<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                          -----------------------------

                                    FORM 10-Q

              /X/ QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                         For Quarter Ended June 30, 2003

                                       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 001-14171

                                    C2, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter.)

         Wisconsin                                        39-1915787
 (State of  Incorporation)                     (IRS Employer Identification No.)

700 N. Water Street, Suite 1200, Milwaukee, Wisconsin         53202
           (Address of principal executive offices)         (Zip Code)

Registrant's telephone number, including area code    (414) 291-9000

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   /X/         No

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

         Yes               No  /X/

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common Stock $1.00 par value                            5,275,864
----------------------------                --------------------------------
         (Class)                            (Outstanding at August 11, 2003)

Page 1 of 22 total pages                 No exhibits are filed with this report.


                                       1
<PAGE>




PART I -- FINANCIAL INFORMATION
      ITEM 1.  FINANCIAL STATEMENTS
                            C2, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                       JUNE 30,       DECEMBER 31,
                                                                        2003             2002
                                                                   -------------     -------------
<S>                                                                <C>               <C>
ASSETS:
Current Assets:
    Cash and cash equivalents                                      $   4,032,000     $   4,483,000
    Accounts receivable, net                                          27,285,000        24,224,000
    Inventories                                                        9,934,000        10,518,000
    Prepaids and other                                                 2,875,000         2,699,000
                                                                   -------------     -------------
       Total Current Assets                                           44,126,000        41,924,000
                                                                   -------------     -------------
Long-Term Assets:
    Fixed assets, net                                                 63,790,000        65,971,000
    Goodwill                                                          16,162,000        16,191,000
    Other assets                                                       2,464,000         2,300,000
                                                                   -------------     -------------
       Total Long-Term Assets                                         82,416,000        84,462,000
                                                                   -------------     -------------
                                                                   $ 126,542,000     $ 126,386,000
                                                                   =============     =============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
    Current maturities of long-term debt                           $   2,635,000     $   3,285,000
    Line of credit                                                     6,052,000         4,470,000
    Accounts payable                                                  15,186,000        13,571,000
    Accrued liabilities                                               16,019,000        16,595,000
                                                                   -------------     -------------
       Total Current Liabilities                                      39,892,000        37,921,000
                                                                   -------------     -------------
Long-Term Liabilities:
    Long-term debt, less current maturities                           49,127,000        52,278,000
    Other liabilities                                                  3,536,000         3,196,000
                                                                   -------------     -------------
       Total Long-Term Liabilities                                    52,663,000        55,474,000
                                                                   -------------     -------------
       Total Liabilities                                              92,555,000        93,395,000
                                                                   -------------     -------------
Shareholders' Equity:
    Preferred stock, par value $.01 per share,                              --                --
       10,000,000 shares authorized, none issued or outstanding
    Common stock, par value $.01 per share;
       50,000,000 shares authorized, 5,275,864 issued                     53,000            53,000
    Additional paid-in capital                                        22,458,000        22,353,000
    Deferred compensation                                                (84,000)             --
    Accumulated other comprehensive loss                              (1,049,000)         (943,000)
    Retained earnings                                                 12,609,000        11,528,000
                                                                   -------------     -------------
       Total Shareholders' Equity                                     33,987,000        32,991,000
                                                                   -------------     -------------
                                                                   $ 126,542,000     $ 126,386,000
                                                                   =============     =============
</TABLE>

            See notes to consolidated condensed financial statements.


                                       2
<PAGE>




                            C2, INC. AND SUBSIDIARIES

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED                   SIX MONTHS ENDED
                                                                JUNE 30,                            JUNE 30,
                                                    -------------------------------------------------------------------
                                                         2003             2002              2003               2002
                                                    -------------------------------------------------------------------
<S>                                                 <C>               <C>               <C>               <C>
Revenues:
    Logistic services                               $  51,311,000     $  53,291,000     $  98,832,000     $  98,732,000
    Product sales                                      15,989,000        20,033,000        32,653,000        39,232,000
                                                    -------------------------------------------------------------------
                                                       67,300,000        73,324,000       131,485,000       137,964,000
                                                    -------------------------------------------------------------------
Costs and Expenses:
    Logistic expenses                                  46,004,000        47,601,000        88,209,000        87,987,000
    Cost of product sales                              13,283,000        15,730,000        27,187,000        31,312,000
    Depreciation and amortization                       1,923,000         2,030,000         3,837,000         4,110,000
    Selling, general and administrative expenses        4,430,000         5,002,000         8,816,000         9,096,000
                                                    -------------------------------------------------------------------
                                                       65,640,000        70,363,000       128,049,000       132,505,000
                                                    -------------------------------------------------------------------
Earnings from Operations                                1,660,000         2,961,000         3,436,000         5,459,000

