<PAGE>

                                  FORM 10-QSB/A

                       Securities and Exchange Commission
                              Washington D.C. 20549

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

                     For the fiscal quarter ended: June 30, 2003
                       Commission file number: 000-49647


                             GRAPHCO HOLDINGS CORP.
             (Exact name of registrant as specified in its charter)

           Delaware                                  75-2926438
(State or other jurisdiction of                   (I.R.S. Employer
Incorporation or organization)                    Identification No.)


                               41 University Drive
                          Newtown, Pennsylvania, 18940
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (215) 497-9170
              (Registrant's telephone number, including area code)

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

         Indicate the number of shares  outstanding of each of the  registrant's
classes of common stock: As of August 25, 2003, there were 19,974,153  shares of
the Issuer's  common stock,  par value $0.001,  issued and  outstanding of which
17,351,553  shares  are  in  the  name  of  our  operating  subsidiary,  Graphco
Technologies, Inc. and are being distributed pro rata to the former shareholders
of Graphco Technologies, Inc.


<PAGE>

                                      INDEX


PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

<TABLE>
<CAPTION>
<S>                                                                                                <C>
Condensed Consolidated Balance Sheets
June 30, 2003 (unaudited) And December 31, 2002.............................................        2

Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 2003 and 2002 and period from
January 1, 1998 (date of Inception) to June 30, 2003 (unaudited) ...........................        3

Condensed Consolidated Statements of Changes in Stockholders' Deficiency
Six Months ended June 30, 2003 and period from January 1, 1998 (date of Inception)
to June 30, 2003 (unaudited) ...............................................................      4-7

Condensed Consolidated Statements of Cash Flows
Six Months ended June 30, 2003 and 2002 and Period from January 1, 1998
(date of Inception) to June 30, 2003 (unaudited) ...........................................      8-9


Notes to Condensed Consolidated Financial Statements (unaudited) ...........................    10-17

Item 2.  Management's Discussion and Analysis or Plan of Operation .........................    18-22

Item 3. Controls and Procedures.............................................................       22

PART II.  OTHER INFORMATION

Item 1. Legal Proceedings ..................................................................       23

Item 2. Changes in Securities ..............................................................       23

Item 3. Defaults upon Senior Securities ....................................................       23

Item 4. Submission of Matters to a Vote of Security Holders.................................       24

Item 5. Other Information...................................................................       24

Item 6. Exhibits and Reports on Form 8-K....................................................       24

Signatures..................................................................................       25

</TABLE>



<PAGE>

Item 1. Financial Statements

                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                         ( A Development Stage Company)
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                 JUNE 30, 2003 (Unaudited) AND DECEMBER 31, 2002


<TABLE>
<CAPTION>
                                     ASSETS
                                     ------

                                                                                        June 30,          December 31,
                                                                                          2003                2002
                                                                                    -----------------    --------------
                                                                                      (Unaudited)
     Current Assets:
<S>                                                                                <C>                   <C>
        Cash                                                                            $     28,164       $        955
        Accounts receivable                                                                    1,808              1,808
        Prepaid expenses                                                                      77,710             65,708
                                                                                    -----------------    --------------
            Total current assets                                                             107,682             68,471

     Property and equipment, net of accumulated depreciation
       and amortization of $274,474 and $247,820                                             122,447            149,101
     Investments, at equity                                                                       --                 --
     Other assets                                                                             22,432             22,432
                                                                                    -----------------    --------------

                               Totals                                                   $    252,561       $    240,004
                                                                                    =================    ==============


                                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY
                                    ----------------------------------------

Current Liabilities:
     Convertible notes payable                                                          $  2,574,908       $  2,574,908
     Accounts payable and other accrued expenses                                           4,080,162          3,465,059
     Other notes payable                                                                     209,000            204,000
                                                                                    -----------------    --------------

        Total liabilities                                                                  6,864,070          6,243,967
                                                                                    -----------------    --------------

Commitments and contingencies


Stockholders' deficiency:
     Preferred Stock, no par value, 5,000,000 shares authorized:
        Series A convertible preferred stock; 333,333 shares authorized;
         225,029 shares issued and outstanding (aggregate liquidation
         preference - $ 3,579,948 and $3,495,563)                                          3,265,383          3,265,383
        Series B convertible preferred stock, no par value; 4,500,000 shares
         authorized; 469,000 shares issued and outstanding (aggregate
         liquidation preference $ 938,000)                                                        --            415,760
     Subscription receivable for 53,000 shares of Series B
         convertible preferred stock                                                              --            (53,000)
     Common Stock, par value $.001 per share; 40,000,000 shares authorized:
       19,798,968 and 18,511,793 shares issued and outstanding                                19,799             18,512
     Additional paid-in capital                                                           16,131,348         14,444,637
     Unearned compensation                                                                  (237,661)          (328,891)
     Accumulated deficit, including $24,921,618 and $22,897,604
       accumulated in the development stage                                              (25,790,378)       (23,766,364)
                                                                                     ----------------    --------------
        Total stockholders' deficiency                                                    (6,611,509)        (6,003,963)
                                                                                     ----------------    --------------

                               Totals                                                   $    252,561       $    240,004
                                                                                     ================    ==============
</TABLE>

See Notes To Condensed Consolidated Financial Statements.


                                        2

<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                         ( A Development Stage Company)
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
              THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002 AND
                 PERIOD FROM JANUARY 1, 1998 (DATE OF INCEPTION)
                          TO JUNE 30, 2003 (UNAUDITED)



<TABLE>
<CAPTION>
                                                     Three Months Ended                Six Months Ended
                                                 ----------------------------    ----------------------------    Cumulative-
                                                   June 30,        June 30,        June 30,        June 30,      Development
                                                     2003            2002            2003            2002           Stage
                                                 ------------    ------------    ------------    ------------    ------------
<S>                                              <C>              <C>              <C>              <C>              <C>
Revenues                                         $         --    $    215,867    $         --    $    277,986    $  1,532,975
Cost of revenue                                            --              --              --          10,356         713,002
                                                 ------------    ------------    ------------    ------------    ------------
Gross profit                                               --         215,867              --         267,630         819,973
                                                 ------------    ------------    ------------    ------------    ------------

Operating expenses:
     Research and development                          88,319          74,481         180,009         197,763       4,915,222
     Selling, general and administrative              615,442         651,507       1,571,891       1,426,948      16,319,766
                                                 ------------    ------------    ------------    ------------    ------------
              Totals                                  703,761         725,988       1,751,900       1,624,711      21,234,988
                                                 ------------    ------------    ------------    ------------    ------------

Loss from operations                                 (703,761)       (510,121)     (1,751,900)     (1,357,081)    (20,415,015)
                                                 ------------    ------------    ------------    ------------    ------------

Other income (expense):
     Interest income                                       --              76              --             138         184,354
     Interest expense, including amortization of
       deferred loan fees and debt discount of
       $-0-, $283,583, $-0-, $1,101,945 and
       $2,807,284                                    (136,057)       (396,795)       (272,114)     (1,311,629)     (3,763,414)
     Loss from equity investees                            --              --              --              --        (949,420)
     Other                                                 --              --              --              --          21,877
                                                 ------------    ------------    ------------    ------------    ------------
              Totals                                 (136,057)       (396,719)       (272,114)     (1,311,491)     (4,506,603)
                                                 ------------    ------------    ------------    ------------    ------------

Net loss                                         $   (839,818)   $   (906,840)   $ (2,024,014)   $ (2,668,572)   $(24,921,618)
                                                 ============    ============    ============    ============    ============

Basic loss per common share                      $      (0.04)   $      (0.05)   $     (0.11)    $      (0.15)
                                                 ============    ============    ============    ============

Basic weighted average number of common
  shares outstanding                               19,407,957      17,323,553      19,222,574      17,323,553
                                                 ============    ============    ============    ============
</TABLE>

See Notes To Condensed Consolidated Financial Statements.

