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, 2004 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 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, 2003 as reported by the American Stock
Exchange on that date was $31,340,000.

Number of shares of Common Stock outstanding at June 30, 2004:

Class A Common Stock............... 12,899,146
Class B Common Stock............... 1,965,419
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Total............................ 14,864,565

DOCUMENTS INCORPORATED BY REFERENCE

Items 10, 11, 12, 13 and 14 are incorporated by reference into Part III of
this Form 10-K from the Baldwin Technology Company, Inc. Proxy Statement for the
2004 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.)

TABLE OF CONTENTS

CAUTIONARY STATEMENT -- This Annual Form 10-K may contain "forward-looking"
statements 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, 2004.

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 publishers, and to printers and publishers 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 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. 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.
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. During the
fiscal year ended June 30, 2002, The Company recorded a loss on the sale of the
RHG business of approximately $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.

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

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terminated by the Lender on August 15, 2004 or by the Company by payment in
full, would 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 were subject to
reduction 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,
for which the Company received a waiver for fiscal year ended June 30, 2004,
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.

On September 15, 2004, the Credit Agreement with Maple Bank GmbH was
amended to increase the size of the credit facility from $20,000,000 to
$28,000,000, subject to available borrowing base, reduced the interest rate by
approximately 350 basis points (in no event, however, may the interest rate be
less than 7.625% for EURO based borrowings and 7.5% for dollar based
borrowings), extended the maturity date of the loan to October 2008, reduced the
amount of annual fees associated with the Agreement and granted to the lender an
option to acquire a maximum of $5,000,000 of Equity Securities (as defined in
the Amendment) if the Company issues any such equity securities.

The Company experienced operating losses and debt covenant violations
during fiscal years 2003 and 2002. As more fully discussed in this Form 10-K,
the Company embarked on restructuring plans and undertaken other actions aimed
at improving the Company's competitiveness, operating results and cash flow.
These actions 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 amendment of the 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.

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.

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

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process in terms of both the quality of the finished product and addresses
environmental and safety issues, as well as enhance productivity and reduce
materials waste.

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, 2004, 2003 and 2002, net sales of Cleaning Systems
represented approximately 52.6%, 54.9% and 45.8% 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, 2004, 2003 and
2002, net sales of Fluid Management Systems represented approximately 23.2%,
21.0% and 23.9% 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 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

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years ended June 30, 2004, 2003 and 2002, net sales of Other Accessory and
Control Products represented approximately 24.2%, 24.1% and 26.2% of the
Company's net sales, respectively.

NEWSPAPER INSERTER EQUIPMENT AND MAILING MACHINE SYSTEMS (DISCONTINUED
OPERATION). 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 three
months in the fiscal year ended June 30, 2002. There were no net sales included
for the POD business in the fiscal years ended June 30, 2004 and 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 (PRODUCT LINE SOLD). 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 workflow. The RHG
product lines were sold on September 26, 2001. Net sales for the RHG are
included for the first three months in the fiscal year ended June 30, 2002. In
the fiscal year ended June 30, 2002, net sales of Roll Handling Systems
represented approximately 4.1% of the Company's net sales. There were no sales
included for the RHG in the fiscal years ended June 30, 2004 and June 30, 2003.

WORLDWIDE OPERATIONS

The Company believes that it is one of only a few manufacturers 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. The Company, as an international business, is subject
to various changing competitive economic, political, legal and social
conditions. The Company currently has subsidiaries in 11 countries, and its
results of operations may be adversely or positively affected by currency
fluctuations. The results of the operations and financial position of the
Company's subsidiaries outside of the United States are reported in the relevant
foreign currencies and then translated into U.S. dollars at the applicable
exchange rates for inclusion in the Company's consolidated financial statements.
The exchange rates between the currencies and the U.S. dollar may fluctuate
substantially. Because the Company generates a significant percentage of its
revenues and operating expenses in currencies other than the U.S. dollar,
fluctuations in the value of the U.S. dollar against other currencies may have a
material effect on the Company's operating income. The Company's results and
financial condition are particularly affected by changes in the value of the
U.S. dollar in relation to the euro, Japanese yen and Swedish krona. Since the
Company's foreign subsidiaries primarily manufacture, incur expenses and earn
revenue in the local countries in which they reside the impact from cross
currency fluctuations is somewhat mitigated.

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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, 2004,
2003 and 2002:

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.

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. The Company recorded restructuring charges in the amounts
of $23,000, $220,000 and $621,000 for the fiscal years ended June 30, 2004, 2003
and 2002, respectively, related to the March 2000 Plan. 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 had 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. At June 30, 2004, the March 2000 Plan is substantially complete with
only $792,000 of facility lease termination costs to be paid through April 2006.

The estimated total cash cost of the restructuring program was
approximately $8,324,000. 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 August 2002, in response to weak market conditions, 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. 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

5

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 net $450,000. At
June 30, 2004 the August 2002 Plan is substantially complete with approximately
$341,000 of severance and lease payments remaining to be paid, through the
second half of 2006.

ACQUISITION STRATEGY

An element of the Company's growth strategy is an intention to 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 field of accessories
and controls for the printing and publishing industry 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 69 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, 2004, approximately 52%
of the Company's net sales were to OEMs and approximately 48% were directly to
printers.

SUPPORT. The Company is committed to after-sales service and support of
its products throughout the world. Baldwin employs approximately 82 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 $44,923,000 as of June 30, 2004, $49,709,000 as of June
30, 2003 and $48,707,000 as of June 30, 2002. 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.

CUSTOMERS. For the fiscal year ended June 30, 2004, one customer accounted
for more than 10% of the Company's net sales. Koenig and Bauer
Aktiengesellschaft ("KBA") accounted for approximately 15% of the Company's net
sales. The ten largest customers of Baldwin (including KBA) accounted for
approximately 52%, 46% and 44%, respectively, of the Company's net sales for the
fiscal years ended June 30, 2004, 2003 and 2002. Sales of Baldwin's products are
not considered seasonal.

