##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.
20549


FORM 10-Q

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|  |  | for the quarterly period ended March 31, 2003                                          

or

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|  |  | for the transition period from  to                                                      

Commission file number0-10691

SECURITIES AND EXCHANGE COMMISSION

DELPHAX TECHNOLOGIES INC.

---

|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Minnesota                                                      |  | 41-1392000                       
|                                                               |  |                                  
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)
|                                                               |  |                                  
|12500 Whitewater Drive
Minnetonka, Minnesota                   |  | 55343-9420                       
|                                                               |  |                                  
|(Address of principal executive offices)                       |  | (Zip Code)                       

|                                                                                               
|-----------------------------------------------------------------------------------------------
|(952) 939-9000
Registrants telephone number, including area code                              
|                                                                                               
|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
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 o
|
| | Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange
Act Rule 12b-2). Yes o No x                                                                                                                                                                                                                                          
|
| | Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the
latest practical date.                                                                                                                                                                                                                                        
|
| | As of May 12, 2003, there were 6,177,698 shares outstanding of Common Stock.                                                                                                                                                                                                                                                                                       

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TABLE OF CONTENTS



|                                            |                                                                                               |                                                                                                      |  |  |  |  |  | 
|------------------------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION              
|                                            | Item 1. Financial Statements (Unaudited)                                                     
|                                            |                                                                                               | Condensed Consolidated Balance Sheets  March 31, 2003 and September 30, 2002                       
|                                            |                                                                                               | Condensed Consolidated Statements of Operations  Three and six months ended March 31, 2003 and 2002
|                                            |                                                                                               | Condensed Consolidated Statements of Cash Flows  Six months ended March 31, 2003 and 2002          
|                                            |                                                                                               | Condensed Notes to Consolidated Financial Statements  March 31, 2003                               
|                                            | Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
|                                            | Item 3. Quantitative and Qualitative Disclosure of Market Risk                               
|                                            | Item 4. Controls and Procedures.                                                             
|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                                 
|CERTIFICATIONS                             
|Certificate Pursuant to 18 USC Section 1350



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INDEX
DELPHAX TECHNOLOGIES INC. AND SUBSIDIARIES

|                              |  |                                                                                                      |  | 
|----------------------------- |  | ---------------------------------------------------------------------------------------------------- |  | 
|PART I. FINANCIAL INFORMATION
|                             
|Item 1.                       |  | Financial Statements (Unaudited)                                                                    
|                              |  | Condensed Consolidated Balance Sheets  March 31, 2003 and September 30, 2002                       
|                              |  | Condensed Consolidated Statements of Operations  Three and six months ended March 31, 2003 and 2002
|                              |  | Condensed Consolidated Statements of Cash Flows  Six months ended March 31, 2003 and 2002          
|                              |  | Condensed Notes to Consolidated Financial Statements  March 31, 2003                               
|                              |  |                                                                                                      |  | 
|Item 2.                       |  | Managements Discussion and Analysis of Results of Operations and Financial Condition               
|                              |  |                                                                                                      |  | 
|Item 3.                       |  | Quantitative and Qualitative Disclosure of Market Risk                                              
|                              |  |                                                                                                      |  | 
|Item 4.                       |  | Controls and Procedures                                                                             
|                              |  |                                                                                                      |  | 
|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                    |  |                                                                                                      |  | 
|                              |  |                                                                                                      |  | 
|CERTIFICATIONS                |  |                                                                                                      |  | 

2



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##### Table of Contents












PART I. FINANCIAL INFORMATION

DELPHAX TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

|                       |                                                                                                                                              |                                   |            |            |            |   |               |            |            | 
|---------------------- | -------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | ---------- | ---------- | ---------- | - | ------------- | ---------- | ---------- | 
|                       |                                                                                                                                              |                                   |            | March 31,  |            |   | September 30, |           
|                       |                                                                                                                                              |                                   |            | 2003       |            |   | 2002          |           
|                       |                                                                                                                                              |                                   |            |            |            |   |               |           
|ASSETS                 |                                                                                                                                              |                                   |            |            |            |   |               |           
|CURRENT ASSETS         |                                                                                                                                              |                                   |            |            |            |   |               |           
|                       | Cash and cash equivalents                                                                                                                    |                                   | $          | 1,622,828  |            |   | $             | 1,717,973  |           
|                       | Short-term investments                                                                                                                       |                                   |            | 78,220     |            |   |               | 78,430     |           
|                       | Accounts receivable, less allowance for doubtful
accounts of $226,442 and $253,106 as of March 31,
2003 and September 30, 2002, respectively |                                   |            | 11,272,279 |            |   |               | 10,712,889 |           
|                       | Inventory:                                                                                                                                   |                                   |            |            |            |   |               |            |           
|                       |                                                                                                                                              | Raw materials and component parts |            |            | 11,594,982 |   |               |            | 13,602,964 | 
|                       |                                                                                                                                              | Work-in-progress                  |            |            | 312,836    |   |               |            | 597,388    | 
|                       |                                                                                                                                              | Finished goods                    |            |            | 6,845,977  |   |               |            | 6,672,664  | 
|                       |                                                                                                                                              |                                   |            |            |            |   |              
|                       |                                                                                                                                              |                                   | 18,753,795 |            |            |   | 20,873,016    |           
|                       |                                                                                                                                              |                                   |            |            |            |   |              
|                       | Other current assets                                                                                                                         |                                   |            | 1,472,331  |            |   |               | 1,525,695  |           
|                       |                                                                                                                                              |                                   |            |            |            |   |              
|TOTAL CURRENT ASSETS   |                                                                                                                                              |                                   | 33,199,453 |            |            |   | 34,908,003    |           
|                       |                                                                                                                                              |                                   |            |            |            |   |              
|EQUIPMENT AND FIXTURES |                                                                                                                                              |                                   |            |            |            |   |               |           
|                       | Machinery and equipment                                                                                                                      |                                   |            | 5,050,215  |            |   |               | 4,853,798  |           
|                       | Furniture and fixtures                                                                                                                       |                                   |            | 3,076,656  |            |   |               | 2,925,345  |           
|                       | Leasehold improvements                                                                                                                       |                                   |            | 2,388,773  |            |   |               | 2,386,996  |           
|                       |                                                                                                                                              |                                   |            |            |            |   |              
|                       |                                                                                                                                              |                                   | 10,515,644 |            |            |   | 10,166,139    |           
|                       | Less accumulated depreciation and amortization                                                                                               |                                   |            | 6,318,109  |            |   |               | 5,406,752  |           
|                       |                                                                                                                                              |                                   |            |            |            |   |              
|                       |                                                                                                                                              |                                   | 4,197,535  |            |            |   | 4,759,387     |           
|                       |                                                                                                                                              |                                   |            |            |            |   |              
|TOTAL ASSETS           |                                                                                                                                              | $                                 | 37,396,988 |            |            | $ | 39,667,390    |           
|                       |                                                                                                                                              |                                   |            |            |            |   |              

See condensed notes to consolidated financial statements.