Other Income (Expense):
    Interest expense, net                                (758,000)       (1,105,000)       (1,515,000)       (2,172,000)
    Other income (expense)                                   --            (163,000)             --            (139,000)
                                                    -------------------------------------------------------------------
                                                         (758,000)       (1,268,000)       (1,515,000)       (2,311,000)
                                                    -------------------------------------------------------------------
Earnings before income taxes
    and minority interest                                 902,000         1,693,000         1,921,000         3,148,000

Income tax provision                                      387,000           672,000           840,000         1,250,000
                                                    -------------------------------------------------------------------
Earnings before minority interest                         515,000         1,021,000         1,081,000         1,898,000

Minority interest                                            --             160,000              --             284,000
                                                    ===================================================================
Net earnings                                        $     515,000     $     861,000     $   1,081,000     $   1,614,000
                                                    ===================================================================
Basic net earnings per share                        $        0.10     $        0.17     $        0.21     $        0.32
                                                    ===================================================================
Diluted net earnings per share                      $        0.09     $        0.16     $        0.20     $        0.31
                                                    ===================================================================
Average number of shares outstanding                    5,273,853         5,081,864         5,272,858         5,081,864
                                                    ===================================================================
Diluted number of shares outstanding                    5,506,697         5,277,286         5,527,254         5,261,774
                                                    ===================================================================
</TABLE>


            See notes to consolidated condensed financial statements.






                                       3
<PAGE>




                            C2, INC. AND SUBSIDIARIES
            CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
                         SIX MONTHS ENDED JUNE 30, 2003
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                                       Accumulated     Current
                                                 Additional                            Other           Year
($000)                                 Common    Paid-In      Deferred      Retained   Comprehensive   Comprehensive
                                       Stock     Capital      Compensation  Earnings   Loss            Income (Loss)
                                      --------------------------------------------------------------------------------
<S>                                   <C>       <C>          <C>            <C>       <C>             <C>
Balance, December 31, 2002               $53     $22,353                      $11,528     $  (943)

Stock Options Exercises                               16

Restricted Stock Issued                               89        $     (89)

Vesting of Restricted Stock                                             5

Unrealized Losses on Interest Rate
   Swaps for the Six Months Ended
   June 30, 2003, net of tax                                                                 (106)             (106)

Net Earnings for the Six
   Months ended June 30, 2003                                                   1,081                         1,081
                                                                                                         -----------

Total Comprehensive Income                                                                                 $    975
                                                                                                         ===========
                                      -------------------------------------------------------------
Balance, June 30, 2003                   $53     $22,458         $    (84)    $12,609     $(1,049)
                                      =============================================================
</TABLE>





            See notes to consolidated condensed financial statements.



                                       4
<PAGE>




                            C2, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                        SIX MONTHS ENDED JUNE 30,
                                                                      -----------------------------
                                                                          2003             2002
                                                                      ------------     ------------
<S>                                                                   <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net earnings                                                      $  1,081,000     $  1,614,000
        Adjustments to reconcile net earnings to net
        cash (used in) provided by operating activities:
          Depreciation and amortization                                  3,837,000        4,110,000
          Gain on sale of fixed assets                                     (19,000)        (123,000)
          Minority interest in consolidated income of subsidiaries            --            284,000
          Amortization of restricted stock                                   5,000             --
     Changes in assets and liabilities:
          Increase in accounts receivable                               (3,061,000)      (6,499,000)
          Decrease in other assets                                         262,000        2,899,000
          Increase in accounts payable, accrued
           liabilities and other liabilities                             1,273,000        2,647,000
                                                                      ------------     ------------

Net cash provided by operating activities                                3,378,000        4,932,000

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of fixed assets                                           (2,148,000)      (2,763,000)
     Proceeds from sale of assets                                          522,000        9,848,000
                                                                      ------------     ------------

Net cash (used in) provided by investing activities                     (1,626,000)       7,085,000

CASH FLOWS FROM FINANCING ACTIVITIES:
    Net (payments) borrowings on credit lines                            1,582,000          876,000
    Borrowings on notes and loans payable                                3,046,000           70,000
    (Payments) on notes and loans payable                               (6,847,000)     (11,638,000)
    Proceeds issuance of stock                                              16,000             --
                                                                      ------------     ------------

Net cash used in financing activities                                   (2,203,000)     (10,692,000)
                                                                      ------------     ------------

NET (DECREASE)  INCREASE IN CASH AND
     CASH EQUIVALENTS                                                     (451,000)       1,325,000

BEGINNING CASH AND CASH EQUIVALENTS                                      4,483,000        2,539,000
                                                                      ------------     ------------

ENDING CASH AND CASH EQUIVALENTS                                      $  4,032,000     $  3,864,000
                                                                      ============     ============

Supplemental disclosures of cash flow information:
    Interest paid                                                     $  1,623,000     $  2,231,000
    Income taxes paid                                                 $    593,000     $  1,122,000
</TABLE>

            See notes to consolidated condensed financial statements.



