<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, 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, 2001

                                       OR

[_]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         FOR THE TRANSITION PERIOD FROM __________ TO __________

                         Commission file number: 0-20828

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

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

   11201 DANKA CIRCLE NORTH        MASTERS HOUSE
   ST. PETERSBURG, FLORIDA    AND  107 HAMMERSMITH ROAD
                                   LONDON, ENGLAND W14 0QH           33716
   -------------------------------------------------------           -----
           (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  727-576-6003


                                 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 [_]

The registrant had 248,084,622 Ordinary Shares outstanding as of
November 13, 2001
<PAGE>

                                      INDEX

<TABLE>
<CAPTION>
<S>                                                                                                                        <C>
PART I - FINANCIAL INFORMATION..............................................................................................3

   ITEM 1.   CONSOLIDATED FINANCIAL STATEMENTS..............................................................................3
     Consolidated Statement of Operations for the three months and six months ended September 30, 2001 and 2000.............3
     Condensed Consolidated Balance Sheet as of September 30, 2001 and March 31, 2001.......................................4
     Consolidated Statements of Cash Flows for the six months ended September 30, 2001 and 2000.............................5
     Consolidated Statements of Shareholders' Equity for the six months ended September 30, 2001 and 2000...................6
     Notes to Consolidated Financial Statements.............................................................................7

   ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..........................20

PART II - OTHER INFORMATION................................................................................................27

   ITEM 1.   LEGAL PROCEEDINGS.............................................................................................27
   ITEM 2.   CHANGES IN SECURITIES.........................................................................................27
   ITEM 3.   DEFAULTS UPON SENIOR SECURITIES...............................................................................27
   ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........................................................28
   ITEM 5.   OTHER INFORMATION.............................................................................................29
   ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K..............................................................................30

SIGNATURE..................................................................................................................31
</TABLE>


                                       2
<PAGE>

PART I - FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements

Danka Business Systems PLC
Consolidated Statement of Operations for the three months and six months ended
 September 30, 2001 and 2000
(In thousands, except per American Depositary Share ("ADS") amounts)
(Unaudited)

<TABLE>
<CAPTION>
                                                                     For the Three Months Ended     For the Six Months Ended
                                                                    ----------------------------   ----------------------------
                                                                    September 30,  September 30,   September 30,  September 30,
                                                                        2001          2000             2001           2000
                                                                    -------------  -------------   -------------  -------------
<S>                                                                 <C>            <C>             <C>            <C>
Revenue:
Retail equipment sales                                                $ 132,028      $ 163,480      $ 265,114      $ 318,791
Retail service, supplies and rentals                                    232,298        268,735        479,826        557,968
Wholesale                                                                16,984         20,710         38,038         46,971
----------------------------------------------------------------  ---------------  -------------   -------------  -------------
Total revenue                                                           381,310        452,925        782,978        923,730
----------------------------------------------------------------  ---------------  -------------   -------------  -------------

Costs and operating expenses:
Cost of retail equipment sales                                          101,114        145,522        202,782        251,379
Retail service, supplies and rental costs                               136,975        171,403        279,830        341,914
Wholesale costs of revenue                                               13,671         17,190         30,937         39,230
Selling, general and administrative expenses                            127,433        155,127        263,131        315,331
Amortization of intangible assets                                         2,694         22,099          5,363         25,574
Restructuring charges (credits)                                          (1,992)          --           (1,992)        (8,158)
Other (income)/expense                                                   (2,799)         4,408            (96)         6,027
----------------------------------------------------------------  ---------------  -------------   -------------  -------------
Total costs and operating expenses                                      377,096        515,749        779,955        971,297
----------------------------------------------------------------  ---------------  -------------   -------------  -------------
Operating earnings (loss) from continuing operations                      4,214        (62,824)         3,023        (47,567)
Interest expense                                                        (11,053)       (19,617)       (26,924)       (45,538)
Interest income                                                             457            471          1,159          1,554
----------------------------------------------------------------  ---------------  -------------   -------------  -------------
Loss from continuing operations before income taxes                      (6,382)       (81,970)       (22,742)       (91,551)
Provision (benefit) for income taxes                                     (4,506)       (17,347)        (7,710)       (20,760)
----------------------------------------------------------------  ---------------  -------------   -------------  -------------
Loss from continuing operations before extraordinary items               (1,876)       (64,623)       (15,032)       (70,791)
Discontinued operations, net of tax                                      (1,291)         4,445        111,761          9,373
Extraordinary gain/(loss) on early retirement of debt,
  net of tax                                                               (241)          --           26,521           --
----------------------------------------------------------------  ---------------  -------------   -------------  -------------
Net (loss) earnings                                                   $  (3,408)     $ (60,178)     $ 123,250      $ (61,418)
================================================================  ===============  =============   =============  =============

Basic (loss) earnings available to common shareholders
  per ADS:
Net loss per ADS, continuing operations                               $   (0.10)     $   (1.15)     $   (0.38)     $   (1.33)
Net earnings (loss) per ADS, discontinued operations                      (0.02)          0.07           1.81           0.16
Net earnings per ADS, extraordinary item                                   --             --             0.43           --
                                                                  ---------------  -------------   -------------  -------------
Net (loss) earnings per ADS                                           $   (0.12)     $   (1.08)     $    1.86      $   (1.17)
                                                                  ===============  =============   =============  =============
Weighted average ADSs                                                    61,935         59,593         61,914         59,252

Diluted (loss) earnings available to common shareholders per ADS:
Net loss per ADS, continuing operations                               $   (0.10)     $   (1.15)     $   (0.38)     $   (1.33)
Net earnings (loss) per ADS, discontinued operations                      (0.02)          0.07           1.81           0.16
Net earnings per ADS, extraordinary item                                   --             --             0.43           --
                                                                  ---------------  -------------   -------------  -------------
Net (loss) earnings per ADS                                           $   (0.12)     $   (1.08)     $    1.86      $   (1.17)
                                                                  ===============  =============   =============  =============
Weighted average ADSs                                                    61,935         59,593         61,914         59,252
</TABLE>

         See accompanying notes to the consolidated financial statements


                                       3
<PAGE>

Danka Business Sys PLC
Condensed Consolidated Balance Sheet as of September 30, 2001 and March 31, 2001
(In Thousands)
(Unaudited)

<TABLE>
<CAPTION>
                                                                        September 30,      March 31,
                                                                           2001              2001
                                                                        ------------      -----------
<S>                                                                     <C>              <C>
Assets
Current assets:
Cash and cash equivalents                                               $    50,841      $    69,085
Accounts receivable, net                                                    314,271          346,398
Inventories                                                                 182,371          199,523
Prepaid expenses, deferred income taxes and other current assets             60,082           81,025
Assets of discontinued operations                                              --            113,405
----------------------------------------------------------------        -----------      -----------
Total current assets                                                        607,565          809,436

Equipment on operating leases, net                                           66,247           94,085
Property and equipment, net                                                  71,445           66,470
Intangible assets, net                                                      243,101          244,170
Other assets                                                                 39,843           68,781
----------------------------------------------------------------        -----------      -----------
Total assets                                                            $ 1,028,201      $ 1,282,942
================================================================        ===========      ===========

Liabilities and shareholders' equity (deficit)
Current liabilities:
Current maturities of long-term debt and notes payable                  $    33,455      $   517,447
Accounts payable                                                            117,419          136,604
Accrued expenses and other current liabilities                              181,862          182,459
Deferred revenue                                                             39,974           34,969
Liabilities of discontinued operations                                         --             22,230
----------------------------------------------------------------        -----------      -----------
Total current liabilities                                                   372,710          893,709

Convertible subordinated notes                                                 --            200,000
Long-term debt and notes payables, less current maturities                  341,370            1,731
Deferred income taxes and other long-term liabilities                        29,116           29,431
----------------------------------------------------------------        -----------      -----------
Total liabilities                                                           743,196        1,124,871
----------------------------------------------------------------        -----------      -----------

6.5% convertible participating shares                                       231,988          223,713
----------------------------------------------------------------        -----------      -----------

Shareholders' equity (deficit):
Ordinary shares, 1.25 pence stated value                                      5,138            5,130
Additional paid-in capital                                                  325,880          325,399
Retained earnings (accumulated deficit)                                    (187,642)        (302,619)
Accumulated other comprehensive (loss) income                               (90,359)         (93,552)
----------------------------------------------------------------        -----------      -----------
Total shareholders' equity (deficit)                                         53,017          (65,642)
----------------------------------------------------------------        -----------      -----------
Total liabilities & shareholders' equity (deficit)                      $ 1,028,201      $ 1,282,942
================================================================        ===========      ===========
</TABLE>

         See accompanying notes to the consolidated financial statements

                                       4
<PAGE>

Danka Business Systems PLC
Consolidated Statements of Cash Flows
 for the six months ended September 30, 2001 and 2000
(In Thousands)
(Unaudited)

<TABLE>
<CAPTION>
                                                               September 30,   September 30,
                                                                    2001           2000
                                                               -------------   -------------
<S>                                                              <C>            <C>
Operating activities:
Net earnings (loss)                                              $ 123,250      $ (61,418)
Adjustments to reconcile net earnings (loss) to net cash
 provided by operating activities of continuing operations:
  Extraordinary gain on debt retirement                            (26,521)          --
  Net earnings and gain from sale of discontinued operations      (111,761)        (9,373)
  Depreciation and amortization                                     43,390         80,294
  Deferred income taxes                                            (10,592)       (21,119)
  Loss on sale of equipment on operating leases
   equipment on operating leases                                     5,872          5,075
  Proceeds from sale of equipment on operating leases                3,008          3,032
  Restructuring and other special charges (credits)                 (1,992)        (8,159)
  Changes in net assets and liabilities:
       Changes in net assets of discontinued operations               --           11,333
       Accounts receivable                                          32,127         42,647
       Inventories                                                  17,152         45,201
       Prepaid expenses and other current assets                     2,969         (6,943)
       Other non-current assets                                     (7,250)         8,615
       Accounts payable                                            (19,186)            44
       Accrued expenses and other current liabilities               (7,683)       (38,303)
       Deferred revenue                                              5,005         (3,234)
       Other long-term liabilities                                    (315)           350
------------------------------------------------------------     ---------      ---------
Net cash provided by operating activities                           47,473         48,042
------------------------------------------------------------     ---------      ---------

