BALDWIN TECHNOLOGY CO INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 30, 2002

COMMISSION FILE NUMBER 1-9334

BALDWIN TECHNOLOGY COMPANY, INC.

(Exact name of registrant as specified in its charter)

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DELAWARE 13-3258160
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

12 COMMERCE DRIVE 06484
SHELTON, CONNECTICUT (Zip Code)
(Address of principal executive
offices)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
203-402-1000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE

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 [ ] No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Aggregate market value of the voting stock held by non-affiliates of the
registrant as of August 31, 2002 was $10,603,000.

Number of shares of Common Stock outstanding at August 31, 2002:

Class A Common Stock........................................ 12,828,647
Class B Common Stock........................................ 2,185,883
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Total.................................................. 15,014,530

DOCUMENTS INCORPORATED BY REFERENCE

Items 10, 11, 12 and 13 are incorporated by reference into Part III of this
Form 10-K from the Baldwin Technology Company, Inc. Proxy Statement for the 2002
Annual Meeting of Stockholders. (A definitive proxy statement will be filed with
the Securities and Exchange Commission within 120 days after the close of the
fiscal year covered by this Form 10-K.)
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TABLE OF CONTENTS

CAUTIONARY STATEMENT -- This Annual Form 10-K may contain statements which
constitute "forward-looking" information as that term is defined in the Private
Securities Litigation Reform Act of 1995 or by the Securities and Exchange
Commission ("SEC") in its rules, regulations and releases. Baldwin Technology
Company, Inc. (the "Company") cautions investors that any such forward-looking
statements made by the Company are not guarantees of future performance and that
actual results may differ materially from those in the forward-looking
statements. Some of the factors that could cause actual results to differ
materially from estimates contained in the Company's forward-looking statements
are set forth in Exhibit 99 to this Annual Report on Form 10-K for the year
ended June 30, 2002.

PART I

ITEM 1. BUSINESS

Baldwin Technology Company, Inc. ("Baldwin" or the "Company") is the
leading global manufacturer of controls and accessories equipment for the
printing industry. The Company offers its customers a broad range of products
designed to enhance the quality of printed products and increase the
productivity and cost-efficiency of the print manufacturing process while
addressing the environmental concerns and safety issues involved in the printing
process. Baldwin's products include cleaning systems, fluid management and ink
control systems, web press protection systems, drying systems, and newspaper
inserter equipment.

The Company sells its products both to printing press manufacturers who
incorporate the Company's products into their own printing systems for sale to
printers and to printers to upgrade the quality and capability of existing and
new printing presses. The Company has product development and manufacturing
facilities, as well as sales and service operations, in strategic markets
worldwide.

During the first quarter of the fiscal year ending June 30, 2003, the
Company committed to a plan to dispose of substantially all of the assets of its
Baldwin Kansa subsidiary ("BKA"); the transaction closed on October 10, 2002.
The consideration received for the transaction, after certain post-closing
adjustments, was approximately $3,769,000, which approximated the net book value
of the assets sold. During the fourth quarter of the fiscal year ended June 30,
2002, the Company recorded an impairment charge of $5,434,000 related to the
goodwill associated with this business as the recorded value of this goodwill
exceeded the assessment of its fair value made by the Company. For a further
discussion, see Note 18 to the Consolidated Financial Statements.

On November 16, 2001, the Company sold substantially all of the assets of
the Print-On-Demand ("POD") business. The revenues and corresponding expenses
attributable to the POD business are included in these consolidated financial
statements only for the periods owned by the Company. As a result of this sale,
the Company recorded an impairment charge of $687,000 during the fiscal year
ended June 30, 2001 to write-off goodwill associated with the POD business.
During the fiscal year ended June 30, 2002, the Company recorded a loss on the
sale of the POD business of approximately $8,000.

On September 26, 2001, the Company sold substantially all of the assets of
the Roll Handling Group ("RHG"). The revenues and corresponding expenses
attributable to the RHG are included in these consolidated financial statements
only for the periods owned by the Company. As a result of the sale, the Company
recorded an impairment charge during the fiscal year ended June 30, 2001 of
approximately $14,831,000 as a result of the write-off of assets, primarily
goodwill associated with the RHG. During the fiscal year ended June 30, 2002,
the Company recorded a loss on the sale of the RHG of approximately $250,000.

On September 27, 2000, the Company sold substantially all of the assets of
its Baldwin Stobb Division ("BSD"). The revenues and corresponding expenses
attributable to BSD are included in these consolidated financial statements only
for the periods owned by the Company.

LIQUIDITY

The Company has experienced operating losses, negative cash flows and debt
covenant violations over the past two fiscal years. As more fully discussed in
this Form 10-K, the Company has embarked on restructuring plans and undertaken
other actions aimed at improving the Company's competitiveness, operating
results and cash flow. These actions have included the sale of certain
businesses, as noted above, the consolidation of other operations and headcount
reductions related to the consolidations and weak market conditions. As a result
of these actions, combined with the renegotiation of certain of the Company's
debt obligations, management believes that the Company's cash flows from
operations, along with available bank lines of credit and alternative sources of
borrowings are sufficient to finance its working capital and other capital
requirements for the near and long-term future. Management further believes that
additional actions can be taken to reduce operating expenses or that assets can
be sold to meet liquidity needs.

1

INDUSTRY OVERVIEW

Baldwin operates in a highly fragmented market. The Company defines its
business as that of providing controls and accessories equipment for the
printing industry. The Company believes that it produces the most complete line
of controls and accessories equipment for the printing industry.

The Company's products are used by printers engaged in all printing
processes including lithography, flexography and digital printing. The largest
share of its business is in offset (lithographic) printing. Offset printing is
the largest segment of the domestic printing market and is used primarily for
printing books, magazines, business forms, catalogs, greeting cards, packaging
and newspapers. The Company's products are designed to improve the printing
process in terms of both the quality of the finished product as well as its cost
efficiency.

Offset printing represents a significant segment of the U.S. commercial
printing industry, and has become the dominant technology in the international
printing market. The Company believes that the future growth of its
international markets will be attributable in large part to the increased use of
offset printing. The Company has established operations in strategic geographic
locations to take advantage of growth opportunities in these markets. Baldwin's
worldwide operations enable it to closely monitor new product developments in
different printing markets and to introduce new products, or adapt existing
ones, to meet the printing equipment requirements of specific local markets
throughout the world.

PRINCIPAL PRODUCTS

The Company manufactures and sells many different products to printers and
printing press manufacturers. The Company's product development efforts are
focused on the needs of the printer and the printing press manufacturers.
Typically, it takes a new product several years after its introduction to make a
significant contribution to the Company's net sales. With the exception of the
Company's Baldwin Kansa product line, as a product progresses through its life
cycle, the percentage of sales to printing press manufacturers generally
increases as the product's acceptance by the industry increases and printers
begin to specify certain of the Company's products as part of their accessory
and controls equipment package selected when ordering new printing presses. The
Company's Baldwin Kansa product line was primarily marketed directly to
newspaper publishers. Historically, the Company's products have had a long life
cycle as the Company continually upgrades and refines its product lines to meet
customer needs and changes in printing press technology. The Company's products
help printers address increasingly demanding requirements for print quality and
environmental and safety issues, as well as enhance productivity and reduce
materials waste. The Company's sales have historically increased about equally
through both internal product development and acquisitions of product lines and
companies.

The Company's products range in unit price from under $100 to approximately
$50,000. Baldwin's principal products are described below:

Cleaning Systems. The Company's Cleaning Systems products clean the
cylinders of an offset press and include the Press Washer, Automatic Blanket
Cleaner, Newspaper Blanket Cleaner, Chill Roll Cleaner, Digital Plate Cleaner
and Guide Roll Cleaner, all of which reduce paper waste, volatile organic
compound ("VOC") emissions and press downtime, as well as improve productivity,
print quality and safety of operation for the press operator. In the fiscal
years ended June 30, 2002, 2001 and 2000, net sales of Cleaning Systems
represented approximately 44.1%, 33.5% and 35.2% of the Company's net sales,
respectively.

Fluid Management Systems. The Company's Fluid Management Systems control
the supply, temperature, cleanliness, chemical composition and certain other
characteristics of the fluids used in the lithographic printing process. Among
the most important of these products are the Company's Refrigerated Circulators
and Spray Dampening Systems. In the fiscal years ended June 30, 2002, 2001 and
2000, net sales of Fluid Management Systems represented approximately 23.1%,
20.1% and 18.4% of the Company's net sales, respectively.

2

Web Press Protection Systems. The Company's Web Press Protection Systems,
designed in response to the increasing number of web leads used in printing
today's colorful newspapers, provide an auto-arming electronic package offering
high quality press protection in the event of a web break.

Other Accessory and Control Products. The Company's Ink Control Systems
regulate many aspects of the ink feed system on a printing press. These products
include Ink Agitators, Ink Mixers and Ink Level Systems which reduce ink and
paper waste. Other products include Ultraviolet and Infrared Dryers and Gluing
Systems. In the fiscal years ended June 30, 2002, 2001 and 2000, net sales of
Other Accessory and Control Products represented approximately 17.9%, 12.4% and
11.7% of the Company's net sales, respectively.

Roll Handling Systems. The Company's Roll Handling Systems unwind, rewind
and splice paper and other substrates supplied to presses in rolls and also
control the tension and position of web materials. This equipment eliminates
unnecessary press stoppages and allows an efficient work flow. The RHG product
lines were sold on September 26, 2001. Net sales for the RHG are included for
the entire fiscal years ended June 30, 2001 and 2000, and only for three months
in the fiscal year ended June 30, 2002. In the fiscal years ended June 30, 2002,
2001 and 2000, net sales of Roll Handling Systems represented approximately
3.2%, 19.0% and 17.8% of the Company's net sales, respectively.

Material Handling/Stacking Systems. The Company's Material
Handling/Stacking Systems automate the handling of the printed product. The
efficient counting, stacking, packing and compressing of printed materials helps
to increase press utilization and productivity, reduce and control waste and
decrease pressroom labor requirements. This product line was sold on September
27, 2000, when the Company sold substantially all the assets of BSD. Net sales
for BSD are included for the entire fiscal year ended June 30, 2000 and only for
three months in the fiscal year ended June 30, 2001. There were no sales
included for BSD in the fiscal year ended June 30, 2002.

Newspaper Inserter Equipment and Mailing Machine Systems. The Company's
Newspaper Inserter Equipment collates and inserts sections and advertising
material into newspapers. The cost of materials in the printing industry
continues to pressure printers to reduce other costs, particularly labor costs.
When manual processes are replaced by newspaper inserters, payback periods as
low as six months have been realized by some purchasers of this equipment. The
Company's Mailing Machine Systems fold, label and prepare newspapers for
mailing. These products were produced at the Company's Baldwin Kansa facility
("BKA"). The Company decided to exit this business, and completed the sale of
substantially all the assets of BKA on October 10, 2002. For the fiscal years
ended June 30, 2002, 2001 and 2000, net sales of BKA represented approximately
3.8%, 5.6% and 4.7% of the Company's net sales, respectively.

The Company entered the short-run, print on-demand market in January of
1997 with the formation of a business named Baldwin Document Finishing Systems,
Inc. ("BDF"). This business venture marketed and distributed finishing equipment
for the digital printing market. The results of operations for this business
were not material for all periods presented. Net sales for BDF are included for
the entire fiscal years ended June 30, 2001 and 2000, and only for three months
in the fiscal year ended June 30, 2002. As part of the Company's restructuring
plan, the Company exited this market, upon the completion of the sale of
substantially all the assets of BDF, on November 16, 2001.

WORLDWIDE OPERATIONS

The Company believes that it is the only manufacturer of controls and
accessories equipment for the printing industry, which has complete product
development, manufacturing and marketing capabilities in the Americas, Europe
and Asia.

3

The following table sets forth the percentages of the Company's net sales
attributable to its geographic regions for the fiscal years ended June 30, 2002,
2001 and 2000:

In the Americas, the Company operates in North, Central and South America
through its U.S. subsidiaries and a sales office in Brazil. In Europe, the
Company operates through its subsidiaries in Germany, Sweden, France, England
and the Netherlands. In Asia, the Company operates through its subsidiaries in
India, Japan, China and Australia. All of the Company's subsidiaries are wholly
owned except for two subsidiaries, one in which the Company holds a 90%
interest, and another in which the Company holds an 80% interest. The sale of
the RHG on September 26, 2001 reduced operations in Sweden, China and the United
States, while the sale of BKA on October 10, 2002 will further reduce operations
in the United States.

For additional information relating to the Company's segments and
operations in its three geographic regions, see Note 6 to the Consolidated
Financial Statements.

RESTRUCTURING CHARGES

During March 2000, the Company initiated a restructuring plan that included
the consolidation of production into certain facilities, and a reduction in
total employment, primarily in the United States. This plan was expanded during
the fourth quarter of the fiscal year ended June 30, 2001. As a result, the
Company recorded restructuring charges in the amounts of $621,000, $2,277,000
and $5,664,000 for the fiscal years ended June 30, 2002, 2001 and 2000,
respectively. The $621,000 relates primarily to additional exit costs, which
were expensed as incurred and is net of a credit adjustment of $541,000 recorded
during the fourth quarter of the fiscal year ended June 30, 2002, relating to
severance benefits as those costs are not expected to be paid under this
restructuring plan. The initial restructuring charge of $5,664,000 included
$509,000 related to impairments of property, equipment and certain intangible
assets. The restructuring plan is expected to reduce the Company's worldwide
cost base and strengthen its competitive position as a leading global supplier
of controls and accessories equipment to the printing and publishing industries.
Prior to the restructuring, the Company was managed in a decentralized manner
through geographically dispersed, autonomous business units. Given that many of
the Company's significant customers have been reorganizing on a global basis,
management decided to restructure the Company along functional lines on a global
basis. Rather than have sales, product development and production activities at
each decentralized business unit, the restructuring plan included the
centralization of these activities. Product lines that were previously being
produced at multiple facilities have been consolidated with similar product
lines at existing facilities. The former corporate headquarters was vacated and
relocated to the Shelton, Connecticut facility to take advantage of the space
created by the downsizing at that facility. Severance costs will be paid through
December 2002, the majority of which are expected to be paid during the first
quarter of the fiscal year ending June 30, 2003. Facility lease termination
costs are expected to be paid through April 2006.

The Company expects to incur approximately $258,000 in additional unaccrued
restructuring costs related to the above plan during the fiscal year ending June
30, 2003, which will be expensed as incurred. The estimated total cash cost of
the restructuring program is expected to be approximately $8,311,000, with
approximately $1,422,000 expected to be spent during the fiscal year ending June
30, 2003 and approximately $1,071,000 (primarily facility lease costs) expected
to be spent over the balance of the lease terms of approximately four years. The
restructuring plan was expected to save the Company approximately $8,843,000
annually following full implementation; however, approximately $1,876,000 of
this savings was related to the divested RHG, which will not be realized under
this restructuring plan.

4

In August 2002, the Company announced additional restructuring activities
in response to weak market conditions, which will reduce total worldwide
employment by approximately 90. As a result, the Company recorded an additional
restructuring charge of approximately $3,100,000 during the first quarter of the
fiscal year ending June 30, 2003. These reductions are expected to reduce
operating costs by approximately $4,800,000 annually after this restructuring
plan is fully implemented, which is expected to occur by the end of March 2003.
The Company expects that the severance costs will be paid through June 2003 and
approximately $200,000 in lease termination costs will be paid through December
2004.

ACQUISITION STRATEGY

The Company is not currently seeking acquisition targets as the Company is
focusing on its core business and implementing the cost reductions associated
with its restructuring plans. An element of the Company's growth strategy is to
eventually make strategic acquisitions of companies and product lines in related
business areas. In such case, the Company's acquisition strategy would involve:
(i) acquiring entities that will strengthen the Company's position in the
accessories and controls segment and whose products can be sold through the
Company's existing distribution network; (ii) entering new end-user market
segments and extending existing markets; and (iii) acquiring companies which
contribute new products to the Company and which can benefit from the Company's
manufacturing and marketing expertise and financial support. Subsequent to an
acquisition, the Company's strategy would be to integrate the acquired companies
processes and controls with those currently existing in the Company's structure
with a view towards enhancing sales, productivity and operating results.

MARKETING, SALES AND SUPPORT

Marketing and Sales. While the Company markets its products in most
countries throughout the world, the product mix and distribution channels vary
from country to country. The Company has approximately 109 employees devoted to
marketing and sales activities in its three principal markets and more than 200
dealers, distributors and representatives worldwide. The Company markets its
products throughout the world through these direct sales representatives,
distributors and dealer networks. The Company markets its products to printing
press manufacturers ("OEMs") and to newspaper and commercial printers. For the
fiscal year ended June 30, 2002, approximately 48% of the Company's net sales
were to OEMs and approximately 52% were directly to printers.

Support. The Company is committed to after-sales service and support of
its products throughout the world. Baldwin employs approximately 104 service
technicians, who are complemented by product engineers, to provide field service
for the Company's products on a global basis.

Backlog. The Company's backlog was $48,887,000 as of June 30, 2002,
$60,789,000 as of June 30, 2001, and $65,893,000 as of June 30, 2000. Included
in the June 30, 2002, 2001 and 2000 backlogs was $179,000, $200,000 and
$808,000, respectively, relating to the BKA business, the assets of which were
sold on October 10, 2002. Included in the June 30, 2001 and 2000 backlogs was
$10,513,000 and $11,614,000, respectively, of backlog related to the Company's
former RHG, the assets of which were sold in September 2001. Included in the
June 30, 2000 backlog was $5,445,000 of backlog relating to the Company's former
BSD, the assets of which were sold in September 2000. Backlog represents
unfilled product orders, which Baldwin has received from its customers under
valid contracts or purchase orders.