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DELPHAX TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

|                                           |                                                                                                 |                                                       |            |            |         |   |               |            |         | 
|------------------------------------------ | ----------------------------------------------------------------------------------------------- | ----------------------------------------------------- | ---------- | ---------- | ------- | - | ------------- | ---------- | ------- | 
|                                           |                                                                                                 |                                                       |            | March 31,  |         |   | September 30, |           
|                                           |                                                                                                 |                                                       |            | 2003       |         |   | 2002          |           
|                                           |                                                                                                 |                                                       |            |            |         |   |               |           
|LIABILITIES AND SHAREHOLDERS EQUITY       |                                                                                                 |                                                       |            |            |         |   |               |           
|CURRENT LIABILITIES                        |                                                                                                 |                                                       |            |            |         |   |               |           
|                                           | Accounts payable                                                                                |                                                       | $          | 4,386,513  |         |   | $             | 4,284,465  |        
|                                           | Accrued expenses                                                                                |                                                       |            | 4,114,420  |         |   |               | 3,269,531  |        
|                                           | Income taxes payable                                                                            |                                                       |            |           |         |   |               | 482,197    |        
|                                           | Current portion of bank credit facility                                                         |                                                       |            | 13,400,000 |         |   |               | 2,300,000  |        
|                                           | Current portion of capital leases                                                               |                                                       |            | 37,150     |         |   |               | 33,361     |        
|                                           | Deferred revenue                                                                                |                                                       |            | 595,155    |         |   |               | 489,996    |        
|                                           |                                                                                                 |                                                       |            |            |         |   |              
|TOTAL CURRENT LIABILITIES                  |                                                                                                 |                                                       | 22,533,238 |            |         |   | 10,859,550    |           
|                                           | Long-term portion of bank credit facility                                                       |                                                       |            |           |         |   |               | 12,980,000 |        
|                                           | Long-term portion of capital leases                                                             |                                                       |            | 8,644      |         |   |               | 28,217     |        
|                                           |                                                                                                 |                                                       |            |            |         |   |              
|TOTAL LIABILITIES                          |                                                                                                 |                                                       | 22,541,882 |            |         |   | 23,867,767    |           
|                                           |                                                                                                 |                                                       |            |            |         |   |              
|SHAREHOLDERS EQUITY                       |                                                                                                 |                                                       |            |            |         |   |               |           
|                                           | Common stock  par value $.10 per share  authorized
50,000,000 shares; issued and outstanding: |                                                       |            |            |         |   |               |            |        
|                                           |                                                                                                 | 6,175,898 as of March 31, 2003 and
September 30, 2002 |            |            | 617,590 |   |               |            | 617,590 | 
|                                           | Additional paid-in capital                                                                      |                                                       |            | 17,039,945 |         |   |               | 17,039,945 |        
|                                           | Accumulated other comprehensive loss                                                            |                                                       |            | (1,710,233 | )       |   |               | (1,912,335 | )      
|                                           | Retained earnings                                                                               |                                                       |            | (1,092,196 | )       |   |               | 54,423     |        
|                                           |                                                                                                 |                                                       |            |            |         |   |              
|TOTAL SHAREHOLDERS EQUITY                 |                                                                                                 |                                                       | 14,855,106 |            |         |   | 15,799,623    |           
|                                           |                                                                                                 |                                                       |            |            |         |   |              
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |                                                                                                 | $                                                     | 37,396,988 |            |         | $ | 39,667,390    |           
|                                           |                                                                                                 |                                                       |            |            |         |   |              

See condensed notes to consolidated financial statements.

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DELPHAX TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

|                                                                                                   |                                     |   |                            |            |  |                          |            |           |      |   |            |            |  |   |            |            | 
|-------------------------------------------------------------------------------------------------- | ----------------------------------- | - | -------------------------- | ---------- |  | ------------------------ | ---------- | --------- | ---- | - | ---------- | ---------- |  | - | ---------- | ---------- | 
|                                                                                                   |                                     |   | For the Three Months Ended |            |  | For the Six Months Ended |           
|                                                                                                   |                                     |   | March 31,                  |            |  | March 31,                |           
|                                                                                                   |                                     |   |                            |            |  |                          |           
|                                                                                                   |                                     |   | 2003                       |            |  | 2002                     |            |           | 2003 |   |            | 2002       | 
|                                                                                                   |                                     |   |                            |            |  |                          |            |           |      |   |            |            | 
|Sales:                                                                                             |                                     |   |                            |            |  |                          |            |           |      |   |            |            |  |   |            |           
|                                                                                                   | Maintenance, spares and supplies    |   | $                          | 12,132,000 |  |                          | $          | 9,814,329 |      |   | $          | 24,393,324 |  |   | $          | 15,153,948 | 
|                                                                                                   | Printing equipment                  |   |                            | 2,098,602  |  |                          |            | 3,252,710 |      |   |            | 5,312,174  |  |   |            | 9,690,633  | 
|                                                                                                   |                                     |   |                            |            |  |                          |            |           |      |   |            |            | 
|NET SALES                                                                                          |                                     |   | 14,230,602                 |            |  |                          | 13,067,039 |           |      |   | 29,705,498 |            |  |   | 24,844,581 |           
|Costs and Expenses:                                                                                |                                     |   |                            |            |  |                          |            |           |      |   |            |            |  |   |            |           
|                                                                                                   | Cost of sales                       |   |                            | 6,325,001  |  |                          |            | 6,285,659 |      |   |            | 14,141,085 |  |   |            | 12,434,920 | 
|                                                                                                   | Selling, general and administrative |   |                            | 6,171,217  |  |                          |            | 5,746,679 |      |   |            | 12,217,720 |  |   |            | 9,559,714  | 
|                                                                                                   | Research and development            |   |                            | 1,374,048  |  |                          |            | 1,743,896 |      |   |            | 2,662,135  |  |   |            | 2,486,315  | 
|                                                                                                   | Restructuring costs                 |   |                            |           |  |                          |            |          |      |   |            | 1,185,000  |  |   |            |           | 
|                                                                                                   |                                     |   |                            |            |  |                          |            |           |      |   |            |            | 
|                                                                                                   |                                     |   | 13,870,266                 |            |  |                          | 13,776,234 |           |      |   | 30,205,940 |            |  |   | 24,480,949 |           
|                                                                                                   |                                     |   |                            |            |  |                          |            |           |      |   |            |            | 
|INCOME (LOSS) FROM SYSTEM SALES AND SERVICE                                                        |                                     |   | 360,336                    |            |  |                          | (709,195   | )         |      |   | (500,442   | )          |  |   | 363,632    |           
|Net interest expense                                                                               |                                     |   | 219,935                    |            |  |                          | 255,433    |           |      |   | 435,748    |            |  |   | 292,235    |           
|Net realized exchange loss (gain)                                                                  |                                     |   | 32,634                     |            |  |                          | (69,813    | )         |      |   | 9,074      |            |  |   | 9,571      |           
|Net unrealized exchange loss (gain)                                                                |                                     |   | 117,044                    |            |  |                          | (5,157     | )         |      |   | 201,355    |            |  |   | (30,277    | )         
|                                                                                                   |                                     |   |                            |            |  |                          |            |           |      |   |            |            | 
|(LOSS) INCOME BEFORE INCOME TAXES                                                                  |                                     |   | (9,277                     | )          |  |                          | (889,658   | )         |      |   | (1,146,619 | )          |  |   | 92,103     |           
|Income tax (benefit) expense                                                                       |                                     |   |                           |            |  |                          | (310,700   | )         |      |   |           |            |  |   | 32,300     |           
|                                                                                                   |                                     |   |                            |            |  |                          |            |           |      |   |            |            | 
|NET (LOSS) INCOME                                                                                  |                                     | $ | (9,277                     | )          |  | $                        | (578,958   | )         |      | $ | (1,146,619 | )          |  | $ | 59,803     |           
|                                                                                                   |                                     |   |                            |            |  |                          |            |           |      |   |            |            | 
|Basic and diluted (loss) earnings per common share                                                 |                                     | $ | (0.00                      | )          |  | $                        | (0.09      | )         |      | $ | (0.19      | )          |  | $ | 0.01       |           
|Weighted average number of shares outstanding
during the period                                    |                                     |   | 6,175,898                  |            |  |                          | 6,161,841  |           |      |   | 6,175,898  |            |  |   | 6,160,718  |           
|Weighted average number of shares and equivalents
outstanding during the period, assuming dilution |                                     |   | 6,175,898                  |            |  |                          | 6,161,841  |           |      |   | 6,175,898  |            |  |   | 6,353,722  |           

See condensed notes to consolidated financial statements.

