##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q/A
Amendment No. 1

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|  |  | for the quarterly period ended June 30, 2002                                           

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

DELPHAX TECHNOLOGIES INC.

---

(Exact name of registrant as
specified in its charter)


|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|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 periods that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.      Yes x  No o
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Indicate the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practical date.                                                                                                                                                                                                                                               
|
| |  | As of August 5, 2002, there were 6,175,898 shares outstanding of Common
Stock.                                                                                                                                                                                                                                                                                            

1



---

TABLE OF CONTENTS



|                                                                                              |                                                                                                      |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                                                                
|                                                                                              | Condensed consolidated balance sheets  June 30, 2002 and September 30, 2001                        
|                                                                                              | Condensed consolidated statements of operations  Three and nine months ended June 30, 2002 and 2001
|                                                                                              | Condensed consolidated statements of cash flows  Nine months ended June 30, 2002 and 2001          
|                                                                                              | Condensed notes to consolidated financial statements  June 30, 2002                                
|Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
|SIGNATURES                                                                                   
|CERTIFICATIONS                                                                               
|EX-99.1 Certification pursuant to 18 U.S.C. 1350                                             



---



##### Table of Contents



DELPHAX TECHNOLOGIES INC. AND SUBSIDIARIES

EXPLANATORY NOTE

Delphax Technologies Inc. is filing this Amendment No. 1 to its Quarterly
Report on Form 10-Q for the quarter ended June 30, 2002 to amend Part I, Item 1
(Financial Statements) and Part I, Item 2 (Managements Discussion and Analysis
of Results of Operations and Financial Condition) contained in the Form 10-Q as
filed on August 13, 2002 to restate the financial statements for the fiscal
quarter ended June 30, 2002 to reflect the correction of an error in the
consolidation of intercompany transactions between the parent corporation and
its Canadian subsidiary, which was acquired in December 2001. The correction
of the error reduces the Registrants net loss for the quarter ended June 30,
2002 to $0.00 per share, instead of a loss of $0.07 per share as originally
reported. Other than information set forth in this amended report which is
affected by that restatement, the information in the originally filed Form 10-Q
is presented as filed therein and has not been updated in this amended filing.
Without limiting the generality of the foregoing, with respect to any forward
looking statements included in the Registrants original filing on August 13,
2002, the Registrant has not endeavored to update those statements and no
implication may be drawn as to the validity of those statements by the fact
that they are included in this Form 10-Q/A.

TABLE OF CONTENTS

|                              |  |                                                                                                     
|----------------------------- |  | ----------------------------------------------------------------------------------------------------
|PART I. FINANCIAL
INFORMATION
|                              |  |                                                                                                     
|Item 1.                       |  | Financial Statements (Unaudited)                                                                    
|                              |  | Condensed consolidated balance sheets  June 30, 2002 and September 30, 2001                        
|                              |  | Condensed consolidated statements of operations  Three and nine months ended June 30, 2002 and 2001
|                              |  | Condensed consolidated statements of cash flows  Nine months ended June 30, 2002 and 2001          
|                              |  | Condensed notes to consolidated financial statements  June 30, 2002                                
|                              |  |                                                                                                     
|Item 2.                       |  | Managements Discussion and Analysis of Results of Operations and Financial Condition               
|                              |  |                                                                                                     
|SIGNATURES                    |  |                                                                                                     
|                              |  |                                                                                                     
|CERTIFICATIONS                |  |                                                                                                     
|                              |  |                                                                                                     
|EXHIBITS                      |  |                                                                                                     
|                              |  |                                                                                                     
|Exhibit 99.1                  |  | Certification pursuant to 18 U.S.C. §1350                                                           

2



---



##### Table of Contents






PART I. FINANCIAL INFORMATION

DELPHAX TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

|                       |                                                                                                                                            |                                   |            |             |            |   |               |            |           | 
|---------------------- | ------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------- | ---------- | ----------- | ---------- | - | ------------- | ---------- | --------- | 
|                       |                                                                                                                                            |                                   |            | June 30,    |            |   |               |            |          
|                       |                                                                                                                                            |                                   |            | 2002        |            |   | September 30, |           
|                       |                                                                                                                                            |                                   |            | As Restated |            |   | 2001          |           
|                       |                                                                                                                                            |                                   |            |             |            |   |               |           
|ASSETS                 |                                                                                                                                            |                                   |            |             |            |   |               |           
|CURRENT ASSETS         |                                                                                                                                            |                                   |            |             |            |   |               |           
|                       | Cash and cash equivalents                                                                                                                  |                                   | $          | 903,938     |            |   | $             | 591,536    |          
|                       | Short-term investments                                                                                                                     |                                   |            | 74,550      |            |   |               |           |          
|                       | Accounts receivable, less allowance for doubtful
accounts of $122,186 and $51,749 as of June 30,
2002 and September 30, 2001, respectively |                                   |            | 11,288,804  |            |   |               | 10,129,470 |          
|                       | Inventory:                                                                                                                                 |                                   |            |             |            |   |               |            |          
|                       |                                                                                                                                            | Raw materials and component parts |            |             | 11,380,550 |   |               |            | 7,519,015 | 
|                       |                                                                                                                                            | Work-in-progress                  |            |             | 676,276    |   |               |            | 317,800   | 
|                       |                                                                                                                                            | Finished goods                    |            |             | 11,340,568 |   |               |            | 3,998,855 | 
|                       |                                                                                                                                            |                                   |            |             |            |  
|                       |                                                                                                                                            |                                   | 23,397,394 |             |            |   | 11,835,670    |           
|                       |                                                                                                                                            |                                   |            |             |            |  
|                       | Deferred income taxes                                                                                                                      |                                   |            | 1,060,054   |            |   |               | 842,851    |          
|                       | Other current assets                                                                                                                       |                                   |            | 2,041,184   |            |   |               | 1,349,280  |          
|                       |                                                                                                                                            |                                   |            |             |            |  
|TOTAL CURRENT ASSETS   |                                                                                                                                            |                                   | 38,765,924 |             |            |   | 24,748,807    |           
|                       |                                                                                                                                            |                                   |            |             |            |  
|EQUIPMENT AND FIXTURES |                                                                                                                                            |                                   |            |             |            |   |               |           
|                       | Machinery and equipment                                                                                                                    |                                   |            | 19,740,079  |            |   |               | 2,192,448  |          
|                       | Furniture and fixtures                                                                                                                     |                                   |            | 12,128,532  |            |   |               | 2,440,243  |          
|                       | Leasehold improvements                                                                                                                     |                                   |            | 7,766,071   |            |   |               | 309,932    |          
|                       |                                                                                                                                            |                                   |            |             |            |  
|                       |                                                                                                                                            |                                   | 39,634,682 |             |            |   | 4,942,623     |           
|                       | Less accumulated depreciation and amortization                                                                                             |                                   |            | 35,075,492  |            |   |               | 3,904,814  |          
|                       |                                                                                                                                            |                                   |            |             |            |  
|                       |                                                                                                                                            |                                   | 4,559,190  |             |            |   | 1,037,809     |           
|                       |                                                                                                                                            |                                   |            |             |            |  
|TOTAL ASSETS           |                                                                                                                                            | $                                 | 43,325,114 |             |            | $ | 25,786,616    |           
|                       |                                                                                                                                            |                                   |            |             |            |  

See condensed notes to consolidated financial statements.

