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, 2003 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:

Title of Each Class Name of Each Exchange
on Which Registered
CLASS A COMMON STOCK AMERICAN STOCK EXCHANGE
PAR VALUE $.01

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 [X] No [ ]

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. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

Aggregate market value of the of the registrant's common stock held by
non-affiliates of the registrant, based upon the closing price of a share of the
registrant's common stock on December 31, 2002 as reported by the American Stock
Exchange on that date was $5,926,000.

Number of shares of Common Stock outstanding at August 31, 2003:

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 2003
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, 2003.

PART I

ITEM 1. BUSINESS

Baldwin Technology Company, Inc. ("Baldwin" or the "Company") is a leading
global manufacturer of accessories and controls for the printing and publishing
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 and drying systems.

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 $3,736,000, which approximated the net book value
of the assets sold. During the fiscal year ended June 30, 2002, the operating
results and future prospects of BKA deteriorated. As a result, the goodwill
associated with BKA exceeded the assessment of its fair-value made by the
Company, and the Company recorded a goodwill impairment charge of $5,434,000 in
the fourth quarter of the fiscal year ended June 30, 2002. BKA is accounted for
as a discontinued operation, therefore, for all periods presented, amounts
previously reported in continuing operations have been reclassified to reflect
BKA as a discontinued operation. 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
its subsidiary Baldwin Document Finishing Systems, Inc. ("BDF"), the sole
operation unit in the Print On-Demand ("POD") business to Finishing and Systems
Technology LLC ("FAST"), a new company formed by the management of the POD
business. The consideration included the Company retaining a note receivable
from FAST in the amount of $137,000 plus interest at 8%, due in three equal
annual installments on the anniversary date of the sale. The first installment
was due in November 2002, which was not paid, and in May 2003, FAST filed for
Chapter 7 bankruptcy protection. As a result, the Company wrote-off the entire
amount of the note of $137,000 in May 2003. The remaining assets of the POD
business are not material. The revenues and corresponding expenses attributable
to the POD business are included in the Company's consolidated financial
statements only for the periods that the POD business was owned by the Company.
As a result of its decision to sell the POD business, 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 that the RHG business was owned by the Company. As a result
of the decisions to sell the RHG business, the Company recorded an impairment
charge during the fiscal year ended June 30, 2001 of approximately $14,831,000
associated with the write-off of assets, primarily goodwill related to the RHG
business. During the fiscal year ended June 30, 2002, The Company recorded a
loss on the sale of the RHG business of approximately

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$250,000 during the fiscal year ended June 30, 2002 and an additional loss of
approximately $211,000 during the fiscal year ended June 30, 2003.

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 the Company's consolidated financial
statements only for the periods that BSD was owned by the Company. The Company
recorded a loss of $831,000 on the sale of BSD in the fiscal year ended June 30,
2001.

LIQUIDITY

On August 18, 2003, Baldwin and certain of its subsidiaries, entered into a
$20,000,000 Credit Agreement (the "Credit Agreement") with Maple Bank GmbH
("Maple" or "Lender"), which if not terminated by the Lender on August 15, 2004
or by the Company by payment in full, shall terminate in its entirety on August
15, 2005. The credit facility is collateralized by substantially all of the
accounts and notes receivable of the Company and a portion of the Company's
inventory up to a maximum amount of $5,000,000. Borrowings under the credit
facility are subject to a borrowing base and bear interest at a rate equal to
the three-month Eurodollar rate (as defined in the Credit Agreement) plus (i)
10% for loans denominated in U.S. Dollars or (ii) 11.5% for loans denominated in
Euros. The interest rate will be reduced by 0.50% or whole increments thereof
for each whole increment of Disclosed EBITDA (as defined in the Credit
Agreement) that equals or exceeds $1,250,000 for any fiscal quarter commencing
with the quarter ending December 31, 2003. In no event however, may the interest
rate be less than 10.5% per annum. The initial borrowings under the credit
facility amounted to $18,874,000, of which the Company utilized $16,243,000 to
retire its previously existing debt with Fleet National Bank and Wachovia Bank
National Association and the remainder of the borrowings was utilized for
closing costs and working capital purposes. The Credit Agreement does not
require the Company to satisfy any financial covenants, except for the
limitation on annual capital expenditures; however, it contains a material
adverse effect clause, which provides that Maple would not be obligated to fund
any loan, convert or continue any loan as a LIBOR loan or issue any new letters
of credit in the event of a material adverse effect. Management does not
anticipate that such an event will occur; however, there can be no assurance
that such an event will not occur.

The Company has experienced operating losses and debt covenant violations
over the past three 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 new credit agreement discussed above, management believes that
the Company's cash flows from operations, along with available bank lines of
credit and alternative sources of borrowings, if necessary, are sufficient to
finance its working capital and other capital requirements over the term of the
current financing with Maple. Management further believes that additional
actions can be taken to reduce operating expenses and that assets can be sold to
meet liquidity needs, if necessary.

INDUSTRY OVERVIEW

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

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The Company's products are used by printers engaged in all commercial
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 and international 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. 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 printing 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. 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 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, 2003, 2002 and 2001, net sales of Cleaning Systems
represented approximately 54.9%, 45.8% and 48.6% 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, 2003, 2002 and
2001, net sales of Fluid Management Systems represented approximately 21.0%,
23.9% and 20.1% of the Company's net sales, respectively.

OTHER ACCESSORY AND CONTROL PRODUCTS. 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

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event of a web break. 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, 2003, 2002 and 2001, net sales of Other Accessory
and Control Products represented approximately 24.1%, 26.2%, 8.0% of the
Company's net sales, respectively.

NEWSPAPER INSERTER EQUIPMENT AND MAILING MACHINE SYSTEMS. 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. Mailing Machine Systems
fold, label and prepare newspapers for mailing. These products were produced at
the Company's BKA facility. The Company decided to exit this business, and
completed the sale of substantially all the assets of BKA on October 10, 2002.
For all periods presented, BKA is shown as a discontinued operation and
therefore none of BKA's sales are included in the Company's net sales.

The Company entered the short-run, POD market in January of 1997. 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 the POD business are included for the
entire fiscal year ended June 30, 2001, and only for three months in the fiscal
year ended June 30, 2002. There were no net sales included for the POD business
in the fiscal year ended June 30, 2003. 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 the POD business on November 16, 2001.

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 year ended June 30, 2001, and only for three months in the
fiscal year ended June 30, 2002. In the fiscal years ended June 30, 2002 and
2001, net sales of Roll Handling Systems represented approximately 4.1% and
20.1% of the Company's net sales, respectively. There were no sales included for
the RHG in the fiscal year ended June 30, 2003.

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 only for three months in the fiscal year ended June 30,
2001, and represented approximately 3.2% of the Company's net sales. There were
no sales included for BSD in the fiscal years ended June 30, 2003 and 2002.

WORLDWIDE OPERATIONS

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

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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, 2003,
2002 and 2001:

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 further reduced 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 (the "March
2000 Plan") that included the consolidation of production into certain
facilities, and a reduction in total employment, primarily in the United States.
The March 2000 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 $220,000, $621,000 and $2,277,000 for the fiscal years ended June
30, 2003, 2002 and 2001, respectively, related to the March 2000 Plan. The
$220,000 relates primarily to additional exit costs, which were expensed as
incurred. The March 2000 Plan reduced the Company's worldwide cost base and
strengthened its competitive position as a leading global supplier of
accessories and controls to the printing and publishing industry. Prior to
initiating the March 2000 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 reorganized 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 March 2000 Plan included the
centralization of these activities. Product lines that were previously being
produced at multiple facilities were 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 October
2003, the majority of which is expected to be paid during the first quarter of
the fiscal year ending June 30, 2004. Facility lease termination costs are
expected to be paid through April 2006.

The Company expects to incur approximately $50,000 in additional unaccrued
restructuring costs related to the March 2000 Plan during the fiscal year ending
June 30, 2004, which will be expensed as incurred. The estimated total cash cost
of the restructuring program is expected to be approximately $8,324,000, with
approximately $660,000 expected to be spent during the fiscal year ending June
30, 2004 and approximately $971,000 (primarily facility lease costs) expected to
be spent

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over the balance of the terms of the leases extending for approximately three
years. The March 2000 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 the March 2000 Plan.

In response to weak market conditions, in August 2002, the Company
announced additional restructuring activities (the "August 2002 Plan"), which
reduced total worldwide employment by approximately 160. Accordingly, the
Company recorded an additional restructuring charge of approximately $3,385,000
during the fiscal year ended June 30, 2003 related to the August 2002 Plan.
These reductions are expected to reduce operating costs by approximately
$7,500,000 annually after the August 2002 Plan is fully implemented, which is
expected to occur by the end of October 2003. The Company expects that the
severance costs will be paid through December 2003 and approximately $400,000 in
lease termination costs will be paid through December 2006. In August 2003, the
Company expanded the August 2002 Plan and announced additional employment
reductions of 15 in the United States and 8 in the United Kingdom. In addition,
the Company closed its office in Dunstable, England and is currently running its
two separate business operations from its Poole, England location in an effort
to reduce or eliminate certain costs as part of its global restructuring
efforts. The additional costs associated with the expansion of the August 2002
Plan amounted to approximately $400,000, comprised of; $243,000 in severance
costs, $130,000 in lease termination costs and $27,000 in other costs associated
with this expansion, which will be expensed as incurred. The majority of these
costs will be recognized in the first quarter of the fiscal year ended June 30,
2004.

ACQUISITION STRATEGY

The Company is not currently seeking acquisition targets as the Company is
focusing on operating 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 67 employees devoted to
marketing and sales activities in its three principal worldwide markets and more
than 150 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, 2003, approximately 45%
of the Company's net sales were to OEMs and approximately 55% were directly to
printers.

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SUPPORT. The Company is committed to after-sales service and support of
its products throughout the world. Baldwin employs approximately 90 service
technicians, who are complemented by product engineers, to provide field service
for the Company's products on a global basis.

BACKLOG. Backlog represents unfilled product orders, which Baldwin has
received from its customers under valid contracts or purchase orders. The
Company's backlog was $49,709,000 as of June 30, 2003, $48,707,000 as of June
30, 2002 and $60,589,000 as of June 30, 2001. The above backlog amounts have
been adjusted to exclude the backlog of the BKA business, the assets of which
were sold on October 10, 2002, as BKA is reported as a discontinued operation.
Included in the June 30, 2001 backlog was $10,513,000 related to the Company's
former RHG, the assets of which were sold in September 2001.

CUSTOMERS. For the fiscal year ended June 30, 2003, one customer accounted
for more than 10% of the Company's net sales. Koenig and Bauer
Aktiengesellschaft ("KBA") accounted for approximately 13% of the Company's net
sales. The ten largest customers of Baldwin (including KBA) accounted for
approximately 46%, 44% and 49%, respectively, of the Company's net sales for the
fiscal years ended June 30, 2003, 2002 and 2001. Sales of Baldwin's products are
not considered seasonal. Sales in three of the last five years have been greater
in the first six months of its fiscal year than in the second six months of its
fiscal year (see Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations").

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 accessories and controls for the printing and publishing
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 several of its locations.
While the Company believes that this approach to research and development has
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.
The restructured organization focuses attention on opportunities within the
respective markets, while avoiding duplicative efforts within the Company.