                                        3

<PAGE>

                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

    CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
         SIX MONTHS ENDED JUNE 30, 2003 AND PERIOD FROM JANUARY 1, 1998
                (DATE OF INCEPTION) TO JUNE 30, 2003 (Unaudited)


<TABLE>
<CAPTION>
                                                   Series A Convertible
                                                      Preferred Stock                Common Stock
                                                 -------------------------    ---------------------------     Additional
                                                  Number of                     Number of                      Paid-in
                                                   Shares         Amount         Shares          Amount        Capital
                                                 ------------   -----------   ------------    ------------   -------------
<S>              <C>                             <C>                             <C>          <C>             <C>
Balance, January 1, 1998                         1,000,000                       3,721,695    $      3,722    $   418,750
2.68975-for-1 stock split                                                        6,282,378           6,282         (6,282)
Stock issued for services                                                          360,000             360           (360)
Detachable warrants issued in connection
   with bridge financing                                                                                           86,064
Retirement of preferred shares                  (1,000,000)
Net loss
                                                ----------                     ----------     ------------     ----------
Balance, December 31, 1998                              --                      10,364,073          10,364        498,172
Stock issued in connection with private
   placement                                                                     5,881,054           5,881      6,389,287
Stock issued in connection with
   acquisition                                                                      23,810              24         31,644
Stock exchanged for the retirement of
   bridge notes                                                                    474,506             474        564,618
Net loss
                                                ----------                     ----------     ------------     ----------
Balance, December 31, 1999                              --                      16,743,443          16,743      7,483,721
Stock issued in connection with
   private placement                               225,029    $  3,265,383
Stock warrants exercised                                                           246,659             247        327,809
Stock issued in connection with acquisition                                        143,999             144        191,375
Stock issued for services                                                           50,000              50         66,450
Warrants issued for services                                                                                       31,280
Net loss
                                                 ---------      ----------    ------------    ------------   -------------
Balance, December 31, 2000                         225,029       3,265,383      17,184,101          17,184      8,100,635
</TABLE>

<TABLE>
<CAPTION>
                                                   Accumulated
                                                    Deficit           Total
                                                  -------------    ------------
<S>              <C>                             <C>              <C>
Balance, January 1, 1998                         $    (820,132)   $   (397,660)
2.68975-for-1 stock split
Stock issued for services
Detachable warrants issued in connection
   with bridge financing                                                86,064
Retirement of preferred shares
Net loss                                              (742,295)       (742,295)
                                                    ----------      -----------
Balance, December 31, 1998                          (1,562,427)     (1,053,891)
Stock issued in connection with private
   placement                                                         6,395,168
Stock issued in connection with
   acquisition                                                          31,668
Stock exchanged for the retirement of
   bridge notes                                                        565,092
Net loss                                            (1,489,397)     (1,489,397)
                                                    ----------      -----------
Balance, December 31, 1999                          (3,051,824)      4,448,640
Stock issued in connection with
   private placement                                                 3,265,383
Stock warrants exercised                                               328,056
Stock issued in connection with acquisition                            191,519
Stock issued for services                                               66,500
Warrants issued for services                                            31,280
Net loss                                            (7,157,185)     (7,157,185)
                                                    ----------      -----------
Balance, December 31, 2000                         (10,209,009)      1,174,193
</TABLE>

                                          4
<PAGE>

                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

    CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
         SIX MONTHS ENDED JUNE 30, 2003 AND PERIOD FROM JANUARY 1, 1998
                (DATE OF INCEPTION) TO JUNE 30, 2003 (Unaudited)

<TABLE>
<CAPTION>
                                                    Series A Convertible
                                                       Preferred Stock            Common Stock
                                                 --------------------------   ------------------------      Additional
                                                  Number of                    Number of                     Paid-in
                                                    Shares         Amount        Shares         Amount       Capital
                                                 -----------     ----------   ----------       --------    -----------
<S>                                              <C>               <C>          <C>            <C>         <C>
Sales of common stock through
   private placement                                                             120,000     $      120   $    299,880
Compensatory stock options issued
   to employees and directors                                                                                1,922,305
Amortization of unearned compen-
   sation
Warrants issued for payment of
   interest                                                                                                     19,053
Issuance of beneficial conversion
   rights in connection with private
   placement of convertible notes
   payable                                                                                                   1,336,054
Sale of warrants as part of private
   placement of convertible notes
   payable                                                                                                   1,002,775
Warrants issued for payment of fees
   in connection with private placement
   applicable to convertible notes payable                                                                     299,004
Expenses in connection with private
   placement applicable to sale of
   warrants                                                                                                    (43,294)
Dividends accrued on Series A
   convertible preferred stock
Common stock issued as payment
   of accrued dividends                                                           19,452             19         48,609
Net loss
                                                 -----------     ----------   ----------       --------    -----------
Balance, December 31, 2001                         225,029       3,265,383    17,323,553         17,323     12,985,021
</TABLE>

<TABLE>
<CAPTION>
                                                       Unearned       Accumulated
                                                     Compensation        Deficit          Total
                                                    ---------------   ------------     -----------
<S>                                                  <C>              <C>             <C>
Sales of common stock through
   private placement                                                                  $   300,000
Compensatory stock options issued
   to employees and directors                        $(1,771,040)                         151,265
Amortization of unearned compen-
   sation                                                183,153                          183,153
Warrants issued for payment of
   interest                                                                                19,053
Issuance of beneficial conversion
   rights in connection with private
   placement of convertible notes
   payable                                                                              1,336,054
Sale of warrants as part of private
   placement of convertible notes
   payable                                                                              1,002,775
Warrants issued for payment of fees
   in connection with private placement
   applicable to convertible notes payable                                                299,004
Expenses in connection with private
   placement applicable to sale of
   warrants                                                                               (43,294)
Dividends accrued on Series A
   convertible preferred stock                                        $   (48,628)        (48,628)
Common stock issued as payment
   of accrued dividends                                                                    48,628
Net loss                                                               (6,292,623)     (6,292,623)
                                                    ---------------   ------------     -----------
Balance, December 31, 2001                            (1,587,887)     (16,550,260)     (1,870,420)

</TABLE>

                                          5

<PAGE>



                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

    CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
         SIX MONTHS ENDED JUNE 30, 2003 AND PERIOD FROM JANUARY 1, 1998
                (DATE OF INCEPTION) TO JUNE 30, 2003 (Unaudited)


<TABLE>
<CAPTION>

                                       Series A Convertible         Series B Convertible
                                         Preferred Stock               Preferred Stock                  Common Stock
                                       ---------------------    ------------------------------    ------------------------
                                       Number of                Number of           Subscription   Number of
                                         Shares     Amount       Shares   Amount     Receivable     Shares         Amount
                                       ---------   ---------    -------   ------     ---------    ----------      --------
<S>                                    <C>         <C>          <C>       <C>        <C>          <C>             <C>
Effects of reverse acquisition                                                                       938,240    $     939

Compensatory stock options issued to
   employees and directors

Cancellation of compensatory stock options
   issued to employees and directors

Amortization of unearned compensation

Warrants issued for payment of interest

Warrants issued for services

Exercise of warrants

Sale of Series B preferred stock, net
   of expenses of $65,740                                       469,000  $415,760    $(53,000)

Common stock issued for services                                                                     250,000          250

Net loss

                                       ---------   ---------    -------   ------     ---------    ----------      --------
Balance, December 31, 2002               225,029   3,265,383    469,000  415,760      (53,000)    18,511,793       18,512

</TABLE>

<TABLE>
<CAPTION>

                                                   Additional
                                                     Paid-in    Unearned      Accumulated
                                                     Capital   Compensation     Deficit        Total
                                                   ---------   ------------   -----------   -----------
<S>                                               <C>            <C>            <C>         <C>
Effects of reverse acquisition                   $  (154,935)                              $  (153,996)

Compensatory stock options issued to
   employees and directors                           418,148   $(130,000)                      288,148