Customers. For the fiscal year ended June 30, 2002, one customer accounted
for more than 10% of the Company's net sales. Koenig and Bauer
Aktiengesellschaft ("KBA") accounted for approximately 12% of the Company's net
sales. The ten largest customers of Baldwin (including KBA) accounted for
approximately 44%, 49% and 46%, respectively, of the Company's net sales for the
fiscal years ended June 30, 2002, 2001 and 2000. Sales of Baldwin's products are
not seasonal. However, sales have traditionally been greater in the second six
months of its fiscal year than in the first six months of its fiscal year (see
Item 7 "Management's Discussion and Analysis of Financial Condition and Results
of Operations"). The only recent exceptions to this trend are the current fiscal
year and the fiscal year ended June 30, 1999. These exceptions were primarily
due to the divestiture of the RHG as well as the global printing industry
economic slowdown following the events of September 11, 2001 in the fiscal year
ended June 30, 2002 and to lower sales to Goss Graphic
5

Systems, Inc. ("Goss") and a lower level of activity in the Japanese market
during the second six months of fiscal 1999.

RESEARCH, DEVELOPMENT AND ENGINEERING

The Company believes its research, development and engineering efforts have
been an important factor in establishing and maintaining its leadership position
in the field of controls and accessories for the printing industry. The Company
has won six Intertech Awards from the Graphic Arts Technical Foundation. The
Intertech Award was established in 1978 to recognize technologies that are
predicted to have a major impact on the graphic communications industry, but are
not yet in widespread use in the marketplace. Baldwin has devoted substantial
efforts to adapt its products to almost all models and sizes of printing presses
in use worldwide.

The Company has product development functions at many of its locations.
While the Company believes that this approach to research and development helped
the Company to react quickly to meet the needs of its customers, coordination of
the Company's product development activities required more centralization, which
was accomplished with the Company's restructuring efforts. This organizational
structure focuses attention on opportunities within the respective markets,
while avoiding duplicative efforts within the Company.

Baldwin employs approximately 147 persons whose primary function is new
product development or modification of existing products. The Company's total
expenditures for research, development and engineering for the fiscal years
ended June 30, 2002, 2001 and 2000 were $15,286,000, $17,030,000 and
$17,962,000, respectively, representing approximately 10.5%, 9.3% and 9.0% of
the Company's net sales in each fiscal year, respectively.

PATENTS

The Company owns or licenses a number of patents and patent applications
relating to a substantial number of Baldwin's products. These products
represented a substantial portion of the Company's net sales for all periods
presented. The Company's patents expire at different times during the next
twenty years; however, one significant patent, which provides for the majority
of the Company's current royalty income, is scheduled to expire during February
2005. The expiration of patents in the near future is not expected to have a
material adverse effect on the Company's net sales; however, royalty income is
expected to be negatively impacted upon the expiration of this patent. The
Company has also relied upon and intends to continue to rely upon unpatented
proprietary technology, including the proprietary engineering required to adapt
its products to a wide range of models and sizes of printing presses. The
Company believes its rights under, and interests in, its patents and patent
applications, as well as its proprietary technology, are sufficient for its
business as currently conducted.

MANUFACTURING

The Company conducts its manufacturing operations through a number of
operating subsidiaries. In North America, the Company has subsidiaries, which
had manufacturing facilities in Kansas (which was sold on October 10, 2002) and
which have manufacturing facilities in Connecticut. In Europe, the Company has
subsidiaries with manufacturing and assembly facilities in Germany and Sweden.
In Asia, Baldwin has manufacturing and assembly facilities in India and Japan.
The RHG sale reduced the number of facilities in Sweden, China and the United
States.

In general, raw materials required by the Company can be obtained from
various sources in the quantities desired. The Company has no long-term supply
contracts and does not consider itself dependent on any individual supplier.

The nature of the Company's operations is such that there is little, if
any, negative effect upon the environment, and the Company has not experienced
any serious problems in complying with environmental protection laws and
regulations.

6

COMPETITION

Within the highly fragmented printing press accessory industry, the Company
produces and markets what it believes to be the most complete line of controls
and accessories equipment. Numerous companies, including vertically integrated
printing press manufacturers, manufacture and sell products, which compete with
one or more of the Company's products. These printing press manufacturers
generally have larger staffs and greater financial resources than the Company.

The Company competes by offering customers a broad product line, coupled
with a well-known reputation for the reliability of its products and its
commitment to service and after-sale support. The Company's ability to compete
effectively in the future will depend upon the continued reliability of its
products, after-sale support, its ability to keep its market position with new
proprietary technology and its ability to develop new products which meet the
demands of the printing industry.

EMPLOYEES

The Company employs approximately 682 persons (plus approximately 19
temporary and part-time employees), of which approximately 246 are production
employees, approximately 109 are marketing, sales and customer service
employees, approximately 251 are research, development, engineering and
technical service employees and approximately 76 are management and
administrative employees. Of the Company's 100 employees in its Baldwin Graphic
Products Division in the United States, 13 are represented by the International
Association of Machinists and Aerospace Workers under a contract which expires
in November 2002. In Europe, employees are represented by various unions under
contracts with indefinite terms. In Sweden, 1, 15, and 12 of the Company's 148
employees are represented by Ledarna (SALF), Metall, and Svenska
Industritjanstemanna Forbundet, respectively. In Germany, approximately 43 of
the Company's 208 employees are represented by the IG Metall (Metalworker's
Union). The Company considers relations with its employees and with its unions
to be good.

ITEM 2. PROPERTIES

The Company owns and leases various manufacturing and office facilities
aggregating approximately 411,000 square feet at June 30, 2002. The table below
presents the locations and ownership of these facilities:

The Company believes that its facilities are adequate to carry on its
business as currently conducted. The sale of BKA, which closed on October 10,
2002, will reduce the total square footage by approximately 64,000 in North
America (64,000 owned).

ITEM 3. LEGAL PROCEEDINGS

There are no legal proceedings pending to which either the Company is a
party or to which any of its property is subject, which would have a material
adverse effect on the Company.

7

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

No matters were submitted to a vote of security holders since November 13,
2001.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

(A) PRICE RANGE OF CLASS A COMMON STOCK

The Company's Class A Common Stock is traded on the American Stock Exchange
("AMEX") under the symbol "BLD". The following chart sets forth, for the
calendar periods indicated, the range of closing prices for the Company's Class
A Common Stock on the AMEX, as reported by the AMEX.

(B) CLASS B COMMON STOCK

The Company's Class B Common Stock has no established public trading
market.

(C) APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS

As of August 30, 2002, the approximate number of record holders (excluding
those listed under a nominee name) of the Company's Class A and Class B Common
Stock totaled 314 and 27, respectively. The Company believes, however, that
there are approximately 1,800 beneficial owners of its Class A Common Stock.

(D) DIVIDENDS

Declarations of dividends depend upon the earnings and financial position
of the Company and are within the discretion of the Company's Board of
Directors. However, certain of the Company's debt agreements prohibit the
payment of dividends. No dividend in cash or property can be declared or paid on
shares of the Company's Class B Common Stock unless simultaneously therewith
there is declared or paid, as the case may be, a dividend in cash or property on
shares of Class A Common Stock of at least 105% of the dividend on shares of
Class B Common Stock (see Note 13 to the Consolidated Financial Statements).

ITEM 6. SELECTED FINANCIAL DATA

The Company's income statement and balance sheet data as it relates to the
fiscal years ended June 30, 2002, 2001 and 2000 have been derived from the
Company's audited financial statements (including the

8

Consolidated Balance Sheet of the Company at June 30, 2002 and 2001 and the
related Consolidated Statements of Income of the Company for the fiscal years
ended June 30, 2002, 2001 and 2000 appearing elsewhere herein). Certain
transactions have affected comparability, specifically, the Company's disposal
of assets of certain businesses. During the fiscal year ended June 30, 2002, the
operating results and future prospects of the Baldwin Kansa subsidiary ("BKA")
deteriorated, resulting in the fair value of the goodwill associated with BKA
being less than BKA's book value. Therefore, management determined that the
implied fair value of the goodwill associated with BKA was zero, and the Company
recorded a goodwill impairment charge of $5,434,000. In September 2001, the
Company sold substantially all of the assets of its Roll Handling Group ("RHG")
and its Print-On-Demand Group ("POD"). The Company recorded impairment charges
related to RHG and POD of $14,831,000 and $687,000, respectively, in the fiscal
year ended June 30, 2001 and losses on the sale of RHG of $250,000 and POD of
$8,000 in the fiscal year ended June 30, 2002. In September 2000, the Company
disposed of substantially all of the assets of its Baldwin Stobb Division
("BSD"). The Company recorded a loss on the sale of BSD of $831,000 in the
fiscal year ended June 30, 2001. The revenues and corresponding expenses
attributable to these divested operations are included in the consolidated
financial statement only for the periods owned by the Company. Effective July 1,
2001, the Company adopted the provisions of Statement of Financial Accounting
Standards No. 142 "Goodwill and Other Intangible Assets." As a result, the
Company no longer amortizes goodwill. Goodwill amortization expense amounted to
zero, $973,000, $1,028,000, $995,000 and $961,000 for the fiscal years ended
June 30, 2002, 2001, 2000, 1999 and 1998, respectively. The following
information should be read in conjunction with the aforementioned financial
statements and with "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

General. The following is management's discussion and analysis of certain
factors, which have affected the consolidated financial statements of Baldwin
Technology Company, Inc. ("Baldwin" or the "Company").

During the first quarter of the fiscal year ending June 30, 2003, the
Company committed to a plan to dispose of substantially all of the assets of its
Baldwin Kansa subsidiary ("BKA"); the transaction closed on October 10, 2002.
The consideration received for the transaction, after certain post-closing
adjustments, was approximately $3,769,000, which approximated the net book value
of the assets sold. During the fourth quarter of the fiscal year ended June 30,
2002, the Company recorded an impairment charge of $5,434,000 related to the
goodwill associated with this business as the recorded value of this goodwill
exceeded the assessment of its fair value made by the Company. For a further
discussion, see Note 18 to the consolidated financial statements. The effects of
this transaction on the consolidated financial statements are discussed below
where significant.

On September 26, 2001, the Company sold substantially all of the assets of
its Roll Handling Group ("RHG"). The Company recorded an impairment charge
during the fiscal year ended June 30, 2001 of approximately $14,831,000 as a
result of the write-off of assets, primarily patents and goodwill, associated
with this business. The Company recorded a similar write-off of goodwill of
approximately $687,000, during the fiscal year ended June 30, 2001 associated
with the Company's Print On Demand Group ("POD") as the Company also exited this
business. As a result, the revenues and corresponding expenses attributable to
RHG and POD are included in these consolidated financial statements only for the
periods owned by the Company. The effects of these transactions on the
consolidated financial statements are discussed below where significant.

On September 27, 2000, the Company sold substantially all the assets of its
Baldwin Stobb Division ("BSD"). As a result, the revenues and corresponding
expenses attributable to BSD are included in these consolidated financial
statements only for the periods owned by the Company. The effects of this
transaction on the consolidated financial statements are discussed below where
significant.

Net sales and operating loss of RHG, POD, BSD and BKA as included in the
accompanying consolidated financial statements, were as follows for the fiscal
years ended June 30:

10

The Company does not consider its business to be seasonal; however within
the last five fiscal years, except for the fiscal year ended June 30, 2002 and
the fiscal year ended June 30, 1999, its sales have traditionally been greater
in the second six months of its fiscal year than in the first six months of its
fiscal year. The decline in net sales in the second half of the fiscal year
ended June 30, 2002 is primarily due to the global printing industry economic
slowdown following the events of September 11, 2001, and the disposition of the
RHG. The decline in net sales in the second half of fiscal 1999 was primarily
due to the lower sales to Goss Graphic Systems, Inc. ("Goss") and lower sales
volume in the Japanese markets. The following schedule shows the Company's net
sales for such six-month periods over the last five fiscal years to reflect the
comparison.

FORWARD-LOOKING STATEMENTS

Except for the historical information contained herein, the following
statements and certain other statements contained herein are based on current
expectations. Such statements are forward-looking statements that involve a
number of risks and uncertainties. The Company cautions investors that any such
forward-looking statements made by the Company are not guarantees of future
performance and that actual results may differ materially from those in the
forward-looking statements. Some of the factors that could cause actual results
to differ materially are set forth in Exhibit 99 to this Annual Report on Form
10-K for the fiscal year ended June 30, 2002.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Baldwin's discussion and analysis of its financial condition and results of
operations are based on the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires Baldwin to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, Baldwin evaluates its
estimates, including those related to product returns, bad debts, inventories,
investments, asset impairments, intangible assets, income taxes, financing
operations, warranty obligations, restructuring, pensions and other
post-retirement benefits, contingencies and litigation. Baldwin bases its
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

Baldwin believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements. Baldwin maintains allowances for doubtful accounts for
estimated losses resulting from the inability of its customers to make required
payments. If the financial condition of Baldwin's customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances could be required. Baldwin provides for the estimated cost of product
warranties at the time revenue is recognized. While Baldwin engages in extensive
product quality programs and processes, including actively monitoring and
evaluating the quality of its component suppliers, Baldwin's warranty obligation
is affected by product failure rates, material usage and service delivery costs
incurred in correcting a product failure. Should actual product failure rates,
material usage or service delivery costs differ from Baldwin's estimates,
revisions to the estimated warranty liability would be required. Baldwin writes
down its inventory for estimated obsolescence or unmarketable inventory equal to
the difference between the cost of

11

inventory and the estimated market value based upon assumptions about future
demand and market conditions. If actual market conditions are less favorable
than those projected by management, additional inventory write-downs may be
required. Baldwin records a valuation allowance to reduce its deferred tax
assets to the amount that is more likely than not to be realized. Baldwin has
considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance. In the event
Baldwin were to determine that it would be able to realize its deferred tax
assets in the future in excess of its net recorded amount, an adjustment to the
deferred tax asset valuation allowance would increase income in the period such
determination is made. Likewise, should Baldwin determine that it would not be
able to realize all or part of its net deferred tax asset in the future, an
adjustment to the deferred tax asset valuation allowance would be charged to
income in the period such determination is made.

Effective July 1, 2001, Baldwin adopted Financial Accounting Standards
Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142"). Accordingly, Baldwin no
longer amortizes goodwill but instead tests goodwill for impairment at the
reporting unit level, at least annually, by determining the fair value of the
reporting unit and comparing it with its book value. If, during the annual
impairment review, the book value of the reporting units exceeds its fair value,
the implied fair value of the reporting unit's goodwill is compared with the
carrying amount of the unit's goodwill. If the carrying amount exceeds the
implied fair value, goodwill is written down to its implied fair value. SFAS 142
requires management to estimate the fair value of each reporting unit, as well
as the fair value of the assets and liabilities of each reporting unit, other
than goodwill. The implied fair value of goodwill is determined as the
difference between the fair value of a reporting unit, taken as a whole, and the
fair value of the assets and liabilities of such reporting unit.

Other long-lived assets are reviewed for impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. Events which could trigger an impairment review include, among
others, a decrease in the market value of an asset, the asset's inability to
generate income from operations and positive cash flow in future periods, a
decision to change the manner in which an asset is used, a physical change to
the asset or a change in business climate. Baldwin calculates estimated future
undiscounted cash flows, before interest and taxes, of the related operation and
compares it to the carrying value of the asset in determining whether impairment
potentially exists. If a potential impairment exists, a calculation is performed
to determine the fair value of the long-lived asset. This calculation is based
upon a valuation model and discount rate commensurate with the risks involved.
Third party appraised values may also be used in determining whether impairment
potentially exits. Future adverse changes in market conditions or poor operating
results of a related reporting unit may require the Company to record an
impairment charge in the future.

Baldwin records a valuation allowance against deferred tax assets if it is
more likely than not that Baldwin will not be able to utilize these assets to
offset future taxes. This valuation allowance is based on estimates of future
taxable profits and losses and tax planning strategies. Subsequent revisions to
estimates of future taxable profits and losses and tax planning strategies could
change the amount of the deferred tax asset Baldwin would be able to realize in
the future, and therefore could increase or decrease the valuation allowance.

12

RESULTS OF OPERATIONS

The following table sets forth certain of the items (expressed as a
percentage of net sales) included in the Selected Financial Data and should be
read in connection with the Consolidated Financial Statements of the Company,
including the notes thereto, presented elsewhere in this report.

FISCAL YEAR ENDED JUNE 30, 2002 VERSUS FISCAL YEAR ENDED JUNE 30, 2001

Consolidated Results

Net Sales. Net sales for the fiscal year ended June 30, 2002 decreased by
$37,990,000, or 20.7%, to $145,625,000 from $183,615,000 for the fiscal year
ended June 30, 2001. Currency rate fluctuations attributable to the Company's
overseas operations decreased net sales for the current period by $5,890,000.
Otherwise, net sales would have decreased by $32,100,000, of which $35,593,000
relates to the divestiture of the Company's former RHG, BSD and POD businesses.
Excluding the divested businesses, and the effects of currency translation, net
sales would have increased by $3,493,000 over the same period in the prior
fiscal year. In local currency, sales decreased by 12.1% in the United States
and by 4.3% in Germany. Sales increased by 35.2% in Sweden and 5.7% in Japan.

