                                  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:                 September 30, 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 October 29, 2003.











                                        1
<PAGE>
                         PART 1 - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

                          AG-BAG INTERNATIONAL LIMITED
                            CONDENSED BALANCE SHEETS



                                     ASSETS

                                                 September 30       December 31
                                                  (Unaudited)
                                               2003         2002         2002
                                            ----------   ----------   ----------

Current assets:
 Cash and cash equivalents                 $   344,629  $   242,990  $    67,526
 Accounts receivable                         2,638,828    5,429,937    1,158,927
 Inventories                                 6,634,189    6,805,158    6,051,720
 Other current assets                          298,273      393,263      198,877
 Deferred income tax                           312,000      155,000      388,000
                                            ----------   ----------   ----------


    Total current assets                    10,227,919   13,026,348    7,865,050

 Deferred income tax                           927,000      175,000      625,000
 Intangible assets, less
  accumulated amortization                      17,543       13,357       11,511
 Property, plant and equipment
  less accumulated depreciation              3,410,617    4,157,261    3,958,473
 BAW Joint-venture                             359,747      362,438      397,938
 Other assets                                  481,417      470,612      490,628
                                             ---------   ----------   ----------

Total assets                               $15,424,243  $18,205,016  $13,348,600
                                            ==========   ==========   ==========




                           (Continued)
















                                       2
<PAGE>
                          AG-BAG INTERNATIONAL LIMITED
                            CONDENSED BALANCE SHEETS

                      LIABILITIES AND SHAREHOLDERS' EQUITY

                                                 September 30       December 31
                                                  (Unaudited)
                                               2003        2002         2002
                                           ----------   ----------   ----------
Current liabilities:
 Notes payable to bank                    $ 2,942,818  $ 3,417,369  $   384,725
 Current portion of long term
  debt and capital lease
  obligations                                 190,988      356,654      351,974
 Accounts payable                           1,200,892    1,646,693      903,309
 Accrued expenses and other
  current liabilities                       1,311,735    1,020,697    1,135,608
 Income tax payable                             2,210        2,210        2,210
                                          -----------  -----------  -----------

   Total current liabilities                5,648,643    6,443,623    2,777,826

 Long-term debt and capital
  lease obligation, less
  current portion                           1,108,662    1,555,806    1,459,138
                                          -----------  -----------  -----------
   Total liabilities                        6,757,305    7,999,429    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)
 Retained earnings (deficit)               (1,328,392)     210,257     (883,694)
                                          -----------  -----------  -----------
   Total shareholders' equity               8,666,938   10,205,587    9,111,636
                                          -----------  -----------  -----------
Total liabilities and
 shareholders' equity                     $15,424,243  $18,205,016  $13,348,600
                                           ==========   ==========   ==========







                  See Notes to Condensed Financial Information








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


<TABLE>
<CAPTION>
                                 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

Preferred stock dividends                                                                                     (14,790)      (14,790)
Net loss                                                                                                      (34,486)      (34,486)
                                -------   -------  ----------   -------   --------   -------   ---------    ---------   -----------
Balance June 30, 2003           174,000  $696,000  12,061,991  $120,619    105,000 ($31,500)  $9,210,211  $ ( 997,047)  $ 8,998,283

Preferred stock dividends                                                                                     (14,790)      (14,790)
Net loss                                                                                                     (316,555)     (316,555)
                                -------   -------  ----------   -------   --------   -------   ---------    ---------   -----------
Balance September 30, 2003      174,000  $696,000  12,061,991  $120,619    105,000 ($31,500)  $9,210,211  $(1,328,392)  $ 8,666,938
                                =======   =======  ==========   =======   ========   =======   =========    =========   ===========
</TABLE>


























                  See Notes to Condensed Financial Information



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

                                                        Three Months Ended
                                                           September 30
                                                            (Unaudited)
                                                       ----------------------
                                                         2003          2002
                                                         ----          ----
Net sales                                            $ 5,711,389  $ 8,816,610
Cost of sales                                          4,860,689    7,193,752
                                                       ---------    ---------
Gross profit from operations                             850,700    1,622,858

Selling expenses                                         687,410      844,610
Administrative expenses                                  655,244      632,096
Gain on sale of assets                                   (12,439)         -
Research and development expenses                         17,319       86,177
                                                       ---------    ---------
Income (loss) from operations                           (496,834)      59,975

Other income (expense):
  Interest income                                            -         18,406
  Interest expense                                       (63,219)     (94,542)
  Miscellaneous                                          113,498      152,427
                                                       ---------    ---------
Income (loss) before provision for
 income taxes                                           (446,555)     136,266

