidated Financial Statements and Notes thereto included herein.

Background

On August 21, 1997,  AX, a wholly-owned  subsidiary of Axiohm S.A.,  completed a
tender  offer to acquire 7 million  (or  approximately  88%) of the  outstanding
shares of DH Technology, which resulted in a change of control of DH Technology.
On October 2, 1997, AX (i) acquired all of the outstanding shares of Axiohm S.A.
in exchange for 5,518,524 shares of DH Technology Common Stock and $12.2 million
in cash and then (ii) was merged into DH Technology.  Although DH Technology was
the  surviving  corporation  for legal  purposes,  the merger  was  treated as a
purchase of DH Technology by Axiohm S.A. for accounting purposes.  The effective
date of the merger was October 2, 1997 for legal purposes. The effective date of
the  acquisition  and merger of DH Technology was August 31, 1997 for accounting
purposes.  For the three and nine month  periods ended  September 30, 1996,  the
following  discussion  includes the results of operations  for Axiohm S.A. only.
For the three and nine month  periods ended  September  30, 1997,  the following
discussion  includes  the results of  operations  for Axiohm  S.A.  for the full
periods  plus the  results  of  operations  of DH  Technology  for the  month of
September 1997. 

Results Of Operations

Three Months Ended  September 30, 1997 Compared To Three Months Ended  September
30, 1996

Net Sales.  Net sales of $42.9 million for the third  quarter of 1997  increased
68.0%,  or $17.3  million,  compared to net sales of $25.6  million for the same
period  last  year.  This  increase  was  attributable  to  the  addition  of DH
Technology  net sales for September 1997 of $10.3 million and an increase in net
sales of $7.0 million.  The increase in net sales reflects increased unit volume
of transaction  printers and printer mechanisms partially offset by a decline in
average selling prices and a unit decline in thermal mechanisms.

Historically,  the Company has experienced  lower levels of sales of transaction
printers  during the period from  mid-November  to the end of December caused by
the fact that some of its POS  customers  do not  install  new  systems in their
facilities between Thanksgiving and Christmas.


Cost of Net Sales.  Cost of net sales of $28.2 million decreased to 65.6% of net
sales for the third quarter of 1997 from 71.3%,  or $18.2 million,  of net sales
for the same period of 1996,  due  primarily to the following  four  factors:  a
favorable  impact of the exchange  rate  between the U.S.  dollar and the French
franc for products  manufactured in France and sold in the U.S.;  lower purchase
prices of components and parts; continuing technology  improvements;  and higher
absorption of relatively  fixed overhead costs partially offset by a decrease in
average selling prices.

Selling,   General  and   Administrative   Expenses.   Selling,   general,   and
administrative  expenses of $8.2 million  increased to 19.0% of net sales in the
third quarter of 1997 from 11.5%,  or $2.9 million,  in the same period in 1996.
This increase was largely the result of non-cash goodwill  amortization  expense
of $2.5 million, the inclusion of expenses attributable to DH Technology of $1.6
million,  $0.5 million in a non-cash charge for stock options and an increase of
$0.8 million in base  expenses.  The increase in base expenses was primarily the
result of higher  staffing  levels and expenses  needed to support higher sales,
offset,  in part, by the favorable impact of the fluctuations in the U.S. dollar
compared to the French franc. The Company anticipates that, on a quarterly basis
through the third quarter of 2000, selling,  general and administrative expenses
will  include  approximately  $8 million to $9 million in  non-cash  acquisition
related charges which principally includes non-cash goodwill amortization.

Research  and  Development  Expenses.  Research  and  development  expenses as a
percentage of net sales  decreased to 6.0% in the third quarter of 1997 compared
to 6.4% in the third quarter of 1996.  Total  dollars  expended for research and
development  increased $1 million to $2.6  million in the third  quarter of 1997
compared  to $1.6  million  in the third  quarter of 1996  partially  due to the
inclusion of DH  Technology  expenses of $.5 million.  In addition,  the Company
believes that the continued timely  development of new products and enhancements
to its existing products are essential to maintaining the Company's  competitive
position.  Accordingly, the Company anticipates that such expenses will increase
in absolute dollar terms for the foreseeable future.

In-Process Technology. In conjunction with the acquisition of DH Technology, the
Company  incurred a non-cash  charge of $50.8  million due to the  write-off  of
acquired  in-process  technology  (projects  that had not reached  technological
feasibility and had no future alternative use).

Loss from  Operations.  Loss from  operations  for the third quarter of 1997 was
$46.8  million,  compared  to net income of $2.8  million in the same period for
1996.  The  net  loss  in the  third  quarter  of 1997  was  largely  due to the
in-process technology charge discussed above.

Interest and Other Income.  Interest  income  increased  $.3 million  during the
third quarter of 1997 over the prior year as a result of higher cash balances in
the third  quarter of 1997.  The  Company  does not  anticipate  it will  obtain
significant  interest  income  for at  least  the  next  twelve  months  because
substantially  all of the  Company's  cash was used to  complete  the  Merger or
became restricted following the Merger.

Interest and Other Expense.  Interest  expense  increased to $2.7 million in the
third  quarter of 1997 from $.3  million  for the same period in 1996 due to the
incurrence  of  Acquisition  Financing.   See  Note  5  of  Notes  to  Condensed
Consolidated Financial Statements.

