##### Table of Contents

---

SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

---

FORM 10-Q

---

(Mark One)

| | x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
| | - | -----------------------------------------------------------------------------------------------------------------------------------------

OR

| | o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROMTO
| | - | -------------------------------------------------------------------------------------------------------------------------

Commission file number: 0-20828

---

DANKA BUSINESS SYSTEMS PLC(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

---

| | ENGLAND & WALES(STATE OR OTHER JURISDICTION OFINCORPORATION OR ORGANIZATION) |  | 98-0052869(I.R.S. EMPLOYER IDENTIFICATION NO.) | 
| | ---------------------------------------------------------------------------- |  | ---------------------------------------------- | 

| | 11201 DANKA CIRCLE NORTHST. PETERSBURG, FLORIDA 33716 | AND(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) | MASTERS HOUSE107 HAMMERSMITH ROADLONDON, ENGLAND W14 0QH | 
| | ----------------------------------------------------- | ------------------------------------------- | -------------------------------------------------------- | 

REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE:(727) 576-6003 in the United States011-44-207-603-1515
in the United Kingdom

NOT APPLICABLE(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)

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

The registrant had 248,113,094 Ordinary Shares outstanding as of November 1,
2002

---



---

##### Table of Contents



INDEX

|RISK FACTORS | 3
|------------ | -

|PART I  |  | FINANCIAL INFORMATION | 7 
|------- |  | --------------------- | --
|        |  | ITEM1.                |   
|        |  |                       |   
|        |  |                       |   
|        |  |                       |   
|        |  |                       |   
|        |  |                       |   
|        |  | ITEM2.                |   
|        |  |                       |   
|        |  |                       |   
|        |  |                       |   
|        |  |                       |   
|        |  |                       |   
|        |  |                       |   
|        |  | ITEM3.                |   
|        |  | ITEM4.                |   
|        |  |                       |   
|PART II |  | OTHER INFORMATION     | 37
|        |  | ITEM1.                |   
|        |  | ITEM2.                |   
|        |  | ITEM3.                |   
|        |  | ITEM4.                |   
|        |  | ITEM5.                |   
|        |  | ITEM6.                |   

|SIGNATURE | 39
|--------- | --
|          |   



---

##### Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained herein, or otherwise made by our officers, including statements
related to our future performance and our outlook for our businesses and respective markets, projections, statements of managements plans or objectives, forecasts of market trends and other matters, are forward looking statements, and contain
information relating to us that is based on the beliefs of our management as well as assumptions, made by, and information currently available to, our management. The words goal, anticipate, expect,
believe and similar expressions as they relate to us or our management are intended to identify forward looking statements. No assurance can be given that the results in any forward looking statement will be achieved. For the forward
looking statements, we claim the protection of the safe harbor for forward looking statements provided in the Private Securities Litigation Reform Act of 1995. Such statements reflect our current views with respect to future events and are subject
to certain risks, uncertainties and assumptions that could cause actual results to differ materially from those reflected in the forward looking statements. Factors that might cause such actual results to differ materially from those reflected in
any forward looking statements include, but are not limited to, the following (some of which are explained in greater detail below): (i) any material adverse change in financial markets or in our own position, (ii) any inability to achieve or
maintain cost savings, (iii) increased competition from other high-volume and digital copier distributors and the discounting of such copiers by our competitors, (iv) any inability by us to procure, or any inability by us to continue to gain access
to and successfully distribute, new products, including digital products and high-volume copiers, or to continue to bring current products to the marketplace at competitive costs and prices, (v) any negative impact from the loss of any of our key
upper management personnel, (vi) fluctuations in foreign currencies and (vii) any change in economic conditions in domestic or international markets where we operate or have material investments which may affect demand for our services. Readers are
cautioned not to place undue reliance on these forward-looking statements, which reflect our analysis only as of the date they are made. We undertake no obligation, and do not intend, to update these forward looking statements to reflect events or
circumstances that arise after the date they are made. Furthermore, as a matter of policy, we do not generally make any specific projections as to future earnings nor do we endorse any projections regarding future performance, which may be made by
others outside our company.

RISK FACTORS

Profitability - We generated earnings from continuing operations of $7.5 million and generated net earnings of $7.5 million during the first six months of fiscal year 2003,
which fiscal year will end March 31, 2003. We incurred losses from continuing operations of $15.0 million and generated net earnings of $123.3 million during the first six months of fiscal year 2002, which fiscal year ended March 31, 2002. This
included income from discontinued operations of $111.8 million from the sale of Danka Services International (DSI) and an extraordinary gain on the early retirement of debt of $26.5 million. We incurred losses from continuing operations
of $9.9 million during fiscal year 2002 and $233.5 million during fiscal year 2001. An analysis of factors that affected earnings for both the three month and six month periods that ended September 30, 2002 and September 30, 2003 are discussed in
the Managements Discussion and Analysis of Financial Condition and Results of Operation section of this document. These factors include, but are not limited to changes in the accounting for goodwill amortization, the impact of foreign currency
gains and losses and changes in reserve estimates. If we incur losses in the future, our growth potential and our ability to execute our business strategy may be limited. In addition, our ability to service our indebtedness may be impaired because
we may not generate sufficient cash flow from operations to pay principal or interest when due. We believe that our results for the first six months of fiscal year 2002 and for fiscal years 2001 and 2001 were impacted in large part by competitive
pressures, the transition in our industry from analog to digital products, our decision to substantially exit the analog business, our efforts to position ourselves as a preeminent provider of digital equipment, services and solutions, certain
under-performing business units and our efforts to develop and grow areas of our business that do not rely on the sale and servicing of office imaging equipment.

Competition - Our industry is highly
competitive. We have competitors in all markets in which we operate and our competitors include a number of companies worldwide with significant technological, distribution and financial resources. Competition in our industry is based largely upon
technology, performance, pricing, quality, reliability, distribution, customer service and support, and leasing and rental financing. In addition, our suppliers continue to establish themselves as direct competitors in many of the areas in which we
do business. Besides competition from within the office imaging industry, we are also experiencing competition from other sources as a result of technology convergence, including the development of document management processing, retention and
digital printing technologies. We may not be able to keep, and we may even lose our market share because of the high level of competition in our industry. The intense competition in our industry may result in pressure on the prices that we can
obtain for our products and may affect our ability to retain customers, both of which could negatively affect our operating results.

Technological Changes - The office imaging industry continues to change from
analog to digital photocopiers. Most of our digital products replace or compete with analog products. Digital photocopiers are more efficient than analog photocopiers, meaning that our customers require fewer of them to provide the same level of
output. Digital photocopiers are increasingly more reliable than analog photocopiers and require less maintenance. This has contributed, in part, to a decline in our service contract revenue,



---

##### Table of Contents

which has traditionally formed a significant portion of our revenues. In addition, color printing and copying represents an important and growing part of our industry. We must improve our
execution of color sales and meet the demand for color products if we are to maintain and improve our operating performance and our ability to compete. Development of technologies in our industry, including digital and color products, may impair our
future operating performance and our ability to compete. For example, we may not be able to procure or gain access to products and bring them to the marketplace, or to make the investments necessary for us to maintain a technologically competitive
workforce. We launched three major initiatives in fiscal year 2002, which are designed to address the impact of these technological changes on our service revenue: (1) our Danka @ the Desktop initiative, which is intended to improve print management
processes, increase productivity, and lower overall document production costs, (2) our multi-vendor services initiative, which is intended to leverage our existing Technical Services group and expand the types of technical services and maintenance
that we provide for our customers to include other types of digitally connected devices and equipment installed by other vendors, (3) and our professional services group. The success of these initiatives may not be achieved if they are not accepted
by our customers, do not generate additional revenue, or we are unable to provide the software, hardware, solutions or services necessary to successfully implement these initiatives.

Vendor Relationships - We
have relationships with Canon, Ricoh, Toshiba, Heidelberg/Nexpress, and Konica. These companies manufacture equipment, parts, supplies and software for resale by us in all of our markets. We also rely on our equipment suppliers for related parts and
supplies. An inability to obtain parts or supplies from our major vendors, or the loss of any major vendor, may seriously harm our business because we may not be able to supply those vendors products to our customers on a timely basis in
sufficient quantities or at all. There is no guarantee that these vendors or any of our other vendors will continue to sell their products and services to us, or that they will do so at competitive prices. Other factors, including reduced access to
credit by our vendors resulting from economic conditions, may impair our vendors ability to provide products on a timely manner or at competitive prices.

Indebtedness - We have significant outstanding
indebtedness. At September 30, 2002 we had consolidated bank and long-term indebtedness, including current maturities of long-term debt, of approximately $237.7 million. As of September 30, 2002, we owed $121.0 million under our credit facility. The
facility requires repayment of principal in installments of $16.0 million in fiscal year 2003 ($4 million at the end of each quarter), $32 million in fiscal years 2004 and 2005 ($8 million at the end of each quarter), $24 million in fiscal year 2006
($8 million at the end of each quarter), with the balance due March 31, 2006. We also are required to make additional repayments of our indebtedness under the credit facility in amounts equal to 50% of our excess cash flow (as defined in the credit
facility) for each of our fiscal years. In addition, we have $47.6 million in principal amount of zero coupon senior subordinated notes due April 1, 2004 and $64.5 million in principal amount of 10% subordinated notes due April 1, 2008.

Our significant level of indebtedness requires us to dedicate a substantial portion of our operating cash flows to payments of interest and principal. The payment obligations and covenants under our indebtedness may also
limit our liquidity and our ability to make investments that are necessary for us to keep pace with the technological and other changes currently affecting our industry. The majority of our borrowings bear interest at a variable rate. Accordingly,
increases in interest rates could increase our interest expense and adversely affect our cash flow, reducing the amounts available to make payments on our indebtedness.

Bank and Other Covenants - Our credit
facility imposes significant operating restrictions on us, because it contains financial and non-financial covenants, which restrict our business operations. If we were to fail to comply with the financial covenants and did not obtain a waiver or
amendment from our senior bank lenders, we would be in default under the credit facility and lenders owning a majority of our senior bank debt would be permitted to demand immediate repayment. If we were to fail to repay our senior bank debt when it
becomes due, our lenders could proceed against certain of our and our subsidiaries assets and capital stock which we have pledged to them as security for the repayment of our senior bank debt.

Third Party
Financing Arrangements - We have an agreement with General Electric Capital Corporation (GECC) under which GECC agrees to provide financing to our United States customers to purchase equipment from us. Although we have other financing
arrangements, GECC finances a significant part of our business. If we were to breach the covenants or other restrictions in our agreement with GECC, then GECC may refuse to provide financing to our customers. If GECC were to fail to provide
financing to our customers, those customers may be unable to purchase equipment from us if we were unable to provide alternative financing arrangements on similar terms. In addition, if we were unable to provide financing, we may lose sales, which
could negatively affect our operating results. If we fail to provide a minimum level of customer leases under the agreement, we are required to pay penalty payments to GECC. We paid a penalty of approximately $0.2 million to GECC in fiscal year
2002. We presently anticipate that we will be obligated to pay GECC a penalty of approximately $1.5 million at November 30, 2002.



---

##### Table of Contents

Achieving and Sustaining Profits - In order to be profitable, we must maintain efficient and cost-effective operations. We are continuing to focus on
exploring and exploiting new market opportunities, pursuing productivity initiatives and streamlining our infrastructure. These initiatives are aimed at making us more profitable and competitive in the long-term. Our ability to sustain and improve
our profit margins through these initiatives may be affected by factors outside our control.

Restructuring Plan - In December 2000, we announced that we would be
eliminating approximately 1,200 positions, or approximately 8% of our worldwide workforce, and that we would be closing and consolidating several of our facilities in order to lower our costs to meet our current revenue and margin expectations. We
modified our restructuring plan during fiscal year 2002 and implemented a new restructuring plan for fiscal year 2002. If we do not implement our restructuring plans within our projected time frames, our ability to achieve our anticipated savings
and lower costs may be harmed, which may reduce our profitability. We anticipate that the workforce reductions will be substantially completed by March 31, 2003 and that the remaining lease obligations related to the facility closures will be
substantially completed by March 31, 2003.

Information Systems and Financial Controls. Our management information systems run on numerous disparate legacy IT systems that
are outdated and incompatible in certain regards. This is primarily the result of our rapid expansion through many acquisitions, followed by a period of financial difficulties that caused a lack of focus on, and investment in, these
systems.

The operation and coordination of our management information systems is labor-intensive and expensive. We must manually collect, compile and consolidate certain
information due to system limitations. We utilize manual internal control reviews to provide assurance of the accuracy of such information. These manual procedures are more difficult to supervise, more time-consuming and more costly than automated
processes. As a result of these issues, we are limited in our ability to obtain, manage and access important information, such as customer and contract data, in an effective and timely manner. We also incur substantial effort and expense with
respect to billing, collections, contract data and inventory accounting. Our ability to manage, account for and control our business efficiently and effectively can be adversely affected when important information and knowledge cannot be accessed
timely or accurately.

We believe that we must upgrade our management information systems so that we have an infrastructure that is appropriate for a business of our size,
scope and complexity. We are in the process of implementing an approximately $35 to $40 million program, known as Vision 21, to enhance and unify our United States management information systems. This program has proved more expensive and
time-consuming than we originally anticipated, in part because of the lack of prior investment in our IT infrastructure, systems performance issues and software deficiencies. It is possible that the costs of completing the project may still exceed
our current expectations. We anticipate that the United States program will be completed by the end of the fourth quarter of fiscal year 2003, although we cannot give any assurance that this will be the case. We plan to implement a similar program
for our International and European operations once our United States program is substantially complete. We expect the International and European Vision 21 program will take 12 to 24 months to implement from its start and will require a substantial
investment.

In conjunction with the management information system initiatives outlined above, we are in the process of improving our internal financial and business
control functions. We are working with outside consultants to strengthen and improve certain areas of identified weaknesses in our financial controls. We are developing a new European internal audit department and are developing a compliance
auditing function, as well as implementing new policy controls, quality standards and corporate governance initiatives. Our ability to achieve our goal of reducing operating costs, improving operating effectiveness and ensuring the necessary
improvement to our financial and business controls will depend upon the success of our Vision 21 initiative and programs that continue to enhance our internal financial and business control functions.

Currency Fluctuations - As a multinational company, changes in currency exchange rates affect our revenues, cost of sales and operating expenses. In addition, fluctuations in exchange rates between the United
States dollar and the currencies in each of the countries in which we operate affect the results of our non-United States operations when reported in United States dollars in our U.S. financial statements, and the value of the net assets of our
non-United States operations when reported in United States dollars in our U.S. financial statements. Approximately 45.7% of our revenues were generated outside the United States during the first six months of fiscal year 2003, with the majority of
these revenues generated in countries that have adopted the euro as their currency and the United Kingdom. During the first six months of fiscal year 2003, the euro strengthened approximately 7.7% against the United States dollar and the United
Kingdom pound strengthened approximately 5.2% against the United States dollar. We pay for some high-volume copiers, parts and supplies in euro countries in United States dollars, but we generally invoice our customers in euro countries in euro. If
the euro weakens against the United States dollar, our operating margins and cash flow may be negatively impacted when we receive payment in euro but we pay our suppliers in United States dollars. In addition, our results of operations and financial
condition have been, and may continue to be, negatively impacted by the effect of currency fluctuations on the translation of the financial statements of our non-United States subsidiaries, including our European and Latin American subsidiaries,
from local currencies to the United States dollar for inclusion in our U.S financial statements. We generally do not hedge our exposure to changes in foreign currency.



---

##### Table of Contents

Share Price - The market price of our ordinary shares and American depositary shares could be subject to significant fluctuations as a result of many factors. In addition, global stock
markets have from time to time experienced significant price and volume fluctuations, which may lead to a drop in the market price of our ordinary shares and American depositary shares. Factors which may add to the volatility of the price of our
ordinary shares and American depositary shares include many of the factors set out above, and may also include changes in liquidity in our ordinary shares and American depositary shares, sales of our ordinary shares and American depositary shares,
investor sentiment towards the business sector in which we operate and conditions in the capital markets generally. Many of these factors are beyond our control. These factors may decrease the market price of our ordinary shares and American
depositary shares, regardless of our operating performance.

