##### Table of Contents



FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

For the quarterly period ended          March 31, 2000

Commission file number             0-10691

CHECK TECHNOLOGY CORPORATION

---

(Exact name of registrant as specified in its charter)

|                                                                          |  |                                            
|------------------------------------------------------------------------- |  | -------------------------------------------
|Minnesota

(State or other jurisdiction of incorporation
or organization) |  | 41-1392000(IRS Employer Identification No.)

|                                                                                      |  |                      
|------------------------------------------------------------------------------------- |  | ---------------------
|12500 Whitewater Drive
Minnetonka, Minnesota
(Address of principal executive offices) |  | 55343-9420
(Zip Code)

(952) 939-9000

---

Not Applicable

---



Former name, former address and former fiscal year, if changed since last
report

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter periods that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes /X/ No / /

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

Common Stock, $.10 Par Value Shares 6,169,320 as of May 5, 2000.

1



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TABLE OF CONTENTS



|                                                                                             |                                                                       |  |  |  |  |  |  | 
|-------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                                                               
|Item 1. Financial Statements (Unaudited)                                                    
|                                                                                             | Condensed consolidated balance sheets  March 31, 2000               
|                                                                                             | Condensed consolidated statements of operations                      
|                                                                                             | Condensed consolidated statements of cash flow                       
|                                                                                             | Condensed notes to consolidated financial statements  March 31, 2000
|                                                                                             | Condensed notes to consolidated financial statements  March 31, 2000
|Item 2 Managements Discussion and Analysis of Results of
Operations and Financial Condition
|PART II. OTHER INFORMATION                                                                  
|Item 4. Submission of Matters to a Vote of Security Holders                                 
|Item 6. Exhibits and Reports on Form 8-K                                                    
|SIGNATURES                                                                                  



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INDEX

CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES

Part I. FINANCIAL
INFORMATION



|        |                                                                                                                                            
|------- | -------------------------------------------------------------------------------------------------------------------------------------------
|Item 1. | Financial Statements (Unaudited)                                                                                                           
|        |                                                                                                                                            
|        | Condensed consolidated balance sheets   March 31, 2000 and September 30, 1999.                                                            
|        |                                                                                                                                            
|        | Condensed consolidated statements of operations   Three months ended March 31, 2000 and 1999 and six months ended
March 31, 2000 and 1999.
|        |                                                                                                                                            
|        | Condensed consolidated statements of cash flows   Six months ended March 31, 2000 and 1999.                                               
|        |                                                                                                                                            
|        | Condensed notes to consolidated financial statements  March
31, 2000.                                                                     
|        |                                                                                                                                            
|Item 2. | Managements Discussion and Analysis of Results of Operations and
Financial Condition                                                      
|       
|Item 3. | Quantitative and Qualitative Disclosures about Market
Risk                                                                                 
|       
|        | See Market Risk in Managements Discussion and Analysis.                                                                                   

