                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q


Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934


For the quarterly period ended:          March 31, 2003


Commission file Number:  0-18259


                          AG-BAG INTERNATIONAL LIMITED
             (Exact name of registrant as specified in its charter)


         Delaware                                               93-1143627
(State or other jurisdiction                                (I.R.S. Employer
 of incorporation or organization)                           Identification No.)


2320 SE Ag-Bag Lane, Warrenton  OR                                97146
(Address of principal executive offices)                        (Zip Code)


                                  (503)861-1644
              (Registrant's telephone number, including area code)


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 whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2)
                    YES  [   ]      NO [ X ]


     The registrant has one class of Common Stock with 11,956,991 shares
outstanding as of April 23, 2003.
<PAGE>
                         PART 1 - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

                    AG-BAG INTERNATIONAL LIMITED
                      CONDENSED BALANCE SHEETS



                              ASSETS

                                                   March 31         December 31
                                                 (Unaudited)
                                               2003        2002         2002
                                           ----------   ----------   ----------

Current assets:
 Cash and cash equivalents                $       774  $     1,988  $    67,526
 Accounts receivable                        3,271,349    4,307,960    1,158,927
 Inventories                                5,276,021    7,138,711    6,051,720
 Other current assets                         389,338      271,912      198,877
 Deferred income tax                          374,000      268,000      388,000
 Income taxes recoverable                        -         148,465         -
                                           ----------   ----------   ----------


    Total current assets                    9,311,482   12,137,036    7,865,050

 Deferred income tax                          691,000      210,000      625,000
 Intangible assets, less
  accumulated amortization                      9,666       17,047       11,511
 Property, plant and equipment
  less accumulated depreciation             3,781,674    4,131,814    3,958,473
 BAW Joint-venture                            409,438      272,938      397,938
 Other assets                                 458,917      446,275      490,628
                                            ---------   ----------   ----------

Total assets                              $14,662,177  $17,215,110  $13,348,600
                                           ==========   ==========   ==========



                           (Continued)
















                                       2
<PAGE>
                    AG-BAG INTERNATIONAL LIMITED
                     CONDENSED BALANCE SHEETS
                LIABILITIES AND SHAREHOLDERS' EQUITY

                                                   March 31         December 31
                                                 (Unaudited)
                                               2003        2002         2002
                                           ----------   ----------   ----------
Current liabilities:
 Notes payable to bank                    $   941,145  $ 2,629,754  $   384,725
 Current portion of long term
  debt and capital lease
  obligations                                 315,386      402,478      351,974
 Accounts payable                           1,593,120    1,917,366      903,309
 Accrued expenses and other
  current liabilities                       1,375,476      973,543    1,135,608
 Income tax payable                             2,210         -           2,210
                                           -----------  -----------  -----------

   Total current liabilities                4,227,337    5,923,141    2,777,826

 Long-term debt and capital
  lease obligation, less
  current portion                           1,387,281    1,723,403    1,459,138
                                            ---------    ----------   ----------
   Total liabilities                        5,614,618    7,646,544    4,236,964
                                            ---------    ----------   ----------
Commitments

Shareholders' equity:
 Preferred stock, $4LV 8 1/2%
  nonvoting                                   696,000      696,000      696,000
 Common stock, $.01 par value                 120,619      120,619      120,619
 Additional paid-in capital                 9,210,211    9,210,211    9,210,211
 Treasury stock                              ( 31,500)     (31,500)    ( 31,500)
 Accumulated deficit                         (947,771)    (426,764)    (883,694)
                                            ---------    ---------   ----------
   Total shareholders' equity               9,047,559    9,568,566    9,111,636
                                            ---------    ---------   ----------
Total liabilities and
 shareholders' equity                     $14,662,177  $17,215,110  $13,348,600
                                           ==========   ==========   ==========







          See Notes to Condensed Financial Information








                                       3
<PAGE>
<TABLE>
<CAPTION>
                          AG-BAG INTERNATIONAL LIMITED
                   CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
                                   (Unaudited)



                           Preferred Stock        Common Stock       Treasury Stock       Paid-In    Accumulated
                           Shares    Amount     Shares     Amount   Shares     Amount     Capital      Deficit      Total
                           ------    ------     ------     ------   ------     ------     -------      --------  -----------
<S>                       <C>      <C>       <C>         <C>         <C>     <C>        <C>           <C>         <C>
Balance December 31, 2002 174,000  $696,000  12,061,991  $120,619    105,000 ($31,500)  $9,210,211    $(883,694)  $9,111,636