Dividends - We have not paid any cash or other dividends on our ordinary shares since 1998 and we do not expect to do so for the foreseeable future.
We are an English company and under English law, we are allowed to pay dividends to shareholders only if:

| |  |  | we have accumulated, realized profits that have not been previously distributed or capitalized, in excess of our accumulated, realized losses that have not previously been written off in a
reduction or reorganization of capital; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | our net assets are not less than the aggregate of our share capital and our non-distributable reserves, either before or as a result of the dividend.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

As of the date of filing of this Form 10-Q, we have insufficient, accumulated realized profits to pay dividends on our ordinary shares. In addition, our credit facility prohibits us from paying dividends on our ordinary
shares without our lenders consent. We may also only pay dividends on our ordinary shares if we have paid the dividends due on our 6.50% senior convertible participating shares.

ADDITIONAL INFORMATION
AVAILABLE ON COMPANY WEB-SITE

Our most recent annual report and current SEC filings may be viewed or downloaded electronically or as paper copies from our website:http://www.danka.com/FinancialReports.asp. Our recent press releases are also available to be viewed or downloaded electronically athttp://www.danka.com/PressReleases.htm. We will also provide electronic or paper copies of our SEC filings free of charge on request. Any information on or linked from our website is not incorporated by reference into this Quarterly Report on Form 10-Q.



---

##### Table of Contents

PART I  FINANCIAL INFORMATION

|Item 1. | Consolidated Financial Statements
|------- | ---------------------------------

Danka Business Systems PLCConsolidated Statements of Operations for the three and six months ended September 30, 2002 and 2001(In thousands, except per American
Depositary Share (ADS) amounts)(Unaudited)

|                                                                           |  | For the Three Months Ended |         | For the Six Months Ended |  
|-------------------------------------------------------------------------- |  | -------------------------- | ------- | ------------------------ | -
|                                                                           |  |                            |         |                          |  
|                                                                           |  | September 30,2002          |         | September 30,2001        |  
|                                                                           |  |                            |         |                          |  
|Revenue:                                                                   |  |                            |         |                          |  
|Retail equipment sales                                                     |  | $                          | 118,063 |                          | $
|Retail service, supplies and rentals                                       |  |                            | 207,161 |                          |  
|Wholesale                                                                  |  |                            | 18,526  |                          |  
|                                                                           |  |                            |         |                          |  
|Total revenue                                                              |  |                            | 343,750 |                          |  
|                                                                           |  |                            |         |                          |  
|                                                                           |  |                            |         |                          |  
|Costs and operating expenses:                                              |  |                            |         |                          |  
|Cost of retail equipment sales                                             |  |                            | 79,533  |                          |  
|Retail service, supplies and rental costs                                  |  |                            | 125,676 |                          |  
|Wholesale costs of revenue                                                 |  |                            | 14,714  |                          |  
|Selling, general and administrative expenses                               |  |                            | 118,188 |                          |  
|Amortization of intangible assets                                          |  |                            | 238     |                          |  
|Restructuring charges (credits)                                            |  |                            | (555    | )                        |  
|Other (income) expense                                                     |  |                            | (3,305  | )                        |  
|                                                                           |  |                            |         |                          |  
|Total costs and operating expenses                                         |  |                            | 334,489 |                          |  
|                                                                           |  |                            |         |                          |  
|                                                                           |  |                            |         |                          |  
|Operating earnings (loss) from continuing      operations                  |  |                            | 9,261   |                          |  
|                                                                           |  |                            |         |                          |  
|Interest expense                                                           |  |                            | (6,881  | )                        |  
|Interest income                                                            |  |                            | 20      |                          |  
|                                                                           |  |                            |         |                          |  
|Earnings (loss) from continuing operations before      income taxes        |  |                            | 2,400   |                          |  
|Provision (benefit) for income taxes                                       |  |                            | 644     |                          |  
|                                                                           |  |                            |         |                          |  
|Earnings (loss) from continuing operations before      extraordinary items |  |                            | 1,756   |                          |  
|Discontinued operations, net of tax                                        |  |                            |        |                          |  
|Extraordinary gain (loss) on early retirement of      debt, net of tax     |  |                            |        |                          |  
|                                                                           |  |                            |         |                          |  
|Net earnings (loss)                                                        |  | $                          | 1,756   |                          | $
|                                                                           |  |                            |         |                          |  
|                                                                           |  |                            |         |                          |  
|Basic (loss) earnings available to common      shareholders per ADS:       |  |                            |         |                          |  
|Net earnings (loss) per ADS, continuing operations                         |  | $                          | (0.04   | )                        | $
|Net earnings (loss) per ADS, discontinued      operations                  |  |                            |        |                          |  
|Net earnings per ADS, extraordinary item                                   |  |                            |        |                          |  
|                                                                           |  |                            |         |                          |  
|Net earnings (loss) per ADS                                                |  | $                          | (0.04   | )                        | $
|                                                                           |  |                            |         |                          |  
|Weighted average ADSs                                                      |  |                            | 62,026  |                          |  
|                                                                           |  |                            |         |                          |  
|Diluted (loss) earnings available to common      shareholders per ADS:     |  |                            |         |                          |  
|Net earnings (loss) per ADS, continuing operations                         |  | $                          | (0.04   | )                        | $
|Net earnings (loss) per ADS, discontinued      operations                  |  |                            |        |                          |  
|Net earnings per ADS, extraordinary item                                   |  |                            |        |                          |  
|                                                                           |  |                            |         |                          |  
|Net earnings (loss) per ADS                                                |  | $                          | (0.04   | )                        | $
|                                                                           |  |                            |         |                          |  
|Weighted average ADSs                                                      |  |                            | 62,026  |                          |  

See accompanying notes to the consolidated financial statements



---

##### Table of Contents

Danka Business Systems PLCCondensed Consolidated Balance Sheets as of September 30, 2002 and March 31, 2002(In Thousands)(Unaudited)

|                                                                 |  | September 30,2002 |          | March 31,2002 |  
|---------------------------------------------------------------- |  | ----------------- | -------- | ------------- | -
|                                                                 |  |                   |          |               |  
|Assets                                                           |  |                   |          |               |  
|Current assets:                                                  |  |                   |          |               |  
|Cash and cash equivalents                                        |  | $                 | 37,822   |               | $
|Accounts receivable, net                                         |  |                   | 264,168  |               |  
|Inventories                                                      |  |                   | 116,505  |               |  
|Prepaid expenses, deferred income taxes and other current assets |  |                   | 41,239   |               |  
|                                                                 |  |                   |          |               |  
|Total current assets                                             |  |                   | 459,734  |               |  
|                                                                 |  |                   |          |               |  
|Equipment on operating leases, net                               |  |                   | 46,401   |               |  
|Property and equipment, net                                      |  |                   | 58,832   |               |  
|Goodwill, net                                                    |  |                   | 247,447  |               |  
|Noncompete agreements, net                                       |  |                   | 911      |               |  
|Deferred income taxes and other assets                           |  |                   | 51,098   |               |  
|                                                                 |  |                   |          |               |  
|Total assets                                                     |  | $                 | 864,423  |               | $
|                                                                 |  |                   |          |               |  
|                                                                 |  |                   |          |               |  
|Liabilities and shareholders equity                             |  |                   |          |               |  
|Current liabilities:                                             |  |                   |          |               |  
|Current maturities of long-term debt and notes payable           |  | $                 | 27,277   |               | $
|Accounts payable                                                 |  |                   | 102,897  |               |  
|Accrued expenses and other current liabilities                   |  |                   | 89,760   |               |  
|Taxes payable                                                    |  |                   | 51,855   |               |  
|Deferred revenue                                                 |  |                   | 42,855   |               |  
|                                                                 |  |                   |          |               |  
|Total current liabilities                                        |  |                   | 314,644  |               |  
|                                                                 |  |                   |          |               |  
|Long-term debt and notes payable, less current maturities        |  |                   | 210,398  |               |  
|Deferred income taxes and other long-term liabilities            |  |                   | 25,014   |               |  
|                                                                 |  |                   |          |               |  
|Total liabilities                                                |  |                   | 550,056  |               |  
|                                                                 |  |                   |          |               |  
|                                                                 |  |                   |          |               |  
|6.5% convertible participating shares                            |  |                   | 249,313  |               |  
|                                                                 |  |                   |          |               |  
|                                                                 |  |                   |          |               |  
|Shareholders equity:                                            |  |                   |          |               |  
|Ordinary shares, 1.25 pence stated value                         |  |                   | 5,139    |               |  
|Additional paid-in capital                                       |  |                   | 325,896  |               |  
|Retained earnings (accumulated deficit)                          |  |                   | (183,174 | )             |  
|Accumulated other comprehensive (loss) income                    |  |                   | (82,807  | )             |  
|                                                                 |  |                   |          |               |  
|Total shareholders equity                                       |  |                   | 65,054   |               |  
|                                                                 |  |                   |          |               |  
|Total liabilities & shareholders equity                         |  | $                 | 864,423  |               | $
|                                                                 |  |                   |          |               |  

See accompanying notes to the consolidated financial statements



---

##### Table of Contents

Danka Business Systems PLCConsolidated Statements of Cash Flows for the six months ended September 30, 2002 and 2001(In Thousands)(Unaudited)

|                                                                         |  | September 30,2002 |         | September 30,2001 |  
|------------------------------------------------------------------------ |  | ----------------- | ------- | ----------------- | -
|                                                                         |  |                   |         |                   |  
|Operating activities:                                                    |  |                   |         |                   |  
|Net earnings (loss)                                                      |  | $                 | 7,508   |                   | $
|Adjustments to reconcile net earnings (loss) to net cash provided:       |  |                   |         |                   |  
|Extraordinary gain on debt retirement                                    |  |                   |        |                   |  
|Net earnings and gain from sale of discontinued operations               |  |                   |        |                   |  
|Depreciation and amortization                                            |  |                   | 29,121  |                   |  
|Deferred income taxes                                                    |  |                   | (2,413  | )                 |  
|Amortization of debt issuance costs                                      |  |                   | 4,217   |                   |  
|Loss on sale of property and equipment and equipment on operating leases |  |                   | 2,503   |                   |  
|Proceeds from sale of equipment on operating leases                      |  |                   | 1,431   |                   |  
|Restructuring and other special charges (credits)                        |  |                   |        |                   |  
|Changes in net assets and liabilities:                                   |  |                   |         |                   |  
|Accounts receivable                                                      |  |                   | 28,182  |                   |  
|Inventories                                                              |  |                   | 14,094  |                   |  
|Prepaid expenses and other current assets                                |  |                   | (50     | )                 |  
|Other non-current assets                                                 |  |                   | 3,276   |                   |  
|Accounts payable                                                         |  |                   | (7,688  | )                 |  
|Accrued expenses and other current liabilities                           |  |                   | (14,707 | )                 |  
|Deferred revenue                                                         |  |                   | 512     |                   |  
|Other long-term liabilities                                              |  |                   | 1,600   |                   |  
|                                                                         |  |                   |         |                   |  
|Net cash provided by operating activities                                |  |                   | 67,586  |                   |  
|                                                                         |  |                   |         |                   |  
|                                                                         |  |                   |         |                   |  
|Investing activities:                                                    |  |                   |         |                   |  
|Capital expenditures                                                     |  |                   | (17,441 | )                 |  
|Proceeds from the sale of property and equipment                         |  |                   | 234     |                   |  
|Net proceeds from the sale of business                                   |  |                   |        |                   |  
|                                                                         |  |                   |         |                   |  
|Net cash provided by (used in) investing activities                      |  |                   | (17,207 | )                 |  
|                                                                         |  |                   |         |                   |  
|                                                                         |  |                   |         |                   |  
|Financing activities:                                                    |  |                   |         |                   |  
|Net payments under line of credit agreements                             |  |                   | (49,404 | )                 |  
|Principal payments of debt                                               |  |                   | (17,778 | )                 |  
|Payment of debt issue costs                                              |  |                   | (6,938  | )                 |  
|                                                                         |  |                   |         |                   |  
|Net cash used in financing activities                                    |  |                   | (74,120 | )                 |  
|                                                                         |  |                   |         |                   |  
|Effect of exchange rates                                                 |  |                   | 2,093   |                   |  
|                                                                         |  |                   |         |                   |  
|Net decrease in cash                                                     |  |                   | (21,648 | )                 |  
|Cash and cash equivalents, beginning of period                           |  |                   | 59,470  |                   |  
|                                                                         |  |                   |         |                   |  
|Cash and cash equivalents, end of period                                 |  | $                 | 37,822  |                   | $
|                                                                         |  |                   |         |                   |  

See accompanying notes to the consolidated financial statement



---

##### Table of Contents

Danka Business Systems PLCConsolidated Statements of Shareholders Equity and Accumulated Other Comprehensive Losses for the sixmonths ended September 30, 2002
and 2001(In Thousands)(Unaudited)

|                                                       |  | Number ofOrdinaryShares(4 OrdinarySharesEqual1 ADS) |         | OrdinaryShares |   | AdditionalPaid-InCapital |  | RetainedEarnings(AccumulatedDeficit) |         | AccumulatedOtherCompre-hensive(Loss)Income |   | Total    |  
|------------------------------------------------------ |  | --------------------------------------------------- | ------- | -------------- | - | ------------------------ |  | ------------------------------------ | ------- | ------------------------------------------ | - | -------- | -
|                                                       |  |                                                     |         |                |   |                          |  |                                      |         |                                            |   |          |  
|                                                       |  |                                                     |         |                |   |                          |  |                                      |         |                                            |   |          |  
|Balances at March 31, 2002                             |  | $                                                   | 248,085 |                | $ | 5,139                    |  | $                                    | 325,880 |                                            | $ | (181,872 | )
|                                                       |  |                                                     |         |                |   |                          |  |                                      |         |                                            |   |          |  
|Net earnings                                           |  |                                                     |        |                |   |                         |  |                                      |        |                                            |   | 7,508    |  
|Currency translation adjustment                        |  |                                                     |        |                |   |                         |  |                                      |        |                                            |   |         |  
|                                                       |  |                                                     |         |                |   |                          |  |                                      |         |                                            |   |          |  
|comprehensive income                                   |  |                                                     |         |                |   |                          |  |                                      |         |                                            |   |          |  
|Dividends and accretion on        participating shares |  |                                                     |        |                |   |                         |  |                                      |        |                                            |   | (8,810   | )
|Shares issued under employee     stock plans           |  |                                                     | 28      |                |   |                         |  |                                      | 16      |                                            |   |         |  
|                                                       |  |                                                     |         |                |   |                          |  |                                      |         |                                            |   |          |  
|                                                       |  |                                                     |         |                |   |                          |  |                                      |         |                                            |   |          |  
|Balances at September 30, 2002                         |  |                                                     | 248,113 |                | $ | 5,139                    |  | $                                    | 325,896 |                                            | $ | (183,174 | )
|                                                       |  |                                                     |         |                |   |                          |  |                                      |         |                                            |   |          |  
|                                                       |  |                                                     |         |                |   |                          |  |                                      |         |                                            |   |          |  
|Balances at March 31, 2001                             |  |                                                     | 247,571 |                | $ | 5,130                    |  | $                                    | 325,399 |                                            | $ | (302,619 | )
|Net earnings                                           |  |                                                     |        |                |   |                         |  |                                      |        |                                            |   | 123,250  |  
|Currency translation adjustment                        |  |                                                     |        |                |   |                         |  |                                      |        |                                            |   |         |  
|                                                       |  |                                                     |         |                |   |                          |  |                                      |         |                                            |   |          |  
|comprehensive income                                   |  |                                                     |         |                |   |                          |  |                                      |         |                                            |   |          |  
|Dividends and accretion on        participating shares |  |                                                     |        |                |   |                         |  |                                      |        |                                            |   | (8,273   | )
|Shares issued under employee     stock plans           |  |                                                     | 514     |                |   | 8                        |  |                                      | 481     |                                            |   |         |  
|                                                       |  |                                                     |         |                |   |                          |  |                                      |         |                                            |   |          |  
|                                                       |  |                                                     |         |                |   |                          |  |                                      |         |                                            |   |          |  
|Balances at September 30, 2001                         |  |                                                     | 248,085 |                | $ | 5,138                    |  | $                                    | 325,880 |                                            | $ | (187,642 | )
|                                                       |  |                                                     |         |                |   |                          |  |                                      |         |                                            |   |          |  

See accompanying notes to the consolidated financial statements



---

##### Table of Contents

Danka Business Systems PLCNotes to Consolidated Financial Statements(Unaudited)

Note
1.      Basis of Presentation

The accompanying condensed consolidated balance sheet as of September 30, 2002, the consolidated statements of
operations for the three and six months ended September 30, 2002 and 2001, the consolidated statements of cash flows for the six months ended September 30, 2002 and 2001, and the consolidated statement of shareholders equity (deficit) and
accumulated other comprehensive losses for the six months ended September 30, 2002 and 2001 are unaudited. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of
operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results which may be expected for the entire fiscal year. The consolidated financial
statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report contained in Form 10-K for the year ended March 31, 2002. Certain prior year amounts have been reclassified to
conform to current year presentations.