Baldwin employs approximately 119 persons whose primary function is new
product development, application engineering or modification of existing
products. The Company's total expenditures for research, development and
engineering for the fiscal years ended June 30, 2003, 2002 and 2001 were
$16,148,000, $15,451,000 and $17,135,000, respectively, representing
approximately 12.0%, 11.0% and 9.9% 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. Patented products
represent a significant 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 group of patents, which provide for the
majority of the Company's current royalty income, are scheduled to expire in
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,

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royalty income and cash flows, are expected to be negatively impacted upon the
expiration of this group of patents. 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 a manufacturing
facility in Kansas. 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.

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.

COMPETITION

Within the highly fragmented printing press accessory industry, the Company
produces and markets what it believes to be the most complete line of
accessories and controls. 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 and publishing industry.

EMPLOYEES

At June 30, 2003, the Company employed 533 persons (plus 15 temporary and
part-time employees), of which 193 are production employees, 67 are marketing,
sales and customer service employees, 209 are research, development, engineering
and technical service employees and 64 are management and administrative
employees. In Europe, employees are represented by various unions under
contracts with indefinite terms. In Sweden, 1, 4, and 11 of the Company's 98
employees, are represented by Ledarna (SALF), Metall, and Svenska
Industritjanstemanna Forbundet, respectively. In Germany, 42 of the Company's
191 employees, are represented by the IG Metall (Metalworker's Union). The
Company considers relations with its employees and with its unions to be good.

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ITEM 2. PROPERTIES

The Company owns and leases various manufacturing and office facilities
aggregating approximately 400,000 square feet at June 30, 2003. 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.

ITEM 3. LEGAL PROCEEDINGS

Baldwin is involved in various legal proceedings from time to time,
including actions with respect to commercial, intellectual property, and
employment matters. The Company believes that it has meritorious defenses
against the claims currently asserted against it and intends to defend them
vigorously. However, the outcome of litigation is inherently uncertain, and the
Company cannot be sure that it will prevail in any of the cases currently in
litigation. The Company believes that the ultimate outcome of any such cases
will not have a material adverse effect on its results of operations, financial
position or cash flows, however, there can be no assurances that an adverse
determination would not have a material adverse effect on the Company.

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

No matters were submitted to a vote of security holders since November 21,
2002.

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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 consolidated market, 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, 2003, the number of record holders (excluding those listed
under a nominee name) of the Company's Class A and Class B Common Stock totaled
311 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 shall 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).

10

ITEM 6. SELECTED FINANCIAL DATA

The Company's statement of operations and balance sheet data as it relates
to the fiscal years ended June 30, 2003, 2002 and 2001 have been derived from
the Company's audited financial statements (including the Consolidated Balance
Sheets of the Company at June 30, 2003 and 2002 and the related Consolidated
Statements of Operations of the Company for the fiscal years ended June 30,
2003, 2002 and 2001 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. As a result, the goodwill associated with BKA exceeded the
assessment of its fair-value made by the Company, and the Company recorded a
goodwill impairment charge of $5,434,000 in the fiscal year ended June 30, 2002.
In September 2001, the Company sold substantially all of the assets of its Roll
Handling Group ("RHG") and its Print On-Demand ("POD") business. The Company
recorded impairment charges related to the RHG and the POD business of
$14,831,000 and $687,000, respectively, in the fiscal year ended June 30, 2001
and losses on the sale of the RHG of $250,000 and the POD business of $8,000 in
the fiscal year ended June 30, 2002. The Company recorded an additional loss on
the sale of RHG of $211,000 in the fiscal year ended June 30, 2003. 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 that the businesses were
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 $0, $0, $973,000, $1,028,000 and
$995,000 for the fiscal years ended June 30, 2003, 2002, 2001, 2000 and 1999,
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 ended 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 $3,736,000, which approximated the net book value
of the assets sold.

12

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. For all periods presented, BKA is reported as a discontinued
operation and therefore is not included in the continuing operations of the
Company.

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 loss of $211,000 and $250,000 on the
sale of RHG in the fiscal years ended June 30, 2003 and 2002, respectively. 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 business ("POD") as the Company also exited this business. As a
result, the revenues and corresponding expenses attributable to RHG and the POD
business are included in these consolidated financial statements only for the
periods their operations were owned by the Company. The Company recorded a loss
of $8,000 on the sale of the POD business in the fiscal year ended June 30,
2002. 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 BSD was owned by the Company. The Company
recorded a loss of $831,000 on the sale of BSD in the fiscal year ended June 30,
2001. The effects of this transaction on the consolidated financial statements
are discussed below where significant.

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

The Company does not consider its business to be seasonal. For three of the
last five fiscal years, sales in the first six months were greater than the last
six months. The decline in net sales in the second half of the fiscal year ended
June 30, 2003 is primarily due to the global printing and publishing industry
economic slowdown. The decline in net sales in the second half of the fiscal
year ended June 30, 2002 is primarily due to the global printing and publishing
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, adjusted for the treatment of
BKA as a discontinued operation over the last five fiscal years to reflect the
comparison.

13

FORWARD-LOOKING STATEMENTS

Except for the historical information contained herein, the following
statements and certain other statements contained herein are based on current
expectations. Similarly, the press releases we issue and other public statements
we make from time to time may contain language that is forward-looking. These
forward-looking statements may be identified by the use of forward-looking words
or phrases such as "forecast," "believe," "expect," "intend," "anticipate,"
"should," "plan," "estimate," and "potential," among others. 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,
2003.

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

14

inventory for estimated obsolescence or unmarketable inventory equal to the
difference between the cost of 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 net 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 recorded through a charged to income in the period
such determination is made. In addition, Baldwin recognizes reserves for
contingencies when it becomes probable that such a contingency exists.

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 based on a discounted cash flow model, and comparing it with its
book value. If, during the annual impairment review, the book value of the
reporting unit 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.

15

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, 2003 VERSUS FISCAL YEAR ENDED JUNE 30, 2002

CONSOLIDATED RESULTS

NET SALES. Net sales for the fiscal year ended June 30, 2003 decreased by
$5,883,000, or 4.2%, to $134,208,000 from $140,091,000 for the fiscal year ended
June 30, 2002. Currency rate fluctuations attributable to the Company's overseas
operations increased net sales for the current period by $10,309,000. Otherwise,
net sales would have decreased by $16,192,000, of which $4,782,000 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 decreased by $11,410,000 over the prior fiscal year.

GROSS PROFIT. Gross profit for the fiscal year ended June 30, 2003 was
$40,420,000 (30.1% of net sales), compared to $41,277,000 (29.5% of net sales)
for the fiscal year ended June 30, 2002, a decrease of $857,000 or 2.1%. Gross
profit decreased by $1,040,000 due to the effects of dispositions over the prior
fiscal year, and increased by $3,471,000 as a result of fluctuations in currency
rates. Excluding the divested businesses and the effects of foreign currency
translations, gross profit would

16

have decreased by $3,288,000 over the prior fiscal year, due primarily to
decreased sales levels, increased warranty costs and higher freight costs and
continuing pricing pressures.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $26,953,000 (20.1% of net sales) for the fiscal
year ended June 30, 2003, compared to $30,627,000 (21.9% of net sales) for the
prior fiscal year, a decrease of $3,674,000. Currency rate fluctuations
increased the current fiscal year's expenses by $1,407,000 and the effect of net
dispositions from the prior fiscal year reduced expenses by $1,267,000.
Excluding the divested businesses and the effects of the currency translation,
selling expenses would have decreased by $892,000 and general and administrative
expenses would have decreased by $2,922,000. Selling expenses decreased
primarily as a result of reductions in staffing levels and decreases in sales
commissions resulting from lower sales volumes. General and administrative
expenses decreased primarily as a result of decreased compensation expense
associated with reductions in personnel due to the Company's restructuring
efforts and reduced incentive compensation expense resulting from the lower
profitability of the Company in the current fiscal year, while the prior fiscal
year included a $439,000 bad debt charge related to a major OEM customer,
additional compensation of $112,000 related to a loan to an officer of the
Company, and increased consulting and subcontracting costs.

ENGINEERING AND DEVELOPMENT EXPENSES. Engineering and development expenses
increased by $697,000 over the prior fiscal year. Fluctuations in currency rates
increased these expenses by $1,687,000, while the exclusion of costs associated
with the divested RHG business reduced these expenses by $659,000; otherwise,
these expenses would have decreased by $331,000. The decrease in these expenses
relates primarily to decreased research and development labor and project costs
and reductions in engineering costs primarily in the United States attributed to
reduced personnel costs associated with the planned restructurings. As a
percentage of net sales, engineering and development expenses increased by 1.0%
to 12.0% for the year ended June 30, 2003 compared to 11.0% for the year ended
June 30, 2002.

RESTRUCTURING AND OTHER CHARGES. Restructuring and other charges consist
primarily of restructuring charges of $3,603,000 and a settlement charge of
$1,250,000 associated with a customer dispute related to a business unit that
was divested in 2000, which is to be settled primarily for product in lieu of
cash. The restructuring charges included $220,000 associated with the Company's
March 2000 restructuring plan, which were expensed as incurred and $3,385,000
associated with the Company's August 2002 plan. The August 2002 plan consists of
$2,840,000 in additional employee severance and benefit costs, $437,000 in lease
termination costs, $20,000 in asset write-offs and $88,000 in incremental costs
associated with the restructuring plan.

INTEREST AND OTHER. Interest expense for the fiscal year ended June 30,
2003 increased by $619,000 to $2,411,000, compared to $1,792,000 for the fiscal
year ended June 30, 2002. Currency rate fluctuations increased interest expense
by $156,000 in the current period. The remainder of the increase was due
primarily to higher interest rates partially offset by lower long-term debt
levels outstanding during the current period, primarily as a result of applying
the proceeds from the BKA divestiture to reduce outstanding long-term debt.
Interest income was $281,000 and $288,000 for the fiscal years ended June 30,
2003 and June 30, 2002, respectively. Currency rate fluctuations increased
interest income by $36,000 in the current period. Other income and expense, net,
amounted to an expense of $2,251,000 for the fiscal year ended June 30, 2003
compared to $1,037,000 for the fiscal year ended June 30, 2003. These amounts
include foreign currency transaction (losses) gains of $(879,000) and $18,000
for the current and prior periods, respectively. Currency rate fluctuations
negatively impacted other income and expense by $240,000 in the current period.
The ineffective portions of derivative financial instruments, which qualify as
hedges pursuant to SFAS No. 133

17

"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133")
amounted to losses of $5,000 and $45,000 for the fiscal years ended June 30,
2003 and 2002, respectively, while derivative financial instruments which do not
qualify as hedges pursuant to SFAS 133 amounted to a gain of $200,000 and a loss
of $413,000 respectively. Other income and expense in the current fiscal year
also includes a $446,000 write-down of deferred financing costs in the current
period and an additional $928,000 associated with the pursuit of certain
financing and strategic alternatives, and a $211,000 pre-tax loss on the sale of
the RHG. The prior year period included a write-down of deferred financing costs
of $255,000 and a $250,000 pre-tax loss on the sale of RHG.