PART II. OTHER INFORMATION

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

Item 6. Exhibits and reports on Form 8-K

SIGNATURES

2



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##### Table of Contents






Part I. FINANCIAL INFORMATION

CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES







CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

|                       |                                                                     |                                   |                      |            |           |            |               |            |           |            | 
|---------------------- | ------------------------------------------------------------------- | --------------------------------- | -------------------- | ---------- | --------- | ---------- | ------------- | ---------- | --------- | ---------- | 
|                       |                                                                     |                                   |                      |            | March 31, |            | September 30,
|                       |                                                                     |                                   |                      |            | 2000      |            | 1999         
|                       |                                                                     |                                   |                      |            |           |            |              
|ASSETS                
|                      
|                      
|                      
|                      
|CURRENT ASSETS        
|                      
|                      
|                      
|                      
|                       | Cash and cash equivalents                                           |                                   | $                    | 3,531,221  |           |            | $             | 2,882,618  |          
|                      
|                      
|                      
|                      
|                       | Short-term investments                                              |                                   |                      | 626,750    |           |            |               | 164,380    |          
|                      
|                      
|                      
|                      
|                       | Accounts receivable less allowance for
doubtful accounts of $50,000 |                                   |                      | 5,387,968  |           |            |               | 3,542,350  |          
|                       | Inventories                                                         |                                   |                      |            |           |            |               |            |          
|                      
|                      
|                      
|                      
|                       |                                                                     | Raw materials and component parts |                      | 5,784,906  |           |            |               | 6,128,748  |          
|                      
|                      
|                      
|                      
|                       |                                                                     | Work-in-process                   |                      |            | 600,448   |            |               |            | 107,622   |           
|                      
|                      
|                      
|                      
|                       |                                                                     | Finished Goods                    |                      |            | 2,816,687 |            |               |            | 4,218,621 |           
|                       |                                                                     |                                   |                      |            |           |            |               |           
|                       |                                                                     |                                   | 9,202,041            |            |           |            | 10,454,991    |           
|                      
|                      
|                      
|                      
|                       | Deferred income taxes                                               |                                   |                      | 1,661,160  |           |            |               | 1,570,884  |          
|                      
|                      
|                      
|                      
|                       | Other current assets                                                |                                   |                      | 1,467,816  |           |            |               | 870,633    |          
|                       |                                                                     |                                   |                      |            |           |            |               |           
|                       |                                                                     |                                   | TOTAL CURRENT ASSETS |            |           | 21,876,956 |               |            |           | 19,485,856 | 
|                      
|                      
|                      
|                      
|EQUIPMENT AND FIXTURES
|                      
|                      
|                      
|                      
|                       | Machinery and equipment                                             |                                   |                      | 1,984,076  |           |            |               | 2,005,512  |          
|                      
|                      
|                      
|                      
|                       | Furniture and fixtures                                              |                                   |                      | 2,064,872  |           |            |               | 1,985,732  |          
|                      
|                      
|                      
|                      
|                       | Leasehold improvements                                              |                                   |                      | 319,902    |           |            |               | 316,850    |          
|                       |                                                                     |                                   |                      |            |           |            |               |           
|                       |                                                                     |                                   | 4,368,850            |            |           |            | 4,308,094     |           
|                      
|                      
|                      
|                      
|                       | Less accumulated depreciation and amortization                      |                                   |                      | (3,455,943 | )         |            |               | (3,338,081 | )        
|                       |                                                                     |                                   |                      |            |           |            |               |           
|                      
|                      
|                      
|                      
|                       |                                                                     |                                   | 912,907              |            |           |            | 970,013       |           
|                       |                                                                     |                                   |                      |            |           |            |               |           
|                       | TOTAL ASSETS                                                        |                                   | $                    | 22,789,863 |           |            | $             | 20,455,869 |          
|                       |                                                                     |                                   |                      |            |           |            |               |           

See notes to consolidated financial statements.

3



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|                                           |                                                                                                                                                                                 |                                              |                            |               |           |            |            |            |           |            | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | -------------------------- | ------------- | --------- | ---------- | ---------- | ---------- | --------- | ---------- | 
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                                                                                                                                                 |                                              |                            |              
|                                           |                                                                                                                                                                                 | March 31,                                    |                            | September 30,
|                                           |                                                                                                                                                                                 | 2000                                         |                            | 1999         
|                                           |                                                                                                                                                                                 |                                              |                            |              
|CURRENT LIABILITIES                       
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                                                                 | Accounts payable and accrued expenses        |                            | $             | 2,299,540 |            |            | $          | 2,533,952 |           
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                                                                 | Employee compensation and related taxes      |                            |               | 606,843   |            |            |            | 553,185   |           
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                                                                 | Income taxes payable                         |                            |               | 69,827    |            |            |            | 175,449   |           
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                                                                 | Deferred revenue                             |                            |               | 3,727,102 |            |            |            | 448,335   |           
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                                                                 | Current portion of capital lease obligations |                            |               | 6,628     |            |            |            | 38,888    |           
|                                           |                                                                                                                                                                                 |                                              |                            |               |           |            |            |           
|                                           |                                                                                                                                                                                 | TOTAL CURRENT LIABILITIES                    |                            |               | 6,709,940 |            |            |            | 3,749,809 |           
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                                                                                                                                 |                                              | TOTAL LIABILITIES          |               |           | 6,709,940  |            |            |           | 3,749,809  | 
|                                          
|                                          
|                                          
|                                          
|                                          
|STOCKHOLDERS EQUITY                      
|                                          
|                                          
|                                          
|                                          
|                                           | Capital Stock
Common Stockpar value $.10 per shareauthorized
25,000,000 shares; issued and outstanding
March 31, 2000 6,165,482 shares;
September 30, 1999 6,154,157 shares |                                              |                            | 616,548       |           |            |            | 615,416    |          
|                                          
|                                          
|                                          
|                                          
|                                           | Additional paid in capital                                                                                                                                                      |                                              |                            | 16,903,626    |           |            |            | 16,861,417 |          
|                                          
|                                          
|                                          
|                                          
|                                           | Accumulated other comprehensive (loss) income                                                                                                                                   |                                              |                            | (1,580,256    | )         |            |            | (1,184,070 | )        
|                                          
|                                          
|                                          
|                                          
|                                           | Retained earnings                                                                                                                                                               |                                              |                            | 140,005       |           |            |            | 413,297    |          
|                                           |                                                                                                                                                                                 |                                              |                            |               |           |            |            |           
|                                           |                                                                                                                                                                                 |                                              | TOTAL STOCKHOLDERS EQUITY |               |           | 16,079,923 |            |            |           | 16,706,060 | 
|                                           |                                                                                                                                                                                 |                                              |                            |               |           |            |            |           
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                                                                                                 | $                                            | 22,789,863                 |               |           | $          | 20,455,869 |           
|                                           |                                                                                                                                                                                 |                                              |                            |               |           |            |            |           

