SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q/A
                                 Amendment No. 2

           |X| 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 No. 0-9989

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

                              STAKE TECHNOLOGY LTD.
             (Exact name of registrant as specified in its charter)

                                     CANADA
                         (Jurisdiction of Incorporation)

                                 Not Applicable
                      (I.R.S. Employer Identification No.)

                                 2838 Highway 7
                         Norval, Ontario L0P 1K0, Canada
                    (Address of Principle Executive Offices)

                                 (905) 455-1990
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:

               Securities registered pursuant to 12(g) of the Act:

                           Common Shares, no Par value
                                (Title of Class)

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 Rule 12b-2 of the Exchange Act)

                                 Yes |X| No |_|

At April 30, 2003 registrant had 42,616,999 common shares outstanding, the only
class of registrant's common stock outstanding. There were no other classes of
stock outstanding and the aggregate market value of voting stock held by
non-affiliates at such date was $147,661,410. The Company's common shares are
traded on the Nasdaq Smallcap Market tier of the Nasdaq Stock Market under the
symbol STKL and The Toronto Stock Exchange under the symbol SOY.

There are 35 pages in the March 31, 2003 10-Q and the index follows the cover
page.


                                       1


STAKE TECHNOLOGY LTD.

                                   FORM 10-QA
                                 March 31, 2003

EXPLANATORY NOTE

This Amendment No. 2 to Form 10-Q filed on Form 10Q/A for the year quarter ended
March 31, 2003 is being filed to clarify and expand various disclosures in "Item
1. Consolidated Financial Statements" and "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations". All information
contained herein is as of April 30, 2003, and does not reflect any events or
changes in information that may have occurred subsequent to April 30, 2003.

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

            Consolidated Balance Sheets as at March 31, 2003 and December 31,
            2002.

            Consolidated Statements of Retained Earnings for the three months
            ended March 31, 2003 and 2002, and the year ended December 31, 2002.

            Consolidated Statements of Earnings for the three months ended March
            31, 2003 and 2002.

            Consolidated Statements of Cash Flow for the three months ended
            March 31, 2003 and 2002.

            Condensed Notes to Consolidated Financial Statements.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Item 3. Quantitative and Qualitative Disclosure about Market Risk

Item 4. Controls and Procedures

PART II - OTHER INFORMATION

            All financial information is expressed in United States Dollars

            The closing rate of exchange on April 30, 2003 was CDN $1 = U.S.
            $0.6976


                                       2


PART I - FINANCIAL INFORMATION

Item 1 -

                        Consolidated Financial Statements
                    (Expressed in thousands of U.S. dollars)

                              Stake Technology Ltd.

                    For the Three Months Ended March 31, 2003


                                       3


Stake Technology Ltd.
Consolidated Balance Sheets
As at March 31, 2003 and December 31, 2002
Unaudited
(Expressed in thousands of U.S. dollars)



                                                                  March 31,   December 31,
                                                                       2003           2002
                                                                          $              $
------------------------------------------------------------------------------------------
                                                                             
Assets

Current assets
Cash and cash equivalents                                             1,782          7,012
Short-term investments                                                   --          2,038
Accounts receivable - trade                                          17,698         18,144
Note receivable                                                         697          1,034
Inventories (note 4)                                                 23,642         22,989
Prepaid expenses and other current assets                             1,736            958
Future income taxes                                                      --            115
                                                                 -------------------------

                                                                     45,555         52,290

Property, plant and equipment                                        37,741         37,033
Goodwill and intangibles, net                                        15,245         14,992
Future income taxes                                                   9,956          9,892
Other assets (note 5)                                                   988          1,080
                                                                 -------------------------

                                                                    109,485        115,287
                                                                 =========================
Liabilities

Current liabilities
Bank indebtedness                                                     9,191          3,963
Accounts payable and accrued liabilities                             17,073         19,664
Customer deposits                                                     1,334            421
Current portion of long-term debt (note 6)                            2,626         11,650
Current portion of long-term payables (note7)                         1,190          3,458
                                                                 -------------------------

                                                                     31,414         39,156

Long-term debt  (note 6)                                             24,125         25,099
Long-term payables (note 7)                                           1,447          1,505
                                                                 -------------------------

                                                                     56,986         65,760
                                                                 -------------------------
Shareholders' Equity

Capital stock (note 8)                                               39,150         38,020
Authorized
   Unlimited common shares without par value
Issued
   42,547,199 (December 31, 2002 - 41,984,118) common shares
Contributed surplus                                                   2,914          2,914
Retained earnings                                                     8,534          7,470
Currency translation adjustment                                       1,901          1,123
                                                                 -------------------------

                                                                     52,499         49,527
                                                                 -------------------------

                                                                    109,485        115,287
                                                                 =========================


Commitments and contingencies (note 11)

          (See accompanying notes to consolidated financial statements)


                                       4


Stake Technology Ltd.
Consolidated Statements of Retained Earnings
For the three months ended March 31, 2003 and 2002, and the year ended December
31, 2002 Unaudited
(Expressed in thousands of U.S. dollars)



                                                                                Three months ended             Year ended
                                                         ------------------------------------------    ------------------
                                                                   March 31,             March 31,           December 31,
                                                                        2003                  2002                   2002
                                                                           $                     $                      $
-------------------------------------------------------------------------------------------------------------------------
                                                                                                           
Retained Earnings - Beginning of the period                            7,470                 3,709                  3,704

Net earnings for the period                                            1,064                    23                  3,766
                                                         ----------------------------------------------------------------

Retained Earnings - End of the period                                  8,534                 3,732                  7,470
                                                         ================================================================


          (See accompanying notes to consolidated financial statements)


                                        5


Stake Technology Ltd.
Consolidated Statements of Earnings
For the three months ended March 31, 2003 and 2002
Unaudited
(Expressed in thousands of U.S. dollars, except per share amounts)



                                                                                   March 31,             March 31,
                                                                                        2003                   2002
                                                                                           $                      $
-------------------------------------------------------------------------------------------------------------------
                                                                                                       
Revenues                                                                              41,411                 23,283

Cost of good sold                                                                     34,293                 19,979
                                                                          -----------------------------------------

Gross profit                                                                           7,118                  3,304

Selling, general and administrative expenses                                           5,485                  2,983
                                                                          -----------------------------------------

Earnings before the following                                                          1,633                    321

Interest expense                                                                        (491)                  (422)
Interest and other income                                                                 37                    111
Foreign exchange gain (loss)                                                             341                     (4)
                                                                          -----------------------------------------

                                                                                        (113)                  (315)
                                                                          -----------------------------------------

Earnings before income taxes                                                           1,520                      6

Provision for (recovery of) income taxes                                                 456                    (17)
                                                                          -----------------------------------------

Net earnings for the period                                                            1,064                     23
                                                                          =========================================

Net earnings per share for the period

   - Basic                                                                              0.03                   0.00
                                                                          =========================================

   - Diluted                                                                            0.02                   0.00
                                                                          =========================================


          (See accompanying notes to consolidated financial statements)


                                       6


Stake Technology Ltd.
Consolidated Statements of Cash Flow
For the three months ended March 31, 2003 and 2002
Unaudited
(Expressed in thousands of U.S. dollars)



                                                                                  March 31,           March 31,
                                                                                       2003                2002
                                                                                          $                   $
---------------------------------------------------------------------------------------------------------------
                                                                                                  
Cash provided by (used in)

Operating activities
Net earnings for the period                                                           1,064                  23
Items not affecting cash
      Amortization                                                                    1,178                 934
      Future income taxes                                                                51                 (21)
      Other                                                                              45                 (24)
                                                                           ------------------------------------
                                                                                      2,338                 912

Changes in non-cash working capital (note 10)                                        (2,729)             (2,890)
                                                                           ------------------------------------

                                                                                       (391)             (1,978)
                                                                           ------------------------------------
Investing activities
Decrease in short term investments                                                    2,038               6,307
Acquisition of companies, net of cash acquired                                       (1,871)               (214)
Acquisition of property, plant and equipment                                         (1,229)             (1,167)
Proceeds from note receivable                                                           358                 358
Other                                                                                  (147)               (103)
                                                                           ------------------------------------

                                                                                       (851)              5,181
                                                                           ------------------------------------
Financing activities
Increase in bank indebtedness                                                         5,228               2,695
Borrowings under term debt facilities                                                 7,800              15,000
Repayment of term debt and tender facilities                                        (17,819)            (15,470)
Repayment of deferred purchase consideration                                           (227)               (147)
Proceeds from the issuance of common shares, net of issuance costs                    1,130                  98
Financing costs                                                                         (70)               (486)
Decrease in restricted cash                                                               -                 267
Purchase and redemption of Preference Shares of subsidiary companies                   (130)               (105)
                                                                           ------------------------------------