3



---



##### Table of Contents






DELPHAX TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

|                                           |                                                                                                 |   |             |            |   |               |            |            |  
|------------------------------------------ | ----------------------------------------------------------------------------------------------- | - | ----------- | ---------- | - | ------------- | ---------- | ---------- | -
|                                           |                                                                                                 |   | June 30,    |            |   |               |            |           
|                                           |                                                                                                 |   | 2002        |            |   | September 30, |           
|                                           |                                                                                                 |   | As Restated |            |   | 2001          |           
|                                           |                                                                                                 |   |             |            |   |               |           
|LIABILITIES AND SHAREHOLDERS EQUITY       |                                                                                                 |   |             |            |   |               |            |           
|CURRENT LIABILITIES                        |                                                                                                 |   |             |            |   |               |            |           
|                                           | Accounts payable                                                                                |   | $           | 3,893,014  |   |               | $          | 4,143,228  |  
|                                           | Accrued expenses                                                                                |   |             | 4,079,897  |   |               |            | 1,763,739  |  
|                                           | Income taxes payable                                                                            |   |             | 308,563    |   |               |            | 248,132    |  
|                                           | Current portion of bank note payable                                                            |   |             | 16,274,371 |   |               |            | 595,000    |  
|                                           | Deferred revenue                                                                                |   |             | 338,339    |   |               |            | 1,053,893  |  
|                                           | Warranty reserves                                                                               |   |             | 313,835    |   |               |            |           |  
|                                           |                                                                                                 |   |             |            |   |               |           
|TOTAL CURRENT LIABILITIES                  |                                                                                                 |   | 25,208,019  |            |   |               | 7,803,992  |           
|                                           |                                                                                                 |   |             |            |   |               |           
|TOTAL LIABILITIES                          |                                                                                                 |   | 25,208,019  |            |   |               | 7,803,992  |           
|                                           |                                                                                                 |   |             |            |   |               |           
|SHAREHOLDERS EQUITY                       |                                                                                                 |   |             |            |   |               |            |           
|                                           | Common stock  par value $.10 per share  authorized
50,000,000 shares; issued and outstanding: |   |             |            |   |               |            |            |  
|                                           | 6,175,898
and 6,161,138 as of June 30, 2002 and September 30, 2001,
respectively                |   |             | 617,588    |   |               |            | 616,114    |  
|                                           | Additional paid-in capital                                                                      |   |             | 17,059,838 |   |               |            | 17,010,008 |  
|                                           | Accumulated other comprehensive loss                                                            |   |             | (2,056,318 | ) |               |            | (2,089,483 | )
|                                           | Retained earnings                                                                               |   |             | 2,495,987  |   |               |            | 2,445,985  |  
|                                           |                                                                                                 |   |             |            |   |               |           
|TOTAL SHAREHOLDERS EQUITY                 |                                                                                                 |   | 18,117,095  |            |   |               | 17,982,624 |           
|                                           |                                                                                                 |   |             |            |   |               |           
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |                                                                                                 | $ | 43,325,114  |            |   | $             | 25,786,616 |           
|                                           |                                                                                                 |   |             |            |   |               |           

See condensed notes to consolidated financial statements.

4



---



##### Table of Contents






DELPHAX TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

|                                                                                                   |                                     |   |                            |            |  |                           |            |           |             |      |            |            |  |   |            |            | 
|-------------------------------------------------------------------------------------------------- | ----------------------------------- | - | -------------------------- | ---------- |  | ------------------------- | ---------- | --------- | ----------- | ---- | ---------- | ---------- |  | - | ---------- | ---------- | 
|                                                                                                   |                                     |   | For the Three Months Ended |            |  | For the Nine Months Ended |           
|                                                                                                   |                                     |   | June 30,                   |            |  | June 30,                  |           
|                                                                                                   |                                     |   |                            |            |  |                           |           
|                                                                                                   |                                     |   | 2002                       |            |  |                           |            |           |             | 2002 |            |            |  |   |           
|                                                                                                   |                                     |   | As Restated                |            |  | 2001                      |            |           | As Restated |      |            | 2001       | 
|                                                                                                   |                                     |   |                            |            |  |                           |            |           |             |      |            |            | 
|Sales:                                                                                             |                                     |   |                            |            |  |                           |            |           |             |      |            |            |  |   |            |           
|                                                                                                   | Printing equipment                  |   | $                          | 2,345,341  |  |                           | $          | 7,111,323 |             |      | $          | 12,035,974 |  |   | $          | 21,600,919 | 
|                                                                                                   | Maintenance, spares and supplies    |   |                            | 11,185,673 |  |                           |            | 3,903,899 |             |      |            | 26,339,621 |  |   |            | 11,221,707 | 
|                                                                                                   |                                     |   |                            |            |  |                           |            |           |             |      |            |           
|NET SALES                                                                                          |                                     |   | 13,531,014                 |            |  |                           | 11,015,222 |           |             |      | 38,375,595 |            |  |   | 32,822,626 |           
|Costs and Expenses:                                                                                |                                     |   |                            |            |  |                           |            |           |             |      |            |            |  |   |            |           
|                                                                                                   | Cost of sales                       |   |                            | 5,945,671  |  |                           |            | 5,757,112 |             |      |            | 18,380,591 |  |   |            | 17,087,105 | 
|                                                                                                   | Selling, general and administrative |   |                            | 5,832,610  |  |                           |            | 3,941,524 |             |      |            | 15,392,324 |  |   |            | 11,795,496 | 
|                                                                                                   | Research and development            |   |                            | 1,708,238  |  |                           |            | 680,235   |             |      |            | 4,194,553  |  |   |            | 2,031,819  | 
|                                                                                                   |                                     |   |                            |            |  |                           |            |           |             |      |            |           
|                                                                                                   |                                     |   | 13,486,519                 |            |  |                           | 10,378,871 |           |             |      | 37,967,468 |            |  |   | 30,914,420 |           
|                                                                                                   |                                     |   |                            |            |  |                           |            |           |             |      |            |           
|INCOME FROM SYSTEM SALES AND SERVICE                                                               |                                     |   | 44,495                     |            |  |                           | 636,351    |           |             |      | 408,127    |            |  |   | 1,908,206  |           
|Interest expense                                                                                   |                                     |   | 250,549                    |            |  |                           | 24,999     |           |             |      | 556,448    |            |  |   | 41,046     |           
|Interest income                                                                                    |                                     |   | (9,758                     | )          |  |                           | (9,834     | )         |             |      | (23,422    | )          |  |   | (37,917    | )         
|Net realized exchange (gain) loss                                                                  |                                     |   | (22,948                    | )          |  |                           | 34,236     |           |             |      | (13,377    | )          |  |   | 143,831    |           
|Net unrealized exchange (gain)                                                                     |                                     |   | (46,747                    | )          |  |                           | (153,396   | )         |             |      | (77,024    | )          |  |   | (90,038    | )         
|                                                                                                   |                                     |   |                            |            |  |                           |            |           |             |      |            |           
|(LOSS) INCOME BEFORE INCOME TAXES                                                                  |                                     |   | (126,601                   | )          |  |                           | 740,346    |           |             |      | (34,498    | )          |  |   | 1,851,284  |           
|Income tax (benefit) expense                                                                       |                                     |   | (116,800                   | )          |  |                           | 288,330    |           |             |      | (84,500    | )          |  |   | 710,487    |           
|                                                                                                   |                                     |   |                            |            |  |                           |            |           |             |      |            |           
|NET (LOSS) INCOME                                                                                  |                                     | $ | (9,801                     | )          |  | $                         | 452,016    |           |             | $    | 50,002     |            |  | $ | 1,140,797  |           
|                                                                                                   |                                     |   |                            |            |  |                           |            |           |             |      |            |           
|Basic and diluted (loss) earnings per common share                                                 |                                     | $ | (0.00                      | )          |  | $                         | 0.07       |           |             | $    | 0.01       |            |  | $ | 0.18       |           
|Weighted average number of shares
outstanding during the period                                    |                                     |   | 6,171,365                  |            |  |                           | 6,169,038  |           |             |      | 6,164,267  |            |  |   | 6,175,938  |           
|Weighted average number of shares and equivalents
outstanding during the period, assuming dilution |                                     |   | 6,171,365                  |            |  |                           | 6,203,568  |           |             |      | 6,349,815  |            |  |   | 6,232,896  |           

See condensed notes to consolidated financial statements.

