|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 June 30, 2003 |  | 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 |_|
|------- |  | ------

|ClassCommon Stock, $.50 par value |  | Shares Outstanding EffectiveAugust 7, 200314,984,301
|--------------------------------- |  | ----------------------------------------------------

|1

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

|                                                           | June 30,2003 |  | March 31,2003 |        
|---------------------------------------------------------- | ------------ |  | ------------- | -------
|
|
|ASSETS                                                     |              |  |               |        
|Current assets:                                            |              | 
|Cash and cash equivalents                                  |              |  | $             | 49,420 
|Short-term investments, available-for-sale                 |              |  |               | 8,422  
|Trade and installment accounts receivable, less            |              | 
|allowance of $1,484 and $1,755                             |              |  |               | 13,929 
|Note Receivable                                            |              |  |               | 7,000  
|Deferred income taxes                                      |              |  |               | 1,715  
|Prepaid expenses and other current assets                  |              |  |               | 3,603  
|                                                           |              |  |               |        
|Total current assets                                       |              |  |               | 84,089 
|                                                          
|Installment accounts receivable, long-term                 |              |  |               | 30     
|Property and equipment, net                                |              |  |               | 4,864  
|Computer software, net                                     |              |  |               | 23,600 
|Goodwill                                                   |              |  |               | 12,722 
|Other assets                                               |              |  |               | 220    
|                                                           |              |  |               |        
|Total assets                                               |              |  | $             | 125,525
|                                                           |              |  |               |        
|                                                          
|LIABILITIES AND STOCKHOLDERS EQUITY                       |              | 
|Current liabilities:                                       |              | 
|Accounts payable                                           |              |  | $             | 1,345  
|Current portion of note payable                            |              |  |               | 347    
|Accrued expenses                                           |              |  |               | 5,836  
|Accrued compensation                                       |              |  |               | 4,837  
|Current deferred revenues                                  |              |  |               | 28,203 
|                                                           |              |  |               |        
|Total current liabilities                                  |              |  |               | 40,568 
|Note payable, net of current portion                       |              |  |               | 350    
|Deferred revenues, long-term                               |              |  |               | 386    
|Deferred income taxes                                      |              |  |               | 4,402  
|                                                           |              |  |               |        
|Total liabilities                                          |              |  |               | 45,706 
|                                                           |              |  |               |        
|Commitments and contingencies                              |              | 
|Stockholders equity:                                      |              | 
|6% cumulative convertible preferred stock $0.25 par value; |              | 
|1,200 shares authorized; 48 shares issued                  |              |  |               |       
|Common stock $0.50 par value; 50,000 shares authorized;    |              | 
|15,041 and 14,902 shares issued                            |              |  |               | 7,521  
|Additional paid in capital                                 |              |  |               | 36,333 
|Retained earnings                                          |              |  |               | 39,672 
|Accumulated other comprehensive income                     |              |  |               | 938    
|Treasury stock, 1,246 shares, at cost                      |              |  |               | (4,645 
|                                                           |              |  |               |        
|Total stockholders equity                                 |              |  |               | 79,819 
|                                                           |              |  |               |        
|Total liabilities and stockholders equity                 |              |  | $             | 125,525
|                                                           |              |  |               |        

|See notes to consolidated financial statements.

2

GROUP 1 SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                            | For the Three Month PeriodEnded June 30, | 
|------------------------------------------- | ---------------------------------------- | 
|
|Revenue:                                    |                                          | 
|Software license and related revenue        |                                          | 
|Maintenance and services                    |                                          | 
|                                            |                                          | 
|Total revenue                               |                                          | 
|                                            |                                          | 
|                                           
|Cost of revenue:                            |                                          | 
|Software license expense                    |                                          | 
|Maintenance and service expense             |                                          | 
|                                            |                                          | 
|Total cost of revenue                       |                                          | 
|                                            |                                          | 
|                                           
|Gross profit                                |                                          | 
|                                            |                                          | 
|                                           
|Operating expenses:                         |                                          | 
|Research and development, net (see note 6)  |                                          | 
|Sales and marketing                         |                                          | 
|General and administrative                  |                                          | 
|                                            |                                          | 
|Total operating expenses                    |                                          | 
|                                            |                                          | 
|                                           
|Income from operations                      |                                          | 
|                                           
|Other income:                               |                                          | 
|Interest income                             |                                          | 
|Interest expense                            |                                          | 
|Other income (expense)                      |                                          | 
|                                            |                                          | 
|Total other income                          |                                          | 
|                                            |                                          | 
|Income before provision for income taxes    |                                          | 
|                                           
|Provision for income taxes                  |                                          | 
|                                            |                                          | 
|Net income                                  |                                          | 
|                                           
|Preferred stock dividend requirements       |                                          | 
|                                            |                                          | 
|Net income available to common stockholders |                                          | 
|                                            |                                          | 
|                                           
|Basic earnings per share                    |                                          | 
|                                            |                                          | 
|                                           
|Diluted earnings per share                  |                                          | 
|                                            |                                          | 
|                                           
|Basic weighted average shares outstanding   |                                          | 
|                                            |                                          | 
|                                           
|Diluted weighted average shares outstanding |                                          | 
|                                            |                                          | 