The financial statements contained herein for the three and six months ended September 30, 2002 and September 30, 2001 do not comprise statutory accounts within the
meaning of Section 240 of the United Kingdom Companies Act 1985. Statutory accounts for the year ended March 31, 2002 have beendelivered to the Registrar of Companies for England and Wales. The
independent auditors report on those statutory accounts was unqualified and did not contain a statement under Section 237(2) or 237(3) of the United Kingdom Companies Act 1985.

Note
2.      Accounting Change

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 142 revises the standards of accounting for goodwill and indefinite-lived intangible assets by replacing the regular amortization of these assets with the
requirement that they are reviewed annually for possible impairment or more frequently if impairment indicators arise. Separable intangible assets that have finite lives will continue to be amortized over their estimated useful lives. We adopted
SFAS 142 effective April 1, 2002. During the first quarter of the fiscal year ending March 31, 2003, we finalized the required transitional impairment tests of goodwill and indefinite-lived intangible assets under the requirements of SFAS 142. Based
on the results of the transitional impairment tests, no adjustments for impairment were necessary.

The following table reflects our unaudited pro forma results of operations giving effect to SFAS 142 as if it
were adopted on April 1, 2001 (in thousands, except per share amounts):

|                                                                  |  | For the Three Months Ended |        | For the Six Months Ended |  
|----------------------------------------------------------------- |  | -------------------------- | ------ | ------------------------ | -
|                                                                  |  |                            |        |                          |  
|                                                                  |  | September 30,2002          |        | September 30,2001        |  
|                                                                  |  |                            |        |                          |  
|                                                                  |  |                            |        |                          |  
|Reported net earnings (loss)                                      |  | $                          | 1,756  |                          | $
|Add-back goodwill amortization, net of taxes                      |  |                            |       |                          |  
|                                                                  |  |                            |        |                          |  
|Adjusted net earnings (loss)                                      |  | $                          | 1,756  |                          | $
|                                                                  |  |                            |        |                          |  
|                                                                  |  |                            |        |                          |  
|Basic (loss) earnings available to common shareholders per ADS:   |  |                            |        |                          |  
|Reported net earnings (loss) per ADS                              |  | $                          | (0.04  | )                        | $
|Add-back goodwill amortization, net of taxes                      |  |                            |       |                          |  
|                                                                  |  |                            |        |                          |  
|Adjusted net earnings (loss) per ADS                              |  | $                          | (0.04  | )                        | $
|                                                                  |  |                            |        |                          |  
|Weighted average ADSs                                             |  |                            | 62,026 |                          |  
|                                                                  |  |                            |        |                          |  
|Diluted (loss) earnings available to common shareholders per ADS: |  |                            |        |                          |  
|Reported net earnings (loss) per ADS                              |  | $                          | (0.04  | )                        | $
|Add-back goodwill amortization, net of taxes                      |  |                            |       |                          |  
|                                                                  |  |                            |        |                          |  
|Adjusted net earnings (loss) per ADS                              |  | $                          | (0.04  | )                        | $
|                                                                  |  |                            |        |                          |  
|Weighted average ADSs                                             |  |                            | 62,026 |                          |  

As of September 30, 2002, goodwill amounted to $247.4 million. Changes to goodwill for the six months ended September 30, 2002 resulted primarily from fluctuations in foreign
currency exchange rates and an adjustment related to a prior year acquisition. Non-compete agreements, net amounted to $0.9 million, which included $2.9 million of accumulated amortization.



---

##### Table of Contents

Aggregate amortization expense of non-compete agreements for the first six months of fiscal 2003 amounted to $0.2 million. Estimated amortization expense for the current fiscal year is $0.3
million and the succeeding five fiscal years is between $0.1 million and $0.2 million per year.

Goodwill by operating segment as of September 30, 2002 (in thousands):

|              |  | Goodwill |        
|------------- |  | -------- | -------
|              |  |          |        
|United States |  | $        | 72,736 
|Europe        |  |          | 167,258
|International |  |          | 7,453  
|              |  |          |        
|Total         |  | $        | 247,447
|              |  |          |        

Note 3.      Recent Accounting Pronouncements

SFAS No. 143, Accounting for
Asset Retirement Obligations, requires recognition of the fair value of liabilities associated with the retirement of long-lived assets when a legal obligation to incur such costs arises as a result of the acquisition, construction,
development and/or the normal operation of a long-lived asset. Upon recognition of the liability, a corresponding asset is recorded and depreciated over the remaining life of the long-lived asset. The Statement defines a legal obligation as one that
a party is required to settle as a result of an existing or enacted law, statute, ordinance, or written or oral contract or by legal construction of a contract under the doctrine of promissory estoppel. SFAS 143 is effective for fiscal years
beginning after June 15, 2002. We do not expect a material impact from this statement on our financial position and results of operations.

SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets requires long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. Therefore, discontinued operations will no
longer be measured at net realizable value or include amounts for operating losses that have not yet occurred. Statement 144 also broadens the reporting of discontinued operations to include all components of an entity with operations that can be
distinguished from the rest of the entity and that will be eliminated from the ongoing operations of the entity in a disposal transaction. The provisions of Statement 144 are effective for financial statements issued for fiscal years beginning after
December 15, 2001 and, generally, are to be applied prospectively. The impact of adoption of this statement on our financial position and results of operations were not material.

In April 2002, the FASB issued
SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections (SFAS 145) which is effective for fiscal years beginning after May 15, 2002. This Statement rescinds
SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, as well as SFAS No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. As a result, the gains or losses from debt extinguishments will no
longer be classified as extraordinary items unless they meet the requirements in APB 30 of being unusual and infrequently occurring. Additionally, this Statement amends SFAS No. 13, Accounting for Leases, to eliminate any inconsistency
between the reporting requirements for sale-leaseback transactions and certain lease modifications that have similar economic effects. We will adopt the provisions of Statement 145 for the first quarter of our fiscal year 2004. Upon adoption, prior
years gains from debt extinguishment will be reclassified to continuing operations.

SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities requires companies to
recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Statement 146 is to be applied prospectively to exit or disposal activities initiated after
December 31, 2002.



---

##### Table of Contents

4.   Restructuring and Other Special Charges

Fiscal Year 2002 Charge:

The hiring of
a new Chief Executive Officer in March of 2001 was the first in a series of changes to our senior management team. Upon the completion of the financial restructuring plan at the end of the second quarter of fiscal year 2002, we made additional
significant changes to our senior management team. Our new management team reviewed the existing restructuring plan and, as a result of changing business conditions in the U.S. and Europe and revisions to our business strategies, we modified our
2001 restructuring plan in the second, third and fourth quarters of fiscal year 2002 and implemented a new restructuring plan for fiscal year 2002. Additionally, higher than anticipated employee attrition reduced cash outlay requirements for
severance. As a result of these actions and evaluations, we reversed $13.0 million of fiscal year 2001 severance and facility restructuring reserves in fiscal year 2002 while recording a pre-tax restructuring charge of $11.0 million during fiscal
year 2002. Due to a change in estimate, we reversed $0.01 million of fiscal year 2002 charges in fiscal year 2003.

During fiscal year 2002, we incurred restructuring charges that included $4.9 million related to
severance for 355 employees in the U.S., Canada and Europe. We expect substantially all of these reductions to be completed by March 31, 2003. Cash outlays for the reductions during the first six months of fiscal year 2003 totaled $0.5 million. The
restructuring charges also included $6.1 million for future lease obligations on 39 facilities that were vacated by March 31, 2002. Cash outlays for the facilities during the first six months of fiscal year 2003 totaled $2.0 million. The following
table summarizes the fiscal year 2002 restructuring charges:

2002 Restructuring Charge:

|(in 000s)                                    |  | Fiscal 2002Expense |        | Reserve atMarch 31,2002 |   | CashOutlays |  | OtherNon-CashChanges |        | Reserve atSeptember 30,2002 |  
|--------------------------------------------- |  | ------------------ | ------ | ----------------------- | - | ----------- |  | -------------------- | ------ | --------------------------- | -
|                                              |  |                    |        |                         |   |             |  |                      |        |                             |  
|Severance                                     |  | $                  | 4,967  |                         | $ | 1,210       |  | $                    | (511   | )                           | $
|Future lease obligations on facility closures |  |                    | 6,074  |                         |   | 3,426       |  |                      | (1,965 | )                           |  
|                                              |  |                    |        |                         |   |             |  |                      |        |                             |  
|Total                                         |  | $                  | 11,041 |                         | $ | 4,636       |  | $                    | (2,476 | )                           | $
|                                              |  |                    |        |                         |   |             |  |                      |        |                             |  

Fiscal Year 2001 Charge:

Our fiscal year 2001 restructuring charge included $21.8 million related to severance, which represented the
anticipated reduction of approximately 1,200 positions worldwide. However, as a result of the changes in senior management and higher than anticipated employee attrition discussed above, we determined during fiscal year 2002 that $10.1 million of
the original severance reserve would not be required. Cash outlays related to these reductions during the first six months of fiscal year 2003 totaled $0.1 million. We expect cash outlays for the workforce reductions to be completed by March 31,
2003.

The fiscal year 2001 restructuring charge also included $4.3 million for future lease obligations on facility closures and exit costs. As a result of the changes in senior management, we determined during
fiscal year 2002 that $3.0 million of facility reserves would not be required. Cash outlays for facilities during the first six months of fiscal year 2003 totaled $0.03 million. We expect the remaining lease obligations related to these facility
closures to be substantially completed by March 31, 2003. Due to a change in estimate, we reversed $0.3 million of fiscal year 2001 facility charges during fiscal year 2003. The following table summarizes the fiscal year 2001 restructuring charge:

2001 Restructuring Charge:

|(in 000s)                                                             |  | Fiscal 2001Expense |        | Reserve atMarch 31,2002 |   | CashOutlays |  | OtherNon-CashChanges |      | Reserve atSeptember 30,2002 |  
|---------------------------------------------------------------------- |  | ------------------ | ------ | ----------------------- | - | ----------- |  | -------------------- | ---- | --------------------------- | -
|                                                                       |  |                    |        |                         |   |             |  |                      |      |                             |  
|Severance                                                              |  | $                  | 21,766 |                         | $ | 414         |  | $                    | (87  | )                           | $
|Future lease obligations on facility closures     and other exit costs |  |                    | 4,295  |                         |   | 475         |  |                      | (28  | )                           |  
|                                                                       |  |                    |        |                         |   |             |  |                      |      |                             |  
|Total                                                                  |  | $                  | 26,061 |                         | $ | 889         |  | $                    | (115 | )                           | $
|                                                                       |  |                    |        |                         |   |             |  |                      |      |                             |  



---

##### Table of Contents

Fiscal Year 1999:We recorded certain restructuring and other non-cash special charges during the third and fourth quarters of the fiscal year ended March 31,
1999. The restructuring charge included $19.8 million related to severance, representing the reduction of approximately 1,400 positions worldwide and the elimination of excess facilities. Special charges included the write-off of goodwill and other
long-lived assets, as well as the write-down of assets, which were impacted as a result of the termination of certain agreements between Kodak and us. Due to a change in estimate, we reversed $0.2 million of fiscal year 1999 facility charges during
fiscal year 2003. The following table summarizes the restructuring and other special pre-tax charges:

1999 Restructuring Charge:

|(in 000s)                                                             |  | Fiscal 1999Expense |        | Reserve atMarch 31,2002 |   | CashOutlays |  | OtherNon-CashChanges |   | Reserve atSeptember 30,2002 |  
|---------------------------------------------------------------------- |  | ------------------ | ------ | ----------------------- | - | ----------- |  | -------------------- | - | --------------------------- | -
|                                                                       |  |                    |        |                         |   |             |  |                      |   |                             |  
|Future lease obligations on facility closures and     other exit costs |  | $                  | 19,820 |                         | $ | 425         |  |                      |  |                             | $
|Severance                                                              |  |                    | 19,790 |                         |   |            |  |                      |  |                             |  
|Write-off of leasehold improvements on facility     closures           |  |                    | 3,084  |                         |   |            |  |                      |  |                             |  
|                                                                       |  |                    |        |                         |   |             |  |                      |   |                             |  
|                                                                       |  |                    |        |                         |   |             |  |                      |   |                             |  
|Total                                                                  |  | $                  | 42,694 |                         | $ | 425         |  |                      |  |                             | $
|                                                                       |  |                    |        |                         |   |             |  |                      |   |                             |  

Note 5.      Discontinued Operations

On June 29, 2001, we completed the sale of
Danka Services International (DSI) to Pitney Bowes Inc. for $290 million in cash, pursuant to an asset purchase agreement dated April 9, 2001. DSI was our facilities management and outsourcing business. Our shareholders approved the sale
at an extraordinary general meeting on June 29, 2001. We also entered into agreements to provide services and supplies to Pitney Bowes, Inc. on a worldwide basis for an initial term of two years.

An escrow
account of $5 million of the DSI purchase price was set-aside at closing. The purchase price was subject to an adjustment depending on the value of DSIs net assets as of the closing of the sale, which was estimated at $82.4 million. As of June
30, 2002, the value of DSIs net assets as of the closing of the sale were determined to be $77.9 million. Therefore, the consideration has been adjusted downward by $4.5 million, which amount has been released from the escrow account to Pitney
Bowes, Inc. while the remaining $0.5 million has been released to us.