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DELPHAX TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

|                                                                                         |                                            |   |                          |           |   |      |             |            |  
|---------------------------------------------------------------------------------------- | ------------------------------------------ | - | ------------------------ | --------- | - | ---- | ----------- | ---------- | -
|                                                                                         |                                            |   | For the Six Months Ended |          
|                                                                                         |                                            |   | March 31,                |          
|                                                                                         |                                            |   |                          |          
|                                                                                         |                                            |   | 2003                     |           |   | 2002 |            
|                                                                                         |                                            |   |                          |           |   |      |            
|OPERATING ACTIVITIES                                                                     |                                            |   |                          |           |   |      |             |           
|Net (loss) income                                                                        |                                            | $ | (1,146,619               | )         |   | $    | 59,803      |           
|Adjustments
to reconcile net (loss) income to net cash
provided by operating activities: |                                            |   |                          |           |   |      |             |           
|                                                                                         | Depreciation and amortization              |   |                          | 917,585   |   |      |             | 794,281    |  
|                                                                                         | Loss on disposal of equipment and fixtures |   |                          |          |   |      |             | 16,005     |  
|                                                                                         | Other                                      |   |                          | 55,099    |   |      |             | 3,677      |  
|Changes in operating assets and liabilities:                                             |                                            |   |                          |           |   |      |             |           
|                                                                                         | Accounts receivable, net                   |   |                          | (489,553  | ) |      |             | 2,037,728  |  
|                                                                                         | Inventory                                  |   |                          | 2,207,727 |   |      |             | (2,277,520 | )
|                                                                                         | Other current assets                       |   |                          | 64,168    |   |      |             | (777,699   | )
|                                                                                         | Accounts payable and accrued expenses      |   |                          | 440,269   |   |      |             | 4,776,935  |  
|                                                                                         | Deferred revenue                           |   |                          | 104,668   |   |      |             | (746,434   | )
|                                                                                         |                                            |   |                          |           |   |     
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                                |                                            |   | 2,153,344                |           |   |      | 3,886,776   |           
|INVESTING ACTIVITIES                                                                     |                                            |   |                          |           |   |      |             |           
|Business acquisition                                                                     |                                            |   |                         |           |   |      | (16,673,000 | )         
|Purchase of equipment and fixtures                                                       |                                            |   | (353,857                 | )         |   |      | (125,399    | )         
|Proceeds from sale of equipment and fixtures                                             |                                            |   |                         |           |   |      | 28,103      |           
|Purchase of short-term investments                                                       |                                            |   |                         |           |   |      | (133,368    | )         
|                                                                                         |                                            |   |                          |           |   |     
|NET CASH USED IN INVESTING ACTIVITIES                                                    |                                            |   | (353,857                 | )         |   |      | (16,903,664 | )         
|FINANCING ACTIVITIES                                                                     |                                            |   |                          |           |   |      |             |           
|Issuance of common stock                                                                 |                                            |   |                         |           |   |      | 29,075      |           
|Repurchase of common stock                                                               |                                            |   |                         |           |   |      | (22,050     | )         
|Borrowing (repayment) on bank credit facility, net                                       |                                            |   | (1,880,000               | )         |   |      | 13,973,157  |           
|Principal payments on capital lease obligations                                          |                                            |   | (15,784                  | )         |   |      |            |           
|                                                                                         |                                            |   |                          |           |   |     
|NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                                      |                                            |   | (1,895,784               | )         |   |      | 13,980,182  |           
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                  |                                            |   | 1,152                    |           |   |      | (83,632     | )         
|                                                                                         |                                            |   |                          |           |   |     
|(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                         |                                            |   | (95,145                  | )         |   |      | 879,662     |           
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                           |                                            |   | 1,717,973                |           |   |      | 591,539     |           
|                                                                                         |                                            |   |                          |           |   |     
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                 |                                            | $ | 1,622,828                |           |   | $    | 1,471,201   |           
|                                                                                         |                                            |   |                          |           |   |     

See condensed notes to consolidated financial statements.

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DELPHAX TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2003

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 the accounting principles generally accepted in the
United States 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, 2002.

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

NOTE B  Earnings per Share

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

|             |                                                                                                      |  |                            |           |   |  |  |  |  |                          |   |           |   |  |  |  |      |  |   |            |   |  |  |      |  |  |   |           | 
|------------ | ---------------------------------------------------------------------------------------------------- |  | -------------------------- | --------- | - |  |  |  |  | ------------------------ | - | --------- | - |  |  |  | ---- |  | - | ---------- | - |  |  | ---- |  |  | - | --------- | 
|             |                                                                                                      |  | For the Three Months Ended |           |   |  |  |  |  | For the Six Months Ended |  
|             |                                                                                                      |  | March 31,                  |           |   |  |  |  |  | March 31,                |  
|             |                                                                                                      |  |                            |           |   |  |  |  |  |                          |  
|             |                                                                                                      |  | 2003                       |           |   |  |  |  |  | 2002                     |   |           |   |  |  |  | 2003 |  |   |            |   |  |  | 2002 | 
|             |                                                                                                      |  |                            |           |   |  |  |  |  |                          |   |           |   |  |  |  |      |  |   |            |   |  |  |      | 
|Numerator:   |                                                                                                      |  |                            |           |   |  |  |  |  |                          |   |           |   |  |  |  |      |  |   |            |   |  |  |      |  |  |   |          
|             | Net (loss) income                                                                                    |  | $                          | (9,277    | ) |  |  |  |  |                          | $ | (578,958  | ) |  |  |  |      |  | $ | (1,146,619 | ) |  |  |      |  |  | $ | 59,803    | 
|             |                                                                                                      |  |                            |           |   |  |  |  |  |                          |   |           |   |  |  |  |      |  |   |            |   | 
|             | Numerator for basic and diluted earnings
per share  (loss) income applicable to
common shareholders |  | $                          | (9,277    | ) |  |  |  |  |                          | $ | (578,958  | ) |  |  |  |      |  | $ | (1,146,619 | ) |  |  |      |  |  | $ | 59,803    | 
|Denominator: |                                                                                                      |  |                            |           |   |  |  |  |  |                          |   |           |   |  |  |  |      |  |   |            |   |  |  |      |  |  |   |          
|             | Denominator for basic earnings per share,
weighted average shares                                    |  |                            | 6,175,898 |   |  |  |  |  |                          |   | 6,161,841 |   |  |  |  |      |  |   | 6,175,898  |   |  |  |      |  |  |   | 6,160,718 | 
|             | Dilutive potential common shares, employee
stock options                                             |  |                            |          | a |  |  |  |  |                          |   |          | a |  |  |  |      |  |   |           | a |  |  |      |  |  |   | 193,004   | 
|             |                                                                                                      |  |                            |           |   |  |  |  |  |                          |   |           |   |  |  |  |      |  |   |            |   | 
|             | Denominator for diluted earnings per share,
adjusted weighted average shares                         |  |                            | 6,175,898 |   |  |  |  |  |                          |   | 6,161,841 |   |  |  |  |      |  |   | 6,175,898  |   |  |  |      |  |  |   | 6,353,722 | 
|             | (Loss) earnings per common share                                                                     |  | $                          | (0.00     | ) |  |  |  |  |                          | $ | (0.09     | ) |  |  |  |      |  | $ | (0.19      | ) |  |  |      |  |  | $ | 0.01      | 
|             | (Loss) earnings per common share,
assuming dilution                                                  |  |                            | (0.00     | ) |  |  |  |  |                          |   | (0.09     | ) |  |  |  |      |  |   | (0.19      | ) |  |  |      |  |  |   | 0.01      | 

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

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##### Table of Contents



NOTE C  Comprehensive Income

The components of comprehensive income and loss, net of related tax, for the
three and six months ended March 31, 2003 and 2002 were as follows:

|                                        |  |                            |        |   |                          |   |          |      |  |   |            |   |  |   |         |  
|--------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | -------- | ---- |  | - | ---------- | - |  | - | ------- | -
|                                        |  | For the Three Months Ended |        |   | For the Six Months Ended |  
|                                        |  | March 31,                  |        |   | March 31,                |  
|                                        |  |                            |        |   |                          |  
|                                        |  | 2003                       |        |   | 2002                     |   |          | 2003 |  |   | 2002       |  
|                                        |  |                            |        |   |                          |   |          |      |  |   |            |  
|Net (loss) income                       |  | $                          | (9,277 | ) |                          | $ | (578,958 | )    |  | $ | (1,146,619 | ) |  | $ | 59,803  |  
|Foreign currency translation adjustment |  |                            | 83,096 |   |                          |   | (101,349 | )    |  |   | 202,102    |   |  |   | (66,894 | )
|                                        |  |                            |        |   |                          |   |          |      |  |   |            |  
|Comprehensive income (loss)             |  | $                          | 73,819 |   |                          | $ | (680,307 | )    |  | $ | (944,517   | ) |  | $ | (7,091  | )
|                                        |  |                            |        |   |                          |   |          |      |  |   |            |  