INCOME TAXES. The Company recorded an income tax provision of $2,578,000
for the fiscal year ended June 30, 2003 as compared to $6,684,000 for the fiscal
year ended June 30, 2002. Certain items have significantly affected 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 $4,911,000
and $6,210,000 valuation allowances primarily against certain of its foreign and
domestic deferred tax assets resulted in additional tax charges for the fiscal
years ended June 30, 2003 and 2002, respectively. Currency rate fluctuations
increased the tax provision by $74,000 in the current period.

LOSS FROM CONTINUING OPERATIONS. Loss from continuing operations for the
fiscal year ended June 30, 2003 was $11,416,000 as compared to $10,309,000 for
the fiscal year ended June 30, 2002, or $0.76 per share, basic and diluted, and
$0.69 per share, basic and diluted, respectively. For the current period,
currency rate fluctuations increased the net loss by $227,000 and net
dispositions decreased the net loss by $735,000. The net loss in the current
fiscal year includes a settlement charge related to a customer dispute
associated with a business unit that was divested in 2000.

DISCONTINUED OPERATIONS. Loss from operations of discontinued operations
for the year ended June 30, 2003 was $253,000, as compared to $241,000 for the
year ended June 30, 2002, and relates to BKA. The increase in the loss is
primarily the result of reduced revenues and gross profit margins, being
partially offset by decreased operating expenses in the current period, as the
business is included only for three months in the current year period. A gain on
the sale of BKA of $543,000 was recorded in the quarter ended December 31, 2002
as a result of the sale of the entity being completed on October 10, 2002.

NET LOSS. The Company's net loss amounted to $11,126,000 for the year
ended June 30, 2003, compared to $15,984,000 for the year ended June 30, 2002.
Currency rate fluctuations increased the net loss by $227,000 in the current
period. Net loss per share amounted to $0.74 basic and diluted for the year
ended June 30, 2003, as compared to $1.07 basic and diluted for the year ended
June 30, 2002.

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 had anticipated reduced
demand for its products during the subsequent quarters, which adversely affected
revenues and earnings over this period. In an effort to reduce operating costs,
the Company entered into a new restructuring plan in August 2002, to reduce
total employment worldwide by approximately 160. This restructuring plan allowed
the Company to reduce operating costs to a level more commensurate with its
revenue stream. However, as the industry continued to soften in the third and
fourth quarters of the fiscal year ended June 30, 2003, the Company expanded its
restructuring plan in the first quarter of the fiscal year ended June 30, 2004,
to further reduce employment by approximately 15 in the

18

United States and 8 in the United Kingdom. Additionally, the Company closed its
office in Dunstable, England, and is currently running its two separate business
operations from its Poole, England location in an effort to reduce or eliminate
certain costs as part of its global restructuring efforts.

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
$33,217,000, or 19.2%, to $140,091,000 from $173,308,000 for the fiscal year
ended June 30, 2001. Currency rate fluctuations attributable to the Company's
overseas operations decreased net sales for the fiscal year ended June 30, 2002
by $5,890,000. Otherwise, net sales would have decreased by $27,327,000, 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 $8,266,000 in the fiscal
year ended June 30, 2002 over the fiscal year ended June 30, 2001.

GROSS PROFIT. Gross profit for the fiscal year ended June 30, 2002 was
$41,277,000 (29.5% of net sales), compared to $49,762,000 (28.7% of net sales)
for the fiscal year ended June 30, 2001, a decrease of $8,485,000 or 17.1%.
Gross profit was lower due primarily to the effects of dispositions from the
prior fiscal year, which accounted for approximately $9,143,000, 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 $2,654,000 in the fiscal year
ended June 30, 2002 over the fiscal year ended June 30, 2001.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $30,627,000 (21.9% of net sales) for the fiscal
year ended June 30, 2002, compared to $37,337,000 (21.5% of net sales) for the
prior fiscal year, a decrease of $6,710,000. Currency rate fluctuations
decreased expenses for the fiscal year ended June 30, 2002 by $857,000 and the
effect of net dispositions from the fiscal year ended June 30, 2001 reduced
expenses by $4,189,000. Excluding the divested businesses and the effects of
currency translation, selling expenses would have increased by $434,000 while
general and administrative expenses would have decreased by $2,098,000. 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 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, additional compensation of $112,000 related to
a loan to an officer of the Company, and increased consulting and subcontracting
costs in the fiscal year ended June 30, 2002.

ENGINEERING AND DEVELOPMENT EXPENSES. Engineering and development expenses
for the fiscal year ended June 30, 2002 decreased by $1,684,000 over the fiscal
year ended June 30, 2001. Fluctuations in currency rates decreased these
expenses by $491,000; otherwise, these expenses would have decreased by
$1,193,000. 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.

19

RESTRUCTURING AND OTHER CHARGES. Restructuring and other charges consist
primarily of restructuring charges of $621,000 in the fiscal year ended June 30,
2002, while the fiscal year ended June 30, 2001 included restructuring charges
of $2,277,000 and asset impairment charges of $15,518,000, primarily patents and
goodwill associated with the divestiture of the RHG and POD businesses. 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 were 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.

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 $13,000 in the fiscal year ended June 30, 2002. The remainder of the decrease
was due primarily to lower interest rates and lower long-term debt levels
outstanding during the fiscal year ended June 30, 2002, primarily as a result of
applying the proceeds from the RHG divestiture to reduce outstanding long-term
debt. Interest income was $288,000 for each of the fiscal years ended June 30,
2002 and June 30, 2001. Currency rate fluctuations decreased interest income by
$37,000 for the fiscal year ended June 30, 2002. 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 fiscal years ended June 30, 2002 and 2001, respectively. Currency rate
fluctuations negatively impacted other income and expense by $7,000 for the
fiscal year ended June 30, 2002. 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 fiscal year ended June 30, 2002,
recorded as a result of the renegotiation of the Amended Credit Facility (as
defined below under "Liquidity and Capital Resources") and a $250,000 pre-tax
loss on the sale of the RHG. The fiscal year ended June 30, 2001 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 fiscal year ended June 30, 2002,
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 fiscal year ended June
30, 2002.

LOSS FROM CONTINUING OPERATIONS. Loss from continuing operations for the
fiscal year ended June 30, 2002 was $10,309,000 as compared to $19,618,000 for
the fiscal year ended June 30, 2001, or $0.69 per share, basic and diluted, and
$1.33 per share, basic and diluted, respectively. For the fiscal year ended June
30, 2002, currency rate fluctuations increased the net loss by $487,000 and net
dispositions increased the net loss by $2,115,000. Additionally, the fiscal year
ended June 30, 2002 includes a $6,210,000 charge related to increased valuation
allowances for certain deferred tax assets. The net loss in the fiscal year
ended June 30, 2001 includes asset impairment charges of $14,831,000

20

associated with the sale of the RHG and $687,000 associated with the disposition
of the POD business.

DISCONTINUED OPERATIONS. Loss from operations of discontinued operations
for the year ended June 30, 2002 was $241,000 as compared to income of
$1,446,000 for the year ended June 30, 2001 and relates to BKA. The increase in
the loss is primarily the result of weak market conditions, which resulted in
reduced revenues and gross profit margins, being slightly offset by decreased
operating expenses in the fiscal year ended June 30, 2002. In 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 BKA, as the
recorded value of this goodwill exceeded the assessment of its fair value made
by the Company.

NET LOSS. The Company's net loss amounted to $15,984,000 for the year
ended June 30, 2002, compared to $18,172,000 for the year ended June 30, 2001.
Currency rate fluctuations increased the net loss by $487,000 in the fiscal year
ended June 30, 2002. Net loss per share amounted to $1.07 basic and diluted for
the year ended June 30, 2002, as compared to $1.23 basic and diluted for the
year ended June 30, 2001.

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 August 18, 2003, the Company entered into a $20,000,000 Credit Agreement
(the "Credit Agreement") with Maple Bank GmbH ("Maple" or "Lender"), which if
not terminated by the Lender on August 15, 2004 or by the Company by payment in
full, shall terminate in its entirety on August 15, 2005. The credit facility is
collateralized by substantially all of the accounts and notes receivable of the
Company and a portion of the Company's inventory up to a maximum amount of
$5,000,000. Borrowings under the credit facility are subject to a borrowing base
and bear interest at a rate equal to the three-month Eurodollar rate (as defined
in the Credit Agreement) plus (i) 10% for loans denominated in U.S. Dollars or
(ii) 11.5% for loans denominated in Euros. The interest rate will be reduced by
0.50% or whole increments thereof for each whole increment of Disclosed EBITDA
(as defined in the Credit Agreement) that equals or exceeds $1,250,000 for any
fiscal quarter commencing with the quarter ending December 31, 2003. In no event
however, may the interest rate be less than 10.5% per annum. The initial
borrowings under the credit facility amounted to $18,874,000, of which the
Company utilized $16,243,000 to retire its previously existing debt and
associated interest with Fleet National Bank and Wachovia Bank National
Association and the remainder of the borrowings was utilized for closing costs
and working capital purposes. The Credit Agreement does not require the Company
to meet any financial covenants, except for the limitation on annual capital
expenditures; however, it contains a material adverse effect clause, which
provides that Maple would not be obligated to fund any loan, convert or continue
any loan as a LIBOR loan or issue any new letters of credit in the event of a
material adverse effect. Management does not anticipate that such an event will
occur; however, there can be no assurance that such an event will not occur.

Prior to this refinancing with Maple, and 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

21

"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. The Revolver had associated commitment fees, which were
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, 2003, 2002 and 2001 were $4,000, $24,000 and $47,000, respectively.

The Company has experienced operating and net losses, and debt covenant
violations over the past three 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 the 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 30, 2002, the Company and the Banks entered
into an amendment 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, consisted of a
$17,000,000 revolving credit line (the "Extended Revolver") and a $3,900,000
term loan each due July 1, 2003 (the "Extended Term Loan"). The Extended Credit
Facility required the Company to utilize the net proceeds of $3,736,000 from the
sale of certain assets of its wholly-owned subsidiary Baldwin Kansa Corporation
("BKA") (see Note 8) plus $464,000 from the Company's cash flows to reduce
outstanding borrowings under the Extended Revolver by $4,200,000 before October
30, 2002, of which $2,700,000 permanently reduced the Extended Revolver and
$1,036,000 became available for future borrowings, subject to a borrowing base
calculation. Additionally, beginning in December 2002 and extending through June
2003, the Company was required to permanently reduce the Extended Revolver by
making monthly principal payments of $125,000. The Company was also required to
permanently reduce the Extended Revolver by $5,000,000 on December 30, 2002 and
by $5,000,000 on March 30, 2003, but only if the Company generated non-operating
alternative sources of financing. As the Company did not generate any
alternative sources of financing since entering into the Extended Credit
Facility on October 30, 2002, the Company was not required to make, and did not
make, the $5,000,000 payment on December 30, 2002 or the $5,000,000 payment on
March 30, 2003. Additionally, at September 30, 2002 and March 31, 2003, the
Company was not in compliance with its debt covenants, and received waivers from
the non-compliance. At June 30, 2003, the Company had outstanding borrowings of
$16,112,000 under the Extended Revolver and Extended Term Loan and this entire
outstanding balance has been classified as current as of June 30, 2003, which
was entirely repaid from the proceeds of the refinancing with Maple on August
18, 2003.