The sale of DSI resulted in a gain in the first six months of fiscal year 2002 of $107.7 million after income taxes of $69.7 million. During
the three months ended September 30, 2001, we incurred an additional $1.2 million of purchase price adjustments and expenses related to the sale of DSI. A summary of the operating results of discontinued operations are as follows:

|(in 000s)                                                                                                                   |  | For the threemonths endedSeptember 30,2001 |        | For the sixmonths endedSeptember 30,2001 |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------ | ------ | ---------------------------------------- | -
|                                                                                                                             |  |                                            |        |                                          |  
|Revenue                                                                                                                      |  | $                                          |       |                                          | $
|                                                                                                                             |  |                                            |        |                                          |  
|Earnings before income taxes                                                                                                 |  | $                                          |       |                                          | $
|Provision for income taxes                                                                                                   |  |                                            | 85     |                                          |  
|                                                                                                                             |  |                                            |        |                                          |  
|                                                                                                                             |  |                                            |        |                                          |  
|Net earnings (loss) from discontinued operations                                                                             |  |                                            | (85    | )                                        |  
|Gain (loss) from sale of discontinued operations after income taxes (benefits) of     ($4.1) and $69.7 million, respectively |  |                                            | (1,206 | )                                        |  
|                                                                                                                             |  |                                            |        |                                          |  
|                                                                                                                             |  |                                            |        |                                          |  
|Discontinued operations, net of tax                                                                                          |  | $                                          | (1,291 | )                                        | $
|                                                                                                                             |  |                                            |        |                                          |  





---

##### Table of Contents

Note 6.      Earnings Per Share

The following table reconciles the numerator and
denominator of the basic and diluted earnings (loss) from continuing operations available to common shareholders per ADS computations for the three and six months ended September 30, 2002 and 2001:

|                                                                  |  | For the three months endedSeptember 30, 2002       |        | For the three months endedSeptember 30, 2001 | 
|----------------------------------------------------------------- |  | -------------------------------------------------- | ------ | -------------------------------------------- | 
|                                                                  |  |                                                    |        |                                              | 
|(In 000s except per share amounts)                               |  | Earnings(loss) fromContinuingOperations(Numerator) |        | Shares(Denominator)                          | 
|                                                                  |  |                                                    |        |                                              | 
|                                                                  |  |                                                    |        |                                              | 
|Basic earnings (loss) available to common shareholders per ADS:   |  |                                                    |        |                                              | 
|Earnings (loss) from        continuing operations                 |  | $                                                  | 1,756  |                                              | 
|                                                                  |  |                                                    |        |                                              | 
|Dividends and accretion on        participating shares            |  |                                                    | (4,463 | )                                            | 
|                                                                  |  |                                                    |        |                                              | 
|Earnings (loss)                                                   |  |                                                    | (2,707 | )                                            | 
|                                                                  |  |                                                    |        |                                              | 
|                                                                  |  |                                                    |        |                                              | 
|Effect of dilutive securities:                                    |  |                                                    |        |                                              | 
|Stock options                                                     |  |                                                    |       |                                              | 
|                                                                  |  |                                                    |        |                                              | 
|                                                                  |  |                                                    |        |                                              | 
|Diluted earnings (loss) available to common shareholders per ADS: |  |                                                    |        |                                              | 
|Earnings (loss)                                                   |  | $                                                  | (2,707 | )                                            | 
|                                                                  |  |                                                    |        |                                              | 



|                                                                  |  | For the six months endedSeptember 30, 2002         |        | For the six months endedSeptember 30, 2001 | 
|----------------------------------------------------------------- |  | -------------------------------------------------- | ------ | ------------------------------------------ | 
|                                                                  |  |                                                    |        |                                            | 
|(In 000s except per share amounts)                               |  | Earnings(loss) fromContinuingOperations(Numerator) |        | Shares(Denominator)                        | 
|                                                                  |  |                                                    |        |                                            | 
|                                                                  |  |                                                    |        |                                            | 
|Basic earnings (loss) available to common shareholders per ADS:   |  |                                                    |        |                                            | 
|Earnings (loss) from        continuing operations                 |  | $                                                  | 7,508  |                                            | 
|                                                                  |  |                                                    |        |                                            | 
|Dividends and accretion on        participating shares            |  |                                                    | (8,856 | )                                          | 
|                                                                  |  |                                                    |        |                                            | 
|Earnings (loss)                                                   |  |                                                    | (1,348 | )                                          | 
|                                                                  |  |                                                    |        |                                            | 
|                                                                  |  |                                                    |        |                                            | 
|Effect of dilutive securities:                                    |  |                                                    |        |                                            | 
|Stock options                                                     |  |                                                    |       |                                            | 
|                                                                  |  |                                                    |        |                                            | 
|                                                                  |  |                                                    |        |                                            | 
|Diluted earnings (loss) available to common shareholders per ADS: |  |                                                    |        |                                            | 
|Earnings (loss)                                                   |  | $                                                  | (1,348 | )                                          | 
|                                                                  |  |                                                    |        |                                            | 

The effect of our 6.5% convertible participating shares are not included in the computation of diluted earnings per share for the three and six months ended September 30, 2002 and 2001
and the effect of our 6.75% convertible subordinated notes are not included in the computation of diluted earnings per share for the three and six months ended September 30, 2001 because they are not dilutive.



---

##### Table of Contents

Note 7.      Segment Reporting

Our reportable segments are Danka United States, Danka
Europe and Danka International. Our reportable segments do not include the discontinued operations of DSI. Danka United States, Danka Europe and Danka International provide office imaging solutions together with related parts, supplies and services
on a direct basis to retail customers. The geographical areas covered by Danka International include Canada, Latin America and Australia. Danka Europe also provides office imaging equipment and supplies on a wholesale basis to independent dealers.
We measure segment performance as earnings from operations, which is defined as earnings before interest expense and income taxes as shown on our consolidated statements of operations. The following tables present information about our segments.

|Three Months Ended September 30,                                      |  | DankaUnited States$000 |         | DankaEurope$000 |   | DankaInternational$000 |  | Other$000 |        | Total$000 |  
|--------------------------------------------------------------------- |  | ---------------------- | ------- | --------------- | - | ---------------------- |  | --------- | ------ | --------- | -
|                                                                      |  |                        |         |                 |   |                        |  |           |        |           |  
|                                                                      |  |                        |         |                 |   |                        |  |           |        |           |  
|2002                                                                  |  |                        |         |                 |   |                        |  |           |        |           |  
|Total revenue                                                         |  | $                      | 187,454 |                 | $ | 126,440                |  | $         | 29,856 |           | $
|                                                                      |  |                        |         |                 |   |                        |  |           |        |           |  
|Operating earnings (loss) from continuing operations                  |  |                        | 8,523   |                 |   | 5,524                  |  |           | (6,541 | )         |  
|Interest expense                                                      |  |                        |         |                 |   |                        |  |           |        |           |  
|Provision (benefit) for income taxes                                  |  |                        |         |                 |   |                        |  |           |        |           |  
|Earnings (loss) from continuing operations before extraordinary items |  |                        |         |                 |   |                        |  |           |        |           |  
|                                                                      |  |                        |         |                 |   |                        |  |           |        |           |  
|2001                                                                  |  |                        |         |                 |   |                        |  |           |        |           |  
|Total revenue                                                         |  | $                      | 213,738 |                 | $ | 130,906                |  | $         | 35,817 |           | $
|                                                                      |  |                        |         |                 |   |                        |  |           |        |           |  
|Operating earnings (loss) from continuing operations                  |  |                        | 2,369   |                 |   | 1,949                  |  |           | (309   | )         |  
|Interest expense                                                      |  |                        |         |                 |   |                        |  |           |        |           |  
|Provision (benefit) for income taxes                                  |  |                        |         |                 |   |                        |  |           |        |           |  
|Earnings (loss) from continuing operations before extraordinary items |  |                        |         |                 |   |                        |  |           |        |           |  

|Six Months Ended September 30,                                        |  | DankaUnited States$000 |         | DankaEurope$000 |   | DankaInternational$000 |  | Other$000 |        | Total$000 |  
|--------------------------------------------------------------------- |  | ---------------------- | ------- | --------------- | - | ---------------------- |  | --------- | ------ | --------- | -
|                                                                      |  |                        |         |                 |   |                        |  |           |        |           |  
|                                                                      |  |                        |         |                 |   |                        |  |           |        |           |  
|2002                                                                  |  |                        |         |                 |   |                        |  |           |        |           |  
|Total revenue                                                         |  | $                      | 375,494 |                 | $ | 253,128                |  | $         | 62,189 |           |  
|                                                                      |  |                        |         |                 |   |                        |  |           |        |           |  
|Operating earnings (loss) from continuing operations                  |  |                        | 22,557  |                 |   | 12,960                 |  |           | (8,356 | )         |  
|Interest expense                                                      |  |                        |         |                 |   |                        |  |           |        |           |  
|Provision (benefit) for income taxes                                  |  |                        |         |                 |   |                        |  |           |        |           |  
|Earnings (loss) from continuing operations before extraordinary items |  |                        |         |                 |   |                        |  |           |        |           |  
|                                                                      |  |                        |         |                 |   |                        |  |           |        |           |  
|2001                                                                  |  |                        |         |                 |   |                        |  |           |        |           |  
|Total revenue                                                         |  | $                      | 441,530 |                 | $ | 270,634                |  | $         | 75,017 |           | $
|                                                                      |  |                        |         |                 |   |                        |  |           |        |           |  
|Operating earnings (loss) from continuing     operations              |  |                        | 8,089   |                 |   | 6,328                  |  |           | 413    |           |  
|Interest expense                                                      |  |                        |         |                 |   |                        |  |           |        |           |  
|Provision (benefit) for income taxes                                  |  |                        |         |                 |   |                        |  |           |        |           |  
|Earnings (loss) from continuing operations before extraordinary items |  |                        |         |                 |   |                        |  |           |        |           |  





---

##### Table of Contents

Note 8.      Debt

Debt consisted of the following at September 30, 2002 and March 31,
2002:

|(in 000s)                                                                                                                                                  |  | September 30,2002 |         | March 31,2002 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | ------------- | -
|                                                                                                                                                            |  |                   |         |               |  
|Credit facility (limited to $221.0 million) interest at LIBOR plus an applicable     margin (7.2% average interest rate for 2003)due March 2006  see below |  | $                 | 121,000 |               | $
|Zero coupon senior subordinated notes due April 2004                                                                                                        |  |                   | 47,593  |               |  
|10% subordinated notes due April 2008                                                                                                                       |  |                   | 64,520  |               |  
|6.75% convertible subordinated notes  see below                                                                                                            |  |                   |        |               |  
|Various notes payable bearing interest from prime to 12.0% maturing principally     over the next 5 years                                                   |  |                   | 4,562   |               |  
|                                                                                                                                                            |  |                   |         |               |  
|                                                                                                                                                            |  |                   |         |               |  
|Total long-term debt and notes payable                                                                                                                      |  |                   | 237,675 |               |  
|Less current maturities of long-term debt and notes payable                                                                                                 |  |                   | 27,277  |               |  
|                                                                                                                                                            |  |                   |         |               |  
|                                                                                                                                                            |  |                   |         |               |  
|Long-term debt and notes payable, less current maturities                                                                                                   |  | $                 | 210,398 |               | $
|                                                                                                                                                            |  |                   |         |               |  

We entered into an amended and restated credit facility on June 14, 2002 with our existing senior bank lenders to provide us with financing through March 31, 2004. Total commitments
under the facility are $221.0 million consisting of a $70.0 million revolver commitment, a $121.0 million term loan and a $30 million letter of credit commitment. At September 30, 2002, we had an outstanding balance of $121.0 million under the
credit facility, with no amount due under the revolver. On June 20, 2002, we paid a $4.1 million fee to our senior bank lenders for an option to extend the credit facility for an additional two years through March 31, 2006. We exercised that option
by paying an additional fee of $2.8 million in September 2002. The term loan component of the facility, as extended, requires principal repayments in installments of $16.0 million in fiscal year 2003 ($4 million at the end of each quarter), $32
million in fiscal years 2004 and 2005 ($8 million at the end of each quarter), $24 million in fiscal year 2006 ($8 million at the end of each quarter), with the balance due March 31, 2006. The interest rate on the extended revolver and term loan
components are at LIBOR plus 7.5% effective September 30, 2002, except that, if we do not receive a rating for the indebtedness under the extended credit facility from Moodys of at least B2 during any interest period commencing on or after
November 30, 2002, the interest rate for each such interest period will increase to LIBOR plus 8.25%

On March 18, 2002, we entered into an interest rate cap agreement with Bank of America. The interest rate cap
will pay us the difference between the quarterly LIBOR and 3.99% on a notional amount of $80 million for the period March 18, 2002 to March 18, 2003. If we were to have settled the commitment related to our interest rate swap on September 30, 2002,
the amount due to us would have been de minimis.

Our indebtedness under the credit facility is secured by substantially all of our assets in the United States, Canada, United Kingdom, Netherlands, and Germany.
The credit facility contains negative and affirmative covenants which place restrictions on us regarding, among other things, the disposition of assets, capital expenditures, additional indebtedness and permitted liens, and prohibits the payment of
dividends (other than payment-in-kind dividends on our participating shares). The credit facility requires that we maintain minimum levels of adjusted consolidated net worth and cumulative consolidated EBITDA, a minimum ratio of consolidated EBITDA
to interest expense and contains limitations on the amounts of annual capital expenditures, each as defined in the credit facility. We were in compliance with all of the applicable covenants at September 30, 2002.

We incurred $11.2 million in bank fees and $6.6 million in third party fees in the prior year relating to the fiscal year 2002 amended and restated facility. These fees are being amortized over the term of the facility. We are also required
to pay fees of 1% of total commitments at December 31, 2002, March 31, 2003, December 31, 2003, March 31, 2004, December 31, 2004, March 31, 2005 and June 30, 2005, and fees of 2% of the total commitments at June 30, 2003 and June 30,
2004.

We have $47,593,000 in principal amount of zero coupon senior subordinated notes due April 1, 2004 and $64,520,000 in principal amount of 10% subordinated notes due April 1, 2008. The senior subordinated
notes are guaranteed by Danka Holding Company and Danka Office Imaging Company, which are both our 100% owned U.S. subsidiaries. The 6.75% convertible subordinated notes were due April 2002 and were fully repaid at that time.



---

##### Table of Contents

Note 9.      Supplemental Consolidating Financial Data for Subsidiary Guarantors

On
June 29, 2001, we completed an exchange offer for 92% of our 6.75% convertible subordinated notes due April 1, 2002. We issued zero coupon senior subordinated notes due April 1, 2004 as partial consideration. The zero coupon senior subordinated
notes are fully and unconditionally guaranteed on a joint and several basis by our 100% owned subsidiaries, Danka Holding Company and Danka Office Imaging Company (collectively, the Subsidiary Guarantors). The Subsidiary Guarantors
represent substantially all of our operations conducted in the United States of America.

The following supplemental consolidating financial data includes the combined Subsidiary Guarantors. Management believes
separate complete financial statements of the respective Subsidiary Guarantors would not provide additional material information that would be useful in assessing the financial composition of the Subsidiary Guarantors. No single Subsidiary Guarantor
has any significant legal restriction on the ability of investors or creditors to obtain access to its assets in the event of default on the guarantee other than subordination of the guarantee to our senior indebtedness. The indenture governing the
zero coupon senior subordinated notes contains limitations on the amount of additional indebtedness, including senior indebtedness, that we may incur.

We account for investment in subsidiaries on the equity
method for purposes of the supplemental consolidating presentation. Earnings of the subsidiaries are therefore reflected in Danka Business Systems PLCs (Parent Company) investment in subsidiaries. The principal elimination entries
eliminate investments in subsidiaries and intercompany balances and transactions.