Provision for Income  Taxes.  Provision for income taxes of $2.3 million in 1997
increased  $1.3 million from $1.0 million in 1996.  Income taxes as a percentage
of income before taxes,  excluding the effect of acquisition related charges was
approximately  46% compared to 38.3% due to the increase from 36.7% to 41.3%, in
the French  statutory  tax rate which has been  applied in the third  quarter of
1997  retroactively  from January 1, 1997. Income tax expense as a percentage of
loss before income taxes  including the effect of acquisition  related  charges,
was 4.6% in the third quarter of 1997 primarily due to the in-process technology
charge and goodwill amortization being non-deductible for income tax purposes.




Nine Months Ended September 30, 1997 Compared To Nine Months Ended September 30,
1996

Net Sales.  Net sales of $99.6 million for the  nine-months  ended September 30,
1997 increased  38.3% compared to net sales of $72.0 million for the same period
in the  prior  year.  This  increase  was  attributable  to the  addition  of DH
Technology  net sales of $10.3  million  and an  increase  in net sales of $27.6
million.   The  increase  in  net  sales  reflects  increased  unit  volumes  of
transaction  printers and printer  mechanisms  partially  offset by a decline in
average selling prices and a unit decline in thermal mechanisms.

Historically,  the Company has experienced  lower levels of sales of transaction
printers  during the period from  mid-November  to the end of December caused by
the fact that some of its POS  customers  do not  install  new  systems in their
facilities between Thanksgiving and Christmas.

Cost of Net Sales.  Cost of net sales of $67.0 million increased $17.2 or 34.5%,
from $49.8  million in the 1996  period.  Cost of net sales as a  percentage  of
revenues  decreased  from 69.2% in the 1996 period to 67.3% in 1997. The decline
was due to a favorable  impact of the exchange rate between the U.S.  dollar and
the French franc for products manufactured in France and sold in the U.S., lower
purchase prices of components and parts,  continuing technology improvements and
higher  absorption of relatively  fixed  overhead  costs  partially  offset by a
decrease in average selling prices.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses of $13.9  million for the 1997  period  increased  $5.6
million or 67.1% from $8.3  million in the 1996  period.  Selling,  general  and
administrative  expenses as a percentage of revenues increased from 11.5% in the
1996 period to 13.9% in the 1997 period. This increase was largely the result of
non-cash  goodwill  amortization  expense  of $2.5  million,  the  inclusion  of
expenses  attributable  to DH  Technology  of $1.6  million,  $0.5  million in a
one-time  charge  for stock  options  and an  increase  of $0.8  million in base
expenses.  The  increase  in base  expenses  was  primarily  a result  of higher
staffing levels and expenses needed to support higher sales, offset, in part, by
the favorable  impact of the  fluctuations  in the U.S.  dollar  compared to the
French franc.  The Company  anticipates  that, on a quarterly  basis through the
third quarter of 2000, selling, general and administrative expenses will include
approximately $8 million to $9 million in non-cash acquisition related charges.

Research and Development  Expenses.  Research and  development  expenses of $6.2
million in the 1997 period increased $1.5 million or 31.8% from $4.7 in the 1996
period.  Research and development expenses as a percentage of revenues decreased
slightly  from 6.5% in the 1996 period to 6.2% in the 1997  period.  The Company
believes that the timely  development  of new products and  enhancements  to its
existing  products  are  essential  to  maintaining  its  competitive  position.
Accordingly,  the  Company  anticipates  that such  expenses  will  continue  to
increase in absolute dollar terms for the foreseeable future.

In-Process Technology. In conjunction with the acquisition of DH Technology, the
Company  incurred a non-cash  charge of $50.8  million due to the  write-off  of
acquired  in-process  technology  (projects  that had not reached  technological
feasibility and had no future alternative use).

Loss  From  Operations.  Loss  from  operations  for the 1997  period  was $38.3
million, compared to net income of $9.2 million in the same period for 1996. The
net  loss  in the  third  quarter  of 1997  was  largely  due to the  in-process
technology charge discussed above.

Interest And Other Income.  Interest  income and other income of $0.4 million in
the 1997 period decreased $0.8 million from $1.2 million in the 1996 period.  In
the 1996  period,  Axiohm S.A.  received  insurance  proceeds of $1.0 million as
compensation  for the loss of  revenue  and  commercial  damage  caused by water
damage in its clean room facility located in Puiseaux,  France. The Company does
not anticipate that it will obtain significant  interest income for at least the
next twelve months because  substantially  all of the Company's cash was used to
complete the Merger or became restricted following the Merger.

Interest And Other Expense.  Interest expense  increased to $3.1 million for the
1997 period from $.09  million in the 1996 period due to the  incurrence  of the
Acquisition  Financing.  See Note 5 of Notes to Condensed Consolidated Financial
Statements.

Provision For Income  Taxes.  Provision for income taxes of $5.5 million in 1997
increased  $1.8 million from $3.7 million in 1996.  Income taxes as a percentage
of income before taxes, excluding the effect of acquisition related charges, was
approximately  41.8%  compared to 38.3% due to the increase from 36.7% to 41.3%,
in the French  statutory  tax rate.  Income tax expense as a percentage  of loss
before income taxes  including the effect of acquisition  related  charges,  was
13.4% in the 1997 period primarily due to the in-process technology charge being
non deductible for income tax purposes.

Certain Factors That May Affect Future Results

An  investment in the  Company's  securities  involves a high degree of risk. In
making  an  investment  decision  with  respect  to  the  Company's   securities
prospective  investors should carefully read the following factors,  in addition
to the other  information set forth in this Quarterly  report on Form 10Q and in
any  other  document  filed by the  Company  with the  Securities  and  Exchange
Commission under the Securities Exchange Act of 1934, as amended, after the date
hereof.