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

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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 105 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, 2004, 2003 and 2002 were
$13,618,000, $16,148,000 and $15,451,000, respectively, representing
approximately 9.0%, 12.0% and 11.0% of the Company's net sales in each fiscal
year, respectively.

PATENTS

The Company owns or licenses a number of patents and patent applications
relating to a substantial number of Baldwin's products. 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 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, 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 market for accessories and controls for the
printing and publishing 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
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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, 2004, the Company employed 508 persons (plus 32 temporary and
part-time employees); of which 191 are production employees, 69 are marketing,
sales and customer service employees, 187 are research, development, engineering
and technical service employees and 61 are management and administrative
employees. In Europe, employees are represented by various unions under
contracts with indefinite terms. In Sweden, approximately 20 of the Company's 78
employees are represented by either Ledarna (SALF), Metall, or Svenska
Industritjanstemanna Forbundet unions. In Germany, 40 of the Company's 190
employees are represented by the IG Metall (Metalworker's Union). The Company
considers relations with its employees and with its unions to be good.

ITEM 2. PROPERTIES

The Company owns and leases various manufacturing and office facilities
aggregating approximately 384,000 square feet at June 30, 2004. 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 11,
2003.

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PART II

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

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.

CLASS B COMMON STOCK

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

APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS

As of August 30, 2004, the number of record holders (excluding those listed
under a nominee name) of the Company's Class A and Class B Common Stock totaled
303 and 26, respectively. The Company believes, however, that there are
approximately 1,700 beneficial owners of its Class A Common Stock.

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, the Company's debt agreement prohibits 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).

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PURCHASES OF EQUITY SECURITIES BY ISSUER AND AFFILIATED PURCHASES

There has been no activity under the Company's stock repurchase program for
the fiscal year ended June 30, 2004.

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, 2004, 2003 and 2002 have been derived from
the Company's audited financial statements (including the Consolidated Balance
Sheets of the Company at June 30, 2004 and 2003 and the related Consolidated
Statements of Operations of the Company for the fiscal years ended June 30,
2004, 2003 and 2002 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, $0, $973,000 and $1,028,000
for the fiscal years ended June 30, 2004, 2003, 2002, 2001 and 2000,
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

11

adjustments, was approximately $3,736,000, which approximated the net book value
of the assets sold. During the fourth quarter of the fiscal year ended June 30,
2002, the Company recorded an impairment charge of $5,434,000 related to the
goodwill associated with this business as the recorded value of this goodwill
exceeded the assessment of its fair value made by the Company. For a further
discussion, see Note 18 to the Consolidated Financial Statements. The effects of
this transaction on the consolidated financial statements are discussed below
where significant. 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 a loss of $211,000 and
$250,000 on the sale of RHG in the fiscal years ended June 30, 2003 and 2002,
respectively. Additionally, during the fiscal year ended June 30, 2001, the
Company also exited the Print-On-Demand business ("POD"). 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.

Net sales and operating loss of RHG and POD 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 two of the
last five fiscal years, sales in the first six months were greater than the last
six months. During fiscal year ended June 30, 2004, sales during the first half
of the year were impacted by a continued economic slowdown in the global
printing and publishing industry. During the second half of the year, a slow to
gradual industry upturn coupled with successful sales and marketing initiatives
increased second half sales. The decline in net sales in the second half of the
fiscal year ended June 30, 2003 was 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 was 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 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.

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 issued by the Company and other
public statements made by the Company from time to time may contain

12

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, 2004.

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.

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

13

of assets and liabilities, as well as the effects of net operating losses
carried forward in certain tax jurisdictions in which the Company operates that
may be utilized to offset future taxable income and similar tax credits carried
forward that may be utilized to reduce future taxes payable. The Company records
valuation allowances on deferred tax assets when appropriate to reflect the
expected future tax benefits to be realized. In determining the appropriate
valuation allowances, certain judgments are made by management relating to
recoverability of deferred tax assets, use of tax loss and tax credit
carryforwards, levels of expected future taxable income and available tax
planning strategies. The assumptions in making these judgments are updated
periodically by management based on current business conditions that affect the
Company and overall economic conditions. These management judgments are
therefore subject to change based on factors that include, but are not limited
to (1) changes in the profitability of the Company's subsidiaries as well as for
the Company as a whole, (2) the ability of the Company to successfully execute
its tax planning strategies and (3) the accuracy of the Company's estimate of
the potential effect that changes in tax legislation, in the jurisdictions where
the Company operates, may have on the Company's future taxable profits. Failure
by the Company to achieve forecasted taxable income or to execute its tax
planning strategies may affect the ultimate realization of certain deferred tax
assets. Factors that may affect the Company's ability to achieve sufficient
forecasted taxable income or successfully execute its tax planning strategies
include, but are not limited to, increased competition, general economic
conditions, a decline in sales or earnings, loss of market share, delays in
product availability or changes in tax legislation. 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.

The impairment review process requires management to make significant
estimates and judgments regarding the future cash flows expected to result from
the use and, if applicable, the

14

eventual disposition of the respective assets. The key variables that management
must estimate in determining these expected future cash flows include sales
volumes, sales prices, sales growth, production and operating costs, capital
expenditures, working capital requirements, market conditions and other economic
factors. Significant management judgment is involved in estimating these
variables, and such estimates are inherently uncertain; however, the assumptions
used are reasonable and consistent with the Company's internal planning.
Management periodically evaluates and updates the estimates based on conditions
that influence these variables.

The assumptions and conditions for determining impairments of property,
plant and equipment, goodwill and other intangible assets reflect management's
best assumptions and estimates, but these items involve inherent uncertainties
as described above, many of which are not under management's control. As a
result, the accounting for such items could result in different estimates or
amounts if management used different assumptions or if different conditions
occur in future accounting periods.

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.