The ability of the Company to achieve and maintain profitability 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. Management believes, although there can be
no guarantee, that as the Company's profitability improves, alternative sources
of financing will be available to finance the existing facilities at lower
interest rates.

The Company maintains relationships with both foreign and domestic banks,
which combined have extended credit facilities totaling $21,469,000 at June 30,
2003, including amounts available under the Revolver. As of June 30, 2003, the
Company had $19,413,000 outstanding under these credit facilities including
$16,112,000 under the Revolver and Term Loan. Total debt levels as

22

reported on the balance sheet at June 30, 2003 are $427,000 higher than they
would have been if June 30, 2002 exchange rates had been used.

On April 27, 2001, the Company entered into an interest rate swap agreement
with Fleet National Bank, which matures on October 30, 2003, 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 $525,000 and $383,000 to interest expense for the fiscal years ended
June 30, 2003 and 2002, respectively and a pre-tax loss of zero and $63,000
($54,000 after-tax) loss to Other Comprehensive Income ("OCI") at June 30, 2002,
respectively.

The Company's working capital decreased by $18,255,000 or 81.8% from
$22,319,000 at June 30, 2002, to $4,064,000 at June 30, 2003. Foreign currency
rate fluctuations increased working capital by $2,496,000; otherwise working
capital would have decreased by $20,751,000. Working capital decreased primarily
due to a portion of the long-term debt being reclassified to short-term,
decreases in accounts and notes receivable, inventories and other prepaid
expenses, and increases in notes payable, accrued compensation, accrued interest
and income taxes payable. Offsetting these items were increases in cash and
decreases in loans payable, customer deposits, and accrued expenses. On October
10, 2002, the Company divested its BKA business. The proceeds of $3,736,000 plus
$464,000 from the Company's cash flows were utilized to reduce outstanding bank
debt by $4,200,000.

The Company provided $2,366,000 and $4,963,000 for investing activities for
the fiscal year ended June 30, 2003, and 2002, respectively. The decrease in the
cash provided by investing activities is primarily the result of greater
proceeds from the sale of the RHG in the fiscal year ended June 30, 2002, than
the proceeds from the sale of BKA in the fiscal year ended June 30, 2003. Net
capital expenditures made to meet the normal business needs of the Company for
the fiscal years ended June 30, 2003, and June 30, 2002, including commitments
for capital lease payments, were $1,370,000 and $2,040,000, respectively. The
Company has capital expenditures of approximately $500,000 planned for the
fiscal year ending June 30, 2004.

The net cash used by financing activities was $3,733,000 for the fiscal
year ended June 30, 2003 as compared to $2,786,000 for the fiscal year ended
June 30, 2002. 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's European and Asian subsidiaries
were 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 trade
receivables from Goss, of which approximately $1,029,000 relates to Goss's
European and Asian subsidiaries, which are not included in the bankruptcy
proceeding. The balance of $950,000 was 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. At June 30, 2003, the Company's consolidated balance sheet
included approximately $1,687,000 of trade receivables from Goss, of which
approximately $966,000 relates to Goss's European and Asian subsidiaries, which
are not included in the bankruptcy proceeding. The balance of $721,000 is fully
reserved. The reserve was decrease of $229,000 was the result of a write-off of
an identical amount of domestic accounts receivable of the Company.

23

During March 2000, the Company initiated a restructuring plan (the "March
2000 Plan") that included the consolidation of production into certain
facilities, and a reduction in total employment, primarily in the United States.
The March 2000 Plan was expanded during the fourth quarter of the fiscal year
ended June 30, 2001. The Company recorded restructuring charges in the amounts
of $220,000 and $2,277,000 for the fiscal years ended June 30, 2003 and 2002,
respectively related to the March 2000 Plan. The $220,000 relates primarily to
additional exit costs, which were expensed as incurred. The March 2000 Plan
reduced the Company's worldwide cost base and strengthened its competitive
position as a leading global supplier of auxiliary equipment to the printing and
publishing industry. Prior to initiating the March 2000 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
reorganized 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 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 $220,000 recorded during the
fiscal year ended June 30, 2003 includes approximately $64,000 in employee
severance and benefit costs, $149,000 in facility lease termination costs, and
$7,000 in additional exit costs related to the March 2000 Plan, which were
expensed as incurred. As of June 30, 2003, $660,000 is included in "Other
accounts payable and accrued liabilities" and $791,000 is included in "Other
long-term liabilities."

The Company expects to incur approximately $50,000 (primarily insurance and
property tax costs related to the leased facilities) in additional unaccrued
restructuring costs related to the March 2000 Plan during the fiscal year ending
June 30, 2004, which will be expensed as incurred. The estimated total cash cost
of the March 2000 Plan is expected to be approximately $8,324,000, with
approximately $660,000 expected to be spent during the fiscal year ending June
30, 2004 and approximately $971,000 (primarily facility lease costs) expected to
be spent over the balance of the lease terms of approximately three years. The
March 2000 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 the March 2000 Plan.

In response to weak market conditions, in August 2002, the Company
announced additional restructuring activities (the August 2002 Plan"), which
reduced total worldwide employment by approximately 160. Accordingly, the
Company recorded an additional restructuring charge of approximately $3,385,000
during the fiscal year ended June 30, 2003 related to the August 2002 Plan.
These reductions are expected to reduce operating costs by approximately
$7,500,000 annually after the August 2002 Plan is fully implemented, which is
expected to occur by the end of December 2003. The Company expects that the
severance costs will be paid through December 2003 and approximately $400,000 in
lease termination costs will be paid through December 2004. In August 2003, the
Company expanded the August 2002 Plan and announced additional employment
reductions of 15 in the United States and 8 in the United Kingdom. In addition,
the Company closed

24

one of its offices in the United Kingdom and is currently running its two
separate business operations from one location in an effort to reduce certain
redundancy costs. The additional costs associated with the expansion of the
August 2002 Plan amounted to approximately $400,000, comprised of; $243,000 in
severance costs, $130,000 in lease termination costs and $27,000 in other costs
associated with this expansion, which will be expensed as incurred. The majority
of these costs will be recognized in the first quarter of the fiscal year ended
June 30, 2004.

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 $2,570,000
and the elimination of previously reserved tax. 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.
It is expected that the German Tax Authority will assess the Company during the
second or third quarter of the fiscal year ended June 30, 2004. Under German tax
law, an assessment is payable at the time it is assessed, however, a Company is
permitted to request a deferral of the payment from the German Tax Authority
through various alternatives. Management believes a deferral will be granted,
however no assurances can be given that such deferral will be granted.

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 over
the term of the current financing with Maple.

At June 30, 2003 and 2002, 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 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,
2003 and the effect such obligations are expected to have on its liquidity and
cash flow in future periods (in thousands):

25

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
occasionally uses derivative financial instruments in order 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.

INTEREST RATE AND DEBT SENSITIVITY

As of June 30, 2003, the Company had debt totaling $20,069,000, 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%. This interest rate swap matures on October 30, 2003.
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. As of June 30, 2003, the Company had recorded
$197,000 in current liabilities; while gains of $200,000 and losses of $413,000
were recognized in other income in the fiscal years ended June 30, 2003 and
2002, respectively, associated with the changes in the fair value of this
interest rate swap.

The Company performed a sensitivity analysis as of June 30, 2003, 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 $200,000. 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 80% of its revenues from countries
outside of the United States for the fiscal year ended June 30, 2003. 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, 2003, the Company had recorded $5,000 in current
liabilities and a loss of $4,000 in other comprehensive income; currency
exchange losses of $4,000 and gains of $45,000 were recognized in other income
in the fiscal years ended June 30, 2003 and 2002, respectively, associated with
these currency exchange forward contracts.

The Company performed a sensitivity analysis as of June 30, 2003 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 $150,000. 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.
26

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

27

REPORT OF INDEPENDENT AUDITORS

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 operations, 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,
2003 and 2002, and the results of their operations and their cash flows for each
of the three years in the period ended June 30, 2003 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
September 24, 2003

28

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

ASSETS

The accompanying notes to consolidated financial statements
are an integral part of these statements.
29

BALDWIN TECHNOLOGY COMPANY, INC.

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

LIABILITIES AND SHAREHOLDERS' EQUITY

The accompanying notes to consolidated financial statements
are an integral part of these statements.
30

BALDWIN TECHNOLOGY COMPANY, INC.

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

The accompanying notes to consolidated financial statements
are an integral part of these statements.
31

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.
32

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.

33

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
accessories and controls for the printing and publishing industry.

The Company has experienced operating losses and debt covenant violations
over the past three 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 refinancing
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, if necessary, are sufficient to
finance its working capital and other capital requirements over the term of the
current financing (see Note 11). Management further believes that additional
actions can be taken to reduce operating expenses or that assets can be sold to
meet liquidity needs, if necessary.

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 operations. Net transaction gains (losses)
credited or charged to "Other expense (income), net" for the fiscal years ended
June 30, 2003, 2002 and 2001 were $879,000, $18,000 and $334,000, 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 occasionally uses derivative financial instruments in order 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.

34

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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
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 statement of operations when the underlying hedged item affects earnings.
Ineffectiveness related to cash flow hedges is recognized in earnings and is
included in "Other expense (income), net".

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. For the fiscal year
ended June 30, 2003, one customer accounted for more than 10% of the Company's
net sales. Koenig and Bauer Aktiengesellschaft ("KBA") accounted for
approximately 13% of the Company's net sales. The Company's ten largest
customers accounted for approximately 46%, 44% and 49% of the Company's net
sales for each of the fiscal years ended June 30, 2003, 2002 and 2001,
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 other comprehensive income (loss) included within
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 $505,000 and $635,000 greater as of June 30, 2003
and 2002, 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 $1,288,000, $1,423,000 and $1,659,000 for the fiscal years ended June 30,
2003, 2002 and 2001, respectively.

LONG-LIVED ASSETS. Whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable, the Company
evaluates the basis of its long-lived assets

35

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

based on expectations of undiscounted cash flows related to those assets. Based
on its most recent analysis, the Company believes that no impairment of its
long-lived assets exists at June 30, 2003.

In October 2001, Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." SFAS 144 provides guidance on
the accounting for long-lived assets to be held and used and for assets to be
disposed of through sale or other means. SFAS 144 also broadens the definition
of what constitutes a discontinued operation and how such results are to be
measured and presented. SFAS 144 was effective for fiscal years beginning after
December 15, 2001. The adoption of SFAS 144 did not have a material impact on
the earnings or financial position of the Company.

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 utilizing discounted cash flows 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 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 during the year ended June 30, 2002, subsequent to
adoption of the standard, related to a reporting unit whose operating results
and future prospects deteriorated during that fiscal year. Note 18 also
discusses goodwill amortization expense for each period. The Company performed
its annual impairment assessment by utilizing a discounted cash flow model and
determined that no impairment existed as of June 30, 2003.

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 $643,000, $437,000 and $669,000 for the fiscal years ended June 30,
2003, 2002 and 2001, 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 the Company expects to realize in the
future. The Company continually reviews the adequacy of the valuation allowance
and recognizes these benefits only as reassessment indicates that it is more
likely

36

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

than not that these benefits will be realized. In addition, the Company
continuously evaluates its tax contingencies and recognizes a liability when it
believes that it is probable that a liability exists.