Cancellation of compensatory stock options
   issued to employees and directors                (923,455)    923,455

Amortization of unearned compensation                            465,541                       465,541

Warrants issued for payment of interest              189,193                                   189,193

Warrants issued for services                       1,652,915                                 1,652,915

Exercise of warrants                                  28,000                                    28,000

Sale of Series B preferred stock, net
   of expenses of $65,740                                                                      362,760

Common stock issued for services                     249,750                                   250,000

Net loss
                                                                              $(7,216,104)  (7,216,104)
                                                  ----------    --------      -----------   -----------
Balance, December 31, 2002                        14,444,637    (328,891)     (23,766,364)  (6,003,963)
</TABLE>

                                          6

<PAGE>

                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)
    CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
         SIX MONTHS ENDED JUNE 30, 2003 AND PERIOD FROM JANUARY 1, 1998
                (DATE OF INCEPTION) TO JUNE 30, 2003 (Unaudited)


<TABLE>
<CAPTION>
                                                              Series A Convertible
                                                                 Preferred Stock          Series B Convertible Preferred Stock
                                                          ----------------------------   ----------------------------------------
                                                          Number of                        Number                   Subscriptions
                                                           Shares            Amount       of Shares       Amount      Receivable
                                                          ----------      ------------   -----------   ------------  ------------
<S>                                                       <C>             <C>            <C>           <C>           <C>
Sale of Series B preferred stock through private
  placement, net of expenses of $16,390                                                      46,500     $     36,610

Conversion of Series B preferred stock into common stock                                   (515,500)        (452,370)

Sale of Common Stock through private placement,
  net of expenses of $3,000

Compensatory stock options issued to employees

Amortization of unearned compensation

Warrants issued for payment of interest

Exercise of warrants

Common stock issued for services

Common stock issued as payment of
 accounts payable

Payments of subscription receivable                                                                                    $     53,000

Net loss
                                                         -------   ---------------      -----------     ------------   ------------
Balance, June 30, 2003                                   225,029   $     3,265,383               --     $         --   $         --
                                                         =======   ===============      ===========     ============   ============


<CAPTION>
                                                    Common Stock
                                               ------------------------
                                                                          Additional
                                                 Number of                  Paid-in        Unearned      Accumulated
                                                  Shares      Amount        Capital       Compensation      Deficit        Total
                                                ---------- ------------- -------------   --------------  ------------   -----------
<S>                                             <C>        <C>           <C>             <C>             <C>            <C>
Sale of Series B preferred stock
  through private placement, net of
  expenses of $16,390                                                                                                $     36,610

Conversion of Series B preferred
  stock into common stock                        515,500  $        515  $    451,855

Sale of Common Stock through private placement,
  net of expenses of $3,000                      343,146           343       293,846                                      294,189

Compensatory stock options issued to employees                               100,845                                      100,845

Amortization of unearned compensation                                                  $     91,230                        91,230

Warrants issued for payment of interest                                      119,490                                      119,490

Exercise of warrants                              83,625            84        29,916                                       30,000

Common stock issued for services                 183,000           183       529,017                                      529,200

Common stock issued as payment of
  accounts payable                               161,904           162       161,742                                      161,904

Payments of subscription receivable                                                                                        53,000

Net loss                                                                                              $ (2,024,014)    (2,024,014)
                                               ---------- ------------  ------------   ------------   ------------   ------------
Balance, June 30, 2003                         19,798,968 $     19,799  $ 16,131,348   $   (237,661)  $(25,790,378)  $ (6,611,509)
                                               ========== ============  ============   ============   ============   ============
</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                        7


<PAGE>

                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   SIX MONTHS ENDED JUNE 30, 2003 AND 2002 AND
                 PERIOD FROM JANUARY 1, 1998 (DATE OF INCEPTION)
                          TO JUNE 30, 2003 (Unaudited)

<TABLE>
<CAPTION>

                                                                                Six Months ended June 30,          Cumulative-
                                                                             -------------------------------       Development
                                                                                2003                2002              Stage
                                                                             ------------       ------------       ------------
Operating activities:
<S>                                                                            <C>                  <C>                  <C>
Net loss                                                                     $ (2,024,014)      $ (2,668,572)      $(24,921,618)
Adjusts to reconcile net loss to net cash used in
         operating activities:
    Depreciation and amortization of property and equipment                        26,654            276,562          1,686,797
    Write-off of impaired property and equipment                                                                        377,004
    Note Payable issued for services                                                                                    129,000
    Warrants issued for payment of interest                                       119,490             59,745            308,683
    Warrants issued for services                                                                                      1,244,000
    Common stock issued for services                                              529,200                               845,700
    Compensatory options and warrants issued to employees and directors           100,845                             1,064,290
    Amortization of unearned compensation                                          91,230                               739,924
    Charges to interest expense for amortization of:
       Deferred Loan Expenses                                                                        211,256            468,455
       Debt discount                                                                                 890,689          2,338,829
    Equity in net loss of equity investee                                                                               949,420
    Acquired research and development expenses                                                                          200,000
    Gain on sale of marketable securities                                                                               (40,949)
    Unrealized loss on marketable securities                                                                            108,249
Changes in operating assets and liabilities:
    Accounts receivable                                                                               15,881              2,041
    Prepaid expenses and other assets                                             (12,002)           287,807            (91,390)
    Other assets                                                                                      (9,772)            42,163
    Accounts payable and other accrued expenses                                   777,007            859,696          4,027,625
                                                                             ------------       ------------       ------------

                      Net cash used in operating activities                      (391,590)           (76,708)       (10,521,777)
                                                                             ------------       ------------       ------------

</TABLE>

                                        8

<PAGE>

                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   SIX MONTHS ENDED JUNE 30, 2003 AND 2002 AND
                 PERIOD FROM JANUARY 1, 1998 (DATE OF INCEPTION)
                          TO JUNE 30, 2003 (Unaudited)


<TABLE>
<CAPTION>

                                                                                Six Months ended June 30,          Cumulative-
                                                                             -------------------------------       Development
                                                                                2003                2002              Stage
                                                                             ------------       ------------       ------------
 Investing activities:
<S>                                                                      <C>
         Purchases of marketable securities                                                                        $   (540,210)
         Proceeds from maturities of marketable securities                                                              473,716
         Purchases of property and equipment                                                                         (1,813,319)
         Loan to related party                                                                                         (150,000)
         Acquisition of interest in equity investee                                                                    (750,000)
         Acquisition of technology license                                                                              (23,776)
                                                                             ------------       ------------       ------------
                        Net cash used in investing activities                $       --         $        --          (2,803,589)
                                                                             ------------       ------------       ------------

Financing activities:
         Payment for shares in connection with reverse acquisition                                                      (75,000)
         Proceeds from long-term debt                                                                                 1,160,000
         Repayments of long-term debt                                                                                (1,096,891)
         Costs of sales of convertible notes and warrants allocable
           to sales of:
             Convertible notes                                                                                         (169,451)
             Warrants                                                                                                   (43,294)
         Repayment of convertible notes payable                                                                        (120,000)
         Proceeds from sales of convertible notes and warrants                                                        2,620,000
         Proceeds from exercise of warrants                                      30,000              23,000              58,000
         Proceeds from private placements of preferred stock,
           net of expenses                                                       36,610              22,500           3,664,753
         Proceeds from private placements of common stock,
           net of expenses                                                      347,189                               7,370,413
         Proceeds from short-term debt obligations, net                           5,000                                   5,000
         Other                                                                                                          (20,000)
                                                                             ------------       ------------       ------------

                        Net cash provided by financing activities               418,799              45,500          13,353,530
                                                                             ------------       ------------       ------------

Net increase (decrease) in cash                                                  27,209             (31,208)             28,164

Cash, beginning of period                                                           955              76,299                  --
                                                                             ------------       ------------       ------------

Cash, end of period                                                          $   28,164        $     45,091        $     28,164
                                                                             ============      =============       ============

Supplemental disclosure of cash flow data:
         Interest paid                                                                                             $    141,113
                                                                                                                   ============
</TABLE>

See Notes To Condensed Consolidated Financial Statements.