15

FISCAL YEAR ENDED JUNE 30, 2004 VERSUS FISCAL YEAR ENDED JUNE 30, 2003

CONSOLIDATED RESULTS

NET SALES. Net sales of $158,110,000 for the fiscal year ended June 30,
2004 reflect an increase of $23,902,000 or 18% versus the fiscal year ended June
30, 2003. Currency rate fluctuations increased net sales for the current period
by $13,392,000. Excluding the effects of currency translation net sales
increased $10,510,000 or 8%.

The net sales increase reflects increased demand in Europe and Asia
partially offset by declines in the Americas, primarily in the U.S. In Europe,
sales increased approximately $7,000,000, particularly in Germany and Sweden,
where demand for the Company's cleaning and spray dampening systems improved in
both newspaper and commercial markets. While downward pricing pressures
continue, particularly in the OEM customer base, demand and improving market
conditions led to the improved sales. In Asia, particularly Japan, sales
increased approximately $5,000,000. Despite continued pricing pressures,
increased demand for cleaning systems, in both commercial and newspaper markets,
spray dampening systems in the newspaper market and commercial water systems led
to the increased sales.

In the Americas, particularly the U.S., sales declined by approximately
$2,000,000. Weaker North American markets and an internal shift to supply
products for certain European manufactured presses from the Company's foreign
subsidiaries, led to a decline in the amount of revenue recorded by the
Company's U.S. subsidiary, in both the newspaper and commercial markets.

GROSS PROFIT. Gross profit of $50,036,000 for the fiscal year ended June
30, 2004 reflects an increase of $9,616,000 or 24% versus the fiscal year ended
June 30, 2003. Excluding the favorable foreign currency translation effect of
$4,490,000, gross profit increased $5,126,000 or 13%. Gross margin improved to
32% from 30% primarily on the strength of the improvement in sales volume,
coupled with better control over material and labor costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses of $29,711,000 for the fiscal year ended June 30, 2004
reflect an increase of $2,758,000 or 10%. Excluding the effects of foreign
currency translation of $2,157,000, SG&A expenses increased $601,000 or 2%. G&A
expenses of $17,277,000 for the fiscal year ended June 30, 2004 increased
$2,107,000 or 14% versus the fiscal year ended June 30, 2003. Excluding the
effects of currency translation of $1,053,000 G&A expenses increased $1,054,000
or 7%. This increase relates primarily to increased incentive compensation costs
which are commensurate with improved business performance. Excluding the
increased incentive compensation costs, G&A remained virtually flat for the
period ended June 30, 2004 versus the period ended June 30, 2003.

Selling expenses of $12,434,000 for the fiscal year ended June 30, 2004
increased $651,000 or 6%. Excluding the effects of currency translation of
$1,104,000 selling expenses declined $453,000. The decline in selling expenses
reflects lower customer support costs in the U.S. as a result of staffing level
decreases coupled with lower outside contractor costs and higher project
management costs which are included in cost of sales, in Sweden. Partially
offsetting these declines was an increase in marketing costs, primarily
associated with trade show advertising and higher salaries, benefits and other
employee related costs in Europe.

ENGINEERING AND DEVELOPMENT EXPENSES. Engineering and Development expenses
of $13,618,000 for the year ended June 30, 2004 reflect a decrease of $2,530,000
or 16% versus the fiscal year ended June 30, 2003. Excluding foreign currency
translation effects, engineering and development, expenses declined $3,895,000
or 24%. The decrease relates primarily to lower project costs and reductions in
engineering costs attributed to reduced personnel costs, associated with

16

planned restructuring in the U.S. and in Sweden where lower research and
development expenses were replaced by project management costs which are
included in cost of sales.

RESTRUCTURING AND OTHER CHARGES. The Company recorded restructuring
charges of $448,000 for the year ended June 30, 2004. These charges primarily
relate to additional employment reductions in the U.S. and the U.K. associated
with the August 2002 Plan. In 2003, restructuring and other charges consisted
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 was 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 of $4,985,000 for the fiscal year
ended June 30, 2004 increased $2,574,000 versus the period ended June 30, 2003.
Higher average debt levels and interest rates as a result of the credit
agreement with Maple Trade GmbH, entered into on August 18, 2003, coupled with
higher amortization of deferred financing costs during the period primarily
account for the increase. Additionally, currency rate fluctuations increased
interest expense $613,000 in the current period. Interest income and royalty
income remained virtually flat year over year on a currency adjusted basis.

Other income and expense, net, amounted to income of $559,000 for the
period ended June 30, 2004 and primarily reflects foreign currency transaction
and fair value change gains of $1,194,000 and $203,000, respectively. Partially
offsetting those gains were financial, legal and accounting fees amounting to
$833,000 related to the termination of a proposed transaction with regard to the
planned sale of the Company.

In 2003, other income and expense, net, amounted to expense of $2,251,000.
This amount includes $(879,000) of foreign currency transaction losses,
$(446,000) of write-off of deferred costs associated with several alternative
financing arrangements which no longer qualified as deferrable once the Maple
Bank GmbH Agreement became the definitive agreement and $(928,000) of expenses
incurred in pursuit of financial and strategic alternatives related to the
Company's pursuit of alternative capital arrangements. Included in the
$(928,000) were, $(564,000) related to a breakage fee payable to a private
equity firm once the Company concluded it would not require a capital
transaction (investment) with the entity; $(215,000) of expenses related to
certain due diligence procedures by the Company on a potential strategic buyer;
and $(139,000) and ($10,000) for financial and legal advisor fees incurred in
connection with these alternatives, respectively.