5



---



##### Table of Contents






DELPHAX TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

|                                                                              |                                            |   |             |                           |   |   |            |            |   | 
|----------------------------------------------------------------------------- | ------------------------------------------ | - | ----------- | ------------------------- | - | - | ---------- | ---------- | - | 
|                                                                              |                                            |   |             | For the Nine Months Ended |  
|                                                                              |                                            |   |             | June 30,                  |  
|                                                                              |                                            |   |             |                           |  
|                                                                              |                                            |   |             | 2002                      |   |   |            |            |  
|                                                                              |                                            |   |             | As Restated               |   |   | 2001       |           
|                                                                              |                                            |   |             |                           |   |   |            |           
|OPERATING ACTIVITIES                                                          |                                            |   |             |                           |   |   |            |           
|Net income                                                                    |                                            | $ | 50,002      |                           |   | $ | 1,140,797  |           
|Adjustments to reconcile net income to net cash
used in operating activities: |                                            |   |             |                           |   |   |            |           
|                                                                              | Depreciation and amortization              |   |             | 1,194,185                 |   |   |            | 272,400    |  
|                                                                              | Loss on disposal of equipment and
fixtures |   |             | 254,533                   |   |   |            | 25,212     |  
|                                                                              | Forgiveness of executive officer note      |   |             |                          |   |   |            | 135,186    |  
|                                                                              | Other                                      |   |             | (5,923                    | ) |   |            | 61,672     |  
|Changes in operating assets and liabilities:                                  |                                            |   |            |                           |   |   |            |           
|                                                                              | Accounts receivable, net                   |   |             | (1,088,420                | ) |   |            | (3,170,549 | )
|                                                                              | Inventory                                  |   |             | (11,549,399               | ) |   |            | (319,386   | )
|                                                                              | Other current assets                       |   |             | (1,130,093                | ) |   |            | 727,843    |  
|                                                                              | Accounts payable and accrued expenses      |   |             | 2,333,362                 |   |   |            | 907,567    |  
|                                                                              | Deferred revenue                           |   |             | (717,814                  | ) |   |            | (3,033,242 | )
|                                                                              | Warranty reserves                          |   |             | 313,835                   |   |   |            |           |  
|                                                                              |                                            |   |             |                           |   |  
|NET CASH USED IN OPERATING ACTIVITIES                                         |                                            |   | (10,345,732 | )                         |   |   | (3,252,500 | )         
|INVESTING ACTIVITIES                                                          |                                            |   |             |                           |   |   |            |           
|Purchase of equipment and fixtures                                            |                                            |   | (4,966,277  | )                         |   |   | (463,069   | )         
|Purchase of short-term investments                                            |                                            |   | (125,106    | )                         |   |   | (133,487   | )         
|Proceeds from sale of short-term investments                                  |                                            |   | 66,687      |                           |   |   | 176,849    |           
|                                                                              |                                            |   |             |                           |   |  
|NET CASH USED IN INVESTING ACTIVITIES                                         |                                            |   | (5,024,696  | )                         |   |   | (419,707   | )         
|FINANCING ACTIVITIES                                                          |                                            |   |             |                           |   |   |            |           
|Issuance of common stock                                                      |                                            |   | 73,356      |                           |   |   | 18,191     |           
|Repurchase of common stock                                                    |                                            |   | (22,050     | )                         |   |   | (78,383    | )         
|Borrowing on bank line of credit, net                                         |                                            |   | 15,679,371  |                           |   |   | 1,895,000  |           
|                                                                              |                                            |   |             |                           |   |  
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                     |                                            |   | 15,730,677  |                           |   |   | 1,834,808  |           
|EFFECT OF EXCHANGE RATE CHANGES ON CASH                                       |                                            |   | (47,847     | )                         |   |   | (30,731    | )         
|                                                                              |                                            |   |             |                           |   |  
|INCREASE (DECREASE) IN CASH AND EQUIVALENTS                                   |                                            |   | 312,402     |                           |   |   | (1,868,130 | )         
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                |                                            |   | 591,536     |                           |   |   | 3,043,754  |           
|                                                                              |                                            |   |             |                           |   |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                      |                                            | $ | 903,938     |                           |   | $ | 1,175,624  |           
|                                                                              |                                            |   |             |                           |   |  
|Supplemental Schedule                                                         |                                            |   |             |                           |   |   |            |           
|Forgiveness of executive officer note                                         |                                            |   |            |                           |   |   | 135,186    |           

See condensed notes to consolidated financial statements.

6



---



##### Table of Contents






DELPHAX TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2002

NOTE A  Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Companys annual report on Form 10-K for the year ended September 30,
2001.

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 Nine Months Ended |  
|             |                                                                                                      |  | June 30,                   |           |   | June 30,                  |  
|             |                                                                                                      |  |                            |           |   |                           |  
|             |                                                                                                      |  | 2002                       |           |   |                           |   |           |             | 2002 |   |           |  |  |  
|             |                                                                                                      |  | As Restated                |           |   | 2001                      |   |           | As Restated |      |   | 2001      | 
|             |                                                                                                      |  |                            |           |   |                           |   |           |             |      |   |           | 
|Numerator:   |                                                                                                      |  |                            |           |   |                           |   |           |             |      |   |           |  |  |   |          
|             | Net (loss) income                                                                                    |  | $                          | (9,801    | ) |                           | $ | 452,016   |             |      | $ | 50,002    |  |  | $ | 1,140,797 | 
|             |                                                                                                      |  |                            |           |   |                           |   |           |             |      |   |          
|             | Numerator for basic and diluted earnings
per share  (loss) income applicable to
common shareholders |  | $                          | (9,801    | ) |                           | $ | 452,016   |             |      | $ | 50,002    |  |  | $ | 1,140,797 | 
|Denominator: |                                                                                                      |  |                            |           |   |                           |   |           |             |      |   |           |  |  |   |          
|             | Denominator for basic earnings per share,
weighted average shares                                    |  |                            | 6,171,365 |   |                           |   | 6,169,038 |             |      |   | 6,164,267 |  |  |   | 6,175,938 | 
|             | Dilutive potential common shares, employee
stock options                                             |  |                            |          | a |                           |   | 34,530    |             |      |   | 185,548   |  |  |   | 56,958    | 
|             |                                                                                                      |  |                            |           |   |                           |   |           |             |      |   |           | 
|             | Denominator for earnings per share, assuming
dilution, adjusted weighted average shares              |  |                            | 6,171,365 |   |                           |   | 6,203,568 |             |      |   | 6,349,815 |  |  |   | 6,232,896 | 
|             | (Loss) earnings per common share                                                                     |  | $                          | (0.00     | ) |                           | $ | 0.07      |             |      | $ | 0.01      |  |  | $ | 0.18      | 
|             | (Loss) earnings per common share,
assuming dilution                                                  |  |                            | (0.00     | ) |                           |   | 0.07      |             |      |   | 0.01      |  |  |   | 0.18      | 