Substantial  Leverage and Debt Service. The Company is, and will continue to be,
highly leveraged.  The Company's ability to make scheduled payments of principal
of, or to pay the premium,  if any, interest on its outstanding  indebtedness or
to refinance its  indebtedness  or to fund planned  capital  expenditures,  will
depend  upon its  future  performance,  which,  in turn,  is  subject to general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond its control.  There can be no assurance  that the Company's  business
will generate cash flow at or above anticipated  levels or that the Company will
be able to borrow funds under the Credit  Agreement in an amount  sufficient  to
enable the Company to service its indebtedness,  or to make anticipated  capital
expenditures.  There can be no assurance that anticipated revenue growth or cost
savings will be achieved at the levels  currently  anticipated or at all. If the
Company is unable to generate  sufficient cash flow from operations or to borrow
sufficient  funds in the future to service its debt,  it may be required to sell
assets, reduce capital expenditures,  refinance all or a portion of its existing
indebtedness or obtain additional financing.  There can be no assurance that any
such refinancing would be available on commercially reasonable terms, or at all,
or that any additional financing could be obtained,  particularly in view of the
Company's high level of indebtedness,  the restrictions on the Company's ability
to incur additional  indebtedness  under the Credit Agreement and the Indenture,
and the fact that  substantially all assets of the Company' and its subsidiaries
will be pledged to secure obligations under the Credit Agreement.

The degree to which the Company is  leveraged  (i) could make it more  difficult
for the  Company to satisfy  its  obligations  with  respect to its  outstanding
indebtedness;  (ii)  increase the  Company's  vulnerability  to general  adverse
economic and industry  conditions;  (iii) limit the Company's  ability to obtain
additional  financing to fund future working capital,  capital  expenditures and
other  general  corporate  requirements;   (iv)  require  the  dedication  of  a
substantial portion of the Company's cash flow from operations to the payment of
principal  of,  and  interest  on,  its   indebtedness,   thereby  reducing  the
availability of such cash flow to fund working capital,  capital expenditures or
other general  corporate  requirements;  (v) limit the Company's  flexibility in
planning for, or reacting to,  changes in its business and the industry in which
it competes; and (vi) place the Company at a competitive  disadvantage vis-a-vis
less leveraged or better capitalized competitors. In addition, the Indenture and
the Credit  Agreement  contain  financial and other  restrictive  covenants that
limit,  among other  things,  the  ability of the  Company to borrow  additional
funds.  Failure by the Company to comply  with such  covenants  could  result in
events of default  under the Indenture and the Credit  Agreement  which,  if not
cured or waived,  could permit the  indebtedness  thereunder  to be  accelerated
which would have a material adverse effect on the Company's business,  financial
condition and results of operations.

Restrictive  Loan  Covenants.  The Indenture  contains  covenants that restrict,
among other things, the ability of the Company to incur additional indebtedness,
pay dividends or make certain other  Restricted  Payments (as defined  therein),
enter into transactions with affiliates,  allow its subsidiaries to make certain
payments,  make  certain  asset  dispositions,  merge or  consolidate  with,  or
transfer  substantially  all of its assets to another  person,  encumber  assets
under  certain  circumstances,   restrict  dividends  and  other  payments  from
subsidiaries,  issue  capital  stock of  wholly-owned  subsidiaries,  engage  in
certain   business   activities,   or  engage  in  certain   change  of  control
transactions.  In  addition,  the  Credit  Agreement  contains  other  and  more
restrictive  covenants and prohibits the Company from  prepaying  certain of its
indebtedness.  Under the  Credit  Agreement,  the  Company is also  required  to
maintain specified  financial  covenants,  including maximum capital expenditure
limits,  minimum  EBITDA,  a minimum fixed charge  coverage  ratio and a maximum
leverage  ratio  (each as defined in the Credit  Agreement).  The failure by the
Company to maintain such financial  covenants or to comply with the restrictions
contained  in the Credit  Agreement or the  Indenture  could result in a default
thereunder,  which in turn  could  cause  such  indebtedness  (and by  reason of
cross-default  provisions,  other  indebtedness)  to become  immediately due and
payable.  No assurance can be given that the Company's future operating  results
will be sufficient to enable compliance with such covenants,  or in the event of
a default, to remedy such default.