Preferred stock dividends                                                                              (14,790)      (14,790)
Net loss                                                                                               (49,287)     ( 49,287)
                          -------   -------  ----------   -------   --------   -------   ---------    ---------  -----------
Balance March 31, 2003    174,000  $696,000  12,061,991  $120,619    105,000 ($31,500)  $9,210,211    $(947,771)  $9,047,559
                          =======   =======  ==========   =======   ========   =======   =========    =========  ===========
</TABLE>


































          See Notes to Condensed Financial Information


                                       4
<PAGE>
                        AG-BAG INTERNATIONAL LIMITED
                      CONDENSED STATEMENTS OF OPERATIONS

                                                            Three Months
                                                           Ended March 31
                                                            (Unaudited)
                                                       ----------------------
                                                         2003         2002

Net sales                                            $ 7,165,585  $ 4,807,485
Cost of sales                                          5,658,640    3,761,615
                                                       ---------    ---------
Gross profit from operations                           1,506,945    1,045,870

Selling expenses                                         976,979      803,128
Administrative expenses                                  656,641      631,150
Research and development expenses                         23,068       22,935
                                                       ---------    ---------
Loss from operations                                    (149,743)    (411,343)

Other income (expense):
  Interest income                                           -           9,216
  Interest expense                                      ( 47,500)    ( 66,134)
  Miscellaneous                                           95,956       65,368
                                                       ---------    ---------
Loss before provision for
 income taxes                                           (101,287)    (402,893)

Benefit for income taxes                                  52,000      151,465
                                                       ---------    ---------

Net loss and comprehensive loss                      $  ( 49,287) $  (251,428)
                                                       =========    =========
Basic and diluted net loss
 per common share                                    $      (.01) $      (.02)
                                                       =========    =========
Basic and diluted weighted average
 number of common shares outstanding                  11,956,991   11,956,991
                                                      ==========   ==========
















                  See Notes to Condensed Financial Information


                                       5
<PAGE>
                          AG-BAG INTERNATIONAL LIMITED
                         CONDENSED STATEMENTS OF CASH FLOWS

                                                     Three Months Ended March 31
                                                             (Unaudited)
                                                             -----------
                                                          2003         2002
                                                          ----         ----
Cash flows from operating activities:
 Net loss                                             $ ( 49,287) $  (251,428)
 Adjustments to reconcile net loss
  to net cash used in operating activities:
   Depreciation and amortization                         202,121      197,368
   Inventory obsolescence reserves                          -        (100,000)
   Deferred income taxes                                 (52,000)      (3,000)
 Changes in assets and liabilities:
    Accounts receivable                               (2,112,422)  (1,874,118)
    Inventories                                          775,699     (342,817)
    Other current assets                                (190,461)    ( 46,368)
    Accounts payable                                     689,811    1,244,803
    Accrued expenses and other current
     liabilities                                         239,868       (2,759)
            Other assets                                  20,211       35,429
    Income taxes recoverable                                 -       (148,465)
                                                       ----------  -----------
Net cash used in operating
    activities                                        (  476,460)  (1,291,355)
                                                      -----------  -----------

Cash flows from investing activities:
   Capital expenditures                                 ( 23,477)    ( 99,484)
                                                        ---------    ---------
Net cash used in investing activities                   ( 23,477)    ( 99,484)
                                                        ---------    ---------

Cash flows from financing activities:
   Net proceeds from (payments on) line
     of credit                                           556,420    1,341,899
   Principal payments on debt                           (108,445)    ( 98,808)
   Payment of preferred dividends                        (14,790)     (14,790)
                                                       ---------    ---------
Net cash provided by financing
   activities                                            433,185    1,228,301
                                                       ---------    ----------

Net increase/(decrease) in cash                         ( 66,752)    (162,538)

Cash and cash equivalents at beginning
 of period                                                67,526      164,526
                                                       ---------      -------

Cash and cash equivalents at end of period            $      774  $     1,988
                                                       =========   ==========




                  See Notes to Condensed Financial Information

                                       6
<PAGE>
                   AG-BAG INTERNATIONAL LIMITED
              Notes to Condensed Financial Information
                           (Unaudited)

Note 1 - Description of Business and Summary of Significant
Accounting Policies
--------------------------------------------------------------------------------


The accompanying unaudited condensed financial statements have been prepared in
accordance with the instructions to Form 10-Q. They do not include all
information and footnotes necessary for a fair presentation of financial
position and results of operations and cash flows in conformity with accounting
principles generally accepted in the United States of America. These condensed
financial statements should be read in conjunction with the financial statements
and related notes contained in the Company's Annual Report on Form 10-K for the
year ended December 31, 2002. In the opinion of management, all adjustments of a
normal recurring nature that are considered necessary for a fair presentation
have been included in the interim period. Operating results for the period ended
March 31, 2003 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2003.