                                       5
<PAGE>




                            C2, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


NOTE 1 -- BASIS OF PRESENTATION

The accompanying unaudited consolidated condensed financial statements have been
prepared by the Company in accordance with accounting principles generally
accepted in the United States of America ("US GAAP") without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements,
prepared in accordance with accounting principles generally accepted in the
United States of America, have been condensed or omitted pursuant to such rules
and regulations. These condensed statements should be read in conjunction with
the financial statements and the notes thereto included in the Company's 2002
Annual Report on Form 10-K.

In the opinion of management, the aforementioned statements reflect all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the results for the interim periods. Results for the six
months ended June 30, 2003 are not necessarily indicative of results that may be
expected for the year ending December 31, 2003.

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

REVENUE RECOGNITION: Logistic service revenues are recognized when goods are
delivered to the customer or when services are provided. Costs and related
expenses are recorded as incurred. Revenues and costs related to product sales
are recognized when products are shipped to customers.

ACQUISITIONS: On February 5, 2002, Zero Zone, Inc. ("Zero Zone") acquired the
assets and assumed certain liabilities of Systematic Refrigeration, Inc.
Additional consideration is contingent upon Systematic achieving certain future
performance targets through 2006. Systematic, located in Ramsey, Minnesota, is a
supplier of refrigeration control systems to the retail grocery industry and
various industrial markets. Systematic was an independent producer of
refrigeration systems with annual revenues of approximately $10,000,000. The
company is now operated under the trade name Zero Zone Refrigeration. Results of
operations have been included in the accompanying statements of operations since
the acquisition date and are not material to the Company on a pro forma basis.
The purchase price, acquisition expenses of $130,000 and the assumption of
liabilities of $6,214,000 was allocated as follows:

<TABLE>
<S>                                      <C>
        Cash                             $    6,000
        Receivables                         530,000
        Inventory                         1,338,000
        Other Assets                        432,000
        Goodwill                             31,000
        PP&E                              4,007,000
                                         ----------
                                         $6,344,000
                                         ==========
</TABLE>

On December 31, 2002, C2, Inc. acquired the remaining 29.4% of Zero Zone, Inc.
that it did not previously own. The consideration paid to the minority interest
holders, all of whom are current members of Zero Zone's management team, was
190,000 shares of C2, Inc. common stock valued at approximately $2,561,000 based
on the average closing price of C2 for the five business days prior to the
transaction date of December 31, 2002. The Company has preliminarily allocated
$579,000 to fixed assets, $29,000 to


                                       6
<PAGE>


finished goods inventory, and the remainder of the purchase price over minority
interest is recorded as goodwill.

INVENTORIES: Inventories at Total Logistic Control, LLC ("TLC") consist of
repair parts and commodities and other food products held for distribution under
an exclusive logistic contract. These items are carried at their lower of FIFO
(first-in, first-out) cost or market value. At Zero Zone, inventories are stated
at the lower of FIFO cost or market value and include materials, labor and
manufacturing overhead. As of June 30, 2003 and December 31, 2002, inventories
are comprised of the following:

<TABLE>
<CAPTION>
                                                                                 JUNE 30,              DECEMBER 31,
                                                                                   2003                    2002
                                                                               ------------            ------------
<S>                                                                            <C>                     <C>
Repair parts                                                                   $    169,000            $    173,000
Commodities and other                                                               866,000               1,651,000
Raw materials and work in process                                                 4,798,000               5,682,000
Finished goods                                                                    4,101,000               3,012,000
                                                                               ------------            ------------
                                                                               $  9,934,000            $ 10,518,000
                                                                               ============            ============
</TABLE>

GOODWILL: Prior to 2002, goodwill was amortized on a straight-line basis over 40
years. Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill
and Other Intangible Assets." SFAS No. 142 requires goodwill to be tested for
impairment annually, or more frequently under certain circumstances, and written
down when impaired, rather than being amortized as previous standards required.
Changes in the carrying amount of goodwill by reportable segment for the six
months ended June 30, 2003 are as follows:

<TABLE>
<CAPTION>
                                                                         LOGISTIC               PRODUCT
                                                                         SERVICES                SALES                  TOTAL
                                                                       -------------        ---------------        ---------------
<S>                                                                    <C>                  <C>                    <C>
Balance as of December 31, 2002                                        $  4,882,000        $    11,309,000         $   16,191,000

Adjustment to Purchase Price Allocation  for Zero Zone                        --                   (29,000)               (29,000)
                                                                       ------------        ---------------         --------------

Balance as of June 30, 2003                                            $  4,882,000        $    11,280,000         $   16,162,000
                                                                       ============        ===============         ==============
</TABLE>





                                       7
<PAGE>



NOTE 3 -- EARNINGS PER SHARE

The following is a reconciliation of basic and diluted earnings per share for
the three months and six months ended June 30, 2003 and 2002.