Investing activities:
   Capital expenditures                                            (21,832)       (34,692)
   Proceeds from the sale of property and equipment                    250            466
   Net proceeds from the sale of business                          273,218           --
------------------------------------------------------------     ---------      ---------
Net cash provided by (used in) investing activities                251,636        (34,226)
------------------------------------------------------------     ---------      ---------

Financing activities:
   Net payments under line of credit agreements                   (274,147)       (35,121)
   Principal payments of debt                                      (23,183)           (55)
   Payment of debt issue costs                                     (24,437)          --
------------------------------------------------------------     ---------      ---------
Net cash used in financing activities                             (321,767)       (35,176)
------------------------------------------------------------     ---------      ---------
Effect of exchange rates                                             4,414         (1,095)
------------------------------------------------------------     ---------      ---------
Net decrease in cash                                               (18,244)       (22,456)
Cash and cash equivalents, beginning of period                      69,085         64,861
------------------------------------------------------------     ---------      ---------
Cash and cash equivalents, end of period                         $  50,841      $  42,405
============================================================     =========      =========
</TABLE>

        See accompanying notes to the consolidated financial statements


                                       5
<PAGE>

Danka Business Systems PLC
Consolidated Statements of Shareholders' Equity for the six months ended
 September 30, 2001 and 2000
(In Thousands)
(Unaudited)

<TABLE>
<CAPTION>
                                    Number of
                                    Number of                                                    Accumulated
                                    Ordinary                                                        Other
                                     Shares                                      Retained          Compre-
                                  (4 Ordinary                   Additional       Earnings          hensive
                                  Shares Equal    Ordinary       Paid-In       (Accumulated        (Loss)
                                     1 ADS)        Shares        Capital         Deficit)          Income        Total
                                  ------------   ---------     -----------      -----------      ----------    ---------
<S>                                 <C>          <C>           <C>              <C>              <C>           <C>
Balances at March 31, 2001          247,571      $ 5,130       $ 325,399        $(302,619)       $ (93,552)    $ (65,642)

Net earnings                             --           --              --          123,250               --       123,250
Currency translation adjustment          --           --              --               --            3,193         3,193
                                                                                                               ---------
    Comprehensive income (loss)                                                                                  126,443
Dividends and accretion
    of participating shares              --           --              --           (8,273)              --        (8,273)
Shares issued under
    employee stock plans                514            8             481               --               --
                                                                                                                     489
---------------------------------   -------      -------       ---------        ---------        -----------    --------
Balances at September 30, 2001      248,085      $ 5,138       $ 325,880        $(187,642)       $ (90,359)     $ 53,017
=================================   =======      =======       =========        =========        ===========    ========
</TABLE>

<TABLE>
<CAPTION>
                                    Number of
                                    Number of                                                    Accumulated
                                    Ordinary                                                        Other
                                     Shares                                      Retained          Compre-
                                  (4 Ordinary                   Additional       Earnings          hensive
                                  Shares Equal    Ordinary       Paid-In       (Accumulated        (Loss)
                                     1 ADS)        Shares        Capital         Deficit)          Income        Total
                                  ------------   ---------     -----------      -----------      ----------    ---------
<S>                                 <C>          <C>           <C>              <C>              <C>           <C>
Balances at March 31, 2000          234,573      $ 4,892       $ 317,056        $ (66,226)       $ (74,722)    $ 181,000

Net loss                                 --           --              --          (61,418)              --
                                                                                                                 (61,418)
Currency translation adjustment          --           --              --               --          (16,181)      (16,181)
                                                                                                               ---------
    Comprehensive income (loss)                                                                                  (77,599)
Dividends and accretion
    of participating shares              --           --              --           (7,756)              --        (7,756)
Shares issued under
    employee stock plans              2,436          105           4,668               --               --         4,773
---------------------------------   -------      -------       ---------        ---------        ---------     ---------
Balances at September 30, 2000      237,009      $ 4,997       $ 321,724        $(135,400)       $ (90,903)    $ 100,418
=================================   =======      =======       =========        =========        =========     =========
</TABLE>

                                       6
<PAGE>

Danka Business Systems PLC
Notes to Consolidated Financial Statements
(Unaudited)

Note 1.  Basis of Presentation

         The accompanying condensed consolidated balance sheet as of September
30, 2001, the consolidated statements of operations for the three months and six
months ended September 30, 2001 and 2000, the consolidated statements of cash
flows for the six months ended September 30, 2001 and 2000, and the consolidated
statement of shareholders' equity for the six months ended September 30, 2001
and 2000, 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/A for the year ended March 31, 2001. Certain prior
year amounts have been reclassified to conform to current year presentations.

Note 2.  Restructuring Charges (Credits)

Fiscal 2001 Charge:

         Beginning at the end of the fourth quarter of fiscal year 2001, we
proceeded with a series of changes to our senior management team.  The hiring of
a new Chief Executive Officer in March of 2001 was the first in a series of
changes. Upon completion of the financial restructuring plan at the end of the
first quarter of fiscal year 2002, the Company made additional significant
changes to its senior management team including the hiring of a new Chief
Operating Officer of International, a new Chief Operating Officer of our
Canadian, Latin American and Asian Pacific region and a new Chief Operating
Officer of our U.S. Office Imaging business unit. The Company's 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, the decision was reached to modify the 2001 restructuring plan in
the current quarter. Additionally, higher than anticipated employee attrition
reduced cash outlay requirements for severance. As a result of these actions,
the Company reversed $9.4 million of severance and facility restructuring
reserves in the second quarter of fiscal year 2002.

         The fiscal 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
discussed above, and higher than anticipated employee attrition, it was
determined that $7.0 million of the severance reserve would not be required.
Cash outlays related to these reductions during the six months ended September
30, 2001 totaled $4.6 million. We expect to complete the remaining workforce
reductions by the third quarter of fiscal year 2002.

         The 2001 restructuring charge also included $5.7 million for future
lease obligations on facility closures and exit costs. We identified 50
facilities to be closed and/or consolidated with other Danka facilities. In the
fourth quarter of fiscal year 2001 we determined that 10 of the facilities
previously identified for closure would remain open because of changes in our
business plan and accordingly reversed $1.4 million of reserves. In the current
quarter as a result of the senior management changes discussed above, we
determined that an additional $2.4 million of facility reserves would not be
required. Cash outlays for the remaining facilities during the six months ended
September 30, 2001 totaled $0.6 million. The remaining lease obligations related
to these facility closures are expected to be substantially completed during
fiscal year 2002. The following table summarizes the fiscal 2001 restructuring
charge:

2001 Restructuring Charge:

<TABLE>
<CAPTION>
                                                Reserves at                Other      Reserve at
                                                 March 31,     Cash       Non-Cash   September 30,
(in 000's)                                          2001      Outlays      Changes       2001
                                                -----------   -------     --------   -------------
<S>                                               <C>         <C>          <C>          <C>
Severance                                         $16,743     $(4,584)     $(6,996)     $ 5,163
Future lease obligations on facility closures
   and other exit costs                             4,172        (574)      (2,370)       1,228
                                                  -------     -------      -------      -------
Total                                             $20,915     $(5,158)     $(9,366)     $ 6,389
                                                  =======     =======      =======      =======
</TABLE>

Fiscal 2002 Charge:

         The Company recorded a pre-tax restructuring charge of $7.4 million
during the second quarter of fiscal 2002. The restructuring charge included $1.3
million related to severance for a reduction of 123 positions in its U.S. sales
force. We expect these reductions should be completed by the fourth quarter of
fiscal 2002. Cash outlays for the reductions during the six months ended
September 30, 2001 totaled $0.6 million. The restructuring charge also included
$6.1 million for

                                       7
<PAGE>

future lease obligations on approximately 39 facilities that will be vacated by
fiscal year end. Cash outlays for the remaining facilities during the six months
ended September 30, 2001 totaled $0.4 million. The following table summarizes
the fiscal 2002 restructuring charge:

2002 Restructuring Charge:

<TABLE>
<CAPTION>
                                               Total Fiscal             Other     Reserve at
                                                   2002       Cash     Non-Cash  September 30,
(in 000's)                                        Expense    Outlays   Changes      2001
                                               ------------  -------   --------  -------------
<S>                                               <C>        <C>         <C>       <C>
Severance                                         $1,300     $ (591)     --        $  709
Future lease obligations on facility closures      6,074       (400)     --         5,674
                                                  ------     ------      --        ------
Total                                             $7,374     $ (991)     --        $6,383
                                                  ======     ======      ==        ======
</TABLE>

Note 3.  Discontinued Operation

         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 on a worldwide basis for an initial term
of two years.

         An escrow account of $5 million of the DSI purchase price has been set
aside. The purchase price is subject to an adjustment depending on the value of
DSI's net assets as of the closing of the sale. If the value of DSI's net assets
as of the closing date (as determined by reference to an audited balance sheet
for DSI that we must prepare and provide to Pitney Bowes) exceeds $81.7 million,
Pitney Bowes will pay us an amount equal to the excess on a dollar-for-dollar
basis and the $5 million in escrow will be released to us. If the value of DSI's
net assets as of the closing date is less than $81.7 million, an amount equal to
the shortfall will be paid to Pitney Bowes on a dollar-for-dollar basis from the
escrow account and, if the amount of the escrow account is insufficient to meet
the shortfall, we will pay the difference to Pitney Bowes. Any money remaining
in the escrow account following payment of any shortfall to Pitney Bowes will be
released to us.