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

7



---



##### Table of Contents



NOTE C  Comprehensive Income

The components of comprehensive income, net of related tax, for the three- and
nine-month periods ended June 30, 2002 and 2001 are as follows:

|                                        |  |                            |         |   |                           |   |          |             |      |   |        |  |  |   |           |  
|--------------------------------------- |  | -------------------------- | ------- | - | ------------------------- | - | -------- | ----------- | ---- | - | ------ |  |  | - | --------- | -
|                                        |  | For the Three Months Ended |         |   | For the Nine Months Ended |  
|                                        |  | June 30,                   |         |   | June 30,                  |  
|                                        |  |                            |         |   |                           |  
|                                        |  | 2002                       |         |   |                           |   |          |             | 2002 |   |        |  |  |  
|                                        |  | As Restated                |         |   | 2001                      |   |          | As Restated |      |   | 2001   | 
|                                        |  |                            |         |   |                           |   |          |             |      |   |        | 
|Net (loss) income                       |  | $                          | (9,801  | ) |                           | $ | 452,016  |             |      | $ | 50,002 |  |  | $ | 1,140,797 |  
|Foreign currency translation adjustment |  |                            | 100,059 |   |                           |   | (119,591 | )           |      |   | 33,165 |  |  |   | (288,530  | )
|                                        |  |                            |         |   |                           |   |          |             |      |   |        | 
|Comprehensive income                    |  | $                          | 90,258  |   |                           | $ | 332,425  |             |      | $ | 83,167 |  |  | $ | 852,267   |  
|                                        |  |                            |         |   |                           |   |          |             |      |   |        | 

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

On December 20, 2001, the Company and its 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 is engaged in the
development, manufacture and distribution of print engines, print management
software and a range of digital printing systems incorporating the Acquired
Companys proprietary electron-beam imaging technology. The Acquired Company
is the supplier of the print engines used in a number of the Companys
products.

The purchase price consisted of approximately $15.8 million in cash plus the
assumption of approximately $3.4 million of liabilities. The property acquired
included fixed assets, inventory, accounts receivable, 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. The wholly-owned
subsidiaries of the Company have also been renamed. New and former names are
as follows:

|                                 |  |                              |  |                |         |  |  | 
|-------------------------------- |  | ---------------------------- |  | -------------- | ------- |  |  | 
|New Name                         |  | Former Name                  |  |                | Country | 
|                                 |  |                              |  |               
|                                
|Delphax Technologies Inc.        |  | Check Technology Corporation |  | United States 
|Delphax Technologies Canada Ltd. |  | Check Technology Canada Ltd  |  | Canada        
|Delphax Technologies Limited     |  | Check Technology Limited     |  | United Kingdom
|Delphax Technologies S.A.        |  | Check Technology France S.A  |  | France        

The Company intends to continue to use the purchased assets in substantially
the same manner as used by the Acquired Company. As part of the acquisition,
the Company anticipated that efficiencies could be achieved in integrating the
two companies, and, as a result, included in accrued expenses in the
Consolidated Balance Sheets and in the cost of the acquisition $875,000 for
restructuring in accordance with Statement of Financial Accounting Standards
No. 141, Business Combinations(SFAS 141). On April 23, 2002, the Company
effected a workforce reduction, eliminating approximately 40 positions in the
Canadian subsidiary. Benefits are paid on either a lump-sum basis or over
time. As of June 30, 2002, the accrued liability for benefits payable in the
future was $523,000. It is estimated that this balance will be sufficient to
cover the remaining obligation under the workforce reduction plan.

8



---



##### Table of Contents



NOTE D  Acquisition of Delphax Systems, Corporate Name Change and Workforce
Reduction (Continued)

The following unaudited pro forma combined summary statements of operations for
the three- and nine-month periods ended June 30, 2002 and 2001 were prepared in
accordance with SFAS 141 and Statement of Financial Accounting Standards No.
142, Goodwill and Other Intangible Assetsand assumes the acquisition had
occurred at the beginning of the nine-month periods presented. The following
pro forma data reflects adjustments for interest expense in both periods, and
the nine months ended June 30, 2001 includes an expense of approximately $13.1
million for inventory reserves and an expense of approximately $2.0 million for
write-down of equipment and fixtures in the first quarter of the period. 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

|                                                   |  |                             |            |   |                            |   |            |             |      |   |            |   |  |   |             |  
|-------------------------------------------------- |  | --------------------------- | ---------- | - | -------------------------- | - | ---------- | ----------- | ---- | - | ---------- | - |  | - | ----------- | -
|                                                   |  | Three Months Ended June 30, |            |   | Nine Months Ended June 30, |  
|                                                   |  |                             |            |   |                            |  
|                                                   |  | 2002                        |            |   |                            |   |            |             | 2002 |   |            |   |  |  
|                                                   |  | As Restated                 |            |   | 2001                       |   |            | As Restated |      |   | 2001       |  
|                                                   |  |                             |            |   |                            |   |            |             |      |   |            |  
|Net sales                                          |  | $                           | 13,531,014 |   |                            | $ | 17,914,686 |             |      | $ | 44,059,851 |   |  | $ | 55,742,245  |  
|Net (loss) income                                  |  |                             | (9,801     | ) |                            |   | 506,295    |             |      |   | (318,075   | ) |  |   | (10,506,858 | )
|Basic and diluted
(loss) earnings
per common share |  |                             | (0.00      | ) |                            |   | 0.08       |             |      |   | (0.05      | ) |  |   | (1.71       | )

NOTE E  Credit Agreement

Effective December 20, 2001, the Company entered into a bank credit agreement,
secured by substantially all the assets of the Company, expiring December 19,
2004. The credit agreement provides two types of loans, term and revolving,
including 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, also outstanding as of June 30, 2002. 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: (i) the revolving credit commitment in effect
at such time and (ii) the borrowing base as then determined and computed. The
revolving credit commitment was $15.0 million as of June 30, 2002, and is
subject to a commitment fee of 0.5% per annum on the unused portion of the
commitment. As of June 30, 2002, revolving loans outstanding were $12.3
million. Term loans and revolving loans, at the Companys election, may be
outstanding as base rate loans or Eurodollar loans, provided that $3.0 million
of the principal amount of the revolving loans bear interest at the fixed rate
of 7.35% per annum.

Principal payments on the term loan are due in installments of $250,000 on the
last day of each March, June, September and December in each year commencing
with June 30, 2002, with any remaining principal and interest due on December
19, 2004. Similarly, the revolving credit commitment will be permanently
reduced by $250,000 on the last day of each March, June, September and December
in each year commencing June 30, 2002.

Because June 30, 2002, was a Sunday, the scheduled reductions in both the term
loan and the revolving credit commitment were effected on July 1, 2002. As of
that date, outstanding term loans were paid down to $3.75 million and the
revolving credit commitment was reduced to $14.75 million.

Outstanding base rate loans accrue interest at the banks prime rate plus 0.5%.
Outstanding Eurodollar loans accrue interest at adjusted LIBOR plus 3%. As of
June 30, 2002, $2.8 million was outstanding as base rate loans and $13.5
million was outstanding as Eurodollar loans, at a weighted average interest
rate of approximately 5.9%.

9



---



##### Table of Contents



NOTE E  Credit Agreement (Continued)

As of June 30, 2002, the Company was not in compliance with one of the
financial covenants of the credit agreement. The lender has advised the
Company that it is reserving all rights and remedies under the credit agreement
and will consider further requests for loans on a case-by-case basis. Since
the loan is in default, the lender could, but has not, declared the loans due
and payable. Thus, the Company has classified the entire outstanding loan
balance as a current liability.