                                                                                     (4,088)              1,852

Foreign exchange gain (loss) on cash held in a foreign currency                         100                 (65)
                                                                           ------------------------------------

(Decrease) Increase in cash and cash equivalents during the period                   (5,230)              4,990

Cash and cash equivalents - Beginning of the period                                   7,012               3,364
                                                                           ------------------------------------

Cash and cash equivalents - End of the period                                         1,782               8,354
                                                                           ====================================


See note 10 for supplemental cash flow information

          (See accompanying notes to consolidated financial statements)


                                       7


Stake Technology Ltd.
Condensed Notes to Consolidated Financial Statements
For the three months ended March 31, 2003
Unaudited
(Expressed in thousands of U.S. dollars)

1.    Interim financial statements

      The interim consolidated financial statements of Stake Technology Ltd.
      (the Company) have been prepared in accordance with the instructions to
      Form 10-Q and Rule 10-01 of Regulation S-X and in accordance with
      accounting principles generally accepted in Canada which conform, in all
      material respects (except as indicated in Note 12, with accounting
      principles generally accepted in the U.S.). Accordingly, these financial
      statements do not include all of the disclosures required by generally
      accepted accounting principles for annual financial statements. In the
      opinion of management, all adjustments considered necessary for fair
      presentation have been included and all such adjustments are of a normal,
      recurring nature. Operating results for the three months ended March 31,
      2003 are not necessarily indicative of the results that may be expected
      for the full year ending December 31, 2003. For further information, see
      the Company's consolidated financial statements, and notes thereto,
      included in the Annual Report on Form 10K for the year ended December 31,
      2002.

2.    Description of business and significant accounting policies

      The Company was incorporated under the laws of Canada on November 13, 1973
      and operates in three principal businesses. The Food Group processes,
      packages, markets and distributes a wide range of natural and organic food
      products and ingredients via its vertically integrated operations with a
      focus on soy, oat and corn based products. The Environmental Industrial
      Group processes, distributes and recycles industrial minerals. The Steam
      Explosion Technology Group markets proprietary steam explosion technology
      systems for the pulp and food processing industries. The Company's assets,
      operations and employees at March 31, 2003 are located in the United
      States and Canada.

      The Company's significant accounting policies are outlined below. These
      consolidated financial statements are prepared in accordance with
      accounting principles generally accepted in Canada. Differences arising
      from the application of accounting principles generally accepted in the
      United States are described in note 12.

      Basis of presentation

      The consolidated financial statements include the accounts of the Company
      and its subsidiaries, all of which are wholly owned. All significant
      intercompany accounts and transactions have been eliminated on
      consolidation.

      Cash and cash equivalents

      Cash and cash equivalents consist of unrestricted cash and short-term
      deposits with a maturity at acquisition of less than 90 days.

      Short-term investments

      Short-term investments consist of portfolio investments in other companies
      and deposits with a maturity at acquisition of greater than 90 days, and
      are valued at market.

      Inventories

      Raw materials and finished goods inventories are valued at the lower of
      cost and estimated net realizable value. Cost is determined on a first-in,
      first-out basis.

      Inventories of grain are valued at market. Changes in market value are
      included in cost of goods sold. The Food Group generally follows a policy
      of hedging its grain transactions to protect gains and minimize losses due
      to market fluctuations. Futures and purchase and sale contracts are
      adjusted to market price and gains and losses from such transactions are
      included in cost of goods sold. The Company has a risk of loss from hedge
      activity if the grower does not deliver the grain as scheduled.


                                       8


Stake Technology Ltd.
Condensed Notes to Consolidated Financial Statements
For the three months ended March 31, 2003
Unaudited
(Expressed in thousands of U.S. dollars)

      Property, plant and equipment

      Property, plant and equipment are stated at cost, less accumulated
      amortization.

      Amortization is provided on property, plant and equipment on the
      diminishing balance basis or, in the case of certain U.S.-based
      subsidiaries, straight-line basis at rates based on the estimated useful
      lives of the assets as follows: 10% to 33% for office furniture and
      equipment, machinery and equipment and vehicles and 4 to 8% for buildings.
      Amortization is calculated from the time the asset is put into use.

      Goodwill and intangibles

      The Company adopted the new CICA Handbook Section 3062 "Goodwill and
      Intangible Assets" on January 1, 2002. This new standard eliminated the
      need for amortization of goodwill and indefinite life intangible assets.
      Goodwill represents the excess of the purchase price over the assigned
      value of net assets acquired. Under the transitional provisions of the
      standard, a goodwill impairment test was carried out and no impairment was
      identified on January 1, 2002.

      In accordance with the new standard, the Company has assessed the carrying
      value of goodwill for possible impairment, and has determined that no such
      impairment exists as at December 31, 2002. Certain of the Company's
      trademarks are intangible assets with an indefinite life. The Company has
      further determined that there is no impairment in the value of these
      indefinite life trademarks. As required by the standard, the new rules
      related to goodwill and other intangible assets have been applied
      prospectively.

      Other assets

      i)    Pre-operating costs

            Net costs incurred in the pre-operating stage of a start-up business
            are deferred until the business reaches commercial operation or the
            passage of a certain period of time as predetermined by management.

            During 2001, the Company initiated the start-up of an organic dairy
            business based in Canada. Certain pre-operating costs totaling $308
            were deferred up to June 30, 2002 (2001 - $32). Amortization of
            these costs on a straight-line basis commenced in July 2002 and will
            result in these costs being fully amortized by December 31, 2003.

            During 2000, the Company acquired Nordic Aseptic, Inc., which was
            considered a start-up business from the date of acquisition to
            December 31, 2000. Certain operating costs, net of income earned
            during the pre-operating period totaling $482 were deferred.
            Amortization of these costs on a straight-line basis commenced in
            January, 2001 and will result in these costs being fully amortized
            by December 31, 2003.

      ii)   Deferred financing costs

            Costs incurred in connection with obtaining long-term financing are
            deferred and amortized over the term of the related financing
            agreement.


                                       9


Stake Technology Ltd.
Condensed Notes to Consolidated Financial Statements
For the three months ended March 31, 2003
Unaudited
(Expressed in thousands of U.S. dollars)

      iii)  Investments

            The Company has a 32% (2002 - 32%) investment in Easton Minerals
            Limited ("Easton). This investment is considered impaired and the
            carrying value at March 31, 2003 is nil (2002 - $nil). The
            investment was accounted for using the equity method of accounting.
            The Company does not have any guaranteed obligations with respect to
            Easton or any commitment to provide further financial support, thus
            it is not anticipated that further losses will be recorded on this
            investment.

            All other subsidiaries are 100% owned at March 31, 2003. On November
            1, 2002, the Company acquired the remaining 49% minority interest in
            International Materials & Supplies, Inc. Investments in these
            subsidiaries are recorded using the consolidation method, whereby
            revenues and expenses are consolidated with the results of the
            Company.

      Revenue recognition

      i)    Food Group

            Grain revenues are recorded at the time of shipment. Revenues from
            custom processing services are recorded upon provision of services
            and upon completion of quality testing. All other Food Group
            revenues are recognized upon the sale and shipment of a product or
            the providing of a service to a customer. Revenues are generally
            recorded at the time of shipment unless there is a specific
            agreement with the customer for FOB destination. Customer rebates
            are recorded at the earlier of when the related revenue is
            recognized and when the rebate is determinable or when a reasonable
            estimate is available.

      ii)   Environmental Industrial Group

            Revenues from the sale of industrial minerals are recognized upon
            the sale and shipment of the related minerals. Revenues from
            recycling activities are recognized upon the sale and shipment or
            the disposal of non-hazardous material received.

      iii)  Steam Explosion Technology Group

            The percentage of completion method is used to account for
            significant contracts in progress when related costs can be
            reasonably estimated. The Company uses costs incurred to date as a
            percentage of total expected costs to measure the extent of progress
            towards completion.

            Revenues from consulting and contract research are recognized when
            the service is completed.

            License fees related to the right to sell the Company's technologies
            are recorded as revenues over the term of the license, when
            collectibility is reasonably assured.


                                       10


Stake Technology Ltd.
Condensed Notes to Consolidated Financial Statements
For the three months ended March 31, 2003
Unaudited
(Expressed in thousands of U.S. dollars)

      Foreign currency translation

      The Company's Canadian operations are self-sustaining operations, with the
      exception of the Corporate office, which is considered to be an integrated
      operation. The assets and liabilities of the self-sustaining operations
      are translated at exchange rates in effect at the balance sheet date.
      Monetary assets and liabilities of the Corporate office are translated at
      exchange rates in effect at the balance sheet date. All other assets and
      liabilities of the Corporate office are translated at historical exchange
      rates. Revenues and expenses are translated at average exchange rates
      prevailing during the period. Unrealized gains or losses resulting from
      translating self-sustaining operations are accumulated and reported as
      currency translation adjustment in shareholders' equity. Unrealized gains
      or losses resulting from translating the Corporate office accounts are
      included in the determination of earnings. The functional currency of all
      operations located in the United States of America is the United States
      dollar. The functional currency of all operations located in Canada is the
      Canadian dollar.