NOTE D  Accounting for Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB
25), and related interpretations. The Company has adopted the disclosure-only
provisions of Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation (SFAS 123) as amended by Statement of Financial
Accounting Standards No. 148, Accounting for Stock-Based Compensation 
Transition and disclosure (SFAS 148). Pro forma net loss and loss per share
determined as if the Company had accounted for its employee stock options under
the fair value method of those Statements, for the three- and six-month periods
ended March 31, 2003 and 2002 were as follows:

|                                                                                 |  |                            |         |   |                          |   |          |      |  |   |            |   |  |   |          |  
|-------------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | -------- | ---- |  | - | ---------- | - |  | - | -------- | -
|                                                                                 |  | For the Three Months Ended |         |   | For the Six Months Ended |  
|                                                                                 |  | March 31,                  |         |   | March 31,                |  
|                                                                                 |  |                            |         |   |                          |  
|                                                                                 |  | 2003                       |         |   | 2002                     |   |          | 2003 |  |   | 2002       |  
|                                                                                 |  |                            |         |   |                          |   |          |      |  |   |            |  
|Net (loss) income, as reported                                                   |  | $                          | (9,277  | ) |                          | $ | (578,958 | )    |  | $ | (1,146,619 | ) |  | $ | 59,803   |  
|Stock-based compensation determined under
fair value based method for all awards |  |                            | (49,661 | ) |                          |   | (59,029  | )    |  |   | (103,298   | ) |  |   | (102,316 | )
|                                                                                 |  |                            |         |   |                          |   |          |      |  |   |            |  
|Adjusted net loss, assuming fair value
method for all stock-based awards         |  | $                          | (58,938 | ) |                          | $ | (637,987 | )    |  | $ | (1,249,917 | ) |  | $ | (42,513  | )
|                                                                                 |  |                            |         |   |                          |   |          |      |  |   |            |  
|Basic (loss) earnings per share, as reported                                     |  | $                          | (0.00   | ) |                          | $ | (0.09    | )    |  | $ | (0.19      | ) |  | $ | 0.01     |  
|Diluted (loss) earnings per share, as reported                                   |  |                            | (0.00   | ) |                          |   | (0.09    | )    |  |   | (0.19      | ) |  |   | 0.01     |  
|Basic loss per share, SFAS 123 adjusted                                          |  |                            | (0.01   | ) |                          |   | (0.10    | )    |  |   | (0.20      | ) |  |   | (0.01    | )
|Diluted loss per share, SFAS 123 adjusted                                        |  |                            | (0.01   | ) |                          |   | (0.10    | )    |  |   | (0.20      | ) |  |   | (0.01    | )

NOTE E  Acquisition of Delphax Systems, Corporate Name Change and Workforce Reduction

In December 2001, the Company through a newly organized Canadian subsidiary
acquired substantially all of the North American business assets of Delphax
Systems, a Massachusetts general partnership, and Delphax Systems, Inc., a
Delaware corporation (collectively, the Acquired Company). The Acquired
Company is located in suburban Toronto, Ontario, and was the supplier of the
print engines used in a number of the Companys products and to a number of
non-competing original equipment manufacturers.

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NOTE E  Acquisition of Delphax Systems, Corporate Name Change and Workforce Reduction (continued)

The property acquired included accounts receivable, inventory, fixed assets,
contract rights, various intellectual property and intangibles, including
rights to the name Delphax. Effective April 1, 2002, following an
affirmative shareholder vote at the March 21, 2002 Annual Meeting of
Shareholders, the Company changed its name from Check Technology Corporation to
Delphax Technologies Inc.

On April 23, 2002, the Company effected a workforce reduction, eliminating
approximately 40 positions in the Canadian subsidiary. The cost of terminating
the employees in these positions, estimated at approximately $875,000, was
included in the cost of the acquisition in accordance with Statement of
Financial Accounting Standards No. 141, Business Combinations (SFAS 141), and
included in accrued expenses in the Consolidated Balance Sheets. Benefits are
paid on either a lump-sum basis or over time. As of March 31, 2003, the
accrued liability for benefits payable in the future was $41,000. It is
estimated that this balance will be sufficient to cover the remaining
obligation under the workforce reduction plan.

The following pro forma data for the six months ended March 31, 2002, compared
with the current fiscal-year-to-date period, was prepared in accordance with
SFAS 141 and Statement of Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets, and assumes the acquisition had occurred at the
beginning of fiscal 2001 and reflects an adjustment for interest expense in the
period ended December 31, 2001. The unaudited pro forma financial information
is provided for informational purposes only and does not purport to be
indicative of future results of the Company.

Unaudited Pro Forma
Combined Summary Statements of Operations

|                                        |  |                          |            |   |      |   |            |  
|--------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | -
|                                        |  | For the Six Months Ended |           
|                                        |  | March 31,                |           
|                                        |  |                          |           
|                                        |  | 2003                     |            |   | 2002 |  
|                                        |  |                          |            |   |      |  
|Net sales                               |  | $                        | 29,705,498 |   |      | $ | 30,528,837 |  
|Net loss                                |  |                          | (1,146,619 | ) |      |   | (308,274   | )
|Basic and diluted loss per common share |  |                          | (0.19      | ) |      |   | (0.05      | )

NOTE F  Restructuring

On December 4, 2002, the Company announced plans to consolidate its North
American manufacturing and engineering operations at its Canadian subsidiary.
These operations had been divided between the facilities in the United States
and Canada. The Companys worldwide headquarters and marketing functions
continue to be based in the United States. The selling and customer service
functions remain unchanged in the United States, as well as in the subsidiaries
in the United Kingdom and France. The Company expects to incur approximately
$1.2 million in restructuring expenses over the course of the consolidation,
which is scheduled to be completed by the end of calendar 2003. These
restructuring costs are wholly comprised of employee severance costs unrelated
to the acquisition of the Canadian subsidiary and, therefore, were properly
charged to operating expense in the first quarter of fiscal 2003, in accordance
with Emerging Issues Task Force Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in Restructuring). As of March 31, 2003,
the accrued liability for benefits payable in the future was $998,000. It is
estimated that this balance will be sufficient to cover the remaining
obligation under the workforce reduction plan.

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NOTE G  Credit Agreement

Effective December 20, 2001, the Company entered into a bank credit agreement,
secured by substantially all the assets of the Company. The credit agreement
provides for term and revolving loans and letters of credit. The term loan
portion of the credit facility was advanced as a single borrowing on December
20, 2001, in the amount of $4.0 million, $3.0 million of which remained
outstanding as of March 31, 2003. No amount repaid or prepaid on any term loan
may be borrowed again. The Company may borrow on a revolving loan basis up to
the lesser of the revolving credit commitment or the then current borrowing
base.

On December 18, 2002, the lender and the Company amended the credit agreement.
Under the amendment, installment payments of $250,000 were due and paid on the
term loan on December 31, 2002 and March 31, 2003, with future installments of
$250,000 due June 30, 2003 and September 30, 2003, and the balance of the term
loans due on December 31, 2003. The amendment reduced the revolving credit
commitment from $12.5 million as of December 31, 2002, to $11.5 million
effective on January 1, 2003, and $10.5 million effective on July 1, 2003, and
the facility matures and comes due on December 31, 2003. As of March 31, 2003,
revolving loans outstanding were $10.4 million. The revolving credit
commitment is subject to a commitment fee of 0.5% per annum on the unused
portion of the commitment. Term loans and revolving loans, at the Companys
election, may be outstanding at one of two rates, the banks prime rate plus 1%
or the banks adjusted LIBOR rate plus 4%, provided that $3.0 million of the
principal amount of the revolving loans bear interest at the fixed rate of
7.35% per annum. As of March 31, 2003, $9.5 million was outstanding at the
banks adjusted LIBOR rate plus 4%, $3.0 million at 7.35%, $900,000 at the
banks prime rate plus 1% and in total, at a weighted average interest rate of
approximately 6.8%.