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED            SIX MONTHS ENDED
                                                             JUNE 30,                    JUNE 30,
                                                     ----------------------------------------------------
                                                        2003          2002          2003          2002
                                                     ----------------------------------------------------
<S>                                                  <C>           <C>           <C>           <C>
Basic Net Earnings per Share:
    Net earnings available to common shareholders    $  515,000    $  861,000    $1,081,000    $1,614,000
    Average Shares of common stock outstanding        5,273,853     5,081,864     5,272,858     5,081,864
                                                     ----------------------------------------------------
    Basic net earnings per share                     $     0.10    $     0.17    $     0.21    $     0.32
                                                     ====================================================

Diluted Net Earnings per Share:
    Average shares of common stock outstanding        5,273,853     5,081,864     5,272,858     5,081,864
    Incremental common shares applicable to
    common stock options                                232,348       195,422       252,932       179,910
    Restricted stock                                        496          --           1,464          --
                                                     ----------------------------------------------------
    Average common shares assuming full dilution      5,506,697     5,277,286     5,527,254     5,261,774
                                                     ----------------------------------------------------
    Diluted net earnings per share                   $     0.09    $     0.16    $     0.20    $     0.31
                                                     ====================================================
</TABLE>

NOTE 4 -- SEGMENT INFORMATION

C2, Inc. is divided into two discrete segments -- Logistic Services and Product
Sales. C2, Inc.'s subsidiary, TLC, operates increasingly as a fully integrated
third-party logistics provider. TLC's integrated logistic services include
providing warehousing, transportation operations and management services, supply
chain management, dedicated third-party facility and operations management,
fulfillment services, packaging and food processing. C2, Inc.'s product sales
operating segment includes the purchase for resale of certain food products by
TLC and open and glass-door refrigerated and frozen display cases and
refrigeration control systems manufactured and sold by Zero Zone. Products
within this segment are sold primarily to grocery, municipal school districts,
and convenience and drug store chains throughout the United States. These
operating segments are determined based upon the primary services and product
lines provided to customers.

Financial information by business segment is as follows:

<TABLE>
<CAPTION>
                                   THREE MONTHS ENDED                    SIX MONTHS ENDED
                                      JUNE 30, 2003                       JUNE 30, 2003
                             -------------------------------     -------------------------------
                                 2003              2002              2003             2002
                             -------------     -------------     -------------     -------------
<S>                          <C>               <C>               <C>               <C>
Revenues:
    Logistic services        $  51,311,000     $  53,291,000     $  98,832,000     $  98,732,000
    Product sales               15,989,000        20,033,000        32,653,000        39,232,000
                             -------------     -------------     -------------     -------------
                             $  67,300,000     $  73,324,000     $ 131,485,000     $ 137,964,000
                             =============     =============     =============     =============

Earnings from Operations:
    Logistic services        $   1,957,000     $   1,943,000     $   3,898,000     $   3,432,000
    Product sales                   61,000         1,335,000           159,000         2,605,000
    Corporate                     (358,000)         (317,000)         (621,000)         (578,000)
                             -------------     -------------     -------------     -------------
                             $   1,660,000     $   2,961,000     $   3,436,000     $   5,459,000
                             =============     =============     =============     =============
</TABLE>




                                       8
<PAGE>


NOTE 5 --  DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

The Company has limited involvement with derivative financial instruments and
does not use them for trading purposes. As of June 30, 2003, interest rate swaps
are the only derivative financial instruments held by the Company. The interest
rate swaps were established during 2001 in an effort to manage certain interest
rate risks. The interest rate swaps, designated as cash flow hedging
relationships, were entered in an effort to mitigate the risk of rising interest
rates in future periods by converting certain floating rate debt instruments
into fixed rate debt. As these interest rate swaps are deemed to be effective,
gains and losses on these instruments are deferred in other comprehensive income
and recognized in interest expense over the period in which the Company accrues
interest expense on the related debt instruments.

Unrealized depreciation on these Swap transactions at June 30, 2003 was
$1,049,000, net of tax.

NOTE 6 -- COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED              SIX MONTHS ENDED
                                                  JUNE 30                       JUNE 30
                                       -----------------------------   ---------------------------
                                            2003           2002           2003           2002
                                       -----------------------------   ---------------------------
<S>                                    <C>             <C>             <C>             <C>
Unrealized loss on cash flow hedges    $   (96,000)    $  (772,000)    $  (106,000)    $  (572,000)
Net earnings                               515,000         861,000       1,081,000       1,614,000
                                       -----------------------------------------------------------
Total Comprehensive Income             $   419,000     $    89,000     $   975,000     $ 1,042,000
                                       ===========================================================
</TABLE>