         The sale of DSI resulted in a gain, subject to final post-closing
adjustments, for the six months ended September 30, 2001 of $107.7 million after
income taxes of $69.7 million. For the three months ended September 30, 2001, we
incurred an additional $1.2 million of net purchase price adjustments and
expenses related to the sale of DSI. Assets and liabilities of DSI at March 31,
2001, have been segregated in the condensed consolidated balance sheets. A
summary of the operating results of discontinued operations is as follows:

<TABLE>
<CAPTION>

(in 000's)                                      For the three months ended     For the six months ended
                                               September 30,  September 30,  September 30,  September 20,
(in 000's)                                         2001           2000          2001           2000
                                               -------------  -------------  -------------  -------------
<S>                                              <C>           <C>            <C>            <C>
Revenue                                          $   --        $ 75,715       $ 74,234       $145,122

Earnings before income taxes                     $   --        $  7,916       $  6,664       $ 15,726
Provision for income taxes                             85         3,471          2,559          6,353
                                                 --------      --------       --------       --------

Net earnings/(loss) from discontinued                 (85)        4,445          4,105          9,373
operations
Gain/(loss) from sale of discontinued
operations after income taxes (benefits)
    of ($4.1) and $69.7 million, respectively      (1,206)         --          107,656           --
                                                 --------      --------       --------       --------

Discontinued operations, net of tax              $ (1,291)     $  4,445       $111,761       $  9,373
                                                 ========      ========       ========       ========
</TABLE>

Note 4.  Debt

         On June 29, 2001, we completed an exchange offer for our 6.75%
convertible subordinated notes due April 1, 2002. We accepted tenders from
holders of a total of $184,012,000 in aggregate principal amount (92%) of the
6.75% convertible subordinated notes. Of the notes tendered pursuant to the
exchange offer, $118,484,000 in principal amount was tendered for a limited cash
option, $1,008,000 in principal amount was tendered for a new zero coupon senior
subordinated note option and $64,520,000 in principal amount was tendered for a
new 10% note option. In aggregate, we paid $24,000,000 in cash and issued
$47,593,000 in principal amount of new zero coupon senior subordinated notes due
April 1, 2004 and $64,520,000 in principal amount of 10% subordinated notes due
April 1, 2008 as consideration under the exchange offer. The senior subordinated
notes are guaranteed by Danka Holding Company and Danka Office Imaging Company,
which are both our 100% owned U.S. subsidiaries.


                                       8
<PAGE>

         The exchange offer was accounted for as a troubled debt restructuring
and resulted in an extraordinary gain of $26.5 million after income taxes of
$11.4 million.

         In addition, on June 29, 2001, we entered into an amended and restated
senior credit facility with our existing senior bank lenders to provide us with
financing through March 31, 2004. The facility, which consists of a $100 million
revolver, a $190 million term loan and $30 million letters of credit
commitments, is an amendment and restatement of our previous credit agreement.
The term component of the facility requires principal installments aggregating
$5.0 million in fiscal year 2002, $16.0 million in fiscal year 2003, and $24.0
million in fiscal year 2004, with payment due in full on March 31, 2004.
Interest on the revolver and term loan components of the new facility are at
LIBOR plus 5% or base rate plus 4%. The interest rate will increase by 0.5% on
December 29, 2001, June 29, 2002 and quarterly thereafter.

         Our indebtedness under the new facility is secured by substantially all
of our assets in the United States, Canada, United Kingdom, Netherlands, and
Germany. The new facility contains negative and affirmative covenants which
place restrictions on us regarding the disposition of assets, capital
expenditures, additional indebtedness and permitted liens, prohibit the payment
of dividends (other than payment-in-kind dividends on our participating shares).
The new facility requires that we comply with minimum levels of adjusted
consolidated net worth, cumulative EBITDA, a ratio of consolidated EBITDA to
interest expense, and a limitation on the maximum levels of capital
expenditures, each as defined in the credit facility. We were in compliance with
all of the applicable covenants as of September 30, 2001.

         We incurred $11.2 million in bank fees and $4.8 million in third party
fees relating to the new facility. These fees will be amortized over the term of
the new facility. We are also required to pay our banks a fee equal to 1.5% of
the then total commitments on June 29, 2002 and a fee equal to 4.0% of the then
total commitments on June 29, 2003.

Note 5.  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, 2001 and 2000:

<TABLE>
<CAPTION>
                                               For the three months ended                 For the three months ended
                                                   September 30, 2001                         September 30, 2000
                                       ------------------------------------------- ------------------------------------------
                                         Earnings                                     Earnings
                                        (loss) from                                 (loss) from
                                        Continuing                                   Continuing
                                         Operations        Shares      Per-share     Operations        Shares      Per-share
 (In 000's except per share amounts)    (Numerator)    (Denominator)     Amount     (Numerator)    (Denominator)     Amount
                                       --------------- --------------- ----------- --------------- --------------- -----------
<S>                                      <C>              <C>           <C>         <C>               <C>            <C>
Basic loss available to
    common shareholders pre ADS:

Net loss form continuing operations
    Before extraordinary items           $ (1,876)                                  $ (64,623)

    Dividends and accretion on
        participating shares               (4,199)                                     (3,957)
                                         --------                                  ----------

    Loss                                   (6,075)        61,935        $ (0.10)      (68,580)        59,593        $ (1.15)
                                                                        =======                                     =======
Effect of dilutive securities:
    Stock options                             --             --                           --             --
                                         --------         ------                    ---------         ------

Diluted loss available to
    common shareholders per ADS:

    Loss                                 $ (6,075)        61,935        $ (0.10)    $ (68,580)        59,593        $ (1.15)
                                         ========         ======        =======     =========         ======        =======
</TABLE>


                                       9
<PAGE>

<TABLE>
<CAPTION>
                                                For the six months ended                   For the six months ended
                                                   September 30, 2001                         September 30, 2000
                                       ------------------------------------------- ------------------------------------------
                                         Earnings                                     Earnings
                                        (loss) from                                 (loss) from
                                        Continuing                                   Continuing
                                         Operations        Shares      Per-share     Operations        Shares      Per-share
 (In 000's except per share amounts)    (Numerator)    (Denominator)     Amount     (Numerator)    (Denominator)     Amount
                                       --------------- --------------- ----------- --------------- --------------- -----------
<S>                                      <C>              <C>           <C>         <C>               <C>            <C>
Net loss form continuing operations
    Before extraordinary items           $(15,032)                                  $ (70,791)

Basic loss available to common
    shareholders pre ADS:
    Dividends and accretion on
       participating shares                (8,336)                                     (7,859)
                                         --------                                   ---------

    Loss                                  (23,368)        61,914        $ (0.38)      (78,650)        59,252        $(1.33)
                                                                        =======                                     =======
Effect of dilutive securities:
    Stock options                             --             --                           --             --
                                         --------         ------                    ---------         ------

Diluted loss available to
    common shareholders per ADS:

    Loss                                 $(23,368)        61,914        $ (0.38)    $ (78,650)        59,252        $(1.33)
                                         ========         ======        =======     =========         ======        =======
</TABLE>

         The effect of our 6.75% convertible subordinated notes and our 6.5%
senior convertible participating shares are not included in the computation of
diluted earnings per share for the three and six months ended September 30, 2001
and 2000 because they are not dilutive.

Note 6.  Segment Reporting

         Our reportable segments are Danka Americas and Danka International. Our
reportable segments do not include the discontinued operations of DSI. Danka
Americas distributes photocopiers, facsimiles and other related office imaging
equipment together with related parts, supplies and services on a direct basis
to retail customers. The geographical areas covered by Danka Americas include
the United States, Canada and Latin America. Danka International distributes
photocopiers, facsimiles and other related office imaging equipment. These
products, together with related services, parts and supplies, are marketed
primarily on a direct basis to retail customers. Danka International also
provides photocopiers, facsimiles and other related office imaging equipment and
supplies on a wholesale basis to independent dealers. Danka International has an
extensive sales and service network throughout Europe and additional operations
in Australia. 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. Other items, which includes Corporate
Headquarters expenses and eliminations, are shown for purposes of reconciling to
our total consolidated amounts as shown in the following tables (which have been
restated to reflect our reportable segments) for the three months and six months
ended September 30, 2001 and 2000:


                                       10
<PAGE>

<TABLE>
<CAPTION>
                                                          Danka            Danka     Consolidated
                                                         Americas      International     Other         Total
Three Months Ended September 30                            $000            $000          $000          $000
---------------------------------------------------      ---------     ------------- ------------    ---------
<S>                                                      <C>            <C>           <C>            <C>
2001
Total revenue                                            $ 238,848      $ 142,462          --        $ 381,310

Operating earnings (loss) from continuing operations        (1,880)           309     $   5,785          4,214
Interest expense                                              --             --          11,053         11,053
Provision (benefit) for income taxes                          --             --          (4,506)        (4,506)
Earnings (loss) from continuing operations, before
    extraordinary items                                                                                 (1,876)

2000
Total revenue                                              295,451        167,161        (9,687)       452,925

Operating earnings (loss) from continuing operations        (5,648)         4,254       (61,430)       (62,824)
Interest expense                                              --             --          19,617         19,617
Provision (benefit) for income taxes                          --             --         (17,347)       (17,347)
Earnings (loss) from continuing operations, before
    extraordinary items                                                                                (64,623)
</TABLE>

<TABLE>
<CAPTION>
                                                          Danka            Danka     Consolidated
                                                         Americas      International     Other         Total
Three Months Ended September 30                            $000            $000          $000          $000
---------------------------------------------------      ---------     ------------- ------------    ---------
<S>                                                      <C>            <C>           <C>            <C>
2001
Total revenue                                            $ 495,620      $ 294,075        (6,717)     $ 782,978

Operating earnings (loss) from continuing operations         3,176          3,771        (3,924)         3,023
Interest expense                                              --             --          26,924         26,924
Provision (benefit) for income taxes                          --             --          (7,710)        (7,710)
Earnings (loss) from continuing operations, before
    extraordinary items                                                                                (15,032)

2000
Total revenue                                              595,422        337,930        (9,622)       923,730

Operating earnings (loss) from continuing operations         1,318          6,562       (55,447)       (47,567)
Interest expense                                              --             --          45,538         45,538
Provision (benefit) for income taxes                          --             --         (20,760)       (20,760)
Earnings (loss) from continuing operations, before
    extraordinary items                                                                                (70,791)
</TABLE>

Note 7.  New Accounting Pronouncements

Goodwill and Other Intangible Assets:

         In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets", which will be effective for the first quarter of our fiscal year 2003.
Statement No. 142 establishes accounting and reporting requirements for goodwill
and other intangible assets, and modifies disclosures previously required under
other accounting standards. We have not yet evaluated what impact the adoption
of this new statement may have on our results of operation, financial position,
or liquidity.

