|SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549


FORM 10-Q


Quarterly Report Under Section 13 or 15(d) of the


Securities Exchange Act of 1934
|-------------------------------------------------------------------------------------------------------------------------------------------------------------

|For the Quarter Ended December 31, 2002 | Commission file number 0-6355
|--------------------------------------- | -----------------------------

|Group 1
Software, Inc.
|----------------------

|Incorporated in Delaware | IRS EI No. 52-0852578
|------------------------ | ---------------------

|4200 Parliament Place, Suite 600, Lanham, MD 20706-1860


Telephone Number: (301) 918-0400


Indicate by check mark
whether the registrant (1) has filed 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 |_|
|------- |  | ------

|Class                        | Shares Outstanding EffectiveFebruary 7, 2003
|---------------------------- | --------------------------------------------
|Common Stock, $.50 par value | 14,634,778                                  

|1
GROUP 1 SOFTWARE,
INC.CONSOLIDATED BALANCE SHEETS(In thousands, except par value)
|-----------------------------------------------------------------------------------

|                                                              | December
      31,
      2002 |  | March
      31,
      2002 |        
|------------------------------------------------------------- | ----------------------------- |  | -------------------------- | -------
|
|ASSETS                                                        |                               |  |                            |        
|Current
      assets:                                         |                               | 
|Cash
      and cash equivalents                               |                               |  | $                          | 42,150 
|Short-term
      investments, available-for-sale              |                               |  |                            | 13,150 
|Trade
      and installment accounts receivable, less         |                               | 
|allowance
      of $2,017 and $2,058                          |                               |  |                            | 19,890 
|Deferred
      income taxes                                   |                               |  |                            | 1,717  
|Prepaid
      expenses and other current assets               |                               |  |                            | 4,207  
|                                                              |                               |  |                            |        
|Total
      current assets                                    |                               |  |                            | 81,114 
|                                                             
|Installment
      accounts receivable, long-term              |                               |  |                            | 53     
|Property
      and equipment, net                             |                               |  |                            | 4,676  
|Computer
      software, net                                  |                               |  |                            | 23,058 
|Goodwill                                                      |                               |  |                            | 12,716 
|Other
      assets                                            |                               |  |                            | 193    
|                                                              |                               |  |                            |        
|Total
      assets                                            |                               |  | $                          | 121,810
|                                                              |                               |  |                            |        
|                                                             
|LIABILITIES
      AND STOCKHOLDERS EQUITY                    |                               | 
|Current
      liabilities:                                    |                               | 
|Accounts
      payable                                        |                               |  | $                          | 900    
|Current
      portion of notes payable and capital lease      |                               | 
|obligation                                                    |                               |  |                            | 377    
|Accrued
      expenses                                        |                               |  |                            | 5,609  
|Accrued
      compensation                                    |                               |  |                            | 8,004  
|Current
      deferred revenues                               |                               |  |                            | 30,411 
|                                                              |                               |  |                            |        
|Total
      current liabilities                               |                               |  |                            | 45,301 
|                                                              |                               |  |                            |        
|Notes
      payable, net of current portion                   |                               |  |                            | 722    
|Deferred
      revenues, long-term                            |                               |  |                            | 259    
|Deferred
      income taxes                                   |                               |  |                            | 4,464  
|                                                              |                               |  |                            |        
|Total
      liabilities                                       |                               |  |                            | 50,746 
|                                                              |                               |  |                            |        
|Commitments
      and contingencies                           |                               |  |                            |       
|                                                              |                               | 
|Stockholders
      equity:                                   |                               | 
|6%
      cumulative convertible preferred stock $0.25 par     |                               | 
|value;
      1,200 shares authorized; 48 shares issued        |                               | 
|(aggregate
      involuntary liquidation preference $950)     |                               |  |                            | 916    
|Common
      stock $0.50 par value; 50,000 shares authorized; |                               |  |                            |        
|14,623
      and 13,836 shares issued                         |                               |  |                            | 7,311  
|Additional
      paid in capital                              |                               |  |                            | 33,111 
|Retained
      earnings                                       |                               |  |                            | 34,146 
|Accumulated
      other comprehensive income                  |                               |  |                            | 193    
|Treasury
      stock, 1,244 and 1,240 shares, at cost         |                               |  |                            | (4,613 
|                                                              |                               |  |                            |        
|Total
      stockholders equity                              |                               |  |                            | 71,064 
|                                                              |                               |  |                            |        
|Total
      liabilities and stockholders equity              |                               |  | $                          | 121,810
|                                                              |                               |  |                            |        

|See notes to consolidated
financial statements.


2
GROUP 1
SOFTWARE, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(Adjusted  to reflect the 2 for 1
stock split approved by the Board of Directors on  November 5, 2002) (In thousands,
except per share data)(Unaudited)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                            | For the Three Month PeriodEnded December 31, |  | For the Nine Month PeriodEnded December 31, |       
|------------------------------------------- | -------------------------------------------- |  | ------------------------------------------- | ------
|
|Revenue:                                    |                                              |  |                                             |       
|Software license and related revenue        |                                              |  | $                                           | 12,525
|Maintenance and services                    |                                              |  |                                             | 14,165
|                                            |                                              |  |                                             |       
|Total revenue                               |                                              |  |                                             | 26,690
|                                            |                                              |  |                                             |       
|Cost of revenue:                            |                                              | 
|Software license expense                    |                                              |  |                                             | 3,379 
|Maintenance and service expense             |                                              |  |                                             | 4,302 
|                                            |                                              |  |                                             |       
|Total cost of revenue                       |                                              |  |                                             | 7,681 
|                                            |                                              |  |                                             |       
|                                           
|Gross profit                                |                                              |  |                                             | 19,009
|                                            |                                              |  |                                             |       
|                                           
|Operating expenses:                         |                                              | 
|Research and development, net (see note 5)  |                                              |  |                                             | 3,032 
|Sales and marketing                         |                                              |  |                                             | 8,464 
|General and administrative                  |                                              |  |                                             | 3,999 
|                                            |                                              |  |                                             |       
|Total operating expenses                    |                                              |  |                                             | 15,495
|                                            |                                              |  |                                             |       
|Income from operations                      |                                              |  |                                             | 3,514 
|                                           
|Non-operating income:                       |                                              | 
|Interest income                             |                                              |  |                                             | 276   
|Interest expense                            |                                              |  |                                             | (97   
|Other non-operating income (expense)        |                                              |  |                                             | (31   
|                                            |                                              |  |                                             |       
|Total non-operating income                  |                                              |  |                                             | 148   
|                                            |                                              |  |                                             |       
|Income before provision for income taxes    |                                              |  |                                             | 3,662 
|                                           
|Provision for income taxes                  |                                              |  |                                             | 1,321 
|                                            |                                              |  |                                             |       
|Net income                                  |                                              |  |                                             | 2,341 
|                                           
|Preferred stock dividend requirements       |                                              |  |                                             | (14   
|                                            |                                              |  |                                             |       
|Net income available to common stockholders |                                              |  | $                                           | 2,327 
|                                            |                                              |  |                                             |       
|                                           
|Basic earnings per share                    |                                              |  | $                                           | 0.18  
|                                            |                                              |  |                                             |       
|                                           
|Diluted earnings per share                  |                                              |  | $                                           | 0.16  
|                                            |                                              |  |                                             |       
|                                           
|Basic weighted average shares outstanding   |                                              |  |                                             | 13,182
|                                            |                                              |  |                                             |       
|                                           
|Diluted weighted average shares outstanding |                                              |  |                                             | 14,959
|                                            |                                              |  |                                             |       

|See notes to consolidated
financial statements.