Provision (benefit) for income taxes                    (130,000)      11,675
                                                       ---------    ---------

Net income(loss) and comprehensive income(loss)      $  (316,555) $   124,591
                                                       =========    =========
Basic and diluted net income(loss)
 per common share                                    $     (.03)  $       .01
                                                       =========    =========
Basic and diluted weighted average
 number of common shares outstanding                  11,963,657   11,980,172
                                                      ==========   ==========















                  See Notes to Condensed Financial Information



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

                                                         Nine Months Ended
                                                            September 30
                                                             (Unaudited)
                                                        ----------------------
                                                          2003         2002
                                                          ----         ----

Net sales                                             $18,836,515  $23,553,322
Cost of sales                                          15,257,275   18,310,689
                                                       ----------   ----------
Gross profit from operations                            3,579,240    5,242,633

Selling expenses                                        2,518,652    2,630,891
Administrative expenses                                 2,085,512    2,030,581
Gain on sale of assets                                   (185,358)        (500)
Research and development expenses                         107,437      152,784
                                                       ----------   ----------
Income (loss) from operations                            (947,003)     428,877

Other income (expense):
  Interest income                                             -         44,400
  Interest expense                                       (174,673)    (251,870)
  Miscellaneous                                           495,348      340,976
                                                       ----------   ----------
Income (loss) before provision for
 income taxes                                            (626,328)     562,383

Provision (benefit) for income taxes                     (226,000)     147,210
                                                       ----------   ----------

Net income(loss) and comprehensive income(loss)       $  (400,328) $   415,173
                                                       ==========   ==========
Basic and diluted net income(loss)
 per common share                                     $      (.04) $       .03
                                                       ==========   ==========
Basic and diluted weighted average
 number of common shares outstanding                   11,962,508   11,959,255
                                                       ==========   ==========















                  See Notes to Condensed Financial Information


                                        6
<PAGE>
                          AG-BAG INTERNATIONAL LIMITED
                       CONDENSED STATEMENTS OF CASH FLOWS

                                                          Nine Months Ended
                                                            September 30
                                                            (Unaudited)
                                                            -----------
                                                          2003         2002
                                                          ----         ----
Cash flows from operating activities:
 Net income (loss)                                    $  (400,328) $   415,173
 Adjustments to reconcile net income
  to net cash used in operating activities:
   Depreciation and amortization                          593,847      611,527
   Inventory obsolescence reserves                        165,000      (25,000)
   Deferred income taxes                                 (226,000)     145,000
  (Gain)/loss on disposition of equipment                (185,358)        (500)
 Changes in assets and liabilities:
    Accounts receivable                                (1,479,901)  (2,996,095)
    Inventories                                          (795,890)    (415,990)
    Other current assets                                  (99,396)    (167,719)
    Accounts payable                                      297,585      974,130
    Accrued expenses and other current
     liabilities                                          176,127       44,395
            Other assets                                 (125,516)     (78,408)
    Income tax payable                                        -          2,210
                                                       ----------   ----------
Net cash used in operating
    activities                                         (2,079,830)  (1,491,277)
                                                       ----------   ----------

Cash flows from investing activities:
   Capital expenditures                                   (47,035)    (203,674)
   Intangible assets                                      (12,532)         -
   Proceeds from disposition of equipment                 414,239          500
                                                       ----------   ----------
Net cash provided (used) in
   investing activities                                   354,672     (203,174)
                                                       ----------   ----------

Cash flows from financing activities:
   Net proceeds from line of credit                     2,558,093    2,129,514
   Principal payments on debt                            (511,462)    (312,229)
   Payment of preferred dividends                         (44,370)     (44,370)
                                                       ----------   ----------
Net cash provided by financing
   activities                                           2,002,261    1,772,915
                                                       ----------   ----------

Net increase in cash                                      277,103       78,464

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

Cash and cash equivalents at end of period            $   344,629  $   242,990
                                                       ==========   ==========

                  See Notes to Condensed Financial Information
                                        7
<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
September  30, 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:

                                              September 30,       December 31,
                                               (Unaudited)
                                            2003         2002         2002
                                         ----------   ----------   ----------
 Finished goods                          $5,432,231   $5,529,335   $4,830,332
 Work in process                         $  945,463   $1,047,266   $1,116,606
 Raw materials                           $  256,495   $  228,557   $  104,782
                                         ----------   ----------   ----------
                            Total        $6,634,189   $6,805,158   $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 of 2002, the
Company took steps to counteract  seasonality  by developing  and  introducing a
Pre-Season  ordering  program,  whereby the  Company's  dealers place their next
year's annual  product  requirements  order in advance.  This began to allow the
Company to know in advance its production  mix which in turn allows  leveling of
production and flexibility in customer shipments. The nine-month results may not
be indicative of the estimated results for a full fiscal year.