      Customer deposits

      Customer deposits principally include prepayments by the Food Group's
      customers for merchandise inventory to be purchased during the spring
      planting season.

      Income taxes

      The Company follows the asset and liability method of accounting for
      income taxes whereby future income tax assets are recognized for
      deductible temporary differences and operating loss carry-forwards, and
      future income tax liabilities are recognized for taxable temporary
      differences. Temporary differences are the differences between the amounts
      of assets and liabilities recorded for income tax and financial reporting
      purposes. Future income tax assets are recognized only to the extent that
      management determines that it is more likely than not that the future
      income tax assets will be realized. Future income tax assets and
      liabilities are adjusted for the effects of changes in tax laws and rates
      on the date of enactment or substantive enactment. The income tax expense
      or benefit is the income tax payable or refundable for the period plus or
      minus the change in future income tax assets and liabilities during the
      period.

      Employee stock compensation

      Employee/director stock options granted by the Company contain exercise
      prices which are equivalent to the closing market price of the shares on
      the day prior to the grant date. Any consideration paid by employees on
      exercise of stock options or purchase of stock is credited to capital
      stock. No compensation expense is recorded upon issuance of stock options
      to employees. Stock options granted have a maximum life of six years and
      usually vest over a four year period.

      Derivative instruments

      The Food Group enters into exchange-traded commodity futures and options
      contracts to hedge its exposure to price fluctuations on grain
      transactions to the extent considered practicable for minimizing risk from
      market price fluctuations. Futures contracts used for hedging purposes are
      purchased and sold through regulated commodity exchanges. Inventories,
      however, may not be completely hedged, due in part to the Company's
      assessment of its exposure from expected price fluctuations. Exchange
      purchase and sales contracts may expose the Company to risk in the event
      that a counter party to a transaction is unable to fulfill its contractual
      obligation. The Company manages its risk by entering into purchase
      contracts with pre-approved producers.

      The Company has a risk of loss from hedge activity if a grower does not
      deliver the grain as scheduled. Sales contracts are entered into with
      organizations of acceptable creditworthiness, as internally evaluated. All
      futures transactions are marked to market. Gains and losses on futures
      transactions related to grain inventories are included in cost of goods
      sold.


                                       11


Stake Technology Ltd.
Condensed Notes to Consolidated Financial Statements
For the three months ended March 31, 2003
Unaudited
(Expressed in thousands of U.S. dollars)

      Earnings per share

      Basic earnings per share are computed by dividing the income available for
      common shareholders by the weighted average number of common shares
      outstanding during the period. Diluted earnings per share is computed
      using the treasury stock method whereby the weighted average number of
      common shares used in the basic earnings per share calculation is
      increased to include the number of additional common shares that would
      have been outstanding if the dilutive potential common shares had been
      issued.

      Use of estimates

      The preparation of these consolidated financial statements in conformity
      with generally accepted accounting principles requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent liabilities at the dates of the
      consolidated financial statements and the reported amounts of revenues and
      expenses during the reporting periods. Actual results could differ from
      those estimates.

3.    Business acquisitions

      On April 11, 2003 Stake announced that it has reached an agreement to
      acquire 100% of the outstanding shares of Kettle Valley Dried Fruit Ltd.
      (Kettle Valley) and its related companies, subject to completion of
      required documentation and definitive agreements, for total consideration
      of $2,668, consisting of cash, common shares and notes payable.

      Kettle Valley produces natural and organic fruit bars and fruit leathers
      with an apple base and markets these products under the Kettle Valley Real
      Fruit Snack and Frunola brands. Kettle Valley operates two production
      facilities in Summerland, British Columbia, the heart of the B.C. apple
      growing district, and is currently constructing a third plant in the State
      of Washington, the center of the apple growing district of the Western
      U.S. In addition, Kettle Valley produces a number of private label
      products for customers in the U.S., Canada and the United Kingdom. Kettle
      Valley's products are sold through agents and distributors to the health
      food and mass markets as well as to various school districts who are
      leading the trend in improving the dietary content of student lunches.


                                       12


Stake Technology Ltd.
Condensed Notes to Consolidated Financial Statements
For the three months ended March 31, 2003
Unaudited
(Expressed in thousands of U.S. dollars)

4.    Inventories



                                                                                March 31,          December 31,
                                                                                     2003                  2002
                                                                                        $                     $
                                                                                                    
      Raw materials                                                                 7,928                  7,859
      Finished goods                                                               12,225                 11,750
      Grain                                                                         3,489                  3,380
                                                                         ---------------------------------------

                                                                                   23,642                 22,989
                                                                         =======================================


      Grain inventories consist of the following:



                                                                                March 31,           December 31,
                                                                                     2003                   2002
                                                                                        $                      $
                                                                                                     
           Company owned grain                                                      3,550                  3,338
           Unrealized gain (loss) on
                Sales and purchase contracts                                         (150)                   (79)
                Futures contracts                                                      89                    121
                                                                         ---------------------------------------

                                                                                    3,489                  3,380
                                                                         =======================================


5.    Other assets



                                                                                March 31,           December 31,
                                                                                     2003                   2002
                                                                                        $                      $
                                                                                                     
      Pre-operating costs, net of accumulated amortization of $520
           (2002 - $432)                                                              268                    358
      Deferred financing costs, net of accumulated amortization of $272
           (2002 - $201)                                                              618                    619
      Other                                                                           102                    103
                                                                         ---------------------------------------

                                                                                      988                  1,080
                                                                         =======================================


6.    Long-term debt and banking facilities



                                                                                March 31,           December 31,
                                                                                     2003                   2002
                                                                                        $                      $
                                                                                                   
      Term loan (a)                                                                21,275                 13,900
      Tender facility (b)                                                              --                 15,186
      Convertible debenture                                                         4,733                  4,697
      Other long-term debt (c)                                                        743                  2,966
                                                                         ---------------------------------------
                                                                                   26,751                 36,749
      Less: current portion                                                        (2,626)               (11,650)
                                                                         ---------------------------------------

                                                                                   24,125                 25,099
                                                                         =======================================



                                       13


Stake Technology Ltd.
Condensed Notes to Consolidated Financial Statements
For the three months ended March 31, 2003
Unaudited
(Expressed in thousands of U.S. dollars)

6.    Long-term debt and banking facilities, continued

      (a)   In March 2003, the Company amended its financing arrangement with
            its current lenders and entered into a syndication agreement. As
            part of the amendment, the term loan increased by $7,800. On March
            31, 2003 the Company made a regularly scheduled repayment on the
            term loan of $425.

      (b)   During the first quarter of 2003, the Company repaid the tender
            facility with proceeds from the amended term loan of $7,800, $3,500
            from an increase in a line of credit facility (noted in (d) below)
            and the utilization of $3,886 in cash.

      (c)   During the first quarter the Company repaid certain other long-term
            debt of $2,097, in addition to making regularly scheduled repayments
            of $111.

      (d)   As part of the amended financing arrangement noted above in (a), the
            Company also increased a line of credit facility by $4,000.

7.    Long-term payables



                                                                                March 31,         December 31,
                                                                                     2003                 2002
                                                                                        $                    $
                                                                                                  
      Product rebate payable                                                        1,361                1,330
      Deferred purchase consideration                                                 440                  667
      Preference shares of subsidiary companies                                       161                  291
      Payable to former shareholders of acquired companies  (a)                       675                2,675
                                                                           -----------------------------------
                                                                                    2,637                4,963
      Less: Current portion                                                        (1,190)              (3,458)
                                                                           -----------------------------------

                                                                                    1,447                1,505
                                                                           ===================================


      (a)   During the first quarter $1,871 was paid to the former shareholders
            of Opta in respect of untendered shares converted to a right to
            receive $2.50 per share in cash as a result of the amalgamation of
            Stake Acquisition Corp. with Opta.


                                       14


Stake Technology Ltd.
Condensed Notes to Consolidated Financial Statements
For the three months ended March 31, 2003
Unaudited
(Expressed in thousands of U.S. dollars, except per share amounts)

8.    Capital stock



                                                                                       March 31,     December 31,
                                                                                            2003             2002
                                                                                               $                $
                                                                                                     
      (a)   Issued and fully paid -
            42,547,199 common shares (December 31, 2002 - 41,984,118)                     36,449           35,230
            4,101,244 warrants (December 31, 2002 - 4,224,600)                             2,701            2,790
                                                                                ---------------------------------

                                                                                          39,150           38,020
                                                                                =================================


      (b)   During the quarter ended March 31, 2003, employees and directors
            exercised 223,725 (March 31, 2002 - 48,100) common share options and
            an equal number of common shares were issued for net proceeds of
            $405 (March 31, 2002 - $98). Subsequent to March 31, 2003, employees
            exercised 19,800 common share options and an equal number of common
            shares were issued for net proceeds of $26.