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 other short and long-term borrowings, and derivative financial
instruments. The current carrying amount of these instruments approximates fair
market value.

DEFERRED LOAN ORIGINATION COSTS. At June 30, 2003, these costs were
$953,000 less $743,000 of accumulated amortization ($1,427,000 less $786,000 of
accumulated amortization at June 30, 2002) 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
and is included in "Cost of goods sold". 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 $1,649,000 and $1,516,000 at June 30, 2003 and 2002 respectively, which are
included in "Other accounts payable and accrued liabilities" (see Note 21).

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 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.

37

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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, 2003, 2002 and 2001,
respectively, which represent potentially dilutive securities. Outstanding
options to purchase 1,285,000 shares, 1,514,000 shares and 1,361,000 shares of
the Company's stock, respectively, for the fiscal years ended June 30, 2003,
2002 and 2001 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. The most significant
assumptions and estimates relate to the determination of accrued expenses
including warranty, accounts receivable and inventory valuations, useful lives
of assets and deferred tax asset valuations. Actual results could differ from
those estimates.

ROYALTY INCOME. The Company owns and licenses a number of patents and
patent applications relating to Baldwin's products, some of which provide
royalty income to the Company. Patented products represent a significant 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 group of
patents, which provide for the majority of the Company's current royalty income,
are scheduled to expire in February 2005. The expiration of patents in the near
future in general, is not expected to have a material adverse effect on the
Company's net sales; however, royalty income and cash flows, are expected to be
negatively impacted upon the expiration of this group of patents. 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.

RECENTLY ISSUED ACCOUNTING STANDARDS. In May 2003, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 150 ("SFAS 150"), "Accounting for Certain Financial
Instruments with Characteristics of both Liability and Equity."

38

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SFAS 150 improves the accounting for certain financial instruments that, under
previous guidance, issuers could account for as equity and requires that those
instruments be classified as liabilities (or assets in certain circumstances) in
statements of financial position. SFAS 150 affects the issuer's accounting for
certain types of freestanding financial instruments and also requires disclosure
about alternative ways of settling the instruments and the capital structure of
entities -- all of whose shares are mandatorily redeemable. SFAS 150 is
generally effective for all financial instruments entered into or modified after
May 31, 2003, and otherwise is effective as of July 1, 2003 for the Company.
SFAS 150 is not expected to have a material impact on the Company's current
capital structure, but may in the future should the Company enter into
transactions with certain types of freestanding financial instruments.

In April 2003, the FASB issued SFAS No. 149 ("SFAS 149"), "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities." SFAS 149 amends
and clarifies (1) the accounting guidance on derivative instruments (including
certain derivative instruments embedded in other contracts) and (2) hedging
activities that fall within the scope of FASB Statement No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities." SFAS 149 amends
SFAS 133 to reflect decisions made (1) as part of the Derivatives Implementation
Group ("DIG") process that effectively required amendments to SFAS 133, (2) in
connection with other projects dealing with financial instruments, and (3)
regarding implementation issues related to the application of the definition of
a derivative. SFAS 149 is effective (1) for contracts entered into or modified
after June 30, 2003, with certain exceptions, and (2) for hedging relationships
designated after June 30, 2003. The guidance is to be applied prospectively.
Generally, SFAS 149 improves financial reporting by (1) requiring that contracts
with comparable characteristics be accounted for similarly and (2) clarifying
when a derivative contains a financing component that warrants special reporting
in the statement of cash flows. SFAS 149 is not expected to have a material
impact on the Company's operations, cash flows or financial position.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure, an amendment of FASB Statement No.
123" ("SFAS 148"). SFAS 148 amends FASB Statement No. 123 "Accounting for
Stock-Based Compensation" ("SFAS 123"), to provide alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based employee compensation prescribed by SFAS 123. SFAS
148 also amends the disclosure provisions of SFAS 123 to require prominent
disclosure in both annual and interim financial statements about the effects on
reported net income of an entity's accounting policy decisions with respect to
stock-based employee compensation. The amendment relating to the additional
disclosure requirements in the interim financial statements are effective for
interim periods beginning after December 14, 2002. SFAS 148 is not expected to
have a material impact on the operations or cash flows of the Company. However,
additional disclosures have been incorporated into the Company's interim
consolidated financial statements beginning with the quarter ended March 31,
2003.

39

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The pro forma net loss and loss per share information have been determined
for employee stock plans under the fair value method using the Black-Scholes
option-pricing model at the date of grant. The following table illustrates the
effect on net loss and loss per share if the Company had applied the fair value
recognition provisions of SFAS 123 for the years ended June 30, 2003, 2002 and
2001 (in thousands):

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 has
expanded its August 2002 restructuring plan as more fully described in Note 5,
and as such has expensed certain costs as incurred in the fiscal year ending
June 30, 2004, rather than to accrue the costs of this enhancement into the
fiscal year ended June 30, 2003 as would have been the previous treatment under
EITF 94-3.

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 long-lived assets, excluding
goodwill, 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 also requires
long-lived assets that are to be abandoned, be treated as held for use and
depreciated over their remaining expected lives and broadens the presentation of
discontinued operations in the statement of operations to a component of an
entity rather than a segment of a business. SFAS 144 was effective for the
Company beginning July 1, 2002 and has not materially changed the methods used
by the Company to measure impairment losses on long-lived assets, but as a
result of the adoption of SFAS 144, BKA has been included as a discontinued
operation in the consolidated statements of operations for the year ended

40

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

June 30, 2003 and the corresponding amounts relating to BKA for all prior
periods presented have been reclassified to conform to this presentation.

In November 2002, the FASB issued Interpretation No. 45 "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, (an interpretation of FASB Statements No.
5, 57, and 107 and rescission of FASB interpretation No. 34)" ("FIN 45"). FIN 45
elaborates on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain guarantees that
it has issued. FIN 45 also clarifies that a guarantor is required to recognize,
at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. The initial recognition and
initial measurement provisions of FIN 45 are applicable on a prospective basis
to guarantees issued or modified after December 31, 2002. The disclosure
requirements of FIN 45 were effective for interim and annual financial
statements for periods ending after December 15, 2002. The initial recognition
and initial measurement provisions did not have a material impact on the
operations or cash flows of the Company. See Note 21 regarding additional
disclosures about the Company's warranty costs.

In January 2003, the FASB issued Interpretation No. 46 "Consolidation of
Variable Interest Entities" ("FIN 46"). FIN 46 requires that if an entity is the
primary beneficiary of a variable interest entity, the assets, liabilities, and
results of operations of the variable interest entity should be included in the
Consolidated Financial Statements of the entity. The provisions of FIN 46 are
effective immediately for all arrangements entered into after January 31, 2003.
For those arrangements entered into prior to January 31, 2003, the provisions of
FIN 46 are required to be adopted at the beginning of the first interim or
annual period beginning after December 15, 2003. The initial recognition and
measurement provisions of FIN 46 are not expected to have a material impact on
the financial position or results of operation of the Company.

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:

41

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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
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. In June
2003, the Company received a distribution of $45,000 from the escrow agent. The
Company may in the future receive additional distributions either from the sale
of certain assets, or from settlements of the litigation, although amounts are
not anticipated to be material and the prospects of collection seem remote at
the present time.

42

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5 -- RESTRUCTURING CHARGES AND RELATED RESERVES:

During March 2000, the Company initiated a restructuring plan (the "March
2000 Plan") that included the consolidation of production into certain
facilities, and reduction in total employment, primarily in the United States.
The March 2000 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 $220,000, $621,000 and $2,277,000 for the fiscal years ended June
30, 2003, 2002 and 2001, respectively related to the March 2000 Plan. The
$220,000 relates primarily to additional exit costs, which were expensed as
incurred. The initial restructuring charge of $5,664,000 included $509,000
related to asset impairments of property, equipment and certain intangible
assets. The March 2000 Plan reduced 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 initiating the March
2000 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 March 2000 Plan included the
centralization of these activities. Products that were previously being produced
at multiple facilities were consolidated with similar product lines at existing
facilities. The following tables detail the components of the restructuring
charges and the remaining reserve balances as of June 30, 2003 and 2002 related
to the March 2000 Plan.

Activity related to the March 2000 Plan in the fiscal year ended June 30,
2002 was as follows:

Activity related to the March 2000 Plan in the fiscal year ended June 30,
2003 was as follows:

Severance costs will be paid through October 2003, the majority of which is
expected to be paid in the first quarter of fiscal 2004. Facility lease
termination costs will be paid through April 2006. As

43

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

of June 30, 2003, $660,000 is included in "Other accounts payable and accrued
liabilities" and $791,000 is included in "Other long-term liabilities" which are
discussed below. In June 2003, the Company revised its estimate of severance
costs to be paid, and as a result reclassified approximately $295,000 from the
severance portion of the liability to the facility lease termination portion of
the liability in order to account for the inability of the Company to sublease
its facility in Shelton, Connecticut at acceptable terms as initially
contemplated in the Company's March 2000 Plan.

In response to weak market conditions, in August 2002, the Company
announced additional restructuring activities (the "August 2002 Plan"), which
reduced total worldwide employment by approximately 160. Accordingly, the
Company recorded an initial restructuring charge of approximately $3,385,000 in
August 2002 and additional restructuring charges of $144,000 during the balance
of the fiscal year ended June 30, 2003 related to the August 2002 Plan. The
Company expects that the severance costs will be paid through December 2003 and
approximately $400,000 in lease termination costs will be paid through December
2006. The following table details the components of the restructuring charges
and the remaining reserve balances as of June 30, 2003 and 2002 related to the
August 2002 Plan.

Activity related to the August 2002 Plan in the fiscal year ended June 30,
2003 was as follows:

Severance costs will be paid through December 2003, the majority of which
is expected to be paid in the first quarter of fiscal 2004. Lease termination
costs will be paid through October 2006, the end of the lease term. As of June
30, 2003, $493,000 is included in "Other accounts payable and accrued
liabilities" and $157,000 is included in "Other long-term liabilities.

In August 2003, the Company expanded the August 2002 Plan and announced
additional employment reductions of 15 in the United States and 8 in the United
Kingdom. In addition, the Company closed its office in Dunstable, England and is
currently running its two separate business operations from its Poole, England
location in an effort to reduce or eliminate certain costs as pert of its global
restructuring efforts. The additional costs associated with the expansion of the
August 2002 Plan amounted to approximately $400,000, comprised of; $243,000 in
severance costs, $130,000 in lease termination costs and $27,000 in other costs,
which will be expensed as incurred. The majority of these costs will be
recognized in the first quarter of the fiscal year ended June 30, 2004.
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.

44

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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. The Company also completed the sale of the
POD business in November 2001. As a result of the divestitures of these
businesses, 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, 2003, 2002, and 2001 (in thousands). All prior periods have been
restated to conform to the current period's presentation.

45

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:

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. There were no sales to this customer in the fiscal year
ended June 30, 2003.