INCOME TAXES. The Company recorded an income tax benefit of $1,673,000 for
the fiscal year ended June 30, 2004. During the fourth quarter, the Company
reversed its valuation allowance for net deferred tax assets associated with its
German subsidiary (approximately $4,700,000) which resulted in the recording of
a net tax benefit of $3,623,000 for the quarter ended June 30, 2004 and
$1,673,000 for the year ended June 30, 2004. The reversal of the Germany
subsidiary deferred tax valuation allowance is based upon the subsidiaries
recent operating performances and management's expectation that the subsidiary
will generate sufficient taxable income in future periods to realize the tax
benefits associated with its net operating loss carryforwards. Partially
offsetting this benefit were foreign income taxed at rates higher than the U.S.
statutory rate and a recent change in German tax law which limits the use of
previously recorded net operating losses to offset current taxable income.

17

INCOME/LOSS FROM CONTINUING OPERATIONS. Income from continuing operations
for the fiscal year ended June 30, 2004 of $5,313,000 compares to a loss from
continuing operations of $8,838,000 in fiscal year ended June 2003. Increased
revenue, gross margin improvement and lower restructuring and settlement charges
primarily account for the increase.

NET INCOME/LOSS. The Company's net income amounted to $6,986,000 for the
year ended June 30, 2004 and reflects the improved income from operations
coupled with the income tax benefit associated with the reversal of the German
Valuation allowance. Net loss of $11,126,000 in 2003 primarily reflects the loss
from continuing operations.

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. The sales
decline was attributable primarily to lower sales in the newspaper market. More
specifically, the Company sales of spray dampening equipment in Japan and Sweden
accounted for approximately $9,000,000 of the reduction while declines in
cleaning systems accounted for approximately $2,000,000.

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 have decreased by $3,288,000 over the prior
fiscal year, due primarily to decreased sales levels, increased warranty costs
of approximately $1,200,000 primarily related to an unusually high warranty
expense incurred by the Company's Japanese subsidiary related to a print quality
detection system of approximately $1,300,000 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.

18

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 "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.

19

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.

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

The increase in cash and cash equivalents in fiscal year 2004 and 2003 of
$5,058,000 and $2,271,000 resulted from cash flows provided by or used in the
Company's operating, investing and financing activities.

The Company's continued focus on profitability and asset management coupled
with lower restructuring payments generated cash flows from operations of
$4,376,000 in 2004 versus $2,728,000 in 2003. Higher revenues and improved
profitability led to higher cash receipts from sales in 2004.

20

Asset management additionally led to a decline in days sales outstanding (54 in
2004; 57 in 2003) and an increase in inventory turns (4.6 times in 2004; 4.1
times in 2003).

In 2004, cash used for additions amounted to $1,022,000 versus $1,370,000
in 2003 and $2,040,000 in 2002. The decrease in 2004 primarily relates to lower
property additions pursuant to the capital expenditures limitations contained in
the Maple credit agreement. Proceeds from the sale of BKA in 2003 and RHG in
2002 were primarily used to reduce outstanding bank 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, for which the Company attained a waiver for fiscal year ended June
30, 2004, 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.

On September 15, 2004, the Credit Agreement with Maple Bank GmbH was
amended to increase the size of the credit facility from $20,000,000 to
$28,000,000, subject to available borrowing

21

base, reduced the interest rate by approximately 350 basis points (in no event,
however, may the interest rate be less than 7.625% for EURO based borrowings and
7.5% for dollar based borrowings), extended the maturity date of the loan to
October 2008, reduced the amount of annual fees associated with the Agreement
and granted to the lender an option to acquire a maximum of $5,000,000 of Equity
Securities (as defined in the Amendment) should the Company choose to issue any
such equity securities.

Prior to this refinancing with Maple, on October 31, 2000, the Company
entered into a $35,000,000 revolving credit facility (the "Credit Facility")
with Fleet National Bank and First Union National Bank (collectively the
"Banks"), which had an original scheduled maturity date of October 31, 2003. The
Credit Facility consisted of a $25,000,000 revolving credit line (the
"Revolver") and a $10,000,000 credit line to be utilized for acquisitions, (the
"Acquisition Line"). On January 28, 2002, the Credit Facility was amended (the
"Amended Credit Facility"), to among other things, remove the Acquisition Line,
reduce the Revolver to $21,000,000 (subject to a borrowing base), and change the
maturity date to October 1, 2002. In addition, $4,000,000 of the existing
Revolver was converted into a term loan (the "Term Loan"), which matured on June
28, 2002, resulting in available borrowings under the Revolver from July 1, 2002
to October 1, 2002 of $17,000,000. The Amended Credit Facility required the
Company to maintain certain financial covenants including minimum operating
income covenants. 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 and 2002 were $4,000 and $24,000, respectively.

The Company experienced operating and net losses, and debt covenant
violations during fiscal years 2003 and 2002. 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

22

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 maintain profitability depends in part on
management's continued 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 $25,973,000 at June 30,
2004, including amounts available under the Maple Revolver. As of June 30, 2004,
the Company had $24,522,000 outstanding under these credit facilities including
$21,765,000 under the Maple Revolver and Term Loan.

On April 27, 2001, the Company entered into an interest rate swap agreement
with Fleet National Bank, which matured 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 $197,000, $525,000 and $383,000 to interest expense for the fiscal
years ended June 30, 2004, 2003 and 2002, respectively and $63,000 ($54,000
after-tax) loss to Other Comprehensive Income ("OCI") at June 30, 2002,
respectively.

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. As a result of this bankruptcy filing,
the Company increased its bad debt reserve related to Goss by $439,000 during
the fiscal year ended June 30, 2002.

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 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 to be 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. At June 30, 2004,
the March 2000 Plan is substantially completed with only $792,000 of facility
lease termination costs to be paid through April 2006.

The estimated total cash cost of the March 2000 Plan is expected to be
approximately $8,324,000. The March 2000 Plan was expected to save the Company
approximately $8,843,000
23

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 August 2002, in response to weak market conditions, 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. 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 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 net $450,000. At
June 30, 2004, the August 2002 Plan is substantially complete with approximately
$341,000 of severance and lease payments remaining to be paid through the first
half of 2006.