                                       9
<PAGE>


NOTE 7 -- STOCK-BASED EMPLOYEE COMPENSATION PLANS

At June 30, 2003, the Company had one stock-based employee compensation plan,
which is described more fully in Note E to the Notes to Consolidated Financial
Statements of the Company's Annual Report on Form 10-K for the year ended
December 31, 2002. The Company accounts for this stock-based plan under the
recognition and measurement principles of APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations. No stock-based employee
compensation cost was reflected in previously reported results for any period,
as all options granted under this plan had an exercise price equal to the market
value of the underlying Common Stock on the measurement date. The following
table illustrates the effect on net income and earnings per share if the Company
had applied the fair value recognition provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure," to stock-based employee
compensation.
<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED                SIX MONTHS ENDED
                                                                       JUNE 30,                         JUNE 30,
                                                             ---------------------------     -------------------------------
                                                                 2003            2002             2003             2002
                                                             ---------------------------     -------------------------------
<S>                                                          <C>             <C>             <C>               <C>
Net income, as reported                                      $   515,000     $   861,000     $   1,081,000     $   1,614,000
Employee compensation expense determined under fair value
based method for all awards,
net of related tax effects                                       (28,000)        (32,000)          (56,000)          (64,000)

                                                             -----------     -----------     -------------     -------------
Pro forma net income                                         $   487,000     $   829,000     $   1,025,000     $   1,550,000
                                                             ===========     ===========     =============     =============

Basic earnings per share:
    As reported                                              $      0.10     $      0.17     $        0.21     $        0.32
    Pro forma                                                       0.09            0.16              0.19              0.31

Diluted earnings per share:
    As reported                                              $      0.09     $      0.16     $        0.20     $        0.31
    Pro forma                                                       0.09            0.16              0.19              0.29
</TABLE>

An amendment to the Company's 1998 Stock Incentive Plan was approved by the
shareholders at the Company's 2003 Annual Meeting of Shareholders on April 22,
2003. The amendment replaced the automatic grant of stock options to
non-employee directors of the Company upon election or appointment to the Board
with automatic grants of restricted stock to non-employee directors on an annual
basis on the date of the annual meeting of shareholders each year. In accordance
with this amendment, four non-employee directors of the Company were each
awarded 2,088 shares of restricted stock. The stock has a five year cliff
vesting.

NOTE 8 -- AMENDMENT TO DEBT AGREEMENT

Zero Zone has a financing package with a major commercial bank which contains
two bond issues and a demand line of credit. Zero Zone had $12,390,000
outstanding as part of this package at December 31, 2002. Due to lower operating
income in the second quarter at Zero Zone, certain financial covenants, Minimum
Fixed Charge Coverage and Maximum Funded Debt to EBITDA (a defined earnings
level), were not achieved. The Company received waivers from its bank related to
the non-compliance and negotiated amended covenants for which future compliance
is expected. Interest cost spreads over LIBOR or prime on Zero Zone's line of
credit increase by 50 basis points when the ratio of senior funded debt to
EBITDA is greater than or equal to 4 times. Similarly, Zero Zone's letters of
credit fee increases by 50 basis points when the ratio of senior funded
indebtedness to EBITDA is greater than or equal to 4 times. In both cases, the
prior incentive grid pricing remains intact and available as the ratio declines.
In connection


                                       10
<PAGE>




with the amended covenants, C2 corporate made a 6% unsecured, subordinated loan
to Zero Zone in the amount of $1,500,000. Interest is payable quarterly if
compliance with the amended covenants is maintained.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                       CONDITION AND RESULTS OF OPERATIONS

General Business

The Company is comprised of two operating companies, TLC and Zero Zone. TLC,
based in Zeeland, Michigan, is a national provider of integrated third-party
logistic services which include refrigerated and dry warehousing, transportation
operations and management services, supply chain management, dedicated
third-party facility and operations management, food distribution, fulfillment
services, packaging and food processing. Operations are conducted through a
network of 40 logistic centers with 36.3 million cubic feet of refrigerated
capacity and more than 3 million square feet of dry warehouse space. TLC
operates a fleet of over 400 tractors with over 700 refrigerated and dry
trailers.

Zero Zone, based in North Prairie, Wisconsin, manufactures open and glass-door
refrigerated and freezer reach-in display cases used in grocery, convenience and
drug store chains for retail merchandising of food, beverage and floral
products. In 2002, Zero Zone acquired a manufacturer of refrigeration control
systems located in Ramsey, Minnesota. Now known as Zero Zone Refrigeration, this
company manufactures refrigeration houses and racks used to power and control
the refrigeration systems, electrical panels, air conditioning and stand-by
power for supermarkets, convenience stores and industrial applications.

Results of Operations

The Company's revenues for the quarter ended June 30, 2003 decreased 8.2% to
$67,300,000 from $73,324,000 reported for the same period last year. Revenues
from logistic services for the second quarter were $51,311,000, approximately
$2,000,000 below last year's comparable period due primarily to reduced
throughput in certain fixed fee contracts, which does not alter the Company's
fee structure. Revenues from product sales totaled $15,989,000, a decline of
20.2% over those reported for last year's second quarter, due primarily to lower
volume of refrigerated display case sales at Zero Zone and lower volume in Food
Distribution Services at TLC. Sales of refrigerated display cases have been
impacted by reduced spending by retailers for new stores and refurbishments and
by consolidation in the grocery, convenience and drug store retailers.