Gross Profit. Gross profit for the fiscal year ended June 30, 2002 was
$42,759,000 (29.4% of net sales), compared to $53,788,000 (29.3% of net sales)
for the fiscal year ended June 30, 2001, a decrease of $11,029,000 or 20.5%.
Gross profit was lower due primarily to the effects of dispositions from the
prior fiscal year, which accounted for approximately $9,351,000, to increased
warranty costs primarily on spray dampening equipment and continuing pricing
pressures. Gross profit decreased by $1,996,000 as a result of fluctuations in
currency rates. Excluding the divested businesses and the effects of currency
translation, gross profit would have increased by $318,000 over the prior fiscal
year.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $32,517,000 (22.3% of net sales) for the fiscal
year ended June 30, 2002, compared to $40,025,000 (21.8% of net sales) for the
prior fiscal year, a decrease of $7,508,000. Currency rate fluctuations
decreased the current fiscal year's expenses by $869,000 and the effect of net
dispositions from the prior fiscal year reduced expenses by $4,120,000. Selling
expenses increased primarily as a result of higher trade show and advertising
costs (including related travel costs), which more than offset reductions in
staffing levels and decreases in sales commissions resulting from lower sales
volumes. General and administrative expenses decreased primarily as a result of
reductions in personnel due to the Company's restructuring efforts, reduced
incentive and deferred

13

compensation expenses resulting from the lower profitability of the Company and
decreased goodwill amortization expense due to the adoption of SFAS 142.
Goodwill amortization expense for the fiscal years ended June 30, 2002 and 2001
amounted to $0 and $973,000, respectively. These decreases were partially offset
by an additional $439,000 bad debt charge related to a major OEM customer,
interest forgiveness of $112,000 related to a loan to an officer of the Company,
and increased consulting and subcontracting costs.

Research, Development and Engineering Expenses. Research, development and
engineering expenses decreased by $1,744,000 over the same period of the prior
fiscal year. Fluctuations in currency rates decreased these expenses by
$515,000; otherwise, these expenses would have decreased by $1,229,000. The
decrease in these expenses relates primarily to the exclusion of costs
associated with the divested RHG business and to the reduced engineering costs
primarily in the United States attributed to reduced personnel costs associated
with the planned restructuring, offset by increased research and development
labor and project costs.

Restructuring and Other Charges. Restructuring and other charges consist
of restructuring charges of $621,000 and a goodwill impairment charge of
$5,434,000 associated with BKA. The restructuring charges of $621,000 recorded
during the fiscal year ended June 30, 2002 were expensed as incurred and
included a credit adjustment of $541,000 recorded during the fourth quarter of
the fiscal year ended June 30, 2002, relating to severance benefits as those
costs are not expected to be paid under this restructuring plan. The $621,000
consists of $115,000 in additional employee severance and benefit costs, $15,000
in facility lease termination costs and $491,000 in incremental costs associated
with the restructuring plan. The Company performed a review of the carrying
amount of its goodwill in accordance with SFAS 142. Based on recent downward
trends in the overall U.S. newspaper market, the Company's review indicated that
an impairment existed at one of the Company's reporting units, BKA, which
specializes in this market. As a result, the Company recorded an impairment of
goodwill associated with BKA in the amount of $5,434,000 in the fourth quarter
of the fiscal year ended June 30, 2002.

Interest and Other. Interest expense for the fiscal year ended June 30,
2002 decreased by $222,000 to $1,792,000, compared to $2,014,000 for the fiscal
year ended June 30, 2001. Currency rate fluctuations decreased interest expense
by $16,000 in the current period. The remainder of the decrease was due
primarily to lower interest rates and lower long-term debt levels outstanding
during the current period, primarily as a result of applying the proceeds from
the RHG divestiture to reduce outstanding long-term debt. Interest income was
$290,000 and $291,000 for the fiscal years ended June 30, 2002 and June 30,
2001, respectively. Currency rate fluctuations increased interest income by
$38,000 in the current period. Other income and expense, net, amounted to an
expense of $1,037,000 for the fiscal year ended June 30, 2002 compared to income
of $940,000 for the fiscal year ended June 30, 2001. These amounts include
foreign currency transaction gains of $18,000 and $334,000 for the current and
prior periods, respectively. Currency rate fluctuations negatively impacted
other income and expense by $5,000 in the current period. The ineffective
portions of derivative financial instruments, which qualify as hedges pursuant
to SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133") amounted to losses of $45,000 and $29,000 for the fiscal years
ended June 30, 2002 and 2001, respectively, while derivative financial
instruments which do not qualify as hedges pursuant to SFAS 133 amounted to a
loss of $413,000 and a gain of $345,000 respectively. Other income and expense
also includes a $255,000 write-down of deferred financing costs in the current
period, recorded as a result of the renegotiation of the Amended Credit Facility
(as defined below under "Liquidity and Capital Resources at June 30, 2002") and
a $250,000 pre-tax loss on the sale of the RHG. The prior year period included a
pre-tax gain of $1,213,000 related to a favorable settlement of a patent
litigation suit and an $831,000 pre-tax loss on the sale of BSD.

Income Taxes. The Company recorded an income tax provision of $6,684,000
for the fiscal year ended June 30, 2002 as compared to $698,000 for the fiscal
year ended June 30, 2001. Certain items have significantly increased the
Company's tax provision. Specifically, in the current year, foreign income taxed
at rates higher than the U.S. statutory tax rate and the recording of a
$6,210,000 valuation allowance primarily against certain of its domestic
deferred tax assets resulted in additional tax charges. Currency rate
fluctuations reduced the tax provision by $178,000 in the current period.

14

Net Loss. Net loss for the fiscal year ended June 30, 2002 was $15,984,000
as compared to $18,172,000 for the fiscal year ended June 30, 2001, or $1.07 per
share, basic and diluted, and $1.23 per share, basic and diluted, respectively.
For the current period, currency rate fluctuations decreased the net loss by
$464,000 and net dispositions increased the net loss by $646,000. The net loss
in the current fiscal year includes a goodwill impairment charge of $5,434,000
associated with the BKA business, while the prior fiscal year net loss includes
asset impairment charges of $14,831,000 associated with the sale of the RHG and
$687,000 associated with the disposition of the POD business. Additionally, the
current fiscal year includes a $6,210,000 charge related to increased valuation
allowances for certain deferred tax assets.

Outlook

The Company's business is highly dependant on sales to OEM press
manufacturers, newspaper publishers and commercial printers. During the third
quarter of the fiscal year ended June 30, 2002, Baldwin began to see signs of
softening demand from its principal customers as the advertising industry, which
is typically a leading indicator, had weakened. Baldwin anticipates reduced
demand for its products over the next several quarters, which will adversely
affect revenues and earnings over these next several quarters. In an effort to
reduce operating costs, the Company has entered into a new restructuring plan
during the first quarter of the fiscal year ending June 30, 2003, to reduce
total employment worldwide by approximately 90.

FISCAL YEAR ENDED JUNE 30, 2001 VERSUS FISCAL YEAR ENDED JUNE 30, 2000

Consolidated Results

Net Sales. Net sales for the fiscal year ended June 30, 2001 decreased by
$14,987,000, or 7.5%, to $183,615,000 from $198,602,000 for the fiscal year
ended June 30, 2000. Currency rate fluctuations attributable to the Company's
overseas operations decreased net sales for the fiscal year ended June 30, 2001
by $14,676,000 and the previously noted divestiture of BSD further reduced net
sales by $7,074,000. Otherwise, net sales would have increased by $6,763,000.
This increase was primarily the result of increased product volumes, principally
spray dampening equipment, water products and roll handling equipment, offset by
a reduction in equipment shipments to the commercial web heat-set printing
market. In local currency, sales decreased by 16.0% in the United States, and by
8.4% in the United Kingdom. Sales increased by 97.7% in China and by 24.8% in
Sweden.

Gross Profit. Gross profit for the fiscal year ended June 30, 2001 was
$53,788,000 (29.3% of net sales), compared to $63,456,000 (32.0% of net sales
for the fiscal year ended June 30, 2000), a decrease of $9,668,000 or 15.2%.
Gross profit was lower due primarily to increased warranty costs and to
continuing pricing pressures in the market. Gross profit decreased by $3,654,000
as a result of fluctuations in currency rates and decreased by $2,259,000 due to
the effect of the sale of BSD.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $40,025,000 (21.8% of net sales) for the fiscal
year ended June 30, 2001, compared to $42,193,000 (21.3% of net sales) for the
fiscal year ended June 30, 2000, a decrease of $2,168,000. Currency rate
fluctuations decreased expenses for the fiscal year ended June 30, 2001 by
$1,901,000 and the effect of the sale of BSD further reduced expenses by
$1,796,000. Selling expenses decreased primarily as a result of lower trade show
and advertising costs (including related travel costs), reductions in staffing
levels and decreases in sales commissions resulting from lower sales volumes.
General and administrative expenses increased primarily as a result of increases
in compensation, consulting and subcontracting costs and a $536,000 bad debt
charge related to a receivable from a major OEM customer during the fiscal year
ended June 30, 2001. The fiscal year ended June 30, 2001 also included a
$1,100,000 bad debt charge for an OEM customer.

Research, Development and Engineering Expenses. Research, development and
engineering expenses for the fiscal year ended June 30, 2001 decreased by
$932,000 over the same period of the fiscal year ended June 30, 2000.
Fluctuations in currency rates decreased these expenses by $1,187,000;
otherwise, these expenses would have increased by $255,000. The increase in
these expenses related to increased compensation and consulting costs, partially
offset by reduced costs in Japan, attributed to reduced personnel costs
associated with the restructuring, and the impact of the previously noted
divestiture of BSD.
15

Restructuring and Other Charges. Restructuring and other charges for the
fiscal year ended June 30, 2001 consisted of restructuring charges of $2,277,000
and asset write-offs, primarily patents and goodwill, of $15,518,000. These
asset write-offs are the result of asset impairments of $14,831,000, associated
with the RHG and $687,000 associated with POD. The Company sold the RHG on
September 26, 2001 and exited the POD business on November 16, 2001.

The restructuring charge of $2,277,000 for the fiscal year ended June 30,
2001 represents additional charges incurred associated with the restructuring
plan announced in March 2000, which resulted in a $5,664,000 restructuring
charge during the fiscal year ended June 30, 2000. These additional charges
related primarily to severance and facility lease termination costs associated
with the Company's restructuring efforts.

Interest and Other. Interest expense for the fiscal year ended June 30,
2001 increased by $195,000 to $2,014,000, compared to $1,819,000 for the fiscal
year ended June 30, 2000. Currency rate fluctuations decreased interest expense
by $169,000 in the fiscal year ended June 30, 2001. Otherwise, interest expense
would have increased by $364,000. This increase was due primarily to higher
long-term, fixed-rate indebtedness outstanding during the fiscal year ended June
30, 2001, which was offset slightly by lower interest rates on variable-rate
debt. Interest income was $291,000 and $330,000 for the fiscal years ended June
30, 2001 and June 30, 2000, respectively. Currency rate fluctuations increased
interest income by $53,000 for the fiscal year ended June 30, 2001. Other income
and expense, net, amounted to income of $940,000 for the fiscal year ended June
30, 2001 compared to expense of $98,000 for the fiscal year ended June 30, 2000.
These amounts include foreign currency transaction gains (losses) of $334,000
and $(251,000) for the fiscal years ended June 30, 2001 and 2000, respectively.
Other income and expense also includes a pre-tax gain of $1,213,000 related to a
favorable settlement of a patent litigation suit, and an $831,000 pre-tax loss
on the sale of BSD for the fiscal year ended June 30, 2001.

Income Taxes. The Company recorded income tax expense of $698,000 for the
fiscal year ended June 30, 2001 as compared to an income tax benefit of
$5,675,000 for the fiscal year ended June 30, 2000. Certain items significantly
increased the Company's tax provision. Specifically, for the fiscal year ended
June 30, 2001, non-deductible goodwill and increased foreign income taxed at
rates higher than the U.S. statutory rate resulted in additional tax of
$3,735,000 and $1,966,000, respectively. The fiscal year ended June 30, 2000
included a benefit of $4,147,000, recorded as a result of a reduction of the
valuation allowance related to prior net operating losses ("NOL's") of the
Company's Swedish subsidiaries, and estimated adjustments related to the
settlement of both foreign and domestic tax issues. Currency rate fluctuations
reduced the tax expense by $420,000 in the fiscal year ended June 30, 2001.

Net (Loss) Income. Net loss for the fiscal year ended June 30, 2001 was
$(18,172,000) as compared to net income of $4,836,000 for the fiscal year ended
June 30, 2000, or $(1.23) per share basic and diluted, and $.31 per share basic
and diluted, respectively. For the fiscal year ended June 30, 2001, currency
rate fluctuations and the sale of BSD decreased net income by $581,000 and
$344,000, respectively. The after-tax impact of $1,600,000 for restructuring
charges reduced net income per share by $0.11 basic and diluted in the fiscal
year ended June 30, 2001. The net loss for the fiscal year ended June 30, 2001
was primarily the result of asset impairment charges of $14,831,000 associated
with the sale of the RHG, and $687,000 associated with the decision to exit the
POD business.

Impact of Inflation

The Company's results are affected by the impact of inflation on
manufacturing and operating costs. Historically, the Company has used selling
price adjustments, cost containment programs and improved operating efficiencies
to offset the otherwise negative impact of inflation on its operations.

LIQUIDITY AND CAPITAL RESOURCES

On October 31, 2000, the Company entered into a $35,000,000 revolving
credit facility (the "Credit Facility") with Fleet National Bank and First Union
National Bank (collectively the "Banks"), which had an original scheduled
maturity date of October 31, 2003. The Credit Facility consisted of a
$25,000,000 revolving credit line (the "Revolver") and a $10,000,000 credit line
to be utilized for acquisitions, (the "Acquisition
16

Line"). On January 28, 2002, the Credit Facility was amended (the "Amended
Credit Facility"), to among other things, remove the Acquisition Line, reduce
the Revolver to $21,000,000 (subject to a borrowing base), and change the
maturity date to October 1, 2002. In addition, $4,000,000 of the existing
Revolver was converted into a term loan (the "Term Loan"), which matured on June
28, 2002, resulting in available borrowings under the Revolver from July 1, 2002
to October 1, 2002 of $17,000,000. The Amended Credit Facility required the
Company to maintain certain financial covenants including minimum operating
income covenants. At June 30, 2002, the Company had outstanding borrowings of
$16,650,000 under the Revolver and Term Loan, plus outstanding letters of credit
of $3,068,000. The Revolver has associated commitment fees, which are calculated
quarterly, at a rate of one-half of one percent per annum of the unused portion
of the Revolver. Commitment fees for the fiscal years ended June 30, 2002, 2001
and 2000 were $24,000, $47,000 and $44,000, respectively.

As a result of the reduction in available borrowings under the Amended
Credit Facility, and the revised maturity date, the Company was required to
write-down a portion of the related unamortized deferred financing costs
initially recorded in connection with obtaining the Credit Facility.
Accordingly, the Company recorded a charge against earnings of $255,000 during
the quarter ended December 31, 2001, which is included in "Other income and
expense." The Company incurred additional costs of approximately $227,000
associated with entering into the Amended Credit Facility. The Company amortized
the remaining deferred financing costs through October 1, 2002, the maturity
date of the Amended Credit Facility.

The Company has experienced operating losses, negative cash flows and debt
covenant violations over the past two years. During the quarters ended March 31,
2002 and June 30, 2002, the Company did not meet its minimum operating income
covenants contained in the Amended Credit Facility, and further the Company did
not make a required $4,000,000 principal payment on the Term Loan on June 28,
2002. The banks granted a forbearance of the collection of the indebtedness
until October 1, 2002 and on October 16, 2002, the Company received an
irrevocable commitment letter from the Banks to further amend and extend the
Amended Credit Facility, and waive the covenant violations and Term Loan default
(the "Extended Credit Facility"). The Extended Credit Facility, totaling
$20,900,000, will consist of a $17,000,000 revolving credit line (the "Extended
Revolver") and a $3,900,000 term loan due July 1, 2003 (the "Extended Term
Loan"). The Extended Credit Facility will require the Company to utilize the net
proceeds of $3,736,000 from the sale of BKA plus $464,000 from the Company's
cash flows to reduce the outstanding borrowings under the Extended Revolver by
$4,200,000 before October 30, 2002, of which, $2,700,000 will permanently reduce
the Extended Revolver and $1,500,000 will become available for future borrowings
upon the payment of the $464,000 referenced above. Additionally, beginning in
November 2002 and extending through June 2003, the Company will be required to
permanently reduce the Extended Revolver by making monthly payments of $125,000.
The Company will be required to permanently reduce the Extended Revolver by
$5,000,000 on December 30, 2002 and by $5,000,000 on March 30, 2003, only if the
Company generates non-operating alternative sources of financing. $5,300,000 due
under the Extended Revolver and Extended Term Loan has been classified as
current (of which $3,835,000 has been paid through October 15, 2002) and the
remaining $11,350,000 has been classified as long-term at June 30, 2002.

Interest on the Extended Revolver and Extended Term Loan will be charged at
prime plus 2.00% per annum. The Extended Credit Facility will be collateralized
by a pledge of the capital stock and certain domestic assets of the Company's
subsidiaries. The Extended Credit Facility will include certain restrictions,
which will limit the incurrence of debt and prohibit dividend payments among
other things, and require the Company to satisfy certain financial covenants.
These financial covenants will require the Company to achieve minimum operating
income of $945,000 for the quarter ending December 31, 2002, $844,000 for the
quarter ending March 31, 2003 and $732,000 for the quarter ending June 30, 2003.
The ability to achieve these covenants depends in part on management's
successful execution of the restructuring plans discussed in Note 5 to the
consolidated financial statements and other business factors outside of the
control of management. There can be no guarantee that such covenants will be
met. Accordingly, if the covenants are not met, amounts outstanding under the
Extended Credit Facility would become payable on demand. Management believes
that alternative sources of financing are available to finance the existing
facilities beyond July 1, 2003, which the Company is currently pursuing.
However, if the loans become payable on

17

demand and alternative financing sources are not available, management will be
required to take additional actions to reduce operating expenses or sell assets
to meet liquidity needs.