                                        8
<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)
                                             Nine-Months Ended September 30,
                                                       (Unaudited)
                                      ------------------------------------------
                                           2003                       2002
                                           ----                       ----

Net sales                                 $ 2,406                    $ 1,949
Cost of goods sold                         (1,881)                    (1,512)
                                      ------------------------------------------
Gross profit                                  525                        437
Selling & administrative expenses            (219)                      (175)
Other income (expense)                        120                         69
Income tax expense                           (171)                      (133)
                                      ------------------------------------------
Net income*                               $   255                    $   198
                                      ==========================================

*  Attributed to other shareholders       $    13                    $    21

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  September 30,
2003 and 2002.  The average  exchange  rates used at September 30, 2003 and 2002
were $1.10 and $.94 respectively.


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

Income taxes are lower than the expected  statutory rates for the quarter due to
the Company's  recognition  of the tax benefits of the research and  development
tax credit,  the  non-taxability of income from the Company's  investment in its
BAW Joint Venture, and the extraterritorial income exclusion. The effective tax
rate for the nine months ended September 30, 2003 does not significantly differ
from the federal statutory rate.
















                                       11
<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 periods ended was as follows:

                                                 September 30,   September 30,
                                                      2003           2002
                                                --------------- ---------------
Balance, beginning of the year
                                                    $177,384       $124,482
Charged to expense                                   130,716        187,895
Warranty costs incurred during the period           (150,998)      (179,487)
                                                --------------- ---------------
Balance, end of period                              $157,102       $132,890
                                                =============== ===============



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.

The Company has computed the value of all options  granted during the nine-month
period ended September 30, 2003 and 2002 using the  Black-Scholes  pricing model
as  prescribed  under SFAS 123.  The  pro-forma  effect on net income of options
granted is as follows:

                                     September 30,             September 30,
                                          2003                     2002
                                ------------------------------------------------
Net income (loss):
    As reported                         $(400,328)               $ 415,173
    Pro forma                           $(409,604)               $ 408,205

Net income (loss)per share:
    As reported                              (.04)                     .03
    Pro forma                                (.04)                     .03







                                       10
<PAGE>
Contingencies
-------------

     The Company is involved in litigation matters that are in the normal course
of business.  Management  is of the opinion  that these  matters will not have a
material  effect  on the  accompanying  financial  statements.  Accordingly,  no
provision  for these  matters is included in the  financial  statements  for the
nine-month period ended September 30, 2003.


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

     In June 2003, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standard  ("SFAS") No. 150,  "Accounting for
Certain  Financial  Instruments  with  Characteristics  of Both  Liabilities and
Equity." This  statement  establishes  standards  regarding  classification  and
measurement  of  certain  financial  instruments  with  characteristics  of both
liabilities and equity. It requires  financial  instruments  within the scope of
this  statement  to  be  classified  as   liabilities   (or  an  asset  in  some
circumstances).  Many of these financial  instruments were previously classified
as equity. This statement is effective for financial instruments entered into or
modified  after May 31, 2003, and otherwise is effective at the beginning of the
first interim period  beginning  after June 15, 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 April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative  Instruments  and  Hedging  Activities."  This  statement  amends and
clarifies  financial  accounting  and  reporting  for  derivative   instruments,
including  certain  derivative  instruments  embedded in other contracts and for
hedging  activities  under FASB  Statement No. 133,  "Accounting  for Derivative
Instruments and Hedging  Activities."  This statement is effective for contracts
entered into or modified after June 30, 2003,  except for hedging  relationships
designated  after June 30, 2003. The  provisions of this  statement  relating to
Statement  133  implementation  issues,  that have  been  effective  for  fiscal
quarters  that began prior to June 15,  2003,  should  continue to be applied in
accordance with their respective  effective dates. In addition,  paragraphs 7(a)
and 23(a), which relate to forward purchases or sales of when-issued  securities
or other  securities  that do not yet exist,  should be applied to both existing
contracts  and new  contracts  entered into after June 30, 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 December 2002, the FASB issued 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










                                       11
<PAGE>
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 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.