Inventories
-----------

Inventories consist of the following:

                                       March 31          December 31
                                     (Unaudited)
                                  2003         2002         2002
                               ----------   ----------   ----------
         Finished goods        $4,329,800   $5,729,478   $4,830,332
         Work in process       $  663,119   $1 350,410   $1,116,606
         Raw materials         $  283,102   $   58,823   $  104,782
                               ----------   ----------   ----------
                       Total   $5,276,021   $7,138,711   $6,051,720
                               ==========   ==========   ==========


Seasonal Fluctuations
---------------------

The core business of the Company is historically seasonal due to the harvest
seasons in North America and Europe. The seasonal nature of the Company's
operations results in between 65-70% of the Company's revenue being generated
during the spring and summer (2nd and 3rd Quarters). In September 2002, the
Company took additional steps to counteract seasonality by developing and
introducing a Pre-Season ordering program, whereby the Company's dealer's place
their next year's annual product requirements order in advance. This allows the
Company to know in advance its production mix which in turn allows leveling of
production and flexibility in customer shipments. The three-month results may
not be indicative of the estimated results for a full fiscal year.

                                       7
<PAGE>
BAW Joint Venture
-----------------

The Company has a 50% interest in the BAW (Budissa Agrodienstleistungen Und
Warenhandels) venture which is accounted for under the equity method. Condensed
income statements for the Company's BAW Joint Venture in Germany are as follows:


                                               (Dollars in 000's)
                                             Quarter Ended March 31
                                                  (Unaudited)
                                        -------------------------------
                                          2003                    2002
                                          ----                    ----

Net sales                                $ 225                   $ 102
Cost of goods sold                        (161)                   (139)
                                        -------------------------------
Gross profit                                64                     (37)
Selling & administrative expenses          (87)                    (54)
Other income (expense)                      (1)                     32
Income tax benefit                           9                      24
                                        -------------------------------
Net (loss)*                              $ (15)                  $ (35)
                                        ===============================

*  Attributed to other shareholders       $ (1)                   $ (4)

The condensed income statements have been translated from the Euro to the U.S.
dollar at average exchange rates in effect for the periods ended March 31, 2003
and 2002. The average exchange rates used at March 31, 2003 and 2002 were $1.06
and $.88 respectively.


Income Taxes
------------

Income taxes are lower than the expected statutory rates due to the Company's
recognition of the tax benefits of the research and development tax credit and
the non-taxability of income from the Company's investment in its BAW Joint
Venture and the extraterritorial income exclusion.


















                                       8
<PAGE>
Warranty
--------

At the time of sale, the Company accrues a liability for the estimated future
costs to be incurred under the provisions of its warranty agreements. The
Company reviews its historical warranty expense and current sales trends in
products covered under warranty, and adjusts its warranty reserves accordingly.

The activity in that account for the quarters ended was as follows:

                                                   March 31,        March 31,
                                                      2003             2002
                                                   ---------        ---------
Balance, beginning of the year
                                                   $177,384         $124,482
Charged to expense                                   19,373           33,492
Warranty costs incurred during the quarter          (24,815)         (52,245)
                                                   ---------        ---------
Balance, end of quarter                            $171,942         $105,729
                                                   =========        =========



Stock option plan
-----------------

The Company applies Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for its stock option plan. Accordingly, compensation expense related
to grants to employees would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. Had
compensation cost for the Company's stock option plan been determined based upon
the fair value at grant date for awards under the plan consistent with the
methodology prescribed under Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation," additional compensation
expense would have been recognized.























                                       9
<PAGE>
The Company has computed the value of all options granted during the quarters
ended March 31, 2003 and 2002 using the Black-Scholes pricing model as
prescribed under SFAS 123. The pro-forma effect on net loss of options granted
is as follows:

                                                        March 31,    March 31,
                                                          2003         2002
                                                        ---------   ----------

              Net income (loss):
                  As reported                           $(49,287)   $(251,428)
                  Pro forma                             $(50,691)   $(253,751)

              Net income (loss) per share:
                  As reported                               (.01)        (.02)
                  Pro forma                                 (.01)        (.02)


Recently Issued Accounting Standards
------------------------------------

         In December 2002, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 148, "Accounting
for Stock-Based Compensation--Transition and Disclosure--an amendment of FASB
Statement No. 123." This Statement amends FASB Statement No. 123, "Accounting
for Stock-Based Compensation," to provide alternative methods of transition for
a voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, this Statement amends the disclosure
requirements of Statement 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. The
Company's management intends to continue using the intrinsic value method for
stock-based employee compensation arrangements and therefore does not expect
that the application provisions of this statement will have a material impact on
the Company's financial statements.