3
GROUP  1 SOFTWARE,
INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)
|-----------------------------------------------------------------------------------------------------------------------------------------

|                                                                              | For the
      Nine Month Period
      Ended December 31, | 
|----------------------------------------------------------------------------- | -------------------------------------------------------- | 
|
|Cash
      flows from operating activities:                                   |                                                          | 
|Net
      income                                                              |                                                          | 
|Adjustments
      to reconcile net income from                                |                                                          | 
|operations
      to net cash provided by operating activities:                |                                                          | 
|Amortization
      expense                                                    |                                                          | 
|Depreciation
      expense                                                    |                                                          | 
|Provision
      for doubtful accounts                                         |                                                          | 
|Deferred
      income taxes                                                   |                                                          | 
|Net
      loss on disposal of assets                                          |                                                          | 
|Tax
      benefit from exercises of stock options                             |                                                          | 
|Foreign
      currency transaction loss                                       |                                                          | 
|Changes
      in assets and liabilities:                                      |                                                          | 
|Accounts
      receivable                                                     |                                                          | 
|Prepaid
      expenses and other current assets                               |                                                          | 
|Other
      assets                                                            |                                                          | 
|Deferred
      revenues                                                       |                                                          | 
|Accounts
      payable                                                        |                                                          | 
|Accrued
      expenses and accrued compensation                               |                                                          | 
|                                                                              |                                                          | 
|Net
      cash provided by operating activities                               |                                                          | 
|                                                                              |                                                          | 
|Cash
      flows from investing activities:                                   |                                                          | 
|Purchases
      and development of computer software                          |                                                          | 
|Purchases
      of property and equipment                                     |                                                          | 
|Purchases
      of marketable securities                                      |                                                          | 
|Sales
      of marketable securities                                          |                                                          | 
|Payment
      for acquisitions, net of cash acquired                          |                                                          | 
|                                                                              |                                                          | 
|Net
      cash provided by (used in) investing activities                     |                                                          | 
|                                                                              |                                                          | 
|Cash
      flows from financing activities:                                   |                                                          | 
|Proceeds
      from exercise of stock options                                 |                                                          | 
|Repayment
      of principal on long-term debt                                |                                                          | 
|Dividends
      paid                                                          |                                                          | 
|Repurchase
      of common stock                                              |                                                          | 
|                                                                              |                                                          | 
|Net
      cash provided by (used in) financing activities                     |                                                          | 
|                                                                              |                                                          | 
|Net
      increase (decrease) in cash and cash equivalents                    |                                                          | 
|Effect
      of exchange rate on cash and cash equivalents                    |                                                          | 
|Cash
      and cash equivalents at beginning of period                        |                                                          | 
|                                                                              |                                                          | 
|Cash
      and cash equivalents at end of period                              |                                                          | 
|                                                                              |                                                          | 
|Supplemental
      disclosure of non-cash investing and financing activities: |                                                          | 
|Mature
      shares tendered in payment for stock option exercises            |                                                          | 
|Note
      payable issued for acquisition                                     |                                                          | 
|Liabilities
      assumed in acquisitions                                     |                                                          | 
|Warrants
      issued in lieu of cash payments for acquisition costs          |                                                          | 

|See notes to consolidated
financial statements.


4
GROUP  1 SOFTWARE,
INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In thousands)(Unaudited)
|---------------------------------------------------------------------------------------------------------------------------------------------------

|                                         | For the Three Month PeriodEnded December 31, |  | For the Nine Month PeriodEnded December 31, |      
|---------------------------------------- | -------------------------------------------- |  | ------------------------------------------- | -----
|
|Net income                               |                                              |  | $                                           | 2,341
|                                        
|Foreign currency translation adjustments |                                              |  |                                             | 143  
|                                         |                                              |  |                                             |      
|                                        
|Comprehensive income                     |                                              |  | $                                           | 2,484
|                                         |                                              |  |                                             |      

|See notes to consolidated
financial statements.


5
Group 1 Software, Inc.Notes to Consolidated Financial Statements(Unaudited)


1. The consolidated
financial statements for the three and nine months ended December 31, 2002 and
2001 are unaudited. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included and are of a recurring
nature in the normal course of business. Limited footnote information is
presented in accordance with quarterly reporting requirements. The results of
operations for the three months ended December 31, 2002 are not necessarily
indicative of the results for the year ending March 31, 2003. The information
contained in the annual report on the Form 10-K for the year ended March 31,
2002, should be referred to in connection with the unaudited interim financial
information.


2. On December 10, 2002,
under authorization of the Board of Directors the Company moved to redeem all of
the outstanding 6% cumulative convertible preferred stock. On January 15, 2003,
the holders of all 47,500 shares outstanding elected to exchange their preferred
shares for 142,500 common shares in accordance with the conversion provision of
the preferred stock.


3. On November 5, 2002,
the Board of Directors declared a two-for-one common stock split for
stockholders of record as of November 15, 2002. There was no change in the par
value of the stock as a result of the split. The additional shares were issued
on December 2, 2002. The effect of the stock split has been retroactively
reflected in the consolidated financial statements for all periods presented.


4. Certain prior period
amounts have been reclassified to conform to current period presentation. In
accordance with Emerging Issues Task Force Issue No. 01-14, service revenue and
service cost of revenue were each increased $140,000 and $389,000 in the three
and nine months ended December 31, 2001, respectively.


5. Research and
development expense, before the capitalization of computer software development
costs, was $5,003,000 and $4,349,000 for the three months ended December 31,
2002 and 2001, respectively. Capitalization of computer software development
costs for the three months ended December 31, 2002 and 2001 were $1,971,000 and
$1,633,000, respectively. Research and development expense, before the
capitalization of computer software development costs, was $14,263,000 and
$13,101,000 for the nine months ended December 31, 2002 and 2001, respectively.
Capitalization of computer software development costs for the nine months ended
December 31, 2002 and 2001 were $5,677,000 and $5,293,000, respectively.