                                       12
<PAGE>
     In January 2003, the FASB issued  Interpretation No. 46,  "Consolidation of
Variable Interest  Entities."  Interpretation  No. 46 requires  companies with a
variable interest in a variable interest entity to apply this guidance as of the
beginning  of the first  interim  period  beginning  after  June 15,  2003,  for
existing  interests and  immediately  for new  interests.  In October 2003,  the
effective date of the  Interpretation was deferred to the beginning of the first
interim  period  ending after  December 15, 2003,  for existing  interests.  The
application  of the  guidance  could result in the  consolidation  of a variable
interest entity.  The Company is associated with a potential  variable  interest
entity through their equity  interest in BAW and their  guarantee of the debt of
BAW. Management is evaluating whether this entity is a variable interest entity,
whether the Company is the  primary  beneficiary  and, if so, the impact of this
interpretation on financial position and results of operations.

     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.


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  September 30, 2003,  compared to the results of operations for the
three-month  period ended  September 30, 2002,  and to the results of operations
for the nine-month  period ended September 30, 2003,  compared to the results of
operations for the nine-month  period ended September 30, 2002 and to changes in
the Company's financial condition from December 31, 2002 to September 30, 2003.














                                       13
<PAGE>
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 $896,322  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. This reserve was $791,322
at June 30, 2003 and $731,322 at December 31, 2002  respectively.  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 included
in finished goods,  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 $172,293  estimate of allowance for doubtful accounts is comprised of a
specific account  analysis and a general  reserve.  This reserve was $160,571 at
June 30, 2003 and $203,595 at December  31, 2002  respectively.  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  $157,102  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.  This reserve was $163,642 at June
30, 2003 and $177,384 at December 31, 2002 respectively. The 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











                                       14
<PAGE>
likely than not that all or some portion of  potential  deferred tax assets will
not be  realized.  As of  September  30,  2003,  management  has  established  a
valuation allowance of $12,000 against the value of its deferred tax assets.

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 and  throughout  2004;
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  Pre-Season  order program
for 2004; the availability of trade credit and working capital; the availability
of third party financing sources;  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 farming sector or the Company's third party financing sources;  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
---------------------













                                       15
<PAGE>
     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 of 2002 however,
the Company took steps to counteract seasonality by developing and introducing a
Pre-Season  ordering  program,  whereby the  Company's  dealers 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  September  2002  of  the  Company's
Pre-Season  order  program,  these  historical  revenue  percentages  may not be
indicative of future revenue percentage by quarter.

     Sales  for the  quarter  ended  September  30,  2003  decreased  35.22%  to
$5,711,389  compared to  $8,816,610  for the quarter  ended  September 30, 2002.
Sales for the nine-month  period ended  September 30, 2003  decreased  20.03% to
$18,836,515  compared to $23,553,322  for the nine-month  period ended September
30,  2002.  Sales were down for the  quarter  as a result of the slow U.S.  farm
economy coupled with the Company's new Pre-Season order program, which has begun
to change the Company's  historical shipping patterns.  With the introduction of
this  Pre-Season  program in September 2002, 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.

     During the first  six-months of 2003,  milk prices  continued at record low
levels,  but began to show some  improvement  during the third quarter with milk
prices beginning to move upward.  The outlook for the remainder of 2003 and into
2004  indicates milk prices will remain above the record low levels seen earlier
this year.  Farmers  began seeing  increases in their monthly milk checks during
the third quarter of 2003,  but continue to be cautious,











                                       18
<PAGE>
despite  continued low interest rates, on increasing their capital  expenditures
until there is sustained,  prolonged upward movement in milk prices and they are
able  to  repay  their  existing   obligations   which  have  mounted  from  the
persistently  low milk prices.  Additionally,  during the quarter and nine-month
period, the Company continued to experience strong competition in the silage bag
market, 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 in certain U.S. central pick-up locations.

     Machine sale revenue for the quarter  declined  45.56% and bag sale revenue
declined  33.58%  compared to the same period of 2002.  Machine sale revenue for
the  nine-month  period  declined  23.18% and bag sale revenue  declined  22.72%
compared  to the same  period of 2002.  Machine  sale  revenue  for the  quarter
declined  as a result of farmers  continuing  to be overly  cautious  on capital
expenditures from the prolonged low milk prices, despite upward movement in milk
prices during the third quarter.  Bag sales declined for the quarter as a result
of the  Company's  Pre-Season  ordering  program,  which  encouraged  dealers to
received their product  earlier in the year,  rather than largely during harvest
season as their  practice had been in the past.  The decline in both machine and
bag sale revenue in the second and third quarters more than offset the increases
seen in the first quarter of 2003 from the flexibility provided by the Company's
Pre-Season ordering program.