During the Company's fiscal year ended June 30, 2004, the German Tax
Authority revised its position regarding the taxability of certain intercompany
dividends. The German Federal Court ruled on June 28, 2004, in a case with facts
similar to the Company's, that these dividends were in fact tax-exempt. As a
result, several companies, including Baldwin, which were assessed additional tax
on dividends paid from 1994 through 1996 are no longer subject to the additional
assessment. The proposed assessment could have resulted in a tax charge of
approximately $2,570,000 and the elimination of previously reserved tax losses.

The Company believes 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, 2004 and 2003, 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,
2004 and the effect such obligations are expected to have on its liquidity and
cash flow in future periods (in thousands):

24

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, 2004, the Company had debt totaling $25,074,000, most of
which bears interest at floating rates.

The Company performed a sensitivity analysis as of June 30, 2004, assuming
a hypothetical one percentage point increase in interest rates. Holding other
variables constant (such as foreign exchange rates, swaps and debt levels), a
one percentage point increase in interest rates would affect the Company's
pre-tax income by approximately $250,000. However, actual increases or decreases
in earnings in the future could differ materially from this analysis based on
the timing and amount of both interest rate changes and amounts borrowed by the
Company.

CURRENCY EXCHANGE RATE SENSITIVITY

The Company derived approximately 84% of its revenues from countries
outside of the United States for the fiscal year ended June 30, 2004. 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.
As of June 30, 2004, the Company had recorded $4,000 in current liabilities and
a loss of $5,000 in other comprehensive income; currency exchange gains of
$5,000 and losses of $4,000 were recognized in other income in the fiscal years
ended June 30, 2004 and 2003, respectively, associated with these currency
exchange forward contracts.

The Company performed a sensitivity analysis as of June 30, 2004 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 $700,000. 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.

25

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

26

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

In our opinion, the consolidated Financial Statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Baldwin Technology Company, Inc. and its subsidiaries at June 30,
2004 and 2003, and the results of their operations and their cash flows for each
of the three years in the period ended June 30, 2004 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 the
standards of the Public Company Accounting Oversight Board (United States).
These standards 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.

PricewaterhouseCoopers LLP

Stamford, Connecticut
September 28, 2004

27

BALDWIN TECHNOLOGY COMPANY, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

ASSETS

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

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.
29

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.
30

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.
31

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.

32

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 experienced operating losses and debt covenant violations over
the fiscal years ended June 30, 2002 and June 30, 2003. As more fully discussed
in other sections of these 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
Notes 10 and 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 Notes 10
and 11).

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.

ACCOUNTS RECEIVABLE, NOTES RECEIVABLE/PAYABLE. Accounts receivable are
recorded at their net realizable value after deducting an allowance for doubtful
accounts. Such deductions reflect either specific cases or estimates based on
historical incurred losses. Notes receivable, trade reflect promissory notes
issued by customers of the Company's Japanese subsidiary. Notes payable trade,
reflect obligations of the Company's Japanese subsidiaries to suppliers.

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 and losses
credited or charged to "Other expense (income), net" for the fiscal years ended
June 30, 2004, 2003 and 2002 were ($1,194,000), $879,000 and $18,000,
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

33

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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.

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.

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, 2004, one customer accounted for more than 10% of the Company's
net sales. Koenig and Bauer Aktiengesellschaft ("KBA") accounted for
approximately 15% of the Company's net sales. The Company's ten largest
customers accounted for approximately 52%, 46% and 44% of the Company's net
sales for each of the fiscal years ended June 30, 2004, 2003 and 2002,
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 $549,000 and $505,000 greater as of June 30, 2004
and 2003, 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 $1,231,000, $1,288,000 and $1,423,000 for the fiscal years ended June 30,
2004, 2003 and 2002, 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 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, 2004.

34

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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.

STOCK BASED COMPENSATION. 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.

GOODWILL AND OTHER INTANGIBLE ASSETS. 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, 2004.

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 $532,000, $643,000 and $437,000 for the fiscal years ended June 30,
2004, 2003 and 2002, 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

35

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 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, 2004, these costs were
$2,720,000 less $2,362,000 of accumulated amortization ($953,000 less $743,000
of accumulated amortization at June 30, 2003) 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 $2,714,000 and $1,649,000 at June 30, 2004 and 2003 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

36

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

such do not contain formal product acceptance clauses. On certain large orders,
usually in the newspaper equipment market, a separately negotiated contract is
used to establish the terms of sale. In such cases, the Company recognizes
revenue only after all acceptance criteria, if any, have been satisfied.

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

RESEARCH AND DEVELOPMENT AND ENGINEERING. Research, development and
engineering costs are expensed as incurred.

EARNINGS (LOSS) PER SHARE. Basic earnings per share is computed by
dividing net income by the weighted average number of common shares outstanding
during the period. Diluted earnings per share is similar to basic earnings per
share except that it reflects the potential dilution that could occur if
dilutive securities, such as stock options and convertible debt, were exercised
or converted into common shares or resulted in the issuance of common shares
that then shared in the earnings of the Company.

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 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 December 2003, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 132R ("SFAS 132R"), "Employers' Disclosures about
Pensions and Other Postretirement Benefits." SFAS 132R revises employers'
disclosures about pension plans and other postretirement benefits plans.

37

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

It does not change measurement or recognition of those plans required by SFAS
No. 87 ("SFAS 87"), "Employers' Accounting for Pensions." The Company has
adopted the disclosure provisions of SFAS 132R. The adoption of SFAS 132R did
not have a material effect on the Company's financial position, results of
operations or cash flow.

In December 2003, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 104 ("SAB 104") "Revenue Recognition,"
which supercedes Staff Accounting Bulletin No. 101 ("SAB 101") "Revenue
Recognition in Financial Statements." The primary purpose of SAB 104 is to
rescind accounting guidance contained in SAB 101 related to multiple element
revenue arrangements, superceded as a result of the issuance of EITF 00-21
"Accounting for Revenue Arrangements with Multiple Deliverables." While the
wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the
revenue recognition principals of SAB 101 remain largely unchanged by the
issuance of SAB 104. SAB 104 did not have a material impact on the Company's
revenue recognition.