See notes to consolidated financial statements.

4



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CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

|                                                                                      |                                       |                                     |                            |   |                    |           |                  |   |           |           |            |   |           |            |            |   |           |            |  
|------------------------------------------------------------------------------------- | ------------------------------------- | ----------------------------------- | -------------------------- | - | ------------------ | --------- | ---------------- | - | --------- | --------- | ---------- | - | --------- | ---------- | ---------- | - | --------- | ---------- | -
|                                                                                      |                                       |                                     |                            |   | Three Month Period |           | Six Month Period
|                                                                                      |                                       |                                     |                            |   | Ending March 31,   |           | Ending March 31,
|                                                                                      |                                       |                                     |                            |   |                    |           |                 
|                                                                                      |                                       |                                     |                            |   | 2000               |           | 1999             |   | 2000      |           | 1999      
|                                                                                      |                                       |                                     |                            |   |                    |           |                  |   |           |           |           
|Sales:                                                                               
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |                                       | Printing equipment                  |                            |   | 3,686,392          |           |                  |   | 1,343,045 |           |            | $ | 6,562,752 |            |            | $ | 2,963,638 |           
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |                                       | Maintenance, spares and supplies    |                            |   | 3,178,208          |           |                  |   | 3,977,155 |           |            |   | 6,647,285 |            |            |   | 7,603,105 |           
|                                                                                      |                                       |                                     |                            |   |                    |           |                  |   |           |           |            |   |           |            |            |  
|                                                                                      |                                       |                                     | Net Sales                  |   |                    | 6,864,600 |                  |   |           | 5,320,200 |            |   |           | 13,210,037 |            |   |           | 10,566,743 |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Costs and expenses:                                                                  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |                                       | Cost of sales                       |                            |   | 3,528,286          |           |                  |   | 2,485,484 |           |            |   | 6,381,904 |            |            |   | 4,871,028 |           
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |                                       | Selling, general and
administrative |                            |   | 2,908,688          |           |                  |   | 2,852,247 |           |            |   | 5,792,483 |            |            |   | 5,572,451 |           
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |                                       | Research and Development            |                            |   | 699,917            |           |                  |   | 681,298   |           |            |   | 1,359,927 |            |            |   | 1,359,940 |           
|                                                                                      |                                       |                                     |                            |   |                    |           |                  |   |           |           |            |   |           |            |            |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |                                       |                                     | 7,136,891                  |   |                    |           | 6,019,029        |   |           |           | 13,534,314 |   |           |            | 11,803,419 |  
|                                                                                      |                                       |                                     |                            |   |                    |           |                  |   |           |           |            |   |           |            |            |  
|(Loss) income from system sales and
service                                           |                                       |                                     | (272,291                   | ) |                    |           | (698,829         | ) |           |           | (324,277   | ) |           |            | (1,236,676 | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Interest income, net                                                                  |                                       |                                     | 32,753                     |   |                    |           | 33,634           |   |           |           | 52,123     |   |           |            | 85,498     |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Unrealized exchange (loss) gain                                                       |                                       |                                     | (130,528                   | ) |                    |           | (118,687         | ) |           |           | (150,196   | ) |           |            | (124,339   | )
|                                                                                      |                                       |                                     |                            |   |                    |           |                  |   |           |           |            |   |           |            |            |  
|                                                                                      |                                       |                                     | (Loss) income before taxes |   |                    | (370,066  | )                |   |           | (783,882  | )          |   |           | (422,350   | )          |   |           | (1,275,517 | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Income taxes                                                                          |                                       |                                     | (162,553                   | ) |                    |           | (274,000         | ) |           |           | (94,982    | ) |           |            | (446,000   | )
|                                                                                      |                                       |                                     |                            |   |                    |           |                  |   |           |           |            |   |           |            |            |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      |                                       |                                     | Net (loss) income          |   | $                  | (207,513  | )                |   | $         | (509,882  | )          |   | $         | (327,368   | )          |   | $         | (829,517   | )
|                                                                                      |                                       |                                     |                            |   |                    |           |                  |   |           |           |            |   |           |            |            |  
|(Loss) earnings per common share
    Basic and diluted                                |                                       | $                                   | (.03                       | ) |                    | $         | (.08             | ) |           | $         | (.05       | ) |           | $          | (0.14      | )
|                                                                                      |                                       |                                     |                            |   |                    |           |                  |   |           |           |            |   |           |            |            |  
|Weighted average number of shares
and share equivalents outstanding during the period |                                       |                                     | 6,138,916                  |   |                    |           | 6,134,216        |   |           |           | 6,133,004  |   |           |            | 6,134,405  |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Weighted average number of shares
and     share equivalents outstanding               |                                       |                                     | 6,138,916                  |   |                    |           | 6,134,216        |   |           |           | 6,133,004  |   |           |            | 6,134,405  |  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | during the period  assuming
dilution