         In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This Statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The statement
is effective for exit or disposal activities that are initiated after December
31, 2002. The Company's management does not expect that the application of the
provisions of this statement will have a material impact on the Company's
financial statements.

         In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This Statement rescinds FASB

                                       10
<PAGE>
Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and
an amendment of that Statement, FASB Statement No. 64, "Extinguishments of Debt
Made to Satisfy Sinking-Fund Requirements." This Statement also rescinds FASB
Statement No. 44, "Accounting for Intangible Assets of Motor Carriers." This
Statement amends FASB Statement No. 13, "Accounting for Leases," to eliminate an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. This Statement also
amends other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed
conditions. The Company's management does not expect that the application of the
provisions of this statement will have a material impact on the Company's
financial statements.

         In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 addresses the accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No. 143 is effective for the Company in
the first quarter of 2003. The Company's management does not expect that the
application of the provisions of this statement will have a material impact on
the Company's financial statements.

         In January 2003, FASB issued Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities." This interpretation clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," and requires existing unconsolidated variable interest entities to
be consolidated by their primary beneficiaries if the entities do not
effectively disperse risks among parties involved. The Company's management does
not expect that the application of the provisions of this interpretation will
have a material impact on the Company's financial statements.

         In November 2002, FASB issued Interpretation No. 45 (FIN 45),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." This interpretation elaborates
on the disclosures to be made by a guarantor in its financial statements about
its obligations under certain guarantees that it has issued. It also clarifies
that a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing a
guarantee. The Company has complied with the disclosure requirements of FIN 45.
The initial recognition and initial measurement provisions shall be applied on a
prospective basis to guarantees issued or modified after December 31, 2002. The
Company's management does not expect that the application of the provisions of
this interpretation will have a material impact on the Company's financial
statements.


                                       11
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.

General
-------

         Reference is made to Item 7 of "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2002, on file with the
Securities and Exchange Commission ("SEC"). The following discussion and
analysis pertains to the Company's results of operations for the three-month
period ended March 31, 2003, compared to the results of operations for the
three-month period ended March 31, 2002, and to changes in the Company's
financial condition from December 31, 2002 to March 31, 2003.

Critical Accounting Policies
----------------------------

         The Company's significant accounting policies are described in Note 1
to the financial statements included in Item 15 of the Annual Report on Form
10-K, filed with the SEC for the year ended December 31, 2002. The Company
believes its most critical accounting policies include inventory obsolescence
reserves, allowance for doubtful accounts, accounting for warranty reserves and
accounting for income taxes.

         The $731,322 estimate for inventory obsolescence reserves was developed
using inventory-aging reports for finished goods, combined with historical
usage, and forecasted usage and inventory shelf life. The Company's estimates of
market value incorporate projections of future sales volume by product class. In
estimating the market value of parts inventory items, the Company reviews
current inventory levels in relation to sales forecasts and adjusts the
valuation reserve accordingly. For the remaining categories of inventory, the
Company establishes a reserve balance based on the aging of the specific
inventory items. As trends in these variables change, the percentages applied to
the inventory aging categories are updated.

         The $169,886 estimate of allowance for doubtful accounts is comprised
of a specific account analysis and a general reserve. Accounts where specific
information indicates a potential loss may exist are reviewed and a specific
reserve against amounts due is recorded. As additional information becomes
available such specific account reserves are updated. Additionally, a general
reserve is applied based upon historical collection and write-off experience. As
trends in historical collection and write-offs change, the general reserve is
updated.

         The $171,942 estimate for warranty reserve is developed based upon the
estimated future costs to be incurred under the provisions of the Company's
warranty agreements on its bags and machines. The

                                       12
<PAGE>
Company reviews its historical warranty expense and current sales trends in
specific products covered under warranty, and reserves are updated as trends in
these variables change.

         The Company accounts for income taxes under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Valuation allowances are
established to reduce potential deferred tax assets when it is more likely than
not that all or some portion of potential deferred tax assets will not be
realized.

Forward-Looking Statements
--------------------------

         Certain statements in this Form 10-Q contain "forward-looking"
information (as defined in Section 27A of the Securities Act of 1933, as
amended) that involves risks and uncertainties that may cause actual results to
differ materially from those predicted in the forward-looking statements.
Forward-looking statements can be identified by their use of such verbs as
expects, anticipates, believes or similar verbs or conjugations of such verbs.
If any of the Company's assumptions on which the forward-looking statements are
based prove incorrect or should unanticipated circumstances arise, the Company's
actual results could differ materially from those anticipated by such
forward-looking statements. The differences could be caused by a number of
factors or combination of factors including, but not limited to, the factors
listed below and the risks detailed in the Company's Securities and Exchange
Commission filings, including the Company's Form 10-K for the fiscal year ended
December 31, 2002.