---

##### Table of Contents



|                                                               |  | Supplemental Consolidating Statement of OperationFor the Three Months EndedSeptember 30, 2002 |       
|-------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------- | ------
|                                                               |  |                                                                                               |       
|                                                               |  | ParentCompany (1)                                                                             |       
|                                                               |  |                                                                                               |       
|                                                               |  | $000                                                                                          |       
|Revenue:                                                       |  |                                                                                               |       
|Retail equipment sales                                         |  | $                                                                                             |      
|Retail service, supplies and rentals                           |  |                                                                                               |      
|Wholesale                                                      |  |                                                                                               |      
|                                                               |  |                                                                                               |       
|Total revenue                                                  |  |                                                                                               |      
|                                                               |  |                                                                                               |       
|                                                               |  |                                                                                               |       
|Costs and operating expenses:                                  |  |                                                                                               |       
|Cost of retail equipment sales                                 |  |                                                                                               |      
|Retail service, supplies and rental     costs                  |  |                                                                                               |      
|Wholesale costs of revenue                                     |  |                                                                                               |      
|Selling, general and administrative     expenses               |  |                                                                                               | 1,123 
|Amortization of intangible assets                              |  |                                                                                               |      
|Restructuring charges (credits)                                |  |                                                                                               |      
|Equity (income) loss                                           |  |                                                                                               | 4,749 
|Other (income) expense                                         |  |                                                                                               | (3,384
|                                                               |  |                                                                                               |       
|Total costs and operating expenses                             |  |                                                                                               | 2,488 
|                                                               |  |                                                                                               |       
|Operating earnings (loss) from continuing operations           |  |                                                                                               | (2,488
|Interest expense                                               |  |                                                                                               | (6,864
|Interest income                                                |  |                                                                                               | 13,500
|                                                               |  |                                                                                               |       
|Earnings (loss) from continuing operations before income taxes |  |                                                                                               | 4,148 
|Provision (benefit) for income taxes                           |  |                                                                                               | 2,392 
|                                                               |  |                                                                                               |       
|Net (loss) earnings                                            |  |                                                                                               | 1,756 
|                                                               |  |                                                                                               |       

| |  |  | (1) |  | Danka Business Systems PLC                                                                                  
| |  |  | --- |  | ------------------------------------------------------------------------------------------------------------
| |  |  | (2) |  | Danka Holding Company and Danka Office Imaging Company                                                      
| |  |  | (3) |  | Subsidiaries of Danka Business Systems PLC other than Danka Holding Company and Danka Office Imaging Company



---

##### Table of Contents



|                                                                      |  | Supplemental Consolidating Statement of OperationFor the Three Months EndedSeptember 30, 2002 |        
|--------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------- | -------
|                                                                      |  |                                                                                               |        
|                                                                      |  | ParentCompany (1)                                                                             |        
|                                                                      |  |                                                                                               |        
|                                                                      |  | $000                                                                                          |        
|Revenue:                                                              |  |                                                                                               |        
|Retail equipment sales                                                |  | $                                                                                             |       
|Retail service, supplies and rentals                                  |  |                                                                                               |       
|Wholesale                                                             |  |                                                                                               |       
|                                                                      |  |                                                                                               |        
|Total revenue                                                         |  |                                                                                               |       
|                                                                      |  |                                                                                               |        
|                                                                      |  |                                                                                               |        
|Costs and operating expenses:                                         |  |                                                                                               |        
|Cost of retail equipment sales                                        |  |                                                                                               |       
|Retail service, supplies and rental     costs                         |  |                                                                                               |       
|Wholesale costs of revenue                                            |  |                                                                                               |       
|Selling, general and administrative     expenses                      |  |                                                                                               | 919    
|Amortization of intangible assets                                     |  |                                                                                               |       
|Restructuring charges (credits)                                       |  |                                                                                               |       
|Equity (income)/loss                                                  |  |                                                                                               | 21,731 
|Other (income)/expense                                                |  |                                                                                               | (3,611 
|                                                                      |  |                                                                                               |        
|Total costs and operating expenses                                    |  |                                                                                               | 19,039 
|                                                                      |  |                                                                                               |        
|Operating earnings (loss) from continuing operations                  |  |                                                                                               | (19,039
|Interest expense                                                      |  |                                                                                               | 4,890  
|Interest income                                                       |  |                                                                                               | 13,149 
|                                                                      |  |                                                                                               |        
|Earnings (loss) from continuing operations before income taxes        |  |                                                                                               | (1,000 
|Provision (benefit) for income taxes                                  |  |                                                                                               | 2,167  
|                                                                      |  |                                                                                               |        
|Earnings (loss) from continuing operations before extraordinary items |  |                                                                                               | (3,167 
|Discontinued operations, net of tax                                   |  |                                                                                               |       
|Extraordinary gain early retirement of     debt, net of tax           |  |                                                                                               | (241   
|                                                                      |  |                                                                                               |        
|Net (loss) earnings                                                   |  | $                                                                                             | (3,408 
|                                                                      |  |                                                                                               |        

| |  |  | (1) |  | Danka Business Systems PLC                                                                                  
| |  |  | --- |  | ------------------------------------------------------------------------------------------------------------
| |  |  | (2) |  | Danka Holding Company and Danka Office Imaging Company                                                      
| |  |  | (3) |  | Subsidiaries of Danka Business Systems PLC other than Danka Holding Company and Danka Office Imaging Company



---

##### Table of Contents



|                                                               |  | Supplemental Consolidating Statement of OperationFor the Six Months EndedSeptember 30, 2002 |        
|-------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- | -------
|                                                               |  |                                                                                             |        
|                                                               |  | ParentCompany (1)                                                                           |        
|                                                               |  |                                                                                             |        
|                                                               |  | $000                                                                                        |        
|Revenue:                                                       |  |                                                                                             |        
|Retail equipment sales                                         |  | $                                                                                           |       
|Retail service, supplies and rentals                           |  |                                                                                             |       
|Wholesale                                                      |  |                                                                                             |       
|                                                               |  |                                                                                             |        
|Total revenue                                                  |  |                                                                                             |       
|                                                               |  |                                                                                             |        
|                                                               |  |                                                                                             |        
|Costs and operating expenses:                                  |  |                                                                                             |        
|Cost of retail equipment sales                                 |  |                                                                                             |       
|Retail service, supplies and rental costs                      |  |                                                                                             |       
|Wholesale costs of revenue                                     |  |                                                                                             |       
|Selling, general and administrative     expenses               |  |                                                                                             | 2,182  
|Amortization of intangible assets                              |  |                                                                                             |       
|Restructuring charges (credits)                                |  |                                                                                             |       
|Equity (income) loss                                           |  |                                                                                             | 11,848 
|Other (income) expense                                         |  |                                                                                             | (15,227
|                                                               |  |                                                                                             |        
|Total costs and operating expenses                             |  |                                                                                             | (1,197 
|                                                               |  |                                                                                             |        
|Operating earnings (loss) from continuing operations           |  |                                                                                             | 1,197  
|Interest expense                                               |  |                                                                                             | (13,642
|Interest income                                                |  |                                                                                             | 27,098 
|                                                               |  |                                                                                             |        
|Earnings (loss) from continuing operations before income taxes |  |                                                                                             | 14,653 
|Provision (benefit) for income taxes                           |  |                                                                                             | 7,145  
|                                                               |  |                                                                                             |        
|Net (loss) earnings                                            |  | $                                                                                           | 7,508  
|                                                               |  |                                                                                             |        

| |  |  | (1) |  | Danka Business Systems PLC                                                                                  
| |  |  | --- |  | ------------------------------------------------------------------------------------------------------------
| |  |  | (2) |  | Danka Holding Company and Danka Office Imaging Company                                                      
| |  |  | (3) |  | Subsidiaries of Danka Business Systems PLC other than Danka Holding Company and Danka Office Imaging Company



---

##### Table of Contents



|                                                                      |  | Supplemental Consolidating Statement of OperationFor the Six Months EndedSeptember 30, 2001 |         
|--------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- | --------
|                                                                      |  |                                                                                             |         
|                                                                      |  | ParentCompany (1)                                                                           |         
|                                                                      |  |                                                                                             |         
|                                                                      |  | $000                                                                                        |         
|Revenue:                                                              |  |                                                                                             |         
|Retail equipment sales                                                |  | $                                                                                           |        
|Retail service, supplies and rentals                                  |  |                                                                                             |        
|Wholesale                                                             |  |                                                                                             |         
|                                                                      |  |                                                                                             |         
|Total revenue                                                         |  |                                                                                             |        
|                                                                      |  |                                                                                             |         
|                                                                      |  |                                                                                             |         
|Costs and operating expenses:                                         |  |                                                                                             |         
|Cost of retail equipment sales                                        |  |                                                                                             |        
|Retail service, supplies and rental costs                             |  |                                                                                             |        
|Wholesale costs of revenue                                            |  |                                                                                             |         
|Selling, general and administrative     expenses                      |  |                                                                                             | 2,067   
|Amortization of intangible assets                                     |  |                                                                                             |        
|Restructuring charges (credits)                                       |  |                                                                                             |        
|Equity (income)/loss                                                  |  |                                                                                             | (100,242
|Other (income)/expense                                                |  |                                                                                             | (4,990  
|                                                                      |  |                                                                                             |         
|Total costs and operating expenses                                    |  |                                                                                             | (103,165
|                                                                      |  |                                                                                             |         
|Operating earnings (loss) from continuing operations                  |  |                                                                                             | 103,165 
|Interest expense                                                      |  |                                                                                             | (22,910 
|Interest income                                                       |  |                                                                                             | 27,387  
|                                                                      |  |                                                                                             |         
|Earnings (loss) from continuing operations before income taxes        |  |                                                                                             | 107,642 
|Provision (benefit) for income taxes                                  |  |                                                                                             | 2,205   
|                                                                      |  |                                                                                             |         
|Earnings (loss) from continuing operations before extraordinary items |  |                                                                                             | 105,437 
|Discontinued operations, net of tax                                   |  |                                                                                             | (8,708  
|Extraordinary gain early retirement of     debt, net of tax           |  |                                                                                             | 26,521  
|                                                                      |  |                                                                                             |         
|Net (loss) earnings                                                   |  | $                                                                                           | 123,250 
|                                                                      |  |                                                                                             |         

| |  |  | (1) |  | Danka Business Systems PLC                                                                                  
| |  |  | --- |  | ------------------------------------------------------------------------------------------------------------
| |  |  | (2) |  | Danka Holding Company and Danka Office Imaging Company                                                      
| |  |  | (3) |  | Subsidiaries of Danka Business Systems PLC other than Danka Holding Company and Danka Office Imaging Company



---

##### Table of Contents



|                                                                     |  | Supplemental Condensed Consolidating Balance Sheet InformationSeptember 30, 2002 |         
|-------------------------------------------------------------------- |  | -------------------------------------------------------------------------------- | --------
|                                                                     |  |                                                                                  |         
|                                                                     |  | ParentCompany (1)                                                                |         
|                                                                     |  |                                                                                  |         
|                                                                     |  | $000                                                                             |         
|                                                                     |  |                                                                                  |         
|Assets                                                               |  |                                                                                  |         
|Current assets:                                                      |  |                                                                                  |         
|Cash and cash equivalents                                            |  | $                                                                                | 7,387   
|Accounts receivable, net                                             |  |                                                                                  |        
|Inventories                                                          |  |                                                                                  |        
|Prepaid expenses, deferred income taxes     and other current assets |  |                                                                                  | 8,976   
|                                                                     |  |                                                                                  |         
|Total current assets                                                 |  |                                                                                  | 16,363  
|                                                                     |  |                                                                                  |         
|Equipment on operating leases, net                                   |  |                                                                                  |        
|Property and equipment, net                                          |  |                                                                                  |        
|Intangible assets, net                                               |  |                                                                                  |        
|Investment in subsidiaries                                           |  |                                                                                  | 619,723 
|Other assets                                                         |  |                                                                                  | 10,463  
|                                                                     |  |                                                                                  |         
|Total assets                                                         |  | $                                                                                | 646,549 
|                                                                     |  |                                                                                  |         
|                                                                     |  |                                                                                  |         
|Liabilities and shareholders equity (deficit)                       |  |                                                                                  |         
|Current liabilities:                                                 |  |                                                                                  |         
|Current maturities of long-term debt and     notes payable           |  | $                                                                                | 20,000  
|Accounts payable                                                     |  |                                                                                  | 35      
|Accrued expenses and other current     liabilities                   |  |                                                                                  | (1,299  
|Deferred revenue                                                     |  |                                                                                  |        
|Due to/(from) affiliate                                              |  |                                                                                  | 100,332 
|                                                                     |  |                                                                                  |         
|Total current liabilities                                            |  |                                                                                  | 119,068 
|                                                                     |  |                                                                                  |         
|Due to/(from) affiliates - long-term                                 |  |                                                                                  |         
|Long-term debt and notes payables, less     current maturities       |  |                                                                                  | 213,114 
|Deferred income taxes and other long-    term liabilities            |  |                                                                                  |        
|                                                                     |  |                                                                                  |         
|Total liabilities                                                    |  |                                                                                  | 332,182 
|                                                                     |  |                                                                                  |         
|                                                                     |  |                                                                                  |         
|6.5% convertible participating shares                                |  |                                                                                  | 249,313 
|                                                                     |  |                                                                                  |         
|                                                                     |  |                                                                                  |         
|Shareholders equity (deficit):                                      |  |                                                                                  |         
|Ordinary shares, 1.25 pence stated value                             |  |                                                                                  | 5,139   
|Additional paid-in capital                                           |  |                                                                                  | 325,896 
|Retained earnings (accumulated deficit)                              |  |                                                                                  | (183,174
|Accumulated other comprehensive (loss)     income                    |  |                                                                                  | (82,807 
|                                                                     |  |                                                                                  |         
|Total shareholders equity (deficit)                                 |  |                                                                                  | 65,054  
|                                                                     |  |                                                                                  |         
|Total liabilities & shareholders equity (deficit)                   |  | $                                                                                | 646,549 
|                                                                     |  |                                                                                  |         

| |  |  | (1) |  | Danka Business Systems PLC                                                                                  
| |  |  | --- |  | ------------------------------------------------------------------------------------------------------------
| |  |  | (2) |  | Danka Holding Company and Danka Office Imaging Company                                                      
| |  |  | (3) |  | Subsidiaries of Danka Business Systems PLC other than Danka Holding Company and Danka Office Imaging Company



---

##### Table of Contents



|                                                                     |  | Supplemental Condensed Consolidating Balance Sheet InformationMarch 31, 2002 |         
|-------------------------------------------------------------------- |  | ---------------------------------------------------------------------------- | --------
|                                                                     |  |                                                                              |         
|                                                                     |  | ParentCompany (1)                                                            |         
|                                                                     |  |                                                                              |         
|                                                                     |  | $000                                                                         |         
|                                                                     |  |                                                                              |         
|Assets                                                               |  |                                                                              |         
|Current assets:                                                      |  |                                                                              |         
|Cash and cash equivalents                                            |  | $                                                                            | 8,420   
|Accounts receivable, net                                             |  |                                                                              |        
|Inventories                                                          |  |                                                                              |        
|Prepaid expenses, deferred income taxes     and other current assets |  |                                                                              | 5,060   
|                                                                     |  |                                                                              |         
|Total current assets                                                 |  |                                                                              | 13,480  
|                                                                     |  |                                                                              |         
|Equipment on operating leases, net                                   |  |                                                                              |        
|Property and equipment, net                                          |  |                                                                              |        
|Intangible assets, net                                               |  |                                                                              |        
|Investment in subsidiaries                                           |  |                                                                              | 631,571 
|Other assets                                                         |  |                                                                              | 13,183  
|                                                                     |  |                                                                              |         
|Total assets                                                         |  | $                                                                            | 658,234 
|                                                                     |  |                                                                              |         
|                                                                     |  |                                                                              |         
|Liabilities and shareholders equity (deficit)                       |  |                                                                              |         
|Current liabilities:                                                 |  |                                                                              |         
|Current maturities of long-term debt and     notes payable           |  | $                                                                            | 31,988  
|Accounts payable                                                     |  |                                                                              | 5,822   
|Accrued expenses and other current     liabilities                   |  |                                                                              | 6,149   
|Deferred revenue                                                     |  |                                                                              |        
|Due to/(from) affiliate                                              |  |                                                                              | 59,591  
|                                                                     |  |                                                                              |         
|Total current liabilities                                            |  |                                                                              | 103,550 
|                                                                     |  |                                                                              |         
|Due to/(from) affiliates - long-term                                 |  |                                                                              |         
|Long-term debt and notes payables, less     current maturities       |  |                                                                              | 266,114 
|Deferred income taxes and other long-    term liabilities            |  |                                                                              |        
|                                                                     |  |                                                                              |         
|Total liabilities                                                    |  |                                                                              | 369,664 
|                                                                     |  |                                                                              |         
|                                                                     |  |                                                                              |         
|6.5% convertible participating shares                                |  |                                                                              | 240,520 
|                                                                     |  |                                                                              |         
|                                                                     |  |                                                                              |         
|Shareholders equity (deficit):                                      |  |                                                                              |         
|Ordinary shares, 1.25 pence stated value                             |  |                                                                              | 5,139   
|Additional paid-in capital                                           |  |                                                                              | 325,880 
|Retained earnings (accumulated deficit)                              |  |                                                                              | (181,871
|Accumulated other comprehensive (loss)     income                    |  |                                                                              | (101,098
|                                                                     |  |                                                                              |         
|Total shareholders equity (deficit)                                 |  |                                                                              | 48,050  
|                                                                     |  |                                                                              |         
|Total liabilities & shareholders equity (deficit)                   |  | $                                                                            | 658,234 
|                                                                     |  |                                                                              |         

| |  |  | (1) |  | Danka Business Systems PLC                                                                                  
| |  |  | --- |  | ------------------------------------------------------------------------------------------------------------
| |  |  | (2) |  | Danka Holding Company and Danka Office Imaging Company                                                      
| |  |  | (3) |  | Subsidiaries of Danka Business Systems PLC other than Danka Holding Company and Danka Office Imaging Company