|See notes to consolidated financial statements.

3

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

|                                                                        | For the Three Month PeriodEnded June 30, | 
|----------------------------------------------------------------------- | ---------------------------------------- | 
|
|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 gain on sale of intellectual property and other property            |                                          | 
|and equipment                                                           |                                          | 
|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                                          |                                          | 
|Proceeds from sale of intellectual property                             |                                          | 
|Issuance of notes receivable                                            |                                          | 
|                                                                        |                                          | 
|Net cash used in investing activities                                   |                                          | 
|                                                                        |                                          | 
|                                                                       
|Cash flows from financing activities:                                   |                                          | 
|Proceeds from exercise of stock options                                 |                                          | 
|Repayment of principal on long-term debt                                |                                          | 
|                                                                        |                                          | 
|Net cash provided by (used in) financing activities                     |                                          | 
|                                                                        |                                          | 
|                                                                       
|Net (decrease) increase 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            |                                          | 

|See notes to consolidated financial statements.

4

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

|                                         | For the Three Month PeriodEnded June 30, | 
|---------------------------------------- | ---------------------------------------- | 
|
|Net income                               |                                          | 
|                                        
|Foreign currency translation adjustments |                                          | 
|                                         |                                          | 
|                                        
|Comprehensive income                     |                                          | 
|                                         |                                          | 

|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 months ended June 30, 2003 and 2002 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 June 30, 2003 are not necessarily indicative of the
results for the year ending March 31, 2004. The information contained in the
annual report on the Form 10-K for the year ended March 31, 2003, should be
referred to in connection with the unaudited interim financial information.

2. On April 15, 2003, the
Company entered into an agreement to acquire key assets of Sagent Technology,
Inc. (Sagent) for up to $17 million, payable in cash and debt
forgiveness. Group 1 has provided Sagent with $7 million in bridge financing,
secured by all of Sagents assets. The purchase agreement has been approved
by Group 1s and Sagents board of directors. The transaction is
subject to approval by Sagents shareholders and certain other closing
conditions. On July 31, 2003, Group 1 entered into an amendment to extend the
maturity date under the $7 million existing secured loans to September 30, 2003
and to increase the borrowing limit of the loan from $7 million to $9 million.
Sagent and Group 1 have also agreed to extend the outside date for closing under
the asset purchase agreement until October 30, 2003. Otherwise, terms of the
existing loan and the asset purchase agreement remain the same.

3. 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.

4. 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.

5. Certain prior period
amounts have been reclassified to conform to current period presentation.

6. Research and
development costs, before the capitalization of computer software development
costs, was $4,818,000 and $4,585,000 for the three months ended June 30, 2003
and 2002, respectively. Capitalization of computer software development costs
for the three months ended June 30, 2003 and 2002 were $2,049,000 and
$1,843,000, respectively.

7. 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):

6
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                 | For the Three Month Period EndedJune 30, | 
|------------------------------------------------ | ---------------------------------------- | 
|
|Weighted average common shares outstanding-basic |                                          | 
|Effect of dilutive securities:                   |                                          | 
|Stock options and warrants                       |                                          | 
|                                                 |                                          | 
|Weighted average shares outstanding-diluted      |                                          | 
|                                                 |                                          | 

|There were no additional
potentially dilutive common stock options, warrants or convertible securities in
the three months ended June 30, 2003. There were 1,500,000 additional
potentially dilutive common stock options and warrants in the three months ended
June 30, 2002. There were 142,500 additional potentially dilutive convertible
securities in the three months ended June 30, 2002.