     The  following  table  identifies  revenue  from  each  product  line  that
accounted  for more that 15% of total  revenue for the  quarter  and  nine-month
period as compared to the same quarter and nine-month period in the prior year:

                                                Nine-months       Nine-months
                                                   Ended             Ended
                 3rd quarter    3rd quarter    September 30,     September 30,
Product              2003           2002            2003              2002
-------              ----           ----            ----              ----
Bags                  61%            59%             48%               50%
Machines              28%            34%             40%               42%
Other                 11%             7%             12%                8%
                      ---             --             ---               ---
Net Sales            100%           100%            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 direct  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.













                                       17
<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  19.12% for the quarter
ended September 30, 2003 compared to the same period in 2002.  Gross profit as a
percentage of sales decreased  14.65% for the nine-month  period ended September
30, 2003  compared to the same period in 2002.  The decrease for the quarter was
the result of lower sales volumes to cover fixed  operating  overheads,  coupled
with lower margins on the Company's  used  equipment sold during the quarter and
increases incurred in the Company's inventory  reserves.  The quarterly decrease
was partially offset by improved margins on the Company's "core" smaller bagging
machines from  production  improvements  made during 2002.  The decrease for the
nine-month period was the result of the above mentioned factors coupled with the
mix of machine  models  sold during the first  quarter of 2003,  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 September 30, 2003 decreased 18.61%
to $687,410  compared to $844,610  for the quarter  ended  September  30,  2002.
Selling  expenses for the nine-month  period ended  September 30, 2003 decreased
4.27% to  $2,518,652  compared to  $2,630,891  for the  nine-month  period ended
September  30, 2002.  The  decrease in selling  expenses for the quarter was the
result of lower  commissions  from  lower  sales  volumes,  coupled  with  lower
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,  partially offset by increased dealer incentive costs.
For the nine-month  period,  the decrease in selling  expenses was the result of
the above mentioned factors in addition to lower overall advertising costs.

     Administrative  expenses for the quarter ended September 30, 2003 increased
3.66% to $655,244 compared to $632,096 for the quarter ended September 30, 2002.
Administrative  expenses  for the  nine-month  period ended  September  30, 2003
increased 2.71% to















                                       18
<PAGE>
$2,085,512  compared to $2,030,581 for the nine-month period ended September 30,
2002.  The  increase  for the  quarter and  nine-month  period was the result of
higher  professional  fees related to ongoing patent litigation and increases in
insurance  expense and financing  costs,  partially offset by lower bad debt and
administrative personnel expenses.

     During the third quarter of 2003, the Company recorded a gain from the sale
of  assets  of  $12,439  which  resulted  from  the  sale of  fully  depreciated
miscellaneous manufacturing equipment and vehicles. During the second quarter of
2003, the Company recorded a gain from the sale of assets of $345,837.  The gain
largely resulted from depreciated  folding equipment that was sold to its German
joint  venture.  Under the equity  method of  accounting  with the Company's 50%
ownership  in the  German  joint  venture,  the  Company's  share of the gain of
$172,918  was  deferred  and will be  recognized  as the  German  joint  venture
depreciates the folding equipment over its useful life. During the third quarter
of 2003, $43,227 of the deferred gain was recognized as joint venture income.

     Research and development  expenses for the quarter ended September 30, 2003
decreased  79.90% to $17,319 compared to $86,177 for the quarter ended September
30, 2002.  Research and  development  expenses for the  nine-month  period ended
September  30, 2003  decreased  29.68% to $107,437  compared to $152,784 for the
nine- month  period  ended  September  30,  2002.  The  decrease in research and
development for the quarter was the result of completed  research  regarding new
silage  and  nutritional  studies  of bagged  feed and their  effects  on animal
production.  The decrease for the nine-month  period was the result of the above
mentioned  factor,  offset by continued  development  and ongoing testing of the
newer design of the Company's larger-sized silage bagging machine.

     Interest  expense for the quarter ended September 30, 2003 decreased 33.13%
to $63,219  compared  to $94,542  for the  quarter  ended  September  30,  2002.
Interest  expense for the nine-month  period ended  September 30, 2003 decreased
30.65%  to  $174,673  compared  to  $251,870  for the  nine-month  period  ended
September 30, 2002. The decrease for the quarter and  nine-month  period 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  September  30, 2003  decreased
25.54% to $113,498  compared to $152,427  for the quarter  ended  September  30,
2002.  Miscellaneous  income for the nine-month  period ended September 30, 2003
increased  45.27% to $495,348  compared to $340,976  for the  nine-month  period
ended  September  30,  2002.  The














                                       19
<PAGE>
decrease  for the quarter was the result of a decrease in folding fee  royalties
received as a result of the sale of the folding  equipment  to the German  joint
venture  during the second quarter of 2003,  which  terminated the folding lease
agreement and future folding  royalties.  The increase for the nine-month period
was the  result of 1) a  special  one-time  folding  royalty  received  from the
Company's German joint venture upon the sale of folding  equipment to the German
joint venture  during the second  quarter of 2003, and 2) an increase in general
miscellaneous income from foregone dealer deposits.