6. Earnings per share


Basic earnings per share
(EPS) is computed by dividing net income available to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted
EPS is computed using the weighted average number of shares of common stock and
dilutive common stock equivalents outstanding during the period. Potentially
dilutive common stock equivalents consist of convertible preferred stock
(computed using the if converted method) and stock options and warrants
(computed using the treasury stock method). Potentially dilutive common stock
equivalents are excluded from the computation if the effect is anti-dilutive.


Reconciliation of the
shares used in the basic EPS calculations to the shares used in the diluted EPS
calculation is as follows (in thousands):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                 | For the Three Month PeriodEnded December 31, |  | For the Nine Month PeriodEnded December 31, |       
|------------------------------------------------ | -------------------------------------------- |  | ------------------------------------------- | ------
|
|Weighted average common shares outstanding-basic |                                              |  |                                             | 13,182
|Effect of dilutive securities:                   |                                              | 
|Stock options and warrants                       |                                              |  |                                             | 1,635 
|Convertible securities                           |                                              |  |                                             | 142   
|                                                 |                                              |  |                                             |       
|Weighted average shares outstanding-diluted      |                                              |  |                                             | 14,959
|                                                 |                                              |  |                                             |       

|6
There were 11,000 and
1,830,000 additional potentially dilutive common stock options and warrants in
the three months ended December 31, 2002 and 2001, respectively and 814,000 and
1,836,000 additional potentially dilutive common stock options and warrants in
the nine months ended December 31, 2002 and 2001, respectively. There were
additional potentially dilutive convertible securities of 142,000 in the three
and nine months ended December 31, 2001. These potentially dilutive common stock
options and warrants and convertible securities were not included in the
earnings per share calculation due to their anti-dilutive effect.


7. In August 2001, FASB
issued SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. This Statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, for the disposal of a segment of a business. The
provisions of this Statement will be effective for the Companys fiscal
year 2003. The adoption of this Statement has not had a significant impact on
the Companys financial position and results of operations.


In April 2002, the FASB
issued SFAS 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections. This Statement rescinds FAS 4,
Reporting Gains and Losses from Extinguishment of Debt, and an
amendment of that Statement, FAS 64, Extinguishments of Debt Made to
Satisfy Sinking-Fund Requirements, and FAS 44, Accounting for
Intangible Assets of Motor Carriers. SFAS 145 also amends FAS 13,
Accounting for Leases, to eliminate an inconsistency between the
required accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. This Statement additionally amends other existing
authoritative pronouncements to make various technical corrections, clarify
earnings, or describe their applicability under changed conditions. SFAS 145 is
effective for fiscal years beginning after May 15, 2002 for FASB Statements No.
4, 44 and 64 and effective for transactions that occurred after May 15, 2002 for
FASB Statement No. 13. Early application is encouraged. The adoption of this
Statement is not expected to have a significant impact on the Companys
financial position and results of operations.


In August 2002, the FASB
issued SFAS 146 Accounting for Costs Associated with Exit or Disposal
Activities. It addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues Task
Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)". SFAS 146 requires that a liability for
a cost associated with an exit or disposal activity be recognized when the
liability is incurred and establishes that fair value is the objective for
initial measurement of the liability. Under Issue 94-3, a liability for an exit
cost, as defined in Issue 94-3, was recognized at the date of an entitys
commitment to an exit plan. The new standard is effective for exit or disposal
activities that are initiated after December 31, 2002, with early application
encouraged. The Company does not believe that SFAS 146 will have a material
effect on the Companys financial position or results of operations.


In November 2002, the
FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires
that a liability be recorded in the guarantors balance sheet upon issuance
of a guarantee. In addition, FIN 45 requires disclosures about the guarantees
that an entity has issued, including a reconciliation of changes in the
entitys product warranty liabilities. The initial recognition and initial
measurement provisions of FIN 45 are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002. The Company believes that
the adoptions of this standard will have no material impact on its financial
statements.


7
In December 2002, the
FASB issued SFAS No. 148, Accounting for Stock Based Compensation 
Transition and Disclosure  an Amendment to FAS 123. SFAS 148
provides two additional transition methods for entities that adopt the
preferable method of accounting for stock based compensation. Further, the
statement requires disclosure of comparable information for all companies
regardless of whether, when or how an entity adopts the preferable, fair value
based method of accounting. These disclosures are now required for interim
periods in addition to the traditional annual disclosure. The amendments to SFAS
No. 123, which provides for additional transition methods, are effective for
periods beginning after December 15, 2002, although earlier application is
permitted. The amendments to the disclosure requirements are required for
financial reports containing condensed financial statements for interim period
beginning after December 15, 2002.


8. Legal Contingencies


The Company is not a
party to any legal proceedings, which in its belief, after review by the
Companys legal counsel, could have a material adverse effect on the
consolidated financial position, cash flows or results of operations of the
Company.


9. Segment Information


The following table
presents certain financial information relating to each reportable segment:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     | Three Months EndedDecember 31, |  | Nine Months EndedDecember 31, |       
|-------------------- | ------------------------------ |  | ----------------------------- | ------
|
|Revenue:             |                                |  |                               |       
|Enterprise Solutions |                                |  | $                             | 18,176
|DOC1                 |                                |  |                               | 8,514 
|                     |                                |  |                               |       
|Total revenue        |                                |  | $                             | 26,690
|                     |                                |  |                               |       
|Gross Profit:        |                                | 
|Enterprise Solutions |                                |  | $                             | 13,731
|DOC1                 |                                |  |                               | 5,278 
|                     |                                |  |                               |       
|Total gross profit   |                                |  | $                             | 19,009
|                     |                                |  |                               |       

|Amortization of
capitalized developed and acquired software associated with the Enterprise
Solutions segment was $1,356,000 and $1,006,000 for the three months ended
December 31, 2002 and 2001 and $4,079,000 and $3,501,000 in the nine months
ended December 31, 2002 and 2001, respectively. Amortization of capitalized
developed and acquired software associated with the DOC1 segment was $761,000
and $597,000 in the three months ended December 31, 2002 and 2001 and $2,234,000
and $1,651,000 in the nine months ended December 31, 2002 and 2001,
respectively.