In May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liability and Equity." SFAS 150
modifies 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 did not 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.

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:

38

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4 -- EARNINGS PER SHARE:

The following represents a reconciliation from basic earnings per share to
diluted earnings per share. Options to purchase 350,000, 1,284,000 and 1,042,000
shares of common stock were outstanding at June 30, 2004, June 30, 2003 and June
30, 2002 but were not included in the computation of diluted earnings per share
because the effect would be antidilutive.

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 $23,000, $220,000 and $621,000 for the fiscal years ended June
30, 2004, 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 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. The following tables detail the components of the restructuring charges
and the remaining reserve balances as of June 30, 2004 and 2003 related to the
March 2000 Plan.

39

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Activity related to the March 2000 Plan in the fiscal year ended June 30,
2004 was as follows:

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

*The reversal of $295,000 relates primarily to an over estimate of
benefit/social costs associated with headcount reductions of the Company's
workforce in Germany.

Facility lease termination costs will be paid through April 2006.

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 $3,241,000 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
following table details the components of the restructuring charges and the
remaining reserve balances as of June 30, 2004 and 2003 related to the August
2002 Plan.

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

40

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 $645,000, comprised of; $488,000 in
severance costs, $149,000 in lease termination costs and $8,000 in other costs,
which will be expensed as incurred.

Activity related to the August 2002 Plan in the fiscal year ended June 30,
2004 was as follows:

* the reversal relates to final settlement of facility lease termination
costs

At June 30, 2004, all employees identified under the employee reduction
programs have been terminated. Additionally, management believes that the
remaining restructuring provisions are adequate to complete all programs.

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.

As a result of divestitures, 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, and other tangible assets.

41

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The tables below present information about reported segments for the years
ended June 30, 2004, 2003 and 2002 (in thousands). All prior periods have been
restated to conform to the current period's presentation.

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

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

42

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 for the fiscal year ended June 30, 2002.

(b) Other income and expense net, amounted to $559,000 for the period ended June
30, 2004 and primarily reflects foreign currency transaction and fair value
change gains of $1,194,000 and $203,000, respectively. Partially offsetting
those gains of financial, legal and accounting fees amounting to $833,000
related to the termination of a proposed transaction with regard to the
planned sale of the Company. 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.

43

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Long-lived assets primarily includes the net book value of; "Property,
plant and equipment" and other tangible assets.

NOTE 7 -- DERIVATIVES:

During the fiscal years ended June 30, 2004 and June 30, 2003, the Company
had currency futures contracts that qualify 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, 2004, 2003 and 2002, is the monthly interest payments of
$196,000, $525,000 and $383,000 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 were recorded in earnings through its maturity date of
October 30, 2003 in the amount of $197,000.

The effect on earnings of the Company's other derivative financial
instruments is not material for any fiscal year presented.

44

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

The unrealized net loss of $5,000 at June 30, 2004, 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 11, 2004, while the interest rate swap
agreement expired on October 30, 2003. Other income and expense, net, for the
year ended June 30, 2003, includes a $206,000 loss on certain derivative
financial instruments which became speculative and no longer qualified as hedges
pursuant to SFAS 133 as a result of the divestiture of the RHG.

NOTE 8 -- SALE OF BUSINESSES AND IMPAIRMENT CHARGES:

During the first quarter of fiscal 2003, the Company committed to a plan to
dispose of substantially all the assets of its Baldwin Kansa subsidiary ("BKA");
the transaction closed on October 10, 2002. The consideration received for the
transaction, after certain post-closing adjustments, was approximately
$3,738,000, 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,

45

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 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, net of reserve, consist of the following:

46

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Foreign inventories increased by $1,291,000 (increased by $1,636,000 in
2003) due to translation rates in effect at June 30, 2004 when compared to rates
in effect at June 30, 2003.

NOTE 10 -- LOANS PAYABLE:

The maximum amount of loans payable outstanding during the year ended June
30, 2004 was $3,566,000 ($6,382,000 in 2003). Average interest rates are
weighted by month and reflect the monthly amount of short-term borrowing in use
and the respective rates of interest thereon. 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.

47

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11 -- LONG-TERM DEBT:

50

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, 2004 and 2003 are as follows:

51

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

At June 30, 2004, net operating loss carryforwards of $65,392,000 and
$24,386,000, respectively, 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, 2004,
the Company has capital loss carry-forwards available in the amount of
$1,159,000, of which $487,000 is domestic and expires in 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, 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. In fiscal year ended June 30, 2004, the valuation
allowance decrease relates primarily to the reversal of valuation allowance
associated with the Company's German subsidiary. The reversal of this valuation
allowance is based upon the subsidiary's historical operating performance and
expectation that the subsidiary will generate sufficient taxable income in
future periods to realize the tax benefits associated with its net operating
loss carryforwards.

The Company has not had to provide for income taxes on $25,397,000 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, 2004, the
German Tax Authority revised its position regarding the taxability of certain
intercompany dividends. The German Federal Court ruled on June 28, 2004, in a
case similar to the Company's, that these dividends were in fact tax-exempt. As
a result, several companies, including Baldwin, which were assessed additional
tax on dividends paid from 1994 through 1996 are no longer subject to the
additional assessment. The proposed assessment could have resulted in a tax
charge of approximately $2,570,000 and the elimination of previously reserved
tax losses.

52

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, 2004, the number of outstanding shares of
Class B constituted approximately 13.2% (14.6% as of June 30, 2003) 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 stock repurchase program. Under
the program, the Company is authorized to utilize up to $5,000,000 to repurchase
Class A. As of June 30, 2004, 818,300 shares of Class A and 25,000 shares of
Class B had been repurchased for $1,784,000, of which

53

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

$1,721,000 was used to purchase Class A and $63,000 was used to purchase Class B
under this program. There was no activity under this repurchase program during
the fiscal year ended June 30, 2004.