See notes to consolidated financial statements.

5



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CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

|                                                 |                                              |                                                                                          |                               |          |                   |         |            |           |          |         | 
|------------------------------------------------ | -------------------------------------------- | ---------------------------------------------------------------------------------------- | ----------------------------- | -------- | ----------------- | ------- | ---------- | --------- | -------- | ------- | 
|                                                 |                                              |                                                                                          |                               |          | Six Months Ending
|                                                 |                                              |                                                                                          |                               |          | March 31,        
|                                                 |                                              |                                                                                          |                               |          |                  
|                                                 |                                              |                                                                                          |                               |          | 2000              |         | 1999      
|                                                 |                                              |                                                                                          |                               |          |                   |         |           
|OPERATING ACTIVITIES                            
|                                                
|                                                
|                                                
|                                                
|                                                 | Net (loss) income                            |                                                                                          | $                             | (327,368 | )                 |         | $          | (829,517  | )       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              | Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              |                                                                                          | Depreciation and amortization |          |                   | 185,395 |            |           |          | 174,570 | 
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              |                                                                                          | Other                         |          |                   | 35,922  |            |           |          | 51,426  | 
|                                                
|                                                
|                                                
|                                                
|                                                 | Changes in operating assets and liabilities:
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              | Accounts receivable                                                                      |                               |          | (2,008,742        | )       |            |           | (894,903 | )      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              | Inventories                                                                              |                               |          | 1,116,498         |         |            |           | (652,113 | )      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              | Other current assets                                                                     |                               |          | (754,064          | )       |            |           | (302,084 | )      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              | Accounts payable and accrued expenses                                                    |                               |          | (193,314          | )       |            |           | (30,893  | )      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                              | Deferred revenue                                                                         |                               |          | 3,284,701         |         |            |           | (19,323  | )      
|                                                 |                                              |                                                                                          |                               |          |                   |         |            |          
|NET CASH PROVIDED (USED IN) OPERATING ACTIVITIES |                                              |                                                                                          | 1,339,028                     |          |                   |         | (2,502,837 | )        
|                                                 |                                              |                                                                                          |                               |          |                   |         |            |          
|INVESTING ACTIVITIES                            
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchase of equipment and fixtures           |                                                                                          |                               | (189,418 | )                 |         |            | (268,244  | )       
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from sale of equipment              |                                                                                          |                               | 47,641   |                   |         |            |          |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchase of short-term investments           |                                                                                          |                               | (507,763 | )                 |         |            | (354,682  | )       
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from sale of short-term investments |                                                                                          |                               | 20,202   |                   |         |            | 2,163,220 |         
|                                                 |                                              |                                                                                          |                               |          |                   |         |            |          
|NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES |                                              |                                                                                          | (629,338                      | )        |                   |         | 1,540,294  |          
|                                                 |                                              |                                                                                          |                               |          |                   |         |            |          
|FINANCING ACTIVITIES                            
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from(Purchase of) common stock      |                                                                                          |                               | 43,341   |                   |         |            | (143,043  | )       
|                                                
|                                                
|                                                
|                                                
|                                                 | Repayment of note receivable from stock sale |                                                                                          |                               |         |                   |         |            | 14,804    |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Repayment of capital leases                  |                                                                                          |                               | (37,761  | )                 |         |            | (6,077    | )       
|                                                 |                                              |                                                                                          |                               |          |                   |         |            |          
|                                                
|                                                
|                                                
|                                                
|NET CASH PROVIDED (USED IN) FINANCING ACTIVITIES |                                              |                                                                                          | 5,580                         |          |                   |         | (134,316   | )        
|                                                 |                                              |                                                                                          |                               |          |                   |         |            |          
|EFFECT OF EXCHANGE RATE CHANGES ON CASH          |                                              |                                                                                          | (66,667                       | )        |                   |         | (50,358    | )        
|                                                 |                                              |                                                                                          |                               |          |                   |         |            |          
|INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS   |                                              |                                                                                          | 648,603                       |          |                   |         | (1,147,217 | )        
|                                                
|                                                
|                                                
|                                                
|CASH & CASH EQUIVALENTS AT BEGINNING OF YEAR     |                                              |                                                                                          | 2,882,618                     |          |                   |         | 2,701,894  |          
|                                                 |                                              |                                                                                          |                               |          |                   |         |            |          
|CASH AND CASH EQUIVALENTS AT END OF PERIOD       |                                              | $                                                                                        | 3,531,221                     |          |                   | $       | 1,554,677  |          
|                                                 |                                              |                                                                                          |                               |          |                   |         |            |          