As of March 31, 2003, the Company was in compliance with all covenants of its
credit agreement. The Company believes, but cannot assure, that it will be
able to fully meet the terms of the amended agreement. The Companys ability
to fund its future working capital requirements is dependent upon its ability
to extend or renegotiate financing before the end of the current term of the
facility. If necessary, the Company believes it has the ability to secure
alternative forms of financing to meet its working capital requirements.
However, the pricing of these alternative forms of financing may not be as
favorable as the current credit facility.

NOTE H  Business Combinations and Goodwill and Other Intangible Assets

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, Business Combinations (SFAS 141) and
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (SFAS 142). SFAS 141 eliminates the pooling-of-interests
method of accounting for business combinations, clarifies the criteria for
recognizing intangible assets separately from goodwill and is effective for
business combinations completed subsequent to June 30, 2001. Under SFAS 142,
goodwill and indefinite lived intangible assets are no longer amortized but are
reviewed at least annually for impairment. Separable intangible assets not
deemed to have an indefinite life will continue to be amortized over their
useful lives, but with no maximum life. The amortization provisions of SFAS
142 apply immediately to goodwill and intangible assets acquired after June 30,
2001 and is required to be adopted for all prior acquisitions in years
beginning after October 1, 2002, our fiscal 2003. SFAS 141 has been applied in
accounting for the acquisition of the Canadian subsidiary described above in
NOTE E. The adoption of these Statements had no material effect on the
Companys results of operations or financial position.

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##### Table of Contents



NOTE I  Impairment or Disposal of Long-Lived Assets

As of October 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS 144). SFAS 144 addresses financial accounting and reporting for
the impairment or disposal of long-lived assets and supersedes Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and the
accounting and reporting provisions of Accounting Principles Board Opinion No.
30, Reporting the Results of Operations for a disposal of a segment of a
business. SFAS 144 is effective for fiscal years beginning after December 15,
2001, with earlier application encouraged. The adoption of this Statement had
no effect on the Companys results of operations or financial position.

NOTE J  Accounting for Costs Associated with Exit or Disposal Activities

In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS
146). SFAS 146 addresses financial accounting and reporting for costs
associated with exit or disposal activities and replaces Emerging Issues Task
Force Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in Restructuring) (EITF 94-3). SFAS 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability
is incurred. SFAS 146 also establishes that fair value is the objective for
initial measurement of the liability. This Statement is effective for exit or
disposal activities initiated after December 31, 2002. The Companys
restructuring initiative, which commenced prior to the effective date of SFAS
146, was accounted for in accordance with EITF 94-3.




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

Critical Accounting Policies

Managements Discussion and Analysis of Results of Operations and Financial
Condition discusses the consolidated financial statements of the Company, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. On an on-going basis,
management evaluates its estimates and adjustments, including those related to
inventory, income taxes, revenue recognition and restructuring initiatives.
Management bases its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

Management believes the following critical accounting policies, among others,
affect its more significant judgments and estimates used in the preparation of
its consolidated financial statements.

Inventory

The Company reduces the stated value of its inventory for obsolescence or
impairment in an amount equal to the difference between the cost of the
inventory and the estimated market value, based upon assumptions about future
demand and market conditions. If actual future demand or market conditions are
less favorable than those projected by management, additional reductions in
stated value may be required. Conversely, if actual future demand or market
conditions are more favorable than those projected by management, reserves in
excess of those estimated to be required in the future may be adjusted.

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##### Table of Contents



Income Taxes

In determining the carrying value of the Companys net deferred tax assets, the
Company must assess the likelihood of sufficient future taxable income in
certain tax jurisdictions, based on estimates and assumptions, to realize the
benefit of these assets. For the fiscal year ended September 30, 2002 and the
six-month period ended March 31, 2003, the Company fully reserved its net
deferred tax assets, recognizing that the Company has incurred losses in three
of the last four fiscal years and there is no assurance that future years will
be profitable. If these estimates and assumptions change in the future, the
Company may record a reduction in the valuation allowance, resulting in an
income tax benefit in the Companys Consolidated Statements of Operations. As
of March 31, 2003 and September 30, 2002, deferred tax assets of $2.9 million
and $2.1 million, respectively, had been fully reserved. Management evaluates
the realizability of the deferred tax assets and assesses the valuation
allowance quarterly.

Revenue Recognition

The Company recognizes revenue when systems are shipped or services are
rendered. For spare parts, supplies and consumable items stored at customer
sites, revenue is recognized when the inventory is used by the customer.
Amounts billed to the customers under maintenance contracts are recorded as
deferred revenue and recognized in income over the term of the maintenance
agreement. Customer billings in advance of system shipment are recorded as
deferred revenue and recognized upon shipment of the system. Revenue on the
Companys PS MICR systems product line, manufactured by Océ Printing Systems
GmbH and private-labeled by the Company, is recorded on a gross basis. Freight
revenue is recorded on a gross basis and recognized upon shipment. The related
freight costs are recorded as a cost of sales.

Restructuring Initiatives

In April 2002, the Company effected a workforce reduction, eliminating
approximately 40 positions in the Canadian subsidiary. See NOTE E to the
financial statements. On December 4, 2002, the Company announced plans to
consolidate its North American manufacturing and engineering operations at its
Canadian subsidiary. See NOTE F to the financial statements. At the end of
each quarter, management evaluates its estimates of costs to complete the
restructuring initiatives. Differences, if any, between previous and revised
cost estimates many result in a charge or credit to the Companys results of
operations. As of March 31, 2003, the accrued liability for benefits payable in
the future was $41,000 and $998,000, respectively, for the April 2002 and
December 2002 initiatives. It is estimated that these balances will be
sufficient to cover the remaining obligation under the plans.

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Results of Operations

The Condensed Consolidated Statements of Operations for the three and six
months ended March 31, 2003 and 2002 include the post-acquisition results of
the business acquired by the Company on December 20, 2001. See NOTE E to the
financial statements.

The following table sets forth the Companys Statements of Operations as a
percentage of net sales and should be read in connection with the Condensed
Consolidated Financial Statements and notes thereto presented elsewhere in this
report.