---

##### Table of Contents

|                                                        |  | Supplemental Condensed Consolidating Statement of Cash FlowsFor the Six Months EndedSeptember 30,
2002 |        
|------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------ | -------
|                                                        |  |                                                                                                        |        
|                                                        |  | ParentCompany (1)                                                                                      |        
|                                                        |  |                                                                                                        |        
|                                                        |  | $000                                                                                                   |        
|Net cash provided by (used in) operating activities     |  | $                                                                                                      | 68,261 
|                                                        |  |                                                                                                        |        
|Investing activities                                    |  |                                                                                                        |        
|Capital expenditures                                    |  |                                                                                                        |       
|Proceeds from sale of property and     equipment        |  |                                                                                                        |       
|Proceeds from sale of business                          |  |                                                                                                        |       
|                                                        |  |                                                                                                        |        
|Net cash provided by (used in) investing     activities |  |                                                                                                        |       
|                                                        |  |                                                                                                        |        
|                                                        |  |                                                                                                        |        
|Financing activities                                    |  |                                                                                                        |        
|Net (payment) borrowing of debt                         |  |                                                                                                        | (65,391
|Payment of debt issue costs                             |  |                                                                                                        | (6,938 
|                                                        |  |                                                                                                        |        
|Net cash provided by (used in) financing     activities |  |                                                                                                        | (72,329
|                                                        |  |                                                                                                        |        
|Effect of exchange rates                                |  |                                                                                                        | 3,035  
|                                                        |  |                                                                                                        |        
|Net increase (decrease) in cash                         |  |                                                                                                        | (1,033 
|                                                        |  |                                                                                                        |        
|Cash and cash equivalents, beginning of     period      |  |                                                                                                        | 8,420  
|                                                        |  |                                                                                                        |        
|Cash and cash equivalents, end of period                |  | $                                                                                                      | 7,387  
|                                                        |  |                                                                                                        |        

|                                                    |  | Supplemental Condensed Consolidating Statement of Cash FlowsFor the Six Months EndedSeptember 30,
2001 |         
|--------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------ | --------
|                                                    |  |                                                                                                        |         
|                                                    |  | ParentCompany (1)                                                                                      |         
|                                                    |  |                                                                                                        |         
|                                                    |  | $000                                                                                                   |         
|Net cash provided by (used in) operating activities |  | $                                                                                                      | 284,318 
|                                                    |  |                                                                                                        |         
|Investing activities                                |  |                                                                                                        |         
|Capital expenditures                                |  |                                                                                                        |        
|Proceeds from sale of property and     equipment    |  |                                                                                                        |        
|Proceeds from sale of business                      |  |                                                                                                        |        
|                                                    |  |                                                                                                        |         
|Net cash provided by (used in) investing activities |  |                                                                                                        |        
|                                                    |  |                                                                                                        |         
|                                                    |  |                                                                                                        |         
|Financing activities                                |  |                                                                                                        |         
|Net (payment) borrowing of debt                     |  |                                                                                                        | (249,842
|Payment of debt issue costs                         |  |                                                                                                        | (24,437 
|                                                    |  |                                                                                                        |         
|Net cash provided by (used in) financing activities |  |                                                                                                        | (274,279
|                                                    |  |                                                                                                        |         
|Effect of exchange rates                            |  |                                                                                                        | 442     
|                                                    |  |                                                                                                        |         
|Net increase (decrease) in cash                     |  |                                                                                                        | 10,481  
|                                                    |  |                                                                                                        |         
|Cash and cash equivalents, beginning of     period  |  |                                                                                                        | 5,471   
|                                                    |  |                                                                                                        |         
|Cash and cash equivalents, end of period            |  | $                                                                                                      | 15,952  
|                                                    |  |                                                                                                        |         

| |  |  | (1) |  | Danka Business Systems PLC                                                                                  
| |  |  | --- |  | ------------------------------------------------------------------------------------------------------------
| |  |  | (2) |  | Danka Holding Company and Danka Office Imaging Company                                                      
| |  |  | (3) |  | Subsidiaries of Danka Business Systems PLC other than Danka Holding Company and Danka Office Imaging Company



---

##### Table of Contents

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

We are one of the worlds leading providers of office imaging
equipment, solutions and related services and supplies. We primarily market office imaging equipment, solutions and related services, parts and supplies directly to customers in 26 countries. Canon, Heidelberg/Nexpress and Toshiba manufacture most
of the products that we distribute. Throughout Europe, we also market private label office imaging equipment from Ricoh and related supplies directly to customers under our Infotec trademark and on a wholesale basis to independent dealers.

On June 29, 2001 we completed a three part financial restructuring plan that reduced and refinanced our indebtedness. The three parts of the plan were:

| |  | the sale of our Danka Services International (DSI) business,
|- |  | --------------------------------------------------------------

| |  | an exchange offer for our 6.75% convertible subordinated notes due April 1, 2002, and
|- |  | -------------------------------------------------------------------------------------

| |  | the refinancing of our senior bank debt.
|- |  | ----------------------------------------

We sold DSI to Pitney Bowes for $290 million in cash, subject to an adjustment depending
on the value of DSIs net assets on closing. The consideration for DSI has been adjusted downward by $4.5 million,being the amount by which the value of DSIs net assets at closing of the
sale were less than the valuation of $82.4 million. We used the net proceeds from the sale of DSI to repay part of our senior bank debt, to finance cash payable under an exchange offer for our 6.75% subordinated notes due 2002, to finance the cost
of the exchange offer and to finance costs associated with the refinancing of our senior bank debt.

We accepted tenders from holders of a total of $184.0 million in aggregate principal amount (92%) of our 6.75%
convertible subordinated notes pursuant to the exchange offer for $24.0 million in cash and approximately $112.1 million in new subordinated notes with extended maturities. We refinanced the remaining balance of our senior bank debt through an
amended and restated credit facility with our existing senior bank lenders.



---

##### Table of Contents

Results of Continuing Operations

The following table sets forth, for the periods indicated, the percentage of total revenue represented by
certain items in our consolidated statements of operations:

|                                                                          |  | For the Three Months Ended |       | For the Six Months Ended | 
|------------------------------------------------------------------------- |  | -------------------------- | ----- | ------------------------ | 
|                                                                          |  |                            |       |                          | 
|                                                                          |  | September 30,2002          |       | September 30,2001        | 
|                                                                          |  |                            |       |                          | 
|Revenue:                                                                  |  |                            |       |                          | 
|Retail equipment sales                                                    |  |                            | 34.3  | %                        | 
|Retail service, supplies and rentals                                      |  |                            | 60.3  |                          | 
|Wholesale                                                                 |  |                            | 5.4   |                          | 
|                                                                          |  |                            |       |                          | 
|Total revenue                                                             |  |                            | 100.0 |                          | 
|                                                                          |  |                            |       |                          | 
|Cost of revenue                                                           |  |                            | 64.0  |                          | 
|Gross profit                                                              |  |                            | 36.0  |                          | 
|Selling, general and administrative expenses                              |  |                            | 34.4  |                          | 
|Amortization of intangible assets                                         |  |                            | 0.1   |                          | 
|Restructuring charges (credits)                                           |  |                            | (0.2  | )                        | 
|Other (income) expense                                                    |  |                            | (1.0  | )                        | 
|                                                                          |  |                            |       |                          | 
|Operating earnings (loss) from continuing     operations                  |  |                            | 2.7   |                          | 
|Interest expense                                                          |  |                            | (2.0  | )                        | 
|Interest income                                                           |  |                            |      |                          | 
|                                                                          |  |                            |       |                          | 
|Earnings (loss) from continuing operations     before income taxes        |  |                            | 0.7   |                          | 
|Provision (benefit) for income taxes                                      |  |                            | 0.2   |                          | 
|                                                                          |  |                            |       |                          | 
|Earnings (loss) from continuing operations     before extraordinary items |  |                            | 0.5   |                          | 
|                                                                          |  |                            |       |                          | 

The following table sets forth for the periods indicated the gross profit margin percentage for each of our revenue classifications:

|                                     |  | For the Three Months Ended |      | For the Six Months Ended | 
|------------------------------------ |  | -------------------------- | ---- | ------------------------ | 
|                                     |  |                            |      |                          | 
|                                     |  | September 30,2002          |      | September 30,2001        | 
|                                     |  |                            |      |                          | 
|Retail equipment sales               |  |                            | 32.6 | %                        | 
|Retail service, supplies and rentals |  |                            | 39.3 |                          | 
|Wholesale                            |  |                            | 20.6 |                          | 





---

##### Table of Contents

Three Months Ended September 30, 2002 compared to the Three Months Ended September 30, 2001

The comparative information included in this section represents results from continuing
operations. In our consolidated statement of operations, the operating results and the gain from the sale of DSI are presented as discontinued operations and the gain resulting from the exchange offer of our 6.75% convertible subordinated notes is
presented as an extraordinary item.

Revenue

Total revenue for the second quarter of fiscal 2003 declined by $37.6 million or 9.9% to $343.7 million from $381.3
million in the prior year second quarter. Our total revenue in the current year second quarter was positively impacted by a $12.3 million foreign currency movement. Retail equipment sales declined across all segments by a total of $14.0 million or
10.6% primarily due to technology convergence, a global slowdown in capital spending, our continuing focus on higher-margin sales and a reduction of our U.S. sales force, offset by a positive $4.8 million foreign currency movement. Retail service,
supplies and rentals revenue declined by $25.1 million or 10.8%, primarily due to a $21.2 million or 15.1% decrease in the United States resulting from selling a reduced number of machines as the market transitions away from analog machines to
digital machines and the impact of technology convergence on service revenues. These decreases were offset by a positive $7.1 million foreign currency movement which resulted in retail service, supplies and rental revenues for our European
operations slightly exceeding the prior year. Wholesale revenue for the second quarter of fiscal 2003 increased by $1.5 million, primarily due to increased demand in Europe and a positive $0.4 million foreign currency movement.

Gross Profit

Our total gross profit margin increased to 36.0% in the second quarter ended September 30, 2002 from 34.0% in the prior year second quarter. The increase in our profit
margin is primarily due to higher margin retail equipment transactions in the United States and an increase in equipment leasing income of approximately $4.2 million related to lease and residual equipment payments from an external lease funding
program. This increase was offset by a $3.4 million charge that consisted primarily of inventory and residual write-downs in Canada.

The retail equipment margin increased to 32.6% in the second quarter from
23.4% in the prior year second quarter, primarily due to an emphasis on higher margin transactions in the United States and Europe and higher leasing income offset by a $1.3 million write-down of inventory in our International division. Retail
service, supplies and rental margins declined to 39.3% in the second quarter from 41.0% in the prior year second quarter due primarily to higher costs in Europe and a $1.5 million write-down of inventory and residuals in Canada. Wholesale margins
increased to 20.6% in the second quarter from 19.5% in the prior year second quarter, primarily due to higher margin transactions in the current year.

Selling, General and Administrative
Expenses

Selling, general and administrative expenses (SG&A) in the second quarter of fiscal 2003 declined by $9.2 million or 7.3% to $118.2 million from $127.4 million in the prior year
second quarter. As a percentage of total revenue, SG&A expenses increased to 34.4% from 33.4% due primarily to lower revenues, increased personnel expenses (including $1.5 million of severance and consolidation costs for our International
division) and $2.5 million of expenses associated with the implementation of our Vision 21 reengineering initiative, which includes our U.S. management information system. The decrease in SG&A in the second quarter as compared to the prior year
second quarter was primarily due to lower employee costs resulting from our restructuring efforts, lower facility costs in the United States, and the reversal of $3.5 million of a prior year first quarter charge associated with the sale by our tax
retention operation lease (TROL) facility of several properties, offset by higher than expected expenses associated with implementing our Vision 21 reengineering initiative.

Amortization of Intangible Assets

Amortization of our intangible assets decreased to $0.2 million in the second quarter of fiscal 2003 from $2.7 million in the prior year second quarter. This difference was primarily due to the
discontinuance of amortization of goodwill under SFAS 142.

Restructuring Charges

We reversed $0.6 million of restructuring charges for facilities and severance during
the second quarter of fiscal year 2003 due to employee attrition and a lower estimate of facility charges. This reversal included $0.3 million for facilities within the 2001 plan and $0.2 million for facilities within the 1999 plan. In the second
quarter of the prior year, senior management reviewed the existing restructuring plan and as a result of the changing business conditions in the U.S. and Europe and revisions to our business



---

##### Table of Contents

strategies, the decision was reached to modify the 2001 restructuring plan. Additionally, higher than anticipated employee attrition reduced cash outlay requirements for severance. As a
result of these actions, we reversed $9.4 million of severance and facility restructuring reserves in the second quarter of fiscal year 2002 while recording a pre-tax restructuring charge of $7.4 million in the second quarter of fiscal year 2002,
which included $1.3 million for severance and $6.1 million for the exit of facilities.

Other (Income) Expense

Other income increased to $3.3 million for the second
quarter of fiscal 2003 from $2.8 million in the prior year second quarter. Other income included a foreign currency gain of $4.2 million for the current quarter and $2.4 million for the prior year quarter.

Operating Earnings (Loss) from Continuing Operations

For the second quarter of fiscal 2003, operating earnings from continuing operations increased by $5.0 million to $9.3 million, compared to
earnings of $4.2 million in the prior year second quarter.

Interest Expense and Interest Income

Interest expense decreased by $4.2 million to $6.9 million for the
second quarter of fiscal 2003 from $11.1 million in the prior year second quarter. The decrease was the result of reduced outstanding debt over the past twelve months and lower interest rates. Interest income decreased by $0.4 million from the prior
year second quarter due to lower cash balances.

Income Taxes

We recorded an income tax provision of $0.6 million for the second quarter of fiscal 2003 compared to a
$4.5 million tax benefit for the comparable prior year period. The combined effective income tax rate was 26.8% for the second quarter as compared to 70.6% for the prior year second quarter. The change in the tax rate is primarily due to changes in
the mix of earnings and losses from continuing operations before extraordinary items in certain tax jurisdictions.

Earnings (Loss) from Continuing Operations, before Extraordinary Items

For the second quarter of fiscal 2003, we generated net earnings from continuing operations of $1.8 million compared to a net loss from continuing operations of $1.9 million in the prior year second quarter. After allowing
for the dilutive effect of dividends on our participating shares, we generated a net loss from continuing operations available to common shareholders of $0.04 per ADS in the second quarter compared to a net loss from continuing operations available
to common shareholders of $0.10 per ADS in the prior year second quarter.

Discontinued Operations, Net of Tax

During the second quarter of fiscal 2002, we recorded an
additional $1.3 million of purchase price adjustments, expenses related to the sale of DSI. Net earnings from discontinued operations were $0.02 per ADS in the prior year second quarter.

Extraordinary Gain,
Net of Tax

During the second quarter of fiscal 2002, we adjusted the extraordinary gain on the early retirement of debt by $0.2 million, net of tax to reflect additional expenses associated with the early
retirement of the debt.



---

##### Table of Contents

Six Months Ended September 30, 2002 compared to the Six Months Ended September 30, 2001

The comparative information included in this section represents results from continuing
operations. In our consolidated statement of operations, the operating results and the gain from the sale of DSI are presented as discontinued operations and the gain resulting from the exchange offer of our 6.75% convertible subordinated notes is
presented as an extraordinary item.

Revenue

Total revenue for the first six months of fiscal 2003, declined by $92.2 million or 11.8% to $690.8 million from $783.0
million in the comparable prior year period. Our total revenue in the first six months was positively impacted by an $18.2 million foreign currency movement. Retail equipment sales declined across all segments by a total of $37.0 million or 13.9%
primarily due to technology convergence, a global slowdown in capital spending, our continuing focus on higher-margin sales and a reduction of our sales force offset by a positive $7.2 million foreign currency movement. Retail service, supplies and
rentals revenue declined by $56.4 million or 11.8%, primarily due to a $45.0 million or 15.5% decrease in the United States resulting from selling a reduced number of machines as the market transitions away from analog office imaging machines to
digital machines and the impact of technology convergence on service revenues, offset by a positive $10.3 million foreign currency movement. Wholesale revenue for the first six months of fiscal 2003 increased by $1.2 million, primarily due to
increased demand in Europe and a positive $0.7 million foreign currency movement.