Other New Accounting Standards

         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

                                       11
<PAGE>

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 December 15, 2002. We do not
expect a material impact from this Statement on our consolidated financial
statements.

         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. We do not expect a material impact from this Statement on our
consolidated financial statements.

Note 8.  Supplemental Consolidating Financial Data for Subsidiary Guarantors

         On June 29, 2001, we completed an exchange offer for our 6.75%
convertible subordinated notes due April 1, 2002. We issued new zero coupon
senior subordinated notes due April 1, 2004 as consideration. The new 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 new 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.


                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                                        Supplemental Consolidating Statement of Operation
                                                                                   For the Three Months Ended
                                                                                       September 30, 2001
                                                                --------------------------------------------------------------------
                                                                                           Subsidiary
                                                                 Parent     Subsidiary        Non-                     Consolidated
                                                                 Company    Guarantors     Guarantors     Eliminations    Total
                                                                ---------   ----------     ----------     ------------ ------------
<S>                                                             <C>          <C>            <C>            <C>          <C>
Revenue:
Retail equipment sales                                          $    --      $  73,434      $  58,594      $    --      $ 132,028
Retail service, supplies and rentals                                 --        140,304         91,994           --        232,298
Wholesale                                                            --           --           16,984           --         16,984
-----------------------------------------------------------     ---------    ---------      ---------      ---------    ---------
Total revenue                                                        --        213,738        167,572           --        381,310
-----------------------------------------------------------     ---------    ---------      ---------      ---------    ---------

Costs and operating expenses
Cost of retail equipment sales                                       --         60,350         40,764           --        101,114
Retail service, supplies and rental costs                            --         76,105         60,870           --        136,975
Wholesale costs of revenue                                           --           --           13,671           --         13,671
Selling, general and administrative expenses                          919       78,304         48,210           --        127,433
Amortization of intangible assets                                    --            945          1,749           --          2,694
Restructuring charges (credits)                                      --         (1,992)          --             --         (1,992)
Equity (income)/loss                                               21,731         --             --          (21,731)        --
Other (income)/expense                                             (3,611)         923            158           (269)      (2,799)
-----------------------------------------------------------     ---------    ---------      ---------      ---------    ---------
Total costs and operating expenses                                 19,039      214,635        165,422        (22,000)     377,096
-----------------------------------------------------------     ---------    ---------      ---------      ---------    ---------
Operating earnings (loss) from continuing operations              (19,039)        (897)         2,150         22,000        4,214
Interest expense                                                    4,890      (19,131)        84,123        (80,936)     (11,053)
Interest income                                                    13,149          141        (93,767)        80,935          457
-----------------------------------------------------------     ---------    ---------      ---------      ---------    ---------
Loss from continuing operations before income taxes                (1,000)     (19,887)        (7,494)        21,999       (6,382)
Provision (benefit) for income taxes                                2,167       (6,339)            43           (377)      (4,506)
-----------------------------------------------------------     ---------    ---------      ---------      ---------    ---------
Loss from continuing operations before extra-ordinary items        (3,167)     (13,548)        (7,537)        22,376       (1,876)
Discontinued operations, net of tax                                  --           --           (1,291)          --         (1,291)
Extraordinary gain early retirement of debt, net of tax              (241)        --             --             --           (241)
-----------------------------------------------------------     ---------    ---------      ---------      ---------    ---------
Net (loss) earnings                                             $  (3,408)   $ (13,548)     $  (8,828)     $  22,376    $  (3,408)
===========================================================     =========    =========      =========      =========    =========
</TABLE>


                                       13
<PAGE>

<TABLE>
<CAPTION>
                                                                        Supplemental Consolidating Statement of Operation
                                                                                   For the Three Months Ended
                                                                                       September 30, 2000
                                                                --------------------------------------------------------------------
                                                                                           Subsidiary
                                                                 Parent     Subsidiary        Non-                     Consolidated
                                                                 Company    Guarantors     Guarantors     Eliminations    Total
                                                                ---------   ----------     ----------     ------------ ------------
<S>                                                             <C>          <C>            <C>            <C>          <C>
Revenue:
Retail equipment sales                                          $    --      $  94,877      $  68,603      $    --       $ 163,480
Retail service, supplies and rentals                                 --        159,622        109,113           --         268,735
Wholesale                                                            --           --           20,710           --          20,710
-----------------------------------------------------------     ---------    ---------      ---------      ---------     ---------
Total revenue                                                        --        254,499        198,426           --         452,925
-----------------------------------------------------------     ---------    ---------      ---------      ---------     ---------

Costs and operating expenses
Cost of retail equipment sales                                       --         74,406         71,116           --         145,522
Retail service, supplies and rental costs                            --         89,590         81,813           --         171,403
Wholesale costs of revenue                                           --           --           17,190           --          17,190
Selling, general and administrative expenses                         --         97,976         57,151           --         155,127
Amortization of intangible assets                                    --          1,126         20,973           --          22,099
Restructuring charges (credits)                                      --            532           (532)          --            --
Equity (income)/loss                                               65,940         --             --          (65,940)         --
Other (income)/expense                                                 (1)        --            4,409           --           4,408
-----------------------------------------------------------     ---------    ---------      ---------      ---------     ---------
Total costs and operating expenses                                 65,939      263,630        252,120        (65,940)      515,749
-----------------------------------------------------------     ---------    ---------      ---------      ---------     ---------
Operating earnings (loss) from continuing operations              (65,939)      (9,131)       (53,694)        65,940       (62,824)
Interest expense                                                     --        (20,661)        77,746        (76,702)      (19,617)
Interest income                                                      --            (70)        26,010        (25,469)          471
-----------------------------------------------------------     ---------    ---------      ---------      ---------     ---------
Loss from continuing operations before income taxes               (65,939)     (29,862)        50,062        (36,231)      (81,970)
Provision (benefit) for income taxes                               (5,761)      (4,785)       (13,545)         6,744       (17,347)
-----------------------------------------------------------     ---------    ---------      ---------      ---------     ---------
Loss from continuing operations before extra-ordinary items       (60,178)     (25,077)        63,607        (42,975)      (64,623)
Discontinued operations, net of tax                                  --          3,422          1,023           --           4,445
Extraordinary gain early retirement of debt, net of tax              --           --             --             --            --
-----------------------------------------------------------     ---------    ---------      ---------      ---------     ---------
Net (loss) earnings                                             $ (60,178)   $ (21,655)     $  64,630      $ (42,975)    $ (60,178)
===========================================================     =========    =========      =========      =========     =========
</TABLE>


                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                                        Supplemental Consolidating Statement of Operation
                                                                                    For the Six Months Ended
                                                                                       September 30, 2001
                                                                --------------------------------------------------------------------
                                                                                           Subsidiary
                                                                 Parent     Subsidiary        Non-                     Consolidated
                                                                 Company    Guarantors     Guarantors     Eliminations    Total
                                                                ---------   ----------     ----------     ------------ ------------
<S>                                                             <C>          <C>            <C>            <C>          <C>
Revenue:
Retail equipment sales                                          $    --      $ 145,547      $ 119,567      $    --       $ 265,114
Retail service, supplies and rentals                                 --        289,267        190,559           --         479,826
Wholesale                                                                                      38,038                       38,038
-----------------------------------------------------------     ---------    ---------      ---------      ---------     ---------
Total revenue                                                        --        434,814        348,164           --         782,978
-----------------------------------------------------------     ---------    ---------      ---------      ---------     ---------

Costs and operating expenses
Cost of retail equipment sales                                       --        118,712         84,070           --         202,782
Retail service, supplies and rental costs                            --        154,236        125,594           --         279,830
Wholesale costs of revenue                                                                     30,937                       30,937
Selling, general and administrative expenses                        2,067      164,586         96,478           --         263,131
Amortization of intangible assets                                    --          1,891          3,472           --           5,363
Restructuring charges (credits)                                      --         (1,992)          --             --          (1,992)
Equity (income)/loss                                             (100,242)        --             --          100,242          --
Other (income)/expense                                             (4,990)       1,636          2,148          1,110           (96)
-----------------------------------------------------------     ---------    ---------      ---------      ---------     ---------
Total costs and operating expenses                               (103,165)     439,069        342,699        101,352       779,955
-----------------------------------------------------------     ---------    ---------      ---------      ---------     ---------
Operating earnings (loss) from continuing operations              103,165       (4,255)         5,465       (101,352)        3,023
Interest expense                                                  (22,910)     (39,148)        79,560        (44,426)      (26,924)
Interest income                                                    27,387          760        (71,414)        44,426         1,159
-----------------------------------------------------------     ---------    ---------      ---------      ---------     ---------
Loss from continuing operations before income taxes               107,642      (42,643)        13,611       (101,352)      (22,742)
Provision (benefit) for income taxes                                2,205      (13,691)         4,153           (377)       (7,710)
-----------------------------------------------------------     ---------    ---------      ---------      ---------     ---------
Loss from continuing operations before extra-ordinary items       105,437      (28,952)         9,458       (100,975)      (15,032)
Discontinued operations, net of tax                                (8,708)      83,784         36,685           --         111,761
Extraordinary gain early retirement of debt, net of tax            26,521         --             --             --          26,521
-----------------------------------------------------------     ---------    ---------      ---------      ---------     ---------
Net (loss) earnings                                             $ 123,250    $  54,832      $  46,143      $(100,975)    $ 123,250
===========================================================     =========    =========      =========      =========     =========
</TABLE>


                                       15
<PAGE>

<TABLE>
<CAPTION>
                                                                        Supplemental Consolidating Statement of Operation
                                                                                    For the Six Months Ended
                                                                                       September 30, 2000
                                                                --------------------------------------------------------------------
                                                                                           Subsidiary
                                                                 Parent     Subsidiary        Non-                     Consolidated
                                                                 Company    Guarantors     Guarantors     Eliminations    Total
                                                                ---------   ----------     ----------     ------------ ------------
<S>                                                             <C>          <C>            <C>            <C>          <C>
Revenue:
Retail equipment sales                                          $    --      $ 191,623      $ 127,168      $    --      $ 318,791
Retail service, supplies and rentals                                 --        331,482        226,486           --        557,968
Wholesale                                                                                      46,971                      46,971
-----------------------------------------------------------     ---------    ---------      ---------      ---------    ---------
Total revenue                                                        --        523,105        400,625           --        923,730
-----------------------------------------------------------     ---------    ---------      ---------      ---------    ---------