NOTE F  Executive Loan

During fiscal 1995, the President and Chief Executive Officer exercised 40,000
options to purchase common stock at $2.00 per share, by executing a $148,996,
five-year, full recourse note, bearing interest at a floating rate, under the
Executive Loan Program. The purpose of the loan was to provide cash for the
exercise of the options and to pay the related income taxes. When exercised,
the Companys stock had a market value of $6.375 per share. In 1998, the loan
terms were amended to change the loan from full recourse to non-recourse, and
the floating rate was fixed at 5.25%. In May of fiscal 2000, the Company
extended the term of the loan to May 2001 and granted forgiveness of the loan
ratably over the extension period. These modifications resulted in the options
being treated as a fixed stock award. The Company recognized the fair market
value of the stock award of $225,000 over the extension period, which concluded
in the third quarter of fiscal 2001. As a result, no expense was incurred in
fiscal 2002; $135,186 was recognized as compensation expense related to the
stock award in fiscal 2001. Over the life of the loan, total principal
payments were $54,671.

NOTE G  Closure of the Companys Australian Subsidiary

In February 2001, the Company committed to a plan to close its subsidiary in
Australia, developed a formal exit plan to cease operations effective September
30, 2001, and communicated the plan to all 14 full- and part-time employees of
the subsidiary. The Company determined that operations in the market served by
the Australian subsidiary could be more profitably served by alternative means,
including independent distributors and sales agents. At the commitment date,
exit costs were estimated at $115,000, comprised solely of termination
benefits, which were included with selling, general and administrative expenses
in the Consolidated Statements of Operation and with accrued expenses in the
Consolidated Balance Sheets. Customer service and transition issues delayed
the office closing until the first quarter of fiscal 2002. As a result of this
delay and refinement of closing cost estimates, an additional charge of
$100,000 was recorded in the fourth quarter of fiscal 2001, bringing the total
one-time charge to $215,000. As of December 31, 2001, operations of the
subsidiary had ceased and all employees were terminated.

NOTE H  Accounting for Derivative Instruments and Hedging Activities

As of October 1, 2000, the Company adopted Statement of Financial Accounting
Standards Number 133, Accounting for Derivative Instruments and Hedging
Activities(SFAS 133). SFAS 133 requires companies to account for derivatives
and hedging activities, including the following two elements: (i) all
derivatives are measured at fair value and recognized in the balance sheets as
assets or liabilities, and (ii) derivatives meeting certain criteria could be
specifically designated as a hedge. The adoption of this Statement had no
impact on the Companys operating results or financial position.

10



---



##### Table of Contents



NOTE I  Revenue Recognition in Financial Statements

On December 3, 1999, the Securities and Exchange Commission issued SEC Staff
Accounting Bulletin Number 101, Revenue Recognition in Financial Statements
(SAB 101). SAB 101 summarizes certain of the staffs views on applying
generally accepted accounting principles to revenue recognition in financial
statements. SAB 101 was effective for the Company in the fourth quarter of
fiscal 2001 and had no material impact on the Companys operations or financial
position.

NOTE J  Business Combinations and Goodwill and Other Intangible Assets

On June 2001, the Financial Accounting Standards Board 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 D. The Company believes SFAS 142 will have no material effect on the
Companys results of operations or financial position.

NOTE K  Impairment or Disposal of Long-Lived Assets

In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets(SFAS 144), which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets
and supersedes SFAS 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of, and the accounting and reporting
provisions of APB Opinion No. 30, Reporting the Results of Operationsfor 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
Company expects to adopt SFAS 144 as of October 1, 2002 and does not expect
that adoption of the Statement will have a significant impact on the Companys
financial position and results of operations.

11



---



##### Table of Contents



NOTE L  Restatement

The Companys financial statements for the quarter ended June 30, 2002, and for
the fiscal-year-to-date period then ended, have been restated from the amounts
previously reported to correct an error in the consolidation of intercompany
transactions between the parent corporation and its Canadian subsidiary, which
was acquired in December 2001. The error resulted in an overstatement of cost
of sales, the related income tax
benefit and accounts payable, and an understatement of inventory. The effects of correcting this error are summarized
below:

Statements of Operations  Restatement

|                                                   |  |                            |            |   |                           |   |            |          |               |   |             |   |  |   |            |  
|-------------------------------------------------- |  | -------------------------- | ---------- | - | ------------------------- | - | ---------- | -------- | ------------- | - | ----------- | - |  | - | ---------- | -
|                                                   |  | For the Three Months Ended |            |   | For the Nine Months Ended |  
|                                                   |  | June 30, 2002              |            |   | June 30, 2002             |  
|                                                   |  |                            |            |   |                           |  
|                                                   |  | As Previously              |            |   |                           |   |            |          | As Previously |   |             |   |  |  
|                                                   |  | Reported                   |            |   | As Restated               |   |            | Reported |               |   | As Restated |  
|                                                   |  |                            |            |   |                           |   |            |          |               |   |             |  
|Net sales                                          |  | $                          | 13,531,014 |   |                           | $ | 13,531,014 |          |               | $ | 38,375,595  |   |  | $ | 38,375,595 |  
|Cost of sales                                      |  |                            | 6,635,960  |   |                           |   | 5,945,671  |          |               |   | 19,070,880  |   |  |   | 18,380,591 |  
|Income from systems sales and service              |  |                            | (645,794   | ) |                           |   | 44,495     |          |               |   | (282,162    | ) |  |   | 408,127    |  
|Loss before income taxes                           |  |                            | (816,890   | ) |                           |   | (126,601   | )        |               |   | (724,787    | ) |  |   | (34,498    | )
|Income tax benefit                                 |  |                            | (358,400   | ) |                           |   | (116,800   | )        |               |   | (326,100    | ) |  |   | (84,500    | )
|Net (loss) income                                  |  |                            | (458,490   | ) |                           |   | (9,801     | )        |               |   | (398,687    | ) |  |   | 50,002     |  
|Basic and diluted (loss) earnings
per common share |  | $                          | (0.07      | ) |                           | $ | (0.00      | )        |               | $ | (0.06       | ) |  | $ | 0.01       |  

Balance Sheets  Restatement

|                                                        |  |                     |            |  |             |   |            | 
|------------------------------------------------------- |  | ------------------- | ---------- |  | ----------- | - | ---------- | 
|                                                        |  | As of June 30, 2002 |           
|                                                        |  |                     |           
|                                                        |  | As Previously       |            |  |             |   |           
|                                                        |  | Reported            |            |  | As Restated |  
|                                                        |  |                     |            |  |             |  
|Inventory                                               |  | $                   | 23,179,958 |  |             | $ | 23,397,394 | 
|Deferred income taxes (asset)                           |  |                     | 1,301,654  |  |             |   | 1,060,054  | 
|Accounts payable                                        |  |                     | 4,365,867  |  |             |   | 3,893,014  | 
|Shareholders equity                                    |  |                     | 17,668,406 |  |             |   | 18,117,095 | 
|Total assets/Total liabilities and
shareholders equity |  |                     | 43,349,278 |  |             |   | 43,325,114 | 