Gross Profit

Our total gross profit margin increased to 37.3% in the first six
months of fiscal 2003 from 34.4% in the comparable prior year period. The increase in our profit margin is primarily due to higher margin transactions in the United States and an increase in equipment leasing income of approximately $7.0 million
related to lease and residual equipment payments from an external lease funding program. This increase was offset by a $3.4 million charge that consists primarily of inventory and residual write-downs in Canada.

The retail equipment margin increased to 33.9% in the first six months of fiscal 2003 from 23.5% in the comparable prior year period, primarily due to an emphasis on higher margin transactions in the United States and Europe and higher
leasing income. Retail service, supplies and rental margins declined to 40.8% in the first six months of fiscal 2003 from 41.7% in the comparable prior year period due to higher costs in Europe and a $1.5 million write-down of inventory and
residuals in Canada. Wholesale margins increased to 19.4% in the first six months of fiscal 2003 from 18.7% in the comparable prior year period, primarily due to higher margin transactions in the current year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (SG&A) in the first six months of fiscal 2003 declined by $25.4 million or 9.7% to $237.7
million from $263.1 million in the comparable prior year period. As a percentage of total revenue, SG&A expenses increased to 34.4% from 33.6% due to lower revenues, $1.5 million of severance and consolidation costs for our International
division and $6.1 million of expenses associated with the implementation of our Vision 21 reengineering initiative, which includes our U.S. management information system. The decrease in SG&A in the current period as compared to the comparable
prior year period was primarily due to lower employee costs resulting from our restructuring efforts, lower facility related costs in the United States, $6.0 million of facility charges associated with our TROL facility incurred in the first quarter
of the prior year offset by the reversal of $3.5 million of a prior year first quarter charge associated with the sale by our tax relention operation lease (TROL) facility of several properties and higher than expected expenses associated with
implementing our Vision 21 reengineering initiative.

Amortization of Intangible Assets

Amortization of our intangible assets decreased to $0.3 million in the first
six months of fiscal 2003 from $5.4 million in the comparable prior year period. This difference was primarily due to the discontinuance of amortization of goodwill under SFAS 142.

Restructuring
Charges

We reversed $0.6 million of restructuring charges for facilities and severance during the second quarter of fiscal year 2003 due to employee attrition and a lower estimate of facility charges. This
reversal included $0.3 million for facilities within the 2001 plan and $0.2 million for facilities within the 1999 plan. In the second quarter of the prior year, senior management reviewed the existing restructuring plan and as a result of the
changing business conditions in the U.S. and Europe and revisions to our business strategies, the decision was reached to modify the 2001 restructuring plan. Additionally, higher than anticipated employee attrition



---

##### Table of Contents

reduced cash outlay requirements for severance. As a result of these actions, we reversed $9.4 million of severance and facility restructuring reserves in the second quarter of fiscal year
2002 while recording a pre-tax restructuring charge of $7.4 million in the second quarter of fiscal year 2002, which included $1.3 million for severance and $6.1 million for the exit of facilities.

Other
(Income) Expense

Other income increased to $3.9 million for the first six months of fiscal 2003 from $0.1 million in the prior year. The current period included a foreign currency gain of $4.4 million while
the comparable prior year period included a foreign currency gain of $1.2 million and a $1.1 million provision relating to the sale of a business.

Operating Earnings (Loss) from Continuing Operations

For the first six months of fiscal 2003, operating earnings from continuing operations increased by $21.2 million to $24.3 million, compared to earnings of $3.0 million in the comparable prior year period.

Interest Expense and Interest Income

Interest expense decreased by $12.6 million to $14.3 million for the first six months of fiscal 2003 from $26.9 million in the
prior year comparable period. The decrease was the result of reduced outstanding debt over the past twelve months and lower interest rates. Interest income decreased by $0.8 million from the prior year due to lower cash balances.

Income Taxes

We recorded an income tax provision of $2.8 million for the first six months of fiscal 2003 compared to a $7.7 million tax benefit for the comparable prior year
period. The combined effective income tax rate was 27.0% for the current period as compared to 33.9% for the comparable prior year period. The change in the tax rate is primarily due to changes in the mix of earnings and losses from continuing
operations before extraordinary items in certain tax jurisdictions.

Earnings (Loss) from Continuing Operations, before Extraordinary Items

For the second quarter of
fiscal 2003, we generated net earnings from continuing operations of $7.5 million compared to a net loss from continuing operations of $15.0 million in the comparable prior year period. After allowing for the dilutive effect of dividends on our
participating shares, we generated a net loss from continuing operations available to common shareholders of $0.02 per ADS in the second quarter compared to a net loss from continuing operations available to common shareholders of $0.38 per ADS in
the comparable prior year period.

Discontinued Operations, Net of Tax

During the second quarter of fiscal 2002, we recorded a gain on the sale of DSI of $107.7
million after tax and earnings from discontinued operations of $4.1 million, net of tax. Net earnings from discontinued operations were $1.81 per ADS in the prior year second quarter.

Extraordinary Gain, Net
of Tax

During the second quarter of fiscal 2002, we generated a $26.5 million extraordinary gain on the early retirement of debt, net of tax. Net earnings from extraordinary items were $0.43 per ADS in the
prior year second quarter.



---

##### Table of Contents

Exchange Rates

Fluctuations in the exchange rates between the pound sterling and the United States dollar affect the dollar equivalent of the pound sterling market price of our
ordinary shares on the London Stock Exchange and, as a result, are likely to affect the market price of our American depositary shares.

We operate in 26 countries worldwide. Fluctuations in exchange rates
between the United States dollar and the currencies in each of the countries in which we operate affect:

| |  | the results of our international operations reported in United States dollars; and
|- |  | ----------------------------------------------------------------------------------

| |  | the value of the net assets of our international operations reported in United States dollars.
|- |  | ----------------------------------------------------------------------------------------------

The results of operations are
affected by the relative strength of currencies in the countries where our products are sold. Approximately 45.5% of our revenue for the second quarter of fiscal 2003 was generated outside the United States with 28.9% of our revenue generated in
Euro countries, 7.9% in the United Kingdom, and 8.7% in other foreign locations. Approximately 43.7% of our revenue for the second quarter of fiscal 2002 was generated outside the United States with 26.9% generated in Euro countries, 7.4% in the
United Kingdom, and 9.4% in other foreign locations. For the first six months of fiscal 2003, approximately 45.7% of our revenue was generated outside the United States with 29.1% of our revenue generated in Euro countries, 7.6% in the United
Kingdom, and 9.0% in other foreign locations. For the first six months of fiscal 2002, approximately 44.1% of our revenue was generated outside the United States with 27.3% generated in Euro countries, 7.2% in the United Kingdom, and 9.6% in other
foreign locations.

During the first six months of fiscal 2003, the Euro currency and the United Kingdom pound strengthened against the dollar by approximately 7.7% and 5.2%, respectively. These changes
positively impacted revenue by approximately $18.2 million.

Our results of operations and financial condition have been, and in the future may be, adversely affected by the fluctuations in foreign currencies
and by translation of the financial statements of our non-United States subsidiaries, including our European and Latin American subsidiaries, from local currencies to the dollar. Generally, we do not hedge our exposure to changes in foreign
currency.

Liquidity and Capital Resources

We have a credit facility with a consortium of international lenders through March 31, 2006. Total commitments under the facility are $221.0 million,
consisting of a $70 million revolver commitment, a $121.0 million term loan and a $30.0 million letter of credit commitment. At September 30, 2002, we had an outstanding balance of $121.0 million under the credit facility, with no amount due under
the revolver. Availability of the revolver commitment is based on the amount of our receivables and inventory. The available commitment as of September 30, 2002 was $62.1 million. During the first six months of fiscal year 2003, we repaid $49.0
million of principal under the term loan. The credit facility requires that we maintain minimum levels of adjusted consolidated net worth and cumulative consolidated EBITDA and a minimum ratio of consolidated EBITDA to interest expense and contains
limitations on the amounts of our annual capital expenditures. We were in compliance with these covenants as of September 30, 2002.

On June 30, 2002, we paid a $4.1 million fee to our senior bank lenders for an
option to extend the credit facility for an additional two years through March 31, 2006. We exercised that option by paying an additional fee of $2.8 million in September 2002.

We were incurring interest on our
indebtedness under the credit facility during the second quarter and first six months of fiscal 2003 at a weighted average rate of approximately 7.3% and 7.2% per annum, respectively. The interest rate under the credit facility through September 30,
2002 was LIBOR, plus 4.75%. The interest rate under the extended credit facility increased to LIBOR plus 7.5% effective September 30, 2002, except that if we do not receive a rating for the indebtedness under the extended credit facility from
Moodys of at least B2 during any interest period commencing on or after November 30, 2002, the interest rate for each such interest period will increase to LIBOR plus 8.25%.

On July 1, 2002, we paid our
banks a fee equal to 1% of the total commitment under the credit facility. We also will be required to pay fees of 1% of total commitments at December 31, 2002, March 31, 2003, December 31, 2003, March 31, 2004, December 31, 2004, March 31, 2005 and
June 30, 2005, and fees of 2% of the total commitments at June 30, 2003 and June 30, 2004. These fees are in lieu of a 4% fee that would otherwise have been due at June 30, 2003 had the credit facility not been extended.

The term component of the facility, as extended, requires repayment of $16 million in fiscal year 2003 ($4 million at the end of





---

##### Table of Contents

each quarter), $32 million in fiscal years 2004 and 2005 ($8 million at the end of the each quarter) and $24 million in fiscal year 2006 ($8 million at the end of the first three quarters),
with the balance due March 31, 2006. In addition, we are required to make additional repayments of our indebtedness under the credit facility in amounts equal to 50% of our excess cash flow (as defined in the credit facility) for each of our fiscal
years.

Our indebtedness under the credit facility is secured by substantially all of our assets in the United States, Canada, the United Kingdom, the Netherlands and Germany. The credit facility contains
negative and affirmative covenants which restrict, among other things, our ability to incur additional indebtedness and create liens beyond certain agreed limits, prohibit the payment of dividends, other than payment-in-kind dividends on our
participating shares, and require us to maintain certain financial ratios as described above.

In June 2001, we issued approximately $47.6 million of zero coupon senior subordinated notes due April 1, 2004 and
approximately $64.5 million of 10% subordinated notes due April 1, 2008 in exchange for 92% of our 6.75% convertible subordinated notes due April 1, 2004. The senior subordinated notes are guaranteed by Danka Holding Company and Danka Office Imaging
Company, which are both 100% owned U.S. subsidiaries. The senior subordinated notes and the 10% notes include covenants which restrict our ability to dispose of assets or merge. The senior subordinated notes also include covenants which restrict us
from incurring additional indebtedness or creating liens and limit the payment of dividends, other than payment-in-kind dividends on our participating shares.

We intend to refinance both our indebtedness under
the credit facility and to refinance our zero coupon notes prior to maturity, but general economic conditions and conditions in the capital markets have so far prevented us from doing so on terms we deem acceptable. Our ability to refinance this
indebtedness will depend upon our performance, our ability to access the capital markets and economic conditions generally, and no assurances can be given as to our ability to consummate any such refinancing or the terms of such
refinancing.

In order to reduce future cash interest payments and future amounts due at maturity or on redemption, we or our affiliates may from time to time purchase our subordinated indebtedness for cash, in
exchange for our ordinary shares and/or American depositary shares, or for a combination of debt and equity, in open market purchases and/or privately negotiated transactions. The amounts involved may be material. However, such repurchases and/or
exchanges, if any, will depend upon prevailing market conditions, the price at which the subordinated indebtedness is available for purchase and/or exchange, our liquidity requirements and prospects for future access to capital, contractual
restrictions, bank group approval and other factors, and may, in certain cases, require the prior approval of our shareholders. We can give no assurances as to our, or to our affiliates ability to consummate any such purchase or exchange or
the terms of any such purchase or exchange.

The following table sets out our future payments for the following contractual obligations:

|Contractual Obligations       |  | Total |         | Payments due inLess Than 1 Year |   | Payments due inMore Than 1 Year | 
|----------------------------- |  | ----- | ------- | ------------------------------- | - | ------------------------------- | 
|                              |  |       |         |                                 |   |                                 | 
|(in 000s)                    |  |       |         |                                 |   |                                 | 
|Credit Facility               |  | $     | 121,000 |                                 | $ | 24,000                          | 
|Notes Payable                 |  |       | 112,114 |                                 |   |                                | 
|Capital Leases                |  |       | 623     |                                 |   | 186                             | 
|Other Long-Term Obligations   |  |       | 3,938   |                                 |   | 3,091                           | 
|                              |  |       |         |                                 |   |                                 | 
|Total Contractual Obligations |  | $     | 237,675 |                                 | $ | 27,277                          | 
|                              |  |       |         |                                 |   |                                 | 

In addition to the above, on September 27, 2002, we entered into a long-term operating lease for facilities to house the headquarters of our U.S. operations. The lease is for 15 years
at a rate that we believe is a competitive market rate.

Other Financing Arrangements

Danka Holding Company (DHC), one of our subsidiaries, is, and has been party to a number of tax retention operating leases (TROL). The TROL
facility sold two properties during September for approximately $31.4 million and three properties in October for $3.5 million. The proceeds from these sales were used to pay off the entire outstanding obligation under the TROL facility of
approximately $24.4 million (there was a $2.4 million balance as of September 30, 2002). Following those sales, DHC continues as lessee of one remaining property under the TROL, which is currently being offered for sale. Under the terms of the TROL
agreement, we are entitled to receive the net proceeds from the sale of that property. We estimate the value of that property together with the two properties sold in October 2002 to be $1.5 million.



---

##### Table of Contents

On December 17, 1999, we issued 218,000 6.50% senior convertible participating shares for $218.0 million. The participating shares are entitled to dividends equal to the greater of 6.50% per
annum or ordinary share dividends on an as converted basis. Dividends are cumulative and are paid in the form of additional participating shares for the first five years. The participating shares are currently convertible into ordinary shares at a
conversion price of $3.11 per ordinary share (equal to $12.44 per American depositary share), subject to adjustment in certain circumstances to avoid dilution of the interests of participating shareholders. The participating shares have voting
rights, on an as converted basis, currently corresponding to approximately 25.3% of the total voting power of our capital stock. As of September 30, 2002, we had issued an additional 40,857 participating shares in respect of payment-in-kind
dividends.

We are not permitted to pay dividends (other than payment-in-kind dividends on our participating shares) under our credit facility and we do not anticipate the payment of a dividend on our ordinary
shares in the foreseeable future.

We are an English company and, under English law, we are allowed to pay dividends to shareholders only if:

| |  | we have accumulated, realized profits that have not been previously distributed or capitalized, in excess of our accumulated, realized losses that have not previously been written off in a
reduction or reorganization of capital; and
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | our net assets are not less than the aggregate of our share capital and our non-distributable reserves, either before, or as a result of, dividends or other distributions.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

At this time, we have insufficient, accumulated realized profits to pay dividends to shareholders. Since December 2000, we have satisfied our obligation to make payment-in-kind dividends
on our participating shares by capitalizing part of our share premium account, which is a reserve required by English company law and which consists of premiums paid to us on the issuance of our shares.

We have
an agreement with General Electric Capital Corporation (GECC) under which GECC agrees to provide financing to our United States customers to purchase equipment until March 31, 2006. In connection with this agreement, we are obligated to
provide a minimum level of customer leases to GE Capital. The minimum level of customer leases is equal to the greater of $176.6 million or a target calculated based on revenues. If we fail to provide a minimum level of customer leases under the
agreement, we are required to pay penalty payments to GECC. For the year ended March 31, 2002 we were obligated for penalty payments of approximately $0.2 million to GE Capital because we did not satisfy the minimum level requirements. At our
existing sales levels, we estimate that we will owe GE Capital a $1.5 million penalty as of November 30, 2002. We have recorded a reserve for this amount in our September 30, 2002 Consolidated Condensed Balance Sheet.