The Company accounts for
its stock based compensation in accordance with the provisions of Accounting
Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to
Employees as interpreted by FASB Interpretation No. 44, Accounting
for Certain Transactions Involving Stock Compensation, and Interpretation of APB
Opinion No. 25, (FIN 44) and present the pro forma disclosures required by
Statement of Financial Accounting Standard No. 123, Accounting for Stock
Based Compensation (SFAS 123) as amended by Statement of Financial
Accounting Standard No. 148, Accounting for Stock Based Compensation
 Transition and Disclosure (SFAS 148).

The Company accounts for
the activity under the Plans in accordance with APB 25. Accordingly, no
compensation expense has been recognized for the Plans. If compensation expense
had been determined based on the fair value of the options at the grant dates
consistent with the method of accounting under SFAS No. 123, the Companys
net income and earnings per share would have decreased or increased to the pro
forma amounts indicated below (in thousands, except per share amounts):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                               | Three months endedJune 30, 2003 |  | Three months endedJune 30, 2002 |        
|---------------------------------------------- | ------------------------------- |  | ------------------------------- | -------
|Net income available to common stockholders as |                                 |  |                                 |        
|reported                                       |                                 |  |                                 | $2,053 
|Add: stock-based employee compensation         |                                 | 
|expense included in reported net income        |                                 |  |                                 |       
|Deduct: total stock-based employee             |                                 | 
|compensation expense determined under fair     |                                 | 
|value based method for all awards              |                                 |  |                                 | (1,046 
|                                               |                                 |  |                                 |        
|Pro forma net income available to common       |                                 | 
|stockholders                                   |                                 |  |                                 | $1,007 
|                                               |                                 |  |                                 |        
|Earnings per share                             |                                 | 
|Basic, as reported                             |                                 |  |                                 | $  0.15
|                                               |                                 |  |                                 |        
|Basic, pro forma                               |                                 |  |                                 | $  0.07
|                                               |                                 |  |                                 |        
|Diluted, as reported                           |                                 |  |                                 | $  0.13
|                                               |                                 |  |                                 |        
|Diluted, pro forma                             |                                 |  |                                 | $  0.06
|                                               |                                 |  |                                 |        

|The fair value of each
option is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions used for grants during the
three months ended June 30, 2003 and 2002, respectively: dividend yield of 0%,
expected volatility of 95% and 104%, respectively, a risk-free interest rate of
2.60% and 4.63%, respectively, and an expected term of 4.04 and 4.08 years,
respectively.

7

8. Recent Accounting
Pronouncements

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 June 30, 2003, with early application
encouraged. The adoption of this Statement did not 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 June 30, 2003. The adoption of this
Statement did not have a material impact on the Companys financial
statements.

In January 2003, the FASB
issued FASB Interpretation No. 46 (FIN 46), Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51. FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective for all
new variable interest entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied for the first interim or annual period
beginning after June 15, 2003. The adoption of FIN 46 did not have a material
effect on the Companys financial position or results of operations.

In April 2003, the FASB
issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments
and Hedging Activities. SFAS No. 149 amends and clarifies accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities under SFAS No. 133. The statement
requires that contracts with comparable characteristics be accounted for
similarly and clarifies when a derivative contains a financing component that
warrants special reporting in the statement of cash flows. SFAS No. 149 is
effective for contracts entered into or modified after June 30, 2003, except in
certain circumstances, and for hedging relationships designated after June 30,
2003. The Company does not expect that the adoption of this standard will have a
material effect on its financial position or results of operations.

In May 2003, the FASB
issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. This Statement establishes
standards for how an issuer classifies and measures in its statement of
financial position certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances) because that financial instrument embodies an obligation of the
issuer. This Statement is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003, except for mandatorily
redeemable financial instruments of nonpublic entities. The Company does not
expect that the adoption of this standard will have a material effect on its
financial position or results of operations.

8

9. 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.

10. Segment Information

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

|                     | Three MonthsEnded June 30, | 
|-------------------- | -------------------------- | 
|
|Revenue:             |                            | 
|Enterprise Solutions |                            | 
|DOC1                 |                            | 
|                     |                            | 
|Total revenue        |                            | 
|                     |                            | 
|                    
|Gross Profit:        |                            | 
|Enterprise Solutions |                            | 
|DOC1                 |                            | 
|                     |                            | 
|Total gross profit   |                            | 
|                     |                            | 
|                     |                            | 

|Amortization of capitalized
developed and acquired software associated with the Enterprise  Solutions segment was
$1,606,000 and $1,376,000 for the three months ended June 30, 2003  and 2002.
Amortization of capitalized developed and acquired software associated with the  DOC1
segment was $938,000 and $720,000 in the three months ended June 30, 2003 and 2002.