         Forward-looking statements contained in this Form 10-Q relate to the
Company's plans and expectations as to: timing of demand for bagging machines
and bags; reductions in U.S. milk prices; optimism in increased milk prices
within the U.S. farm economy for the remainder of 2003; availability of credit
in the farming sector; potential purchases of the Company's bagging machines,
bags and composting systems; anticipated inventory production; the level of
acceptance of the Company's new Pre-Season order program for 2003; the
availability of trade credit and working capital; consumer sentiment and health
of the U.S. and global economy; the Company's dependence on the dairy industry;
and the outcome of pending litigation against the Company.

         The following factors, among others, could cause actual results to
differ from those indicated in the forward-looking statements: a downturn in the
dairy industry; a sharp decline in U.S. milk prices; a reduction in availability
of credit in the

                                       13
<PAGE>
farming sector; an increase in interest rates; adverse weather conditions; a
sharp decline in the health of the farming sector of the U.S. economy; a sharp
decline in government subsidies to the farming sector; disruption of the
manufacturing process of our sole bag manufacturer; increases in the price of
bags; and an adverse outcome in any of the pending litigation against the
Company.


Results of Operations
---------------------

         The core business of the Company is historically seasonal due to the
harvest seasons in North America and Europe. The Company's machinery tends to be
purchased in anticipation of the next harvest season, so most of the sales of
machinery occur in the spring and summer. This may require the Company to carry
significant amounts of inventory to meet rapid delivery requirements of
customers. Bag sales tend to occur as the harvest season approaches in the
summer, and during the harvest season in the fall. In September 2002, the
Company took steps to counteract seasonality by developing and introducing a
Pre-Season ordering program, whereby the Company's dealer's place their next
year's annual product requirements order in advance. This allows the Company to
know in advance its production mix which in turn allows leveling of production
and flexibility in customer shipments.

         Approximately 95% of the Company's business is concentrated in the
Northern Hemisphere, historically resulting in between 65-70% of the Company's
revenue being generated during the spring and summer (2nd and 3rd Quarters). The
following table outlines the percentage of revenue over the past three years by
quarter:

         Quarter                  2000              2001             2002
         -------                  ----              ----             ----
         1st                      21%               15%              18%
         2nd                      31%               35%              37%
         3rd                      34%               35%              32%
         4th                      14%               15%              13%

         As a result of the introduction in October 2002 of the Company's new
Pre-Season order program, these historical revenue percentages may not be
indicative of future revenue percentage by quarter.

         Sales for the quarter ended March 31, 2003 increased 49.05% to
$7,165,585 compared to $4,807,485 for the quarter ended March 31, 2002. Sales
were up for the quarter as a result of the Company shipping orders from its 2003
Pre-Season ordering program, from orders placed in September of 2002 by the
Company's dealers. With the introduction of this Pre-Season program last
September, the Company took steps to eliminate some of its seasonality and to be
able to plan its production mix in advance. This allowed the Company to begin
leveling out production and to increase flexibility in customer shipments.










                                       14
<PAGE>
         During the first quarter of 2003, milk prices continued at record low
levels, but optimism is beginning to show in the U.S. farm economy that milk
prices may begin moving upward during the remainder of 2003 as a result of
decreasing cow numbers and milk production per cow. Farmers continue to be
cautious, despite continued low interest rates, on increasing their capital
expenditures until there is upward movement in milk prices. During the quarter,
strong competition in the silage bag market continued, as farmers look for the
most economical bag, without considering overall quality, customer service and
recycling of the used plastic silage bags offered by the Company.

         Machine sale revenue for the quarter rose 35.55% and bag sale revenue
rose 57.97% compared to the same period of 2002. Machine sale revenue for the
quarter rose as a result of several large bagging machine sales, coupled with
sales of the Company's small-core bagging machine and new "Personal Bagger"
introduced late in 2002, during the 1st quarter compared to 2002 resulting from
orders received in the Company's Pre-Season order program. As a percentage of
total revenue for the 1st quarter of 2003, machine revenue decreased
approximately 5% (due to machine size mix sold) and bag revenue increased
approximately 2% compared to the 1st quarter of 2002. The following table
identifies revenue from each product line that accounted for more that 15% of
total revenue for the quarter as compared to the same quarter in the prior year:

         Product                           2002          2003
         -------                           ----          ----
         Bags                              29%           31%
         Machines                          61%           56%
         Other                             10%           13%
                                           ---           ---
         Net Sales                         100%          100%

         Machine sales are directly tied to farmers' income and therefore their
ability to purchase new equipment. The total number of bagging machines that are
in the marketplace drives the Company's bag and parts sales. However, there is
not a perfect correlation between the Company's bag sales and machine sales, as
the Company's and competitors' bags are interchangeable on all bagging machinery
in the industry. The Company cannot estimate with any certainty the total number
of machines or bags used in the industry.