As of December 31, 2002
and March 31, 2002, the Company determined that the identifiable assets for its
reportable segments were as follows (in thousands):
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     | December 31,2002 |  | March 31,2002 |        
|-------------------- | ---------------- |  | ------------- | -------
|Enterprise Solutions |                  |  | $             | 33,241 
|DOC1                 |                  |  |               | 33,145 
|Corporate            |                  |  |               | 55,424 
|                     |                  |  |               |        
|Total assets         |                  |  | $             | 121,810
|                     |                  |  |               |        

|9
The changes in the
carrying amount of goodwill for the three months ended December 31, 2002 for
each reportable segment were as follows (in thousands):
|---------------------------------------------------------------------------------------------------------------------------------------------------------

|                                           | Enterprise Solutions |  | DOC1 |       
|------------------------------------------ | -------------------- |  | ---- | ------
|Balance as of March 31, 2002               |                      |  |      | $4,497
|Effect of currency translation on goodwill |                      |  |      |      
|                                           |                      |  |      |       
|Balance as of December 31, 2002            |                      |  |      | $4,497
|                                           |                      |  |      |       

|9. Business Combinations


On April 30, 2001, the
Company acquired various assets of TriSense Software, Ltd.
(TriSense) for $1,545,000 in cash, a promissory note with the
present value of $5,997,000, and $423,000 in acquisition costs. The promissory
note was payable in two installments of $3,280,000, including interest, due on
each of the first and second anniversary dates of closing. The first installment
was paid on April 30, 2002. The second installment was paid early, on December
31, 2002, with a $30,000 discount for a total payment of $3,250,000. The results
of operations of TriSense have been included with those of the Company since the
date of acquisition. The cash consideration for the acquisition was paid from
the Companys working capital.


TriSense developed and
marketed electronic bill presentment and payment (EBPP) software.
Integration of TriSenses PaySense EBPP offering, renamed DOC1 Present and
Pay, enables the Company to create an integrated solution providing digital and
paper generation and delivery of customer-focused business documents as well as
electronic payments.


On May 11, 2001, the
Company acquired various assets of HotData, Inc., (HotData) for
$2,000,000 in cash, future payments in the amount of 10% of net revenue, as
defined, generated from the HotData license and service fees over the thirty-six
months following the date of closing, and $225,000 in acquisition costs. The
results of operations of HotData have been included with those of the Company
since the date of acquisition. The cash consideration for the acquisition was
paid from the Companys working capital. Additional consideration to be
paid based on future net revenue will be recorded at its fair value as an
additional cost of the acquisition when such additional consideration is earned.


HotData provides
automated batch processing for address validation, move update, and appending of
various demographic and geographic data over the Internet. The combination of
the HotData technology and the Companys DataQuality.net offering created a
comprehensive hosted services environment that is capable of providing the
functionality of all of the Companys core Data Quality products over the
web.


On December 4, 2001, the
Company acquired various assets of Vision-R eTechnologies, Ltd.
(Vision-R) for $1,000,000 in cash, a $1,250,000 note payable with
the present value of $1,115,000, earn-out payments over the next 36 months not
to exceed $1,000,000, and $220,000 in acquisition costs. The results of
operations of Vision-R have been included with those of the Company since the
date of acquisition. The cash consideration was paid from the Companys
working capital. Additional earn-out consideration will be recorded at its fair
value as additional cost of the acquisition when such additional consideration
is earned. As of December 31, 2002, $192,000 of additional earn-out
consideration has been recorded.


9
The Vision-R product,
enhanced and renamed DOC1 Archive, provides highly scalable electronic archive
and retrieval software solutions. The acquisition adds next-generation,
real-time storage, compression and high-speed retrieval of business documents to
Group 1s DOC1 customer communications management suite.


The following unaudited
pro forma consolidated results of operations for the three months ended December
31, 2001 have been prepared as if the acquisitions of TriSense, HotData and
Vision-R had occurred as of the beginning of fiscal 2002, after giving effect to
purchase accounting adjustments relating to amortization of intangible assets,
interest expense on the notes payable issued to finance the TriSense and
Vision-R purchases, and reduction of income tax provision and interest income:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(thousands, except per share data)          | Three Months EndedDecember 31, |  | Nine Months EndedDecember 31, |       
|------------------------------------------- | ------------------------------ |  | ----------------------------- | ------
|
|Revenue                                     |                                |  | $                             | 26,690
|Net income available to common shareholders |                                |  | $                             | 2,327 
|Diluted earnings per share                  |                                |  | $                             | 0.16  
|Weighted average shares outstanding         |                                |  |                               | 14,959

|The pro forma results are
not necessarily indicative of what actually would have occurred if the
acquisitions had been completed as of the beginning of each of the periods
presented, nor are they necessarily indicative of future consolidated results.


11. Acquired Intangible Assets      (in thousands)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                     | Gross
      Carrying
      Amount |  | Accumulated
      Amortization as of
      December 31, 2002 |         
|------------------------------------ | --------------------------------- |  | ------------------------------------------------------------ | --------
|Amortized
      intangible assets:   |                                   |  |                                                              |         
|Computer
      software              |                                   |  |                                                              | $  4,024
|                                     |                                   | 
|Unamortized
      intangible assets: |                                   | 
|Goodwill                             |                                   |  |                                                              | $14,963 

|The aggregate
amortization expense for the three and nine months ended December 31, 2002 was
$192,000 and $574,000, respectively. The aggregate amortization expense for the
year ended March 31, 2003 is estimated at $780,000. The following table
summarizes aggregate amortization expense for each of the four succeeding fiscal
years (in thousands):
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|For year ending March 31, 2004 |  |  | $ | 817 | 
|------------------------------ |  |  | - | --- | 
|For year ending March 31, 2005 |  |  | $ | 817 | 
|For year ending March 31, 2006 |  |  | $ | 817 | 
|For year ending March 31, 2007 |  |  | $ | 366 | 

|10
Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition


Results of Operations


Any statements in this
Quarterly Report on Form 10-Q concerning the Companys business outlook or
future economic performance, anticipated profitability, revenues, expenses or
other financial items, together with other statements that are not historical
facts, are forward-looking statements as that term is defined under
the Federal Securities Laws. Forward looking statements may include words such
as believes, is developing, will continue to be in
the future, anticipates and expects. Actual
results may differ materially from the expectations expressed or implied in the
forward-looking statements. Forward-looking statements are subject to risks,
uncertainties and other factors which could cause actual results to differ
materially from those stated in such statements. Such risks, uncertainties and
factors include, but are not limited to, changes in currency exchange rates,
changes and delays in new product introduction, customer acceptance of new
products, changes in government regulations, changes in pricing or other actions
by competitors and general economic conditions, as well as other risks detailed
in the Companys other filings with the Securities and Exchange Commission.
The Company undertakes no obligation to update any forward-looking statement.