As of June 30, 2003 and March 31,
2003, the Company determined that the identifiable  assets for its reportable segments
were as follows (in thousands):
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     | June 30,2003 |  | March 31,2003 |        
|-------------------- | ------------ |  | ------------- | -------
|Enterprise Solutions |              |  | $             | 32,416 
|DOC1                 |              |  |               | 31,458 
|Corporate            |              |  |               | 61,651 
|                     |              |  |               |        
|Total assets         |              |  | $             | 125,525
|                     |              |  |               |        

|The changes in the carrying amount
of goodwill for the three months ended June 30, 2003 for each reportable segment  were as
follows (in thousands):
|----------------------------------------------------------------------------------------------------------------------------------------------------

|                                           | Enterprise Solutions |  | DOC1 |        
|------------------------------------------ | -------------------- |  | ---- | -------
|Balance as of March 31, 2003               |                      |  |      | $ 4,497
|Effect of sale of intellectual property    |                      |  |      | (8     
|Effect of currency translation on goodwill |                      |  |      |       
|                                           |                      |  |      |        
|Balance as of June 30, 2003                |                      |  |      | $ 4,489
|                                           |                      |  |      |        

|9

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 June 30, 2003 and 2002, the Company had revenues of $24.3 million and
$23.4 million, respectively. Net income available to common stockholders for the
three months ended June 30, 2003 was $2.1 million or $0.13 diluted earnings per
share compared with $1.0 million or $0.07 diluted earnings per share in the same
period in the prior year. The increase in profitability is primarily due to
increased revenue, lower cost of revenue and an increase in other income.

All of
Group 1s operations are based in the two business segments defined as
Enterprise Solutions and DOC1. Enterprise Solutions revenue accounted for 72%
and 69% of Group 1s total revenue for the first fiscal quarters ended June
30, 2003 and 2002, respectively. DOC1 revenue was 28% and 31% of total revenue
for the first quarters of fiscal 2004 and fiscal 2003, respectively.

International revenues
accounted for 11% and 14% of Group 1s total revenue in the first
quarters of fiscal 2004 and 2003, respectively. The lower international revenue
can primarily be attributed to lower sales of the DOC 1 product in Europe.

Software license and
related revenue of $10.5 million for the first fiscal quarter of 2004 increased
6% from $9.9 million the same period the prior year. As a percent of total
revenue, first quarter software license and related revenues were 43% in the
first fiscal quarter of 2004 compared with 42% in fiscal 2003.

Enterprise Solutions
license revenue increased 16% to $8.2 million in the three month period ended
June 30, 2003. The increase in the quarter is due to higher sales of Group
1s Code 1 Plus, MailStream Plus and MoveForward products partially offset
by lower sales of the Companys GeoTax tax jurisdiction software.

License fees from DOC1
for the three months ended June 30, 2003 decreased 20% to $2.2 million from the
same period in the prior year. The decrease in DOC1 license revenue was due to
lower sales of the DOC 1 document generation product offset in part by higher
sales of the Companys DOC 1 Archive product both domestically and in
Europe.

Maintenance and service
revenue was $13.8 million for the first quarter of fiscal year 2004 and $13.5
million in the prior years first fiscal quarter. Maintenance and service
revenue was 57% of total revenue for the quarter ended June 30, 2003 and 58% of
total revenue in the same period in the prior year. Recognized maintenance fees
included in maintenance and service revenue were $11.8 million for the quarter
ended June 30, 2003 and $11.1 million for the same period the prior year, an
increase of 6%.

10

For the quarter ended
June 30, 2003, Enterprise Solutions recognized maintenance was $8.3 million, a
1% increase from the same period in the prior year. DOC1 recognized maintenance
increased 23% to $3.4 million in the quarter ended June 30, 2003 compared with
the comparable period the prior year.