                                        9

<PAGE>
                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)



Note 1 - Business and basis of presentation:

         In the opinion of  management,  the  accompanying  unaudited  condensed
         consolidated  financial statements reflect all adjustments,  consisting
         of normal recurring accruals, necessary to present fairly the financial
         position of Graphco Holdings Corp. and Subsidiaries  (the "Company") as
         of June 30, 2003,  their  results of  operations  for the three and six
         months  ended June 30, 2003 and 2002,  their  changes in  stockholders'
         deficiency for the six months ended June 30, 2003, their cash flows for
         the six months ended June 30, 2003 and 2002 and the related  cumulative
         amounts for the period from January 1, 1998 (date of inception) to June
         30, 2003.  Pursuant to the rules and  regulations  of the United States
         Securities and Exchange Commission (the "SEC"), certain information and
         disclosures  normally  included  in  financial  statements  prepared in
         accordance with accounting  principles generally accepted in the United
         States  of  America  have  been  condensed  in or  omitted  from  these
         financial  statements unless significant changes have taken place since
         the end of the most recent fiscal year.  Accordingly,  these  unaudited
         condensed   consolidated   financial   statements  should  be  read  in
         conjunction with the audited  consolidated  financial  statements as of
         December 31, 2002 and for the periods ended  December 31, 2002 and 2001
         and the notes  thereto (the  "Audited  Financial  Statements")  and the
         other  information  included in the Company's  amended Annual Report on
         Form 10-KSB/A  (the "Form  10-KSB/A")  for the year ended  December 31,
         2002 that was previously filed with the SEC.

         The results of  operations  for the three and six months ended June 30,
         2003 are not  necessarily  indicative of the results to be expected for
         the full year ending December 31, 2003.

         The accompanying  unaudited condensed consolidated financial statements
         have been  prepared  assuming that the Company will continue as a going
         concern.  However,  the Company has incurred  recurring  losses and, as
         shown in the accompanying  condensed  consolidated  balance sheet as of
         June 30,  2003,  it had a  working  capital  deficit  of  approximately
         $6,756,000,  a cumulative net loss of $25,790,000  and a  stockholders'
         deficiency of $6,612,000.  It also had convertible notes payable with a
         principal  balance  of  $2,574,908  and  other  notes  payable  with  a
         principal  balance of $209,000 that were in default as of June 30, 2003
         (see Notes 3, 4 and 6 herein).  These matters raise  substantial  doubt
         about the Company's ability to continue as a going concern.


                                       10
<PAGE>

                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1 - Basis of presentation (concluded):

         Management  believes that the Company will continue to incur net losses
         and negative cash flows from operating  activities through at least the
         twelve months ending June 30, 2004. In the absence of operating profits
         and cash flows,  management believes the Company will need to limit its
         expenditures,  obtain  additional  debt  or  equity  financing,  obtain
         agreements with creditors for the conversion of outstanding obligations
         into preferred or common stock and/or obtain  agreements with creditors
         for their forbearance with respect to past due obligations.  Management
         plans to continue to  negotiate  the  extension of the due dates for or
         the conversion of the Company's obligations and seek additional debt or
         equity financing through private  placements or by other means. It will
         also  continue to seek  strategic  partners  for the  Company  that can
         provide it with working  capital.  Management also plans to continue to
         limit the Company's  development  activities where necessary.  However,
         management  cannot  assure that the Company  will be able to obtain the
         additional  capital  resources  that will enable the Company to sustain
         its operations and planned development activities through at least June
         30, 2004. If the Company cannot  generate  sufficient  revenues  and/or
         obtain sufficient additional financing, if necessary, by that date, the
         Company may be forced thereafter to restructure its operations,  merge,
         sell its  operations,  file for bankruptcy  reorganization  or entirely
         cease its operations.

         The accompanying  unaudited condensed consolidated financial statements
         do not  include  any  adjustments  related  to the  recoverability  and
         classifications  of  assets  or  the  amounts  and  classifications  of
         liabilities  that might be  necessary  should the  Company be unable to
         continue as a going concern.


Note 2 - Earnings (loss) per share:

         The Company  presents  "basic" earnings (loss) per common share and, if
         applicable,  "diluted"  earnings  per  common  share  pursuant  to  the
         provisions  of  Statement of Financial  Accounting  Standards  No. 128,
         "Earnings  per  Share."  Basic  earnings  (loss)  per  common  share is
         calculated by dividing net income or loss applicable to common stock by
         the weighted  average number of common shares  outstanding  during each
         period.  The weighted  average number of common shares  outstanding for
         the three and six months  ended June 30, 2003  includes  the effects of
         the  assumed  conversion  of shares of Series B  convertible  preferred
         stock that were subject to automatic  conversion from their  respective
         dates  of  issuance  (see  Notes  2 and  10 to  the  Audited  Financial
         Statements in the Form 10-KSB/A and Note 3 herein).  The calculation of
         diluted  earnings per common share is similar to that of basic earnings
         per common share,  except that the  denominator is increased to include
         the number of additional common shares that would have been outstanding
         if all potentially  dilutive common shares, such as those issuable upon
         the  exercise  of stock  options and  warrants  and the  conversion  of
         convertible  notes,  were issued during the period,  the treasury stock
         method  had been  applied  to the  proceeds  from the  exercise  of the
         options  and  warrants  and  the  interest  costs   applicable  to  the
         convertible notes payable had been added back to the numerator.


                                       11
<PAGE>

                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 2 - Earnings (loss) per share (concluded):

         Diluted per share amounts have not been  presented in the  accompanying
         unaudited condensed  consolidated  statements of operations because the
         Company had net losses in the three and six months  ended June 30, 2003
         and  2002  and  the  assumed  effects  of  the  exercise  of all of the
         Company's  stock  options  and  warrants  and  the  conversion  of  the
         convertible  notes payable that were outstanding  during all or part of
         those periods would have been  anti-dilutive.  At June 30, 2003,  there
         were  8,599,640  shares  issuable  upon the  exercise of the  Company's
         outstanding  options and warrants and the conversion of its outstanding
         notes payable that were excluded from the  computation  of diluted loss
         per common share because they were anti-dilutive.


Note 3 - Convertible notes payable:

         The Company sold  convertible  notes and  warrants to purchase  939,166
         shares of common stock through a private placement during 2001 that had
         a net carrying  value of  $2,574,908  at June 30, 2003 and December 31,
         2002  (see  Note 5 to the  Audited  Financial  Statements  in the  Form
         10-KSB/A).  The  convertible  notes  were  convertible  into a total of
         1,954,605 shares of common stock at conversion rates ranging from $1.50
         to $5.00  per  share.  Convertible  notes in the  principal  amount  of
         $1,000,000 are secured and payable (at the Company's discretion) solely
         by certain  intellectual  property  developed by the Company that is no
         longer used and has no carrying value. The remainder of the convertible
         notes are unsecured.  The Company has defaulted on the repayment of all
         of its  convertible  notes which were due on or prior to September  30,
         2002. As a result of the defaults,  the range of interest  rates on the
         convertible notes, which had been 8% to 12%, increased to 13.5% to 18%.
         Accrued interest on the convertible notes total approximately  $442,000
         and $366,000 at June 30, 2003 and December 31, 2002,  respectively.  In
         addition,   the  Company  became  obligated  to  issue  to  holders  of
         convertible notes in the principal amount of $165,000 a total of 46,816
         warrants for the purchase of common stock every 30 days until principal
         and interest are paid. Such warrants are exercisable at $2.50 per share
         from the date they are required to be issued through November 2004.