The Company maintains relationships with both foreign and domestic banks,
which combined have extended credit facilities to the Company totaling
$24,061,000, including amounts available under the Revolver. As of June 30,
2002, the Company had $22,661,000 outstanding under these credit facilities
including $16,650,000 under the Revolver and Term Loan. Total debt levels as
reported on the balance sheet at June 30, 2002 are $930,000 higher than they
would have been if June 30, 2001 exchange rates had been used.

On April 27, 2001, the Company entered into an interest rate swap agreement
with Fleet National Bank to fix the LIBOR portion of its interest rate at 4.98%
for a principal amount of $15,000,000 with the maturity the same as the Credit
Facility. The effect of this interest rate swap added $383,000 to interest
expense for the fiscal year ended June 30, 2002 and a $63,000 pre-tax ($54,000
after-tax) loss to Other Comprehensive Income ("OCI") at June 30, 2002.

The Company's working capital decreased by $90,000 or 0.4% from $22,409,000
at June 30, 2001, to $22,319,000 at June 30, 2002. Foreign currency rate
fluctuations decreased working capital by $1,921,000; otherwise working capital
would have increased by $1,831,000. Working capital increased primarily due to a
portion of the short-term debt being reclassified to long-term, increases in
notes receivable, and decreases in accounts and notes payable, accrued
compensation, customer deposits, and accrued expenses. Offsetting these items
were decreases in inventories and accounts receivable. On September 26, 2001,
the Company divested its RHG. The proceeds of $6,800,000 were utilized to reduce
outstanding bank debt by $4,500,000; the remainder was used for transaction
costs of approximately $1,600,000 and for general working capital purposes. The
RHG utilized cash from operating activities of approximately $2,181,000 for the
fiscal year ended June 30, 2001.

The Company provided $4,963,000 and $1,157,000 for investing activities for
the fiscal year ended June 30, 2002, and 2001, respectively. The increase in the
cash provided by investing activities is primarily the result of greater
proceeds from the sale of the RHG than the proceeds from the sale of BSD. Net
capital expenditures made to meet the normal business needs of the Company for
the fiscal years ended June 30, 2002, and June 30, 2001, including commitments
for capital lease payments, were $2,006,000 and $2,828,000, respectively. The
Company has capital expenditures of approximately $1,300,000 planned for the
fiscal year ending June 30, 2003.

The net cash used by financing activities was $1,872,000 for the fiscal
year ended June 30, 2002 as compared to $702,000 for the fiscal year ended June
30, 2001. The difference was primarily caused by higher net repayments of the
Company's long-term and short-term debt and additional payments of debt
financing costs in the current fiscal year.

On September 10, 2001, one large OEM customer, Goss Graphic Systems, Inc.
("Goss") filed for bankruptcy protection under a prearranged Chapter 11
proceeding in the U.S. Bankruptcy Court. Goss' European and Asian subsidiaries
are not included in this proceeding, and furthermore, the Company has continued
to receive timely payments, on a post petition basis, from the foreign
subsidiaries of Goss. At June 30, 2001, the Company's balance sheet included
approximately $1,478,000 of trade receivables from Goss, of which approximately
$942,000 has been collected to date. The remaining $536,000 was fully reserved
as of June 30, 2001. The Company recorded an additional bad debt charge during
the fiscal year ended June 30, 2002 of $439,0000, which represented the balance
of further uncollected sales to Goss from July 1, 2001 through September 10,
2001. Goss had previously filed for Chapter 11 bankruptcy on July 30, 1999. The
Company subsequently sold pre-petition domestic accounts receivable from Goss of
approximately $4,100,000 pursuant to a non-recourse agreement between the
Company and a third party for approximately $3,000,000. The Company had taken a
charge to earnings during the fiscal year ended June 30, 2000 in the amount of
$1,100,000 as a bad debt, which is included in General and Administrative
expenses. Prior to June 30, 2000, the entire $3,000,000 had been received from
the third party.

18

During March 2000, the Company initiated a restructuring plan that included
the consolidation of production into certain facilities, and a reduction in
total employment, primarily in the United States. This plan was expanded during
the fourth quarter of the fiscal year ended June 30, 2001. The Company recorded
restructuring charges in the amounts of $621,000, $2,277,000 and $5,664,000 for
the fiscal years ended June 30, 2002, 2001 and 2000, respectively. The $621,000
relates primarily to additional exit costs, which were expensed as incurred, and
is net of a credit adjustment of $541,000 recorded during the fourth quarter of
the fiscal year ended June 30, 2002, relating to severance benefits as those
costs are not expected to be paid under this restructuring plan. The
restructuring plan is expected to reduce the Company's worldwide cost base and
strengthen its competitive position as a leading global supplier of auxiliary
equipment to the printing and publishing industry. Prior to the restructuring,
the Company was managed in a decentralized manner through geographically
dispersed autonomous business units. Given that many of the Company's
significant customers have been reorganizing on a global basis, management
decided to restructure the Company along functional lines on a global basis.
Rather than have sales, product development and production activities at each
decentralized business unit, the restructuring plan included the centralization
of these activities. Product lines that were previously being produced in the
Emporia, Kansas, (USA); Shelton, Connecticut, (USA); Malmo, Sweden; Augsburg,
Germany; and Lombard, Illinois (USA) facilities, were consolidated with the
production facilities located in Augsburg, Germany; Emporia, Kansas (USA) and
Malmo, Sweden. Roll handling products previously produced in the Rockford,
Illinois (USA) facility were being consolidated with similar products designed
and manufactured in the Company's facilities in Shanghai, China and Amal,
Sweden. These Roll Handling businesses were sold on September 26, 2001. The
corporate headquarters was vacated and relocated to the Shelton, Connecticut
(USA) facility in order to take advantage of the space created by the downsizing
at that facility previously noted. The restructuring charge of $621,000 recorded
during the fiscal year ended June 30, 2002 includes approximately $115,000 in
employee severance and benefit costs, $15,000 in facility lease termination
costs, and $491,000 in additional exit costs associated with this overall
restructuring plan, which were expensed as incurred. The employee severance and
benefit costs shown above included a $541,000 reduction in severance costs for
two of the foreign locations to adjust the estimated remaining liability at June
30, 2002 to the required amount. As of June 30, 2002, $1,071,000 is included in
"Other accounts payable and accrued liabilities" and $1,164,000 is included in
"Other long-term liabilities."

The Company expects to incur approximately $258,000 in additional unaccrued
restructuring costs related to the above plan during the fiscal year ending June
30, 2003, which will be expensed as incurred. The estimated total cash cost of
the restructuring program is expected to be approximately $8,311,000, with
approximately $1,422,000 expected to be spent during the fiscal year ending June
30, 2003 and approximately $1,071,000 (primarily facility lease costs) expected
to be spent over the balance of the lease terms of approximately four years. The
restructuring plan was expected to save the Company approximately $8,843,000
annually following full implementation; however, approximately $1,876,000 of
this savings was related to the divested RHG, which due to the sale of RHG, will
not be realized under this plan.

In August 2002, the Company announced additional restructuring activities
in response to weak market conditions, which will reduce total worldwide
employment by approximately 90. As a result, the Company recorded an additional
restructuring charge of approximately $3,100,000 during the first quarter of the
fiscal year ending June 30, 2003. These reductions are expected to reduce
operating costs by approximately $4,800,000 annually after this restructuring
plan is fully implemented, which is expected to occur by the end of March 2003.
The Company expects that the severance costs will be paid through June 2003 and
approximately $200,000 in lease termination costs will be paid through December
2004.

The Company is currently negotiating alternative financing sources.
Although these negotiations are ongoing, there can be no assurance that the
Company will be successful in negotiating a replacement of the Extended Credit
Facility beyond July 1, 2003.. The Company believes however, that its cash flow
from operations, along with the available bank lines of credit and alternative
sources of borrowing are sufficient to finance its working capital and other
capital requirements for the near and long-term future.

At June 30, 2002 and 2001, the Company did not have any relationships with
unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements
or other
19

contractually narrow or limited purposes. As such, the Company is not exposed to
any financing, liquidity, market or credit risk that could arise if the Company
had engaged in such relationships.

The following summarizes the Company's contractual obligations at June 30,
2002 and the effect such obligations are expected to have on its liquidity and
cash flow in future periods (in thousands):

NEW ACCOUNTING STANDARDS

See Note 2 to the Consolidated Financial Statements for information
concerning new accounting standards.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company operates internationally and is exposed to certain market risks
arising from transactions that in the normal course of business include
fluctuations in interest rates and currency exchange rates. While the Company
uses derivative financial instruments in order to manage or reduce these risks,
typically currency futures contracts, the Company does not enter into derivative
or other financial instruments for trading or speculative purposes.

INTEREST RATE AND DEBT SENSITIVITY

As of June 30, 2002, the Company had debt totaling $22,661,000, most of
which bears interest at floating rates. The Company entered into an interest
rate swap agreement on April 27, 2001, with a notional amount of $15,000,000 and
a fixed rate of 4.98%. Interest rate swaps act as hedges of the underlying debt
instruments to effectively change the characteristics of the interest rate
without actually changing the debt instruments.

The Company performed a sensitivity analysis as of June 30, 2002, assuming
a hypothetical one percentage point increase in interest rates. Holding other
variables constant (such as foreign exchange rates, swaps and debt levels), a
one percentage point increase in interest rates would affect the Company's
pre-tax income by approximately $250,000. However, actual increases or decreases
in earnings in the future could differ materially from this analysis based on
the timing and amount of both interest rate changes and amounts borrowed by the
Company.

CURRENCY EXCHANGE RATE SENSITIVITY

The Company derived approximately 76% of its revenues from countries
outside of the United States for the fiscal year ended June 30, 2002. Results
were and continue to be affected by fluctuations in foreign currency exchange
rates. The Company's policy is to hedge the impact of currency rate
fluctuations, which could have a material impact on the Company's financial
results. The Company utilizes foreign currency exchange forward contracts to
hedge certain of these exposures. The Company also maintains certain levels of
cash denominated in various currencies, which acts as a natural overall hedge.
The Company adopted the FASB Statement of Financial Accounting Standards No. 133
"Accounting for Derivative Instruments and Hedging Activities" as of July 1,
2000. As of June 30, 2002, the Company had recorded $451,000 in current
liabilities and a loss of $32,000 in other comprehensive income; currency
exchange losses of $369,000 and $50,000 were recognized in other income in the
fiscal years ended June 30, 2002 and 2001, respectively.

20

The Company performed a sensitivity analysis as of June 30, 2002 assuming a
hypothetical 10% adverse change in foreign currency exchange rates. Holding all
other variables constant, the analysis indicated that such a market movement
would affect the Company's pre-tax income by approximately $900,000. However,
actual gains and losses in the future could differ materially from this analysis
based on the timing and amount of both foreign currency exchange rate movements
and the Company's actual exposures and hedges.

21

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

22

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
BALDWIN TECHNOLOGY COMPANY, INC.

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of changes in shareholders' equity
and of cash flows present fairly, in all material respects, the financial
position of Baldwin Technology Company, Inc. and its subsidiaries at June 30,
2002 and 2001, and the results of their operations and their cash flows for each
of the three years in the period ended June 30, 2002 in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, the
Company adopted the provisions of Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets, effective July 1, 2001.

PRICEWATERHOUSECOOPERS LLP

Stamford, Connecticut
October 16, 2002

23

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

The accompanying notes to consolidated financial statements are an integral part
of these statements.
24

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

The accompanying notes to consolidated financial statements are an integral part
of these statements.
25

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The accompanying notes to consolidated financial statements are an integral part
of these statements.
26

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARES)

The accompanying notes to consolidated financial statements are an integral part
of these statements.

27

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

The accompanying notes to consolidated financial statements are an integral part
of these statements.
28

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- ORGANIZATION OF BUSINESS:

Baldwin Technology Company, Inc. and its subsidiaries ("Baldwin" or the
"Company") are engaged primarily in the development, manufacture and sale of
controls and accessories equipment for the printing industry.

The Company has experienced operating losses, negative cash flows and debt
covenant violations over the past two fiscal years. As more fully discussed in
the notes to the consolidated financial statements, the Company has embarked on
restructuring plans (see Note 5) and undertaken other actions aimed at improving
the Company's competitiveness, operating results and cash flow. These actions
have included the sale of certain businesses (see Note 8), the consolidation of
other operations and headcount reductions related to the consolidations and weak
market conditions. As a result of these actions, combined with the renegotiation
of certain of the Company's debt obligations (see Note 11), management believes
that the Company's cash flow from operations, along with available bank lines of
credit and alternative sources of borrowings are sufficient to finance its
working capital and other capital requirements for the near and long-term
future. Management further believes that additional actions can be taken to
reduce operating expenses or that assets can be sold to meet liquidity needs.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The following are the significant accounting policies followed by the
Company:

Consolidation. The consolidated financial statements include the accounts
of Baldwin, its wholly owned subsidiaries, one 90% owned subsidiary and another
80% owned subsidiary. All significant intercompany transactions have been
eliminated in consolidation.

Cash and cash equivalents. The Company considers all highly liquid
instruments (cash and short-term securities) with original maturities of three
months or less to be cash equivalents.

Translation of Foreign Currencies. All assets and liabilities of foreign
subsidiaries are translated into dollars at the fiscal year-end (current)
exchange rates and components of revenue and expense are translated at average
rates for the fiscal year. The resulting translation adjustments are included in
shareholders' equity. Gains and losses on foreign currency exchange transactions
are reflected in the statement of income. Net transaction gains (losses)
credited or charged to income for the fiscal years ended June 30, 2002, 2001 and
2000 were $18,000, $334,000 and $(251,000), respectively.

Hedging. The Company operates internationally and is exposed to certain
market risks arising from transactions that in the normal course of business
include fluctuations in interest rates and currency exchange rates. While the
Company uses derivative financial instruments to manage or reduce these risks,
typically currency futures contracts and interest rate swap agreements, the
Company does not enter into derivative or other financial instruments for
trading or speculative purposes. The Company's policy is to hedge the impact of
currency rate fluctuations which could have a material impact on the Company's
financial results. The Company utilizes foreign currency exchange forward
contracts to hedge these exposures. The Company also entered into an interest
rate swap agreement to convert a portion of its variable rate debt into fixed
rate debt in order to reduce exposure to the changes in interest rates.

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivate Instruments and Hedging Activities" ("SFAS 133"). The effective date of
SFAS 133 was July 1, 2000 for the Company. SFAS 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive (loss), depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. Due to the

29

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company's limited use of derivative instruments, the impact of adoption at July
1, 2000 was immaterial and is not expected to have a significant effect on the
Company's results of operations in future periods.

If a derivative is designated as a fair value hedge, the changes in the
fair value of the derivative and the underlying hedged item attributable to the
hedged risk are recognized in earnings. If the derivative is designated as a
cash flow hedge, the effective portions of changes in fair value of the
derivative are recorded in Other Comprehensive Income ("OCI") and are recognized
in the income statement when the underlying hedged item affects earnings.
Ineffectiveness related to cash flow hedges is recognized in earnings.

Concentration of Credit Risk. Financial instruments, which potentially
subject the Company to concentrations of credit risk, consist principally of
trade accounts and notes receivable. The Company controls this risk through
credit approvals, customer limits and monitoring procedures. The Company's ten
largest customers accounted for approximately 44%, 49% and 46% of the Company's
net sales for each of the fiscal years ended June 30, 2002, 2001 and 2000,
respectively.

Marketable Securities. The Company classifies all of its marketable
securities as available-for-sale securities. Available-for-sale securities are
carried at fair value, with the unrealized gains and losses net of income taxes,
reported as a component of shareholders' equity. Cost is determined using the
average cost method.

Inventories. Inventories are stated at the lower of cost or market. Cost
is determined on the last-in, first-out (LIFO) method for domestic inventories
and the first-in, first-out (FIFO) method for foreign inventories. If the FIFO
method had been used for all inventories, the total stated amount for
inventories would have been $635,000 and $835,000 greater as of June 30, 2002
and 2001, respectively.

Property, Plant and Equipment. The Company depreciates its assets over
their estimated useful lives. The estimated useful lives range from 27 to 30
years for buildings, 7 to 10 years for machinery and equipment, 3 to 7 years for
furniture and fixtures, the life of the lease for leasehold improvements and 5
to 7 years for capital leases. Plant and equipment are carried at historical
cost and are depreciated using primarily the straight-line method. Repair and
maintenance expenditures are expensed as incurred. Depreciation expense amounted
to $1,423,000, $1,659,000 and $1,987,000 for the fiscal years ended June 30,
2002, 2001 and 2000, respectively.

Long-lived Assets. For long-lived assets other than goodwill and
intangibles, the Company follows Statement of Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of" ("SFAS 121"). The Company continually reviews the
recoverability of the carrying value of these assets using the provisions of
SFAS 121.

Goodwill and Other Intangible Assets. Goodwill, representing the excess
purchase price over the fair market value of net assets of Companies acquired,
had been amortized over a period not to exceed 40 years on a straight-line basis
and had been reviewed for impairment in accordance with SFAS 121. Effective July
1, 2001, the Company adopted the provisions of SFAS No. 142, "Goodwill and Other
Intangible Assets." As a result, the Company no longer amortizes goodwill.
Instead, goodwill is tested for impairment at the reporting unit level at least
annually, by determining the fair value of the reporting unit and comparing the
fair value with its recorded book value. A reporting unit is the lowest level of
an entity that is a business and can be distinguished from other activities,
operations, and assets of the entity. If, during the annual impairment review,
the book value of the reporting unit exceeds the fair value, the implied fair
value of the reporting unit's goodwill is compared with the carrying amount of
the unit's goodwill. If the carrying amount exceeds the implied fair value,
goodwill is written down to its implied fair value. SFAS No. 142 requires
management to estimate the fair value of each reporting unit, as well as the
fair value of the assets and liabilities of each reporting unit, other than
goodwill. The implied fair value of goodwill is determined as the difference
between the fair value of a reporting unit, taken as a whole, and the fair value
of the assets and liabilities of such reporting unit. As required by SFAS No.
142, the Company conducted an initial impairment assessment as of
30

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the July 1, 2001 date of adoption and determined that no impairment existed. As
discussed in Note 18, a goodwill impairment charge of $5,434,000 was recorded
subsequent to adoption of the standard related to a reporting unit whose
operating results and future prospects deteriorated during the current fiscal
year. Note 18 also discusses goodwill amortization expense for each period.