         The Company sold one composting system in addition to compost bag sales
during the quarter ended March 31, 2003, generating approximately $150,000 in
revenue, compared to the quarter ended March 31, 2002 in which three systems
were sold, in addition to compost bags, generating approximately $250,000 in
revenue. Compost sales are down for 2003 as a result of current economic
conditions and tight budgetary constraints of the Company's potential end users.



                                       15
<PAGE>
         Although the Company sells its products primarily through a worldwide
dealer network, certain sales are made directly to large volume customers when a
dealer is not present in the customer's geographic market. For each of the last
three years, the Company estimates that direct sales make up between 33-38% of
total sales. The gross margin realized on the Company's direct sales are
typically within 1-3% of those sales realized through the Company's dealer
network. However, various economic, volume and market factors in the geographic
area impact the ultimate margin. Beginning in 2002, the Company began focusing
its marketing efforts more on dealer development and expanding its dealer
network rather than a focus towards direct selling. As a result of this shift,
the Company anticipates its sales mix to begin to favor more dealer sales in the
future.

         Gross profit as a percentage of sales decreased 3.33% for the quarter
ended March 31, 2003 compared to the same period in 2002. The decrease for the
quarter was the result of 1) lower margins on the Company's used equipment sold
during the quarter, and, 2) lower margins on bags in certain highly competitive,
high volume geographic areas. The decrease was partially offset by improved
margins on the Company's "core" smaller bagging machines from production
improvements made during 2002. Also contributing to the decline for the quarter
was the mix of machine models sold during the quarter, which saw a 30% increase
in unit sales of the Company's larger-sized bagging machines. Larger-sized
bagging machines generate a lower overall margin for the Company than its "core"
small sized bagging machine.

         Selling expenses for the quarter ended March 31, 2003 increased 21.65%
to $976,979 compared to $803,128 for the quarter ended March 31, 2002. The
increase for the quarter was the result of increased commissions from higher
sales volumes, and dealer incentive costs, partially offset by lower
advertising, personnel, benefit, and travel costs associated with sales
personnel reductions made in late 2002 in connection with the shift more towards
selling through the Company's dealer network.

         Administrative expenses for the quarter ended March 31, 2003 increased
4.04% to $656,641 compared to $631,150 for the quarter ended March 31, 2002. The
increase for the quarter was the result of higher professional fees, and
increases in administrative salary, general office, and insurance expense,
partially offset by lower bad debt, and employee benefit expenses.

         Research and development expenses for the quarter ended March 31, 2003
were flat at $23,068 compared to $22,935 for the quarter ended March 31, 2002.
Research for the quarter focused on continued development and testing of the
newer design of the Company's larger-sized silage bagging machine, in addition
to continuing ongoing research regarding new silage and nutritional studies of
bagged feed and their effects on animal production.

                                       16
<PAGE>
         Interest expense for the quarter ended March 31, 2003 decreased 28.18%
to $47,500 compared to $66,134 for the quarter ended March 31, 2002. The
decrease for the quarter was the result of the Company utilizing a smaller
portion of its credit facility as a result of the Company changing its
collection methods during the fourth quarter of 2002 whereby the Company's
customers no longer have open account terms. The Company's customers now have
the option to pay in advance for their order, utilize their own established
credit, or utilize one of the Company's third-party financing sources or
programs offered for their purchases.

         Miscellaneous income for the quarter ended March 31, 2003 increased
46.79% to $95,956 compared to $65,368 for the quarter ended March 31, 2002. The
increase was the result of 1) an increase in cash surrender value income for the
quarter, 2) an increase in general miscellaneous income from foregone dealer
deposits, and 3) a decrease in loss from the Company's German Joint Venture.

         The Company's effective income tax rate for the quarter ended March 31,
2003 was (51.34%) compared to (37.59%) for the quarter ended March 31, 2002.
This was due to 1) the fact the Company incurred a net loss for the quarter, 2)
the recognition of research and development credits associated with the
Company's activities, 3) the fact the Company's income from its German Joint
Venture is not taxable in the United States, and 4) the extraterritorial income
exclusion provisions of the current United States tax code.

         Net loss for the quarter ended March 31, 2003 was $49,287 compared to
$251,428 for the quarter ended March 31, 2002. The improvement for the quarter
was the result of higher sales, lower interest costs and higher miscellaneous
income, partially offset by increased selling, and administrative expense. Even
though the Company has a loss in the first quarter of 2003, management projects
the Company will be profitable for the year and accordingly has recognized a
$52,000 tax benefit relating to the first quarter loss. For the first quarter of
2002 a tax benefit of $151,465 was recognized.