Logistic expenses as a percent of logistic service revenues were 89.7%,
representing a slight reduction in margin compared to 89.3% reported for the
same period last year. Cost of product sales represented 83.1% of product sales,
a 4.6 percentage point decrease in margin compared to 78.5% reported for the
same period last year. Lower volume of product sales of refrigerated display
cases and higher product service related expenses at Zero Zone were the
principal factors associated with the decrease in margin generated by this
segment.

Selling, general and administrative expenses were 6.6% of total revenues for the
quarter, a decrease of 0.2 % compared to 6.8% reported for the same period last
year. Both TLC and Zero Zone incurred lower SG&A expense in this year's second
quarter when compared to the same period last year, reflecting aggressive cost
management and reduction initiatives. However, due to lower revenues in the
period, the ratio of SG&A expense to revenues reflected the small percentage
increase.




                                       11
<PAGE>


Consolidated earnings from operations for the second quarter of 2003 were
$1,660,000 compared to $2,961,000 for the same period in the previous year, a
decrease of 43.9%. The decrease in operating earnings for the quarter was
primarily attributable to lower volume of product sales and higher product
service related expenses as previously noted.

Interest expense, net for the quarter of $758,000 decreased 31.4% compared to
the same period last year, reflecting both lower interest rates on the Company's
borrowings and reduced debt at TLC.

The effective income tax rate for the three months ended June 30, 2003 was 42.9%
compared to 39.7% for the same period in the previous year. The change in the
effective rate is the result of increased state taxes attributable to growth in
logistic services.

Net earnings for the three months ended June 30, 2003, decreased 40.2% to
$515,000, or $0.09 per diluted share compared to $861,000, or $0.16 per diluted
share, reported for the same period last year. Increased net earnings
contributed by logistic services were offset by a small loss in product sales
and slightly higher corporate expenses for the period.

For the six months ended June 30, 2003, consolidated revenues decreased 4.7% to
$131,485,000 compared to $137,964,000 reported for the same period last year.
Revenues attributable to logistic services were slightly ahead of last year's
level despite the lower volume in certain fixed fee contracts. Revenues from
product sales declined 16.8% to $32,653,000 compared to the same period last
year, reflecting a substantial deferral of spending by retailers and lower
volume in food distribution services to Michigan school districts.

Consolidated earnings from operations for the six month period were $3,436,000
compared to $5,459,000 for the previous year's six month period, a decrease of
37.1% attributable primarily to lower volume in product sales and increase
product service related expenses.

Interest expense, net for the six months declined 30.2% to $1,515,000 compared
to the same period last year, reflecting lower rates on borrowings and lower
debt at TLC.

The effective income tax rate for the six months ended June 30, 2003 was 43.7%
compared to 39.7% reported for the same period last year. The increase in the
effective rate is the result of increased state taxes attributable to growth in
logistic services.

Net earnings for the six months ended June 30, 2003 totaled $1,081,000, or $0.20
per diluted share, a decline of 33% compared to $1,614,000, or $0.31 per diluted
share reported for the same period last year. Growth in logistic services at TLC
in both revenues and earnings were offset by lower volume and a small loss from
product sales and slightly higher corporate expense for the period.

Liquidity and Capital Resources

The Company's ongoing liquidity requirements arise primarily from its need to
service debt, fund working capital, service lease commitments, maintain and
improve warehouses, transportation and manufacturing facilities and equipment,
and make other investments. The Company is active in the acquisition, leasing or
new construction of warehouse facilities, particularly refrigerated facilities,
transportation operations, and product lines related to Zero Zone's operations.
Historically, bank financing, leasing and internally generated cash have
provided funding for these activities. With the acquisition of ProSource, Inc.
in 2000, TLC has developed the ability to grow in dedicated facility management
services which typically do not require the Company's direct investment in new
facilities. These facilities are generally owned by a third-party and leased to
the Company's customer, or are owned by the customer and made available to the


                                       12
<PAGE>




Company. To the extent that acquisitions or new facility development exceed
historical funding sources, the Company may consider issuing equity securities
in an underwritten stock offering, a rights offering or in private placement
transactions. Currently, the Company has significant subsidiary level credit
facilities with three major commercial banks and a corporate level line of
credit. At June 30, 2003, the Company's operating subsidiaries had outstanding
debt of $57,814,000, all of which is borrowed under various facilities with
these banks. At June 30, 2003, unused borrowing capacity under existing credit
facilities totaled approximately $29,039,000.

On June 8, 2001, TLC entered into an amended and restated credit agreement with
its bank group, which included a $40 million, 5-year reducing revolving credit
agreement and a $25 million, 5-year term loan. Both facilities are secured by
liens or security interests on substantially all of the assets of TLC and
mortgages on its real estate. The revolving credit facility was reduced by 50%
of the proceeds from the sale of a refrigerated warehouse, or $4,900,000, on May
31, 2002 and steps down $2 million per year beginning July 1, 2002, further
reduced by 50% of the proceeds from any future sales of assets with a final
maturity on June 30, 2006. The term loan amortizes $416,666 per quarter
commencing September 30, 2001, with a final payment of $17,000,342 due on June
30, 2006. At June 30, 2003, outstanding borrowings under these facilities were
$38,383,000. The interest rate on these facilities are LIBOR or prime rate
based, at TLC's option, and vary pursuant to a pricing grid based on the ratio
of TLC's funded debt to EBITDA, as defined in the credit agreement. At June 30,
2003, borrowings under these facilities carried an average interest rate of
LIBOR plus 1.75%, or 3.054%. As of June 30, 2003, TLC was in compliance with all
required covenants under the credit agreement.