Other intangible assets include patents, trademarks and engineering
drawings, which are amortized on a straight-line basis over the estimated useful
lives of the related assets, generally 15 to 20 years. Amortization expense
amounted to $437,000, $669,000 and $743,000 for the fiscal years ended June 30,
2002, 2001 and 2000, respectively.

Income Taxes. Deferred taxes are determined under the asset and liability
approach. Deferred tax assets and liabilities are recognized on differences
between the book and tax basis of assets and liabilities using presently enacted
tax rates. Further, deferred tax assets are recognized for the expected benefits
of available net operating loss carryforwards, capital loss carryforwards and
foreign tax credit carryforwards. A valuation allowance is recorded to reduce a
deferred tax asset to an amount, which is expected to more likely than not be
realized. The Company continually reviews the adequacy of the valuation
allowance and recognizes these benefits only as reassessment indicates that it
is more likely than not that these benefits will be realized.

Fair Value Disclosure of Financial Instruments. The Company's financial
instruments consist of cash, short-term securities, accounts receivable, notes
receivable, marketable securities, capital lease obligations, accounts payable,
notes payable and other short and long-term borrowings. The current carrying
amount of these instruments approximates fair market value.

Deferred Loan Origination Costs. At June 30, 2002, these costs were
$1,427,000 less $786,000 of accumulated amortization ($1,698,000 less $1,316,000
of accumulated amortization at June 30, 2001) and were included in "Other
assets."

Warranty. The Company's standard contractual warranty provisions are to
repair or replace, at the Company's option, a product that is proven to be
defective. The Company estimates its warranty costs as a percentage of revenues
on a product-by-product basis, based on actual historical experience within the
Company. Hence, the Company accrues estimated warranty costs at the time of
sale. In addition, should the Company become aware of a specific potential
warranty claim, a specific charge is recorded and accounted for separately from
the percent of revenue discussed above. The Company has accrued estimated future
warranty and customer support obligations of $1,516,000 and $2,878,000 at June
30, 2002 and 2001 respectively, which are included in "Other accounts payable
and accrued liabilities."

Revenue Recognition. The Company's products are sold with terms and
conditions, which vary depending on particular cultural and business
environments in which the Company operates globally. The standard policy of the
Company is to recognize revenue in accordance with accounting principles
generally accepted in the United States of America. The Company's standard
payment terms for equipment include a deposit to be received with the customer
order, progress payments until equipment is shipped and a portion of the balance
due within a set number of days following shipment. Freight terms are FOB
shipping dock with risk of loss passing to the purchaser at the time of
shipment. Installation services are provided to the customer on an as needed
basis and are contracted for separately. If non-standard terms are negotiated,
the impact of the terms of shipment and contractual installation requirements
are determined on an individual contract basis. In the case of non-standard
terms, revenue is not recognized until, at a minimum, title and risk of loss
have passed to the customer, and the customer is obligated to pay. If a loss
should occur in transit, the Company is not responsible for, and does not
administer insurance claims unless the terms are FOB destination. The customer
is not contractually eligible for any refund of the purchase price, or right of
return of the contracted product, except if the product fails to meet published
product specifications and the Company fails to perform its obligations under
product warranty terms. When installation services are a contractual element,
and included in the purchase price of the product, the revenue associated with
installing the product

31

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

is generally inconsequential to the total revenue stream. The Company recognizes
revenue for the total sales price and accrues the cost of installing the product
based on the Company's historical installation costs. The terms of sale are
generally on a purchase order basis and as such do not contain formal product
acceptance clauses. On certain large orders, usually in the newspaper equipment
market, a separately negotiated contract is used to establish the terms of sale.
In such cases, the Company recognizes revenue only after all acceptance
criteria, if any, have been satisfied.

The Company uses distributors to assist in the sales function. In these
cases, the Company does not recognize revenue until title for the equipment and
risk of loss has passed to the ultimate customer, who then becomes obligated to
pay with no right of return. Otherwise, the equipment is reported as a part of
the Company's inventory on consignment and no revenue is reported.

Research and Development and Engineering. Research, development and
engineering costs are expensed as incurred.

Net Income (Loss) Per Share. Basic earnings per share includes no dilution
and is computed by dividing net income (loss) available to common stockholders
by the weighted average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution of securities that
could share in the earnings of an entity. The weighted average shares
outstanding used to compute diluted income (loss) per share includes 0 (zero)
shares for each of the fiscal years ended June 30, 2002 and 2001 and 2000,
respectively, which represent potentially dilutive securities. Outstanding
options to purchase 1,514,000 shares, 1,361,000 shares and 1,366,000 shares of
the Company's stock, for the fiscal years ended June 30, 2002, 2001 and 2000,
respectively, are not included in the above calculation to compute diluted
income (loss) per share as they have an anti-dilutive effect.

Comprehensive Income (Loss). As shown in the Statement of Changes in
Shareholders' Equity, comprehensive income (loss) is a measure of net income
(loss) and all other changes in equity of the Company that result from
recognized transactions and other events of the period other than transactions
with shareholders.

Use of Estimates. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Recently Issued Accounting Standards. In June 2002, the FASB issued SFAS
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities"
("SFAS 146"). SFAS 146 requires that a liability for a cost associated with an
exit or disposal activity be recognized and measured, initially at fair value,
only when the liability is incurred; therefore, nullifying Emerging Issues Task
Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination
benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring)" ("EITF 94-3") that required a liability for an exit cost to
be recognized at the date of an entity's commitment to an exit plan. The
adoption of SFAS 146 is expected to result in delayed recognition for certain
types of costs as compared to the provisions of EITF 94-3, especially for
facility closure costs. The provisions of SFAS 146 are effective for exit or
disposal activities that are initiated after December 31, 2002. Since SFAS 146
is effective only for new exit or disposal activities, the adoption of this
standard will not affect amounts currently reported in the Company's
consolidated financial statements. However, the adoption of SFAS 146 could
affect the types and timing of costs included in future business consolidation
and restructuring programs. The Company is currently evaluating the impact of
this new statement.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 provides new
guidance on the recognition of impairment losses on
32

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

long-lived assets to be held and used or to be disposed of and also broadens the
definition of what constitutes a discontinued operation and how the results of a
discontinued operation are to be measured and presented. SFAS 144 is effective
for the Company's fiscal year beginning in 2003 and is not expected to
materially change the methods used by the Company to measure impairment losses
on long-lived assets, but may result in more matters being reported as
discontinued operations than is permitted under current accounting principles.

Reclassifications. Certain prior year items have been reclassified to
conform to the current year's presentation.

NOTE 3 -- ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):

Accumulated Other Comprehensive Income (Loss) ("OCI") is comprised of
various items which affect equity that result from recognized transactions and
other economic events other than transactions with owners in their capacity as
owners. Accumulated other comprehensive income (loss) consists of the following:

Cumulative translation adjustment was reduced by approximately $1,078,000
related to deferred tax assets associated with capital loss carryforwards
recorded by the Company's foreign subsidiaries and approximately $2,995,000 due
to the decline of the US Dollar against the currencies of the Company's major
foreign subsidiaries, primarily the Yen, the Swedish Krona and the Euro. At June
30, 2001, $961,000 of a cumulative translation adjustment related to the foreign
operations of the Roll Handling Group ("RHG") held for disposal was reclassified
and reflected as part of the overall impairment charge recorded during the
fourth quarter of the fiscal year ended June 30, 2001. See Note 8.

NOTE 4 -- PROVISION FOR LOSS ON THE DISPOSITION OF PRE-PRESS OPERATIONS:

In June 1997, the Company sold all of the outstanding shares of its former
Pre-Press Operations ("PPO") to Kaber Imaging, Inc. ("Kaber" or "Buyer"). The
Company recorded a loss on this disposition in the amount of $42,407,000 in the
fiscal year ended June 30, 1997. When the Company acquired the PPO in July 1991,
the Company assumed the existing guarantees that were being provided by the
previous owner. The guarantees consisted of two parts: 1.) a guarantee to
Forsakring Pensiongaranti ("FPG"), a Swedish pension obligation surety bond
firm, in the form of a guarantee bond covering the quasi Swedish government
retirement plan, and 2.) a direct guarantee to a group of individual employees
who were members of a separate plan. The assumption of the pension obligations
was unconditional.

The Company's initial purchase of the PPO in June 1992, included a
liability for an unfunded pension obligation of approximately $4,309,000. This
obligation was adjusted annually in accordance with SFAS No. 87, "Employer's
Accounting for Pensions," until the PPO was sold in June 1997.

The purchase and sale agreement for the sale of the PPO to Kaber in June
1997, included provisions for the Buyer to assume all pension liabilities
related to the PPO, to use their best efforts to gain the release of the Company
from the guarantees and to reimburse the Company for any and all costs incurred
by the Company associated with the guarantees. The provisions and liabilities
for both the plan covered by the FPG surety bond and the group plan for the
individual retirees were assumed by the Buyer and resulted in no curtailment of

33

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

either plan. At the time that the PPO was sold to Kaber, management conducted
due diligence of Kaber and their financial backers and believed that they had
the financial ability to satisfy these guarantees.

Subsequent to the sale of the PPO, Kaber and their related domestic
subsidiaries filed for protection in the United States under Chapter 11 of the
bankruptcy code in February 1999 which caused similar filings in Kaber's foreign
subsidiaries including Sweden. During the period of July 1997 through February
1999, Kaber failed to gain the release of the Company from the guarantees which
remained in place. In March 1999, the Company was contacted by FPG, the surety
bondholder, to fulfill the Company's guarantee of the pension obligation.
Neither Kaber, nor their Swedish subsidiaries, which were in liquidation,
possessed the financial capability to fulfill its obligation. Based on the
demands from FPG, and representatives of the members of the separate plan and
Kaber's bankruptcy, the Company recognized a liability for the estimated amount
of these obligations in its financial results by establishing a reserve of
$2,400,000 in the third quarter of the fiscal year ended June 30, 1999. The
Company made payments to FPG in the amount of $1,567,000 during the fiscal year
ended June 30, 2000. The Company further reduced the reserve by $472,000 to
$361,000, during fiscal 2001, the estimated liability at June 30, 2001 based
upon then current negotiations with remaining former employees. The Company paid
$275,000 during March 2002 as full settlement of this obligation and further
reduced the remaining balance of $86,000 to zero at March 31, 2002.

NOTE 5 -- RESTRUCTURING CHARGES AND RELATED RESERVES:

During March 2000, the Company initiated a restructuring plan that included
the consolidation of production into certain facilities, and reduction in total
employment, primarily in the United States. This plan was expanded during the
fourth quarter of the fiscal year ended June 30, 2001. Accordingly, the Company
recorded restructuring charges in the amounts of $621,000, $2,277,000 and
$5,664,000 for the fiscal years ended June 30, 2002, 2001 and 2000,
respectively. The $621,000 relates primarily to additional exit costs, which
were expensed as incurred and is net of a credit adjustment of $541,000 recorded
during the fourth quarter of the fiscal year ended June 30, 2002, relating to
severance benefits, as those costs are not expected to be paid under this
restructuring plan. The initial restructuring charge of $5,664,000 included
$509,000 related to asset impairments of property, equipment and certain
intangible assets. The restructuring plan is expected to reduce the Company's
worldwide cost base and strengthen its competitive position as a leading global
supplier of auxiliary equipment to the printing and publishing industries. Prior
to the restructuring plan, the Company was managed in a decentralized manner
through geographically dispersed autonomous business units. Given that many of
the Company's significant customers have been reorganizing on a global basis,
management decided to restructure the Company along functional lines on a global
basis. Rather than have sales, product development and production activities at
each decentralized business unit, the restructuring plan included the
centralization of these activities. Products that were previously being produced
at multiple facilities have been consolidated with similar product lines at
existing facilities. Management believes that the nature and scope of these
restructuring activities will be sufficient to restore the Company's
profitability and cash flow from operations. The following tables detail the
components of the restructuring charges and the remaining reserve balances as of
June 30, 2002 and 2001.

Activity in the fiscal year ended June 30, 2001 was as follows:

34

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Activity in the fiscal year ended June 30, 2002 was as follows:

- ---------------

* Additional charges related to expanded restructuring efforts and additional
facility closings.

Severance costs will be paid through December 2002, the majority of which
are expected to be paid in the first quarter of fiscal 2003. Facility lease
termination costs will be paid through April 2006. As of June 30, 2002,
$1,164,000 is included in "Other accounts payable and accrued liabilities" and
$1,071,000 is included in "Other long-term liabilities." As discussed in Note
21, the Company decided to take additional restructuring actions during the
first quarter of the fiscal year ending June 30, 2003.

NOTE 6 -- BUSINESS SEGMENT INFORMATION:

Operating segments are defined as material components of an enterprise
about which separate information is available that is evaluated regularly by the
chief operating decision maker, or decision-making group, in deciding how to
allocate resources and assess performance.

On September 27, 2000, the Company sold substantially all of the assets of
BSD and on September 26, 2001 the Company sold substantially all of the assets
of the RHG. Together, BSD and the RHG accounted for approximately 91% of net
sales and 113% of the operating loss of the Material Handling Group ("MHG") for
the fiscal year ended June 30, 2001. Additionally, certain production facilities
which were previously used to manufacture material handling equipment, primarily
inserters, have been consolidated, and are now producing both inserters and
other accessories and controls equipment. Therefore, the production of
inserters, which had previously been reported in the MHG, is now reported in the
Accessories and Controls segment. The Company also completed the sale of the POD
business in November 2001. As a result of the divestitures of these businesses
and the consolidation of certain production facilities, the Company has
realigned its segment structure into one segment, the Accessories and Controls
segment.

The accounting policies of the operating segments are the same as those
described in the Summary of Significant Accounting Policies in Note 2. An
operating segment's performance is primarily evaluated based on operating
profit. Sales by major country are determined based on the country in which the
subsidiary is legally domiciled. Long-lived assets are principally comprised of
net property, plant and equipment, patents and trademarks, goodwill, and certain
other assets.

The tables below present information about reported segments for the years
ended June 30, 2002, 2001, and 2000 (in thousands). All prior periods have been
restated to conform to the current period's presentation.

35

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

- ---------------

(a) Operating loss reported for the segments has been reduced by the following
special charges:

36

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Two customers, principally of the RHG, accounted for approximately 23% of
the Company's net sales for the fiscal year ended June 30, 2001. One of
these customers, Goss Graphic Systems, Inc. ("Goss"), which accounted for
approximately 11% of the Company's net sales for the fiscal year ended June
30, 2001, filed for bankruptcy protection under a prearranged Chapter 11
proceeding in the United States bankruptcy court, for which the Company
recognized bad debt charges of $439,000 and $536,000 for the fiscal years
ended June 30, 2002 and 2001, respectively.

(b) Other expense, net, of $1,037,000 in the fiscal year ended June 30, 2002
consists primarily of $413,000 associated with an interest rate swap,
$255,000 of deferred financing costs and a $250,000 loss on the sale of the
RHG. Other income, net, of $940,000 in the fiscal year ended June 30, 2001
consists primarily of a pre-tax gain of $1,213,000 related to a favorable
settlement of a patent litigation suit, a $345,000 pre-tax gain on a
derivative financial instrument that did not qualify as a hedge pursuant to
SFAS 133, and an $831,000 pre-tax loss on the sale of BSD.

37

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7 -- DERIVATIVES:

During the fiscal year ended June 30, 2002, the Company had currency
futures contracts and an interest rate swap agreement that qualified as cash
flow hedges; accordingly, the gain or loss was recorded in OCI and will be
recognized in income when the hedged item affects earnings. On April 27, 2001,
the Company entered into an interest rate swap agreement (the "Swap") with Fleet
National Bank. The effect of this agreement was to convert $15,000,000 of the
Company's variable rate debt into fixed rate debt with an interest rate of 4.98%
with the same maturity as the existing credit facility. Included in interest
expense for the fiscal years ended June 30, 2002 and 2001 is $383,000 and
$19,000, respectively, associated with this Swap.

The adjustment to the fair value of the Swap at June 30, 2002 resulted in a
loss for the fiscal year ended June 30, 2002 of $486,000. Of this amount,
$63,000 has been recorded in OCI, $10,000 has been recorded as a deferred tax
asset and the remaining $413,000 has been charged against earnings, which was
recorded in "Other income and expense" in the accompanying consolidated
statement of income. As a result of entering into the Amended Credit Facility,
as defined in Note 11, which changed various provisions of the original
agreement including the maturity date, a portion of the Swap no longer qualified
as a hedge pursuant to SFAS 133. Future changes in the fair value of this
portion of the Swap will be recorded in earnings through its maturity date of
October 30, 2003. The remaining loss of approximately $63,000 recorded in OCI as
of June 30, 2002, was amortized to earnings through October 1, 2002, the
maturity date of the Amended Credit Facility.

Hedging ineffectiveness, determined in accordance with SFAS 133, had no
material impact on earnings for either of the fiscal years ended June 30, 2002
or 2001. At July 1, 2000, the Company had a derivative that did not qualify as a
hedge pursuant to SFAS 133. A $345,000 pre-tax gain was recorded in other income
in the first quarter of the fiscal year ended June 30, 2001 related to this
derivative instrument. The effect on earnings of the Company's other derivative
financial instruments is not material for any fiscal year presented.