      (c)   During the quarter ended March 31, 2003, 123,356 warrants were
            exercised and an equal number of common shares were issued for net
            proceeds of $207. In addition, 216,000 compensation warrants were
            exercised during the quarter for net proceeds of $518. Subsequent to
            March 31, 2003, 50,000 warrants were exercised and an equal number
            of common shares were issued for net proceeds of $88.

      (d)   During the quarter 398,750 options were granted to employees at a
            price range of $3.06 to $3.72.

      (e)   As at March 31, 2003 there were options vested to employees and
            directors to acquire 1,491,930 common shares at exercise prices of
            $1.06 to $3.72. In additional, at March 31, 2003, options to acquire
            an additional 881,480 common shares at $1.06 to $3.72 have been
            granted to employees and directors but have not yet vested.

      (f)   Employee stock options granted by the Company in 2003 and 2002 were
            granted at prices which approximated the value of stock on the grant
            date. These options vest at various dates ranging from the date of
            the grants to March 20, 2007 and expire two to six years subsequent
            to the grant date.

            The fair value of the options granted during the first quarter of
            2003 was estimated using the Black-Scholes option-pricing model with
            the assumptions of a dividend yield of 0% (2002 - 0%), an expected
            volatility of 60% (2002 - 60%), a risk-free interest rate of 3%
            (2002 - 3%), and an expected life of one to six years.


                                       15


Stake Technology Ltd.
Condensed Notes to Consolidated Financial Statements
For the three months ended March 31, 2003
Unaudited
(expressed in thousands of U.S. dollars)

8.    Capital stock, continued

      Pro-forma net earnings (loss) reflecting stock compensation for the first
      quarter in 2003 and 2002 are as follows:



                                                                                                   Three months ended
                                                                        ---------------------------------------------
                                                                                     March 31,              March 31,
                                                                                          2003                   2002
                                                                                                         
          Number of options granted                                                    398,750                 33,900
                                                                        =============================================

                                                                                             $                      $

          Total fair value                                                                 791                    131
                                                                        =============================================

          Net earnings for the period as reported                                        1,064                     23

          Stock compensation expense:
              Options vested in current year from current year grants                       40                      7
              Options vested in current year from prior years grants                        60                     29
                                                                        ---------------------------------------------
                                                                                           100                     36
                                                                        ---------------------------------------------

          Pro-forma net earnings (loss) for the period                                     964                    (13)
                                                                        =============================================

          Pro-forma net earnings (loss) per common share
             - Basic                                                                      0.02                  (0.00)
                                                                        =============================================
             - Diluted                                                                    0.02                  (0.00)
                                                                        =============================================


9.    Earnings per share

      The calculation of basic earnings per share is based on the weighted
      average number of shares outstanding. Diluted earnings per share reflect
      the dilutive effect of the exercise of warrants and options. The number of
      shares for the diluted earnings per share was calculated as follows:



                                                                                     March 31,              March 31,
                                                                                          2003                   2002
                                                                                                     
        Weighted average number of shares used in
             basic earnings per share                                               42,290,847             41,110,488
        Dilutive potential of the following
             Employee/director stock options                                           915,514                602,821
             Warrants                                                                1,343,550                247,359
                                                                        ---------------------------------------------
        Weighted average number of shares used in
             diluted earnings per share                                             44,549,911             41,960,668
                                                                        =============================================


      Warrants to purchase nil common shares (2002 - $1,250,000) and options to
      purchase 388,750 common shares (2002 - nil) and the convertible debenture,
      convertible into 1,666,667 common shares (2002 - nil) have been excluded
      from the calculations of diluted earnings per share due to their
      anti-dilutive effect.


                                       16


Stake Technology Ltd.
Condensed Notes to Consolidated Financial Statements
For the three months ended March 31, 2003
Unaudited
(Expressed in thousands of U.S. dollars)

10.   Supplemental cash flow information



                                                                                            Three months ended
                                                                           -----------------------------------
                                                                                  March 31,          March 31,
                                                                                       2003               2002
                                                                                          $                  $
                                                                                                  
        Changes in non-cash working capital, net of businesses acquired:
                Accounts receivable - trade                                             346             (1,036)
                Inventories                                                            (725)            (2,041)
                Prepaid expenses and other current assets                              (785)               461
                Accounts payable and accrued liabilities                             (2,478)              (599)
                Customer deposits                                                       913                325
                                                                           -----------------------------------

                                                                                     (2,729)            (2,890)
                                                                           ===================================
       Cash paid for:                                                                   304                424
                Interest
                                                                           ===================================
                Income taxes                                                            418                 65
                                                                           ===================================


11.   Commitments and contingencies

      (a)   Various claims or potential claims arising in the normal course of
            business are pending against the Company. It is the opinion of
            management that these claims or potential claims are without merit
            and the amount of potential liability, if any, to the Company is not
            determinable. Management believes the final determination of these
            claims or potential claims will not materially affect the financial
            position or results of the Company. Legal counsel has concluded the
            outcome of these claims or potential claims is not determinable.

      (b)   The Company believes, with respect to both its operations and real
            property that it is in material compliance with current
            environmental laws. Based on known existing conditions and the
            Company's experience in complying with emerging environmental
            issues, the Company is of the view that future costs relating to
            environmental compliance will not have a material adverse effect on
            its financial position, but there can be no assurance that
            unforeseen changes in the laws or enforcement policies of relevant
            governmental bodies, the discovery of changed conditions on the
            Company's real property or in its operations, or changes in use of
            such properties and any related site restoration requirements, will
            not result in the incurrence of significant costs. No provision has
            been made in these consolidated financial statements for these
            future costs since such costs, if any, are not determinable at this
            time.

      (c)   In the normal course of business, the Food Group holds grain for the
            benefit of others. The Company is liable for any deficiencies of
            grade or shortage of quantity that may arise in connection with such
            grain.


                                       17


Stake Technology Ltd.
Condensed Notes to Consolidated Financial Statements
For the three months ended March 31, 2003
Unaudited
(Expressed in thousands of U.S. dollars)

      (d)   Letters of credit:

            i)    An irrevocable letter of credit for $510 has been placed with
                  the Ontario Ministry of Environment and Energy as a security
                  deposit for the Certificate of Approval granted to the Company
                  for certain recycling activities. This letter of credit must
                  remain in place indefinitely as a condition of the Certificate
                  of Approval.

            ii)   An irrevocable letter of credit for $195 has been placed with
                  the Commonwealth of Virginia Department of Environmental
                  Qualities as a security deposit for the Certificate of
                  Approval granted to the Company for certain recycling
                  activities. This letter of credit must remain in place
                  indefinitely as a condition of the Certificate of Approval.

            iii)  Additional letters of credit totalling $28 have been placed
                  with third parties as security on transactions occurring in
                  the ordinary course of operations.

      (e)   Commitments under operating leases, principally for distribution
            centres, warehouse and equipment, are as follows:

                                                                    $

               2003                                             1,254
               2004                                             1,595
               2005                                             1,514
               2006                                             1,474
               2007                                             1,339
               2008 and thereafter                              1,430
                                                       --------------

                                                                8,606
                                                       ==============


                                       18


Stake Technology Ltd.
Condensed Notes to Consolidated Financial Statements
For the three months ended March 31, 2003
Unaudited
(Expressed in thousands of U.S. dollars)

12.   Segmented information

      Industry segments

      The Company operates in three segments: a) the Food Group, processes,
      packages and distributes a wide range of natural and organic food products
      via its vertically integrated operations with a focus on soy, natural and
      organic food products; (b) the Environmental Industrial Group, processes,
      distributes, and recycles industrial minerals; and (c) the Steam Explosion
      Technology Group, markets proprietary steam explosion technology systems
      for the pulp and food processing industries. Management has identified its
      segments based on the nature of the products and services being sold and
      its organizational structure in support of these segments. Operating
      segments have been aggregated within the Food Group segment. The Company's
      assets, operations and employees are located in Canada and the United
      States.