12



---



##### Table of Contents






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

Results of Operations

The Condensed Consolidated Statements of Operations for the three and nine
months ended June 30, 2002 include the post-acquisition results of the business
acquired by the Company on December 20, 2001. See Note D 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 Nine Months Ended |      
|                                     |                                     |  | June 30,                   |      |   | June 30,                  |      
|                                     |                                     |  |                            |      |   |                           |      
|                                     |                                     |  | 2002                       |      |   |                           |       |      |             | 2002 |       |      |   |  |      
|                                     |                                     |  | As Restated                |      |   | 2001                      |       |      | As Restated |      |       | 2001 |  
|                                     |                                     |  |                            |      |   |                           |       |      |             |      |       |      |  
|Sales:                               |                                     |  |                            |      |   |                           |       |      |             |      |       |      |   |  |       |     
|                                     | Printing equipment                  |  |                            | 17.3 | % |                           |       | 64.6 | %           |      |       | 31.4 | % |  |       | 65.8 | %
|                                     | Maintenance, spares and supplies    |  |                            | 82.7 |   |                           |       | 35.4 |             |      |       | 68.6 |   |  |       | 34.2 |  
|                                     |                                     |  |                            |      |   |                           |       |      |             |      |       |     
|NET SALES                            |                                     |  | 100.0                      |      |   |                           | 100.0 |      |             |      | 100.0 |      |   |  | 100.0 |     
|Costs and Expenses:                  |                                     |  |                            |      |   |                           |       |      |             |      |       |      |   |  |       |     
|                                     | Cost of sales                       |  |                            | 44.0 |   |                           |       | 52.3 |             |      |       | 47.9 |   |  |       | 52.1 |  
|                                     | Selling, general and administrative |  |                            | 43.1 |   |                           |       | 35.7 |             |      |       | 40.1 |   |  |       | 35.9 |  
|                                     | Research and development            |  |                            | 12.6 |   |                           |       | 6.2  |             |      |       | 10.9 |   |  |       | 6.2  |  
|                                     |                                     |  |                            |      |   |                           |       |      |             |      |       |     
|                                     |                                     |  | 99.7                       |      |   |                           | 94.2  |      |             |      | 98.9  |      |   |  | 94.2  |     
|                                     |                                     |  |                            |      |   |                           |       |      |             |      |       |     
|INCOME FROM SYSTEM SALES AND SERVICE |                                     |  | 0.3                        |      |   |                           | 5.8   |      |             |      | 1.1   |      |   |  | 5.8   |     
|Interest expense                     |                                     |  | 1.8                        |      |   |                           | 0.2   |      |             |      | 1.5   |      |   |  | 0.1   |     
|Interest income                      |                                     |  | (0.1                       | )    |   |                           | (0.1  | )    |             |      | (0.1  | )    |   |  | (0.1  | )   
|Net realized exchange (gain) loss    |                                     |  | (0.2                       | )    |   |                           | 0.3   |      |             |      | (0.0  | )    |   |  | 0.5   |     
|Net unrealized exchange (gain)       |                                     |  | (0.3                       | )    |   |                           | (1.3  | )    |             |      | (0.2  | )    |   |  | (0.3  | )   
|                                     |                                     |  |                            |      |   |                           |       |      |             |      |       |     
|(LOSS) INCOME BEFORE INCOME TAXES    |                                     |  | (0.9                       | )    |   |                           | 6.7   |      |             |      | (0.1  | )    |   |  | 5.6   |     
|Income tax (benefit) expense         |                                     |  | (0.8                       | )    |   |                           | 2.6   |      |             |      | (0.2  | )    |   |  | 2.1   |     
|                                     |                                     |  |                            |      |   |                           |       |      |             |      |       |     
|NET (LOSS) INCOME                    |                                     |  | (0.1                       | )%   |   |                           | 4.1   | %    |             |      | 0.1   | %    |   |  | 3.5   | %   
|                                     |                                     |  |                            |      |   |                           |       |      |             |      |       |     

The Companys revenues consists of (i) sales of printing systems and related
equipment, and (ii) maintenance contracts, spare parts, supplies and consumable
items. For the three-month period ended June 30, 2002 (third quarter of fiscal
2002), net revenues were $13.5 million, up 23% from $11.0 million for the
three-month period ended June 30, 2001 (third quarter of fiscal 2001).
Revenues from the sale of printing equipment were $2.3 million for the third
quarter of fiscal 2002, down 67% from $7.1 million for the same period in
fiscal 2001. For the nine months ended June 30, 2002, net revenues were $38.4
million, up 17% from $32.8 million for the same period a year ago. Revenues
from the sale of printing equipment for the first nine months of fiscal 2002
were $12.0 million, down 44% from $21.6 million for the first nine months of
fiscal 2001.

The Companys printing systems primarily consist of the Imaggiaproduct line,
the Checktronicand Foliotronicproduct lines (our legacy products) and the PS
MICRsystems product line (manufactured by Océ Printing Systems
GmbH and sold on a private label basis as the PS75 MICRand PS155 MICR). In
addition, with the acquisition of the Canadian subsidiary in December 2001, the
Company expanded its product lines to include the CR Seriesand RS Seriesof
continuous-feed print systems. In June 2002, the Company reached an agreement
with LexisNexis

13



---



##### Table of Contents



Matthew Bender for the establishment of the first major
reference site for the Delphax high-speed CR Seriespublishing system. This
installation, which currently includes two CR900Pcontinuous-feed digital
publishing systems capable of producing 900 pages per minute, is significant in
that it represents the Companys initial step into the publishing market.

The decline in revenues from printing equipment for the first nine months of
fiscal 2002 compared with the same period a year ago was primarily due to
significantly lower sales of the Imaggiaproduct line, only slightly offset by
stronger sales of the Foliotronicand other legacy products in the second
quarter of fiscal 2002. Printing equipment revenues for the three and nine
months ended June 30, 2002 included (i) $665,000 and $7.7 million,
respectively, from the sale of the Companys Imaggiaproduct line, a decrease
of 88% and 56% from the $5.6 million and $17.5 million for the comparable
year-ago periods and (ii) $1.7 million and $4.3 million, respectively, for all
other products combined, up 14% and 7%, respectively, from year-ago sales of
$1.5 million and $4.1 million. The Company attributes lower printing equipment
sales to customer postponement of equipment purchases in a period of economic
uncertainty for high-end capital equipment.

For the third quarter of fiscal 2002, revenues from maintenance contracts,
spare parts, supplies and consumable items increased 187%, from $3.9 million
for the third quarter of fiscal 2001 to $11.2 million for the most recent
fiscal quarter. Revenues from maintenance contracts, spares parts, supplies
and consumable items for the nine-month periods increased 135%, from $11.2
million for the first nine months of fiscal 2001 to $26.3 million for the first
nine months of fiscal 2002. The increases between the quarter and year-to-date
periods were due primarily to incremental revenues from the fiscal 2002
acquisition of the Canadian subsidiary, which contributed $12.0 million to
fiscal-year-to-date revenues and $5.9 million in the third quarter. In
addition, revenues from maintenance contracts, spare parts, supplies and
consumable items were also higher due to the larger installed base of Imaggia.
For both these reasons, the Company expects domestic revenues from maintenance
contracts, spare parts, supplies and consumable items to continue throughout
fiscal 2002 at levels higher than in fiscal 2001.

The Companys gross margin percentages for the third quarter and first nine
months of fiscal 2002 were 56% and 52%, respectively, compared with 48% for
both the quarter and fiscal-year-to-date periods in fiscal 2001. The improved
margins are primarily due to the increase in consumables and supplies revenues
generated by the Canadian acquisition. In general for fiscal 2002, the Company
anticipates that its gross margin percentage will be slightly higher than it
was for fiscal 2001.