         The Company was required to issue  warrants for the purchase of a total
         of 140,448 and 280,896  shares of common stock during the three and six
         months ended June 30, 2003, respectively. Pursuant to the provisions of
         Statement of Financial  Accounting  Standards No. 123,  "Accounting for
         Stock-Based  Compensation"  ("SFAS  123"),  the  Company  valued  these
         warrants at approximately $59,745 and $119,490,  respectively, based on
         the Black-Scholes option-pricing model and charged interest expense and
         increased  additional paid-in capital by those amounts during the three
         and six months ended June 30, 2003, respectively.  The issuances of the
         warrants to the noteholders were noncash transactions and, accordingly,
         they  are  not  reflected  in  the  accompanying   unaudited  condensed
         consolidated statements of cash flows.



Note 4 - Other notes payable:

         As of June 30,  2003,  the  Company  had other  notes  payable  with an
         aggregate  balance  of  $209,000,   including  notes  payable  with  an
         aggregate  balance of $204,000  that bear interest at 10% and that were
         required  to be  repaid on June 12,  2003  (see  Note 6 to the  Audited
         Financial Statements in the Form 10-KSB/A). The Company was not able to
         repay those notes and they were in default at June 30, 2003. During the
         six months  ended June 30,  2003,  the Company  borrowed an  additional
         $35,555 and repaid $30,555.  As of June 30, 2003, the remaining  $5,000
         note  payable was  noninterest  bearing  and had no specific  repayment
         terms.


                                       12
<PAGE>

                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 5 - Income taxes:

         As explained in Note 7 to the Audited Financial  Statements in the Form
         10-KSB/A,  the Company is offsetting its deferred tax assets, which are
         attributable  primarily to the potential  benefits of its net operating
         loss carryforwards,  by equivalent  valuation  allowances due to, among
         other things, the uncertainties related to the changes in the ownership
         of  the  Company,   which  could  subject  such  net   operating   loss
         carryforwards to substantial annual limitations,  and the uncertainties
         related  to the  extent  and  timing  of  its  future  taxable  income.
         Accordingly, the Company did not recognize any credits for income taxes
         in the  accompanying  unaudited  condensed  consolidated  statements of
         operations to offset its pre-tax losses.


Note 6 - Commitments and contingencies:

         Litigation:

         On May  31,  2002,  one of  the  holders  of  the  Company's  past  due
         convertible  notes (see Note 3 herein)  obtained a judgment against the
         Company in the  Supreme  Court of the State of New York,  County of New
         York,  that  requires the Company to pay her  approximately  $1,376,000
         plus any applicable interest subsequent to the date of the judgment. As
         of June 30,  2003,  the Company was carrying  the  convertible  note at
         approximately $1,529,000,  which was comprised of the principal balance
         of  $1,274,000  and accrued  interest of  approximately  $255,000.  The
         Company has been  attempting to negotiate a forbearance  agreement with
         the  noteholder  and as of September 2, 2003,  the  noteholder  had not
         taken any other  actions to enforce the judgment.  However,  management
         cannot assure that the Company will be able to reach any agreement with
         the  noteholder  for her  continued  forbearance  and if she does  take
         additional  actions  against  the  Company  such  actions  could have a
         material  adverse impact on the Company's  financial  condition and its
         results of operations.

         The Company is a party to various other claims and lawsuits  incidental
         to its business.  In the opinion of management,  the resolution of such
         contingencies  will not materially  affect the  consolidated  financial
         position,  results  of  operations  or cash  flows  of the  Company  in
         subsequent years.

                                       13
<PAGE>

                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note 6 - Commitments and contingencies (concluded):

         Unpaid wages:

         As of June 30, 2003, accrued expenses included approximately $1,723,000
         for amounts  payable to current and former  officers and other  current
         and former  employees  that the Company did not have the  resources  to
         pay.  Although  as of June 30,  2003 the Company was not subject to and
         was not aware of any actions  related to the  enforcement of claims for
         such unpaid amounts,  management cannot assure that the Company will be
         able to reach any agreement with the employees or the former  employees
         if they do take action to enforce their claims; such actions could have
         a material  adverse  impact on the  Company's  financial  condition and
         results of operations.

Note 7 - Employee stock options:

         As explained in Note 9 to the Audited Financial  Statements in the Form
         10-KSB/A,  the Company had issued  options to officers,  directors  and
         other  employees  for the purchase of 2,065,000  shares of common stock
         that  remained  outstanding  as of December 31, 2002.  Such options had
         exercise  prices  ranging  from $.60 to $1.33 per share and  expiration
         dates ranging from 2003 through  2012.  No employee  stock options were
         exercised or cancelled during the six months ended June 30, 2003.

         During the six months ended June 30, 2003, the Company  granted options
         for the purchase 40,500 shares of common stock to an officer.  The fair
         value of the Company's  common stock  exceeded the  aggregate  exercise
         price of the options  granted by $100,845 at the date the options  were
         granted. As explained in Note 2 to the Audited Financial  Statements in
         the Form  10-KSB/A,  the  Company  has  elected to  continue to use the
         provisions of Accounting  Principles Board Opinion No. 25,  "Accounting
         for  Stock  Issued to  Employees"  ("APB  25")  whereby  it  recognizes
         compensation  costs as a result of the  issuance  of stock  options  to
         employees  based  on the  excess,  if any,  of the  fair  value  of the
         underlying  stock at the date of grant or award  (or at an  appropriate
         subsequent  measurement date) over the amount the employees must pay to
         acquire the stock (the "Intrinsic Value Method"). The options issued to
         the officer became exercisable from the date of grant and, accordingly,
         the  Company  charged  compensation  expense and  increased  additional
         paid-in  capital by $100,845 during the six months ended June 30, 2003.
         The  issuance  of  these  options  was  a  noncash   transaction   and,
         accordingly,  it is not reflected in the  accompanying  2003  unaudited
         condensed consolidated statement of cash flows.


                                       14
<PAGE>

                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note 7 - Employee stock options (concluded):

         The fair value of each option  granted by the Company to its  employees
         has exceeded the exercise price of the option.  In accordance  with the
         Intrinsic  Value  Method of  accounting  under APB 25, the  Company has
         recorded such excess as compensation  which has been charged to expense
         over the vesting  period of the  related  option.  The Company  charged
         $100,845 to  compensation  expense during the six months ended June 30,
         2003 as a result of the option  granted to the  officer  and $91,230 of
         amortization of unearned compensation arising from grants of options in
         prior periods that did not vest immediately. The Company did not record
         any  compensation  expense  related to grants of  options to  employees
         during the six months ended June 30, 2002.

         Pro  forma  net loss and pro forma net loss per share for the three and
         six months  ended June 30,  2003 and 2002  computed  using a fair value
         based method of  accounting  for stock  options as required by SFAS 123
         have not been presented  because they do not differ materially from the
         related  historical  amounts  reflected in the  accompanying  condensed
         consolidated statements of operations.


Note 8 - Outstanding warrants:

         As explained in Note 9 to the Audited Financial  Statements in the Form
         10-KSB/A, the Company had issued warrants for the purchase of 6,424,192
         shares of common  stock that  remained  outstanding  as of December 31,
         2002.  Such options had exercise prices ranging from $.001 to $5.00 per
         share and expiration dates ranging from 2003 through 2010.

         During the six months ended June 30, 2003, the Company issued  warrants
         for  the  purchase  of a  total  of  280,896  shares  of  common  stock
         exercisable  at $2.50 per share to certain  holders of its  convertible
         notes (see Note 3 herein).

         During the six months ended June 30, 2003,  the Company  issued  83,625
         shares of common stock upon the exercise of warrants.  It issued 30,000
         shares  upon the  exercise  of warrants at $1.00 per share for which it
         received  $30,000  in  cash.  It also  issued  53,625  shares  upon the
         exercise of warrants to purchase 71,500 shares at $.60 per share, or an
         aggregate  exercise price of $42,900,  and it effectively  retained the
         remaining 17,875 shares,  which had an approximate fair market value of
         $42,900, in lieu of a cash payment for the aggregate exercise price.