                                                                                                Three months ended
                                                                                                    March 31, 2003
                                              --------------------------------------------------------------------
                                                                               Steam Explosion
                                                               Environmental        Technology
                                                                  Industrial         Group and
                                                Food Group             Group         Corporate        Consolidated
                                                         $                 $                 $                   $
      External revenues by market
      U.S.                                          29,824             1,994               225              32,043
      Canada                                         4,507             3,382                 -               7,889
      Other                                          1,452                24                 3               1,479
                                              --------------------------------------------------------------------
                                                                                               
      Total revenues to external customers          35,783             5,400               228              41,411
                                              --------------------------------------------------------------------
      Interest expense                                 386                90                15                 491
                                              --------------------------------------------------------------------
      Provision for (recovery of) income
           taxes                                       397               121               (62)                456
                                              --------------------------------------------------------------------
      Segment net earnings (loss)                      927               284              (147)              1,064
                                              --------------------------------------------------------------------
      Identifiable assets                           82,025            22,685             4,775             109,485
                                              --------------------------------------------------------------------
      Amortization                                     876               209                93               1,178
                                              --------------------------------------------------------------------
      Expenditures on property, plant and
           equipment                                 1,111               110                 8               1,229
                                              ====================================================================



                                       19


Stake Technology Ltd.
Condensed Notes to Consolidated Financial Statements
For the three months ended March 31, 2003
Unaudited
(Expressed in thousands of U.S. dollars)

12.   Segmented information continued



                                                                                                Three months ended
                                                                                                    March 31, 2002
                                              --------------------------------------------------------------------
                                                                               Steam Explosion
                                                               Environmental        Technology
                                                                  Industrial         Group and
                                                Food Group             Group         Corporate        Consolidated
                                                         $                 $                 $                   $
                                                                                                
      External revenues by market
      U.S.                                          17,344             2,287                75              19,706
      Canada                                            75             2,821                --               2,896
      Other                                            648                33                --                 681
                                              --------------------------------------------------------------------
      Total revenues to external customers          18,067             5,141                75              23,283
                                              --------------------------------------------------------------------
      Interest expense                                 369                53                --                 422
                                              --------------------------------------------------------------------
      Provision for (recovery of) income
           taxes                                         2               176              (195)                (17)
                                              --------------------------------------------------------------------
      Segment net earnings (loss)                        2               265              (244)                 23
                                              --------------------------------------------------------------------
      Identifiable assets                           52,651            18,251            11,121              82,023
                                              --------------------------------------------------------------------
      Amortization                                     712               203                19                 934
                                              --------------------------------------------------------------------
      Expenditures on property, plant and
           equipment                                   699               397                71               1,167
                                              --------------------------------------------------------------------


      Geographic segments



                                                                 March 31,                            December 31,
                                                                      2003                                    2002
                                 -----------------------------------------  --------------------------------------
                                          U.S.        Canada         Total         U.S.        Canada        Total
                                            $              $             $            $             $            $
                                                                                         
      Property, plant and
        equipment                      29,713          8,028        37,741       29,568         7,465       37,033
                                 =========================================  ======================================

      Goodwill and intangibles         11,666          3,579        15,245       11,655         3,262       14,917
                                 =========================================  ======================================

      Total assets                     78,445         31,040       109,485       87,399        27,888      115,287
                                 =========================================  ======================================


      Customer concentration

      The Company has one customer in the Food Group whose purchases were 12% of
      the Company's total revenue in the first quarter of 2003 (2002 - 10.3%).


                                       20


Stake Technology Ltd.
Condensed Notes to Consolidated Financial Statements
For the three months ended March 31, 2003
Unaudited
(Expressed in thousands of U.S. dollars, except per share amounts)

13.   United States generally accepted accounting principles differences

      These consolidated financial statements have been prepared in accordance
      with accounting principles generally accepted in Canada (Canadian GAAP)
      which conform in all material respects applicable to the Company with
      those in the United States (U.S. GAAP) during the periods presented,
      except with respect to the following:

      Under U.S. GAAP, certain pre-operating costs of $nil incurred in the
      quarter ended March 31, 2003, (2002 - $87), deferred in these financial
      statements would be expensed. Amortization of $50 in the quarter ended
      March 31, 2003, (2002 - $40) related to pre-operating costs would not have
      been expensed.

      On March 11, 2002, the Company committed to grant certain employees
      114,000 options to acquire 114,000 common shares at $2.15. These options
      were provided to employees contingent upon approval by the shareholders of
      the 2002 stock option plan. This approval was received on June 18, 2002.
      Under U.S. GAAP, the difference in stock price between the exercise price
      and the closing price the day immediately preceding the day of
      shareholders' approval is considered to be compensation expense.
      Accordingly, $62 would be recorded under U.S. GAAP in 2002 as stock option
      compensation expense.

      Accordingly, the following would have been reported under U.S. GAAP:



                                                                                         Three months ended           Year ended
                                                                            ----------------------------------------------------
                                                                                  March 31,        March 31,        December 31,
                                                                                       2003             2002                2002
                                                                                          $                $                   $
                                                                                                             
          Net earnings for the period - as reported                                   1,064               23               3,766

          Pre-operating costs amortized                                                  90               40                 271
          Pre-operating costs capitalized                                                --              (87)               (276)
          Stock option compensation expense                                              --               --                 (62)
          Tax effect of above items                                                     (27)              19                   2
                                                                            ----------------------------------------------------

          Net earnings (loss) for the period - U.S. GAAP                              1,127              (5)               3,701
                                                                            ====================================================

          Net earnings (loss) per common share - U.S. GAAP
                - Basic                                                                0.03             0.00                0.09
                                                                            ====================================================
                - Diluted                                                              0.03             0.00                0.09
                                                                            ====================================================
          Weighted average number of common shares
           outstanding                                                           42,290,857       41,110,488          41,547,302
                                                                            ====================================================

          Shareholders' equity - as reported                                         52,499           43,701              49,527
          Cumulative pre-operating costs, net of amortization, net of tax              (152)            (413)               (215)
          Cumulative stock compensation expense                                        (416)            (353)               (416)
                                                                            ----------------------------------------------------

          Shareholders' equity - U.S. GAAP                                           51,931           42,935              48,896
                                                                            ====================================================



                                       21


Stake Technology Ltd.
Condensed Notes to Consolidated Financial Statements
For the three months ended March 31, 2003
Unaudited
(Expressed in thousands of U.S. dollars)

13.   United States generally accepted accounting principles differences,
      continued

      Comprehensive income

      U.S. GAAP requires that a comprehensive income statement be prepared.
      Comprehensive income is defined as "The change in equity of a business
      enterprise during a period from transactions and other events and
      circumstances from non-owner events". It includes all changes in equity
      during a period, except those resulting from investments by owners and
      distribution to owners. The comprehensive statement reconciles the
      reported net income to the comprehensive income.

      The following is a comprehensive income statement (prepared in accordance
      with U.S. GAAP), which, under U.S. GAAP, would have the same prominence as
      other financial statements.



                                                                            Three months ended            Year ended
                                                        ------------------------------------------------------------
                                                              March 31,              March 31,          December 31,
                                                                   2003                   2002                  2002
                                                                      $                      $                     $
                                                                                                      
      Net earnings (loss) for the period - U.S. GAAP              1,127                     (5)                3,701
      Currency translation adjustment                               778                    (80)                  112
                                                        ------------------------------------------------------------

      Comprehensive income (loss) for the period                  1,905                    (85)                3,813
                                                        ============================================================


      Other U.S. GAAP disclosures



                                                                                Three months ended        Year ended
                                                                 ---------------------------------------------------
      Changes in Reserves                                            March 31,           March 31,      December 31,
                                                                          2003                2002              2002
                                                                             $                   $                 $
                                                                                                        
      Allowance for Doubtful Accounts
           Balance, beginning of period                                    709                 367               367
           Additions charged to profit and loss, including
               effects of foreign exchange rate differences                 70                  16               450
           Accounts receivable charged off, net of recoveries              (48)                 --              (108)
                                                                 ---------------------------------------------------
           Balance, end of period                                          731                 383               709
                                                                 ===================================================

           Deferred Tax Valuation Allowance
           Balance, beginning of period                                  4,107                 479               479
           Additions to valuation allowance                                 --                  --             4,107
           Adjustments to valuation allowance, including
                  effects of foreign exchange rate differences              --                  --              (479)
                                                                 ---------------------------------------------------
               Balance, end of period                                    4,107                 479             4,107
                                                                 ===================================================

      Accrued payroll                                                    1,600               1,235
                                                             =====================================



                                       22


Stake Technology Ltd.
Condensed Notes to Consolidated Financial Statements
For the three months ended March 31, 2003
Unaudited
(Expressed in thousands of U.S. dollars)

14.   Recent accounting developments

      In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
      Accounting and Disclosure Requirements for Guarantees, Including Indirect
      Guarantees of Indebtedness of Others" (FIN 45), which imposes new
      disclosure and liability-recognition requirements for financial
      guarantees, performance guarantees, indemnifications and indirect
      guarantees of the indebtedness of others. The initial recognition and
      initial measurement provisions are applicable on a prospective basis to
      guarantees issued or modified after December 31, 2002. The disclosure
      requirements are effective for interim and annual periods ending after
      December 15, 2002. As the Company did not have any material guarantees
      outstanding, the issuance of FIN 45 did not have an effect on the
      Company's financial statements.