Dependence  on  Principal   Customer.   In  1994,  Axiohm  S.A.  acquired  NCR's
transaction  printer business and placed the business in Axiohm IPB. At the time
of the acquisition,  Axiohm IPB entered into a three-year contract (the "Initial
NCR Contract")  with NCR that required NCR to purchase at least 75% of its needs
for  transaction  printers of the type  manufactured  by Axiohm IPB at such time
(the "Initial Covered  Products").  Since the acquisition,  the Company believes
that NCR has purchased over 90% of its requirements for Initial Covered Products
from Axiohm IPB pursuant to the Initial NCR  Contract  and has also  purchased a
substantial  number of other  products  from Axiohm  S.A.  Total sales to NCR by
Axiohm S.A.  represented  52% and 64% of Axiohm S.A.'s revenues for fiscal years
1996 and 1995,  respectively.  On a pro forma  basis for the nine  months  ended
September 30, 1997, the Company's sales to NCR would have represented 26% of the
Company's  total  revenue.  On September 2, 1997,  Axiohm IPB entered into a new
three-year contract with NCR (the "New NCR Contract"). The New NCR Contract does
not  obligate  NCR  to  purchase  a  minimum  of 75%  of  its  requirements  for
transaction  printers of the type  manufactured  by Axiohm IPB, but does provide
that NCR and Axiohm IPB intend and expect that NCR will purchase from Axiohm IPB
substantially  all of its  requirements  for  transaction  printers  of the type
manufactured by Axiohm IPB (the "New Covered Products"). In case there is reason
to believe  that NCR is  purchasing  less than 75% of its  requirements  for New
Covered  Products from Axiohm IPB at any time during the term of the  agreement,
there is an  obligation  for both  parties  to work  together  in good  faith to
eliminate  such  deficiency.  Similar to the Initial NCR  Contract,  the New NCR
Contract  provides  that NCR's  purchase  commitment  is subject to Axiohm IPB's
ability to meet NCR's  specifications  and requirements for price,  performance,
quality,  service and delivery  with respect to such New Covered  Products.  Any
failure by NCR to continue  purchasing  products  from the Company at historical
levels or the termination of the New NCR Contract would have a material  adverse
effect on the Company's business, financial condition and operating results.

Integration of Operations.  The integration of the  administrative,  finance and
manufacturing  operations of Axiohm S.A. and DH Technology,  the coordination of
their  respective  sales  and  marketing  staffs  and  the   implementation   of
appropriate  operational,  financial  and  management  systems and  controls may
require  significant   financial   resources  and  substantial   attention  from
management.  The Company has  identified  certain  cost  savings  related to the
business combination. The Company expects to incur significant integration costs
over the course of 1998 and 1999 related to the Merger and the implementation of
the Company's  cost saving  strategy.  Any inability of the Company to integrate
these  companies  successfully  in a timely and  efficient  manner  could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of  operations  and would  adversely  affect its  ability to realize its
planned cost savings or would require  additional  expenditures  to realize such
cost  savings.  In  addition,  even if the  businesses  of  Axiohm  S.A.  and DH
Technology are  successfully  integrated,  no assurance can be given that future
expenses can be reduced by the expected  cost savings.  The Company's  prospects
should be  considered in light of the numerous  risks  commonly  encountered  in
business combinations.

Management of Acquisitions.  Historically, the Company has achieved a portion of
its growth  through  acquisitions  of other  businesses  and continues to pursue
additional  acquisitions as part of its growth  strategy.  There are a number of
risks  associated  with any acquisition or business  combination,  including the
substantial  time and  attention  required  from  management  of the  Company in
connection  with such  transactions,  the  difficulty of predicting  whether the
operations  will  perform  as  expected  and other  problems  inherent  with any
transition of one business organization into another.  There can be no assurance
that the anticipated  benefits of any acquisition will be realized. A failure by
the Company to manage any such  acquisitions  effectively  could have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations. Additionally, there may be future acquisitions which could result in
potentially dilutive issuances of equity securities,  the incurrence of debt and
contingent  liabilities and amortization  expenses related to goodwill and other
intangible assets  associated with the acquisitions of other businesses,  any of
which could have a material adverse effect on the Company's business,  financial
condition and results of operations.

Competition.  The  Company  has a number of  significant  domestic  and  foreign
competitors  for its  transaction  printer,  bar code  printer  and card  reader
products.   Many  of  the  Company's   competitors  have  significantly  greater
financial,  technical and marketing  resources than does the Company.  To remain
competitive,  the Company  believes  that it will be required to maintain a high
level of technological expertise and deliver reliable cost-effective products on
a timely basis.  There can be no assurance that the Company will have sufficient
resources  to  continue  to make  the  investments  necessary  to  maintain  its
competitive  position  or that  other  competitors  with  substantially  greater
financial resources,  including other manufacturers of non-transaction printers,
will not attempt to enter the market. A failure to remain competitive would have
a material  adverse effect on the Company's  business,  financial  condition and
results of operations.

Fluctuating Operating Results;  Dependence on OEM Sales. The Company's net sales
and  operating  results may  fluctuate  in the future as a result of a number of
factors,  including:  (i) the  timing of  customer  orders;  (ii) the  timing of
completion of existing  customer  contracts;  (iii)  variations in the Company's
sales channels or the mix of products it sells; (iv) changes in pricing policies
by the Company's  suppliers;  (v)  fluctuations in  manufacturing  yields;  (vi)
market acceptance of new and enhanced versions of the Company's products;  (vii)
the success or failure of the sales and  marketing  efforts of the Company's OEM
customers to end-users;  (viii) the timing of acquisitions of other  businesses,
products and  technologies  and any  associated  charges to  earnings;  and (ix)
seasonal  factors  relating  to  the  Company's  business.  In  particular,  the
Company's  customers encounter uncertain and changing demand for their products.
If demand falls below customers' forecasts, or if customers do not control their
inventories  effectively,  they may cancel or  reschedule  shipments  previously
ordered  from the  Company.  The  Company has in the past  experienced,  and the
Company  may at any time and  with  minimal  notice  in the  future  experience,
cancellations   and   postponements  of  orders.   Any  such   cancellations  or
postponements  of orders could have a material  adverse  effect on the Company's
business, financial condition and results of operations.