Costs and operating expenses
Cost of retail equipment sales                                       --        140,680        110,699           --        251,379
Retail service, supplies and rental costs                            --        187,742        154,172           --        341,914
Wholesale costs of revenue                                                                     39,230                      39,230
Selling, general and administrative expenses                        1,073      198,484        115,774           --        315,331
Amortization of intangible assets                                    --          2,280         23,294           --         25,574
Restructuring charges (credits)                                      --         (4,520)        (3,638)          --         (8,158)
Equity (income)/loss                                               44,484         --             --          (44,484)        --
Other (income)/expense                                              1,921         --            6,028         (1,922)       6,027
-----------------------------------------------------------     ---------    ---------      ---------      ---------    ---------
Total costs and operating expenses                                 47,478      524,666        445,559        (46,406)     971,297
-----------------------------------------------------------     ---------    ---------      ---------      ---------    ---------
Operating earnings (loss) from continuing operations              (47,478)      (1,561)       (44,934)        46,406      (47,567)
Interest expense                                                  (23,275)     (43,495)        72,318        (51,086)     (45,538)
Interest income                                                     3,612        1,013         48,015        (51,086)       1,554
-----------------------------------------------------------     ---------    ---------      ---------      ---------    ---------
Loss from continuing operations before income taxes               (67,141)     (44,043)        75,398        (55,765)     (91,551)
Provision (benefit) for income taxes                               (5,723)      (9,409)        (6,113)           485      (20,760)
-----------------------------------------------------------     ---------    ---------      ---------      ---------    ---------
Loss from continuing operations before extra-ordinary items       (61,418)     (34,634)        81,511        (56,250)     (70,791)
Discontinued operations, net of tax                                  --          6,803          2,570           --          9,373
Extraordinary gain early retirement of debt, net of tax              --           --             --             --           --
-----------------------------------------------------------     ---------    ---------      ---------      ---------    ---------
Net (loss) earnings                                             $ (61,418)   $ (27,831)     $  84,081      $ (56,250)   $ (61,418)
===========================================================     =========    =========      =========      =========    =========
</TABLE>


                                       16
<PAGE>

<TABLE>
<CAPTION>
                                                                    Supplemental Consolidating Balance Sheet Information
                                                                                   September 30, 2001
                                                            --------------------------------------------------------------------
                                                                                         Subsidiary
                                                             Parent        Subsidiary        Non-                     Consolidated
                                                             Company       Guarantors     Guarantors   Eliminations      Total
                                                            ---------      ----------     ----------   ------------   ------------
<S>                                                         <C>            <C>            <C>          <C>            <C>
Assets
Current assets:
Cash and cash equivalents                                   $  15,952      $  (3,914)     $  38,803      $    --        $   50,841
Accounts receivable, net                                         --          149,302        164,969           --           314,271
Inventories                                                      --           71,975        110,396           --           182,371
Prepaid expenses, deferred income taxes and other
   current assets                                               5,215         40,417         14,450           --            60,082
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------
Total current assets                                           21,167        257,780        328,618           --           607,565

Equipment on operating leases, net                               --           29,907         36,340           --            66,247
Property and equipment, net                                      --           59,036         12,409           --            71,445
Intangible assets, net                                           --           96,922        146,179           --           243,101
Investment in Subsidiaries                                    576,944          1,014           --         (577,958)           --
Other assets                                                   15,554         50,060        (25,771)          --            39,843
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------
Total assets                                                $ 613,665      $ 494,719      $ 497,775      $(577,958)     $1,028,201
==========================================================  =========      =========      =========      =========      ==========

Liabilities and shareholders' equity (deficit)
Current liabilities:
Current maturities of long-term debt and notes payable      $  28,988      $     161      $   4,306      $    --        $   33,455
Accounts payable                                                1,736         66,669         49,014           --           117,419
Accrued expenses and other current liabilities                  4,770         76,033         97,338          3,721         181,862
Deferred revenue                                                 --           18,376         21,598           --            39,974
Due to/(from) affiliate                                       (45,943)       365,845       (316,117)        (3,785)           --
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------
Total current liabilities                                     (10,449)       527,084       (143,861)           (64)        372,710
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------

Due to/(from) affiliates - long-term                                         200,000       (200,000)          --
Convertible subordinated notes                                                                                                --
Long-term debt and notes payables, less current maturities    339,114            931          1,325           --           341,370
Deferred income taxes and other long-term liabilities            --           12,988         16,128           --            29,116
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------
Total liabilities                                             328,665        741,003       (326,408)           (64)        743,196
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------

6.5% convertible participating shares                         231,988           --             --             --           231,988
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------

Shareholders' equity (deficit):
Ordinary shares, 1.25 pence stated value                        5,138            258        565,483       (565,741)          5,138
Additional paid-in capital                                    325,880        106,644        103,297       (209,941)        325,880
Retained earnings (accumulated deficit)                      (187,642)      (353,186)       424,786        (71,600)       (187,642)
Accumulated other comprehensive (loss) income                 (90,359)          --         (269,388)       269,388         (90,359)
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------
Total shareholders' equity (deficit)                           53,017       (246,284)       824,178       (577,894)         53,017
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------
Total liabilities & shareholders' equity (deficit)          $ 613,670      $ 494,719      $ 497,770      $(577,958)     $1,028,201
==========================================================  =========      =========      =========      =========      ==========
</TABLE>


                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                                    Supplemental Consolidating Balance Sheet Information
                                                                                     March 31, 2001
                                                            --------------------------------------------------------------------
                                                                                         Subsidiary
                                                             Parent        Subsidiary        Non-                     Consolidated
                                                             Company       Guarantors     Guarantors   Eliminations      Total
                                                            ---------      ----------     ----------   ------------   ------------
<S>                                                         <C>            <C>            <C>          <C>            <C>
Assets
Current assets:
Cash and cash equivalents                                   $   5,471      $  27,723      $  35,891      $    --        $   69,085
Accounts receivable, net                                                     171,429        174,969           --           346,398
Inventories                                                                   88,287        111,236           --           199,523
Prepaid expenses, deferred income taxes and other
   current assets                                               3,350         68,284          9,391           --            81,025
Assets of discontinued operations                                --           64,928         48,477           --           113,405
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------
Total current assets                                            8,821        420,651        379,964           --           809,436

Equipment on operating leases, net                                            39,737         54,348           --           94,085
Property and equipment, net                                                   58,563          7,907           --           66,470
Intangible assets, net                                                        76,664        167,506           --          244,170
Investment in subsidiaries                                    483,410          1,014           --         (484,424)           --
Other assets                                                       78         51,658         91,478        (74,433)         68,781
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------
Total Assets                                                $ 492,309      $ 648,287      $ 701,203      $(558,857)     $1,282,942
==========================================================  =========      =========      =========      =========      ==========

Liabilities and shareholders' equity (deficit)
Current liabilities:
Current maturities of long-term debt and notes payable      $ 464,967      $  44,199      $   8,281      $    --        $  517,447
Accounts payable                                                              83,094         53,510           --           136,604
Accrued expenses and other current liabilities                  8,793         68,060        105,606           --           182,459
Deferred revenue                                                              19,810         15,159           --            34,969
Due to/(from) Affiliates                                     (339,522)       518,928       (179,406)          --              --
Liabilities of discontinued assets                               --           10,088         12,142           --            22,230
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------
Total current liabilities                                     134,238        744,179         15,292           --           893,709

Due to/(from) affiliates - long-term                                         200,000       (200,000)          --
Convertible subordinated notes                                200,000                          --             --           200,000
Long-term debt and notes payables, less current maturities                       780            951           --            1,731
Deferred income taxes and other long-term liabilities                          4,445         48,043        (23,057)        29,431
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------
Total liabilities                                             334,238        949,404       (135,714)       (23,057)      1,124,871
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------

6.5% convertible participating shares                         223,713           --             --             --           223,713
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------

Shareholders' equity (deficit):
Ordinary shares, 1.25 pence stated value                        5,130            258        565,480       (565,738)          5,130
Additional paid-in capital                                    325,399        106,644        103,297       (209,941)        325,399
Retained earnings (accumulated deficit)                      (302,619)      (408,020)       378,644         29,376        (302,619)
Accumulated other comprehensive (loss) income                 (93,552)          --         (210,503)       210,503         (93,552)
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------
Total shareholders' equity (deficit)                          (65,642)      (301,118)       836,918       (535,800)        (65,642)
----------------------------------------------------------  ---------      ---------      ---------      ---------      ----------
Total liabilities & shareholders' equity (deficit)          $ 492,309      $ 648,286      $ 701,204      $(558,857)     $1,282,942
==========================================================  =========      =========      =========      =========      ==========
</TABLE>


                                       18
<PAGE>

<TABLE>
<CAPTION>
                                                               Supplemental Consolidating Statement of Cash Flows
                                                                            For the Six Months Ended
                                                                                September 30, 2001
                                                       --------------------------------------------------------------------
                                                                                    Subsidiary
                                                        Parent        Subsidiary        Non-                     Consolidated
                                                        Company       Guarantors     Guarantors   Eliminations      Total
                                                       ---------      ----------     ----------   ------------   ------------
<S>                                                    <C>            <C>            <C>          <C>            <C>
Net cash provided by (used in) operating activities     $ 284,318      $(150,224)     $ (86,621)        $--        $  47,473

Investing activities
Capital expenditures                                         --          (16,168)        (5,664)         --          (21,832)
Proceeds from sale of property and equipment                 --               51            199          --              250
Proceeds from sale of business                               --          178,591         94,627          --          273,218
---------------------------------------------------     ---------      ---------      ---------         ---        ---------
Net cash provided by (used in) investing activities          --          162,474         89,162          --          251,636
---------------------------------------------------     ---------      ---------      ---------         ---        ---------