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.

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

54

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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.

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.

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 November 11, 2003, the Compensation and Stock Option Committee of the
Company granted non-qualified options to purchase 335,000 shares of Class A to
certain executives and key employees under the Company's 1996 Stock Option Plan
(the "1996 Plan") at an exercise price of $1.93 per share, the fair market value
on the date of grant.

On November 12, 2003, under the 1996 Plan, six non-employee Directors were
automatically granted options to purchase 5,000 shares each of Class A at an
exercise price of $1.91 per share, the fair market value on the date of grant.

55

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

56

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes information regarding stock options
outstanding and exercisable at June 30, 2004:

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, 2004, 2003 and 2002: 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, 2004, 2003 and 2002, the weighted
average risk free interest rates were 3.29% for 2004, 3.26% for 2003 and 4.52%
for 2002, and the average volatility was 143.30% for 2004, 66.12% for 2003 and
54.76% for 2002.

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.

57

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, 2004, 2003 and
2002 (in thousands):

NOTE 15 -- SUPPLEMENTAL COMPENSATION:

Subsidiaries within the Americas had maintained several 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:

58

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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) 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, there is currently one pension plan covering three former
employees, and the Company's Japanese subsidiary maintains two retirement plans
covering all employees, excluding directors, and a separate plan for its
directors. These defined benefit plans provide 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:

59

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For funded plans with Accumulated Benefit Obligation ("ABO") in excess of
the fair value of plan assets, SFAS No. 87 requires that the Company record on
its consolidated balance sheets a minimum pension liability amount such that the
Company's net pension liability is at least equal to the amount of the
under-funded ABO. Net pension liability is the excess of pension liabilities
over prepaid pension

60

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

assets, on the Company's balance sheet. When recording a minimum pension
liability, SFAS No. 87 requires the Company to record a corresponding intangible
asset equal to the amount of any unrecognized prior service cost, with the
remainder, if any, charged to other comprehensive income in shareholder's
equity. Therefore, the recording of this additional minimum pension liability
has no impact on the Company's income from operations. At June 30, 2004, the
Company's Japanese subsidiary, with an ABO of approximately $2,093,000, required
an additional minimal liability recognition of $100,000.

Undiscounted benefit amounts expected to be paid for each of the next five
successive fiscal years and for the aggregate next five years thereafter:

2005........................................................ $ 64,000
2006........................................................ $ 97,000
2007........................................................ $ 123,000
2008........................................................ $ 919,000
2009........................................................ $ 482,000
aggregate for 2010 through 2014............................. $1,004,000

The amount expected to be contributed by the Company to its various pension
plans during 2005 is $290,000.

NOTE 16 -- COMMITMENTS AND CONTINGENCIES:

Future minimum annual lease payments under capital leases, which consist of
machinery and equipment with accumulated depreciation amounting to $115,000 at
June 30, 2004 and $17,000 at June 30, 2003, together with the present value of
the minimum lease payments are as follows at June 30, 2004:

At June 30, 2004, $153,000 ($202,000 at June 30, 2003) is included in
"Other long-term liabilities" representing the long-term portion of the present
value of minimum lease payments, and $103,000, ($60,000 at June 30, 2003) 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

61

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 was terminated during
fiscal 2004. For the year ended June 30, 2004 and 2003, the Company expensed, in
"Other expense (income), net", approximately $570,000 and $500,000 respectively,
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 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". The promissory note was paid in full during
2004.

Rental expense on operating leases amounted to approximately $4,675,000,
$4,201,000 and $4,422,000 for the years ended June 30, 2004, 2003 and 2002,
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
62

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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. In May 2004, Mr. Heald transferred to the Company 172,464 shares
of Class B Common Stock of the Company plus $2,481 in cash in full payment of
the unpaid principal amount of $450,000 and accrued interest on the note. The
balance of the loan, including interest, was $501,000 at June 30, 2003.

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 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.

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, 2004, the balance of the
loan, including interest was $873,000.

The maximum amount of the loan outstanding including interest during the
fiscal years ended June 30, 2004 and 2003 was $873,000 and $1,553,000,
respectively. The Board of Directors of the Company forgave interest payments
due on the loan from Mr. Nathe during the fiscal year ended June 30, 2002 in the
amounts of $112,000, however, no interest payments were forgiven during the
fiscal years ended June 30, 2004 and June 30, 2003.

63

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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, 2004, 2003 and 2002,
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 $90,000 per year for consulting services
through 2014.

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, 2004, the Company paid $111,000 ($82,000 for the year ended June 30,
2003) 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.

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 zero for the fiscal years ended June 30, 2004, 2003
and 2002, 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, 2004 (in thousands) is as
follows:

64

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

Intangible assets subject to amortization at June 30, 2004 are comprised of
the following:

The weighted average life for intangible assets at June 30, 2004 was 13.6
years and amortization expense for the fiscal year ended June 30, 2004 was
$532,000.

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

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. As a result of this bankruptcy filing,
the Company increased its bad debt reserve related to Goss by $439,000 during
the fiscal year ended June 30, 2002.

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 filed an appeal of the DHRC ruling with the German Supreme
Court in Karlsruhe. That court has not yet reached a decision on the appeal.

65

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Technotrans also filed to revoke the Company's patent with the Federal Patent
Court in Munich, Germany. On July 21, 2004, the German Federal Patent Court
upheld the validity of the Company's patent (the judgement is appealable) No
amounts have been recorded in the consolidated financial statements with regard
to the potential contingent gain from the DHRC judgment; however, the Company is
considering a claim for damages based on the favorable rulings in both the
patent infringement case and the patent validity confirmation.