     For the quarter ended  September 30, 2003,  the company  recorded a net tax
benefit of  $130,000  compared  to income tax expense of $11,675 for the quarter
ended  September 30, 2002. For the nine-month  period ended  September 30, 2003,
the  company  recorded a net tax  benefit  of  $226,000  compared  to income tax
expense of $147,210 for the  nine-month  period ended  September  30, 2002.  The
Company's  effective  tax rates for the  quarter  are lower  than the  statutory
corporate  income tax rates as a result of 1) the fact the Company's income from
its  German  joint  venture  is  not  taxable  in  the  United  States,  2)  the
extraterritorial  income  exclusion  provisions of the current United States tax
code, and 3) the recognition of research and development credits associated with
the  Company's  activities.  The  effective  tax rate for the nine months  ended
September  30, 2003 does not  significantly  differ  from the federal  statutory
rate.

     Net loss for the quarter ended  September 30, 2003 was $(316,555)  compared
to net income of $124,591 for the quarter ended September 30, 2002. Net loss for
the nine-month  period ended  September 30, 2003 was $(400,328)  compared to net
income of $415,173 for the nine-month  period ended  September 30, 2002. The net
loss for the  quarter  was the result of lower  sales and gross  margins,  lower
miscellaneous income, and increased administrative expenses, partially offset by
decreased selling, research and development, and interest expenses. The net loss
for the nine-month  period was the result of lower sales and gross margins,  and
increased  administrative  expenses,  which were  partially  offset by decreased
selling,  research and development,  and interest expenses,  coupled with higher
miscellaneous income and gain from the sale of assets.


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.  Although the Company's












                                       20
<PAGE>
Pre-Season  ordering  program  provides it with  flexibility in production,  the
Company must maintain  adequate  inventory levels for those customers,  both old
and new, who order or re-order  product  outside of this program  throughout the
year.

     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  51.40% at September 30, 2003 to $2,638,828
compared to $5,429,937 at September 30, 2002. The decrease 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 2.51% at September 30, 2003 to $6,634,189  compared to
$6,805,158  at September 30, 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  Pre-Season  ordering  program
introduced in September 2002.

     Other  current  assets  decreased  24.15% at September 30, 2003 to $298,273
compared to $393,263 at  September  30,  2002.  The decrease was the result of a
decrease in trade show deposits and other prepaid expenses.

     Intangible  assets at  September  30,  2003  increased  31.34%  to  $17,543
compared to $13,357 at September  30,  2002.  The increase was the result of new
patents developed on the Company's bagging machine technology,  offset by normal
amortization expense.

     BAW joint  venture  asset  decreased  to  $359,747  at  September  30, 2003
compared to $362,438 at September  30, 2002.  The decrease was the result of the
deferred gain under the equity method of accounting,  of the Company's  share of
gain from the sale of folding equipment sold to the German joint venture in June
of 2003.  During the third  quarter of 2003,  $43,227 of the  deferred  gain was
recognized.

     Other assets increased 2.30% at September 30, 2003 to $481,417  compared to
$470,612 at September  30,  2002.  The increase was the result of an increase in
the cash surrender  value of life insurance












                                       21
<PAGE>
policies maintained by the Company under which it is the beneficiary.

     The  Company  has a  revolving  operating  line of  credit  with a limit of
$3,000,000,  secured by accounts receivable,  inventory, fixed asset blanket and
general intangibles, and bears interest at the bank's prime rate plus 2 1/2%. As
of September 30, 2003, $2,942,818 had been drawn under the credit line. The line
of  credit  will  fluctuate  based  upon  production  needs  and the  timing  of
collection of receivable balances. Subsequent to September 30, 2003, the Company
received  a large  funding  from one of its  third-party  financing  sources  on
accounts receivable, which paid the Company's revolving operating line of credit
down below $2  million.  The line of credit is subject to certain  net worth and
earnings 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 renewal in May 2006.

     On December 18, 2000,  the Company  entered into an agreement with Dresdner
Bank to guarantee up to 511,292 Euro ($592,792 US) as security for an additional
cash credit facility of the Company's German joint venture.  In August 2003, the
guarantee  was reduced by Dresdner  Bank to 250,000 Euro  ($289,850).  There was
250,000 Euro ($289,850 US) guaranteed by the Company under this  additional cash
credit facility at September 30, 2003.