Note 9 - Other changes in stockholders' deficiency:

         As explained in Note 10 to the Audited Financial Statements in the Form
         10-KSB/A,  the  Company's  Articles  of  Incorporation   authorize  the
         issuance of up to 5,000,000 shares of preferred stock, of which 333,333
         shares had been  designated  as Series A  convertible  preferred  stock
         ("Series A shares") and 4,500,000  shares had been designated as Series
         B convertible preferred stock ("Series B shares").


                                       15
<PAGE>

                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note 9 - Other changes in stockholders' deficiency (concluded):

         During the six months  ended June 30,  2003,  the  Company  sold 46,500
         Series B shares through  private  placements  and received  proceeds of
         $36,610,  net of related  expenses  of  $16,390.  The  Company had sold
         469,000 Series B shares through private placements during 2002. Holders
         of Series B shares  were not  entitled to  dividends  and had no voting
         rights.  Each  Series B share  sold by the  Company  was  automatically
         convertible  into one  share of the  Company's  common  stock  when the
         Company became a  publicly-held  company as a result of the merger that
         was  consummated  on  December  13,  2002  (see  Note 1 to the  Audited
         Financial  Statements  in the Form  10-KSB/A) and its  ratification  by
         stockholders on March 19, 2003.

         In addition to the  issuances  of shares of preferred  stock  described
         above and the issuances of shares of common stock, options and warrants
         described in Notes 3, 7 and 8 herein,  the Company issued shares of its
         common  stock  during the six months  ended June 30, 2003 as  described
         below.

         The  Company  sold  343,146  shares of common  stock  through a private
         placement and received proceeds of $294,189, net of related expenses of
         $3,000.

                                       16
<PAGE>

                     GRAPHCO HOLDINGS CORP. AND SUBSIDIARIES
                          (A Development Stage Company)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

         The Company  issued 183,000 shares of its common stock as a payment for
         legal and consulting services.  It charged the fair value of the shares
         of  $529,200  to  selling,  general  and  administrative  expenses  and
         increased  additional  paid-in capital by that amount. A principal of a
         law firm that  received  shares of common  stock  with a fair  value of
         approximately  $165,000 is also a director  and officer of the Company.
         It also  issued  161,904  shares of its  common  stock as  payment  for
         accounts  payable with an  aggregate  carrying  value of $161,904.  The
         issuances of these shares were noncash  transactions and,  accordingly,
         they  are  not  reflected  in  the  accompanying   unaudited  condensed
         consolidated  statement of cash flows for the six months ended June 30,
         2003.


Note 10- Subsequent events:

         During the  period  from July 1, 2003  through  August  25,  2003,  the
         Company received gross proceeds of approximately  $79,000 from sales of
         175,185 shares of its common stock through private placements.


                                       17

<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.


FORWARD LOOKING STATEMENTS

This  Quarterly  Report on Form  10-QSB  contains  "forward-looking  statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.  All statements,
other than  statements  of  historical  facts,  included in or  incorporated  by
reference in to this Form 10-QSB/A, are forward-looking statements. In addition,
when used in this document,  the words "anticipate,"  "estimate,"  "project" and
similar expressions are intended to identify forward-looking  statements.  These
forward-looking  statements  are  subject to certain  risks,  uncertainties  and
assumptions  including  risks  relating  to our  limited  operating  history and
operations  losses;  significant  capital  requirements;  development of markets
required for successful performance by the Company.  Should one or more of these
risks or  uncertainties  materialize,  or should  underlying  assumptions  prove
incorrect, actual results may vary materially from those anticipated,  estimated
or  projected.  Although  we believe  that the  expectations  we include in such
forward-looking  statements  are  reasonable,  we cannot  assure  you that these
expectations  will prove to be correct.  The following  discussion  and analysis
should be read in conjunction with the unaudited financial  statements contained
in Part I, Item 1, and the related notes.

OVERVIEW

Business:

Graphco  Holdings  Corp.,  Inc.  ("GHC") is a holding  company that was formerly
known as RCM  Interests,  Inc.  GHC emerged  from  Chapter 11 of Title 11 of the
United States Bankruptcy Code on July 31, 2000. GHC was a publicly-held  company
that had no significant  assets,  liabilities or operating  activities  from the
date of its emergence from  bankruptcy  until December 13, 2002, the date of the
merger  with  Graphco   Technologies,   Inc.,  and  as  of  December  31,  2002.
Accordingly,  it was a "development  stage enterprise" for financial  accounting
purposes.

Graphco  Technologies,  Inc.  is a New Jersey  corporation  that is  referred to
herein  together with its  subsidiaries  as "G-TEC."  G-TEC has been  developing
since,  effectively,   January  1,  1998,  state-of-the-art  biometric  security
solutions  for  government,  industry and home  automation  along with  advanced
information exchange and data management systems for government, law enforcement
and corporate  security.  G-TEC has developed  biometric  software  products for
secure access, surveillance and authentication,  and an information exchange and
data  management  software  application   specifically   designed  for  the  law
enforcement  community and the corporate security  industry.  Biometrics measure
unique  physical  characteristics  of individuals for  authentication  purposes.
G-TEC's two biometric software products are VOICEPASS(R) for speaker recognition
and FRA(TM) for facial recognition. Management believes that speaker recognition
and facial  recognition  are the most user  friendly,  cost effective and widely
accepted  biometrics  currently  available.  G-TEC expects that it will generate
revenues  primarily  through  licenses  or  other  contracts  for the use of its
products over specified periods.

G-TEC had conducted and discontinued  certain unrelated  operations prior to the
commencement on January 1, 1998 of the development  stage  activities  described
above. G-TEC generated revenues primarily from a license agreement that has been
effectively  terminated  and a limited  number of sales of its  products  during
2002.  It  generated  revenues  primarily  from a  contract  with a  residential
community that used an application of its  technologies  during 2001.  G-TEC had
not generated any significant revenues from contracts for the sale or use of its
primary products on a recurring basis and, accordingly,  it also remained in the
development stage for financial accounting purposes as of December 13, 2002, the
date of the merger with GHC and as of June 30, 2003. Upon  Consummation of GHC's
merger with G-TEC on December 13,  2002,  approximately  95% of the  outstanding
shares  of  common  stock  of GHC was  held by  former  stockholders  of  G-TEC.
Accordingly,  although  GHC was the  legal  acquirer  and  G-TEC  was the  legal
acquiree,  the business  combination was accounted for as a reverse acquisition,
whereby, for accounting purposes, G-TEC was the accounting acquirer and GHC, the
inactive "shell" company, was the accounting acquiree.

Basis of Presentation:

In the opinion of management,  the accompanying unaudited condensed consolidated
financial  statements  reflect all  adjustments,  consisting of normal recurring
accruals,  necessary  to  present  fairly  the  financial  position  of GHC  and
Subsidiaries  (the  "Company") as of June 30, 2003,  their results of operations
for the three  months and six months  ended June 30,  2003 and 2002,  their cash
flows  for the six  months  ended  June 30,  2003 and  2002,  their  changes  in
stockholders'  deficiency for the six months ended June 30, 2003 and the related
cumulative  amounts for the period from January 1, 1998 (date of  inception)  to
June 30,  2003.  Pursuant  to the rules and  regulations  of the  United  States
Securities  and  Exchange  Commission  (the  "SEC"),   certain  information  and
disclosures  normally  included in financial  statements  prepared in accordance
with accounting  principles  generally  accepted in the United States of America
have been  condensed  in or  omitted  from  these  financial  statements  unless
significant  changes  have taken place  since the end of the most recent  fiscal
year. Accordingly, these unaudited condensed consolidated



                                       18
<PAGE>

financial statements should be read in conjunction with the audited consolidated
financial  statements as of December 31, 2002 and for the periods ended December
31, 2002 and 2001 and the notes thereto (the "Audited Financial Statements") and
the other  information  included in the Company's Annual Report on Form 10-KSB/A
(the "Form  10-KSB/A")  for the year ended December 31, 2002 that was previously
filed with the SEC.