For the three months
ended December 31, 2002 and 2001, the Company had revenues of $26.7 million and
$22.2 million, respectively. Net income available to common stockholders for the
three months ended December 31, 2002 was $2.3 million or $0.16 diluted earnings
per share compared with $1.3 million or $0.10 diluted earnings per share in the
same period in the prior year. For the nine months ended December 31, 2002 and
2001, the Company had revenues of $75.1 million and $65.3 million, respectively.
Net income available to common stockholders for the nine months ended December
31, 2002 was $5.2 million or $0.37 diluted earnings per share compared with $2.4
million or $0.17 diluted earnings per share in the same period in the prior
year. The increase in profitability is primarily due to increased revenue and
lower maintenance and service expense in both of the Companys operating
segments.


All of
Group 1s operations are based in the two business segments defined as
Enterprise Solutions and DOC1. Enterprise Solutions revenue accounted for 68%
and 64% of Group 1s total revenue for the third fiscal quarters ended
December 31, 2003 and 2002, respectively. DOC1 revenue was 32% and 36% of total
revenue for the third quarters of fiscal 2003 and fiscal 2002, respectively.
Enterprise Solutions revenue accounted for 68% and 66% of Group 1s total
revenue for the nine months ended December 31, 2002 and 2001, respectively. DOC1
revenue was 32% and 34% of total revenue for the nine months ended December 31,
2002 and 2001, respectively.


International revenues
accounted for 17% and 15% of Group 1s total revenue in the third
quarters of fiscal 2003 and 2002, respectively. International revenues were 16%
and 15% of Group 1s total revenue in the first nine months of fiscal
2003 and 2002, respectively.


Software license and
related revenue of $12.5 million for the third fiscal quarter of 2003 increased
58% from $7.9 million the same period the prior year. As a percent of total
revenue, third quarter software license and related revenues were 47% in the
third fiscal quarter of 2003 compared with 36% in fiscal 2002. Software license
and related revenue was $33.7 million in the nine months ended December 31,
2002, an increase of 45% over the $23.3 million in the same period of the prior
fiscal year. As a percent of total revenue, software license and related
revenues in the nine months ended December 31, 2002 and 2001 were 45% and 36%,
respectively.


License fees from
Enterprise Solutions increased 78% to $8.7 million in the three month period
ended December 31, 2002 as compared with the same period in the prior year.
Enterprise Solutions license fees were $23.7 million in the nine month period
ended December 31, 2002, an increase of 62% over the prior year period. The
specifics of Enterprise Solutions license fees are discussed below.


The Companys data
quality and database marketing software license fees for the three months ended
December 31, 2002 increased 78% as compared with the same period in the prior
year. For the nine months ended December 31, 2002, data quality and database
marketing software license fees increased 62% over the prior year nine month
period. The increase in the quarter and the nine month period is due to higher
sales of data quality software which includes the GeoTax product which had
increased license fees of 366% and 127% over the prior year three and nine
months, respectively.


11
License fees from DOC1
for the three months ended December 31, 2002 increased 25% to $3.8 million, from
the same period in the prior year, which was a third quarter record for the DOC1
division. DOC1 license fees were $10.0 million and $8.7 million in the nine
months ended December 31, 2002 and 2001, respectively, an increase of 16%. The
Companys DOC1 Archive product, which was not available in the first
quarter of fiscal year 2002, as well as increased sales in Latin America were
primarily responsible for the increase in revenue.


Maintenance and service
revenue was $14.2 million for the third quarter of fiscal year 2003 and $14.2
million in the prior years third fiscal quarter. Maintenance and service
revenue was $41.4 million and $42.0 million in the nine months ended December
31, 2002 and 2001, respectively. Maintenance and service revenue accounted for
53% of total revenue for the quarter ended December 31, 2002 compared with 64%
of total revenue in the same period in the prior year. Maintenance and service
revenue accounted for 55% of total revenue in the nine months ended December 31,
2002 compared with 64% of total revenue in the same period in the prior year.
Recognized maintenance fees included in maintenance and service revenue were
$11.6 million for the quarter ended December 31, 2002 and $11.0 million for the
same period the prior year, an increase of 6%. Recognized maintenance fees
included in maintenance and service revenue were $33.9 million in the nine
months ended December 31, 2002 and $32.4 million for the same period the prior
year, an increase of 5%.


For the quarter ended
December 31, 2002, Enterprise Solutions recognized maintenance was $8.6 million,
a 2% increase from the same period in the prior year. Enterprise Solutions
recognized maintenance was $25.3 million and $25.2 million in the nine months
ended December 31, 2002 and 2001, respectively. DOC1 recognized maintenance
increased 16% to $3.0 million in the quarter ended December 31, 2002 compared
with the comparable period in the prior year. DOC1 recognized maintenance was
$8.6 million and $7.2 million in the nine months ended December 31, 2002 and
2001, respectively.


Professional and
educational service revenue from the Enterprise Solutions segment decreased to
$0.9 million in the quarter ended December 31, 2002 from $1.0 million in the
same period in the prior year. Enterprise Solutions professional and educational
service revenue was $2.2 million and $3.0 million in the nine months ended
December 31, 2002 and 2001, respectively. DOC1 service revenue decreased to $1.7
million in the quarter ended December 31, 2002 from $2.2 million in the same
period of the prior fiscal year. DOC1 service revenue was $5.3 million and $6.6
million in the nine months ended December 31, 2002 and 2001, respectively. The
decrease in professional and educational service revenue in both segments is due
to lower sales of new installations which require integration services.


Total cost of revenue for
the third quarter of fiscal 2003 and 2002 was $7.7 million in both periods.
Total cost of revenue was $23.9 million in the first nine months of fiscal year
2003, compared with $24.6 million in the same period of the prior year. The
separate components of cost of revenue are discussed below.


Software license expense
increased for the three month period ended December 31, 2002 to $3.4 million
from $2.8 million for the same period in the prior year representing 27% and 36%
of software license and related revenues, respectively. Software license expense
was $11.2 million and $8.3 million in the nine months ended December 31, 2002
and 2001, respectively, representing 33% and 36% of software license and related
revenue in both respective periods. The increase in software license expense in
the third fiscal quarter was due primarily to an increase in amortization of
capitalized development expenses. The increase in software license expense for
the nine months ended December 31, 2002 was primarily due to an increase in
amortization of capitalized development expenses and third party royalty
expenses in the current fiscal year.


Maintenance and service
expense decreased to $4.3 million in the current quarter from $4.8 million in
the comparable period in fiscal 2002, representing 30% and 34% of maintenance
and service revenue, respectively. Maintenance and service expense was $12.7
million and $16.3 million in the nine months ended December 31, 2002 and 2001,
representing 31% and 39% of maintenance and service revenue, respectively. The
decrease in expense as a percentage of revenue was due to lower expenses
associated with both customer support and professional services as discussed
below.