|                                            |                                     |  |                            |      |   |                          |       |      |      |  |       |      |   |  |       |      |  
|------------------------------------------- | ----------------------------------- |  | -------------------------- | ---- | - | ------------------------ | ----- | ---- | ---- |  | ----- | ---- | - |  | ----- | ---- | -
|                                            |                                     |  | For the Three Months Ended |      |   | For the Six Months Ended |      
|                                            |                                     |  | March 31,                  |      |   | March 31,                |      
|                                            |                                     |  |                            |      |   |                          |      
|                                            |                                     |  | 2003                       |      |   | 2002                     |       |      | 2003 |  |       | 2002 |  
|                                            |                                     |  |                            |      |   |                          |       |      |      |  |       |      |  
|Sales:                                      |                                     |  |                            |      |   |                          |       |      |      |  |       |      |   |  |       |     
|                                            | Maintenance, spares and supplies    |  |                            | 85.3 | % |                          |       | 75.1 | %    |  |       | 82.1 | % |  |       | 61.0 | %
|                                            | Printing equipment                  |  |                            | 14.7 |   |                          |       | 24.9 |      |  |       | 17.9 |   |  |       | 39.0 |  
|                                            |                                     |  |                            |      |   |                          |       |      |      |  |       |      |  
|NET SALES                                   |                                     |  | 100.0                      |      |   |                          | 100.0 |      |      |  | 100.0 |      |   |  | 100.0 |     
|                                           
|Costs and Expenses:                         |                                     |  |                            |      |   |                          |       |      |      |  |       |      |   |  |       |     
|                                            | Cost of sales                       |  |                            | 44.4 |   |                          |       | 48.1 |      |  |       | 47.6 |   |  |       | 50.0 |  
|                                            | Selling, general and administrative |  |                            | 43.4 |   |                          |       | 44.0 |      |  |       | 41.1 |   |  |       | 38.5 |  
|                                            | Research and development            |  |                            | 9.7  |   |                          |       | 13.3 |      |  |       | 9.0  |   |  |       | 10.0 |  
|                                            | Restructuring costs                 |  |                            | 0.0  |   |                          |       | 0.0  |      |  |       | 4.0  |   |  |       | 0.0  |  
|                                            |                                     |  |                            |      |   |                          |       |      |      |  |       |      |  
|                                            |                                     |  | 97.5                       |      |   |                          | 105.4 |      |      |  | 101.7 |      |   |  | 98.5  |     
|                                            |                                     |  |                            |      |   |                          |       |      |      |  |       |      |  
|INCOME (LOSS) FROM SYSTEM SALES AND SERVICE |                                     |  | 2.5                        |      |   |                          | (5.4  | )    |      |  | (1.7  | )    |   |  | 1.5   |     
|Net interest expense                        |                                     |  | 1.6                        |      |   |                          | 1.9   |      |      |  | 1.5   |      |   |  | 1.2   |     
|Net realized exchange loss (gain)           |                                     |  | 0.2                        |      |   |                          | (0.5  | )    |      |  | 0.0   |      |   |  | 0.0   |     
|Net unrealized exchange loss (gain)         |                                     |  | 0.8                        |      |   |                          | (0.0  | )    |      |  | 0.7   |      |   |  | (0.1  | )   
|                                            |                                     |  |                            |      |   |                          |       |      |      |  |       |      |  
|(LOSS) INCOME BEFORE INCOME TAXES           |                                     |  | (0.1                       | )    |   |                          | (6.8  | )    |      |  | (3.9  | )    |   |  | 0.4   |     
|Income tax (benefit) expense                |                                     |  | 0.0                        |      |   |                          | (2.4  | )    |      |  | 0.0   |      |   |  | 0.2   |     
|                                            |                                     |  |                            |      |   |                          |       |      |      |  |       |      |  
|NET (LOSS) INCOME                           |                                     |  | (0.1                       | )%   |   |                          | (4.4  | )%   |      |  | (3.9  | )%   |   |  | 0.2   | %   
|                                            |                                     |  |                            |      |   |                          |       |      |      |  |       |      |  

The Companys net sales consist of revenues from: (i) maintenance contracts,
spare parts, supplies and consumable items, and (ii) sales of printing systems
and related equipment. For the three-month period ended March 31, 2003 (second
quarter of fiscal 2003), net sales were $14.2 million, up 9% from $13.1 million
for the three-month period ended March 31, 2002 (second quarter of fiscal
2002). For the six months ended March 31, 2003, net sales were $29.7 million,
up 20% from $24.8 million for the same period a year ago.

For the second quarter of fiscal 2003, revenues from maintenance contracts,
spare parts, supplies and consumable items increased 24%, from $9.8 million for
the second quarter of fiscal 2002, to $12.1 million for the most recent fiscal
quarter. For the six months ended March 31, 2003, revenues from maintenance
contracts, spare parts, supplies and consumable items increased 61%, from $15.2
million for the first half of fiscal 2002, to $24.4 million for the first half
of fiscal 2003. The increase in revenues between the comparative six-month
periods was due primarily to incremental revenues from the fiscal 2002
acquisition of the Canadian subsidiary, which contributed to first half of
fiscal 2002 results for only the period between the December 20, 2001
acquisition date and March 31, 2002, and to the first half of fiscal 2003 for
the entire period. In addition, revenues from maintenance contracts, spare
parts, supplies and consumable items were also higher for the fiscal 2003
quarter and year-to-date period than for the same year-ago periods due to the
larger installed base of Imaggia and the addition of CR Series systems to the
installed base. For these reasons, the Company expects domestic revenues from
maintenance contracts, spare parts, supplies and consumable items to continue
throughout fiscal 2003 at levels higher than in fiscal 2002.

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Revenues from the sale of printing equipment were $2.1 million for the second
quarter of fiscal 2003, down 35% from $3.3 million for second quarter of fiscal
2002. Revenues from the sale of printing equipment for the first six months
of fiscal 2003 were $5.3 million, down 45% from printing equipment revenues for
the same period in fiscal 2002 of $9.7 million.

The Companys printing systems primarily consist of the Imaggia, the CR Series,
the RS Series, the Checktronic, the Foliotronic and the PS MICR systems
(manufactured by Océ and sold on a private label basis) product lines. The
Checktronic and Foliotronic are among the Companys legacy products. The
decline in revenues from printing equipment for the second quarter of fiscal
2003, compared with the second quarter of fiscal 2002, and for the six months
ended March 31, 2003, compared with the same period a year ago, was primarily
due to significantly lower sales of the Imaggia product line, partially offset
by sales of the CR Series product line, which was not available for sale in the
year earlier periods. Total sales of all other product lines were
significantly lower in the second quarter of fiscal 2003 than in the second
quarter of fiscal 2002. However, for the six-month periods ended March 31,
2003 and 2002, total sales of all other product lines were flat. Imaggia sales
were down quarter to quarter and for the first half of fiscal 2003, compared
with the first half of fiscal 2002, due to completion of deliveries under a
significant multi-unit contract in the second quarter of fiscal 2002. In
general, the Company attributes lower revenues from printing equipment to
continuing uncertain economic conditions, which have led customers to postpone
capital equipment purchases.

The Companys gross margin percentage for the second quarter of fiscal 2003 was
56%, compared with 52% for the second quarter of fiscal 2002. For the
fiscal-year-to-date periods, the gross margin percentages were 52% and 50%,
respectively, for fiscal 2003 and 2002. The gross margins for the three- and
six-month periods ended March 31, 2003 were positively impacted by the
sale of certain spare parts, supplies and consumable items acquired
in the December 2001 Canadian acquisition at values in excess of those
originally assigned in the final purchase accounting for the acquisition. The
sale of this inventory resulted in margins higher than the Company would
normally expect to achieve from its on-going business. These sales resulted in incremental gross margin of 7% and 3%,
respectively, in the quarter and six-month period ended March 31, 2003. As
cited above under Critical Accounting Policies  Inventory, actual future
demand or market conditions for inventory may be more or less favorable than
projected by management, resulting in more or less favorable margins than
projected. In general, the Company anticipates that its gross margin percentage
for the remainder of fiscal 2003 will be slightly higher than the Company would
normally expect to achieve due to the sale cited above of
certain spare parts, supplies and consumable items and, potentially, on future
sales of other acquired inventory, including additional spare parts, supplies
and consumable items, as well as certain printing equipment. In addition,
programs continue in place to improve normal margins on revenues from
maintenance contracts, spare parts, supplies and consumable items.