See notes to consolidated financial statements.

6



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CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES




CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2000

NOTE A  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Companys annual report on Form 10-K for the year ended September 30, 1999.

Reclassifications have been made in the prior year to conform with
classifications in the current year.

7



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CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES




CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2000

NOTE B  - Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per
share:

|                                                   |                                                                                                     |                         |      |                    |           |                  |      |           |           |      |      |           |           |   |      |           |           |  |  |  |  | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------------- | ----------------------- | ---- | ------------------ | --------- | ---------------- | ---- | --------- | --------- | ---- | ---- | --------- | --------- | - | ---- | --------- | --------- |  |  |  |  | 
|                                                   |                                                                                                     |                         |      | Three Month Period |           | Six Month Period
|                                                   |                                                                                                     |                         |      | Ended March 31,    |           | Ended March 31, 
|                                                   |                                                                                                     |                         |      |                    |           |                 
|                                                   |                                                                                                     |                         |      | 2000               |           | 1999             |      | 2000      |           | 1999
|                                                   |                                                                                                     |                         |      |                    |           |                  |      |           |           |     
|Numerator:                                        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net Income (Loss)                                                                                   |                         |      | (207,513           | )         |                  |      | (509,882  | )         |      |      | (327,368  | )         |   |      | (829,517  | )        
|                                                   |                                                                                                     |                         |      |                    |           |                  |      |           |           |      |      |           |           |   |      |          
|                                                   | Numerator for basic and
diluted earnings per share -
income(loss) applicable to
common stockholders |                         |      | (207,513           | )         |                  |      | (509,882  | )         |      |      | (327,368  | )         |   |      | (829,517  | )        
|                                                  
|                                                  
|                                                  
|                                                  
|Denominator:                                      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Denominator for basic
earnings per share -                                                         
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                                     | Weighted-average shares |      |                    | 6,138,916 |                  |      |           | 6,134,216 |      |      |           | 6,133,004 |   |      |           | 6,134,405 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Effect of dilutive securities:                                                                     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                                     | Employee stock options  |      |                    |          |                  |      |           |          |      |      |           |          |   |      |           |          | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                                     | Employee stock grants   |      |                    |          |                  |      |           |          |      |      |           |          |   |      |           |          | 
|                                                   |                                                                                                     |                         |      |                    |           |                  |      |           |           |      |      |           |           |   |      |          
|                                                   | Dilutive potential common
shares                                                                    |                         |      |                   | a         |                  |      |          | a         |      |      |          | a         |   |      |          | a        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Denominator for diluted
earnings per share -                                                       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Adjusted weighted-
average shares                                                                   |                         |      | 6,138,916          |           |                  |      | 6,134,216 |           |      |      | 6,133,004 |           |   |      | 6,134,405 |          
|                                                   |                                                                                                     |                         |      |                    |           |                  |      |           |           |      |      |           |           |   |      |          
|Earnings (loss) per common share
basic and diluted |                                                                                                     | $                       | (.03 | )                  |           | $                | (.08 | )         |           | $    | (.05 | )         |           | $ | (.14 | )        
|                                                   |                                                                                                     |                         |      |                    |           |                  |      |           |           |      |      |           |           |   |      |          

a  No incremental shares related to options are included because the impact
would be antidilutive.