Selling, general and administrative expenses for the third quarter increased
48%, from $3.9 million in fiscal 2001 to $5.8 million in fiscal 2002, and
increased as a percentage of net sales from 36% to 43%. Similarly, for the
nine-month periods ended June 30, 2002 and 2001, selling, general and
administrative expense increased 30%, from $11.8 million in fiscal 2001 to
$15.4 million in fiscal 2002. Research and development expenses for the
three-month periods ended June 30, 2002 and 2001 were $1.7 million and
$680,000, respectively, higher by 151% year to year, and increased as a
percentage of net sales from 6% to 13% for the most recent fiscal quarter.
Similarly, for the nine-month periods ended June 30, 2002 and 2001, research
and development expense increased 106%, from $2.0 million for the first nine
months of fiscal 2001, to $4.2 million for the first nine months of fiscal
2002. These significant increases in both selling, general and administrative
expenses and research and development expenses were primarily due to the
acquisition of the Canadian subsidiary, the impact of which is reflected in
full for the second and third quarters of fiscal 2002. In particular, selling,
general and administrative expenses were higher primarily 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. The Company anticipates that its expense levels through the
remainder of fiscal 2002 will be higher than in fiscal 2001 due to the
acquisition.

Interest expense for the three and nine months ended June 30, 2002, was
$251,000 and $556,000, respectively, compared with $25,000 and $41,000 for the
same periods in fiscal 2001. Interest income for the three and nine months
ended June 30, 2002, was $10,000 and $23,000, respectively, compared with
$10,000 and $38,000 for the same periods in fiscal 2001. Due to the Company
borrowing to finance the acquisition of the Canadian subsidiary,
and, to a lesser extent, to fund increases in inventory in the fiscal 2002
periods, the Company incurred higher interest expense and had less funds
available for short-term investments in the current versus prior fiscal year
periods.

14



---



##### Table of Contents



For the three and nine months ended June 30, 2002, the Company realized net
exchange gains of $23,000 and $13,000, respectively, compared with net realized
exchange losses of $34,000 and $144,000, respectively, for the same periods in
the previous fiscal year. In the first quarter of fiscal 2002, a realized
exchange loss of $152,000 was incurred due to recognition of accumulated
unrealized exchange losses of the Australian subsidiary upon closure of the
subsidiary during the quarter. The Company incurs realized foreign exchange
gains and losses on currency conversion transactions. The Company experiences
unrealized foreign currency gains and losses, which are reflected on the
Companys statements of operations, with unrealized gains due to the weakening,
and unrealized 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. Net
unrealized exchange gains for the three and nine months ended June 30, 2002
were $47,000 and $77,000, respectively, compared with net unrealized exchange
gains of $153,000 and $90,000, respectively, for the same periods in fiscal
2001. The Company anticipates that it will continue to have transactional and
translational foreign exchange gains or losses in the future, although
strategies to reduce the size of the gains or losses will be reviewed and
implemented whenever economical and practical.

Income tax benefit for the three months ended June 30, 2002 was $116,800,
compared with income tax expense of $288,000 for the third quarter of fiscal
2001. For the nine months ended June 30, 2002, income tax benefit was $84,500,
compared with income tax expense of $710,000 for the same period in fiscal
2001. The income tax benefit for fiscal 2002 reflects the estimated annual effective tax rate of 35% and the recognition of a previously reserved foreign net operating loss. Interim effective tax
rates vary based on sources of income or loss and estimates of the annual
effective tax rate for the fiscal year.

For the third quarter of fiscal 2002, the Companys basic and diluted loss per
share was $0.00, compared with basic and diluted earnings per share of $0.07
for the comparable prior year period. For the nine months ended June 30, 2002
and 2001, basic and diluted earnings per share were $0.01 and $0.18,
respectively. The decline in earnings in both the three- and nine-months
periods was primarily attributable to the significant decrease in equipment
revenues as customers postponed equipment purchases in a period of continued
economic uncertainty, significantly higher operating expense levels due to the
acquisition of the Canadian subsidiary and interest on debt financing for the
acquisition, only partially offset by the significantly higher maintenance
spares and supplies revenues and related margins generated by the Canadian
acquisition and the tax benefit for the fiscal 2002 periods.

In February 2001, the Company committed to close its subsidiary in Australia,
developed a formal exit plan to cease operations effective September 30, 2001,
and communicated the plan to all 14 full- and part-time employees of the
subsidiary. The Company determined that operations in the market served by the
Australian subsidiary could be more profitably served by alternative means,
including independent distributors and sales agents. At the commitment date,
exit costs were estimated at $115,000. Customer service and transition issues
delayed the office closing until the first quarter of fiscal 2002. As a result
of this delay and refinement of closing cost estimates, an additional charge of
$100,000 was recorded in the fourth quarter of fiscal 2001, bringing the total
one-time charge to $215,000. As of December 31, 2001, operations of the
subsidiary had ceased and all employees were terminated. By taking this
action, the Company anticipated eliminating annual operating expenses of
approximately $500,000, beginning in fiscal 2002, with no further loss of
revenues from Pacific Rim customers as a result of this change.

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 June 30, 2002, the accrued
liability for benefits payable in the future was $523,000. 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.

15



---



##### Table of Contents



Market Risk

The Company has foreign subsidiaries located in Canada, England and France,
does business in 60 countries and generates approximately 24% of its revenues
from outside North America. This percentage is significantly lower in fiscal
2002 than in fiscal 2001 due to the maintenance, spares and supplies revenues
derived from the acquisition of the Canadian subsidiary as, predominantly, this
business is with U.S. customers. The Companys ability to sell its products in
foreign markets may be affected by changes in economic, political or market
conditions in these foreign markets.

The Companys net investment in its foreign subsidiaries was $7.1 million and
$5.7 million at June 30, 2002 and September 30, 2001, 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 dollar against foreign currencies was not
material in the quarter ended June 30, 2002.

From time to time, the Company has entered into foreign exchange contracts as a
hedge against specific foreign currency receivables. In the first nine months
of fiscal 2002, the Company did not enter into any foreign exchange contracts
and does not anticipate entering into any such contracts through the remainder
of the fiscal year.

Factors Affecting Results of Operations

The Companys revenues are subject to fluctuations which may be material.

In January 2000, the Company entered into a three-year equipment and service
contract with a significant customer for Imaggiasystems and related supplies
and consumables that was valued at approximately $40.0 million. Equipment
deliveries under the contract began in the second quarter of fiscal 2000 and
concluded in the third quarter of fiscal 2001. In the fourth quarter of fiscal
2001, the Company executed a new contract with this customer, valued at
approximately $19.5 million, of which approximately $11.5 million was for
Imaggiasystems and an estimated $8.0 million over three years is for supplies
and consumable items. Equipment deliveries under the most recent contract
concluded in the second quarter of fiscal 2002. Under both contracts, the
Company recorded printing systems and related equipment revenues with the
delivery of each component piece of equipment. The Company records revenues
for maintenance, spares and supplies based on the monthly usage of these
components. Revenues from this customer have been significant, representing
57% and 32% of total revenues for fiscal 2001 and 2000, respectively. The
Company anticipates that revenues from this customer will also be significant
in fiscal 2002, but to a lesser extent than in fiscal 2001.

On December 20, 2001, the Company and its 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 is engaged in the
development, manufacture and distribution of print engines, print management
software and a range of digital printing systems incorporating the Acquired
Companys proprietary electron-beam imaging technology. The Acquired Company
is the supplier of the print engines used in a number of the Companys
products. Through June 30, 2002, the acquisition has contributed approximately
$12.0 million in incremental revenues. The Company anticipates that the
acquisition will contribute incremental maintenance, spares and supplies
revenues in the fourth quarter in excess of $5.0 million and have a positive
earnings impact. While the Company expects the acquisition to provide
increased revenues and incremental operating income in the future, there can be
no assurance that actual results will be as anticipated. In addition, the
acquisition expanded the Companys product lines to include the CR Seriesand
RS Seriesof continuous-feed print systems. In June of 2002, the Company
reached an agreement with LexisNexis Matthew Bender for the establishment of
the first major reference site for the Delphax high-speed CR Seriespublishing
system. To date no other CR Seriessystems and only one RS Seriessystem have
been sold and there can be no assurance that such systems will be sold in the
future.