      In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
      "Consolidation of Variable Interest Entities, an Interpretation of ARB No.
      51." FIN 46 requires certain variable interest entities to be consolidated
      by the primary beneficiary of the entity if the equity investors in the
      entity do not have the characteristics of a controlling financial interest
      or do not have sufficient equity at risk for the entity to finance its
      activities without additional subordinated financial support from other
      parties. FIN 46 is effective immediately for all new variable interest
      entities created or acquired after January 31, 2003. For variable interest
      entities created or acquired prior to February 1, 2003, the provisions of
      FIN 46 must be applied for the first interim or annual period beginning
      after June 15, 2003. The Company does not have any ownership in any
      variable interest entities. The Company believes that the adoption of FIN
      46 will not have a material impact on the Company's consolidated financial
      position or on its results of operations.

15.   Comparative balances

      Certain line items in the prior year consolidated balance sheet and prior
      years consolidated statements of earnings and consolidated statements of
      cash flows have been combined to achieve comparability to current year's
      presentation. The reclassifications of these prior year balances did not
      have a significant impact on the presentation of the consolidated
      financial statements.


                                       23


PART I - FINANCIAL INFORMATION

Item 2 -

Management's Discussion and Analysis of Financial Condition and Results of
Operations

Significant Developments

On April 11, 2003, Stake announced that it has reached an agreement to acquire
100% of the outstanding shares of Kettle Valley Dried Fruit Ltd. (Kettle Valley)
and its related companies, subject to completion of required documentation and
definitive agreements, for total consideration of $2,634, consisting of cash,
common shares and notes payable.

Kettle Valley produces natural and organic fruit bars and fruit leathers with an
apple base and markets these products under the Kettle Valley Real Fruit Snack
and Frunola brands. Kettle Valley operates two production facilities in
Summerland, British Columbia, the heart of the B.C. apple growing district, and
is currently constructing a third plant in the State of Washington, the center
of the apple growing district of the Western U.S. In addition, Kettle Valley
produces a number of private label products for customers in the U.S., Canada
and the United Kingdom. Kettle Valley's products are sold through agents and
distributors to the health food and mass markets as well as to various school
districts who are leading the trend in improving the dietary content of student
lunches.

In March 2003, Stake amended its financing arrangements. The amendment
syndicated the financing arrangement to a group of banks which includes existing
lenders and increased the term loan by $7,800 to $21,700 ($21,275 as at March
31, 2003). In addition, the U.S. line of credit facility was increased by $4,000
to $9,000. The Company used the incremental proceeds on the term loan, drew on
the U.S. line of credit facility to the extent of $3,500 and utilized $3,886 of
cash on hand to repay the tender facility which had been obtained to finance the
acquisition of Opta Food Ingredients, Inc. The term loan is repayable quarterly
and is intended to amortize over seven years. The term loan has a two year
maturity at which point the facility is renewable at the option of the lender
and Stake. Stake fully expects to renew this facility.

Operations For the Three Months ended March 31, 2003 Compared With the Three
Months Ended March 31, 2002

Consolidated

Revenues in the first three months of 2003 increased by 77.9% to $41,411 from
$23,283 in the first three months of 2002 and the Company's net earnings for the
first three months in 2003 were $1,064 or $0.03 per common share compared to $23
or $0.00 per common share for the first three months of 2001. The increase in
the Company's revenues of $18,128 is due in most part to increased sales of
aseptic packaged soymilk products of $2,939, increased sales of bulk grains and
specialty beans of $4,485, the combined impact of the acquisitions of Organic
Kitchen, Wild West, Simply Organic and Opta and the start-up of the Company's
organic dairy operation, Sunrich Valley totalling $11,273.

Net earnings increased significantly over the same period in 2002 due in most
part to the turn around at the Company's aseptic packaging operations of $796
after tax, improved market/economic conditions that impacted the Environmental
Industrial Group of $11, earnings from acquisitions noted above of $106 after
tax, and a foreign exchange gain as a result of the appreciation of the Canadian
dollar of $239 after tax.

U.S. readers should note that due to differences between Canadian and U.S. GAAP,
the earnings for the three months ended March 31, 2003 under U.S. GAAP are
$1,127 or $0.03 per common share versus a loss of $5 or $0.00 per common share
in the same period in 2002. Note 13 to the consolidated financial statements
itemizes these differences.

Cost of goods sold increased by 71.6% to $34,293 for the three months ended
March 31, 2003 compared to $19,979 for the three months ended March 31, 2002.
Consistent with the revenue analysis above, the increase in cost of goods sold
is related to the revenue increase resulting from increased sales of certain
food based products and the acquisitions completed in 2002.

The Company's consolidated gross margin increased to 17.2% for the three months
ended March 31, 2003 versus 14.2% in the three months ended March 31, 2002. The
improvement in gross margin is attributable to improvements


                                       24


in efficiencies at the Company's aseptic packaging operation and other Food
Group operations, as well as the impact of higher gross margins in the acquired
businesses.

Selling, general and administrative expenses increased to $5,485 or 13.2% of
revenues in the three months ended March 31, 2003 compared to $2,983 or 12.8% of
revenues for the three months ended March 31, 2002. The increase in
administrative costs is mainly due to the acquisitions completed in 2002 of
$2,352 and incremental legal costs of $95 related to the Company's legal
proceeding against a former supplier for failure to adhere to the terms of a
supply contact, as detailed in Part II - Other Information.

Interest expense increased to $491 in the three months ended March 31, 2003 from
$422 in the three months ended March 31, 2002. The increase in borrowing costs
reflects the increase in borrowings to support the acquisition of Opta in
December of 2002.

Interest and other income decreased to $37 in the three months ended March 31,
2003 from $111 in the three months ended March 31, 2002, primarily due to lower
cash/investment balances versus the prior year.

Foreign exchange gain increased to $341 from a loss of $4 in the same period in
2002 as a result of the significant appreciation of the Canadian dollar.

The provision for income taxes in the first three months of 2003 reflects the
Company's estimated effective tax rate in 2003 of 30%.

Segmented Operations Information

(Note: Certain prior year figures have been adjusted to conform with the current
year presentation which eliminates all intercompany charges for segmented
reporting purposes)

Food Group

The Company currently treats the Food Group as one reporting segment. With the
continued expansion of the Food Group, the Company is in the process of
transitioning its management structure and related reporting systems in support
of its vertically integrated food model. The Company intends to expand segmented
reporting once this transition is complete and information is compiled and
reviewed accordingly and intends to provide expanded segments no later than
December 31, 2003.

The Food Group contributed $35,783 or 86.4% of total Company consolidated
revenues in the first three months of 2002 versus $18,067 or 77.6% in the same
period in 2002. The increase of $17,716 or 98.0% in Food Group revenues was due
primarily to increased sales of aseptic packaged soymilk of $2,939, an increase
in sales of bulk grains and specialty beans of $4,485 and the combined impact of
the acquisitions and start-up completed in 2002 of $11,273. The increase in food
revenues as a percentage of consolidated revenues reflects the Company's
continued growth via acquisitions in the natural and organic food industry and
the inherently higher internal growth rates associated with these businesses.

Gross margin in the Food Group increased by $3,825 in the three months ended
March 31, 2003 to $5,825 or 16.3% compared to $2,000 or 11.1%, in the same
period in 2002. The increase in gross margin reflects the turnaround at the
Nordic Aseptic packaging operation and the acquisitions completed in 2002.

Selling, general and administrative expenses increased to $4,116 in the three
months ended March 31, 2003 versus $1,679 in the three months ended March 31,
2002. The increase of $2,437 is due primarily to acquisitions completed in 2002
of $2,352 and legal costs of $95 associated with an action against a former
supplier for failure to adhere to the terms of a supply contact, as detailed in
Part II - Other Information.

Interest expense increased to $386 in the three months ended March 31, 2003
versus $369 in the three months ended March 31, 2002. The increase was due to
the acquisitions completed in 2002.

Net earnings in the Food Group were $927 in the three months ended March 31,
2003 compared to earnings of $2 in the three months ended March 31, 2002 due to
the factors noted above.


                                       25


Environmental Industrial Group

The Environmental Industrial Group contributed $5,400 or 13.0% of the total
Company consolidated revenues in the first three months of 2003, versus $5,141
or 22.1% in 2002. Revenues were favourably impacted by the improvement in the
market and economic conditions in the steel and foundry businesses and a
resurgence in demand for abrasives totalling $260.