(b) Other expense, net, of $2,251,000 in the fiscal year ended June 30, 2003
consists primarily of a charge of $1,374,000 associated with the Company
refinancing and strategic alternative efforts, a $211,000 loss on the sale
of the RHG and currency transaction losses of $879,000. Offsetting these
charges is a gain of $200,000 associated with an interest rate swap. Other
expense, net, of $1,037,000 in the fiscal year ended June 30, 2002 consists
primarily of a loss of $413,000 associated with an interest rate swap,
$255,000 of expenses relating to 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.

46

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Long-lived assets includes the net book value of; "Property, plant and
equipment", "Patents, trademarks and engineering drawings", "Goodwill" and
certain other amortizable assets included in "Other assets".

47

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 -- DERIVATIVES:

During the fiscal year ended June 30, 2003, 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, 2003, 2002 and 2001 is the monthly
interest payments of $525,000, $383,000 and $19,000, respectively, associated
with this Swap.

The adjustment to the fair value of the Swap at June 30, 2003 resulted in a
gain for the fiscal year ended June 30, 2003 of $289,000. Of this amount,
$89,000 has been recorded in OCI and the remaining $200,000 has been credited to
earnings, which was recorded in "Other income and expense" in the accompanying
consolidated statement of operations. 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.

Hedging ineffectiveness, determined in accordance with SFAS 133, had no
material impact on earnings for either of the fiscal years ended June 30, 2003
or 2002. 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.

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

The unrealized net loss of $4,000 at June 30, 2003, is primarily comprised
of losses on currency futures contracts and is expected to be reclassified
against earnings during the next twelve months. The currency futures contracts
expired at various times through August 12, 2003, 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

48

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

October 10, 2002. The consideration received for the transaction, after certain
post-closing adjustments, was approximately $3,736,000, 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. BKA constitutes
a discontinued operation in accordance with paragraph 42 of SFAS 144, which
became effective on July 1, 2002 for the Company. Accordingly, for all periods
presented, amounts previously reported in continuing operations have been
reclassified to report BKA as a discontinued operation.

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
years ended June 30, 2003 and 2002, the Company recognized an additional loss of
$211,000 and $250,000, respectively on the sale of RHG, which is recorded in
other expense.

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. In November 2001, the Company sold substantially all of the
assets of its subsidiary Baldwin Document Finishing Systems, Inc. ("BDF"), the
sole operation unit in the POD business to Finishing and Systems Technology LLC
("FAST"), a new company formed by the management of the POD business. The
consideration included the Company retaining a note receivable from FAST in the
amount of $137,000 plus interest at 8%, due in three equal annual installments
on the anniversary date of the sale. The first installment was due in November
2002, which was not paid, and in May 2003, FAST filed for Chapter 7 bankruptcy
protection. As a result, the Company wrote-off the entire amount of the note of
$137,000 in May 2003. 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

49

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 and BSD combined, which are
included in the Company's consolidated financial statements, were as follows for
the years ended June 30:

NOTE 9 -- INVENTORIES:

Inventories consist of the following:

Foreign inventories increased by $1,636,000 (increased by $2,017,000 in
2002) due to translation rates in effect at June 30, 2003 when compared to rates
in effect at June 30, 2002.

NOTE 10 -- LOANS PAYABLE:

The maximum amount of loans payable outstanding during the year ended June
30, 2003 was $6,382,000 ($5,372,000 in 2002). Average interest rates are
weighted by month and reflect the

50

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

monthly amount of short-term borrowing in use and the respective rates of
interest thereon. Loans payable increased by $341,000 (increased by $830,000 in
2002), due to translation rates in effect at June 30, 2003 when compared to
rates in effect at June 30, 2002. The majority of the loans are
uncollateralized, however, certain of these loans are collateralized by the
current assets associated with the foreign subsidiaries where the loans are
drawn.

NOTE 11 -- LONG-TERM DEBT:

On August 18, 2003, the Company entered into a $20,000,000 Credit Agreement
(the "Credit Agreement") with Maple Bank GmbH ("Maple" or "Lender"), which if
not terminated by the Lender on August 15, 2004 or by the Company by payment in
full, shall terminate in its entirety on August 15, 2005. The credit facility is
collateralized by substantially all of the accounts and notes receivable of the
Company and a portion of the Company's inventory up to a maximum amount of
$5,000,000. Borrowings under the credit facility are subject to a borrowing base
and bear interest at a rate equal to the three-month Eurodollar rate (as defined
in the Credit Agreement) plus (i) 10% for loans denominated in U.S. Dollars or
(ii) 11.5% for loans denominated in Euros. The interest rate will be reduced by
0.50% or whole increments thereof for each whole increment of Disclosed EBITDA
(as defined in the Credit Agreement) that equals or exceeds $1,250,000 for any
fiscal quarter commencing with the quarter ending December 31, 2003. In no event
however, may the interest rate be less than 10.5% per annum. The initial
borrowings under the credit facility amounted to $18,874,000, of which the
Company utilized $16,243,000 to retire its previously existing debt and
associated interest with Fleet National Bank and Wachovia Bank National
Association and the remainder of the borrowings was utilized for closing costs
and working capital purposes. The Credit Agreement does not require the Company
to meet any financial covenants, except for the limitation on annual capital
expenditures; however, it contains a material adverse effect clause, which
provides that Maple would not be obligated to fund any loan, convert or continue
any loan as a LIBOR loan or issue any new letters of credit in the event of a
material adverse effect. Management does not anticipate that such an event will
occur; however, there can be no assurance that such an event will not occur.

Prior to this refinancing with Maple, and 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

51

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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. The Revolver had associated commitment fees, which
were 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, 2003, 2002 and 2001 were $4,000, $24,000 and $47,000, 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 and net losses, and debt covenant
violations over the past three 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 the 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 30, 2002, the Company and the Banks entered
into an amendment 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, consisted of a
$17,000,000 revolving credit line (the "Extended Revolver") and a $3,900,000
term loan each due July 1, 2003 (the "Extended Term Loan"). The Extended Credit
Facility required the Company to utilize the net proceeds of $3,736,000 from the
sale of certain assets of its wholly-owned subsidiary Baldwin Kansa Corporation
("BKA") (see Note 8) plus $464,000 from the Company's cash flows to reduce
outstanding borrowings under the Extended Revolver by $4,200,000 before October
30, 2002, of which $2,700,000 permanently reduced the Extended Revolver and
$1,036,000 became available for future borrowings, subject to a borrowing base
calculation. Additionally, beginning in December 2002 and extending through June
2003, the Company was required to permanently reduce the Extended Revolver by
making monthly principal payments of $125,000. The Company was also required to
permanently reduce the Extended Revolver by $5,000,000 on December 30, 2002 and
by $5,000,000 on March 30, 2003, but only if the Company generated non-operating
alternative sources of financing. As the Company did not generate any
alternative sources of financing since entering into the Extended Credit
Facility on October 30, 2002, the Company was not required to make, and did not
make, the $5,000,000 payment on December 30, 2002 or the $5,000,000 payment on
March 30, 2003. Additionally, at September 30, 2002 and March 31, 2003, the
Company was not in compliance with its debt covenants, and received waivers from
the non-compliance. At June 30, 2003, the

52

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Company had outstanding borrowings of $16,112,000 under the Extended Revolver
and Extended Term Loan and this entire outstanding balance has been classified
as current as of June 30, 2003, which was entirely repaid from the proceeds of
the refinancing with Maple on August 18, 2003.

The ability of the Company to achieve and maintain profitability 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. Management believes, although there can be
no guarantee, that as the Company's profitability improves, alternative sources
of financing are available to finance the existing facilities at lower interest
rates.

The Company maintains relationships with both foreign and domestic banks,
which combined have extended credit facilities to the Company totaling
$21,469,000, including amounts available under the Revolver. As of June 30,
2003, the Company had $19,413,000 outstanding under these credit facilities
including $16,112,000 under the Revolver and Term Loan. Total debt levels as
reported on the balance sheet at June 30, 2003 are $427,000 higher than they
would have been if June 30, 2002 exchange rates had been used.

Notes payable, denominated in currencies other than the U.S. dollar,
increased by $341,000 ($485,000 in 2002), due to translation rates in effect at
June 30, 2003 when compared to translation rates in effect at June 30, 2002. The
foreign note due through 2008, with an interest rate of 5.95%, is collateralized
by buildings as outlined in the indenture relating to this note.

Maturities of long-term debt in each fiscal year ending after June 30, 2003
are as follows:

53

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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, 2003 and 2002 are as follows:

54

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

At June 30, 2003, net operating loss carryforwards of $69,275,000 and
$22,735,000, respectively, which may be available to reduce future foreign and
domestic taxable income. The majority of the Company's foreign net operating
loss ("NOL") carry-forwards have an indefinite carry-forward period, while the
domestic NOLs begin to expire in June 2022. In addition, as of June 30, 2003,
the Company has capital loss carry-forwards available in the amount of
$4,092,000, of which $3,491,000 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." 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 the Company 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. In the fiscal year ended June 30, 2003,
the valuation allowance increased primarily because the Company did not believe
there was sufficient evidence to indicate that the Company would more likely
than not realize its domestic and certain of its foreign deferred tax assets.

The Company has not had to provide for income taxes on $19,141,000 of
cumulative undistributed earnings of subsidiaries outside the United States
because of the Company's intention to indefinitely reinvest those earnings.

The Company is subject to ongoing tax examinations and assessments in
various jurisdictions. Accordingly, the Company provides for additional tax
expense based upon the probable outcomes of such matters. In addition, when
applicable, the Company adjusts the previously recorded tax expense to reflect
examination results. 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
$2,570,000 and the elimination of previously reserved tax losses. 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. It is expected that the German Tax Authority will assess the
Company during the second or third quarter of the fiscal year ended June 30,
2004. Under German tax law, an assessment is payable at the time it is assessed,
however, a Company is permitted to request a deferral of the payment from the
German Tax Authority through various alternatives. Management believes a
deferral will be granted, however no assurances can be given that such deferral
will be granted.

55

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, 2003, the number of outstanding shares of
Class B constituted approximately 14.6% (14.6% as of June 30, 2002) 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 declared or paid 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, 2003, 818,300 shares of Class A and 25,000
shares of Class B had been repurchased for $1,784,000, of

56

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

which $1,721,000 was used to purchase Class A and $63,000 was used to purchase
Class B under this new program. There was no activity under this repurchase
program during the fiscal year ended June 30, 2003.

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 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.

In August 2002, the Board of Directors approved an amendment to the 1996
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 Options to purchase any shares of
Class B under the 1996 Plan after the date of the next annual meeting of the
Company's stockholders, (c) provide that Eligible Directors shall be eligible to
receive Options under the 1996 Plan and (d) make certain other technical and
clarifying amendments. The stockholders approved the amendment to the 1996 Plan
on November 21, 2002.

57

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Also in August 2002, the Board of Directors authorized 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 Eligible 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.

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

On November 22, 2002, the Committee granted non-qualified options to
purchase 25,000 shares of Class A under the 1996 Plan at an exercise of price of
$0.58 per share, the fair market value on the date of the grant.

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 each Eligible Director. 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. The 1998 Plan was terminated
on November 21, 2002 provided, however, that outstanding options under the 1998
Plan will continue to be subject to the terms thereof.