Professional and
educational service revenue from the Enterprise Solutions segment remained at
$0.6 million in both quarters ended June 30, 2003 and 2002. DOC1 service revenue
decreased to $1.3 million in the quarter ended June 30, 2003 from $1.8 million
in the same period of the prior fiscal year. 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 first quarter of fiscal 2004 and 2003 was $8.2 million and $8.3 million,
respectively. The separate components of cost of revenue are discussed below.

Software license expense
decreased for the three month period ended June 30, 2003 to $3.8 million from
$4.1 million for the same period in the prior year representing 36% and 41% of
software license and related revenues, respectively. The decrease in software
license expense in the first fiscal quarter was due primarily to a decrease in
royalty expenses, partially offset by higher amortization of capitalized
development expenses in the current year.

Maintenance and service
expense increased to $4.5 million in the current quarter from $4.3 million in
the comparable period in fiscal 2003, representing 32% of maintenance and
service revenue in both quarters.

Included in maintenance
and service expense discussed above are professional and educational service
costs of $2.5 million for the three months ended June 30, 2003 compared with
$2.4 million for the comparable period in the prior year. The increase in
professional and educational service costs is due to more professional service
work being performed by third party contractors.

Costs of maintenance were $2.0 million and
$1.9 million for the first fiscal quarters of 2004 and 2003 respectively, representing 17% of
maintenance revenue in both periods.

Total operating costs of
$13.5 million amounted to 56% of revenue for the quarter ended June 30, 2003
compared with $13.6 million or 58% of revenue for the prior year 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 $4.8 million and $4.6 million or 20% of
revenue in the quarters ended June 30, 2003 and 2002, respectively. Total
research and development expense after capitalization of certain development
costs was $2.8 million or 11% of revenue for the three month period ended June
30, 2003 compared with $2.7 million or 12% in the prior year. The increase in
expense is due to increased spending on new product initiatives and related
development resources (see footnote 6 of notes to consolidated financial
statements).

Sales and marketing
expenses totaled $7.6 million or 31% of revenue in the first quarter of fiscal
2004 and $7.5 million or 32% in the prior year first quarter. Sales and
marketing expenses for Enterprise Solutions were 25% of Enterprise Solutions
revenue in the first fiscal quarter of 2003 and 28% for the same period the
prior year. DOC1 sales and marketing expenses were 47% of DOC1 revenue for the
three month period ended June 30, 2003 and 41% for the same period the prior
year. The decrease in Enterprise Solutions cost as a percent of revenue is
primarily due to increased revenue. The increase in cost as a percent of revenue
in the DOC1 division is due primarily to increases in sales and marketing costs
and lower revenue.

11

General and
administrative expenses were $3.2 million or 13% of total revenue compared with
$3.3 million or 14% of revenue for the three months ended June 30, 2003 and
2002, respectively. The decrease in general and administrative expenses in the
quarter is primarily related to a recovery of bad debt expense.

Net other income was $0.8
million for the quarter ended June 30, 2003 as compared with $0.1 million for
the same period in the prior year. The increase in other income in the three
month period ending June 30, 2003 is primarily the result of currency
translation gains and a gain on the sale of intellectual property.

The Companys
effective tax rates were 36.5% and 37.5% for the three month periods ended June
30, 2003 and 2002, 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 increased research and development credits 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, 2003 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
three months ended June 30, 2003, the Company has not incurred any losses on
contracts in progress.

12

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
accordance with SFAS 142, Goodwill and Other Intangible Assets, the
Company ceased amortization of goodwill as of April 1, 2001 and 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 2004 and 2003 in accordance with SFAS
Nos. 141 and 142, as discussed above.

Liquidity
and Capital Resources

The Companys
working capital was $43.5 million at June 30, 2003, as compared with $39.8
million at March 31, 2003. The current ratio was 2.1 to 1 at June 30, 2002 and
1.8 to 1 at March 31, 2003. 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 June 30, 2003 and at March 31, 2003,
there were no borrowings outstanding under the line of credit.

During fiscal 2004, net
income of $2.1 million, non-cash expenses of $3.3 million and $3.2 million net
change in assets and liabilities provided a total of $2.2 million cash from
operating activities. The net changes in assets and liabilities include an
decrease in accounts receivable that increased cash by $5.4 million during the
quarter. The decrease in receivables was due to increased cash collections.
Deferred revenues decreased by $3.1 million, and accrued expenses and
compensation decreased by $5.9 million, decreasing cash by a total of $9.0
million. The decreased accrued compensation was due primarily to payments of
prior year incentive compensation accruals. The decrease in deferred revenue is
primarily related to the recognition of license fees on certain transactions
that had been previously deferred. Other working capital items increased cash by
$0.4 million.