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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2000

NOTE C   COMPREHENSIVE INCOME

As of October 1, 1998, the Company adopted Statement of Financial Accounting
Standards Number 130 (Statement No. 130) Reporting Comprehensive Income.
Statement No. 130 establishes standards for the reporting and display of
comprehensive income and its components; however, the adoption of this
statement had no impact on the Companys net income or stockholders equity.
Statement No. 130 requires foreign currency translation adjustments, which
prior to adoption were reported separately in stockholders equity, to be
included in other comprehensive income. Amounts in prior year financial
statements have been reclassified to conform to Statement No. 130.

The components of comprehensive income, net of related tax, for the three and
six month periods ended March 31, 2000 and 1999 are as follows:

|                                         |  |                    |          |                  |  |      |          |      |  |   |          |   |  |   |            |  
|---------------------------------------- |  | ------------------ | -------- | ---------------- |  | ---- | -------- | ---- |  | - | -------- | - |  | - | ---------- | -
|                                         |  | Three Month Period |          | Six Month Period
|                                         |  | Ending March 31,   |          | Ending March 31,
|                                         |  |                    |          |                 
|                                         |  | 2000               |          | 1999             |  | 2000 |          | 1999
|                                         |  |                    |          |                  |  |      |          |     
|Net (loss) income                        |  | $                  | (207,513 | )                |  | $    | (509,882 | )    |  | $ | (327,368 | ) |  | $ | (829,517   | )
|                                        
|                                        
|                                        
|                                        
|Foreign currency
translation
adjustments |  |                    | (133,104 | )                |  |      | (307,805 | )    |  |   | (396,186 | ) |  |   | (345,000   | )
|                                         |  |                    |          |                  |  |      |          |      |  |   |          |   |  |   |            |  
|Comprehensive income                     |  | $                  | (340,617 | )                |  | $    | (817,687 | )    |  | $ | (723,554 | ) |  | $ | (1,174,517 | )
|                                         |  |                    |          |                  |  |      |          |      |  |   |          |   |  |   |            |  

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##### Table of Contents






Item 2

Managements Discussion and Analysis of Results of
Operations and Financial Condition

Results of Operations

The Companys revenues consist of (i) sales of document production systems and
related equipment and (ii) maintenance contracts, spare parts, supplies and
consumable items. For the three-month period and six-month periods ended March
31, 2000, total revenues were up 30 percent and 25 percent respectively, with
those of the same periods in fiscal 1999. Revenues from the sale of document
production equipment for the fiscal 2000 second quarter increased $2.3 million
from the same period in fiscal 1999 primarily due to increased North American
sales of the Imaggia product line. In the fiscal 2000 second quarter, revenues
from document production equipment included approximately $2.0 million from the
sale of the Companys Imaggia product line.

For some time, the Company has held a dominant position in many of the
international markets in which its Checktronic equipment is sold. Demand for
the Checktronic product line has softened in these international markets and
revenues from this product line are now largely dependent on sales to emerging
markets such as Latin America, Asia and Africa. The present uncertain economic
environment in many of the countries within these emerging markets has limited
the Companys current opportunities to sell high-end capital equipment into
those regions.

For the three and six month periods ended March 31, 2000, revenues from
maintenance contracts, spare parts, supplies and consumable items decreased
$800 thousand and $956 thousand respectively, from the same period a year ago.
Approximately $500 thousand of the decline was attributable to the timing
of customer orders as well as the effect of foreign currency exchange. The
continued reduction in maintenance and consumables revenue from Pacific Rim
customers accounted for the remainder of the decline.

The gross margin percentage for the three and six month periods ended March 31,
2000, was 49 percent and 52 percent, compared to 53 percent and 54 percent for
the same periods a year ago. The decrease was primarily due to the increased
component of the revenue mix from the Imaggia product line as compared to the
Checktronic product line and the decreased revenue from the sale of
maintenance, spares and supplies. The Company anticipates that its gross
margin percentage for fiscal 2000 may be somewhat lower than fiscal 1999 as
revenue from the Imaggia and Océ lines constitutes a larger portion of the
Companys total revenues.

For the three and six month periods ended March 31, 2000, selling, general and
administrative expenses were $2.9 million and $5.8 million respectively,
compared with $2.9 million and $5.6 million for the same periods a year ago.
Research and development expense for the three month period and six month
period ended March 31, 2000 were $0.7 million and $1.4 million respectively,
flat with the research and development expenses for the same periods last year.

Net interest income for the three and six month periods ended March 31, 2000,
was $33 thousand and $52 thousand respectively, compared to $34 thousand and
$85 thousand for the same period a year ago. The decrease was due to lower
cash balances available for investment.