Selling, general and administrative expenses for the second quarter increased
7%, from $5.7 million in fiscal 2002, to $6.2 million in fiscal 2003, but
decreased slightly as a percentage of net sales, from 44% to 43%. For the
first six months of fiscal 2003, selling, general and administrative expenses
were $12.2 million, compared with $9.6 million for the same period a year ago,
a 28% increase. As a percentage of net sales, selling, general and
administrative expenses increased from 38% for the first half of fiscal 2002 to
41% for the first half of fiscal 2003. Research and development expenses for
the three-month periods ended March 31, 2003 and 2002 were $1.4 million and
$1.7 million, respectively, a 21% decrease year to year. As a percentage of
net sales, research and development expenses also decreased, from 13% for the
second quarter of fiscal 2002, to 10% for the most recent fiscal quarter. For
the first six months of fiscal 2003, research and development expenses were
$2.7 million, compared with $2.5 million for the first six months of fiscal
2002, a 7% increase. But, as a percentage of net sales, research and
development expenses decreased from 10% for the first half of fiscal 2002, to
9% for the first half of fiscal 2003. For the first half of fiscal 2003,
expense levels for selling, general and administrative expenses and research and
development expenses were significantly higher in both categories, primarily
due to the acquisition of the Canadian subsidiary, which added costs to the
first half of fiscal 2002 for only the period between the December 20, 2001
acquisition date and March 31, 2002, and to the first half of fiscal 2003 for
the entire period. Selling, general and administrative expenses were

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also higher in the first half of fiscal 2003 due to the increase in customer
service staff and associated expenses required to support the increase in
revenues from maintenance contracts, spare parts, supplies and consumable
items. In conjunction with the Companys announced plans to consolidate its
North American manufacturing and engineering operations at its Canadian
subsidiary, the Company recognized $1.2 million in restructuring costs,
comprised of severance and related costs, in the first quarter of fiscal 2003.
The Company anticipates that its expense levels for fiscal 2003 will be higher
than for fiscal 2002 as a result of these factors and because the cost savings
associated with the restructuring, estimated at approximately $1.6 million
annually, are not expected to begin to be realized until the third quarter of
fiscal 2003.

Net interest expense for the three months ended March 31, 2003 and 2002, was
$220,000 and $255,000, respectively. The reduction was due to a lower average
amount outstanding in the current fiscal quarter, slightly offset by a higher
effective interest rate in fiscal 2003, compared with fiscal 2002. For the
first six months of fiscal 2003, net interest expense was $436,000, compared
with $292,000 for the same period in fiscal 2002. The increase in net interest
expense between periods was primarily due to the Company borrowing to finance
the acquisition of the Canadian subsidiary in late December 2001, incurring
significant interest in the first half of fiscal 2002 for only the period from the
December 20, 2001 acquisition date through March 31, 2002, but for the entire
six-month period in fiscal 2003. As with the respective quarters, for the
comparative six-month periods, effective interest rates were also higher in
fiscal 2003 than in fiscal 2002.

The Company incurs realized and unrealized transactional foreign exchange gains
and losses on currency conversion transactions that are reflected on the
Companys Statements of Operations. Realized and unrealized transactional
exchange gains and losses reflect actual and anticipated, respectively, gains
or losses recognized as the result of transactions between entities with
different functional currencies. The net transactional exchange losses for the
three and six months ended March 31, 2003 were $150,000 and $210,000,
respectively. For the three and six months ended March 31, 2002, net
transactional exchange gains were $75,000 and $21,000, respectively. The
Company experiences translational foreign currency gains and losses, which are
reflected in the Companys equity, with gains due to the weakening, and losses
due to the strengthening, of the U.S. dollar against the currencies of the
Companys foreign subsidiaries and the resulting effect of currency translation
on the valuation of the intercompany accounts and certain assets of the
subsidiaries, which are denominated in U.S. dollars. The functional currency
of the Companys Canadian subsidiary is the U.S. dollar. The Company
anticipates that it will continue to have transactional and translational
foreign currency gains and losses from foreign operations in the future,
although strategies to reduce the size of the gains and losses will be reviewed
and implemented whenever economical and practical.

For the first half and the second quarter of fiscal 2003, no income tax benefit
was recognized on the loss before income taxes; the Company has fully reserved
its net deferred tax assets, totaling $2.9 million as of March 31, 2003,
recognizing that the Company has incurred losses in three of the last four
fiscal years and there is no assurance that future years will be profitable.
Income tax benefit for the three months ended March 31, 2002 was $311,000,
compared with a tax expense of $32,000 for the first half of fiscal 2002,
reflecting an estimated annual effective tax rate of 35%. Interim effective
tax rates vary based on sources of income or loss, estimates of the annual
effective tax rate for the fiscal year and estimated future taxable income.

For the second quarter of fiscal 2003, the Companys basic and diluted loss per
share was zero, compared with basic and diluted loss per share of $0.09 for the
second quarter of fiscal 2002. Basic and diluted loss per share for the six
months ended March 31, 2003 was $0.19, compared with basic and diluted earnings
per share for the first six months of fiscal 2002 of $0.01. The decline in
earnings between periods was primarily attributable to the significant decrease
in equipment revenues as customers postponed equipment purchases in a period of
continued economic uncertainty, and to the recognition of a $1.2 million
restructuring charge in the first quarter of fiscal 2003.

On April 23, 2002, the Company effected a workforce reduction, eliminating
approximately 40 positions in the Canadian subsidiary. The cost of terminating
the employees in these positions, estimated at approximately $875,000, was
included in the cost of the acquisition in accordance with SFAS 141 and
included in accrued expenses in the Consolidated Balance Sheets. Benefits are
paid on either a lump-sum basis or over time. As of March 31, 2003, the
accrued liability for benefits payable in the future was $41,000. It is
estimated that this balance will be sufficient to cover the remaining
obligation under the workforce reduction plan. By taking this action, the
Company anticipates eliminating annual operating expenses of approximately $1.3 million without
affecting its ability to fulfill current or future orders.

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On December 4, 2002, the Company announced plans to consolidate its North
American manufacturing and engineering operations at its Canadian subsidiary.
These operations had been divided between the facilities in the United States
and Canada. The Companys worldwide headquarters and marketing functions
continue to be based in the United States. The selling and customer service
functions remain unchanged in the United States, as well as in the subsidiaries
in the United Kingdom and France. The Company expects to incur approximately
$1.2 million in restructuring expenses over the course of the consolidation,
which is scheduled to be completed by the end of calendar 2003. This action is
expected to eliminate annual operating expenses of approximately $1.6 million
while improving the Companys ability to provide customer service and fulfill
current and future orders. The cost savings could have an impact on operating
results as early as the Companys fiscal 2003 third quarter ending June 30,
2003.

The expense reductions realized and anticipated from these actions, and those
realized from the closing of the Australia subsidiary, which ceased operations
as of December 31, 2001, are being applied to other uses, such as expansion of
customer service functions to support increases in the installed base and
enhanced marketing efforts.

Market Risk

The Company has foreign subsidiaries located in Canada, the United Kingdom and
France, does business in more than 60 countries and generates approximately 31%
of its revenues from outside North America. The Companys ability to sell its
products in foreign markets may be affected by changes in economic, political
or market conditions in the foreign markets in which it does business.

The Companys net investment in its foreign subsidiaries was $7.3 million and
$7.2 million at March 31, 2003 and September 30, 2002, respectively, translated
into U.S. dollars at the closing exchange rates. The potential loss based on
end-of-period balances and prevailing exchange rates resulting from a
hypothetical 10% strengthening of the U.S. dollar against foreign currencies
was not material in the quarter or fiscal-year-to-date period ended March 31,
2003. The functional currency of the Canadian subsidiary is the U.S. dollar.

From time to time, the Company has entered into foreign exchange contracts as a
hedge against specific foreign currency receivables. In the first six months
of fiscal 2003, the Company did not enter into any foreign exchange contracts
and does not anticipate entering into any such contracts in the near future.

Interest Rate Risk

Substantially all of the Companys debt and the associated interest expense are
sensitive to changes in the level of interest rates. A hypothetical 100 basis
point increase in interest rates would result in incremental interest expense
for the three-month periods ended March 31, 2003 and 2002 of approximately
$32,000 and $48,000, respectively, and for the six-month periods then ended of
approximately $66,000 and $56,000, respectively.

Factors Affecting Results of Operations

The Companys revenues are subject to fluctuations, which may be material. The
Companys net sales and operating results may 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 affect 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 will result in significant
fluctuations in operating results from period to period.

On December 20, 2001, the Company acquired substantially all of the North
American business assets of Delphax Systems, which is located in suburban
Toronto, Ontario, and is engaged in the development, manufacture and
distribution of print engines, print management software and a range of digital
printing systems incorporating

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proprietary EBI technology. It is the supplier of the print engines used in a
number of the Companys products. For fiscal 2002, the acquisition contributed
approximately $17.7 million in incremental revenues. While the Company expects
the acquisition to provide increased revenues and incremental operating income
in the future, there is no assurance that actual results will be as
anticipated. In addition, the acquisition expanded the Companys product lines
to include the CR Series and RS Series of roll-fed print systems. To date,
only a limited number of CR Series systems and only one RS Series system have
been sold and there can be no assurance that such systems will be sold in the
future.