The results of  operations  for the three  months and six months  ended June 30,
2003 are not  necessarily  indicative of the results to be expected for the full
year ending December 31, 2003.

The accompanying unaudited condensed consolidated financial statements have been
prepared  assuming that the Company will continue as a going  concern.  However,
the  Company has  incurred  recurring  losses and, as shown in the  accompanying
condensed  consolidated  balance  sheet as of June 30,  2003,  it had a  working
capital  deficit  of  approximately   $6,756,000,   a  cumulative  net  loss  of
$25,790,000  and  a  stockholders'   deficiency  of  $6,612,000.   It  also  had
convertible notes payable with a principal balance of $2,574,908 and other notes
payable with a principal balance of $209,000 that were in default as of June 30,
2003 (see Notes 3, 4 and 6 herein).  These matters raise substantial doubt about
the Company's ability to continue as a going concern.

Management  believes  that the  Company  will  continue  to incur net losses and
negative cash flows from operating activities through at least the twelve months
ending  June 30,  2004.  In the  absence of  operating  profits  and cash flows,
management  believes  the Company  will need to limit its  expenditures,  obtain
additional debt or equity  financing,  obtain  agreements with creditors for the
conversion  of  outstanding  obligations  into  preferred or common stock and/or
obtain  agreements with creditors for their forbearance with respect to past due
obligations.  Management plans to continue to negotiate the extension of the due
dates for or the  conversion of the Company's  obligations  and seek  additional
debt or equity financing  through private  placements or by other means. It will
also  continue to seek  strategic  partners  for the Company that can provide it
with working  capital.  Management also plans to continue to limit the Company's
development activities where necessary.  However,  management cannot assure that
the Company will be able to obtain the  additional  capital  resources that will
enable the Company to sustain its operations and planned development  activities
through  at least June 30,  2004.  If the  Company  cannot  generate  sufficient
revenues and/or obtain sufficient  additional financing,  if necessary,  by that
date, the Company may be forced thereafter to restructure its operations, merge,
sell its operations,  file for bankruptcy  reorganization  or entirely cease its
operations.

The accompanying  unaudited condensed  consolidated  financial statements do not
include any adjustments  related to the  recoverability  and  classifications of
assets or the amounts and classifications of liabilities that might be necessary
should the Company be unable to continue as a going concern.

Significant Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations
are based upon our unaudited condensed consolidated financial statements,  which
have been prepared in accordance with accounting  principles  generally accepted
in the United States of America. The preparation of these condensed consolidated
financial statements requires us to make estimates and judgments that affect the
reported  amounts of assets,  liabilities,  revenues and  expenses,  and related
disclosure  of  contingent  assets and  liabilities.  On an on-going  basis,  we
evaluate  our  estimates,   including  those  related  to  accounts  receivable,
equipment,  capitalized  software



                                       19
<PAGE>

development costs, stock based compensation,  income taxes and contingencies. We
base our estimates on  historical  experience  and on various other  assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for  making  judgments  about the  carrying  values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

The  accounting  policies and estimates  used as of December 31, 2002 which were
explained in the notes to the consolidated financial statements in the Company's
previously  filed Form 10-KSB/A for the year ended December 31, 2002,  have been
applied consistently during the six months ended June 30, 2003.

RESULTS OF OPERATIONS:

For the three and six months  ended June 30,  2003 as  compared to the three and
six months  ended June 30,  2002 and the  period  from  January 1, 1998 (date of
inception) to June 30, 2003.

The Company generated revenues of approximately $-0-,  $216,000,  $-0-, $278,000
and $1,533,000 for the three and six months ended June 30, 2003 and 2002 and the
period from January 1, 1998 (date of inception) to June 30, 2003,  respectively.
Our revenues  derived in prior  periods were from certain  operations  that were
discontinued  prior to the  development  activities that commenced on January 1,
1998 that were previously discussed.

Selling,  general and administrative expenses for the three and six months ended
June 30, 2003 and 2002 and the period from  January 1, 1998 (date of  inception)
to June 30, 2003 were approximately $615,000, $652,000,  $1,572,000,  $1,427,000
and  $16,320,000  respectively.  Selling,  general and  administrative  expenses
primarily consist of the following;  (i) salaries, (ii) professional fees, (iii)
depreciation and amortization of property and equipment,  and (iv) rent expense.
Although  overall these expenses have been fairly  comparable,  our professional
fees have increased as a result of our becoming a public  entity.  This increase
was offset somewhat by a reduction in our  depreciation  and amortization as our
assets become fully depreciated.

Research  and  development  expenses for the three and six months ended June 30,
2003 and 2002 and the period from  January 1, 1998 (date of  inception)  to June
30, 2003 were approximately $88,000, $74,000, $180,000, $198,000 and $4,915,000,
respectively.  Research and development  expense primarily  consists of payroll,
which is fairly consistent.

Loss from  operations  for the three and six months ended June 30, 2003 and 2002
and the period  from  January 1, 1998 (date of  inception)  to June 30, 2003 was
approximately  $704,000,  $510,000,  $1,752,000,   $1,357,000  and  $20,415,000,
respectively.

Interest  expense for the three and six months  ended June 30, 2003 and 2002 and
the  period  from  January  1, 1998  (date of  inception)  to June 30,  2003 was
approximately   $136,000,   $397,000,   $272,000,   $1,312,000  and  $3,763,000,
respectively.  Interest  expense in the three and six months ended June 30, 2003
primarily  consisted  of the fair value of  warrants  issued for the  payment of
interest.  Interest expense  primarily  consist of amortization of deferred loan
fees and debt  discounts in the three and six months ended June 30, 2002.  These
charges are primarily non-cash items.

Net loss for the  three  and six  months  ended  June 30,  2003 and 2002 and the
period  from  January  1,  1998  (date  of  inception)  to June  30,  2003,  was
approximately  $840,000,  $907,000,  $2,024,000,   $2,669,000  and  $24,922,000,
respectively. The reasons for the net losses are explained above.

Liquidity and Capital Resources:

The  consolidated  financial  statements  have been  prepared  assuming that the
Company will  continue as a going  concern.  The Company has not  generated  any
revenue  from its  products  and is in its  development  stage.  As shown in the
consolidated financial statements the Company has incurred a cumulative net loss
of  approximately  $25,790,000  through June 30, 2003 and had a working  capital
deficiency  of  approximately   $6,756,000  and  a  stockholders  deficiency  of
$6,612,000.  It also had  convertible  notes payable with principal  balances of
approximately  $2,575,000 that were in default.  These matters raise substantial
doubt about the Company's ability to continue as a going concern.



                                       20
<PAGE>


Management  believes  that the  Company  will  continue  to incur net losses and
negative cash flows from operating activities through at least the twelve months
ended June 30,  2004.  In the absence of  operating  profits and  positive  cash
flows,  management  believes  the Company  will need to limit its  expenditures,
obtain  additional debt or equity financing,  obtain additional  agreements with
creditors and note holders for the  conversion of outstanding  obligations  into
preferred or common  stock,  and/or  obtain  agreements  with  creditors for the
forbearance with respect to past due  obligations.  Management plans to continue
to  negotiate  the  extension  of the due  dates  for or the  conversion  of the
Company's  obligations  and seek  additional  debt or equity  financing  through
private  placements or by other means.  It will also continue to seek  strategic
partners  for the Company  that can provide it with  working  capital.  However,
management  cannot assure that the Company will be able to obtain the additional
capital  resources  that will enable the Company to sustain its  operations  and
planned  development  activities  through at lease twelve  months ended June 30,
2004.  If  the  Company  cannot  generate   sufficient  revenues  and/or  obtain
sufficient additional financing,  if necessary, by that date, the Company may be
forced  thereafter  to  restructure  its  operations  merge  or  sell,  file for
reorganization or entirely cease its operations.

CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002:

Six months ended June 30, 2003

For the six months  ended June 30, 2003,  we utilized  cash from  operations  of
approximately $392,000.  This was attributable to the following:  (1) a net loss
of  approximately  $2,024,000,   which  was  offset  by,  (2)  depreciation  and
amortization  expense of  approximately  $27,000,  (3) common stock and warrants
issued for services of approximately  $630,000, (4) charges relating to warrants
issued for payment of interest of  approximately  $119,000,  (5) amortization of


                                       21
<PAGE>

unearned  compensation totaling $91,000, and (6) an increase in accounts payable
and accrued expenses totaling $777,000.

We generated cash from financing activities of approximately $419,000, primarily
attributable  to the  following:  (1)  net  proceeds  of  approximately  $90,000
received from the sale of and collection of subscriptions  receivable for Series
B preferred  stock,  (2) exercise of warrants for $30,000,  and (3) net proceeds
from the sale of 343,146 shares of common stock totaling approximately $294,000.

Six months ended June 30, 2002

For the six months  ended June 30, 2002,  we utilized  cash from  operations  of
approximately $77,000. This was attributable to the following; (1) a net loss of
approximately $2,669,000, which was offset by, (2) depreciation and amortization
expense of approximately  $277,000,  (3) charges relating to warrants issued for
payment of interest of approximately  $60,000, (4) amortization of deferred loan
costs and debt discount totaling  $1,102,000 (5) an increase in accounts payable
and  accrued  expenses  totaling  $860,000,  and  (6)  a  decrease  in  accounts
receivable and prepaid expenses totaling $304,000.

We generated cash from financing  activities of $46,000  attributable to (1) the
exercise of warrants for $23,000 and (2) net proceeds of  approximately  $23,000
from the sale of 12,500 shares of Series B preferred stock.

During  the  period  from July 1,  2003 to August  25,  2003 we  received  gross
proceeds of approximately  $79,000 from the sale of 175,185 shares of our common
stock.

ITEM 3.  CONTROLS AND PROCEDURES

(a) As of the end of the period  covered by this report,  management,  including
our principal executive officer and principal  financial officer,  evaluated the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures.  Based upon,  and as of the date of that  evaluation,  our principal
executive  officer and principal  financial  officer  concluded  that other than
improvements  over controls with respect to the issuance of stock warrants,  our
disclosure controls and procedures  effectively  provided  reasonable  assurance
that information  required to be disclosed in the reports that we file or submit
under  the  Securities  and  Exchange  Act  of  1934  are  recorded,  processed,
summarized and reported within the time periods specified by the Securities and
Exchange Commission's rules and forms.

(b) There was no change in internal controls over financial  reporting as of the
end of the period covered by this report that has materially  affected,  or that
is reasonably likely to materially  affect,  our internal control over financial
reporting.

                                       22
<PAGE>

PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

None


ITEM 2. CHANGES IN SECURITIES

None


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

         The Company sold  convertible  notes and  warrants to purchase  939,166
         shares of common stock through a private placement during 2001 that had
         a net carrying  value of  $2,574,908  at June 30, 2003 and December 31,
         2002  (see  Note 5 to the  Audited  Financial  Statements  in the  Form
         10-KSB/A).  The  convertible  notes  were  convertible  into a total of
         1,954,605 shares of common stock at conversion rates ranging from $1.50
         to $5.00  per  share.  Convertible  notes in the  principal  amount  of
         $1,000,000 are secured and payable (at the Company's discretion) solely
         by certain  intellectual  property  developed by the Company that is no
         longer used and has no carrying value. The remainder of the convertible
         notes are unsecured.  The Company has defaulted on the repayment of all
         of its  convertible  notes which were due on or prior to September  30,
         2002. As a result of the defaults,  the range of interest  rates on the
         convertible notes, which had been 8% to 12%, increased to 13.5% to 18%.
         Accrued interest on the convertible notes total approximately  $442,000
         and $366,000 at June 30, 2003 and December 31, 2002,  respectively.  In
         addition,   the  Company  became  obligated  to  issue  to  holders  of
         convertible notes in the principal amount of $165,000 a total of 46,816
         warrants for the purchase of common stock every 30 days until principal
         and interest are paid. Such warrants are exercisable at $2.50 per share
         from the date they are required to be issued through November 2004.

         As of June 30,  2003,  the  Company  had other  notes  payable  with an
         aggregate  balance  of  $209,000,   including  notes  payable  with  an
         aggregate  balance of $204,000  that bear interest at 10% and that were
         required  to be  repaid on June 12,  2003  (see  Note 6 to the  Audited
         Financial Statements in the Form 10-KSB/A). The Company was not able to
         repay those notes and they were in default at June 30, 2003.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


         Certain of our stockholders owning more than fifty percent (50%) of our
total voting shares,  have given their written  consent to amend the Certificate
of  Incorporation  to change the name our from RCM  Interests,  Inc.  to Graphco
Holdings  Corp.  or a  similar  name  approved  by the Board of  Directors.  The
Amendment  to our  Certificate  of  Incorporation,  changing our name to Graphco
Holdings  Corp.,  was filed with the  Department of State of Delaware and became
effective on May 15, 2003.

         No other matters were submitted to a vote of our stockholders as of the
date hereof.

ITEM 5. OTHER INFORMATION

None



                                       23
<PAGE>

ITEM 6. EXHIBITS AND REPORTS



(a) The following reports have been filed since the end of our last fiscal year:

         Form 8-K filed on March 17, 2003 with respect to the  engagement  of JH
Cohn  LLP as our  new  Independent  Accountants  and  the  replacement  of  S.W.
Hatfield, CPA as our Independent Accountants.

         Form 8-K/A filed on July 24,  2003 which  attaches  proforma  financial
information  for the  years  ended  December  31,  2002 and  2001 and  financial
statements of the business acquired as of December 31, 2002 and 2001 and for the
period from January 1, 1998 (date of inception) to December 31, 2002.

         Form 8-K/A filed on August 14, 2003 which attaches audited Consolidated
Financial  Statements of Graphco  Technologies,  Inc. and its subsidiaries as of
and for the year ended December 31, 2000 and which incorporates by reference the
financial information contained in the Form 8-K/A on July 24, 2003.


(b)  The  following  list  sets  forth  the  applicable  exhibits  (numbered  in
accordance  with Item 601 of  Regulation  S-K)  required  to be filed  with this
Quarterly Report on Form 10-QSB:

         Exhibit Number    Description
         --------------    -----------
         Exhibit 2.1       Merger  Agreement by and among RCM  Interests,  Inc.,
                           RCM Interests,  Inc.  Acquisition  Corp., and Graphco
                           Technologies,    Inc.    (Schedules    and   exhibits
                           omitted)incorporated   by   reference   to  Form  8-K
                           (previously filed with the Commission on December 11,
                           2002).

         Exhibit 31.1      Certification of Chief Executive  Officer pursuant to
                           Section 302 of the Sarbanes-Oxley Act of 2002.

         Exhibit 31.2      Certification of Chief Financial  Officer pursuant to
                           Section 302 of the Sarbanes-Oxley Act of 2002.

         Exhibit 32.1      Certification of Chief Executive  Officer pursuant to
                           Section  906 of the  Sarbanes-Oxley  Act of 2002,  18
                           U.S.C. Section 1350.

         Exhibit 32.2      Certification of Chief Financial  Officer pursuant to
                           Section  906 of the  Sarbanes-Oxley  Act of 2002,  18
                           U.S.C. Section 1350.


                                       24
<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) 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.

Date: September 15, 2003
                                                Graphco Holdings Corp.

                                                By: /s/ Cristian Ivanescu
                                                    ----------------------------
                                                    Cristian Ivanescu
                                                    President, Chief
                                                    Executive Officer &
                                                    Chairman





                                                Graphco Holdings Corp.

                                                By: /s/ Rodger Wichterman
                                                    ----------------------------
                                                    Rodger Wichterman
                                                    Chief Financial Officer





                                       25