13

Cash flows used in
investing activities of $10.4 million consist of expenditures for investments in
software development and capital equipment of $3.1 million, net purchases of
marketable securities of $0.7 million, $7.0 million in notes receivable issued
to Sagent and proceeds of $0.4 million from the sale of intellectual property.

Proceeds from the
exercise of stock options of $0.8 million net of repayments of long-term debt
provided a total of $0.8 million cash from 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 June 30, 2003, 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 AmountCommitted |   | Lessthan1 Year |  | 1-3 Years |       | 4-5 Years |   | Over 5 Years | 
|---------------------------------- |  | --------------------- | - | -------------- |  | --------- | ----- | --------- | - | ------------ | 
|Operating leases                   |  |                       | $ | 28,257         |  | $         | 3,877 |           | $ | 6,514        | 
|Notes payable                      |  |                       |   | 697            |  |           | 347   |           |   | 350          | 
|Total contractual cash obligations |  |                       | $ | 28,954         |  | $         | 4,224 |           | $ | 6,864        | 

|Recent Accounting
Pronouncements

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 June 30, 2003, with
early application encouraged. The adoption of this Statement did not 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 June 30, 2003. The adoption of this
Statement did not have a material impact on the Companys financial
statements.

14

In
January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an Interpretation of ARB No.
51. FIN 46 requires certain variable interest entities to be consolidated
by the primary beneficiary of the entity if the equity investors in the entity
do not have the characteristics of a controlling financial interest or do not
have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first interim
or annual period beginning after June 15, 2003. The adoption of FIN 46 did not
have a material effect on the Companys financial position or results of
operations.

In
April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. The statement requires that contracts with comparable characteristics
be accounted for similarly and clarifies when a derivative contains a financing
component that warrants special reporting in the statement of cash flows. SFAS
No. 149 is effective for contracts entered into or modified after June 30, 2003,
except in certain circumstances, and for hedging relationships designated after
June 30, 2003. The Company does not expect that the adoption of this standard
will have a material effect on its financial position or results of operations.

In
May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This
Statement establishes standards for how an issuer classifies and measures in its
statement of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. This Statement is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of nonpublic entities. The Company
does not expect that the adoption of this standard will have a material effect
on its financial position or results of operations.

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.


Item 3. 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 June 30, 2003, 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.

15

ITEM 4. Controls and
Procedures


(a)
Evaluation of disclosure controls and procedures.    Our management,
with the participation of our chief executive officer and chief financial officer,
evaluated the effectiveness of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2003. Based on this
evaluation, our chief executive officer and chief financial officer concluded that, as of
June 30, 2003, our disclosure controls and procedures were (1) designed to ensure that
material information relating to our company, including our consolidated subsidiaries, is
made known to our chief executive officer and chief financial officer by others within
those entities, particularly during the period in which this report was being prepared
and (2) effective, in that they provide reasonable assurance that information
required to be disclosed by us in the reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in
the SECs rules and forms.



(b)
          Changes in internal controls. No change in our internal control over financial
          reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
          occurred during the fiscal quarter ended June 30, 2003 that has materially
          affected, or is reasonably likely to materially affect, our internal control
          over financial reporting.


16

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

Form
8-K filed August 5, 2003 regarding amendment to asset purchase agreement of Sagent
Technology, Inc. and existing $7 million secured loans to Sagent, dated July 31,
2003.

Form
8-K filed July 30, 2003 for the press release regarding financial results for the period
ended June 30, 2003.

Form
8-K filed July 15, 2003 for the press release regarding preliminary financial results for
the period ended June 30, 2003.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Exhibit 31.1 |  | Section 302 Certification
of Robert S. Bowen, Chief Executive Officer, and Mark Funston, Chief
Financial  Officer, of Quarterly Report on Form 10-Q.
| | ------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

| | Exhibit 32.1 |  | Section 906 Certification
of Robert S. Bowen, Chief Executive Officer, and Mark Funston, Chief
Financial  Officer, of Quarterly Report on Form 10-Q.
| | ------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

|17
|--

|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
August 14, 2003
/s/ Mark Funston
Chief Financial Officer
August 14, 2003
| |  | -------------------------------------------------------------------------------------------------------------------------------------------

|18
|--