Liquidity and Capital Resources
-------------------------------

         The seasonal nature of the northern hemisphere farming industry, the
production time for equipment and the time required to prepare bags for use
requires the Company to manufacture and carry high inventories to meet rapid
delivery requirements. In particular, the Company must maintain a significant
level of bags during the spring and summer to meet the sales demands during the
harvest season. The Company uses working capital and trade credit to increase
its inventory so that it has sufficient inventory levels available to meet its
sales demands.



                                       17
<PAGE>
         The Company relies on its suppliers to provide trade credit to enable
the Company to build its inventory. The Company's suppliers have provided
sufficient trade credit to meet the demand to date and management believes this
will continue. No assurance can be given that suppliers will continue to provide
sufficient trade credit in the future.

         Accounts receivable decreased 24.06% at March 31, 2003 to $3,271,349
compared to $4,307,960 at March 31, 2002. The decrease for the quarter was the
result of the Company changing its collection methods during the fourth quarter
of 2002 whereby the Company's customers no longer have open account terms. For
new purchases, the Company's customers now have the option to pay in advance for
their order, utilize their own established credit, or utilize one of the
Company's third-party financing sources or programs offered for their purchases.
The Company's third-party financing sources generally provide funding to the
Company within 10 days of invoice processing.

         Inventory decreased 26.09% at March 31, 2003 to $5,276,021 compared to
$7,138,711 at March 31, 2002. The decrease in inventory resulted from the
Company's continued efforts to streamline its inventory and more closely match
its production with planned inventory requirements. Contributing to these
efforts was the implementation of the Company's new Pre-Season ordering program
introduced in September 2002.

         Other current assets increased 43.18% at March 31, 2003 to $389,338
compared to $271,912 at March 31, 2002. The increase was the result of an
increase in show deposits and prepaid insurance expense.

         Intangible assets at March 31, 2003 decreased to $9,666 compared to
$17,047 at March 31, 2002. The decrease was the result of normal amortization
expense.

         Other assets increased 2.84% at March 31, 2003 to $458,917 compared to
$446,275 at March 31, 2002. The increase for the quarter was the result of an
increase in the cash surrender value of life insurance policies maintained by
the Company under which it is the beneficiary.

         The Company has an operating line of credit with a limit of $2,500,000,
secured by accounts receivable, inventory, fixed asset blanket and general
intangibles, and bears interest at the bank's prime rate plus 1 1/4%. As of
March 31, 2003, $941,145 had been drawn under the credit line. The line of
credit is subject to certain net worth and EBITDA covenants, and an annual
capital expenditure limit. Management believes that funds generated from
operations and the Company's operating line of credit will be sufficient to meet
the Company's cash requirements through the remainder of 2003. The Company's
line of credit is subject to annual renewal at June 1.



                                       18
<PAGE>
         On December 18, 2000, the Company entered into an agreement with
Dresdner Bank to guarantee up to 511,292 Euro ($552,195 US) as security for an
additional cash credit facility of the Company's German Joint Venture. There was
-0-Euro outstanding under this additional cash credit facility at March 31,
2003.

         Accounts payable decreased 16.91% at March 31, 2003 to $1,593,120
compared to $1,917,366 at March 31, 2002. The decrease for the quarter was the
result of the Company beginning to level out its production process and related
manufacturing payables, resulting from the Company's new Pre-Season order
program offered to its dealers, which was slightly offset by some extended term
payables provided by some of the Company's principal suppliers.

         Accrued expenses and other current liabilities increased 41.29% at
March 31, 2003 to $1,375,476 compared to $973,543 at March 31, 2002. The
increase in other current liabilities for the quarter was the result of
increased dealer incentives and volume rebate expense resulting from the
Company's new Pre-Season order program coupled with higher general accruals
resulting from higher sales for the quarter, which were offset by lower payroll
and benefit costs from sales staff reductions made late in 2002.

         In 1997, the Nasdaq listing requirements were substantially expanded.
The Company does not currently qualify under the more stringent requirements
because the price at which its Common Stock is trading is below the $1 per share
minimum. The Company was formally notified on January 13, 1999, that its Common
Stock was delisted from quotation on The Nasdaq SmallCap Market for failure to
meet the new listing requirements. The Company's Common Stock is now quoted on
the OTC Bulletin Board. The removal from quotation on the Nasdaq SmallCap Market
could have a material adverse effect on the Company's ability to raise
additional equity capital in a public stock offering should that become
necessary.