38

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Unrealized net gains (losses) included in OCI are as follows:

The unrealized net loss of $32,000 at June 30, 2002, is primarily comprised
of a loss on the Swap of $63,000 and a gain on future contracts of $31,000, and
is expected to be reclassified against earnings during the next twelve months.
The currency futures contracts expired at various times through September 16,
2002 while the interest rate swap agreement expires on October 30, 2003. Other
income and expense, net for the year ended June 30, 2002 includes a $206,000
loss on certain derivative financial instruments which became speculative and no
longer qualified as hedges pursuant to SFAS 133 as a result of the divestiture
of the RHG.

NOTE 8 -- SALE OF BUSINESSES AND IMPAIRMENT CHARGES:

During the first quarter of fiscal 2003, the Company committed to a plan to
dispose of substantially all the assets of its Baldwin Kansa subsidiary ("BKA");
the transaction closed on October 10, 2002. The consideration received for the
transaction, after certain post-closing adjustments, was approximately
$3,769,000, which approximated the net book value of the assets sold. As more
fully discussed in Note 18, during the fourth quarter of fiscal 2002, the
Company recorded an impairment charge of $5,434,000 to write-off goodwill
associated with this business.

Net assets held for disposal related to BKA are included in the following
categories as of June 30, 2002:

Accounts receivable, net of allowance of $5,000............. $ 635,000
Inventory................................................... 2,107,000
Prepaid expenses and other current assets................... 37,000
Property, plant and equipment, net of accumulated
depreciation.............................................. 1,334,000
Accounts payable............................................ (200,000)
Accrued salaries, commissions, bonus and profit-sharing..... (135,000)
Customer deposits........................................... (24,000)
Accrued and withheld taxes.................................. (2,000)
Other accounts payable and accrued liabilities.............. (14,000)
----------
Net assets held for disposal as of June 30, 2002............ $3,738,000
==========

During the fourth quarter of fiscal 2001, the Company committed to a plan
to dispose of the RHG. On September 26, 2001, the Company sold substantially all
of the assets of its RHG. The consideration received for the transaction,
subject to certain post-closing adjustments, amounted to approximately
$6,800,000. The Company received $1,808,000 at closing and $4,992,000 in October
2001. Accordingly, during the fourth quarter of fiscal 2001, the Company
recorded an impairment charge of approximately $14,831,000 relating primarily to
goodwill and certain assets of the RHG, including $961,000 of cumulative
translation adjustments related to the foreign operations of the RHG, which were
reclassified and reflected as part of the impairment charge. During the fiscal
year ended June 30, 2002, the Company recognized an additional $250,000 loss on
the sale of RHG, which is recorded in other expense.

39

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net assets held for disposal related to the RHG were included in the
following categories as of June 30, 2001:

Cash........................................................ $ 74,000
Accounts receivable, net of allowance of $12,000............ 7,124,000
Inventory................................................... 5,992,000
Prepaid expenses and other current assets................... 690,000
Accounts payable............................................ (2,832,000)
Accrued salaries, commissions, bonus and profit-sharing..... (812,000)
Customer deposits........................................... (1,691,000)
Accrued and withheld taxes.................................. (386,000)
Income taxes payable........................................ (64,000)
Other accounts payable and accrued liabilities.............. (1,361,000)
-----------
Net assets held for disposal as of June 30, 2001............ $ 6,734,000
===========

Not included in the above net assets are $11,192,000 of goodwill, $989,000
of patents and $1,549,000 of property, plant and equipment, which were
written-off as of June 30, 2001. These assets were considered impaired, as the
carrying value of these assets would not be recovered as a result of the sale of
the RHG.

Also during the fourth quarter of fiscal 2001, the Company decided to exit
the POD business, which resulted in the write-off of $687,000 of goodwill, which
was included as part of the impairment charge recorded in the fiscal year ended
June 30, 2001. The remaining assets of the POD business are not material.

On September 27, 2000, the Company sold substantially all of the assets of
its Baldwin Stobb Division ("BSD") to Systems Technology, Inc., a new company
formed by the management of BSD. The consideration received for the transaction,
subject to certain post-closing adjustments, was the sum of (i) $6,750,000;
minus (ii) all payments received (net of disbursements paid) on behalf of BSD
for the period July 1, 2000 through September 27, 2000 amounting to $2,155,000;
plus (iii) $175,000 in consideration for income tax obligations to be received
at a later date. The total consideration received by the Company included
307,000 shares of the Company's Class A Common Stock valued at the average fair
market price of the Company's Class A Common Stock for the ten days immediately
prior to closing ($1.9875 per share). The Company recorded a pre-tax loss of
$831,000 including associated disposition costs, as a result of this
transaction, which is included in other expense in the fiscal year ended June
30, 2001.

Net sales and operating loss of RHG, POD, BSD and BKA combined, which are
included in the Company's consolidated financial statements, were as follows for
the years ended June 30:

40

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9 -- INVENTORIES:

Inventories consist of the following:

Foreign inventories increased by $2,017,000 (decreased by $3,240,000 in
2001) due to translation rates in effect at June 30, 2002 when compared to rates
in effect at June 30, 2001.

NOTE 10 -- LOANS PAYABLE:

The maximum amount of loans payable outstanding during the year ended June
30, 2002 was $5,372,000 ($8,067,000 in 2001). Average interest rates are
weighted by month and reflect the monthly amount of short-term borrowing in use
and the respective rates of interest thereon. Loans payable increased by
$830,000 (decreased by $574,000 in 2001), due to translation rates in effect at
June 30, 2002 when compared to rates in effect at June 30, 2001.

41

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11 -- LONG-TERM DEBT:

On October 31, 2000, the Company entered into a $35,000,000 revolving
credit facility (the "Credit Facility") with Fleet National Bank and First Union
National Bank (collectively the "Banks"), which had an original scheduled
maturity date of October 31, 2003. The Credit Facility consisted of a
$25,000,000 revolving credit line (the "Revolver") and a $10,000,000 credit line
to be utilized for acquisitions, (the "Acquisition Line"). On January 28, 2002,
the Credit Facility was amended (the "Amended Credit Facility"), to among other
things, remove the Acquisition Line, reduce the Revolver to $21,000,000 (subject
to a borrowing base), and change the maturity date to October 1, 2002. In
addition, $4,000,000 of the existing Revolver was converted into a term loan
(the "Term Loan"), which matured on June 28, 2002, resulting in available
borrowings under the Revolver from July 1, 2002 to October 1, 2002 of
$17,000,000. The Amended Credit Facility required the Company to maintain
certain financial covenants including minimum operating income covenants. At
June 30, 2002, the Company had outstanding borrowings of $16,650,000 under the
Revolver and Term Loan, plus outstanding letters of credit of $3,068,000. The
Revolver has associated commitment fees, which are calculated quarterly, at a
rate of one-half of one percent per annum of the unused portion of the Revolver.
Commitment fees for the fiscal years ended June 30, 2002, 2001 and 2000 were
$24,000, $47,000 and $44,000, respectively.

As a result of the reduction in available borrowings under the Amended
Credit Facility, and the revised maturity date, the Company was required to
write-down a portion of the related unamortized deferred financing costs
initially recorded in connection with obtaining the Credit Facility.
Accordingly, the Company recorded a charge against earnings of $255,000 during
the quarter ended December 31, 2001, which is included in "Other income and
expense." The Company incurred additional costs of approximately $227,000
associated with entering into the Amended Credit Facility. The Company amortized
the remaining deferred financing costs through October 1, 2002, the maturity
date of the Amended Credit Facility.

The Company has experienced operating losses, negative cash flows and debt
covenant violations over the past two years. During the quarters ended March 31,
2002 and June 30, 2002, the Company did not meet its minimum operating income
covenants contained in the Amended Credit Facility, and further the Company

42

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

did not make a required $4,000,000 principal payment on the Term Loan on June
28, 2002. The banks granted a forbearance of the collection of the indebtedness
until October 1, 2002 and on October 16, 2002, the Company received an
irrevocable commitment letter from the Banks to further amend and extend the
Amended Credit Facility, and waive the covenant violations and Term Loan default
(the "Extended Credit Facility"). The Extended Credit Facility, totaling
$20,900,000, will consist of a $17,000,000 revolving credit line (the "Extended
Revolver") and a $3,900,000 term loan due July 1, 2003 (the "Extended Term
Loan"). The Extended Credit Facility will require the Company to utilize the net
proceeds of $3,736,000 from the sale of BKA plus $464,000 from the Company's
cash flows to reduce the outstanding borrowings under the Extended Revolver by
$4,200,000 before October 30, 2002, of which, $2,700,000 will permanently reduce
the Extended Revolver and will $1,500,000 become available for future borrowings
upon the payment of the $464,000 referenced above. Additionally, beginning in
November 2002 and extending through June 2003, the Company will be required to
permanently reduce the Extended Revolver by making monthly payments of $125,000.
The Company will be required to permanently reduce the Extended Revolver by
$5,000,000 on December 30, 2002 and by $5,000,000 on March 30, 2003, only if the
Company generates non-operating alternative sources of financing. $5,300,000 due
under the Extended Revolver and Extended Term Loan have been classified as
current (of which $3,835,000 has been paid through October 15, 2002) and the
remaining $11,350,000 has been classified as long-term at June 30, 2002.

Interest on the Extended Revolver and Extended Term Loan will be charged at
prime plus 2.00% per annum. The Extended Credit Facility will be collateralized
by a pledge of the capital stock and certain domestic assets of the Company's
subsidiaries. The Extended Credit Facility will include certain restrictions,
which will limit the incurrence of debt and prohibit dividend payments among
other things, and require the Company to satisfy certain financial covenants.
These financial covenants will require the Company to achieve minimum operating
income of $945,000 for the quarter ending December 31, 2002, $844,000 for the
quarter ending March 31, 2003 and $732,000 for the quarter ending June 30, 2003.
The ability to achieve these covenants depends in part on management's
successful execution of the restructuring plans discussed in Note 5 to the
consolidated financial statements and other business factors outside of the
control of management. There can be no guarantee that such covenants will be
met. Accordingly, if the covenants are not met, amounts outstanding under the
Extended Credit Facility would become payable on demand. Management believes
that alternative sources of financing are available to finance the existing
facilities on a long-term basis, which the Company is currently pursuing.
However, if the loans become payable on demand and alternative financing sources
are not available, management will be required to take additional actions to
reduce operating expenses or sell assets to meet liquidity needs.

The Company maintains relationships with both foreign and domestic banks,
which combined have extended credit facilities to the Company totaling
$24,061,000, including amounts available under the Revolver. As of June 30,
2002, the Company had $22,661,000 outstanding under these credit facilities
including $16,650,000 under the Revolver and Term Loan. Total debt levels as
reported on the balance sheet at June 30, 2002 are $930,000 higher than they
would have been if June 30, 2001 exchange rates had been used.

Notes payable, denominated in currencies other than the U.S. dollar,
increased by $485,000 (decreased by $274,000 in 2001), due to translation rates
in effect at June 30, 2002 when compared to translation rates in effect at June
30, 2001. The foreign note due through 2008, with an interest rate of 5.00%, is
collateralized by buildings as outlined in the indenture relating to this note.

43

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Maturities of long-term debt in each fiscal year ending after June 30, 2002
are as follows:

NOTE 12 -- TAXES ON INCOME:

(Loss) income before income taxes and the (benefit) provision for income
taxes are comprised of:

Deferred income taxes are provided on temporary differences between the
financial reporting basis and tax basis of the Company's assets and liabilities.
The principal temporary differences which give rise to deferred tax assets and
liabilities at June 30, 2002 and 2001 are as follows:

44

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In March 2002, President Bush signed a new law, which temporarily extended
the Net Operating Loss ("NOL") carryback period from two to five years.
Therefore, the Company filed for a refund of $1,420,000, which was received on
May 14, 2002. As part of this refund claim, the Company carried back
approximately $1,927,000 of previously recorded NOL's in exchange for the
$1,420,000 of cash and approximately $507,000 of previously benefited foreign
tax credits.

At June 30, 2002, net operating loss carryforwards of $47,242,000 and
$14,881,000, respectively, are available to reduce future foreign and domestic
taxable income. The foreign NOL carry-forwards have an indefinite carry-forward
period, while the domestic NOLs expire in fiscal 2022. In addition, as of June
30, 2002, the Company has capital loss carry-forwards available in the amount of
$4,092,000, $3,491,000 of which is domestic and expires at various dates through
fiscal 2006. The remainder is available in England and has an indefinite
carry-forward period.

The Company establishes valuation allowances in accordance with the
provisions of SFAS No. 109, "Accounting for Income Taxes." The Company reduced a
previously recorded valuation allowance in fiscal 2000, which related primarily
to foreign NOL carry-forwards previously expected to expire unutilized. In the
fiscal year ended June 30, 2001, the valuation allowance was increased,
primarily for capital loss and foreign tax credit carryforwards that are more
likely than not to expire unused. In the fiscal year ended June 30, 2002, the
valuation allowance increased primarily because the Company did not believe
there was sufficient evidence to indicate that it would more likely than not
realize its domestic deferred tax assets. This increase was partially offset by
a reduction in the valuation allowance for previously reserved loss
carryforwards that expired unutilized.

The Company has not had to provide for income taxes on $19,591,000 of
cumulative undistributed earnings of subsidiaries outside the United States
because of the Company's intention to indefinitely reinvest those earnings.

During the Company's fiscal year ended June 30, 2002, the German Tax
Authority changed its position regarding the taxability of certain intercompany
dividends. As a result, several companies, including Baldwin, were assessed
additional tax on dividends paid from 1994 through 1996. At this point in time,
the proposed assessment would result in a tax charge of approximately $3,500,000
and the elimination of previously reserved tax losses of approximately
$4,500,000. However, based on precedent, the Company believes it will prevail in
this matter and there will be no material financial impact as a result of the
German Tax Authority's change in position.

45

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The reconciliation of the computed "expected" (benefit) provision
(determined by applying the United States Federal statutory income tax rate of
34% to (loss) income before income taxes) to the actual tax provision is as
follows:

NOTE 13 -- COMMON STOCK:

Except with respect to the election or removal of Directors, and certain
other matters with respect to which Delaware law requires each class to vote as
a separate class, the holders of the Company's Class A Common Stock ("Class A")
and Class B Common Stock ("Class B") vote as a single class on all matters, with
each share of Class A having one vote per share and each share of Class B having
ten votes per share.

With respect to the election of Directors, the holders of Class A, voting
as a separate class, are entitled to elect 25% of the total number of Directors
(or the nearest higher whole number) constituting the entire Board of Directors.
The holders of Class B, voting as a separate class, are entitled to elect the
remaining Directors, so long as the number of outstanding shares of Class B is
equal to at least 12.5% of the number of outstanding shares of both classes of
Common Stock as of the record date of the Company's Annual Meeting. If the
number of outstanding shares of Class B is less than 12.5% of the total number
of outstanding shares of both classes of Common Stock as of the record date of
the Company's Annual Meeting, the remaining directors are elected by the holders
of both classes of Common Stock voting together as a single class, with the
holders of Class A having one vote per share and the holders of Class B having
ten votes per share. As of June 30, 2002, the number of outstanding shares of
Class B constituted approximately 14.6% (12.3% as of June 30, 2001) of the total
number of outstanding shares of both classes of Common Stock.

Class A has no conversion rights; however, Class B is convertible into
Class A on a one-for-one basis. In addition, no dividend in cash or property may
be declared or paid on shares of Class B without a dividend being declared or
paid on shares of Class A of at least 105% of the dividend on shares of Class B.

In November 1999, the Company initiated a new stock repurchase program.
Under the new program, the Company is authorized to utilize up to $5,000,000 to
repurchase Class A. As of June 30, 2002, 818,300 shares of Class A and 25,000
shares of Class B had been repurchased for $1,784,000, of which $1,721,000 was
used to purchase Class A and $63,000 was used to purchase Class B under this new
program.

NOTE 14 -- STOCK OPTIONS:

The 1986 Stock Option Plan, as amended and restated (the "1986 Plan"),
allowed for the granting, at fair market value on the date of grant, of
incentive stock options, non-qualified stock options, and tandem Stock
Appreciation Rights ("SARS") for up to a total of 2,220,000 and 590,000 shares
of Class A and

46

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Class B, respectively. Options to purchase shares of Class B were granted at a
price per share of no less than 125% of the fair market value of a share of
Class A on the date of grant. All options became exercisable in three equal
annual installments commencing on the second anniversary of the date of grant.
Unexercised options terminate no later than ten years from the date of grant and
canceled shares became available for future grants. The 1986 Plan was terminated
on October 14, 1996 provided, however, that outstanding options under the 1986
plan will continue to be subject to the terms thereof.

The 1990 Directors' Stock Option Plan (the "1990 Plan") provided for the
granting, at fair market value on the date of grant, of non-qualified stock
options to purchase up to a total of 100,000 shares of Class A and Class B to
members of the Company's Board of Directors who are not employees ("Eligible
Directors") of the Company or any of its subsidiaries. Grants were made on the
third business day subsequent to each Annual Meeting of Stockholders, including
the 1990 meeting, to each Eligible Director for 1,000 shares of Class A and
Class B in proportion to the number of shares of each such class then
outstanding. Options to purchase shares of Class B were granted at a price per
share of no less than 125% of the fair market value of a share of Class A on the
date of grant. Restrictions under the 1990 Plan were similar to those under the
1986 Plan except with regard to the exercise date, which was twelve months after
the date of grant, and termination of options, which is generally nine months
after termination of service as a director. The 1990 Plan was terminated on
November 12, 1998 in connection with the approval of the 1998 Non-Employee
Directors' Stock Option Plan (the "1998 Plan"), provided however, that
outstanding options under the 1990 Plan will continue to be subject to the terms
thereof.