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For the three and six month periods ended March 31, 2000, the loss before
income taxes was $370 thousand and $422 thousand respectively, compared to the
loss before income taxes of $784 thousand and $1.3 million for the same periods
a year ago. Income taxes for the three and six month periods ended March 31,
2000 were a benefit of 44 percent and 23 percent respectively, compared to 35
percent for both the same periods last year. The income tax benefit for fiscal
2000 is primarily attributable to the net operating loss generated by foreign
operations. In fiscal 1999, the income tax benefit was primarily attributable
to the net operating loss generated by domestic operations.

For the three and six month periods ended March 31, 2000, the Company reported
a net loss of $0.03 and $0.05 per share respectively, as compared to a net loss
of $0.08 and $0.14 per share for the same periods a year ago. The improvement
was primarily attributable to the overall increase in revenue offset by the
unfavorable effects of higher selling, general and administrative expenses, and
the reduced income tax benefit.

Market Risk:

The Company presently has three foreign subsidiaries, located in England,
France and Australia, does business in 51 countries, and generates
approximately 60 percent of its revenues from outside North America. The
Companys ability to sell its products in these foreign markets may be affected
by changes in economic, political or market conditions in the foreign markets
in which it does business.

The Company experiences foreign currency gains and losses, which are reflected
on the Companys income statement, due to the strengthening and weakening of
the U.S. dollar against the currencies of the Companys three foreign
subsidiaries and the resulting effect on the valuation of the intercompany
accounts and certain assets of the subsidiaries, which are denominated in U.S.
dollars. The net exchange loss for the three and six month periods ended
March 31, 2000 was $131 thousand and $150 thousand respectively, compared to a
loss of $119 thousand and $125 thousand for the same periods a year ago. The
Company anticipates that it will continue to have exchange gains or losses from
foreign operations in the future.

The Companys net investment in its foreign subsidiaries was $8,006,000 and
$8,443,000 at March 31, 2000, and September 30, 1999, translated into U.S.
dollars at the closing exchange rates. The potential loss in value resulting
from a hypothetical 10% change in foreign exchange rates is not material. The
impact of the stronger U.S. dollar on the translation of foreign currency
denominated sales and related gross profit thereon was not material in 1999 or
in the first six months of fiscal 2000.

Factors Affecting Results of Operations:

The Company is continuing development of the Imaggia system, including
improving its overall reliability and robustness. The Company is using the
Gemini digital print technology, which has been developed by Delphax Systems,
as the print engine for the Imaggia system. Over the course of the
development, the Company has experienced delays due in part to development
delays associated with the Gemini print engine
and finalization of the engines toner formulation, which are outside of the
Companys control. No assurance can be given that further delays will not
occur or that product development or warranty expenses will not be higher than
anticipated.

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In January 2000, the Company accepted a three-year equipment and service
contract, valued at approximately $40.0 million, for its Imaggia system. The
contract value includes the sales of document production systems and related
equipment, maintenance, spare parts, supplies and consumable items for the
three-year period. Equipment deliveries under the contract began in the second
quarter of fiscal 2000 with delivery completion expected during the fourth
quarter of fiscal 2001. Achievement of the Companys future revenue plans
depends upon the successful completion of the three-year contract.

The Companys revenues and operating results may also fluctuate from quarter to
quarter because (i) the Companys sales cycle is relatively long, (ii) the size
of orders may vary significantly, (iii) the availability of financing for
customers in some countries is variable, (iv) customers may postpone or cancel
orders, and (v) economic, political and market conditions in some markets
change with minimal notice and effect the timing and size of orders. Because
the Companys operating expenses are based on anticipated revenue levels and a
high percentage of the Companys operating costs are relatively fixed,
variations in the timing of revenue recognition could result in significant
fluctuations in operating results from period to period.

Year 2000:

The Company satisfactorily completed its Year 2000 readiness work. Since
entering the Year 2000, the Company has not experienced any major disruptions
to its business nor is it aware of any significant Year 2000-related
disruptions impacting its customers or suppliers. The Company will continue to
monitor its critical systems during the calendar year 2000 but does not
anticipate any significant impacts due to Year 2000 exposures from its internal
systems or from the activities of its suppliers or customers. Costs incurred
to achieve Year 2000 readiness were approximately $300 thousand.