A  significant  portion  of the  Company's  net  sales  historically  have  been
application-specific or customizable products designed for and sold to OEMs. The
Company's sales volume for any one particular OEM  application-specific  product
is necessarily  tied to the ability of the OEM to successfully  market its final
product to the end-user. The successful marketing of the OEM's final products to
end-users is generally  outside of the control of the Company and is usually not
dependent on the successful performance of the Company's products.  Although the
Company  attempts to diversify its OEM sales across a broad spectrum of OEMs and
OEM  product  lines to  mitigate  these  risks,  the timing of large  orders for
particular  OEM products  may have a material  adverse  effect on the  Company's
results  of  operations  for the  periods in which such  orders are  filled.  In
addition,  if sales by an OEM of products to end-users  decline or fall short of
expectations,  orders to the  Company  related to such  products  may decline or
cease. For example, DH Technology's results of operations in 1996 were favorably
impacted by $15.6  million in sales to a single OEM for a new product.  However,
the Company  expects  sales to this OEM for this product  during 1997 to be less
than $1.0  million.  The  Company's  results of  operations in the future may be
similarly  affected by large OEM orders for new products or by rapid declines in
sales of the OEM's products.

Seasonality. The Company's results of operations may fluctuate from year to year
or quarter to quarter due to a variety of factors.  The  Company  expects  lower
levels of sales and profitability during the period from mid-November to the end
of December impacting the last quarter of each fiscal year. The Company believes
that this  seasonality  is caused by the fact that some of its POS  customers do
not install new systems in their facilities between Thanksgiving and Christmas.

Technological  Change;  Dependence on New Products.  The markets for some of the
Company's  products are characterized by frequent  refinement and enhancement of
existing products and new product introductions and by declining average selling
prices over product life  cycles.  The  Company's  future  prospects  are highly
dependent  upon the  timely  completion  and  introduction  of new  products  at
competitive  price and  performance  levels and the acceptance by new markets of
the  Company's  products.  The Company also must respond to current  competitors
which may choose to increase their presence in the Company's markets, and to new
competitors,  which may choose to enter those  markets.  In addition,  while the
Company  is not  aware  of any  new  fundamental  technologies  for  transaction
printers  that are  likely to be a  significant  factor in the near  future,  no
assurance  can be given that the  Company's  competitors  will not introduce new
technologies  or  technological  improvements  that will place the  Company at a
competitive disadvantage. The failure by the Company to make timely introduction
of new  products  or to respond  to  competitive  threats  could have a material
adverse effect on its business, financial condition and results of operations.

Environmental  and  Other  Government  Regulations.  Federal,  state,  local and
foreign regulations impose various controls on the storage, handling,  discharge
and disposal of substances used in the Company's  manufacturing processes and on
the Company's  facilities.  The Company believes that its activities  conform to
present  governmental  regulations  applicable to its operations and its current
facilities,  including those related to environmental,  land use, public utility
utilization  and  fire  code  matters.  There  can  be no  assurance  that  such
governmental  regulations  will not in the future impose the need for additional
capital equipment or other process requirements upon the Company or restrict the
Company's ability to expand its operations. The adoption of such measures or any
failure by the  Company to comply  with  applicable  environmental  and land use
regulations or to restrict the discharge of hazardous  substances  could subject
the Company to future liability, or could cause its manufacturing  operations to
be curtailed or suspended.

International  Sales and Operations.  A significant portion of the Company's net
sales  historically  have been derived  from sales to  customers  outside of the
United States.  The Company  expects that  international  sales will continue to
represent a  significant  portion of its net sales for the  foreseeable  future.
Although  the  Company's  net  sales  are  denominated  in  U.S.  dollars,   its
international  business  may be  affected  by changes in demand  resulting  from
fluctuations  in exchange  rates as well as by risks such as tariff  regulations
and  difficulties in obtaining export  licenses.  In addition,  historically the
French  operations  of Axiohm S.A.  have  incurred a majority  of Axiohm  S.A.'s
expenses  in French  francs,  while a  substantial  majority  of  Axiohm  S.A.'s
revenues  have been in U.S.  dollars.  Any material  appreciation  in the French
franc  relative to the U.S.  dollar would,  absent any effects  associated  with
hedging or currency  trading  transactions,  detrimentally  affect the financial
performance of the Company's French operations.

Dependence  on Key  Personnel.  The Company's  success  depends to a significant
degree upon the continued  contributions of senior  management,  certain of whom
would be  difficult to replace.  There can be no assurance  that the services of
such personnel will continue to be available to the Company. The Company is also
dependent  upon  the  continued  services  of  its  engineering,   research  and
development,  sales and marketing and manufacturing and service personnel and on
its ability to attract,  train and retain  highly  skilled  personnel in each of
these areas.  The Company does not have  employment  agreements with many of its
employees, and there is no assurance that the Company will be able to retain its
key employees. The failure of the Company to hire and retain such key management
and other  personnel  could  have a  material  adverse  effect on the  Company's
business, financial condition and results of operations.

Voting Control of the Company.  As of October 2, 1997,  the Company's  executive
officers and directors as a group  beneficially  owned  approximately 59% of the
Company's  outstanding  Common  Stock  and  Patrick  Dupuy  and  Gilles  Gibier,
principal  shareholders  and  Co-Chairmen  of the Company's  Board of Directors,
beneficially owned approximately 54% of the Company's  outstanding Common Stock.
Accordingly,  Mr.  Dupuy and Mr.  Gibier have the ability to elect a majority of
the Board of Directors of the Company and to determine  the outcome of any other
matter  submitted  to the  shareholders  for  approval,  including  the power to
determine  the  outcome  of  all  corporate   transactions,   such  as  mergers,
consolidations  and the sale of all or  substantially  all of the  assets of the
Company.