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. In June 2004, the
Company and its counsel met with the Trustee and its counsel in an unsuccessful
attempt to resolve the matter. The Company believes the claims made by the
Trustee are without merit, and it intends to vigorously assert several defenses
to defend its position.

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.

66

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.

NOTE 22 -- QUARTERLY FINANCIAL DATA (UNAUDITED):

Summarized quarterly financial data for the fiscal years ended June 30,
2004 and 2003 are as follows (in thousands, except per share data):

67

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

68

BALDWIN TECHNOLOGY COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

- ---------------------
(1) The first quarter of fiscal year 2004 other (income), net includes a net
foreign currency transaction gain of $518,000 associated with the Maple GmbH
loan.

(2) The second quarter of fiscal year 2004 other (income), net includes net
foreign currency transaction gains of $1,092,000 associated with the
currency fluctuations associated with the Maple GmbH loan.

(3) The third quarter of fiscal year 2004 other expense, net includes $542,000
of expenses associated with the termination of the proposed sale of the
Company.

(4) The tax benefit recorded in the fourth quarter of fiscal year 2004 reflects
the reversal of valuation allowance associated with the Company's German
subsidiary.

(5) 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.

(6) 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.

(7) 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. The third quarter of fiscal 2001 includes a reduction
to a reserve in the amount of $472,000 related to the sale of the PPO. See
Note 4.

(8) The fourth quarter of fiscal 2003 operating expenses includes a bad debt
charge of $137,000 related to the sale of the POD, which occurred in
November 2001. The fourth quarter of fiscal 2003 includes a refund of
$45,000 related to the sale of the PPO. 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.

NOTE 23 -- SUBSEQUENT EVENTS:

Effective September 15, 2004, the Company entered into a First Amendment to
Credit Agreement among Baldwin Europe Consolidated B.V., as Borrower, Baldwin
Technology Company, Inc., as Parent, Guarantor and Borrower Representative,
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. Terms and
conditions of the First Amendment include, but are not limited to, increasing
the size of the facility from $20,000,000 to $28,000,000, subject to borrowing
base, reducing the interest rate by approximately 350 basis points (in no event,
however, may the interest rate be less than 7.625% for EURO based borrowings and
7.5% for dollar based borrowings), extending the maturity date of the loan to
October, 2008 and granting to the lender an option to acquire a maximum of
$5,000,000 of equity securities (as defined in the Amendment) should the Company
choose to issue any such equity securities.

69

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, 2004, 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, 2004, that has materially affected, or is reasonably likely
to materially affect, Baldwin's internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEMS 10, 11, 12, 13 AND 14

Information required under these items is contained in the Company's 2004
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 registered public accounting firm, during the fiscal years ended
June 30, 2003 and 2004 is incorporated herein by reference to Baldwin's Proxy
Statement.

70

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) Financial statements required by Item 15 are listed in the index
included in Item 8 of Part II.

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

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

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

INDEX TO EXHIBITS

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

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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.
10.27* Baldwin Technology Company, Inc. 1998 Non-Employee
Directors' Stock Option Plan. Filed as Exhibit A to the
Baldwin Technology Company, Inc. 1998 Proxy Statement and
incorporated herein by reference.
10.41* 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.
10.44* 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.
10.48 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.
10.53* Baldwin Technology Profit Sharing and Savings Plan as
Amended Filed as Exhibit 10.53 to the Company's Report on
Form 10-K for the year ended June 30, 2003.
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.

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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* Amendment to 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. Field as Exhibit 10.61 to the Company's Report on
Form 10-K for the year ended June 30, 2004.
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 as Exhibit 10.62 to the
Company's Report on Form 10-K for the year ended June 30,
2004.
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.
10.64 Amendment to Employment Agreement dated and effective
November 11, 2003 between Baldwin Technology Company, Inc.
and Vijay C. Tharani. Filed as Exhibit 10.64 to the
Company's Report on Form 10-Q for the quarter ended
September 30, 2003.
10.65 Amendment to Baldwin Technology Management Incentive
Compensation Plan effective January 1, 2004. Filed as
Exhibit 10.65 to the Company's Report on Form 10-Q for the
quarter ended December 31, 2003.
10.66 Strategic Advisory Services Agreement dated October 19, 2003
and effective January 1, 2004 between Baldwin Technology
Company, Inc. and Akira Hara. Filed as Exhibit 10.66 to the
Company's Report on Form 10-Q for the quarter ended December
31, 2003.
10.67 Amendment to the Employment Agreement dated and effective
February 10, 2004 between Karl Puehringer and the Company.
Filed as Exhibit 10.67 to the Company's Report on Form 10-Q
for the quarter ended March 31, 2004.
10.68 Employment Agreement dated and effective September 1, 2004
between Baldwin Technology Company, Inc. and Shaun J.
Kilfoyle (filed herewith).
10.69 First Amendment to Credit Agreement among Baldwin Europe
Consolidated B.V., as Borrower, Baldwin Technology Company,
Inc., as Parent, Guarantor and Borrower Representative,
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 September 9, 2004.
Filed as Exhibit 10.69 to the Company's Current Report on
Form 8-K dated September 20, 2004.
21. List of Subsidiaries of Registrant (filed herewith).

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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.

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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: September 28, 2004

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.

75

REPORT OF REGISTERED ACCOUNTING FIRM 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 28, 2004 appearing in
the 2004 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 28, 2004

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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 and accounts receivable of
$239,000 from Goss Graphic Systems, Inc.) 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.
(2) The increase in the allowance for obsolete inventories for fiscal year
ended June 30, 2003 resulted primarily from additional charges of $475,000
and currency fluctuations of $304,000.
(3) The amounts charged to costs and expenses included a $634,000 reserve for
Goss for the fiscal years ended June 30, 2002.
(4) The reduction in allowance for obsolete inventory for fiscal year ended
June 30, 2004 reflects a disposition of previously reserved inventory
related to Baldwin Enkel of $1,235,000.

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