The Company has been party to a multi-year equipment and service contract with
a significant customer. Equipment deliveries under the contract concluded in
the second quarter of fiscal 2002, and the service portion of the contract
concluded December 31, 2002. Effective January 1, 2003, a new three-year
service agreement was reached, which will continue through December 31, 2005.
Revenues from this customer have been significant, representing 28% of total
revenues for fiscal 2002. The Company anticipates that revenues from this
customer will also be significant in fiscal 2003, but to a lesser extent than
in fiscal 2002.

The Companys PS MICR systems product line has been marketed under an agreement
with Océ Printing Systems GmbH for the right to private label, sell and service
the PS75 MICR product and other high-performance sheet-fed MICR and non-MICR
printing systems manufactured by Océ. This agreement will terminate effective
October 13, 2003, with delivery of spare parts, supplies and consumable items
inventory continuing, as per the agreement, through October 13, 2008. Though
the Company plans to continue offering sale and service of the PS MICR systems
during that period, there is no expectation that significant sales will be
made.

As discussed below under the heading Liquidity and Capital Resources, the
Company is dependent on its bank credit facility to fund its operations. That
facility currently matures on December 31, 2003. The Companys ability to
maintain working capital depends on its compliance with the amended credit
facility and on being able to extend or replace that facility when it matures.
If necessary, the Company believes it has the ability to secure alternative
forms of financing to meet its working capital requirements. However, the
pricing of these alternative forms of financing may not be as favorable as the
current credit facility.

Liquidity and Capital Resources

Working capital was $10.7 million at March 31, 2003, compared with $24.0
million at September 30, 2002. Of the $13.3 million decrease, approximately
$11.1 million was the result of classifying the entire indebtedness under the
credit facility as a current liability, because it is due within twelve months.
The Companys accounts receivable increased from $10.7 million as of September
30, 2002, to $11.3 million as of March 31, 2003. The $.6 million increase was
due to timing. The Companys inventory levels decreased to $18.8 million at
March 31, 2003, from $20.9 million at September 30, 2002, primarily due to sale
of consumables items, spare parts and supplies and continuing efforts to manage
inventory levels. Deferred revenue was $595,000 at March 31, 2003, compared
with $490,000 at September 30, 2002. Deferred revenue was comprised primarily
of unearned revenues from maintenance contracts.

The Company has undertaken no significant investing activities. No significant
capital investment has been undertaken or is planned, and at March 31, 2003,
the Company had no material commitments for capital expenditures. Short-term
investments are purchased as cash is available and sold as they mature.

Effective December 20, 2001, the Company entered into a bank credit agreement,
secured by substantially all the assets of the Company. The credit agreement
provides for term and revolving loans and letters of credit. The term loan
portion of the credit facility was advanced as a single borrowing on December
20, 2001, in the amount of $4.0 million, $3.0 million of which remained
outstanding as of March 31, 2003. No amount repaid or prepaid on any term loan
may be borrowed again. The Company may borrow on a revolving loan basis up to
the lesser of the revolving credit commitment or the then current borrowing
base.

On December 18, 2002, the lender and the Company amended the credit agreement.
Under the amendment, installment payments of $250,000 were due and paid on the
term loan on December 31, 2002 and March 31, 2003,

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with future installments of $250,000 due June 30, 2003 and September 30, 2003,
and the balance of the term loans due on December 31, 2003. The amendment
reduced the revolving credit commitment from $12.5 million as of December 31,
2002, to $11.5 million effective on January 1, 2003, and $10.5 million
effective on July 1, 2003, and the facility matures and comes due on December
31, 2003. As of March 31, 2003, revolving loans outstanding were $10.4
million. The revolving credit commitment is subject to a commitment fee of
0.5% per annum on the unused portion of the commitment. Term loans and
revolving loans, at the Companys election, may be outstanding at one of two
rates, the banks prime rate plus 1% or the banks adjusted LIBOR rate plus 4%,
provided that $3.0 million of the principal amount of the revolving loans bear
interest at the fixed rate of 7.35% per annum. As of March 31, 2003, $9.5
million was outstanding at the banks adjusted LIBOR rate plus 4%, $3.0 million
at 7.35%, $900,000 at the banks prime rate plus 1% and in total, at a weighted
average interest rate of approximately 6.8%.

As of March 31, 2003, the Company was in compliance with all covenants of its
credit agreement. The Company believes, but cannot assure, that it will be
able to fully meet the terms of the amended agreement. The Companys ability
to fund its future working capital requirements is dependent upon its ability
to extend or renegotiate financing before the end of the current term of the
facility. If necessary, the Company believes it has the ability to secure
alternative forms of financing to meet its working capital requirements.
However, the pricing of these alternative forms of financing may not be as
favorable as the current credit facility.

Cautionary Statement

Statements included in this Managements Discussion and Analysis of Results of
Operations and Financial Condition, 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 shareholders, 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.




Item 3. Quantitative and Qualitative Disclosure of Market Risk

The information called for by this item is provided under the caption Market
Risk under Item 2.  Managements Discussion and Analysis of Results of
Operations and Financial Condition.




Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures.

The Companys Chairman and Chief Executive Officer, Jay A. Herman, and
Vice President and Chief Financial Officer, Robert M. Barniskis, have reviewed
the Companys disclosure controls and procedures within 90 days prior to the
filing of this report. Based upon this review, these officers believe that the
Companys disclosure controls and procedures are effective in ensuring that
material information related to the Company is made known to them by others
within the Company.

(b) Changes in Internal Controls.

There were no significant changes in the Companys internal controls or in
other factors that could significantly affect these controls during the quarter
covered by this report or from the end of the reporting period to the date of
this Form 10-Q.

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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 20, 2003. At the
Annual Meeting, the shareholders re-elected Earl W. Rogers as director to serve
through the 2006 Annual Meeting by a vote of 5,640,091 shares in favor, 126,023
shares withholding authority and a broker non-vote of zero shares.
Shareholders also approved the selection of Ernst & Young LLP as the Companys
independent public auditors for fiscal 2003 by a vote of 5,665,058 shares in
favor, 90,900 shares against, 10,156 shares abstaining and a broker non-vote of
zero shares.




Item 6. Exhibits and Reports on Form 8-K

(a)  The following exhibits are included herein:

|     |  |                                         
|---- |  | ----------------------------------------
|99.1 |  | Certificate pursuant to 18 U.S.C. § 1350

(b)  The following report on Form 8-K was filed during the three months ended March 31, 2003:

None.

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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.

|     |  |              |  |                                                                                      
|---- |  | ------------ |  | -------------------------------------------------------------------------------------
|     |  |              |  | DELPHAX TECHNOLOGIES INC.Registrant                                                  
|    
|Date |  | May 12, 2003 |  | /s/ Jay A. HermanJay A. Herman
Chairman and Chief Executive Officer                  
|    
|     |  |              |  |                                                                                      
|    
|Date |  | May 12, 2003 |  | /s/ Robert M. BarniskisRobert M. Barniskis
Vice President and Chief Financial Officer




CERTIFICATIONS

I, Jay A. Herman, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Delphax
Technologies Inc.;                                                                                                                                                                                                                                              
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| | a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

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



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



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

|      |              |  |                                                                     
|----- | ------------ |  | --------------------------------------------------------------------
|Date: | May 12, 2003 |  | /s/  Jay A. HermanJay A. Herman
Chairman and Chief Executive Officer

I, Robert M. Barniskis, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Delphax
Technologies Inc.;                                                                                                                                                                                                                                              
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| | a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



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

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| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



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

|      |              |  |  |                                                                                      
|----- | ------------ |  |  | -------------------------------------------------------------------------------------
|Date: | May 12, 2003 |  |  | /s/ Robert M. BarniskisRobert M. Barniskis
Vice President and Chief Financial Officer

22