Intellectual Property Rights. The Company holds various U.S. and foreign patents
on impact printheads,  transaction printers,  magnetic card readers and bar code
products and has applied for additional domestic and foreign patents.  The basic
technology for many of the Company's products is based upon these patents and on
manufacturing expertise.  There can be no assurance that any issued patents will
provide the Company with  competitive  advantages  or will not be  challenged by
third  parties,  or that the patents of others will not have a material  adverse
effect  on the  Company's  ability  to do  business,  or that  others  will  not
independently  develop similar products,  duplicate the Company's  products,  or
design around the patents issued to the Company.

The Company has in the past been, and may in the future be, notified that it may
be  infringing  intellectual  property  rights  possessed by third  parties.  In
addition,  the  Company  has in the  past,  and  may  in  the  future,  commence
litigation against third parties for infringement of the Company's  intellectual
property rights.  Any such litigation  initiated by the Company or by others is,
at a minimum,  costly and can divert the efforts and  attention of the Company's
management and technical personnel,  which can have a material adverse effect on
the  Company's   business,   financial  condition  and  results  of  operations.
Furthermore,  there can be no assurance that other infringement  claims by third
parties or other  claims for  indemnification  by  customers or end-users of the
Company's  products  resulting from infringement  claims will not be asserted in
the  future or that  such  assertions,  if  proven  to be true,  will not have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.  If any such claims are asserted against the Company, the
Company  may seek to obtain a  license  under  the  third  party's  intellectual
property  rights.  There can be no  assurance,  however,  that a license will be
available on commercially reasonable terms, if at all. The Company could decide,
in the  alternative,  to resort to  litigation  to  challenge  such claims or to
design  around the patented  technology.  Such actions could be costly and would
divert the efforts and  attention  of the  Company's  management  and  technical
personnel, which could have a material adverse effect on the Company's business,
financial condition and results of operations.


Liquidity And Capital Resources

For the nine months  ended  September  30, 1997 net cash  provided by  operating
activities  was $8.7 million,  which was primarily the result of a $46.5 million
net loss  offset by  non-cash  charges of $56.7  million,  of which the  largest
component was a $50.8 million write-off of in-process  technology in conjunction
with the Acquisition..

The increase in working  capital from December 31, 1996 to September 30, 1997 of
$51.5 million was primarily  due to $56.4  million of working  capital  acquired
with the Acquisition by an increase in accounts  receivable.  On October 2, 1997
$31 million of  unrestricted  cash along with the offset  proceeds from the $120
million  Initial Notes  Offering and $57 million of borrowings  under the Credit
Agreement was used to repay principal and accrued interest under the Acquisition
Financing.

Axiohm,  S.A. completed a tender for approximately 88% of the outstanding shares
of DH Technology and subsequently merged into DH Technology.  On October 2, 1997
DH Technology changed its name to Axiohm Transaction Solutions,  Inc. See Note 2
of Notes to Condensed Consolidated Financial Statements.

The  Company's  primary  capital  requirements  include  debt  service,  capital
expenditures  and  working  capital.  The  Company's  ability to make  scheduled
payments of  principal,  interest or to fund  planned  capital  expenditures  or
working  capital,  will depend upon its future  performance,  which, in turn, is
subject to various  factors  both within and beyond its  control.  See  "Certain
Factors That May Affect Future  ResultsSubstantial  Leverage and Debt  Service."
Based upon current levels of operations and  anticipated  growth in revenues and
cost savings,  the Company believes that the Company's cash flow from operations
and amounts  available  under the Credit  Agreement will be adequate to meet its
anticipated future requirements for working capital,  capital expenditures,  and
scheduled payments of principal and interest on its indebtedness during the next
twelve  months.  See  Note  4  of  Notes  to  Condensed  Consolidated  Financial
Statements.

The Credit  Agreement  includes  various  financial  covenants  of the  Company,
including covenants with respect to the maximum capital expenditures,  a maximum
ratio of debt to EBITDA, a minimum  interest  coverage ratio and a minimum fixed
charge  coverage  ratio.  The Credit  Agreement  subjects the Company to certain
negative  covenants,  including  without  limitation  covenants  that  restrict,
subject to specified exceptions:  the incurrence of additional  indebtedness and
other   obligations   and  the  granting  of  additional   liens;   mergers  and
acquisitions,  investments and  acquisitions  and  dispositions  of assets;  the
incurrence of capitalized lease  obligations;  investments,  loans and advances;
dividends, stock repurchases and redemptions;  prepayment or repurchase of other
indebtedness and other provisions.  Under the Credit  Agreement,  the Company is
required  to enter into  arrangements  to provide  interest  protection  for $20
million of this floating rate debt for two years.

The  Company  incurred  indebtedness  of $120  million  in  connection  with the
issuance of the Notes. The  indebtedness  evidenced by the Notes is subordinated
to the Company's  obligations  under the Credit  Agreement.  Interest is payable
semi-annually on the unpaid principal at 9.75% per annum. The Indenture contains
covenants  regarding:  restricted payments,  incurrence of indebtedness,  liens,
dividends,  merger,  consolidation  or sale of  assets,  and  transactions  with
affiliates.  See "Certain  Factors That May Affect Future  Results-  Restrictive
Loan  Covenants"  and  Note  4 of  Notes  to  Condensed  Consolidated  Financial
Statements.