Financing activities
Net (payment) borrowing of debt                          (249,842)       (43,887)        (3,601)         --         (297,330)
Payment of debt issue costs                               (24,437)                                                   (24,437)
---------------------------------------------------     ---------      ---------      ---------         ---        ---------
Net cash provided by (used in) financing activities      (274,279)       (43,887)        (3,601)         --         (321,767)
---------------------------------------------------     ---------      ---------      ---------         ---        ---------
Effect of exchange rates                                      442           --            3,972          --            4,414
---------------------------------------------------     ---------      ---------      ---------         ---        ---------
Net increase (decrease) in cash                            10,481        (31,637)         2,912          --          (18,244)
Cash and cash equivalents, beginning of period              5,471         27,723         35,891          --           69,085
---------------------------------------------------     ---------      ---------      ---------         ---        ---------
Cash and cash equivalents, end of period                $  15,952      $  (3,914)     $  38,803         $--        $  50,841
===================================================     =========      =========      =========         ===        =========
</TABLE>

<TABLE>
<CAPTION>
                                                               Supplemental Consolidating Statement of Cash Flows
                                                                            For the Six Months Ended
                                                                                September 30, 2000
                                                       --------------------------------------------------------------------
                                                                                      Subsidiary
                                                        Parent        Subsidiary          Non-                      Consolidated
                                                        Company       Guarantors       Guarantors    Eliminations      Total
                                                       ---------      ----------       ----------    ------------   ------------
<S>                                                    <C>            <C>              <C>           <C>            <C>
Net cash provided by (used in) operating activities     $ 63,847      $(25,966)       $ 10,161          $--        $ 48,042

Investing activities
Capital expenditures                                        --         (18,428)        (16,264)          --         (34,692)
Proceeds from sale of property and equipment                --             114             352           --             466
Proceeds from sale of business                              --            --              --             --
---------------------------------------------------     --------      --------        --------          ---        --------
Net cash provided by (used in) investing activities         --         (18,314)        (15,912)          --         (34,226)
---------------------------------------------------     --------      --------        --------          ---        --------

Financing activities
Net (payment) borrowing of debt                          (66,383)       21,125          10,082           --         (35,176)
Payment of debt issue costs
---------------------------------------------------     --------      --------        --------          ---        --------
Net cash provided by (used in) financing activities      (66,383)       21,125          10,082           --         (35,176)
---------------------------------------------------     --------      --------        --------          ---        --------
Effect of exchange rates                                    (167)                         (928)                      (1,095)
---------------------------------------------------     --------      --------        --------          ---        --------
Net increase (decrease) in cash                           (2,703)      (23,155)          3,402           --         (22,456)
Cash and cash equivalents, beginning of period             2,759        31,572          30,530           --          64,861
---------------------------------------------------     --------      --------        --------          ---        --------
Cash and cash equivalents, end of period                $     56      $  8,417        $ 33,932          $--        $ 42,405
===================================================     ========      ========        ========          ===        ========
</TABLE>


                                       19
<PAGE>

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

         We are one of the world's largest suppliers of photocopiers and office
imaging equipment. We primarily market these products and photocopier services,
parts and supplies direct to customers in approximately 30 countries. Canon,
Heidelberg, NexPress, Ricoh and Toshiba manufacture most of the products that we
distribute. Throughout Europe, we also market private label photocopiers,
facsimile machines and related supplies directly to customers under our Infotec
trademark. In addition, we market photocopiers and related parts and supplies on
a wholesale basis to independent dealers through our international operations.

         On June 29, 2001 we completed a three part financial restructuring plan
that reduced and refinanced our indebtedness to provide us with liquidity on a
long-term basis. The three parts of the plan were:

         o        the sale of our Danka Services International ("DSI") business,
         o        an exchange offer for our 6.75% convertible subordinated notes
                  due April 1, 2002, and
         o        the refinancing of our senior bank debt.

         We sold DSI to Pitney Bowes Inc. for $290.0 million in cash, subject to
adjustment depending on the value of DSI's net assets on closing. We used the
net proceeds of DSI to repay part of our senior bank debt, to finance cash
payable under the exchange offer, to finance the costs 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 the 6.75% convertible subordinated notes
pursuant to the exchange offer for $24.0 million in cash and approximately
$112.1 million in new 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. The
facility consists of a $100.0 million revolver, a $190.0 million term loan and
$30.0 million of letters of credit commitments.

Results of Continuing Operations

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

<TABLE>
<CAPTION>
                                                             Three Months Ended           Six Months Rnded
                                                                September 30,               September 30,
                                                           ---------------------        --------------------
                                                            2001            2000         2001           2000
                                                           -----           -----        -----          -----
<S>                                                         <C>             <C>          <C>            <C>
Revenue:
   Retail equipment sales                                   34.6 %          36.1 %       33.9 %         34.5 %
   Retail service, supplies and rentals                     60.9            59.3         61.3           60.4
   Wholesale                                                 4.5             4.6          4.8            5.1
-----------------------------------------------------      -----           -----        -----          -----
Total Revenue                                              100.0           100.0        100.0          100.0
-----------------------------------------------------      -----           -----        -----          -----
Cost of Revenue                                             66.0            73.8         65.6           68.5
Gross Profit                                                34.0            26.2         34.4           31.5
Selling, general and administrative expenses                33.4            34.3         33.6           34.1
Amortization of intangible assets                            0.7             4.9          0.7            2.8
Restructuring charges (credits)                             (0.5)              -         (0.3)          (0.9)
Other expense                                               (0.7)            0.8            -            0.7
-----------------------------------------------------      -----           -----        -----          -----
Operating earnings (loss) from continuing operations         1.1           (13.8)         0.4           (5.2)
Interest expense                                            (2.9)           (4.4)        (3.4)          (4.9)
Interest income                                              0.1             0.1          0.1            0.2
-----------------------------------------------------      -----           -----        -----          -----
Loss from continuing operations before income taxes         (1.7)          (18.1)        (2.9)          (9.9)
Provision (benefit) for income taxes                        (1.2)           (3.8)        (1.0)          (2.2)
-----------------------------------------------------      -----           -----        -----          -----
Loss from continuing operations before extra-ordinary
   items                                                    (0.5)          (14.3)        (1.9)          (7.7)
=====================================================      =====           =====        =====          =====
</TABLE>


                                       20
<PAGE>

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

<TABLE>
<CAPTION>
                                                             Three Months Ended           Six Months Rnded
                                                                September 30,               September 30,
                                                           ---------------------        --------------------
                                                            2001            2000         2001           2000
                                                           -----           -----        -----          -----
<S>                                                         <C>             <C>          <C>            <C>
Rental equipment sales                                      23.4%           11.0%        23.5%          21.1%
Retail service, supplies and rentals                        41.0            36.2         41.7           38.7
Wholesale                                                   19.5            17.0         18.7           16.5
</TABLE>



Three Months Ended September 30, 2001 compared to the Three Months Ended
September 30, 2000:

         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
convertible subordinated notes is presented as an extraordinary item.

Revenue

         Total revenue for the second quarter of fiscal 2002 declined by
approximately 15.8% to $381.3 million from $452.9 million in the prior year
comparable quarter. Our total revenue in the current year second quarter was
negatively impacted by $4.6 million of foreign currency movements. Including a
negative impact of approximately $1.7 million due to foreign currency movements,
retail equipment sales declined by $31.5 million, which was primarily due to
negative market trends, a weakening of the global economic conditions and a
decline in the number of U.S. sales representatives, although the decline in
sales representatives was partially offset by a 29% increase in U.S. sales
productivity. The reduction in sales representatives is part of our strategic
plan to improve sales productivity while reducing operating costs. Retail
service, supplies and rentals revenue declined by $36.4 million primarily due to
the continuing transition from analog to digital equipment and the negative
impact of foreign currency ($2.7 million). Wholesale revenue for the second
quarter of fiscal 2002 declined by $3.7 million primarily due to our decision to
move away from lower margin transactions and due to a negative impact of foreign
currency of $0.2 million.

Gross Profit

         Our total gross profit margin increased to 34.0% in the current year's
second quarter from 26.2% in the prior year's second quarter. The increase in
the Company's profit margin for the current year as compared to the prior year
second quarter is primarily due to the $32.9 million write-down of analog
inventory and rental equipment in the prior year's second quarter. Absent this
adjustment, the Company's gross profit margin for the prior year second quarter
would have been 33.5%.

         Retail equipment margins increased to 23.4% in the quarter ended
September 30, 2001 from 11.0% in the comparable quarter of last year, primarily
due to the $22.4 million inventory write-down in the prior year second quarter.
Retail service, supplies and rental margins increased to 41.0% in the quarter
ended September 30, 2001 from 36.2% for the prior year's second quarter
primarily due to a $10.5 million write-down of rental equipment in the prior
year's second quarter and increased productivity in the current year's second
quarter. Wholesale margins increased to 19.5% in the quarter ended September 30,
2001 from 17.0% in the comparable quarter of the prior year, primarily due to
higher margin transactions in the current year's second quarter.

Selling, General and Administrative Expenses

         Selling, general and administrative expenses ("SG&A") for the quarter
ended September 30, 2001 declined by $27.7 million to $127.4 million from $155.1
million in the comparable quarter in the prior year, while as a percentage of
total revenue, SG&A expenses decreased to 33.4% from 34.3%. The reduction was
primarily attributable to lower selling expenses resulting from reduced sales
and a decrease in our work force which was partially offset by a $2.0 million
charge in the current year's second quarter for the exit of a non-strategic
facility.


                                       21
<PAGE>

Restructuring Charges

         We recorded a pre-tax restructuring charge of $7.4 million in the
second quarter of fiscal year 2002 which includes a $1.3 million charge for
severance and a $6.1 million charge for the exit of facilities. Additionally, we
reversed $9.4 million of prior year restructuring charges.

         Beginning at the end of the fourth quarter of fiscal year 2001, we
proceeded with a series of changes to our senior management team.  The hiring of
a new Chief Executive Officer in March of 2001 was the first in a series of
changes.  Upon completion of the financial restructuring plan at the end of the
first quarter of fiscal year 2002, the  Company made additional significant
changes to its senior management team including the hiring of a new Chief
Operating Officer of International, a new Chief Operating Officer of our
Canadian, Latin American and Asian Pacific region and a new Chief Operating
Officer of our U.S. Office Imaging business unit.  The Company's 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, the decision was reached to modify the 2001 restructuring plan in
the current quarter.  Additionally, higher than anticipated employee attrition
reduced cash outlay requirements for severance. As a result of these actions,
the Company reversed $9.4 million of severance and facility restructuring
reserves in the second quarter of fiscal year 2002.