12
Included in maintenance
and service expense discussed above are professional and educational service
costs of $2.5 million for the three months ended December 31, 2002 compared with
$2.9 million for the comparable period in the prior year. Professional and
educational service costs were $7.1 million and $9.9 million in the nine months
ended December 31, 2002 and 2001, respectively. The decrease in professional and
educational service expense is due to cost reductions to size the services
organization with current revenue levels.


Costs of maintenance were
$1.8 million for the third fiscal quarter of 2003 representing 16% of
maintenance revenue. Costs of maintenance for the same quarter in the prior year
were $1.9 million, representing 17% of maintenance revenue. Costs of maintenance
were $5.6 million and $6.4 million in the nine months ended December 31, 2002
and 2001, representing 17% and 20% of maintenance revenue, respectively. The
decrease in expense as a percent of revenue is primarily due to lower customer
support costs resulting from staffing decreases.


Total operating costs of
$15.5 million amounted to 58% of revenue for the quarter ended December 31, 2002
compared with $12.6 million or 57% of revenue for the prior year period. Total
operating costs of $43.2 million amounted to 57% of revenue for the nine months
ended December 31, 2002 compared with $37.9 million or 58% of revenue for the
prior year nine month period. The various components of operating costs are
discussed below.


Software development
costs incurred subsequent to establishment of the softwares technological
feasibility are capitalized. Capitalization ceases when the software is
available for general release to customers. All costs not meeting the
requirements for capitalization are expensed in the period incurred. Software
development costs include direct labor cost and overhead. Capitalized software
development costs are amortized by the greater of (a) the ratio that current
gross revenues for the product bear to the total of current and anticipated
future gross revenues for that product or (b) the straight-line method over the
remaining estimated economic life of the product including the period being
reported on. At the balance sheet date, the Company evaluates the net realizable
value of the capitalized costs and adjusts the current period amortization for
any impairment of the capitalized asset value. Amortization of capitalized
software is included in the cost of license fees.


Costs of research and
development, before capitalization, were $5.0 million and $4.3 million or 19%
and 20% of revenue in the quarters ended December 31, 2002 and 2001,
respectively. Costs of research and development, before capitalization, were
$14.3 million and $13.1 million or 19% and 20% of revenue in the nine months
ended December 31, 2002 and 2001, respectively. Total research and development
expense after capitalization of certain development costs was $3.0 million or
11% of revenue for the three month period ended December 31, 2002 compared with
$2.7 million or 12% in the prior year. Research and development expenses after
capitalization of certain software development cost totaled $8.6 million for the
nine months ended December 31, 2002 and $7.8 million for the same period of
fiscal 2002, representing 11% and 12% of revenue in the nine months ended
December 31, 2002 and 2001, respectively. The increase in expense is due to
increased spending on new product initiatives in the DOC1 segment, including
expenses associated with the acquisition of the DOC1 Archive product and related
development resources (see footnote 5 of notes to consolidated financial
statements).


Sales and marketing
expenses totaled $8.5 million or 32% of revenue in the third quarter of fiscal
2003 and $7.2 million or 32% in the prior year third quarter. Sales and
marketing expenses were $23.7 million and $21.9 million in the nine months ended
December 31, 2002 and 2001, representing 32% and 34% of revenue, respectively.
Sales and marketing expenses for Enterprise Solutions were 27% of Enterprise
Solutions revenue in the third fiscal quarter of 2003 and 29% for the same
period the prior year. Sales and marketing expenses for Enterprise Solutions
were 27% and 30% of Enterprise Solutions revenue in the first nine months of
fiscal 2003 and 2002, respectively. DOC1 sales and marketing expenses were 41%
of DOC1 revenue for the three month period ended December 31, 2002 and 37% for
the same period the prior year. DOC1 sales and marketing expenses were 41% and
40% of DOC1 revenue in the first nine months of fiscal 2003 and 2002,
respectively. The decrease in cost as a percent of revenue in the Enterprise
Solutions division in both the three and nine month periods is due primarily to
increases in revenue.


13
General and
administrative expenses were $4.0 million or 15% of total revenue compared with
$2.7 million or 12% of revenue for the three months ended December 31, 2002 and
2001, respectively. General and administrative expenses were $10.9 million or
14% of total revenue compared with $8.1 million or 12% of revenue for the nine
months ended December 31, 2002 and 2001, respectively. The increase in general
and administrative expenses in the quarter is primarily related to an increase
in incentive compensation accruals and legal expenses.


Net non-operating income
was $0.1 million for the quarter ended December 31, 2002 as compared with $0.3
million for the same period in the prior year. Net non-operating income was $0.4
million and $1.0 million in the nine months ended December 31, 2002 and 2001,
respectively. The decrease in non-operating income in the three month period
ending December 31, 2002 is primarily a result of currency translation gains
recognized during fiscal 2002. The decrease in non-operating income in the nine
month period ending December 31, 2002 is primarily a result of lower interest
income and higher currency translation losses in the current fiscal year.


The Companys
effective tax rates were 36% and 40% for the three month periods ended December
31, 2002 and 2001, respectively. The current periods rate is the net
effect of a 36% effective tax rate on domestic taxable income and a 29% rate on
foreign taxable income. The lower effective tax rate in the current quarter is
primarily due to the higher credits for research and development in the United
States.


Critical Accounting Policies


The Securities and
Exchange Commission issued Financial Reporting Release No. 60, Cautionary
Advice Regarding Disclosure About Critical Accounting Policies (FR
60), in December 2001. FR 60 requires companies to disclose those
accounting policies considered most critical. Note 1 to the audited financial
statements in the Companys annual report on Form 10-K for the year ended
March 31, 2002 includes a summary of the Companys significant accounting
policies. Of those policies, the Company has identified the following as the
most critical because they require significant judgment and estimates on the
part of management in their application:


Revenue
Recognition: Revenues are primarily derived from the sale of software
licenses and from the sale of related services, which include maintenance and
support, consulting and training services. Revenues from license arrangements
are recognized upon delivery of the product when persuasive evidence of an
arrangement exists, delivery has occurred, the fee is fixed or determinable and
collectibility is probable. If the agreement includes acceptance criteria,
revenue is not recognized until the Company can demonstrate that the software or
service can meet the acceptance criteria. If an ongoing vendor obligation exists
under the license arrangement, revenue is deferred based on vendor-specific
objective evidence of the undelivered element. If vendor-specific objective
evidence does not exist for all undelivered elements, all revenue is deferred
until sufficient evidence exists or all elements have been delivered. Revenues
from annual maintenance and support are deferred and recognized ratably over the
term of the contract. Revenues from consulting and training services are
deferred and recognized when the services are performed and collectibility is
deemed probable.