         The following table outlines the Company's future contractual
obligations by type:

                                           Payments due by period
                         ------------------------------------------------------
Contractual                          Less than                        More than
Obligations                  Total     1 year   1-3 years  3-5 years   5 years
                         ----------  ---------  ---------  ---------  ---------

Long-term debt           $1,678,270  $290,989   $420,099   $148,848   $818,334
Capital lease obligation    $24,397   $24,397         $0         $0         $0
Operating leases           $273,047   $13,698    $40,181    $43,834   $175,334
Purchase obligations             $0        $0         $0         $0         $0
                         ----------  ---------  ---------  ---------  ---------
Total                    $1,975,714  $329,084   $460,280   $192,682   $993,668
                         ----------  ---------  ---------  ---------  ---------

                                       19
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         Market risk is the exposure to loss resulting from changes in interest
rates, foreign currency exchange rates, commodity prices and equity prices. The
primary market risk to which the Company is exposed is interest rates.

         The Company's exposure to changes in interest rates is minimal.
Primarily all of the Company's long-term debt is fixed rate. The Company's line
of credit is based on the prime rate plus 1 1/4%.


ITEM 4. CONTROLS AND PROCEDURES.

         (a) Evaluation of disclosure controls and procedures.

         The Company's chief executive officer and chief financial officer,
after evaluating the effectiveness of the Company's "disclosure controls and
procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c)
and 15d-14(c)) as of a date (the "Evaluation Date") within 90 days before the
filing date of this quarterly report, have concluded that as of the Evaluation
Date, the Company's disclosure controls and procedures were effective and
designed to ensure that material information relating to the Company and the
Company's consolidated subsidiaries would be made known to them by others within
those entities.

         (b) Changes in internal controls.

         There were no significant changes in the Company's internal controls or
in other factors that could significantly affect those controls subsequent to
the Evaluation Date.



                           PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.

         The Company is one of three defendants named in a purported breach of
contract and product warranty lawsuit, Kevin Sustrik v. Alberta Ag-Bag Ltd.,
Ag-Bag International Ltd., and Jim Rakai, filed June 7, 2000. The plaintiff
alleged breach of contract and breach of product warranty relating to a bagging
machine purchased by the plaintiff and sought monetary damages. The Company
settled with the plaintiff May 1, 2002; which settlement was accepted by the
Court of Queen's Bench of Alberta, Canada, on March 27, 2003.



                                       20
<PAGE>
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits:

    99.1      Certification of Michael J. Schoville, Chief Executive Officer of
              Ag-Bag International Limited, as required pursuant to Section 906
              of the Sarbanes-Oxley Act of 2002

    99.2      Certification of Michael R. Wallis, Chief Financial Officer,
              Treasurer and Vice President of Finance of Ag-Bag International
              Limited, as required pursuant to Section 906 of the Sarbanes-Oxley
              Act of 2002

(b) Reports on Form 8-K.

         No reports on Form 8-K were filed by the Company during the quarter
ended March 31, 2003.










































                                       21
<PAGE>
                           SIGNATURES


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


                             AG-BAG INTERNATIONAL LIMITED,
                             a Delaware corporation
                                 (Registrant)



Date: May 2, 2003              By: /s/ Michael R. Wallis
                                   ---------------------------
                                   Michael R. Wallis
                                   Chief Financial Officer and
                                    Vice President of Finance

                               (duly authorized and principal
                                financial officer)





































                                       22
<PAGE>
                                 CERTIFICATIONS

I, Michael J. Schoville, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Ag-Bag
         International Limited;

2.       Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this quarterly report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         a)   designed such disclosure controls and procedures to ensure that
              material information relating to the registrant, including its
              consolidated subsidiaries, is made known to us by others within
              those entities, particularly during the period in which this
              quarterly report is being prepared;

         b)   evaluated the effectiveness of the registrant's disclosure
              controls and procedures as of a date within 90 days prior to the
              filing date of this quarterly report (the "Evaluation Date"); and

         c)   presented in this quarterly report our conclusions about the
              effectiveness of the disclosure controls and procedures based on
              our evaluation as of the Evaluation Date;

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

         a)   all significant deficiencies in the design or operation of
              internal controls which could adversely affect the registrant's
              ability to record, process, summarize and report financial data
              and have identified for the registrant's auditors any material
              weaknesses in internal controls; and

         b)   any fraud, whether or not material, that involves management or
              other employees who have a significant role in the registrant's
              internal controls; and

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

Date: May 2, 2003

/s/Michael J. Schoville
-----------------------
Chief Executive Officer

                                       23
<PAGE>
I, Michael R. Wallis, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Ag-Bag
         International Limited;

2.       Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this quarterly report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

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

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

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

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

Date: May 2, 2003

/s/Michael R. Wallis
--------------------
Chief Financial Officer, Treasurer
and Vice President of Finance


                                       24