Euro Conversion:

On January 1, 1999, certain member countries of the European Union established
fixed conversion rates between their existing currencies and the European
Unions common currency (Euro). The transition period for the introduction of
the Euro will be between January 1, 1999 and January 1, 2002. The
Company has prepared for the introduction of the Euro and has evaluated methods
to address the many issues involved with the introduction of the Euro,
including the conversion of information technology systems, recalculating
currency risk, strategies concerning continuity of contracts, and impacts on
the processes for preparing taxation and accounting records. The Company
believes the Euro conversion will not have a material impact on its financial
statements.

Revenue Recognition:

On December 3, 1999, the Securities and Exchange Commission issued SEC Staff
Accounting Bulletin Number 101 (SAB No.101) Revenue Recognition in Financial
Statements. SAB No. 101 summarizes certain of the staffs views in applying
generally accepted accounting principles to revenue recognition in
financial statements. SAB No. 101 will be effective for the Company in the
first quarter of fiscal 2001. The Company is in the process of determining the
impact of SAB No. 101.

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Liquidity and Capital Resources:

Working capital was $15.2 million at March 31, 2000, compared to $15.7 million
at September 30, 1999. The Companys inventory levels decreased from $10.5
million at September 30, 1999, to $9.2 million at March 31, 2000, primarily due
to a decrease in Imaggia related inventory. Cash and short-term investments
amounted to $4.2 million at March 31, 2000, compared to $3.0 million at
September 30, 1999.

Stockholders equity was $16.1 million at March 31, 2000, compared to $16.7
million at September 30, 1999. In September 1998, the Company announced a
stock repurchase program of up to 500,000 shares. At March 31, 2000, the
Company had repurchased 170,500 shares at a cost of $434,000.

The Companys long-term debt to equity ratio was less than 0.01 at March 31,
2000, and September 30, 1999. The Company maintains a $2.5 million unsecured
bank line of credit expiring March 31, 2001. At March 31, 2000, the line was
unused. The Company believes that its current financial arrangements and
anticipated level of internally generated funds will be sufficient to fund its
working capital requirements in fiscal 2000.

At March 31, 2000, the Company had no material commitments for capital
expenditures.

Cautionary Statement:

Statements included in this Managements Discussion and Analysis of Financial
Condition and Results of Operations, the Companys Annual Report, the Companys
Form 10-K, in other filings with the Securities and Exchange Commission, in the
Companys press releases and in oral statements made to securities market
analysts and stockholders, which are not historical or current facts, are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such statements are subject
to certain risks and uncertainties that could cause the Companys actual
results to differ materially from historical earnings and those presently
anticipated or projected.

The factors mentioned under the subheading Factors Affecting Results of
Operations are among those that in some cases have affected and in the future
could affect the Companys actual results and could cause the Companys actual
financial performance to differ materially from that expressed in any
forward-looking statement.

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##### Table of Contents






PART II. OTHER INFORMATION




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

The Company held its annual meeting of shareholders on March 16, 2000. The
shareholders elected three directors to serve for a term ending in 2001 and
until their successors are elected. The shareholders present in person or by
proxy cast the following numbers of votes in connection with the election of
directors, resulting in the election of all of the nominees:

|                       |  |           |           |                |  |  |        | 
|---------------------- |  | --------- | --------- | -------------- |  |  | ------ | 
|                       |  | Votes For |           | Votes Withheld
|                       |  |           |           |               
|Jay A. Herman          |  |           | 5,594,128 |                |  |  | 13,148 | 
|                      
|                      
|                      
|                      
|Thomas H. Garrett, III |  |           | 5,593,128 |                |  |  | 14,148 | 
|                      
|                      
|                      
|                      
|Gary R. Holland        |  |           | 5,594,128 |                |  |  | 13,148 | 

The shareholders also approved the selection of Ernst & Young LLP as the
Companys independent public accountants for 2000. 5,601,445 votes were cast
for the resolution; 1,383 votes were cast against the resolution; 4,448
shares represent votes abstained; 0 shares represent broker non-vote.




Item 6. Exhibits and Reports on Form 8-K

The Company did not file any reports on Form 8-K during the three months ended
March 31, 2000.

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##### Table of Contents






SIGNATURES

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

| |                                        
| | ---------------------------------------
| | CHECK TECHNOLOGY CORPORATION
Registrant

|     |  |              |  |                                                                       
|---- |  | ------------ |  | ----------------------------------------------------------------------
|Date |  | May 11, 2000 |  | /s/ Jay A. Herman

Jay A. Herman
President and Chief Executive Officer

|     |  |              |  |                                                                                        
|---- |  | ------------ |  | ---------------------------------------------------------------------------------------
|Date |  | May 11, 2000 |  | /s/ Robert M. Barniskis

Robert M. Barniskis
Vice President and Chief Financial Officer

15