The 1996 Stock Option Plan (the "1996 Plan") allows for the granting, at
fair market value on the date of grant, of incentive stock options,
non-qualified stock options, and tandem SARS for up to a total of 875,000 and
125,000 shares of Class A and Class B, respectively. Options to purchase shares
of Class B are granted at a price per share of no less than 125% of the fair
market value of a share of Class A on the date of grant. Restrictions under the
1996 Plan are similar to those under the 1986 Plan with regard to the exercise
and termination of options. Canceled shares become available for future grants.
See Note 21.

The 1998 Non-Employee Directors' Stock Option Plan (the "1998 Plan")
provides for the issuance of options to purchase up to an aggregate of 250,000
shares of Class A to non-employee Directors of the Company. Under the 1998 Plan,
each year, each eligible Director receives a grant of options to purchase 3,000
shares of Class A. The options are granted at the fair market value on the date
of grant, and vest one-third per year on each succeeding anniversary of the date
of grant. Unexercised options terminate no later than ten years from the date of
grant and canceled shares become available for future grants. See Note 21.

47

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

48

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information regarding stock options
outstanding and exercisable at June 30, 2002:

The Company adopted SFAS No. 123, "Accounting for Stock Based Compensation"
("SFAS 123"), on July 1, 1996, electing the disclosure only provisions of that
statement. Accordingly, no charge for compensation has been recorded for stock
based employee awards. In accordance with SFAS 123, the fair value method of
accounting has not been applied to options granted prior to July 1, 1995. Due to
the vesting schedule of options granted under each of the stock option plans, as
well as the exclusion of the fair value of options granted prior to July 1,
1995, the fair value of compensation cost calculated to disclose pro forma
financial information may not be representative of that to be expected in future
years. The fair value method of calculating the value of each option granted
subsequent to June 30, 1995 was estimated as of the option grant date using the
Black-Scholes option pricing model. The following weighted average assumptions
were used to calculate the estimated fair value of the options by the pricing
model for the fiscal years ended June 30, 2002, 2001 and 2000: the forfeiture
rates and dividend yields were 0% (none) and the expected lives were five years
for each of the fiscal years ended June 30, 2002, 2001 and 2000, the weighted
average risk free interest rates were 4.52% for 2002, 5.70% for 2001 and 6.07%
for 2001, and the average volatility was 54.76% for 2002, 50.61% for 2001 and
49.71% for 2000. If the Company had recorded compensation cost based upon the
fair values as calculated above, the proforma effects on net (loss) income and
(loss) earnings per share would have been as follows:

NOTE 15 -- SUPPLEMENTAL COMPENSATION:

Subsidiaries within the Americas maintain profit sharing, savings and
retirement plans. The Company previously had three domestic profit sharing
plans; The Enkel Corporation Retirement Plan (the "Enkel Plan"), the Kansa
Corporation Profit-Sharing/401K Plan and Trust (the "Kansa Plan") and the
Baldwin Technology Profit-Sharing and Savings Plan (the "Baldwin Plan"). The
Enkel Plan, which covered the domestic employees of the divested RHG, was
terminated in accordance with the provisions of the Enkel Plan. The Company
amended the Baldwin Plan to allow for combining the remaining two plans, the
Baldwin Plan and the Kansa Plan into one plan, the Baldwin Plan, effective
January 1, 2002. The amendments also include a change in both the vesting terms
and timing of the Company's contribution to the Baldwin Plan. Previously, the
Company's contribution was discretionary and made on an annual basis, based on
the profitability of the Company and the participants vested in the Company's
contribution according to a 7-year vesting schedule. The changes will enable the
Company to match up to 5% of eligible compensation and the

49

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

participants' interest in the Company's contribution to vest immediately.
Participant contributions are made on a weekly basis, while the Company's
matching contributions are made on a quarterly basis. Amounts expensed under
these plans were as follows:

Company contributions to each of the above plans are discretionary and are
subject to approval by their respective Boards of Directors. The assets of the
above plans are invested primarily in mutual funds, money market funds, and
Class A Common Stock of the Company, which constitutes approximately 1% of the
total assets of the fund at June 30, 2002.

Certain subsidiaries and divisions within Europe maintain pension plans.
The assets of the following plans are invested primarily in insurance contracts,
government securities, and guaranteed investment contracts. Amounts expensed
under these plans were as follows:

The amount of expense relating to the European pension plans is determined
based upon, among other things, the age, salary and years of service of
employees covered by the plans. The Company's German, English and Swedish
subsidiaries make annual contributions to the plans equal to the amounts accrued
for pension expense.

In Germany, at Baldwin Germany GmbH, there is currently one additional
pension plan covering one employee and two former employees. This defined
benefit plan provides for benefits, at maturity age, in lump sum payments on
retirement or death or as a disability pension in case of disability, and is
partially funded by insurance contracts.

50

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following tables set forth the components of net periodic benefit
costs, the funded status and key actuarial assumptions, and reconciliations of
projected benefit obligations and fair values of plan assets of the defined
benefit plans:

The Company's Japanese subsidiary maintains two defined contribution
retirement plans covering all employees, excluding directors, and a separate
plan for its directors. Amounts contributed and expensed under these programs
are determined based on participants' salary and length of service. The plans
are fully accrued

51

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and partially funded through insurance contracts. Expenses relating to these
programs were $376,000, $552,000 and $852,000 for the fiscal years ended June
30, 2002, 2001 and 2000, respectively.

Officers and key employees of the Company participate in various incentive
compensation plans. Amounts expensed under such plans were $0 (zero), $74,000,
and $0 (zero) for the fiscal years ended June 30, 2002, 2001 and 2000,
respectively.

NOTE 16 -- COMMITMENTS AND CONTINGENCIES:

Future minimum annual lease payments under capital leases, which consist of
buildings, and machinery and equipment with accumulated depreciation amounting
to $306,000 at June 30, 2002 and $590,000 at June 30, 2001, together with the
present value of the minimum lease payments are as follows at June 30, 2002:

At June 30, 2002 $67,000, ($4,000 at June 30, 2001) is included in "Other
long-term liabilities" representing the long-term portion of the present value
of minimum lease payments.

Rental expense on operating leases amounted to approximately $4,422,000,
$4,352,000 and $4,600,000 for the years ended June 30, 2002, 2001 and 2000,
respectively. Aggregate future annual rentals under noncancellable operating
leases for periods of more than one year at June 30, 2002 are as follows:

From time to time, in the ordinary course of business, the Company is
subject to legal proceedings. While it is impossible to determine the ultimate
outcome of such matters, it is management's opinion that the resolution of any
pending issues will not have a material adverse effect on the consolidated
financial position or results of operations of the Company.

NOTE 17 -- RELATED PARTIES:

In accordance with the terms of the employment agreement between the
Company and John T. Heald, Jr., President and Chief Executive Officer of the
Company, the Company sold 375,000 shares of Class B to Mr. Heald in October 2001
at $1.80 per share in exchange for a recourse demand promissory note in the
amount of $675,000. The note bears interest, payable annually, at a rate of 5%
per annum. Of the 375,000 shares issued, 189,117 shares were treasury shares,
and the balance of 185,883 shares, were newly

52

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

issued shares. The note is collateralized by the shares, pursuant to a loan and
pledge agreement between Mr. Heald and the Company dated October 17, 2001. Upon
termination of Mr. Heald's employment, the Company has agreed not to demand
payment for a period of six months following termination, or twelve months
following termination if Mr. Heald's employment terminates by reason of death.
Not withstanding the foregoing, if at any time Mr. Heald sells any of these
shares, he is to pay to the Company $1.80 times the number of shares sold within
five days of receipt of the funds from such sale. The balance of the loan at
June 30, 2002 and the maximum amount of the loan outstanding including interest
during the fiscal year ended June 30, 2002 was $699,000.

In accordance with the terms of the employment agreement between the
Company and Gerald A. Nathe, Chairman of the Company and formerly President and
Chief Executive Officer, the Company loaned Mr. Nathe $1,817,000 to enable Mr.
Nathe to purchase 315,144 shares of Class B from a non-employee shareholder in
November of 1993 in exchange for a recourse demand promissory note for said
amount. The note required interest, payable on the anniversary dates, at LIBOR
rates plus 1.25%, reset on the first day of each succeeding January, April, July
and October. The note was collateralized by the shares, pursuant to a loan and
pledge agreement between Mr. Nathe and the Company dated November 30, 1993, as
amended and restated on November 25, 1997. Upon termination of Mr. Nathe's
employment, the Company has agreed not to demand payment for a period of six
months following termination, or twelve months following termination if Mr.
Nathe's employment terminates by reason of death. Notwithstanding the foregoing,
if at any time Mr. Nathe sells any of these shares, he is to pay to the Company
$5.77 times the number of shares sold within five days of receipt of the funds
from such sale. The maximum amount of the loan outstanding including interest
during the fiscal years ended June 30, 2002 and 2001 was $1,612,000 and
$1,644,000, respectively. At June 30, 2002, the balance of the loan, including
interest was $1,544,000. The Board of Directors of the Company forgave interest
payments due on the loan from Mr. Nathe during the fiscal years ended June 30,
2002 and 2001 in the amounts of $112,000 and $128,000 respectively. Such amounts
were recorded as compensation expense to Mr. Nathe, and included in "General and
administrative expenses." In February, 2002, the Company amended Mr. Nathe's
employment agreement and the loan and pledge agreement, and, following repayment
by Mr. Nathe of a portion of the principal on the loan, Mr. Nathe issued a
substitute recourse demand promissory note for $1,500,000, the outstanding
principal balance on the date thereof, with interest payable annually at an
annual rate of 5%. As discussed in Note 21, in August, 2002, the Company amended
Mr. Nathe's employment agreement, the loan and pledge agreement, and the
promissory note, to evidence reduction of the outstanding principal and interest
due from Mr. Nathe on the loan by $750,000 in exchange for an equal reduction in
deferred compensation payments to be made by the Company to Mr. Nathe.

On March 11, 1994, the Company entered into a loan and pledge agreement and
promissory note with William J. Lauricella, a former Chief Financial Officer and
Treasurer of the Company. Mr. Lauricella was loaned $164,000 in order to
purchase 25,000 shares of Class B from non-employee shareholders. All of the
shares purchased were pledged as collateral for a demand promissory note bearing
interest payable on the anniversary dates at LIBOR rates plus 1.25% reset on the
first day of each succeeding January, April, July and October. On February 4,
2000, Mr. Lauricella resigned as Chief Financial Officer and Treasurer of the
Company. Pursuant to Mr. Lauricella's separation agreement, the Company
repurchased the 25,000 shares of Class B for $2.50 per share, with the resulting
$63,000 used to offset the outstanding amount of the loan. In addition, the
Company owed Mr. Lauricella approximately $109,000, relating to a deferred
compensation agreement, which was used to further reduce such loan amount. The
remaining balance of $1,000 was paid by Mr. Lauricella to the Company.

On July 1, 1990, Baldwin Technology Corporation and Baldwin Graphic
Systems, Inc., two subsidiaries of Baldwin Americas Corporation, entered into an
agreement with Harold W. Gegenheimer, Chairman Emeritus, guaranteed by the
Company, to replace various prior agreements including royalty and employment

53

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

agreements, retirement plans and bonus arrangements. The agreement guarantees a
compensation amount of $200,000 per year to Mr. Gegenheimer. Simultaneously, a
separate agreement was entered into by the Company and Mr. Gegenheimer whereby
the Company was released from certain prior agreements and agreed to pay a
minimum guaranteed amount of compensation of $200,000 per year to Mr.
Gegenheimer, not to exceed $350,000 per year, based on one and one-half percent
(1.5%) of the Company's annual net after tax profits. The amount expensed under
these two agreements was $400,000 for each of the fiscal years ended June 30,
2002, 2001 and 2000.

On February 10, 1997, Wendell M. Smith resigned as Chairman of the Company.
The Company has made deferred compensation payments to Mr. Smith in the amount
of $103,000 for each of the fiscal years ended June 30, 2002, 2001 and 2000,
respectively. In addition, the Company entered into a consulting agreement with
Polestar Limited ("Polestar"), a corporation controlled by Mr. Smith, which
provides for payments to Polestar of $60,000 per year for consulting services
through 2014. The agreement was amended during the fiscal year ended June 30,
2001 to increase payments to $90,000 per year.

NOTE 18 -- GOODWILL AND OTHER INTANGIBLE ASSETS:

Goodwill and Other Intangible Assets. As discussed in Note 2, the Company
adopted SFAS 142 effective July 1, 2001 and as a result ceased amortization of
goodwill. Goodwill amortization expense amounted to zero, $973,000, and
$1,028,000 for the fiscal years ended June 30, 2002, 2001 and 2000,
respectively.

During fiscal 2002, the operating results and future prospects of the
Baldwin Kansa reporting unit ("BKA") deteriorated resulting in the fair value of
that reporting unit (determined based on the present value of estimated future
cash flows)becoming less than BKA's book value. Management determined that the
implied fair value of BKA's goodwill was zero, resulting in the write-off of
BKA's goodwill, which totaled $5,434,000.

Intangible assets subject to amortization at June 30, 2002 are comprised of
the following:

The weighted average life for intangible assets at June 30, 2002 was 9.4
years and amortization expense for the fiscal year ended June 30, 2002 was
$437,000.

Estimated amortization expense for each of the five succeeding fiscal years
is as follows:

54

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The changes in the carrying amount of goodwill by segment for each of the
fiscal years ended June 30, 2002 and 2001 are as follows (in thousands):

Activity in the fiscal year ended June 30, 2002 is as follows:

Activity in the fiscal year ended June 30, 2001 is as follows:

The following selected pro forma information for the fiscal years ended
June 30, 2001 and 2000 assumes the provisions of SFAS 142 had been applied as of
the beginning of each of the fiscal years:

NOTE 19 -- CUSTOMER BANKRUPTCY:

On September 10, 2001, one large OEM customer, Goss Graphic Systems, Inc.
("Goss") filed for bankruptcy protection under a prearranged Chapter 11
proceeding in the U.S. Bankruptcy Court. Goss' European and Asian subsidiaries
are not included in this proceeding. The Company received timely payments, on a
post petition basis, from the foreign subsidiaries of Goss, and continues to
monitor the status of all Goss payments. At June 30, 2002, the Company's
consolidated balance sheet included approximately $1,979,000 of

55

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

trade receivables from Goss, of which approximately $1,029,000 relates to Goss'
European and Asian subsidiaries, which are not included in the bankruptcy
proceeding. The balance of $950,000 is fully reserved. As a result of this
bankruptcy filing, the Company increased its bad debt reserve related to Goss by
$439,000 and $536,000 during the fiscal years ended June 30, 2002 and 2001,
respectively. The bad debt write-off in the fiscal year ended June 30, 2002
relates to sales made in the fiscal year ended June 30, 2002, prior to the
bankruptcy filing.

NOTE 20 -- QUARTERLY FINANCIAL DATA (UNAUDITED):

Summarized quarterly financial data for the fiscal years ended June 30,
2002 and 2001 are as follows (in thousands, except per share data):

56

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

- ---------------

(1) The first quarter of fiscal 2002 operating expenses include a $634,000 bad
debt charge related to Goss.

(2) The second quarter of fiscal 2002 operating expenses include a partial
recovery of $195,000 of a bad debt charge related to Goss and a $289,000
profit sharing accrual reversal. The second quarter of fiscal 2002 includes
a reduction to a reserve in the amount of $86,000 related to the sale of the
PPO see Note 4. The second quarter of fiscal 2002 other income includes a
$206,000 loss on certain derivative financial instruments which became
speculative and no longer qualified as hedges pursuant to SFAS 133 as a
result of the divestiture of the RHG, a $170,000 charge for an interest rate
swap, which ceased to qualify as a hedge pursuant to SFAS 133, and a
$255,000 write-down of deferred financing costs.

(3) The third quarter of fiscal 2002 cost of goods sold includes a $352,000
charge for inventory write-offs associated with plant consolidations as the
Company decided to discard certain inventory rather than incur transfer
costs. The third quarter of fiscal 2002 operating expenses includes $112,000
of interest forgiveness related to a note receivable from an officer of the
Company.

(4) The fourth quarter of fiscal 2002 other income includes a $250,000 loss on
the divestiture of the RHG as a result of further negotiations with the
purchaser and the finalization of the purchase price. The fourth quarter of
fiscal 2002 restructuring charge includes a credit adjustment of $541,000
relating to severance benefits as these costs are not expected to be paid
under the restructuring plan. The fourth quarter of fiscal 2002 provision
for income taxes includes a $7,046,000 valuation allowance associated with
the current year's domestic NOL's.

(5) The first quarter of fiscal 2001 operating expenses include goodwill
amortization of $251,000. The first quarter of fiscal 2001 other income
includes a $345,000 gain on a derivative financial instrument that did not
qualify as a hedge pursuant to SFAS 133 and a $650,000 pre-tax loss on the
sale of BSD see Notes 7 and 8.

57

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(6) The second quarter of fiscal 2001 operating expenses include goodwill
amortization of $246,000. The second quarter of fiscal 2001 other income
includes a pre-tax gain of $1,213,000 related to a favorable settlement of a
patent litigation suit.

(7) The third quarter of fiscal 2001 operating expenses include goodwill
amortization of $237,000. The third quarter of fiscal 2001 includes a
reduction to a reserve in the amount of $472,000 related to the sale of the
PPO see Note 4.