Zero Zone completed a financing package August 31, 1999 with a major commercial
bank. The package contains two bond issues and a demand line of credit. The
first is a tax-free Industrial Revenue Bond issue in the amount of $3,420,000
that was issued through the State of Wisconsin. This bond has a 20-year life
with no annual amortization and carries a seven-day variable interest rate. The
second issue is a taxable Industrial Revenue Bond in the original amount of
$6,000,000 issued through a bank. This bond has a 12-year maturity schedule with
annual principal repayments of $500,000. The remaining balance at June 30, 2003
is $4,500,000. The interest rate on the second bond is also a seven-day variable
interest rate. Both bonds are secured by Letters of Credit issued by a major
commercial bank. The interest rate on the line of credit, which is secured by
Zero Zone's assets, is based on LIBOR plus an amount that varies according to a
pricing grid determined by the ratio of funded debt to EBITDA. At June 30, 2003,
Zero Zone had $6,052,000 in outstanding borrowings under its $7,500,000 line of
credit. The interest rate at June 30, 2003 was 2.82%. Due to lower operating
income in the second quarter at Zero Zone, certain financial covenants, Minimum
Fixed Charge Coverage and Maximum Funded Debt to EBITDA, were not achieved. The
Company received waivers from its bank related to the non-compliance and
negotiated amended covenants for which future compliance is expected. Interest
cost spreads over LIBOR or prime on Zero Zone's line of credit increase by 50
basis points when the ratio of senior funded debt to EBITDA (a defined earnings
level) is greater than or equal to 4 times. Similarly, Zero Zone's letters of
credit fee increases by 50 basis points when the ratio of senior funded
indebtedness to EBITDA is greater than or equal to 4 times. In both cases, the
prior incentive grid pricing remains intact and available as the ratio declines.
In connection with the amended covenants, C2 corporate made a 6% unsecured,
subordinated loan to Zero Zone in the amount of $1,500,000. Interest is payable
quarterly if compliance with the amended covenants is maintained.

As part of the acquisition of Zero Zone Refrigeration on February 5, 2002, two
notes were assumed. The first is a tax-free bond for $3,100,000, issued by the
State of Minnesota. The bond issue date was April 1, 2000 and has a 20-year life
with annual principal payments of $85,000 in 2002, increasing to $285,000 by
2020. The interest rate on the bond began at 5.25% and increases to 7.25%. The
second is an Equipment Note from the City of Ramsey for $300,000. This note has
a 10-year life with annual amortization of $34,766 of principal and interest.
The interest rate on this note is 3%.




                                       13
<PAGE>




Zero Zone has unsecured senior subordinated indebtedness in the amount of
$350,000 to former and existing shareholders. The interest rate on this debt is
8% and the final payment of $350,000 is due March 12, 2004. Zero Zone also has
$3,000,000 of unsecured junior subordinated indebtedness to existing
shareholders. The interest rate is 8.5% of which 3.4% is paid in cash and 5.1%
is payment-in-kind. Payment of $1,000,000 per year is due beginning December 31,
2005.

At June 30, 2003, C2, Inc. corporate had available an unsecured line of credit
in the amount of $15,000,000. No borrowings were outstanding under this facility
during the quarter.

As of June 30, 2003, the Company had cash and cash equivalents on hand of
$4,032,000 compared to $4,483,000 at December 31, 2002.

Cash flows provided by operations for six months ended June 30, 2003 totaled
$3,378,000 compared to $4,932,000 in the prior year period. The decrease in
comparative cash flows from operating activities was primarily attributable to
lower net earnings, depreciation and amortization expense and the elimination of
minority interest in fiscal 2003.

Cash flows used in investing activities in the period totaled $1,626,000
compared to $7,085,000 provided in the same period last year. In the six months
ended June 30, 2003, the cash used was primarily related to routine capital
expenditures, but at a reduced level compared to the same period last year. Cash
provided by investing activities in the prior year included proceeds from the
sale and leaseback of assets in the amount of $9,848,000.

Cash flows used in financing activities for the first six months of 2003 totaled
$2,203,000 compared to $10,692,000 for the same period last year. In the first
six months of fiscal 2003, cash flows used in financing activities were related
to net reductions in and scheduled debt payments. In the same period in 2002,
the Company used proceeds from asset sales and cash flow from operating and
investing activities to reduce outstanding indebtedness. Also in the same
period, the Company acquired Zero Zone Refrigeration which required additional
borrowings to fund assumed liabilities.