58

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

59

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes information regarding stock options
outstanding and exercisable at June 30, 2003:

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, 2003, 2002 and 2001: 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, 2003, 2002 and 2001, the weighted
average risk free interest rates were 3.26% for 2003, 4.52% for 2002 and 5.70%
for 2001, and the average volatility was 66.12% for 2003, 54.76% for 2002 and
50.61% for 2001.

On January 1, 2003, the Company adopted the disclosure provisions of
Financial Accounting Standards Board ("FASB") Statement No. 148, "Accounting for
Stock-Based Compensation -- transition and disclosure" ("SFAS 148"), which
amended certain provisions of SFAS 123 to provide alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based employee compensation, effective as of the
beginning of the fiscal year. Baldwin continues to apply the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," ("APB 25") in accounting for stock-based compensation. In accordance
with APB 25, compensation costs for stock options is recognized in income based
on the excess, if any, of the quoted market price over the exercise price of the
stock on the date of grant. The exercise price for all stock option grants
equals the fair market value on the date of grant, therefore no compensation
expense is recorded.

The pro forma net loss and loss per share information have been determined
for employee stock plans under the fair value method using the Black-Scholes
option-pricing model at the date of grant. The following table illustrates the
effect on net loss and loss per share if the Company had applied the

60

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

fair value recognition provisions of SFAS 123 for the years ended June 30, 2003,
2002 and 2001 (in thousands):

NOTE 15 -- SUPPLEMENTAL COMPENSATION:

Subsidiaries within the Americas maintained 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 included 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 enabled the
Company to match up to 5% of eligible compensation and the 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. However, on October 10, 2002, the
Company sold the assets of BKA, which included employees covered under the Kansa
Plan, and recorded the operation as a discontinued operation in accordance with
SFAS 149. Amounts expensed under these plans were as follows:

Company contributions to each of the above plans were discretionary and
subject to approval by their respective Boards of Directors. The assets of the
above plans were (and for the Baldwin Plan, are)

61

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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
Baldwin Plan at June 30, 2003.

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 three 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.

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:

62

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 and partially funded through insurance contracts. Expenses
relating to these programs were $235,000, $376,000 and $552,000 for the fiscal
years ended June 30, 2003, 2002 and 2001, respectively.

Officers and key employees of the Company participate in various incentive
compensation plans. Amounts expensed under such plans were $0 (zero), $0 (zero)
and $74,000 for the fiscal years ended June 30, 2003, 2002 and 2001,
respectively.

63

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16 -- COMMITMENTS AND CONTINGENCIES:

Future minimum annual lease payments under capital leases, which consist of
machinery and equipment with accumulated depreciation amounting to $17,000 at
June 30, 2003 and $306,000 at June 30, 2002, together with the present value of
the minimum lease payments are as follows at June 30, 2003:

At June 30, 2003, $202,000, ($67,000 at June 30, 2002) is included in
"Other long-term liabilities" representing the long-term portion of the present
value of minimum lease payments, and $60,000, ($24,000 at June 30, 2002) is
included in "Other accounts payable and accrued liabilities" representing the
current portion of the present value of minimum lease payments.

During the fiscal year ended June 30, 2003, the Company entered into an
agreement with a strategic advisor to provide consultation services to the
Company as it explores various financing and strategic alternatives. Under the
terms of the agreement the advisor is entitled to a monthly management fee and
either a success fee should the Company consummate a transaction with the
assistance of the advisor or termination fee if the agreement is terminated by
the Company. The agreement shall continue until terminated by either party by
written notice. For the year ended June 30, 2003, the Company expensed, in
"Other expense (income), net", approximately $500,000 associated with these
services.

On May 1, 2003, the Company entered into an agreement with a second
strategic advisor to provide consultation services to the Company as it explores
various financing and strategic alternatives. Under the terms of the agreement
the advisor is entitled to a cash fee and a contingent transaction fee should
the Company consummate a transaction with the assistance of the advisor. The
agreement was terminated in June 2003, and the unpaid portion of the contingent
transaction fee was converted into a promissory note payable in the amount of
$412,500, which bears interest at a rate of 20% per annum. The principal amount
of the promissory note, together with all accrued and unpaid interest and all
other amounts due and payable thereunder, shall become immediately due and
payable upon the earlier of (i) the six-month anniversary of a "Note Event" (as
defined in the agreement) of (ii) the consummation of a "Competing Transaction"
(as defined in the agreement), but if a Note Event has not occurred within 12
months of the date of the agreement, the promissory note shall be void. Since
the Company consummated a financing transaction with a new lender in August
2003, the note matures in February 2004. For the year ended June 30, 2003, the
Company expensed, in "Other expense (income), net", approximately $564,000
(including the principal amount related to the

64

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

promissory note) associated with these services. At June 30, 2003, the Company
has recorded the promissory note of approximately $419,000, including interest
thereon, in "Other accounts payable and accrued liabilities".

Rental expense on operating leases amounted to approximately $4,201,000,
$4,422,000 and $4,352,000 for the years ended June 30, 2003, 2002 and 2001,
respectively. Aggregate future annual rentals under noncancellable operating
leases for periods of more than one year at June 30, 2003 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, cash flows or results of operations of the Company.

NOTE 17 -- RELATED PARTIES:

On October 25, 2002, John T. Heald, Jr. resigned as President, Chief
Executive Officer and a Director of the Company. Mr. Heald was employed by the
Company from March 21, 2001 to November 21, 2002. In accordance with Mr. Heald's
employment agreement, 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 promissory 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 issued
shares. The promissory note is collateralized by the shares, pursuant to a loan
and pledge agreement between Mr. Heald and the Company dated October 17, 2001.
If at any time, Mr. Heald sells any of these shares, he is to pay the Company
$1.80 times the number of shares sold within five days of receipt of the funds
from such sale. In November 2002, the Company amended the loan and pledge
agreement, and the promissory note, to evidence a reduction of the outstanding
principal due from Mr. Heald on the loan by $225,000 in exchange for a reduction
in deferred compensation payments to be made by the Company to Mr. Heald. The
Company agreed not to demand payment of the promissory note for a period of two
years following Mr. Heald's termination. The reduction represented the then
present value of Mr. Heald's deferred compensation benefit that accrued to Mr.
Heald. The balance of the loan, including interest, was $501,000 and $699,000 at
June 30, 2003 and June 30, 2002, respectively.

In accordance with the terms of the employment agreement between the
Company and Gerald A. Nathe, Chairman, President and Chief Executive Officer of
the Company, 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
1993 in exchange for a recourse demand promissory note for said

65

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

amount. The note bore interest, payable on the anniversary dates of the loan, 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 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, 2003 and 2002 was $1,553,000 and $1,612,000,
respectively. 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, however, no interest
payments were forgiven during the fiscal year ended June 30, 2003. Such amounts
were recorded as compensation expense to Mr. Nathe, and included in "General and
administrative expenses" during the fiscal years ended June 30, 2002 and 2001.

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. The reduction
represented the then present value of a portion of Mr. Nathe's deferred
compensation benefit that had accrued to Mr. Nathe. Mr. Nathe was responsible
for his personal taxes on this exchange. At June 30, 2003, the balance of the
loan, including interest was $836,000.

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.

Samuel B. Fortenbaugh III, a Director of the Company since 1987, rendered
legal services to the Company since September 2002. During the fiscal year ended
June 30, 2003, the Company paid $82,000 to Mr. Fortenbaugh for legal services
rendered. Prior to September 2002, Mr. Fortenbaugh was a Partner of the law firm
of Morgan Lewis & Bockius LLP, which firm has rendered legal services to the
Company since 1980.

66

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 18 -- 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, zero and $973,000 for the fiscal years ended June 30, 2003,
2002 and 2001, respectively.

During the fiscal year ended June 30, 2002, the operating results and
future prospects of the Baldwin Kansa subsidiary ("BKA") deteriorated. As a
result, the goodwill associated with BKA exceeded the assessment of its
fair-value made by the Company, and the Company recorded a goodwill impairment
charge of $5,434,000 in the fiscal year ended June 30, 2002. This impairment
charge, along with the operating results of BKA, and the gain on the sale of BKA
are included as a discontinued operation for all periods presented.

The changes in the carrying amount of goodwill by segment for each of the
fiscal years ended June 30, 2003 and 2002 are as follows (in thousands):

Activity in the fiscal year ended June 30, 2003 is as follows:

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

67

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Intangible assets subject to amortization at June 30, 2003 are comprised of
the following:

The weighted average life for intangible assets at June 30, 2003 was 13.4
years and amortization expense for the fiscal year ended June 30, 2003 was
$618,000.

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

The following selected pro forma information for the fiscal years ended
June 30, 2003, 2002 and 2001 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's European and Asian subsidiaries
were not included in this proceeding. The Company received timely payments, on a
post petition basis, from the foreign subsidiaries of Goss, and continues to

68

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

monitor the status of all Goss payments. At June 30, 2002, the Company's
consolidated balance sheet included approximately $1,979,000 of trade
receivables from Goss, of which approximately $1,029,000 relates to Goss's
European and Asian subsidiaries, which are not included in the bankruptcy
proceeding. The balance of $950,000 was 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. At June 30, 2003, the Company's consolidated balance sheet
included approximately $1,687,000 of trade receivables from Goss, of which
approximately $966,000 relates to Goss's European and Asian subsidiaries, which
are not included in the bankruptcy proceeding. The balance of $721,000 is fully
reserved. The decrease in the reserve of $229,000 was the result of a write-off
of an identical amount of domestic accounts receivable of the Company.

NOTE 20 -- LEGAL PROCEEDINGS AND SETTLEMENTS:

On November 14, 2002, the Dusseldorf Higher Regional Court ("DHRC")
announced its judgment in favor of Baldwin in a patent infringement dispute
against its competitor, technotrans AG ("Technotrans"). Subsequent to November
14, 2002, Technotrans has filed an appeal of the DHRC ruling with the German
Supreme Court in Karlsruhe. Technotrans has also filed to invalidate the
Company's patent with the German Patent Court in Munich. No amounts have been
recorded in the consolidated financial statements with regard to the potential
contingent gain from the DHRC judgment.

In February 2002, Epic Products International ("EPIC"), a licensee of one
of the Company's subsidiaries, filed a demand for arbitration with the American
Arbitration Association in Dallas, Texas, claiming breach of the license
agreement and demanding, among other things, damages in an unspecified amount
alleging that Baldwin failed to make royalty payments to EPIC as and when due.
In October 2002, EPIC amended its arbitration claim to add additional damages
and allegations. In February 2003, EPIC and the Company agreed to settle their
dispute for a net payment of $737,000, representing the settlement of all
existing claims and an amendment to the license agreement on a prospective
basis. This settlement amount was paid by the Company over a five-month period
ending May 31, 2003. As a result of this settlement, the Company included
$250,000 in additional royalty income for the year ended June 30, 2003.

In August, 2001, R.R. Donnelley & Sons (RRD), a customer of the Company and
a licensor to Baldwin Stobb, formerly a division of the Company, filed a
complaint against the Company and Systems Technology Inc. (STI), the entity that
acquired substantially all the assets of Baldwin Stobb in September 2000,
alleging among other things, breach of a license agreement. In March 2002, RRD
amended its complaint alleging additional causes of action. In early March 2003,
RRD withdrew some of its claims and moved to again amend its complaint to
include additional allegations and request specific performance; in late March
2003, RRD moved to file a corrected second amended complaint, alleging new
causes of action and increased damages. The parties reached a settlement in June
2003, under which the Company agreed to provide product, in lieu of cash, to RRD
for its share of the settlement, over the course of the next two years, limited
to $250,000 per quarter. The Company recognized a charge to earnings, which is
included in the loss from continuing operations, during its fiscal quarter and
year ended June 30, 2003, in the amount of $1,250,000 representing the fair
market value of said product.