Contracts for
professional services are negotiated individually. The Company generally
recognizes revenues from professional service contracts on a time and materials
basis as the work is performed. Revenues from fixed price professional service
contracts are recognized using the percentage-of-completion method as work is
performed, measured primarily by the ratio of labor hours incurred to total
estimated labor hours for each specific contract. When the total estimated cost
of a contract is expected to exceed the contract price, the total estimated loss
is charged to expense in the period when the information is known. During the
nine months ended December 31, 2002, the Company has not incurred any losses on
contracts in progress.


14
Revenue from arrangements
where the Company provides Web based services is recognized over the contract
period. Any fees paid or costs incurred prior to the customer relationship
period, such as license fees, consulting, customization or development services,
are deferred and recognized ratably over the subsequent contract period, which
is typically one to two years.


Revenue from products
licensed to original equipment manufacturers is recorded when products have been
shipped and the appropriate documentation has been received by Group 1, provided
all other revenue recognition criteria have been satisfied. Revenue from sales
through value added resellers or distributors is recorded when a license
agreement is signed with an end user.


Capitalized
Software: In accordance with Statement of Financial Accounting Standards
(SFAS) No. 86, Accounting for the Costs of Computer Software
to be Sold, Leased, or Otherwise Marketed, software development costs are
expensed as incurred until technological feasibility has been established, at
which time such costs are capitalized until the product is available for general
release to customers. Software development costs capitalized include direct
labor costs and fringe labor overhead costs attributed to programmers, software
engineers, quality control and field certifiers working on products after they
reach technological feasibility but before they are generally available to
customers for sale. Capitalized costs are amortized over the estimated product
life of three to five years, using the greater of the straight-line method or
the ratio of current product revenues to total projected future revenues. At the
balance sheet date, the Company evaluates the net realizable value of the
capitalized costs and adjusts the current period amortization for any impairment
of the capitalized asset value.


Goodwill: In
September 2001, the Financial Accounting Standards Board (FASB) approved
Statements of Financial Accounting Standards (SFAS) No. 141, Business
Combinations and No. 142, Goodwill and Other Intangible
Assets. The Company elected to adopt SFAS No. 142 as of April 1, 2001.
SFAS No. 142 addresses financial accounting and reporting for acquired goodwill
and other intangible assets. In accordance with this Statement, the Company
ceased amortization of goodwill as of April 1, 2001. Goodwill will be tested for
impairment at least annually at the reporting unit level. Goodwill will be
tested for impairment on an interim basis if an event occurs or circumstances
change that would more-likely-than-not reduce the fair value of a reporting unit
below its carrying value. In accordance with FAS 142 provisions, the Company
completed the transitional and the annual goodwill impairment test as of April
1, 2001 and concluded that goodwill of its reporting units was not impaired. The
Company also completed its annual goodwill impairment test for fiscal year 2003
and concluded that goodwill of its reporting units was not impaired.


Goodwill represents the
excess of the aggregate purchase price over the fair market value of the
tangible and intangible assets acquired in various acquisitions and, prior to
fiscal year 2002, was amortized on a straight-line basis over the estimated
economic useful life ranging from nine to fifteen years. There was no goodwill
amortization expense during fiscal year 2003 and 2002 in accordance with SFAS
Nos. 141 and 142, as discussed above.


Liquidity and Capital Resources


The Companys
working capital was $35.8 million at December 31, 2002, as compared with $27.0
million at March 31, 2002. The current ratio was 1.8 to 1 at December 31, 2002
and 1.6 to 1 at March 31, 2002. Note that the current portion of deferred
revenue related to maintenance contracts is included in current liabilities.
Accordingly, working capital and current ratios may not be directly comparable
to such data for companies in other industries where similar revenue deferrals
are not typical.


The Company provides for
its funding requirements through cash funds generated from operations.
Additionally, the Company maintains a $10 million line of credit arrangement
with a commercial bank, expiring October 31, 2004. The line of credit bears
interest at the banks prime rate or Libor plus 140 basis points, at Group
1s option. The line of credit is not collateralized but requires Group 1
to maintain certain operating ratios. At December 31, 2002 and at March 31,
2002, there were no borrowings outstanding under the line of credit.


15
For the nine months ended
December 31, 2002, net cash provided by operating activities was $17.3 million.
This amount included net income of $5.3 million plus non-cash expenses of $10.5
million. Also included in cash provided by operating activities was a $3.9
million increase in accrued expenses and accrued compensation, a $1.4 million
increase in deferred revenues, offset by a $0.3 million decrease in accounts
payable, a $1.0 million increase in prepaid expenses and other current and
non-current assets, and a $2.5 million increase in accounts receivable. The
increase in accounts receivable is due to increased revenues in the current
period. Investment in purchased and developed software of $5.9 million, and
capital equipment of $1.2 million, offset by an $11.5 million net decrease in
short-term investments in marketable securities resulted in $4.5 million
provided by investing activities. For the nine months ended December 31, 2002,
the $6.0 million principal payments related to the TriSense acquisition, offset
by $2.7 million in proceeds from stock option exercises, resulted in $3.3
million cash used in financing activities.


Group 1 continually
evaluates the credit and market risks associated with outstanding receivables.
In the course of this review, Group 1 considers many factors specific to
the individual client as well as to the concentration of receivables within
industry groups.


As of December 31, 2002,
the Companys capital resource commitments consisted primarily of
non-cancelable operating lease commitments for office space and equipment. The
Company believes that its current minimum lease obligations and other short-term
and long-term liquidity needs can be met from its existing cash and short-term
investment balances and cash flows from operations. The Company believes that
its long-term liquidity needs are minimal and no large capital expenditures are
currently planned, except for the continuing investment in software development
costs, which the Company believes can be funded from operations during the next
twelve months.


The following table lists
the Companys contractual obligations and commercial commitments (in
thousands):
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------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-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Contractual Obligations                  |  | Total
      Amount
      Committed |   | Less than
      1 Year |  | 1-3 Years |       | 4-5 Years |   | Over 5
      Years | 
|---------------------------------------- |  | ---------------------------------- | - | ---------------------- |  | --------- | ----- | --------- | - | ------------------ | 
|                                         |  |                                    |   |                        |  |           |       |           |   |                    | 
|Operating
      leases                   |  |                                    | $ | 29,080                 |  | $         | 4,145 |           | $ | 5,499              | 
|Notes
      payable                      |  |                                    | $ | 1,099                  |  | $         | 377   |           | $ | 722                | 
|Total
      contractual cash obligations |  |                                    | $ | 30,179                 |  | $         | 4,522 |           | $ | 6,221              | 

|Recent Accounting Pronouncements


In August 2001, FASB
issued SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. This Statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, for the disposal of a segment of a business. The
provisions of this Statement will be effective for the Companys fiscal
year 2003. The adoption of this Statement has not had a significant impact on
the Companys financial position and results of operations.