ITEM 3.  MARKET RISK

The Company has incurred no additional market risk beyond that disclosed in the
Form 10K for the year ended December 31, 2002.



                                       14
<PAGE>





ITEM 4.  CONTROLS AND PROCEDURES

     (a) Disclosure Controls and Procedures. The Company's management, with the
         participation of the Company's Chief Executive Officer ("CEO") and
         Chief Financial Officer ("CFO"), has evaluated the effectiveness of the
         Company's disclosure controls and procedures (as such term is defined
         in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of
         1934, as amended (the "Exchange Act")) as of the end of the period
         covered by this report. Based on that evaluation, the CEO and CFO have
         concluded that, as of the end of such period, the Company's disclosure
         controls and procedures are effective in recording, processing,
         summarizing and reporting on a timely basis, information required to be
         disclosed by the Company in the reports that it files or submits under
         the Exchange Act.

     (b)  Internal Control Over Financial Reporting. There have not been any
          changes in the Company's internal control over financial reporting (as
          such term is defined in Rules 13a-15(f) and 15d-15(f) under the
          Exchange Act) during the fiscal quarter to which this report relates
          that have materially affected, or are reasonably likely to materially
          affect, the Company's internal control over financial reporting.

Forward-Looking Statements

This Form 10-Q contains forward-looking statements and other statements that are
not historical facts. Actual results may differ materially from management's
expectations. The forward-looking statements involve risks and uncertainties,
including but not limited to:

o    Demand for and profitability of warehousing, transportation, logistic
     services and refrigerated systems and display cases may be adversely
     affected by increases in interest rates, adverse economic conditions,
     increased energy costs, weather or market conditions which adversely affect
     vegetable and fruit crop yields, loss of a material customer or other
     factors.

o    Growth in volume of services or products may be adversely affected by
     reduced ability to identify and hire qualified employees, cancellation or
     non-renewal of supply or service agreement with customers.

o    The Company's profitability may be adversely affected by increases in
     interest rates because a significant portion of the Company's capital
     structure is debt, a portion of which bears interest at variable interest
     rates.

o    The Company's profitability may be adversely affected by performance which
     does not meet standards established in contractual agreements relating to
     transportation operations, logistics management, dedicated facility
     operations and product manufacturing.

o    Consolidations within the food industry, food retailers or drug and
     convenience store chains could impact the Company's customers.

o    Company's market share may be adversely affected as a result of new or
     increased competitive conditions in warehousing, transportation or
     refrigeration systems and product manufacturing.

Additional information about risks and uncertainties discussed above, as well as
additional material risks in the Company's business may be found in the
Company's annual report on Form 10-K for the year 2002 and other filings made by
the Company from time-to-time with the Securities and Exchange Commission.


                                       15
<PAGE>




PART II - OTHER INFORMATION

Item 1.        Not applicable.

Item 2.        Not applicable.

Item 3.        Not applicable.

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

               a.  At the Company's 2003 Annual Meeting of Shareholders on April
                   22, 2003, the following Directors were elected for terms to
                   expire at the 2004 Annual Meeting of Shareholders. There were
                   5,271,864 shares of the company's common stock entitled to
                   vote. The Directors were elected by a vote of 5,064,242
                   shares.

                           John A. Becker
                           Nicholas F. Brady
                           William T. Donovan
                           David J. Lubar
                           Sheldon B. Lubar
                           William H. Lacy

               b.  At the 2003 Annual Meeting of Shareholders on April 22, 2003,
                   the amendments to the Company's 1998 Stock Incentive Plan as
                   described in the proxy statement were approved on a vote of
                   5,059,766 shares of the 5,271,864 shares of the Company's
                   common stock entitled to vote.

Item 5.        Not applicable.

Item 6.        Exhibits and Reports on Form 8-K

               a.  Exhibit 31.1  Certification of Chief Executive Officer
                   Exhibit 31.2  Certification of Chief Financial Officer
                   Exhibit 32.1  Written Statement of Chief Executive Officer
                                 and Chief Financial Officer

               b.  Report on Form 8-K was filed April 24, 2003, to report under
                   Item 12 the disclosure of Results of Operations for the three
                   months ended March 31, 2003.



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<PAGE>


               SIGNATURES:

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



                                        C2, Inc.
                                     (Registrant)


Date:      August 11, 2003               /s/  William T. Donovan
           ---------------           ----------------------------------
                                         William T. Donovan
                                         President and Chief Executive Officer




Date:      August 11, 2003               /s/  David J. Lubar
           ---------------           ----------------------------------
                                         David J. Lubar
                                         Chairman




                                       17
<PAGE>

                                 Exhibit Index


Exhibit Number                             Description
--------------                             -----------
Exhibit 31.1                    Certification of Chief Executive Officer

Exhibit 31.2                    Certification of Chief Financial Officer

Exhibit 32.1                    Written Statement of Chief Executive Officer
                                and Chief Financial Officer



                                       18