Gross margin in the Environmental Industrial Group was $1,066 in the three
months ended March 31, 2003 versus $1,229 in the three months ended March 31,
2002. As a percentage of revenues, gross margin decreased to 19.7% in the first
three months of 2003 from 23.9% in the first three months of 2002. The decrease
in margin is due primarily to a relocation of certain plant operating costs from
selling, general and administrative expenses to cost of goods sold in 2003 of
approximately $200 (after adjustment for the reallocation, 2002 gross margin was
20.0%).

Selling, general and administrative expenses decreased to $536 in the three
months ended March 31, 2003 versus $729 in the three months ended March 31,
2002. The decrease is mainly due to the reallocation noted above.

Interest expense increased to $90 in the first three months of 2003 versus $53
in the first three months of 2002. The increase was mainly due to cash
utilization due to payments made as part of the acquisition of Virginia
Materials in 2001.

Net earnings were $284 in the three months ended March 31, 2003 versus $265 in
the three months ended March 31, 2002.

Steam Explosion Technology Group

Revenues of $228 for the three months ended March 31, 2003 were primarily
derived from licence fees earned in the quarter in addition to licence fees of
$150 relating to 2002 recorded in 2003 as collection has become reasonably
assured.

Selling, general and administrative expenses were $66 for the first three months
of 2003 compared to $57 for the same period in 2002. These costs reflect payroll
and related expenses required to manage and maintain the business.

Net earnings were $113 versus net earnings of $11 in the same period in 2002.

Corporate Activities

Selling, general and administration expenses were $767 in the three months ended
March 31, 2003 versus $518 in the three months ended March 31, 2002. The
increase was due to an increase in the costs of administering a growing public
company of approximately $175 and an increase in the amortization of financing
fees of $71.

Liquidity and Capital Resources at March 31, 2003

Current assets

Cash and cash equivalents decreased to $1,782 at March 31, 2003 (December 31,
2002 - $7,012), primarily due to the repayment of the tender facility in March
2003.

The short term investments held at December 31, 2002 consisted of short-term
money market investments with maturity dates greater than 90 days from
acquisition, obtained in the acquisition of Opta. These short term investments
matured prior to March 31, 2003.

Trade accounts receivable decreased to $17,698 at March 31, 2003 from $18,144 at
December 31, 2002. Trade receivables at March 31, 2003 attributable to the Food
Group were $14,026 (December 31, 2002 - $14,889). The decrease was primarily due
to the collection of a contract cancellation fee subsequent to year-end, offset
by the impact of increased sales in the quarter. Trade receivables in the
Environmental Industrial Group were $3,447 (December 31, 2002 - $3,255). The
Steam Explosion Technology Group has a receivable of $225 related to the license
fee revenue recorded in the quarter (December 31, 2002 - $nil).

The note receivable of $697 (December 31, 2002- $1,034) and the product rebate
payable in long-term payables of $1,361 (December 31, 2002 - $1,330) are related
to an agreement with a major European based company to supply


                                       26


product. This agreement required the Food Group to expand a food processing
plant to the customer's specifications, which was completed in 2001. In
accordance with the terms of the agreement, the customer pays 36 monthly
instalments of $119. The agreement also requires the Company to provide the
customer with a product rebate beginning October 2003 until $1,720 is repaid.
Upon the application of purchase accounting in 2000, both the receivable and
payable were fair valued using a discount rate of 9.5 %.

Inventories increased $653 to $23,642 at March 31, 2003 versus December 31,
2002. The Food Group accounts for $19,125 of the consolidated balance (December
31, 2002 - $18,492) and the Environmental Industrial Group $4,517 (December 31,
2002 - $4,497). The Steam Explosion Technology Group is not required to carry
significant inventories. The higher balances in the Food Group are primarily due
to increased inventory of finished aseptic packaged goods, raw materials and
ingredients to support the increase in production and sales and higher grain
inventories.

Prepaid expenses and other current assets increased $778 to $1,736 at March 31,
2003 from $958 at December 31, 2002. The increase is mainly due to an increase
in prepaid insurance as a result of policy renewals in the first quarter and
timing of a prepaid inventory in the Food Group.

Property, plant and equipment

In the first quarter of 2003, the Company expended $1,229 (March 31, 2002 -
$1,167) on property, plant and equipment, of which, the Food Group comprised of
$1,111. Key projects in the quarter included the micro filter sweetener project
at the Group's operation in Alexandria, MN and the expansion of the grain
cleaning and transfer system in Hope, MN. During the first quarter of 2003, $110
was expended by the Environmental Industrial Group on general additions and
replacements and $8 was spent by the Steam Explosion Technology Group and the
Corporate Office on computer equipment.

Goodwill and intangibles

Goodwill and intangibles increased to $15,245 at March 31, 2003 from $14,992 at
December 31, 2002. The increase is due primarily to foreign exchange valuation
of Canadian goodwill and intangibles.

Future income taxes

The future income tax asset relates primarily to loss carry-forwards recorded on
the acquisition of Opta Food Ingredients, Inc. and scientific research and
development credits available in Canada.

Other assets

Other assets decreased by $92 to $988, primarily due to amortization of
pre-operating costs and financing fees, offset by the capitalization of $70 in
financing fees.

Current liabilities

Bank indebtedness

Bank indebtedness at March 31, 2003 was $9,191 (December 31, 2002 - $3,963). The
increase relates primarily to the utilization of the line of credit facilities
to repay the tender facility which occurred in March 2003.

Accounts payable and accrued liabilities decreased to $17,073 at March 31, 2003
from $19,664 at December 31, 2002. The decrease is primarily due to deferred
payments to grain suppliers at December 31, 2002, the payment of bonuses related
to 2002 and the disbursement of acquisition based accruals.

Customer deposits of $1,334 at March 31, 2003 (December 31, 2002 - $421) relate
to cash deposits made by Food Group customers for purchases made throughout the
growing season in 2003. No recognition of revenue or accrual of costs is booked
on these transactions until the goods are shipped.

Long term debt

At March 31, 2003, the Company's long-term debt, including current portion, is
$26,751, a net decrease of $9,998 from December 31, 2002. The decrease relates
to the repayment of the tender facility and certain other debt


                                       27


instruments, offset by the increase in the term debt facility of $7,800 as a
result of the refinancing completed in March 2003.

Long-term payables

The Company had deferred purchase consideration of $440 at March 31, 2003
(December 31, 2002 - $667) related to the acquisition of Virginia Materials. The
deferred purchase consideration is paid on the purchase of the vendor's
inventory as acquired by the Company. It is expected that it will take
approximately 4 to 6 months from March 31, 2003 to satisfy this liability.

The Preference Shares of subsidiary companies were reduced to $161 from $291 as
a result of regularly scheduled repurchases in the quarter and an additional
repurchase of preferred shares related to a settlement with a former director
relating to certain actions taken while he was the president of an operating
division.

Payables to former shareholders of acquired companies decreased by $2,000 to
$675 at March 31, 2003. The reduction is due primarily to the payment for the
untendered shares of the former shareholders of Opta, in addition to payments
related to the acquisition of Virginia Materials.

Cash flow

For the quarter ended March 31, 2003, cash flow provided by operations before
working capital changes was $2,338, an increase of 156% versus 2002 (March 31,
2002 - $912). The increase is due primarily to improvements in earnings and
higher amortization charges in the first quarter of 2003 versus 2002.

Cash flow used in operations after working capital changes was ($391) for the
three months ended March 31, 2003 (March 31, 2002 - ($1,978)), reflecting the
utilization of funds for non-cash working capital of ($2,729) (March 31, 2002 -
($2,890)). This utilization consists principally of an increase in inventory of
($725), a decrease in accounts payable and accrued liabilities of ($2,478) and
an increase in prepaids and other current assets of ($785), offset by a decrease
in accounts receivable of $346 and an increase in customer deposits of $913. The
working capital deficiencies in the first quarter are comparable to the same
period in the prior year, which reflects the impact of seasonality of the
business on working capital, including the purchase and payment method with
grain suppliers in the Food Group and the economic market seasonality in the
Environmental Industrial Group.

Cash used in investing activities was ($851). The Company sold its short term
investments for proceeds of $2,038 (March 31, 2002 - $6,307) and received
payments on a note receivable of $358 (March 31, 2002 - $358), partially offset
by acquisitions of property, plant and equipment of ($1,229) (March 31, 2002 -
($1,167)), and payment for the acquisition of companies, in this case to the
former shareholders of Opta, of ($1,871) (March 31, 2002 - ($214)).

Cash used in financing activities was ($4,088) in the quarter (March 31, 2002 -
$1,852), which consists primarily of an increase in bank indebtedness of $5,228
(March 31, 2002 - $2,695), proceeds from the issuance of common shares of $1,130
(March 31, 2002 - $98), offset by net debt repayments of ($10,019) (March 31,
2002 - ($470)), deferred purchase consideration payments of ($227) (March 31,
2002 - ($147)) and financing costs of ($70) (March 31, 2002 - ($486)).