In addition, the GECC agreement requires us to maintain a specified minimum consolidated net worth. If we breach that covenant, GECC can refuse to provide financing to our new customers and terminate the agreement as to any future financings.
The net worth covenant is the same as the minimum net worth covenant contained in our credit facility. We were in compliance with this covenant at September 30, 2002.

Fiscal authorities in the Netherlands are
engaged in an audit of our Dutch operations. We do not believe that this audit, or any result thereof, will have a material impact on our financial position, results of operations or liquidity.

Our net cash
flow provided by operating activities was $67.6 million and $47.5 million for the first six months of fiscal year 2003 and 2002, respectively. The increase in fiscal 2003 operating cash flow was primarily due to the generation of earnings from
continuing operations. Net cash flow provided by (used in) investing activities was $(17.2) million and $251.6 million for the first six months of year fiscal 2003 and 2002, respectively. The decrease in fiscal 2003 cash flow from investing
activities was primarily due to the non-recurrence of the $273.2 million in cash proceeds received from the sale of DSI partially offset by a $4.4 million reduction in capital expenditures. Net cash flow used in financing activities was $74.1
million and $321.8 million for the first six months of fiscal year 2003 and 2002, respectively. The decrease in fiscal 2003 cash flow from financing activities was due to the non-recurrence of proceeds from the sale of DSI to pay down
debt.

34



---

##### Table of Contents



Market Risk Management

Interest Rate Risk

Our exposure to interest rate
risk primarily relates to our variable rate bank debt. As outlined above in Liquidity and Capital Resources, at September 30, 2002 we had an outstanding balance of $121.0 million under our credit facility. We incurred interest on our
credit facility at a weighted average rate of 7.3% per annumduring the second quarter fiscal 2003 and 7.2% for the first sixmonths of fiscal 2003. Pursuant to our credit agreement,
we entered into an interest rate cap agreement with Bank of America. The interest rate cap will pay us the difference between the quarterly LIBOR and 3.99% on a notional amount of $80 million for the period March 18, 2002 to March 18, 2003. The
three month LIBOR rate at September 30, 2002 was 1.83%.

Based on the outstanding balance under our credit facility, a change of 100 basis points in the average interest rate, with all other variables remaining
constant, would cause an increase/decrease in our interest expense of approximately $1.2 million on an annual basis, subject to the interest rate cap discussed above.

Currency exchange risk

We are a multinational corporation. Therefore, foreign exchange risk arises as a normal part of our business. We reduce this risk by transacting our
international business in local currencies. In this manner, assets and liabilities are matched in the local currency, which reduces the need for dollar conversion. Any foreign currency impact on translating assets and liabilities into dollars is
included as a component of shareholders equity. Our recent results have been positively impacted by foreign currency movements, in particular the strengthening of the euro and the United Kingdom pound against the dollar.

Generally, we do not enter into forward and option contracts to manage our exposure to foreign currency fluctuations. At September 30, 2002, we had no outstanding forward contracts or option contracts to buy or sell foreign
currency.

Seasonality

We have experienced some seasonality in our business. Our European and Canadian operations have historically experienced lower revenue for the
second quarter of our fiscal year, which is the three month period ended September 30. This is primarily due to increased vacation time by Europeans and Canadians during July and August. This has resulted in reduced sales activity and reduced usage
of photocopiers, facsimiles and other office imaging equipment during that period.

Critical Accounting Policies and Estimates

Our management strives to report our financial results in a clear and understandable manner, even though in some cases accounting and
disclosure rules are complex and require technical terminology. We follow accounting principles generally accepted in the U.S. in preparing our consolidated financial statements contained herein, which require us to make certain estimates and apply
judgements that affect our financial position and results of operations. Our management continually reviews our accounting policies, how they are applied and how they are reported and disclosed in the financial statements. Following is a summary of
our critical accounting policies and how they are applied in preparation of the financial statements.

Accounts Receivable

We provide allowances for doubtful accounts
on our accounts receivable for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of any of our customers were to deteriorate, which may result in the impairment of their ability to
make payments, additional allowances may be required. Our estimates are influenced by the following considerations: our large number of customers and their dispersion across wide geographic areas, the fact that no single customer accounts for 5% or
more of our net sales, our continuing credit evaluation of our customers financial conditions, credit insurance coverage in certain countries and collateral requirements from our customers in certain circumstances.

Inventories

Our inventory levels are based on our projections of future demand and market conditions. Any sudden decline in demand and/or rapid product improvements or
technological changes may cause us to have excess and/or obsolete inventories. On an ongoing basis, we review for estimated obsolete or unmarketable inventories and write-down our inventories to their estimated net realizable value based upon our
forecasts of future demand and market conditions. If actual market conditions are less favorable than our forecasts, additional inventory write-downs may be required. Our estimates are influenced by the following considerations: sudden decline in
demand due to economic downturns, rapid product improvements and technological changes and our ability to return to vendors a certain percentage of our purchases.

Revenue Recognition

Equipment sales are recognized at the time of customer acceptance and, in the case of equipment sales financed by third party leasing companies, at the time of credit acceptance by the leasing company, if later. Supply sales
to customers are recognized at the time of shipment. In the case of service contracts, which include supplies, supply sales are recognized upon usage by the customer.

35



---

##### Table of Contents

Operating lease income is recognized as earned over the lease term. Maintenance contract service revenues are recognized ratably over the term of the underlying maintenance contracts.
Deferred revenue consists of unearned maintenance contract revenue that is recognized using the straight-line method over the life of the related contract, generally twelve months.

We perform an annual review
of the unguaranteed residual values of leased equipment to verify that the recorded residual values do not exceed market valuations. If the residual value is below the market value, a reserve is charged to cost of goods sold. No residual value is
recorded for used equipment.

Income Taxes

As part of the process of preparing our consolidated financial statements, we have to estimate our income taxes in each of
the taxing jurisdictions in which we operate. This process involves estimating our actual current tax expense together with assessing any temporary differences resulting from the different treatment of certain items, such as the timing for
recognizing revenues and expenses for tax and accounting purposes. These differences may result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We assess the likelihood that our deferred tax assets,
which include net operating loss carryforwards and temporary differences that are expected to be deductible in future years, will be recoverable from future taxable income or other tax planning strategies. If recovery is not likely, we have to
provide a valuation allowance based on our estimates of future taxable income in the various taxing jurisdictions, and the amount of deferred taxes that are ultimately realizable. The provision for current and deferred tax liabilities involves
evaluations and judgments of uncertainties in the interpretation of complex tax regulations by various taxing authorities.

Long-lived assets

We review long-lived
assets for impairment as described in note 1 to our consolidated financial statements. In analyzing potential impairments, we use projections of future cash flows from the assets. These projections are based on our views of growth rates for the
related business, anticipated future economic, regulatory and political conditions, the assignment of discount rates relative to risk and estimates of terminal values.

Goodwill

We review our goodwill and indefinite-lived intangible assets annually for possible impairment, or more frequently if impairment indicators arise. Separable intangible assets that have finite lives will continue to be
amortized over their estimated useful lives.

|Item 3. | Quantitative and Qualitative Analysis About Market Risk
|------- | -------------------------------------------------------

The information set forth under the caption Market Risk Management on page 35 of this Quarterly
Report on Form 10-Q is hereby incorporated by reference in answer to this item.

|Item 4. | Controls and Procedures
|------- | -----------------------

Within 90 days prior to this report, we carried out an evaluation under the supervision and with the participation of our Chief Executive
Officer and Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our controls and
procedures are effective in ensuring that all material information required to be filed in this quarterly report has been made known to them in a timely fashion.

There have been no significant changes in our
internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation.

APPROVAL OF NON-AUDIT SERVICES

The audit committee has approved KPMG to perform services regarding local statutory audits and assist in certain tax issues during the six months ended September 30, 2002.

SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS

Certain statements contained herein, or otherwise made by our officers, including statements related to our future performance and our outlook for our businesses and respective
markets, projections, statements of managements plans or objectives, forecasts of market trends and other matters, are forward looking statements, and contain information relating to us that is based on the beliefs of our management as well as
assumptions, made by, and information currently available to, our management. The words goal, anticipate, expect, believe and similar expressions as they relate to us or our management are intended to
identify forward



---

##### Table of Contents

looking statements. No assurance can be given that the results in any forward looking statement will be achieved. For the forward looking statements, we claim the protection of the safe
harbor for forward looking statements provided in the Private Securities Litigation Reform Act of 1995. Such statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions that
could cause actual results to differ materially from those reflected in the forward looking statements. Factors that might cause such actual results to differ materially from those reflected in any forward looking statements include, but are not
limited to, the following: (i) any material adverse change in financial markets or in our own position, (ii) any inability to achieve or maintain cost savings, (iii) increased competition from other high-volume and digital copier distributors and
the discounting of such copiers by our competitors, (iv) any inability by us to procure, or any inability by us to continue to gain access to and successfully distribute, new products, including digital products and high-volume copiers, or to
continue to bring current products to the marketplace at competitive costs and prices, (v) any negative impact from the loss of any of our key upper management personnel, (vi) fluctuations in foreign currencies and (vii) any change in economic
conditions in domestic or international markets where we operate or have material investments which may affect demand for our services. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our analysis
only as of the date they are made. We undertake no obligation, and do not intend, to update these forward looking statements to reflect events or circumstances that arise after the date they are made. Furthermore, as a matter of policy, we do not
generally make any specific projections as to future earnings nor do we endorse any projections regarding future performance, which may be made by others outside our company.

PART II  OTHER INFORMATION

|Item 1. | Legal Proceedings
|------- | -----------------

We are subject to legal proceedings and claims, which arise in the ordinary course of business and should not have a material adverse effect upon
our financial position, results of operation or liquidity.

|Item 2. | Changes in Securities
|------- | ---------------------

Not applicable.

|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

Not applicable.

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

The annual general meeting of the shareholders of Danka
Business Systems PLC was held on October 22, 2002. At the meeting, the following actions were taken by the shareholders:

| | 1. |  | Kevin C. Daly was re-elected as Director of the Company. The voting on the resolution was as follows:
| | -- |  | -----------------------------------------------------------------------------------------------------

|FOR     |  |  | 170,200,083 | 
|------- |  |  | ----------- | 
|        |  |  |            
|AGAINST |  |  | 1,225,173   | 
|        |  |  |            
|ABSTAIN |  |  | 0           | 
|        |  |  |            

| | 2. |  | Richard M. Haddrill was re-elected as Director of the Company. The voting on the resolution was as follows:
| | -- |  | -----------------------------------------------------------------------------------------------------------

|FOR     |  |  | 167,253,620 | 
|------- |  |  | ----------- | 
|        |  |  |            
|AGAINST |  |  | 1,274,332   | 
|        |  |  |            
|ABSTAIN |  |  | 0           | 
|        |  |  |            

| | 3. |  | W. Andrew McKenna was re-elected as Director of the Company. The voting on the resolution was as follows:
| | -- |  | ---------------------------------------------------------------------------------------------------------

|FOR     |  |  | 167,340,339 | 
|------- |  |  | ----------- | 
|        |  |  |            
|AGAINST |  |  | 1,251,657   | 
|        |  |  |            
|ABSTAIN |  |  | 0           | 
|        |  |  |            

| | 4. |  | C. Anthony Wainwright was re-elected as Director of the Company. The voting on the resolution was as follows:
| | -- |  | -------------------------------------------------------------------------------------------------------------





---

##### Table of Contents

|FOR     |  |  | 167,016,115 | 
|------- |  |  | ----------- | 
|        |  |  |            
|AGAINST |  |  | 1,553,741   | 
|        |  |  |            
|ABSTAIN |  |  | 0           | 
|        |  |  |            

| | 5. |  | KPMG Audit PLC was appointed our auditor for fiscal year 2002, and the Board of Directors was authorized to fix the auditors remuneration. The voting on the resolution was as follows:
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|FOR     |  |  | 166,111,517 | 
|------- |  |  | ----------- | 
|        |  |  |            
|AGAINST |  |  | 2,107,543   | 
|        |  |  |            
|ABSTAIN |  |  | 0           | 
|        |  |  |            

| | 6. |  | The Board of Directors was granted the authority to allot securities up to an aggregate nominal amount of £843,313. The voting on the resolution was as follows:
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|FOR     |  |  | 163,255,142 | 
|------- |  |  | ----------- | 
|        |  |  |            
|AGAINST |  |  | 5,143,186   | 
|        |  |  |            
|ABSTAIN |  |  | 0           | 
|        |  |  |            

| | 7. |  | The Board of Directors was granted the authority to allot equity securities up to allot securities, subject to certain limitations, without providing certain pre-emptive rights. The voting on the resolution was as
follows:
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|FOR     |  |  | 156,035,586 | 
|------- |  |  | ----------- | 
|        |  |  |            
|AGAINST |  |  | 12,257,139  | 
|        |  |  |            
|ABSTAIN |  |  | 0           | 
|        |  |  |            

| | 8. |  | The Danka 2002 Outside Director Stock Compensation Plan was approved. The voting on the resolution was as follows:
| | -- |  | ------------------------------------------------------------------------------------------------------------------

|FOR     |  |  | 158,226,951 | 
|------- |  |  | ----------- | 
|        |  |  |            
|AGAINST |  |  | 10,084,025  | 
|        |  |  |            
|ABSTAIN |  |  | 0           | 
|        |  |  |            

| | 9. |  | An amendment to the annual limit on Outside Directors fees was approved. The voting on the resolution was as follows:
| | -- |  | ----------------------------------------------------------------------------------------------------------------------

|FOR     |  |  | 164,960,057 | 
|------- |  |  | ----------- | 
|        |  |  |            
|AGAINST |  |  | 3,586,043   | 
|        |  |  |            
|ABSTAIN |  |  | 0           | 
|        |  |  |            

|Item 5. | Other Information
|------- | -----------------

Not applicable.

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

(a)      Exhibits.

| |  | 10.39     Lease Agreement between DAN (FL) QRS 15-7 INC. and DANKA OFFICEIMAGING
COMPANY dated as of September 27, 2002.                               
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 99-1        Certification of P. Lang Lowrey, III Pursuant to 18 U.S.C. Section 1350, As AdoptedPursuant to Section 906 of the Sarbanes-Oxley Act of 2002
| |  | 99-2        Certification of F. Mark Wolfinger Pursuant to 18 U.S.C. Section 1350, As AdoptedPursuant to Section 906 of the Sarbanes-Oxley Act of 2002  

(b)      Reports on Form 8-K:

| |  | None
| |  | ----



---

##### Table of Contents

SIGNATURE

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

|                        |  |  | Danka Business Systems PLC(Registrant)                                                                                        
|----------------------- |  |  | ------------------------------------------------------------------------------------------------------------------------------
|Date: November 14, 2002 |  |  | /s/ F.MARKWOLFINGER                                                                                                           
|                        |  |  |                                                                                                                               
|                        |  |  | F. Mark WolfingerExecutive Vice-President and Chief Financial Officer(Chief Financial Officer and
PrincipalAccounting Officer)



---

##### Table of Contents

CERTIFICATION PURSUANT TO SECTION 302 OFTHE SARBANES-OXLEY ACT OF 2002

I, P. Lang Lowrey, III, Chief Executive
Officer of the Company, certify that:

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

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

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

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

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

|                                                       |  |  | 
|------------------------------------------------------ |  |  | 
|/s/ P.LANGLOWREY                                       |  |  | 
|                                                       |  |  | 
|P. Lang LowreyChief Executive OfficerNovember 14, 2002 |  |  | 



---

##### Table of Contents

CERTIFICATION PURSUANT TO SECTION 302 OFTHE SARBANES-OXLEY ACT OF 2002

I, F. Mark Wolfinger, Chief Financial
Officer of the Company, certify that:

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

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

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

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

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

|                                                          |  |  | 
|--------------------------------------------------------- |  |  | 
|/s/ F.MARKWOLFINGER                                       |  |  | 
|                                                          |  |  | 
|F. Mark WolfingerChief Financial OfficerNovember 14, 2002 |  |  |