Amortization of Intangible Assets

         Amortization of our intangible assets decreased to $2.7 million for the
quarter ended September 30, 2001 from $22.1 million for the prior year
comparable period. This difference was primarily due to a $18.8 million
write-off of goodwill for our Australian subsidiary in the prior year second
quarter and a $6.9 million write-off of goodwill related to one of our United
States subsidiaries in the fourth quarter of fiscal 2001.

Other Expense

         Other expense for the quarter ended September 30, 2001 included foreign
currency gains of $2.4 million. Other expense for the comparable prior period
included foreign currency losses of $4.6 million.

Earnings from Continuing Operations

         For the three months ended September 30, 2001, operating earnings from
continuing operations were $4.2 million compared to a loss of $62.8 million in
the prior year comparable period. Excluding the $32.9 million write-down for
analog inventory and rental equipment and the $18.8 million write-off of
goodwill for our Australian subsidiary, the loss from operations in the prior
year second quarter would have been $11.1 million, due to slightly lower gross
profit margins and higher operating expenses in the prior year second quarter.

Interest Expense and Interest Income

         Interest expense decreased by $8.6 million to $11.1 million for the
quarter ended September 30, 2001 from $19.7 million in the comparable quarter of
the prior fiscal year. The decrease was due to significantly lower outstanding
debt and a reduction in bank waiver fees.

Income Taxes

         We recorded an income tax benefit of $4.5 million for the second
quarter of fiscal year 2002 compared to a $17.3 million tax benefit in the
second quarter of fiscal year 2001. The combined effective income tax rate was
70.6% for the second quarter of fiscal year 2002 as compared to 21.1% for the
second quarter of fiscal year 2001. The increase in the tax rate is primarily
due to a change in our effective tax rate for the year from 22.6% to 33.9%. The
increased tax rate arose because the Company recorded an adjustment for income
taxes in the current quarter due to an estimated loss in the United Kingdom.

Discontinued Operations, net of tax

         For the three months ended September 30, 2001, we incurred an
additional $1.2 million of net purchase price adjustments and expenses related
to the sale of DSI.

Net Earnings (Loss) from Continuing Operations, before Extraordinary Items

         For the three months ended September 30, 2001, we incurred a net loss
from continuing operations of $1.9 million compared to a net loss from
continuing operations of $64.6 million in the prior year comparable quarter for
the above mentioned reasons. We incurred a net loss from continuing operations
of $0.10 per ADS in the current year second quarter compared to a net loss from
continuing operations of $1.15 per ADS in the prior year comparable quarter.

Six Months Ended September 30, 2001 compared to the Six Months Ended September
30, 2000:

         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
convertible subordinated notes is presented as an extraordinary item.


                                       22
<PAGE>

Revenue

         Total revenue for the six months ended September 30, 2001 declined by
approximately 15.2% to $783.0 million from $923.7 million in the comparable
prior year period. Our total revenue in the current year was negatively impacted
by $16.5 million of foreign currency movements. Including a negative impact of
approximately $5.8 million due to foreign currency movements, retail equipment
sales declined by $53.7 million, which was primarily due to negative market
trends, a weakening of the global economic conditions and a decline in the
number of U.S. sales representatives, although the decline in sales
representatives was partially offset by a 26.6% increase in U.S. sales
productivity. The reduction in sales representatives is part of our strategic
plan to improve sales productivity while reducing operating costs. Retail
service, supplies and rentals revenue declined by $78.1 million primarily due to
the continuing transition from analog to digital equipment and to the negative
impact of foreign currency movements ($9.2 million). Wholesale revenue for the
six months ended September 30, 2001 declined by $8.9 million primarily due to a
movement away from lower margin transactions and the negative impact of foreign
currency of $1.5 million.

Gross Profit

         Our total gross profit margin increased to 34.4% for the six months
ended September 30, 2001 from 31.5% for the comparable prior year period. The
increase in our profit margin in the current year as compared to the prior year
was primarily due to the non-recurrence of a $32.9 million write-down of analog
inventory and rental equipment in the prior year. Absent this adjustment, our
gross profit margin for the prior year would have been 35.0%.

         Retail equipment margins decreased to 23.5% during the six months ended
September 30, 2001 from 24.7% in the comparable prior year period after
adjustment for the inventory write-down, due to competitive market conditions
within the industry in the current year. Retail service, supplies and rental
margins increased to 41.7% for the six months ended September 30, 2001 from
40.1% for the comparable prior year period adjusted for the $2.5 million of
severance costs associated with the reduction of U.S. field service employees
and a $10.5 million write-down of rental equipment. Wholesale margins increased
to 18.7% for the six months ended September 30, 2001 from 16.5% 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") declined by $52.2
million to $263.1 million for the six months ended September 30, 2001 from
$315.3 million for the comparable prior year period, while as a percentage of
total revenue, SG&A expenses decreased to 33.6% from 34.1%. Excluding a charge
of $8.0 million related to the exit of certain facilities in the current year,
SG&A declined $60.2 million to 32.6% of total revenue. Lower expense amounts
were primarily attributable to a reduction in the number of employees.

Amortization of Intangible Assets

         Amortization of our intangible assets decreased by $20.2 million to
$5.4 million for the six months ended September 30, 2001 from $25.6 million for
the comparable prior year period. This difference was primarily due to an $18.8
million write-off of goodwill for our Australian subsidiary in the prior year
second quarter and a $6.9 million write-off of goodwill related to one of our
United States subsidiaries in the fourth quarter of fiscal 2001.

Other Expense

         Other expense for the six months ended September 30, 2001 included a
foreign currency gain of $1.2 million and a $1.1 million provision relating to
the sale of our Ameritrend business. Other expense for the comparable prior
period included foreign currency losses of $5.7 million.

Earnings from Continuing Operations

         For the six months ended September 30, 2001, operating earnings from
continuing operations increased by $50.6 million to $3.0 million, compared to a
loss of $47.6 million in the comparable prior year period. Earnings for the six
months ended September 30, 2001 include an $8.0 million charge for the exit of
facilities and a $2 million net credit for the reversal of restructuring
reserves. Earnings for the comparable prior year six month period includes a
$32.9 million write-down for analog inventory and rental equipment and an $18.8
million write-off of goodwill.


                                      23
<PAGE>

Interest Expense and Interest Income

         Interest expense decreased by $18.6 million to $26.9 million for the
six months ended September 30, 2001 from $45.5 million in the comparable prior
year period. The decrease was due to lower outstanding debt and reduced bank
waiver fees. Interest income decreased by $0.4 million to the comparable prior
year period due to utilizing our cash to reduce our outstanding credit
facilities.

Income Taxes

         We recorded an income tax benefit of $7.7 million for the six months
ended September 30, 2001 compared to a $20.8 million tax benefit for the
comparable prior year period. The combined effective income tax rate was 33.9%
for fiscal year 2002 as compared to 22.6% for the comparable prior year period.
The increase in the tax rate is primarily due to us incurring a loss in the
United Kingdom.

Net Earnings (Loss) from Continuing Operations, before Extraordinary Items

         For the six months ended September 30, 2001, we incurred a net loss
from continuing operations of $15.0 million compared to a net loss from
continuing operations of $70.8 million in the comparable prior year period for
the above mentioned reasons. We incurred a net loss from continuing operations
of $.38 per ADS in the current year fiscal year compared to, a net loss from
continuing operations of $1.33 per ADS in the comparable prior year period.

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 approximately 30 countries worldwide. Fluctuations in
exchange rates between the United States dollar and the currencies in each of
the countries in which we operate affect:

         o        the results of our international operations reported in United
                  States dollars; and
         o        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 43.7% of
our revenue for the three months ended September 30, 2001 was generated outside
the United States. For the three months ended September 30, 2001, approximately
26.9% of our revenue was generated in Euro countries, 7.4% in the United
Kingdom, and 9.4% in other foreign locations. Approximately 44.1% of our revenue
for the six months ended September 30, 2001 was generated outside the United
States. For the six months ended September 30, 2001, approximately 27.3% of our
revenue was generated in Euro countries, 7.2% in the United Kingdom, and 9.6% in
other foreign locations.

         During the six months ended September 30, 2001, both the Euro currency
and the United Kingdom pound weakened against the dollar by approximately 5.0%
and 3.9%, respectively. This change negatively impacted revenue by approximately
$16.5 million.

         Our results of operations and financial condition have been, and may
continue to 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.

Euro

         On January 1, 1999, eleven of the fifteen member countries of the
European Union established fixed conversion rates between existing currencies
and one common currency, referred to as the Euro. Our operating subsidiaries
affected by the Euro conversion implemented changes to their information
technology systems, accounting records, financial instruments, and customer
contracts where necessary to allow for dual currency functionality. Dual
currency functionality allows the business to invoice and to be invoiced in
either local currencies or the Euro. On an ongoing basis we are also evaluating
the impact of the


                                       24
<PAGE>

Euro on our pricing and distribution. It is likely that the Euro will lead to
more uniform pricing in all of our European markets. Our Euro conversion did
not, nor is it expected to have in the future, any material impact on our
financial condition, results of operations or our ability to continue to operate
in markets affected by the Euro. All costs related to the conversion to the
Euro, which are not significant, are expensed as incurred.

Liquidity and Capital Resources

         We have a $320.0 million credit facility with a consortium of
international bank lenders through March 31, 2004. The facility consists of a
$100.0 million revolver, a $190.0 million term loan and $30.0 million of letters
of credit commitments. The credit facility requires that we comply with minimum
levels of adjusted consolidated net worth, cumulative consolidated EBITDA, a
ratio of consolidated EBITDA to interest expense, and maximum levels of capital
expenditures. The Company was in compliance with these covenants as of September
30, 2001.