(8) The fourth quarter of fiscal 2001 operating expenses include additional
executive compensation, recruitment and severance charges, and a $536,000
bad debt charge related to Goss and goodwill amortization of $239,000. The
fourth quarter of fiscal 2001 restructuring and other charges include asset
write-offs associated with the RHG and POD of $15,518,000 and restructuring
charges of $2,182,000. The fourth quarter of fiscal 2001 other income
includes a $181,000 adjustment to the loss on the sale of BSD as additional
costs associated with the sale were incurred. See Notes 5 and 8.

NOTE 21 -- SUBSEQUENT EVENTS:

On August 13, 2002 the Compensation and Stock Option Committee of the Board
of Directors granted non-qualified options to purchase 154,500 shares of Class A
to certain executives and key personnel under the Company's 1996 Stock Option
Plan at an exercise price of $0.82 per share, the fair market value on the date
of the grant.

In August, 2002, the Board of Directors approved an amendment, subject to
stockholder approval, to the Company's 1996 Stock Option Plan to (a) increase
the total number of shares of Class A that may be issued pursuant to options (as
defined in the 1996 Plan) from 875,000 shares to 1,875,000 shares; (b) prohibit
the granting of any Options to purchase any shares of Class B under the Plan
after the date of the next annual meeting of the Company's stockholders, and (c)
provide that Non-Employee Directors shall be eligible to receive Options under
the 1996 Plan.

Also in August 2002, the Board of Directors authorized, subject to
stockholder approval of the amendment to the 1996 Plan set forth above, the
grant under the 1996 Plan on the day after the next annual meeting of the
Company's stockholders and on the day after each succeeding annual meeting of
the Company's stockholders, to each person who is then a Non-Employee Director,
of an Option to purchase 5,000 shares of Class A of the Company at an exercise
price per share equal to 100% of the fair market value of a share of Class A on
the date such Option is granted.

The Board of Directors also approved in August 2002, subject to stockholder
approval of the amendment to the 1996 Plan set forth above, an amendment to the
1998 Non-Employee Directors' Stock Option Plan to prohibit the granting of any
options thereunder after the next annual meeting of the Company's stockholders.

In August 2002, the note receivable due from Mr. Nathe in the amount of
$1,500,000 plus interest thereon was replaced with a note receivable in the
amount of $750,000. The reduction in amount was in exchange for Mr. Nathe
agreeing to forfeit $750,000, which represents the present value of a portion of
Mr. Nathe's previously recorded deferred compensation benefit. The future value
of Mr. Nathe's deferred compensation has been reduced as a result of this
arrangement.

In August 2002, the Company announced additional restructuring activities
in response to weak market conditions, which will reduce total worldwide
employment by approximately 90. As a result, the Company recorded an additional
restructuring charge of approximately $3,100,000 during the first quarter of the
fiscal year ending June 30, 2003. These reductions are expected to reduce
operating costs by approximately $4,800,000 annually after this restructuring
plan is fully implemented, which is expected to occur by the end of March 2003.
The Company expects that the severance costs will be paid through June 2003, and
approximately $200,000 in lease termination costs will be paid through December
2004.

58

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On October 10, 2002, the Company sold substantially all the assets of its
Baldwin Kansa subsidiary ("BKA"). The consideration received for the
transaction, after certain post-closing adjustments, was approximately
$3,769,000, which approximated the net book value of the assets sold. During the
fourth quarter of the fiscal year ended June 30, 2002, the Company recorded an
impairment charge of $5,434,000 related to the goodwill associated with this
business as the recorded value of this goodwill exceeded the assessment of its
fair value made by the Company. For a further discussion, see Note 18 to the
Consolidated Financial Statements.

59

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There has been no Form 8-K filed within 24 months prior to the date of the
most recent financial statements reporting a change of accountants and/or
reporting a disagreement on any matter of accounting principle or financial
statement disclosure.

PART III

ITEMS 10, 11, 12 AND 13

Information required under these items is contained in the Company's 2002
Proxy Statement, which will be filed with the Securities and Exchange Commission
within 120 days after the close of the Company's fiscal year end; accordingly,
this information is therefore incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) Financial statements required by Item 14 are listed in the index
included in Item 8 of Part II.

(a)(2) The following is a list of financial statement schedules filed as
part of this Report:

All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.

(a)(3) The following is a list of all exhibits filed as part of this
Report:

INDEX TO EXHIBITS

3.1 Restated Certificate of Incorporation of the Company as
filed with the Secretary of State of the State of Delaware
on November 4, 1986. Filed as Exhibit 3.1 to the Company's
registration statement (No. 33-10028) on Form S-1 and
incorporated herein by reference.
3.2 Certificate of Amendment of the Certificate of Incorporation
of the Company as filed with the Secretary of State of the
State of Delaware on November 21, 1988. Filed as Exhibit 3.2
to the Company's Registration Statement (No. 33-26121) on
Form S-1 and incorporated herein by reference.
3.3 Certificate of Amendment of the Certificate of Incorporation
of the Company as filed with the Secretary of State of the
State of Delaware on November 20, 1990. Filed as Exhibit 3.3
to the Company's Report on Form 10-K for the fiscal year
ended June 30, 1991 and incorporated herein by reference.
3.4 By-Laws of the Company. Filed as Exhibit 3.2 to the
Company's Registration Statement (No. 33-10028) on Form S-1
and incorporated herein by reference.
10.1* Baldwin Technology Company, Inc. Amended and Restated 1986
Stock Option Plan. Filed as Exhibit 10.2 to the Company's
Registration Statement (No. 33-31163) on Form S-1 and
incorporated herein by reference.
10.2* Amendment to the Baldwin Technology Company, Inc. amended
and Restated 1986 Stock Option Plan. Filed as Exhibit 10.2
to the Company's Report on Form 10-K for the fiscal year
ended June 30, 1991 and incorporated herein by reference.

60

10.3* Baldwin Technology Company, Inc. 1990 Directors' Stock
Option Plan. Filed as Exhibit 10.3 to the Company's Report
on Form 10-K for the fiscal year ended June 30, 1991 and
incorporated herein by reference.
10.4* Baldwin Technology Company, Inc. 1996 Stock Option Plan.
Filed as Exhibit A to the Baldwin Technology Company, Inc.
1996 Proxy Statement and incorporated by reference to the
Company's Report on Form 10-K for the fiscal year ended June
30, 1996 and incorporated herein by reference.
10.5* Baldwin Technology Corporation Profit Sharing Plan, as
amended and restated. Filed as Exhibit 10.2 to the Company's
Registration Statement (No. 33-10028) on Form S-1 and
incorporated herein by reference.
10.7 Agreement effective as of July 1, 1990 between Baldwin
Technology Corporation, Baldwin Graphic Systems, Inc. and
Harold W. Gegenheimer, as guaranteed by Baldwin Technology
Company, Inc. Filed as Exhibit 10.6 to the Company's Report
on Form 10-K for the fiscal year ended June 30, 1991 and
incorporated herein by reference.
10.8 Agreement effective as of July 1, 1990 between Baldwin
Technology Company, Inc. and Harold W. Gegenheimer. Filed as
Exhibit 10.7 to the Company's Report on Form 10-K for the
Fiscal year ended June 30, 1991 and incorporated herein by
reference.
10.9* Employment Agreement dated as of November 16, 1988 between
Baldwin-Japan Limited and Akira Hara. Filed as Exhibit 10.22
to the Company's Registration Statement (No. 33-26121) on
Form S-1 and incorporated herein by reference.
10.11 Baldwin Technology Company, Inc. Dividend Reinvestment Plan.
Filed as Exhibit 10.49 to the Company's Report on Form 10-K
for the fiscal year ended June 30, 1991 and incorporated
herein by reference.
10.13* Employment Agreement effective as of July 1, 1997 between
Baldwin Technology Company, Inc. and Gerald A. Nathe. Filed
as Exhibit 10.15 to the Company's Report on Form 10-Q for
the quarter ended December 31, 1997 and incorporated herein
by reference.
10.16* Amendment to Employment Agreement between Baldwin-Japan
Limited and Akira Hara effective August 15, 1995. Filed as
Exhibit 10.25 to the Company's Report on Form 10-K for the
fiscal year ended June 30, 1996 and incorporated herein by
reference.
10.24* Baldwin Technology Company, Inc. Executive and Key Person
Cash Incentive Program Description. Filed as Exhibit 10.24
to the Company's report on Form 10-K for the fiscal year
ended June 30, 1998 and incorporated herein by reference.
10.27* Baldwin Technology Company, Inc. 1998 Non-Employee
Directors' Stock Option Plan. Filed as Exhibit A to the
Baldwin Technology Company, Inc. 1998 Proxy Statement and
incorporated herein by reference.
10.31* Separation Agreement dated November 17, 1999 and effective
as of January 31, 2000 between Baldwin Technology Company,
Inc. and William J. Lauricella. Filed as Exhibit 10.30 to
the Company's Report on Form 10-Q for the quarter ended
December 31, 1999 and incorporated herein by reference.
10.35* Employment Agreement dated and effective as of April 27,
2000 between Baldwin Technology Company, Inc. and Peter E.
Anselmo. Filed as Exhibit 10.34 to the Company's Report on
Form 10-Q for the quarter ended March 31, 2000 and
incorporated herein by reference.
10.38 Asset Purchase Agreement dated as of September 7, 2000 by
and among Baldwin Technology Corporation and Systems
Technology, Inc. Filed as Exhibit 10.38 to the Company's
report on Form 10-K for the fiscal year ended June 30, 2000
and incorporated herein by reference.
10.39 Amendment to Purchase Agreement dated as of September 27,
2000 by and between Baldwin Technology Corporation and
Systems Technology, Inc. Filed as Exhibit 10.39 to the
Company's report on Form 10-K for the fiscal year ended June
30, 2000 and incorporated herein by reference.
10.40 Credit Agreement Among Baldwin Americas Corporation, Baldwin
Europe Consolidated, Inc., and Baldwin Asia Pacific
Corporation, as Borrowers, the other credit parties
signatory thereto, the Lenders (as defined in the Credit
Agreement), Fleet National Bank, as Administrative Agent,
and First Union National Bank, as Documentation Agent, dated
as of October 31, 2000 (the "Credit Agreement"). Filed as
Exhibit 10.40 to the Company's report on Form 10-Q for the
quarter ended December 31, 2000 and incorporated herein by
reference.

61

10.41* Employment Agreement dated and effective as of March 19,
2001 between Baldwin Technology Company, Inc. and Gerald A.
Nathe. Filed as Exhibit 10.41 to the Company's report on
Form 10-Q for the quarter ended March 31, 2001 and
incorporated herein by reference.
10.42* Employment Agreement dated June 6, 2001 and effective as of
March 21, 2001 between Baldwin Technology Company, Inc. and
John T. Heald. (Filed as Exhibit 10.42 to the Company's
Report on Form 10-K for the fiscal year ended June 30, 2001
and incorporated herein by reference).
10.43* Amendment to Employment Agreement dated and effective as of
April 29, 2000 between Baldwin Technology Company, Inc. and
Peter E. Anselmo. (Filed as Exhibit 10.43 to the Company's
Report on Form 10-K for the fiscal year ended June 30, 2001
and incorporated herein by reference).
10.44* Employment Agreement dated June 8, 2001 and effective as of
June 18, 2001 between Baldwin Technology Company, Inc. and
Vijay C. Tharani (Filed as Exhibit 10.44 to the Company's
Report on Form 10-K for the fiscal year ended June 30, 2001
and incorporated herein by reference).
10.45 Asset and Share Purchase Agreement, dated as of July 20,
2001 by and among Sequa Corporation, Megtec Systems, Inc.
and the Company. Filed as Exhibit 10.45 to the Company's
report on Form 8-K dated September 26, 2001 and incorporated
herein by reference.
10.46 Amendment No. 1 to Asset and Share Purchase Agreement dated
September 25, 2001 and effective August 31, 2001 by and
among Sequa Corporation, Megtec Systems, Inc. and the
Company. Filed as Exhibit 10.46 to the Company's report on
Form 8-K dated September 26, 2001 and incorporated herein by
reference.
10.47* Amendment to employment agreement dated and effective as of
October 17, 2001 between Baldwin Technology Company, Inc.
and John T. Heald, Jr. (Filed as Exhibit 10.47 to the
Company's Report on Form 10-Q for the quarter ended
September 30, 2001 and incorporated herein by reference).
10.48 Amended and Restated Credit Agreement among Baldwin Americas
Corporation, Baldwin Europe Consolidated, Inc. and Baldwin
Asia Pacific Corporation, as Borrowers, the other credit
parties signatory thereto, the Lenders (as defined in the
Credit Agreement), Fleet National Bank, as Administrative
Agent, and First Union National Bank, as Documentation
Agent, dated as of January 29, 2002. (Filed as Exhibit 10.48
to the Company's Report on Form 10-Q for the quarter ended
December 31, 2001 and incorporated herein by reference).
10.49* Employment Agreement dated September 19, 2001 and effective
as of November 1, 2001 between Baldwin Technology Company,
Inc. and Karl S. Puehringer. (Filed as Exhibit 10.49 to the
Company's Report on Form 10-Q for the quarter ended December
31, 2001 and incorporated herein by reference).
10.50* Amendment to Employment Agreement dated February 26, 2002
and effective November 14, 2001 between Baldwin Technology
Company, Inc. and Gerald A. Nathe. (Filed as Exhibit 10.50
to the Company's Report on Form 10-Q for the quarter ended
March 31, 2002 and incorporated herein by reference).
10.51* Amendment to Employment Agreement dated February 26, 2002
and effective November 14, 2001 between Baldwin Technology
Company, Inc. and John T. Heald, Jr. (Filed as Exhibit 10.51
to the Company's Report on Form 10-Q for the quarter ended
March 31, 2002 and incorporated herein by reference).
10.52* Amendment to Employment Agreement dated April 12, 2002 and
effective May 1, 2001 between Baldwin Technology Company,
Inc. and Pete E. Anselmo. (Filed as Exhibit 10.52 to the
Company's Report on Form 10-Q for the quarter ended March
31, 2002 and incorporated herein by reference).
10.53* Baldwin Technology Profit Sharing and Savings Plan as
Amended (filed herewith).
10.54* Baldwin Technology Management Incentive Compensation Plan
(filed herewith).
10.55 Asset Purchase Agreement, dated as of October 3, 2002 by and
among Baldwin Kansa Corporation and Gerald E. Waddell,
Ronnie K. Swint and Vektek, Inc. (filed herewith).
21. List of Subsidiaries of Registrant (filed herewith).
23. Consent of PricewaterhouseCoopers LLP (filed herewith).
28. Post-effective Amendment to the Company's previously filed
Form S-8's, Nos. 33-20611 and 33-30455. Filed as Exhibit 28
to the Company's Report on Form 10-K for the fiscal year
ended June 30, 1991 and incorporated herein by reference.

62

99. Company statement regarding the Private Securities
Litigation Reform Act of 1995, "Safe Harbor for
Forward-Looking Statements" (filed herewith).
99.1 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1354 (filed herewith).
99.2 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1354 (filed herewith).

- ---------------

* Management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K

The Company filed a Current Report on Form 8-K dated June 28, 2002,
relating to items 5 and 7.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

BALDWIN TECHNOLOGY COMPANY, INC.
(Registrant)

By: /s/ GERALD A. NATHE
------------------------------------
Gerald A. Nathe
(Chairman of the Board)

Dated: October 16, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

65

REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Shareholders of
BALDWIN TECHNOLOGY COMPANY, INC.

Our audits of the consolidated financial statements of Baldwin Technology
Company, Inc. referred to in our report dated October 16, 2002 appearing in this
Annual Report on Form 10-K to Shareholders of Baldwin Technology Company, Inc.
also included an audit of the financial statement schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.

PRICEWATERHOUSECOOPERS LLP

Stamford, Connecticut
October 16, 2002

66

SCHEDULE II

BALDWIN TECHNOLOGY COMPANY, INC

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

- ---------------

(1) The decrease in the allowance for doubtful accounts for the fiscal year
ended June 30, 2002 resulted from $603,000 of write-offs, recoveries of
$195,000 and currency fluctuations of $106,000. The decrease in the
allowance for doubtful accounts for the fiscal year ended June 30, 2001
resulted from $610,000 of write-offs and currency fluctuations of $218,000.
The decrease in the allowance for doubtful accounts for the fiscal year
ended June 30, 2000 resulted from $521,000 of recoveries, and a write-off of
$1,100,000 resulting from a sale of pre-petition accounts receivable from
Goss Graphic Systems, Inc. ("Goss"), which was partially offset by currency
fluctuations of $97,000.

(2) The amounts charged to costs and expenses and the deductions both include a
write-off of $1,100,000 resulting from a sale of pre-petition accounts
receivable from Goss.

(3) The decrease in the amount of the valuation allowance is primarily the
result of a reduction of the reserve related to foreign net operating loss
carryforwards. See Note 12 to the Consolidated Financial Statements.

(4) The increase in the amount of the valuation allowance relates primarily to
certain domestic deferred tax assets that the Company does not believe it
will be more likely than not realize. See Note 12 to the Consolidated
Financial Statements.

(5) The decrease in the amount of the valuation allowance is the result of the
release of the reserve relating to foreign net operating loss carryforwards,
and a reduction in foreign tax credit carryforwards. See Note 12 to the
Consolidated Financial Statements.

(6) The decrease in the allowance for obsolete inventories resulted primarily
from the write-offs against the reserve for the sale of the Baldwin Stobb
Division.

(7) The decrease in the allowance for obsolete inventories resulted primarily
from the write-off of inventory associated with the sale of the Company's
former in-line finishing division.

67

(8) The decrease in the allowance for obsolete inventories resulted primarily
from write-offs against the reserve for the disposal of inventory.

(9) The amounts charged to costs and expenses include a $634,000 and a $536,000
reserve for Goss for the fiscal years ended June 30, 2002 and 2001,
respectively.

68