     Accounts  payable  decreased  27.07% at  September  30, 2003 to  $1,200,892
compared to $1,646,693 at September 30, 2002. The decrease was the result of the
Company continuing to level out its production process and related manufacturing
payables,  resulting from the Company's  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  28.51%  at
September 30, 2003 to  $1,311,735  compared to $1,020,697 at September 30, 2002.
The increase was the result of increased  dealer  incentives  resulting from the
Company's  Pre-Season  order  program,  which were  offset by lower  payroll and
benefit costs from sales staff reductions made late in 2002.

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

<TABLE>
<CAPTION>
                                                   Payments due by period
                     ------------------------------------------------------------------------------------
Contractual                               Less than                                        More than
Obligations                Total            1 year        1-3 years       3-5 years         5 years
                     ------------------------------------------------------------------------------------
<S>                          <C>               <C>             <C>             <C>              <C>
Long-term debt               $1,299,650        $190,989        $170,600        $148,848         $789,213











                                       22
<PAGE>
Operating leases               $263,915         $18,264         $42,917         $43,834         $158,900
                     ------------------------------------------------------------------------------------
Total                        $1,563,565        $209,253        $213,517        $192,682         $948,113
                     ------------------------------------------------------------------------------------
</TABLE>


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 2 1/2%.

ITEM 4. CONTROLS AND PROCEDURES.

     In  accordance  with the  Securities  Exchange Act of 1934 Rules 13a-15 and
15d-15, the Company's  management,  under the supervision of the Chief Executive
Officer  and  Chief   Financial   Officer,   conducted  an   evaluation  of  the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures as of the end of the period covered by this report. Based on that
evaluation,  the Chief Executive  Officer and Chief Financial  Officer concluded
that  the  design  and  operation  of  the  Company's  disclosure  controls  and
procedures  were effective.  There has been no change in the Company's  internal
controls over financial reporting that occurred during the Company's last fiscal
quarter that has  materially  affected,  or is  reasonably  likely to materially
affect, the Company's internal control over financial reporting.

                           PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.

     The Company is a defendant in an alleged patent infringement lawsuit, Versa
Corporation v. Ag-Bag  International  Ltd., filed October 30, 2000 in the United
States  District  Court for the  District of Oregon.  The claim  alleges  patent
infringement upon Versa's U.S. Patent Nos. 5,894,713;  5,345,744; 5,426,910; and
5,452,562  relating to a density control patent for an agricultural feed bagging
machine and composting method patents.  Plaintiff seeks monetary damages. In the
composting method patent, the U.S. District Court recently  interpreted  Versa's
patent  claims in a way that was  virtually  impossible  for Ag-Bag to infringe.
Plaintiff's  acknowledged the adversity of this ruling, asked the court to enter
judgment against Plaintiff,  and Plaintiff has appealed the court's













                                       23
<PAGE>
construction  of the  patent  claims.  This  matter is now  awaiting  the courts
decision on the Plaintiff's appeal.

     On March 19, 2003, the Company received another alleged patent infringement
lawsuit, Versa Corporation v. Ag-Bag International Ltd., filed March 11, 2003 in
the United States  District Court for the District of Oregon.  The claim alleges
patent   infringement  upon  Versa's  U.S.  Patent  No.RE38020  relating  to  an
adjustable  anchor wing for an  agricultural  bagging  machine.  Plaintiff seeks
royalty payments as monetary damages. Discovery on this matter is continuing and
the Company continues to vigorously defend itself against this claim.

















































                                       24
<PAGE>
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits:

    31.1   Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

    31.2   Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

    32.1   Section 1350 Certification of Chief Executive Officer

    32.2   Section 1350 Certification of Chief Financial Officer

(b) Reports on Form 8-K.

     No reports on Form 8-K were filed by the Company  during the quarter  ended
September 30, 2003.











































                                       25
<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: November 10, 2003                 By: /s/ MICHAEL R. WALLIS
                                            ---------------------------
                                        Michael R. Wallis
                                        Chief Financial Officer and
                                         Vice President of Finance

                                        (duly authorized and principal
                                         financial officer)






































                                       26
<PAGE>
                                  EXHIBIT INDEX


Exhibit
Number       Description of Exhibit
-------      ----------------------


 31.1        Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

 31.2        Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

 32.1        Section 1350 Certification of Chief Executive Officer

 32.2        Section 1350 Certification of Chief Financial Officer












































                                       27
<PAGE>
                                                                    Exhibit 31.1
                                  Certification