69

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 21 -- WARRANTY COSTS:

The Company's standard contractual warranty provisions are to repair or
replace, at the Company's option, 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 separate from the percent of
revenue discussed above.

70

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 22 -- QUARTERLY FINANCIAL DATA (UNAUDITED):

Summarized quarterly financial data for the fiscal years ended June 30,
2003 and 2002 are as follows (in thousands, except per share data):

71

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

72

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

- ---------------------
(1) The first quarter of fiscal 2003 cost of goods sold includes an additional
warranty cost of $700,000 related to two customer installations. The first
quarter of fiscal 2003 other expenses includes an additional loss on the
sale of RHG of $211,000 and a loss of $65,000 on a derivative financial
instrument that did not qualify as a hedge pursuant to SFAS 133. See Note 7.

(2) The second quarter of fiscal 2003 other expenses includes a gain of $91,000
on a derivative financial instrument that did not qualify as a hedge
pursuant to SFAS 133. See Note 7.

(3) The third quarter of fiscal 2003 other expenses includes a gain of $122,000
on a derivative financial instrument that did not qualify as a hedge
pursuant to SFAS 133. See Note 7. 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.

(4) The fourth quarter of fiscal 2003 operating expenses includes a bad debt
charge of $137,000 related to the sale of the POD, which occurred in
November 2001. See Note 8. The fourth quarter of fiscal 2003 includes a
refund of $45,000 related to the sale of the PPO. See Note 4. The fourth
quarter of fiscal 2003 other expenses includes charges relating to the
Company's financing and strategic alternatives of $1,289,000 and a currency
exchange loss of $263,000 associated with the payoff of a foreign letter of
credit. The fourth quarter of fiscal 2003 other expenses also includes a
gain of $140,000 on a derivative financial instrument that did not qualify
as a hedge pursuant to SFAS 133. See Note 7.

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

(6) 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.

(7) 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.

(8) 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 net operating losses.

73

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 23 -- SUBSEQUENT EVENTS:

In August 2003, the Company expanded the August 2002 Plan and announced
additional employment reductions of 15 in the United States and 8 in the United
Kingdom. In addition, the Company closed its office in Dunstable, England and is
currently running its two separate business operations from its Poole, England
location in an effort to reduce or eliminate certain costs as part of its global
restructuring plan. The additional costs associated with the expansion of the
August 2002 Plan amounted to approximately $400,000, comprised of; $243,000 in
severance costs, $130,000 in lease termination costs and $27,000 in other costs
associated with this expansion, which will be expensed as incurred. The majority
of these costs will be recognized in the first quarter of the fiscal year ended
June 30, 2004. Management believes that the nature and scope of these
restructuring activities, in addition to those completed earlier, will be
sufficient to restore the Company's profitability and cash flow from operations.

On August 18, 2003, the Company entered into a $20,000,000 Credit Agreement
(the "Credit Agreement") with Maple Bank GmbH ("Maple" or "Lender"), which if
not terminated by the Lender on August 15, 2004 or by the Company by payment in
full, shall terminate in its entirety on August 15, 2005. The credit facility is
collateralized by substantially all of the accounts and notes receivable of the
Company and a portion of the Company's inventory up to a maximum amount of
$5,000,000. Borrowings under the credit facility are subject to a borrowing base
and bear interest at a rate equal to the three-month Eurodollar rate (as defined
in the Credit Agreement) plus (i) 10% for loans denominated in U.S. Dollars or
(ii) 11.5% for loans denominated in Euros. The interest rate will be reduced by
0.50% or whole increments thereof for each whole increment of Disclosed EBITDA
(as defined in the Credit Agreement) that equals or exceeds $1,250,000 for any
fiscal quarter commencing with the quarter ending December 31, 2003. In no event
however, may the interest rate be less than 10.5% per annum. The initial
borrowings under the credit facility amounted to $18,874,000, of which the
Company utilized $16,243,000 to retire its previously existing debt and
associated interest with Fleet National Bank and Wachovia Bank National
Association. The Credit Agreement does not require the Company to meet any
financial covenants.

On September 3, 2003, Gus A. Paloian, as the Chapter 7 Trustee of the
Bankruptcy Estate of GGSI Liquidation, Inc., (formerly Goss Graphics Systems,
Inc.) filed a complaint in Federal Bankruptcy Court against Enkel Corporation, a
subsidiary of the Company which prior to the sale of substantially all of its
assets in September 2001, had operations in Illinois. The complaint seeks to
avoid and recover transfers made to or for the benefit of, and to disallow
claims, if any, filed by, Enkel Corporation, claiming the return of an aggregate
amount of $929,421.75 as "Transfers" made during a "Preference Period" on or
within ninety (90) days before GGSI filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code on September 10, 2001. The Company believes
the claims made by the Trustee are without merit, and it intends to vigorously
assert several defenses to defend its position.

74

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.

ITEM 9A. CONTROLS AND PROCEDURES

Baldwin maintains disclosure controls and procedures designed to ensure
that the information required to be disclosed in the reports that Baldwin files
or submits under the Securities and Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms. Baldwin's management, with the
participation of Baldwin's Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of these disclosure controls and procedures as of
the end of our fiscal year ended June 30, 2003, the period covered by this
report. Based on that evaluation, Baldwin's Chief Executive Officer and Chief
Financial Officer have concluded that Baldwin's disclosure controls and
procedures are effective to achieve their stated purpose. However, there is no
assurance that Baldwin's disclosure controls and procedures will operate
effectively under all circumstances. No changes were made to Baldwin's internal
control over financial reporting during the fourth fiscal quarter of the fiscal
year ended June 30, 2003, that has materially affected, or is reasonably likely
to materially affect, Baldwin's internal control over financial reporting.

PART III

ITEMS 10, 11, 12 AND 13

Information required under these items is contained in the Company's 2003
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. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information concerning fees billed by PricewaterhouseCoopers LLP, Baldwin's
independent accountants, during the fiscal years ended June 30, 2002 and 2003 is
incorporated herein by reference to page 24 of Baldwin's Proxy Statement.

ITEM 15. 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.

75

(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.
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.
10.7 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.
10.9* 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.
10.16* 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.
10.27* Baldwin Technology Company, Inc. 1998 Non-Employee
Directors' Stock Option Plan. Filed as Exhibit A to the

76

Baldwin Technology Company, Inc. 1998 Proxy Statement 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.
10.41* 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.

77

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 as Exhibit 10.54 to the Company's Report on Form 10-K
for the year ended June 30, 2002.
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 as Exhibit 10.55 to
the Company's Report on Form 10-K for the year ended June
30, 2002.
10.56* Severance Agreement dated September 11, 2002 and effective
August 2, 2002 between Baldwin Technology Company, Inc. and
Peter E. Anselmo Filed as Exhibit 10.56 to the Company's
Report on Form 10-Q for the quarter ended September 30,
2002.
10.57* Consulting Agreement dated and effective August 2, 2002
between Baldwin Technology Company, Inc. and Peter E.
Anselmo. Filed as Exhibit 10.57 to the Company's Report on
Form 10-Q for the quarter ended September 30, 2002.
10.58 Amended and Restated Loan and Pledge Agreement dated and
effective November 21, 2002 between Baldwin Technology
Company, Inc. and John T. Heald, Jr. Filed as Exhibit 10.59
to the Company's Report on Form 10-Q for the quarter ended
December 31, 2002.
10.59* Employment Agreement dated and effective May 12, 2003
between Baldwin Technology Company, Inc. and Karl S.
Puehringer. Filed as Exhibit 10.60 to the Company's Report
on Form 10-Q for the quarter ended March 30, 2003.
10.60* Employment Agreement dated February 14, 2003 and effective
January 1, 2003 between Baldwin Technology Company, Inc. and
Shaun J. Kilfoyle. Filed as Exhibit 10.61 to the Company's
Report on Form 10-Q for the quarter ended March 30, 2003.
10.61* Amendment to Employment Agreement dated and effective August
13, 2002 between Baldwin Technology Company, Inc. and Gerald
A. Nathe. (filed herewith).

78

10.62* Amendment to Employment Agreement dated July 11, 2003 and
effective July 1, 2003 between Baldwin Technology Company,
Inc. and Gerald A. Nathe (filed herewith).
10.63 Credit Agreement among Baldwin Europe Consolidated, B.V., as
Borrower, and Baldwin Technology Company, Inc., as Parent,
Guarantor and Borrower Representative, and Baldwin Americas
Corporation, Baldwin Europe Consolidated Inc., Baldwin Asia
Pacific Corporation, Baldwin Graphic Systems, Inc., Baldwin
Germany GmbH, Baldwin U.K. Holding Limited, Baldwin (U.K)
Ltd., Acrotec UK Ltd., Baldwin Globaltec Ltd., Baldwin
Sweden Holding AB, Baldwin IVT AB, Baldwin Jimek AB,
Japan-Baldwin Ltd., as Guarantors, and Maple Bank GmbH, as
Lender, dated as of July 25, 2003. Filed as Exhibit 10.64 to
the Company's Current Report on Form 8-K dated August 18,
2003.
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.
31.01 Certification of the Principal Executive Officer pursuant to
Exchange Act Rule 13a-14(a)/ 15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
31.02 Certification of the Principal Financial Officer pursuant to
Exchange Act Rule 13a-14(a)/ 15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
32.01 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1350 (filed herewith).
32.02 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1350 (filed herewith).
99. Company statement regarding the Private Securities
Litigation Reform Act of 1995, "Safe Harbor for
Forward-Looking Statements" (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 May 7, 2003 relating
to items 7 and 9.

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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 13, 2003

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.

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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 September 24, 2003 appearing in
the 2003 Annual Report to Shareholders of Baldwin Technology Company, Inc.
(which report and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included an audit of the
financial statement schedule listed in Item 15(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
September 24, 2003

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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, 2003 resulted from write-off's of $632,000, including
$137,000 from the purchaser of the POD business that was sold in November
2001 (See Note 8 to the Consolidated Financial Statements) and accounts
receivable of $239,000 from Goss Graphic Systems, Inc. ("Goss"), which was
partially offset by currency fluctuations of $250,000. 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.
(2) The amounts charged to costs and expenses and the deductions both include a
write-off of $137,000 resulting from the filing for Chapter 7 bankruptcy
protection by the purchaser of the POD business that was sold in November
2001.
(3) The increase in the allowance for obsolete inventories resulted primarily
from additional charges of $475,000 and currency fluctuations of $304,000.
(4) 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.
(5) 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.
(6) The increase in the amount of the valuation allowance relates primarily to
certain foreign and 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.
(7) The increase in the valuation allowance is primarily the result of currency
rate fluctuations. See Note 12 to the Consolidated Financial Statements.
(8) 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.

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(9) 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.
(10) 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.
(11) 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.

83