<PAGE>


PART II.  OTHER INFORMATION

Item 2 - Changes in Securities

The Company's Credit Agreement and Senior  Subordinated Note Indenture  restrict
the Company from paying dividends on its Common Stock


Item 6 -   Exhibits and reports on Form 8-K

                  (a)      Exhibits:
     ----------------------------------- ---------------------------------------
                               2.1**      Agreement  and Plan of Merger dated as
                                          of   July   14,   1997,    among   the
                                          Registrant,   Axiohm   S.A.   and   AX
                                          Acquisition Corporation.
     ----------------------------------- ---------------------------------------
     ----------------------------------- ---------------------------------------
                                2.2*      Purchase  and  Assumption   Agreement,
                                          dated  October 2, 1997,  among  Axiohm
                                          IPB, AX  Acquisition  Corporation  and
                                          the Registrant.
     ----------------------------------- ---------------------------------------
     ----------------------------------- ---------------------------------------
                                3.1*      Certificate   of   Ownership   of  the
                                          Registrant  filed with the  California
                                          Secretary of State on October 2, 1997.
     ----------------------------------- ---------------------------------------
     ----------------------------------- ---------------------------------------
                                3.2*      Amended and Restated Bylaws of the 
                                          Registrant.
     ----------------------------------- ---------------------------------------
     ----------------------------------- ---------------------------------------
                                4.1*      Indenture, dated as of October 2, 1997
                                          among the  Registrant,  the Guarantors
                                          named  therein,  and  The  Bank of New
                                          York, as trustee.
     ----------------------------------- ---------------------------------------
     ----------------------------------- ---------------------------------------
                                4.2*      $117,300,000 9-3/4% Senior 
                                          Subordinated Note due 2007 and  
                                          Subsidiary Guarantee.
     ----------------------------------- ---------------------------------------
     ----------------------------------- ---------------------------------------
                                4.3*      $2,350,000 9-3/4% Senior Subordinated 
                                          Note due 2007 and Subsidiary
                                          Guarantee.
     ----------------------------------- ---------------------------------------
     ----------------------------------- ---------------------------------------
                                4.4*      $350,000 9-3/4% Senior Subordinated 
                                          Note due 2007 and Subsidiary
                                          Guarantee.
     ----------------------------------- ---------------------------------------
     ----------------------------------- ---------------------------------------
                               10.1*      Registration  Rights Agreement,  dated
                                          as  of   October  2,  1997  among  the
                                          Registrant,  Axiohm S.A.,  Axiohm IPB,
                                          Inc., Dardel Technologies S.A., Stadia
                                          Colorado Corp.,  Cognitive  Solutions,
                                          Inc. and Lehman Brothers Inc.
     ----------------------------------- ---------------------------------------
     ----------------------------------- ---------------------------------------
                               10.2*      Purchase  Agreement,  dated  September
                                          25, 1997, among the Registrant, Axiohm
                                          IPB Inc., Cognitive  Solutions,  Inc.,
                                          Stadia   Colorado   Corp.  and  Lehman
                                          Brothers Inc.
     ----------------------------------- ---------------------------------------
     ----------------------------------- ---------------------------------------
                               10.3*      Employment   Agreement   between   the
                                          Registrant  and William H. Gibbs dated
                                          as of July 14, 1997.
     ----------------------------------- ---------------------------------------
     ----------------------------------- ---------------------------------------
                               10.4*      Employment   Agreement   between   the
                                          Registrant  and Walter  Sobon dated as
                                          of July 14, 1997.
     ----------------------------------- ---------------------------------------
     ----------------------------------- ---------------------------------------
                               10.5*      Employment   Agreement   between   the
                                          Registrant  and Janet  Shanks dated as
                                          of July 14, 1997.
     ----------------------------------- ---------------------------------------
     ----------------------------------- ---------------------------------------
                               10.6*      Employment   Agreement   between   the
                                          Registrant  and David Ledwell dated as
                                          of July 14, 1997.
     ----------------------------------- ---------------------------------------
    ------------------------------------ ---------------------------------------
                               10.7*      Credit  Agreement,  dated  October  2,
                                          1997,    among   the   Registrant   as
                                          Borrower,  Lehman  Brothers  Inc.,  as
                                          arranger,  and Lehman Commercial Paper
                                          Inc.,   as   syndication   agent   and
                                          administrative agent.

         ----------------------------------- -----------------------------------
     ----------------------------------- ---------------------------------------
                               10.8*      Guarantee  and  Collateral  Agreement,
                                          dated as of October  2, 1997,  between
                                          the Registrant, Lehman Brothers, Inc.,
                                          Lehman   Commercial   Paper  Inc.  and
                                          certain of Registrant's subsidiaries.
     ----------------------------------- ---------------------------------------
     ----------------------------------- ---------------------------------------
                                27.1      Financial Data Schedule.

     ----------------------------------- ---------------------------------------
                             **  Incorporated  by reference to Exhibit (c)(1) of
                             the  Registrant's  Schedule  14D-9  dated  July 16,
                             1997. * Incorporated by reference to exhibits filed
                             in  response  to  Item  7(c),  "Exhibits,"  of  the
                             Company's Report on Form 8-K dated October 2, 1997.


                  (b)      During the quarter  ended  September  30,  1997,  the
                           Company filed the following reports on Form 8-K:

                                         Current Report on Form 8-K dated August
                                         21,  1997   relating  to  a  change  in
                                         control of DH Technology pursuant to an
                                         acquisition of 7,000,000  shares of the
                                         Common  Stock  of DH  Technology  by AX
                                         Acquisition  Corporation,  a California
                                         corporation     and     an     indirect
                                         wholly-owned subsidiary of Axiohm S.A.,
                                         a private French Company.