In April 2002, the FASB
issued SFAS 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections. This Statement rescinds FAS 4,
Reporting Gains and Losses from Extinguishment of Debt, and an
amendment of that Statement, FAS 64, Extinguishments of Debt Made to
Satisfy Sinking-Fund Requirements, and FAS 44, Accounting for
Intangible Assets of Motor Carriers. SFAS 145 also amends FAS 13,
Accounting for Leases, to eliminate an inconsistency between the
required accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. This Statement additionally amends other existing
authoritative pronouncements to make various technical corrections, clarify
earnings, or describe their applicability under changed conditions. SFAS 145 is
effective for fiscal years beginning after May 15, 2002 for FASB Statements No.
4, 44 and 64 and effective for transactions that occurred after May 15, 2002 for
FASB Statement No. 13. Early application is encouraged. The adoption of this
Statement is not expected to have a significant impact on the Companys
financial position and results of operations.


16
In August 2002, the FASB
issued SFAS 146 Accounting for Costs Associated with Exit or Disposal
Activities. It addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues Task
Force (EITF) Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)". SFAS 146 requires that a liability for
a cost associated with an exit or disposal activity be recognized when the
liability is incurred and establishes that fair value is the objective for
initial measurement of the liability. Under Issue 94-3, a liability for an exit
cost, as defined in Issue 94-3, was recognized at the date of an entitys
commitment to an exit plan. The new standard is effective for exit or disposal
activities that are initiated after December 31, 2002, with early application
encouraged. The Company does not believe that SFAS 146 will have a material
effect on the Companys financial position or results of operations.


In November 2002, the
FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires
that a liability be recorded in the guarantors balance sheet upon issuance
of a guarantee. In addition, FIN 45 requires disclosures about the guarantees
that an entity has issued, including a reconciliation of changes in the
entitys product warranty liabilities. The initial recognition and initial
measurement provisions of FIN 45 are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002. The Company believes that
the adoptions of this standard will have no material impact on its financial
statements.


In December 2002, the
FASB issued SFAS No. 148, Accounting for Stock Based Compensation 
Transition and Disclosure  an Amendment to FAS 123. SFAS 148
provides two additional transition methods for entities that adopt the
preferable method of accounting for stock based compensation. Further, the
statement requires disclosure of comparable information for all companies
regardless of whether, when or how an entity adopts the preferable, fair value
based method of accounting. These disclosures are now required for interim
periods in addition to the traditional annual disclosure. The amendments to SFAS
No. 123, which provides for additional transition methods, are effective for
periods beginning after December 15, 2002, although earlier application is
permitted. The amendments to the disclosure requirements are required for
financial reports containing condensed financial statements for interim period
beginning after December 15, 2002.


Legal Contingencies


The Company is not a
party to any legal proceedings which in its belief, after review by the
Companys legal counsel, could have a material adverse effect on the
consolidated financial position, cash flows or results of operations of the
Company.


Quantitative and Qualitative Disclosures about Market Risk


The Company has a
subsidiary in the United Kingdom with offices throughout continental Europe.
Additionally, the Company uses third party distributors to market and distribute
its products in other international regions. Transactions conducted by the
subsidiary are typically denominated in the local country currency, while
transactions conducted by the distributors are typically denominated in pounds
sterling. As a result, the Company is primarily exposed to foreign exchange rate
fluctuations as the financial results of its subsidiary and third party
distributors are translated into U.S. dollars in consolidation. As exchange
rates vary, these results, when translated, may vary from expectations and
impact overall expected profitability. Through and as of December 31, 2002,
however, the Companys exposure was not material to the financial
statements taken as a whole. The Company has not entered into any foreign
currency hedging transactions with respect to its foreign currency market risk.
The Company does not have any financial instruments subject to material market
risk.


17
Controls and Procedures


(a) Evaluation of
disclosure controls and procedures. Based on their evaluation as of a date
within 90 days of the filing date of this report, the Companys principal
executive officer and principal financial officer have concluded that the
Companys disclosure controls and procedures (as defined in Rules 13a-14(c)
and 15d-14(c) under the Securities Exchange Act of 1934 (the Exchange Act) are
effective to ensure that information required to be disclosed by the Company in
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms.


(b) Changes in internal
controls. There were no significant changes in the Companys internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation. There were no significant
deficiencies or material weaknesses, and therefore there were no corrective
actions taken.


18
Part II
Other Information


Item 1. Legal Proceedings
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | NONE
| | ----

|Item 2. Changes in Securities
|-----------------------------

| | NONE
| | ----

|Item 3. Defaults Upon Senior Securities
|---------------------------------------

| | NONE
| | ----

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

| | NONE
| | ----

|Item 5. Other Information
|-------------------------

| | NONE
| | ----

|Item 6. Exhibits and Reports on Form 8-K
|----------------------------------------

| | Exhibit 99.1 |  | Certification
of Robert S. Bowen, Chief Executive Officer, and Mark Funston, Chief  Financial Officer,
of Quarterly Report on Form 10-Q.
| | ------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------

| | Form 8-K |  | filed
November 6, 2002 for the declaration of a two for one stock split for
shareholders of record on November 15, 2002.
| | -------- |  | ------------------------------------------------------------------------------------------------------------------------

| | Form 8-K |  | filed
December 16, 2002 for the notification of shareholders of redemption
of 6% cumulative convertible preferred stock on January 15, 2003.
| | -------- |  | --------------------------------------------------------------------------------------------------------------------------------------------

|19
Signatures


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

| |  | Group 1 Software, Inc.
/s/ Robert S. Bowen
Chief Executive Officer
February 14, 2003
/s/ Mark Funston
Chief Financial Officer
February 14, 2003
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------

|20
Exhibit 99.1


I, Robert S. Bowen, certify that:


1. I have reviewed this quarterly
report on Form 10-Q of Group 1 Software, Inc.;


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


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


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

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

b) evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and

c)
presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;


5. The registrants
other certifying officer and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent
function):


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

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


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

| |  | /s/ Robert S. Bowen
Chief Executive Officer
February 14, 2003
| |  | -------------------------------------------------------------

|21
I, Mark Funston, certify
that:


1. I have reviewed this quarterly
report on Form 10-Q of Group 1 Software, Inc.;


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


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


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

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

b) evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and

c)presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;


5. The registrants
other certifying officer and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent
function):


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

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


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

| |  | /s/ Mark FunstonChief Financial OfficerFebruary 14, 2003
| |  | --------------------------------------------------------

|22
|--