The Companys PS MICRsystems product line is marketed under an agreement with
Océ Printing Systems GmbH for the right to private label, sell and service the
PS75 MICRproduct and other high-performance sheet-fed MICR

16



---



##### Table of Contents



and non-MICR printing systems manufactured by Océ. The Company agreed to
purchase a minimum number of PS75 MICRunits from Océ to maintain the exclusive
right to sell the PS75 MICRproduct. The Company purchased less than the
minimum, and as a result, the Company incurred a penalty and forfeited certain
rights of exclusivity. The Company plans to continue offering the PS MICR
systems for sale, but there is no assurance that significant sales will be
made.

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

Euro Conversion

On January 1, 1999, certain member countries of the European Union established
fixed conversion rates between their existing currencies and the European
Unions common currency (Euro). The transition period for the introduction of
the Euro was from January 1, 1999 to January 1, 2002. The Company prepared for
the introduction of the Euro and evaluated methods to address the many issues
involved with the introduction of the Euro, including the conversion of
information technology systems, recalculating currency risk, strategies
concerning continuity of contracts, and ramifications on the processes for
preparing taxation and accounting records. The conversion on January 1, 2002
had no material impact on the Companys financial statements.

Revenue Recognition

On December 3, 1999, the Securities and Exchange Commission issued SEC Staff
Accounting Bulletin Number 101 Revenue Recognition in Financial Statements(SAB
101). SAB 101 summarizes certain of the SEC staffs views on applying
generally accepted accounting principles to revenue recognition in financial
statements. SAB 101 was effective for the Company in the fourth quarter of
fiscal 2001 and had no material impact on the Companys operations or financial
position.

Liquidity and Capital Resources

Working capital was $13.6 million at June 30, 2002, compared with $16.9 million
at September 30, 2001. Of the $3.3 million decrease, approximately $15.1
million was a result of borrowing on the credit facility to purchase the
Canadian subsidiary, partially offset by the current assets and current
liabilities of the acquired entity. The Companys inventory levels increased
to $23.4 million at June 30, 2002, from $11.8 million at September 30, 2001.
Inventory acquired from acquisition of the Canadian subsidiary comprised
approximately $8.7 million of the increase. Accounts receivable increased to
$11.3 million at June 30, 2002, from $10.1 million at September 30, 2001, with
approximately $4.1 million of the increase due to the Canadian acquisition,
offset by collection of receivables and lower second and third quarter
equipment sales. Cash and short-term investments amounted to $978,000 at June
30, 2002, compared with $592,000 at September 30, 2001. The increase in cash
and short-term investments was primarily due to the timing of borrowing and
repaying amounts under the Companys credit facility. Deferred revenue was
$338,000 at June 30, 2002, compared with $1.1 million at September 30, 2001.
This decrease was principally due to completion of deliveries under the
equipment portion of the equipment contract with the significant customer that
is described above and the earning of the related deferred revenue. As of June
30, 2002, deferred revenue was comprised primarily of unearned maintenance
contract revenues.

17



---



##### Table of Contents



The Company has undertaken no significant investing activities. No significant
capital investment has been undertaken or is planned, and at June 30, 2002, the
Company had no material commitments for capital expenditures. Short-term
investments are purchased as cash is available and sold as they mature.

To finance the acquisition of the Canadian subsidiary on December 20, 2001, the
Company entered into a bank credit agreement, secured by substantially all the
assets of the Company, expiring December 19, 2004. The credit agreement
provides two types of loans, term and revolving, including 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, also outstanding as of
June 30, 2002. 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:
(i) the revolving credit commitment in effect at such time and (ii) the
borrowing base as then determined and computed. The revolving credit
commitment was $15.0 million as of June 30, 2002, and is subject to a
commitment fee of 0.5% per annum on the unused portion of the commitment. As
of June 30, 2002, revolving loans outstanding were $12.3 million. Term loans
and revolving loans, at the Companys election, may be outstanding as base rate
loans or Eurodollar loans, provided that $3.0 million of the principal amount
of the revolving loans bear interest at the fixed rate of 7.35% per annum.

Principal payments on the term loan are due in installments of $250,000 on the
last day of each March, June, September and December in each year commencing
with June 30, 2002, with any remaining principal and interest due on December
19, 2004. Similarly, the revolving credit commitment will be permanently
reduced by $250,000 on the last day of each March, June, September and December
in each year commencing June 30, 2002.

Because June 30, 2002, was a Sunday, the scheduled reductions in both the term
loan and the revolving credit commitment were effected on July 1, 2002. As of
that date, outstanding term loans were paid down to $3.75 million and the
revolving credit commitment was reduced to $14.75 million.

Outstanding base rate loans accrue interest at the banks prime rate plus 0.5%.
Outstanding Eurodollar loans accrue interest at adjusted LIBOR plus 3%. As of
June 30, 2002, $2.8 million was outstanding as base rate loans and
$13.5 million was outstanding as Eurodollar loans, at a weighted average
interest rate of approximately 5.9%.

As of June 30, 2002, the Company was not in compliance with one of the
financial covenants of the credit agreement. The lender has advised the
Company that it is reserving all rights and remedies under the credit agreement
and will consider further requests for loans on a case-by-case basis. Since
the loan is in default, the lender could, but has not, declared the loans due
and payable. Thus, the Company has classified the entire outstanding loan
balance as a current liability.

The Company is engaged in discussions with the lender to determine remedies and
renegotiate the terms of the credit agreement. While the Company believes it
will be successful in renegotiating the terms of the credit agreement, there is
no assurance that it will be. The Companys ability to fund its future working
capital requirements is dependent on successful completion of these
negotiations.

Cautionary Statement

Statements included in this Managements Discussion and Analysis of Financial
Condition and Results of Operations, the Companys Annual Report, the Companys
Form 10-K, in other filings with the Securities and Exchange Commission, in the
Companys press releases and in oral statements made to securities market
analysts and 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.

18



---



##### Table of Contents






SIGNATURES

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

|     |  |                  |  |                                                                                      
|---- |  | ---------------- |  | -------------------------------------------------------------------------------------
|     |  |                  |  | DELPHAX TECHNOLOGIES INC.                                                            
|     |  |                  |  | Registrant                                                                           
|    
|Date |  | December 9, 2002 |  | /s/ Jay A. HermanJay A. Herman
Chairman and Chief Executive Officer                  
|    
|Date |  | December 9, 2002 |  | /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/A 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; and

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.

|     |  |                  |  |                                     
|---- |  | ---------------- |  | ------------------------------------
|Date |  | December 9, 2002 |  | /s/ Jay A. Herman                   
|     |  |                  |  |                                     
|     |  |                  |  | Jay A. Herman                       
|     |  |                  |  | Chairman and Chief Executive Officer

19



---



##### Table of Contents



I, Robert M. Barniskis, certify that:

1. I have reviewed this quarterly report on Form 10-Q/A 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; and

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.

|     |  |                  |  |                                           
|---- |  | ---------------- |  | ------------------------------------------
|Date |  | December 9, 2002 |  | /s/ Robert M. Barniskis                   
|     |  |                  |  |                                           
|     |  |                  |  | Robert M. Barniskis                       
|     |  |                  |  | Vice President and Chief Financial Officer

20