Item 3 -Quantitative and Qualitative Disclosures about Market Risk

Interest rate risk

The primary objective of our investment activities is to preserve principal and
limit risk. To achieve this objective, the Company maintains its portfolio in a
variety of securities, including both government and corporate obligations and
money market funds. These securities are generally classified as cash
equivalents and are recorded on the balance sheet at fair value with unrealized
gains or losses reported through profit and loss.

Debt in both fixed rate and floating rate interest carry varying degrees of
interest rate risk. Fixed rate debt may have their fair market value adversely
affected by a decline in interest rates. In general, longer date debts are
subject to greater interest rate risk than shorter dated securities. Floating
rate term debt gives less predictability to cash flows as interest rates change.
As of March 31, 2003, the weighted average interest rate of the fixed rate term
debt including the convertible debenture was 9.10% and $5,476 of the Company's
outstanding term debt is at fixed interest rates. Variable rate term debt of
$21,275 at an interest rate of 3.78% is outstanding at March 31, 2003. The
Company looks at varying factors to determine the percentage of debt to hold at
fixed rates including the interest rate spread between variable and


                                       28


fixed (swap rates), the Company's view on interest rate trends, the percent of
offset to variable rate debt through holding variable rate investments and the
Company's ability to manage with interest rate volatility and uncertainty. For
every 1% increase (decrease) in interest rates, the Company's after-tax earnings
would decrease (increase) by approximately $150,000. Given the short duration of
fixed rate debt, changes in interest rates would have a negligible affect on
fixed rate debt valuations.

Foreign currency risk

All U.S. subsidiaries use the U.S. dollar as their functional currency, and
since January 1, 2002, the United States dollar has been the Company's reporting
currency. Canadian subsidiaries and corporate office use the Canadian dollar as
their functional currency. The subsidiaries are subject to risks typical of
multi-jurisdiction businesses, including, but not limited to differing economic
conditions, changes in political climate, differing tax structures, other
regulations and restrictions, and foreign exchange rate volatility. Accordingly,
the Company's future results could be materially adversely affected by changes
in these or other factors. The Company is exposed to foreign exchange rate
fluctuations as the financial results of the Company and its Canadian
subsidiaries are translated into U.S. dollars on consolidation. During the first
quarter, the Canadian dollar has appreciated significantly against the U.S.
dollar with closing rates moving from CDN $1.5776 at December 31, 2002 to CDN
$1.4678 at March 31, 2003 for each U.S. dollar. The net effect of this
appreciation has been a $341 exchange gain and a $1,119 increase in net assets.
A 10% movement in the levels of foreign currency exchange rates in favour of
(against) the Canadian dollar with all other variables held constant would
result in an increase (decrease) in the fair value of the Company's net assets
by $1,886. These changes would flow through the Company's cumulative translation
adjustment account in shareholders' equity.

The Food Group and the Environmental Group Canadian operations have U.S. based
receivables and payables that on a net basis provide limited exchange exposure.
The Food Group U.S. operations have no exposure to other currencies since all
sales are made in U.S. dollars. It is the Company's intention to hold funds in
the currency in which the funds are likely to be used, which will from time to
time, potentially expose the Company to exchange rate fluctuations when
converted into U.S. dollars.

Commodity risk

The Food Group enters into exchange-traded commodity futures and options
contracts to hedge its exposure to price fluctuations on grain transactions to
the extent considered practicable for minimizing risk from market price
fluctuations. Futures contracts used for hedging purposes are purchased and sold
through regulated commodity exchanges. Inventories, however, may not be
completely hedged, due in part to the Company's assessment of its exposure from
expected price fluctuations. Exchange purchase and sales contracts may expose
the Company to risk in the event that a counterparty to a transaction is unable
to fulfill its contractual obligation. The Company manages its risk by entering
into purchase contracts with pre-approved producers. The Company has a risk of
loss from hedge activity if a grower does not deliver the grain as scheduled.
Sales contracts are entered into with organizations of acceptable
creditworthiness, as internally evaluated. All futures transactions are marked
to market. Gains and losses on futures transactions related to grain inventories
are included in cost of goods sold. At March 31, 2003, the Company owned 135,405
bushels of corn with a weighted average price of $2.16 and 285,396 bushels of
soy beans with a weighted average price of $7.42. The Company has at March 31,
2003 net long positions on corn and soy beans of 12,162 bushels and 16,250
bushels, respectively. Therefore, a change in the commodity prices would not
have a material impact on the Company. There are no futures contracts in the
Environmental Industrial Group or the Steam Explosion Technology Group or
related to Corporate activities.

Item 4. Controls and Procedures

The Company's management, including the Chief Executive Officer and Chief
Financial Officer, have evaluated the effectiveness of disclosure controls
pursuant to Exchange Act Rules 13a-14 and 15d-14. Based on this evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that the
disclosure controls and procedures are effective in ensuing that all material
information has been made known to them in a timely fashion. There have been no
significant changes in internal controls, or in factors that could significantly
affect internal controls, subsequent to the date the Chief Executive Officer and
Chief Financial Officer completed their evaluation.


                                       29


PART II - OTHER INFORMATION.

Item 1. Legal proceedings

The Food Group continues to pursue a suit against a supplier for failure to
adhere to the terms of a contract. The Company and its legal counsel believe
that this claim has merit. The Company has ceased co-packing arrangements under
the existing contract and has commenced packing under separate arrangements. It
cannot, however, be determined if there will be any recovery by the Company at
this time and the Group is expensing the costs of pursuing this suit on a
monthly basis. Other than this action, the Group has not been and is not
currently party to any material litigation other than stated above.

The supplier has counter-sued the Company for breach of contract. The Company
believes this suit is without merit.

The Canadian Organic Food Group which includes Sunrich Valley, Organic Kitchen,
Simply Organic and Wild West has not been and is not currently a party to any
material litigation.

The Environmental Industrial Group has not been and is not currently a party to
any material litigation.

The Steam Explosion Technology Group has not been and is not currently a party
to any material litigation.

Item 2. Changes in securities and use of proceeds - Not applicable

Item 3. Defaults on senior securities - Not applicable

Item 4. Submission of matters to a vote of security holders - Not applicable

Item 5. Other - Not applicable

Item 6. Exhibits and Reports on Form 8-K

(a)   Exhibits -

      99.1  Certification of Chief Executive Officer Pursuant to Section 906 of
            the Sarbanes-Oxley Act of 2002

      99.2  Certification of Chief Financial Officer Pursuant to Section 906 of
            the Sarbanes-Oxley Act of 2002

(b)   Reports on Form 8-K -

      i)    Form 8-K filed February 5, 2003 resignation of John D. Taylor,
            President & C.O.O.

      ii)   Form 8-K amendment filed February 14, 2003 relating to the Agreement
            and Plan of Merger among Opta Food Ingredients, Inc., Stake
            Technology and Stake Acquisition Corp.

SIGNATURES

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

                                                STAKE TECHNOLOGY LTD.


                                                /s/ Steven R.  Bromley

Date July 14, 2003

                                                Stake Technology Ltd.
                                                by Steven R. Bromley
                                                Executive Vice President
                                                & Chief Financial Officer


                                       30


                                  Certification

I, Jeremy N. Kendall, Chairman of the Board and Chief Executive Officer of Stake
Technology Ltd., certify that:

      (1)   I have reviewed this quarterly report on Form 10-Q of Stake
            Technology Ltd. for the quarter ended March 31, 2003,

      (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 in order 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
            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.


/s/ Jeremy N. Kendall
---------------------

Chairman & Chief Executive Officer
Stake Technology Ltd.
July 14, 2003


                                       31


                                  Certification

I, Steven R. Bromley, Executive Vice President and Chief Financial Officer of
Stake Technology Ltd., certify that:

      (1)   I have reviewed this quarterly report on Form 10-Q of Stake
            Technology Ltd. for the quarter ended March 31, 2003,

      (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 in order 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
            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.


/s/ Steven R. Bromley
---------------------

Executive Vice President & Chief Financial Officer
Stake Technology Ltd.
July 14, 2003


                                       32


                                  EXHIBIT INDEX

Exhibit No.
-----------

99.1        Certification of the Principal Executive Officer, Jeremy N. Kendall,
            pursuant 18 U.S.C. Section 1350, as enacted pursuant to Section 906
            of the Sarbanes-Oxley Act of 2002.

99.2        Certification of the Principal Financial Officer, Steven R. Bromley,
            pursuant 18 U.S.C. Section 1350, as enacted pursuant to Section 906
            of the Sarbanes-Oxley Act of 2002.


                                       33