         As of September 30, 2001, we owed approximately $240.0 million under
the credit facility. The available unused commitments as of September 30, 2001
are $50.0 million under the revolving credit facility and $2.6 million under the
letter of credit facility. The credit facility limits us from incurring other
significant indebtedness beyond certain agreed upon limits. We were incurring
interest on our indebtedness under the credit facility during the three months
ended September 30, 2001 at a weighted average rate of approximately 7.63% per
annum. Effective interest rates under the new credit facility are LIBOR, plus 5
percent. The interest rate will increase by 0.5% on December 29, 2001, June 29,
2002 and quarterly thereafter. On June 30, 2002, we are required to pay our
banks a fee equal to 1.5% of the total commitment under the credit facility and
on June 30, 2003 a fee equal to 4.0% of the current commitment. The term
component of the facility requires, principal installments of $5.0 million in
fiscal year 2002, $16.0 million in fiscal year 2003, and $24.0 million in fiscal
year 2004, with payment due in full on March 31, 2004.

         Our indebtedness under the credit facility is secured by substantially
all of our assets in the United States, Canada, the U.K., the Netherlands and
Germany. The credit facility contains negative and affirmative covenants which
restrict our ability to incur additional indebtedness and create liens, 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. We are not permitted to make any acquisitions of businesses,
except with the approval of our bank lenders.

         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 as consideration pursuant to an
exchange offer for 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 our 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, which limit the payment of dividends, other than payment-in-kind
dividends on our participating shares.

         In March 1995, we issued $200 million in principal of 6.75% convertible
subordinated notes. Following completion of the exchange offer referred to
above, approximately $16 million of the 6.75% notes remain outstanding. The
outstanding notes are due for repayment in full on April 1, 2002.

         On December 17, 1999, we issued 218,000 new 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 24.2%
of the total voting power of our capital stock. As of September 30, 2001, we had
issued an additional 24,693 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 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:

         o        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;


                                       25
<PAGE>

                  and

         o        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 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.

         On October 9, 2001, we amended our agreement with General Electric
Capital Corporation ("GECC") under which GECC agrees to provide financing to our
customers to purchase equipment from us. The amendment extends the agreement for
a three year period to March 31, 2006. It also amends the minimum levels of
customer leases that we are required to provide to GECC in our fiscal years 2002
and 2003. The agreement also specifies new minimum levels of customer lease
commitments for fiscal years 2004 through 2006. No fee was paid to GECC for this
amendment.

         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 amendment to the agreement modified the net worth
covenant so that it is the same as the minimum net worth covenant contained in
our senior credit facility effective from July 1, 2001. In addition, the
amendment changed the net worth covenant in the GECC agreement for the period
from March 29, 2001 through June 30, 2001. Without that amendment, we would have
been in breach of the covenant.

         The Internal Revenue Service has examined our federal income tax
returns for our fiscal years ended March 31, 1996 and 1995 and has audited our
federal income tax returns for our fiscal years 1998 and 1997. We have now
resolved all outstanding issues with the Internal Revenue Service arising as a
result of those examinations and audits. We have agreed to certain adjustments
with the Internal Revenue Service to the tax returns, primarily relating to the
timing of deductions associated with leased equipment financing and costs
associated with our acquisition of Kodak's office imaging division. The impact
of these adjustments on our liquidity is negligible, due to the availability of
losses that we can carry back to the years affected by the adjustments. We have
previously established reserves in respect of the adjustments.

         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 $47.4 million,
and $48.0 million for the six months ended September 30 of fiscal year 2002 and
2001, respectively. Net cash flow provided by (used in) investing activities was
$251.6 million and $(34.2) million for the first six months of fiscal year 2002
and 2001, respectively. The increase in fiscal year 2001 cash flow from
investing activities was primarily due to the $273.2 million in net cash
proceeds received from the sale of DSI and a $12.9 million reduction in capital
expenditures. Net cash flow provided by (used in) financing activities was
$(321.8) million and $(35.2) million for fiscal year 2002 and 2001,
respectively. The decrease in fiscal year 2002 cash flow from financing
activities was due to repayment of borrowings primarily from the proceeds from
the sale of DSI.


                                       26
<PAGE>

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, 2001 we had an outstanding balance of $240.0 million under our new
credit facility. We incurred interest on our previous credit facility at a
weighted average rate of 7.63% per annum during the three months ended September
30, 2001.

         Based on the outstanding balance under our credit agreement, 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 $2.4 million on an annual basis.

Special Note Regarding Forward Looking Statements

         Certain statements contained in this Form 10-Q, or otherwise made by
officers of the Company, 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 the Company that is based on the beliefs of management as well as
assumptions, made by, and information currently available to, management. The
words "goal", "anticipate", "expect", "believe" and similar expressions as they
relate to the Company or the Company's 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,
the Company claims the protection of the safe harbor for forward-looking
statements provided for in the Private Securities Litigation Act of 1995. Such
statements reflect the current views of the Company 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 (i) any material adverse change in financial
markets or the Company, (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 competitors, (iv) any
inability by the Company to procure, or any inability by the Company 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 the Company's key upper management personnel, (vi) the
ultimate outcome and impact of pending lawsuits, (vii) fluctuations in foreign
currencies (viii) any change in economic conditions in domestic or international
markets where we operate or have material investments which may affect demand
for our services and (ix) other risks including those risks identified in any of
the Company's filings with the Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect the Company's analysis only as of the date they are made. The Company
undertakes no obligation and does not intend to update these forward-looking
statements to reflect events or circumstances that arise after the date such
statements are made. Furthermore, as a matter of policy, the Company does not
generally make any specific projections as to future earnings nor does it
endorse any projections regarding future performance, which may be made by
others outside the 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

         Our articles of association, which define the rights of holders of our
ordinary shares, were modified by resolutions of our shareholders at our annual
general meeting on October 9, 2001. The amendments did not materially modify the
rights of holders of our ordinary shares.

Item 3.  Defaults Upon Senior Securities

         Not applicable.


                                       27
<PAGE>

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

         An extraordinary general meeting of the shareholders of Danka Business
Systems PLC was held on June 29, 2001 to approve the sale of Danka Services
International to Pitney Bowes Inc. for $290.0 million in cash. The voting on the
resolution was as follows:

                   FOR                                        101,520,787
                                                            -------------
                   AGAINST                                         17,430
                                                            -------------
                   ABSTAIN                                              0
                                                            -------------

         The annual general meeting of the shareholders of Danka Business
Systems PLC was held on October 9, 2001. At the meeting, the following actions
were taken by the shareholders:

         1.       P. Lang Lowrey III was re-elected as Director of the Company.
                  The voting on the resolution was as follows:

                  FOR                                         291,291,412
                                                            -------------
                  AGAINST                                          36,320
                                                            -------------
                  ABSTAIN                                               0
                                                            -------------

         2.       Michael B. Gifford was re-elected as Director of the Company.
                  The voting on the resolution was as follows:

                  FOR                                         290,939,621
                                                            -------------
                  AGAINST                                         388,111
                                                            -------------
                  ABSTAIN                                               0
                                                            -------------

         3.       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                                         291,208,171
                                                            -------------
                  AGAINST                                         119,561
                                                            -------------
                  ABSTAIN                                               0
                                                            -------------


         4.       The Board of Directors was granted the authority to allot
                  securities up to an aggregate nominal amount of
                  (pound)843,194. The voting on the resolution was as follows:

                  FOR                                         289,563,564
                                                            -------------
                  AGAINST                                       1,764,168
                                                            -------------
                  ABSTAIN                                               0
                                                            -------------


         5.       The Board of Directors was granted the authority to allot
                  equity securities up to an aggregate nominal amount of
                  (pound)843,194 without providing certain pre-emptive rights.
                  The voting on the resolution was as follows:

                  FOR                                         289,553,790
                                                            -------------
                  AGAINST                                       1,773,942
                                                            -------------
                  ABSTAIN                                               0
                                                            -------------

         6.       Our articles of association were amended to be updated in
                  various regards. The voting on the resolution was as follows:

                  FOR                                         278,360,265
                                                            -------------
                  AGAINST                                      12,967,467
                                                            -------------
                  ABSTAIN                                               0
                                                            -------------


                                       28
<PAGE>

         7.       Our articles of association were amended to increase the limit
                  on non-executive directors' fees from (pound)150,000
                  to (pound)500,000. The voting on the resolution was as
                  follows:

                  FOR                                         289,360,265
                                                            -------------
                  AGAINST                                       2,190,230
                                                            -------------
                  ABSTAIN                                               0
                                                            -------------

         8.       The Danka 1999 Share Option Plan was amneded to allow for the
                  issuance under the Plan of an additional 5,000,000 American
                  depositary shares. The voting on the resolution was as
                  follows:

                  FOR                                         277,157,342
                                                            -------------
                  AGAINST                                      14,169,990
                                                            -------------
                  ABSTAIN                                               0
                                                            -------------

         9.       The Danka 2001 Long-Term Incentive Plan was approved. The
                  voting on the resolution was as follows:

                  FOR                                         277,109,029
                                                            -------------
                  AGAINST                                      14,218,303
                                                            -------------
                  ABSTAIN                                               0
                                                            -------------



Item 5.  Other Information

         The annual general meeting of Danka Business Systems PLC was held on
October 9, 2001.


                                       29
<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits.

         Exhibit Number       Description of Document

              3.2             Articles of Association of the Company
              4.2             Articles of Association of the Company, including
                              sections relating to Shares, Variation of Rights
                              and Votes of Members (Exhibit 3.2 above).
             10.36            Second Amendment to Amended and Restated Global
                              Operating Agreement dated March 31, 2000 between
                              Danka and General Electric Capital Corporation.

         (b)      Reports on Form 8-K:


                  Form 8-K filed July 16, 2001: Items 2, 5 and 7 - reported the
         sale of ("DSI") to Pitney Bowes Inc. for $290 million in cash, the
         completion of our exchange offer for our outstanding 6.75% convertible
         subordinated notes due April 1, 2002 and the entering into an agreement
         on a senior credit facility with our bank lenders to provide us with
         financing through March 31, 2004.


                                       30
<PAGE>

                                    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, 2001                      /s/ F. Mark Wolfinger
        -----------------              -----------------------------------------
                                                  F. Mark Wolfinger
                                             Executive Vice-President and
                                                Chief Financial Officer
                                         (Chief Financial Officer and Principal
                                                   Accounting Officer)


                                       31