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 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
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  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 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-15(e) and 15d-15(e)) for the registrant and have:

     a)  designed  such  disclosure  controls  and  procedures,  or caused  such
         disclosure   controls  and   procedures   to  be  designed   under  our
         supervision,  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 report is being prepared;
     b)  evaluated the effectiveness of the registrant's disclosure controls and
         procedures  and  presented  in this  report our  conclusions  about the
         effectiveness of the disclosure controls and procedures,  as of the end
         of the period covered by this report based on such evaluation; and
     c)  disclosed  in this  report  any  change  in the  registrant's  internal
         control over financial  reporting that occurred during the registrant's
         most recent fiscal quarter (the  registrant's  fourth fiscal quarter in
         the case of an  annual  report)  that has  materially  affected,  or is
         reasonably  likely to  materially  affect,  the  registrant's  internal
         control over financial reporting; and

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

     a)  all significant  deficiencies and material  weaknesses in the design or
         operation of internal  controls  over  financial  reporting,  which are
         reasonably  likely to  adversely  affect  the  registrant's  ability to
         record, process, summarize and report financial information; and
     b)  any fraud,  whether or not material,  that involves management or other
         employees  who have a  significant  role in the  registrant's  internal
         control over financial reporting.


Date: November 10, 2003

/s/ MICHAEL J. SCHOVILLE
--------------------------
Chief Executive Officer
                                       28
<PAGE>
                                                                    Exhibit 31.2
                                  Certification

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 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
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  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 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-15(e) and 15d-15(e)) for the registrant and have:

     a)  designed  such  disclosure  controls  and  procedures,  or caused  such
         disclosure   controls  and   procedures   to  be  designed   under  our
         supervision,  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 report is being prepared;
     b)  evaluated the effectiveness of the registrant's disclosure controls and
         procedures  and  presented  in this  report our  conclusions  about the
         effectiveness of the disclosure controls and procedures,  as of the end
         of the period covered by this report based on such evaluation; and
     c)  disclosed  in this  report  any  change  in the  registrant's  internal
         control over financial  reporting that occurred during the registrant's
         most recent fiscal quarter (the  registrant's  fourth fiscal quarter in
         the case of an  annual  report)  that has  materially  affected,  or is
         reasonably  likely to  materially  affect,  the  registrant's  internal
         control over financial reporting; and

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

     a)  all significant  deficiencies and material  weaknesses in the design or
         operation of internal  controls  over  financial  reporting,  which are
         reasonably  likely to  adversely  affect  the  registrant's  ability to
         record, process, summarize and report financial information; and
     b)  any fraud,  whether or not material,  that involves management or other
         employees  who have a  significant  role in the  registrant's  internal
         control over financial reporting.

Date: November 10, 2003

/s/ MICHAEL R. WALLIS
----------------------------------
Chief Financial Officer, Treasurer
and Vice President of Finance
                                       29
<PAGE>
                                                                    EXHIBIT 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection  with the Quarterly  Report of Ag-Bag  International  Limited (the
"Company")  on Form 10-Q for the period ended  September  30, 2003 as filed with
the Securities and Exchange  Commission on the date hereof (the  "Report"),  the
undersigned  hereby  certifies  pursuant to 18 U.S.C.  Section  1350, as adopted
pursuant to Section 906 of the  Sarbanes-Oxley  Act of 2002, that to the best of
my knowledge:

         (1)  The Report fully complies with the  requirements  of section 13(a)
              or 15(d) of the Securities Exchange Act of 1934; and

         (2)  The information  contained in the Report fairly  presents,  in all
              material  respects,   the  financial   condition  and  results  of
              operations of the Company.




November 10, 2003               /s/ MICHAEL J. SCHOVILLE     Chief Executive
                                ------------------------     Officer
                                (Michael J. Schoville)






























                                       30
<PAGE>
                                                                    EXHIBIT 32.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection  with the Quarterly  Report of Ag-Bag  International  Limited (the
"Company")  on Form 10-Q for the period ended  September  30, 2003 as filed with
the Securities and Exchange  Commission on the date hereof (the  "Report"),  the
undersigned  hereby  certifies  pursuant to 18 U.S.C.  Section  1350, as adopted
pursuant to Section 906 of the  Sarbanes-Oxley  Act of 2002, that to the best of
my knowledge:

         (1)  The Report fully complies with the  requirements  of section 13(a)
              or 15(d) of the Securities Exchange Act of 1934; and

         (2)  The information  contained in the Report fairly  presents,  in all
              material  respects,   the  financial   condition  and  results  of
              operations of the Company.



November 10, 2003          /s/ MICHAEL R. WALLIS     Chief Financial Officer,
                           ---------------------     Vice President of Finance,
                           (Michael R. Wallis)       and Treasurer































                                       31