                                         Current   report   on  Form  8-K  dated
                                         October   2,  1997   relating   to  the
                                         completion of a series of  transactions
                                         with  Axiohm  S.A.,  a  private  French
                                         company,  pursuant to an Agreement  and
                                         Plan of Merger,  dated  July 14,  1997,
                                         among DH Technology,  Inc., Axiohm S.A.
                                         and AX Acquisition Corporation.



<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.


Axiohm Transaction Solutions, Inc. by:


    November 19, 1997                            /s/Janet W. Shanks
   -------------------                 -----------------------------------------
         Date                          Janet W. Shanks, Chief Accounting Officer
                                            (Chief Accounting Officer)


<PAGE>



                       AXIOHM TRANSACTION SOLUTIONS, INC.
                    EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 1997


--------------------------------------------------------------------------------
        EXHIBIT         DESCRIPTION
--------------------------------------------------------------------------------

   ---------------- ------------------------------------------------------------
            2.1**      Agreement  and Plan of Merger  dated as of July 14, 1997,
                       among the  Registrant,  Axiohm  S.A.  and AX  Acquisition
                       Corporation.
     ---------------- ----------------------------------------------------------
     ---------------- ----------------------------------------------------------
             2.2*      Purchase and Assumption Agreement, dated October 2, 1997,
                       among  Axiohm IPB,  AX  Acquisition  Corporation  and the
                       Registrant.
     ---------------- ----------------------------------------------------------
     ---------------- ----------------------------------------------------------
             3.1*      Certificate of Ownership of the Registrant filed with the
                       California Secretary of State on October 2, 1997.
     ---------------- ----------------------------------------------------------
     ---------------- ----------------------------------------------------------
             3.2*      Amended and Restated Bylaws of the Registrant.
     ---------------- ----------------------------------------------------------
     ---------------- ----------------------------------------------------------
             4.1*      Indenture,   dated  as  of  October  2,  1997  among  the
                       Registrant, the Guarantors named therein, and The Bank of
                       New York, as trustee.
     ---------------- ----------------------------------------------------------
     ---------------- ----------------------------------------------------------
             4.2*      $117,300,000 9-3/4% Senior Subordinated Note due 2007 and
                       Subsidiary Guarantee.
     ---------------- ----------------------------------------------------------
     ---------------- ----------------------------------------------------------
             4.3*      $2,350,000  9-3/4% Senior  Subordinated Note due 2007 and
                       Subsidiary Guarantee.
     ---------------- ----------------------------------------------------------
     ---------------- ----------------------------------------------------------
             4.4*      $350,000  9-3/4%  Senior  Subordinated  Note due 2007 and
                       Subsidiary Guarantee.
     ---------------- ----------------------------------------------------------
     ---------------- ----------------------------------------------------------
             10.1*     Registration  Rights  Agreement,  dated as of  October 2,
                       1997 among the Registrant, Axiohm S.A., Axiohm IPB, Inc.,
                       Dardel   Technologies   S.A.,   Stadia   Colorado  Corp.,
                       Cognitive Solutions, Inc. and Lehman Brothers Inc.
     ---------------- ----------------------------------------------------------
     ---------------- ----------------------------------------------------------
             10.2*     Purchase  Agreement,  dated September 25, 1997, among the
                       Registrant,  Axiohm IPB Inc., Cognitive Solutions,  Inc.,
                       Stadia Colorado Corp. and Lehman Brothers Inc.
     ---------------- ----------------------------------------------------------
     ---------------- ----------------------------------------------------------
             10.3*     Employment  Agreement  between the Registrant and William
                       H. Gibbs dated as of July 14, 1997.
     ---------------- ----------------------------------------------------------
     ---------------- ----------------------------------------------------------
             10.4*     Employment  Agreement  between the  Registrant and Walter
                       Sobon dated as of July 14, 1997.
     ---------------- ----------------------------------------------------------
     ---------------- ----------------------------------------------------------
             10.5*     Employment  Agreement  between the  Registrant  and Janet
                       Shanks dated as of July 14, 1997.
     ---------------- ----------------------------------------------------------
     ---------------- ----------------------------------------------------------
             10.6*     Employment  Agreement  between the  Registrant  and David
                       Ledwell dated as of July 14, 1997.
     ---------------- ----------------------------------------------------------
     ---------------- ----------------------------------------------------------
             10.7*     Credit  Agreement,  dated  October  2,  1997,  among  the
                       Registrant  as  Borrower,   Lehman   Brothers   Inc.,  as
                       arranger,   and  Lehman   Commercial   Paper   Inc.,   as
                       syndication agent and administrative agent.
     ---------------- ----------------------------------------------------------
     ---------------- ----------------------------------------------------------
             10.8*     Guarantee and Collateral  Agreement,  dated as of October
                       2, 1997, between the Registrant,  Lehman Brothers,  Inc.,
                       Lehman  Commercial Paper Inc. and certain of Registrant's
                       subsidiaries.
     ---------------- ----------------------------------------------------------
     ---------------- ----------------------------------------------------------
             27.1      Financial Data Schedule.
     ---------------- ----------------------------------------------------------
         **  Incorporated  by  reference to Exhibit  (c)(1) of the  Registrant's
         Schedule  14D-9 dated July 16,  1997.  *  Incorporated  by reference to
         exhibits  filed in response to Item 7(c),  "Exhibits," of the Company's
         Report on Form 8-K dated October 2, 1997.