UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(MARK ONE)

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


For the fiscal year ended December 31, 2004
                          -----------------
                                       OR

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

For the transition period from                       to
                                ---------------------     ----------------------

                         Commission file number 0-14870

                                   Quipp, Inc.
                                   -----------
             (Exact name of registrant as specified in its charter)

                   Florida                          59-2306191
                   -------                          ----------
         (State or other jurisdiction              (IRS Employer
         of incorporation or organization)       Identification No.)

       4800 NW 157th Street, Miami, Florida            33014
       ------------------------------------            -----
      (Address of principal executive offices)      (Zip code)

Registrant's telephone number, including area code  (305) 623-8700
                                                    --------------

           Securities registered pursuant to Section 12(g) of the Act;
                          Common Stock, $.01 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K.
          ----

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

The aggregate market value of voting stock held by non-affiliates of the
Registrant on June 30, 2004 was approximately $21,040,234*. The number of shares
of the Registrant's common stock, $.01 par value, outstanding at March 10, 2005
was 1,423,775.
                       DOCUMENTS INCORPORATED BY REFERENCE

                              Document Incorporated
                              ---------------------

Portions of the Quipp, Inc. Proxy Statement relating to the 2005 Annual Meeting
of Shareholders (to be filed not later than 120 days after the close of the
fiscal year covered by this report on Form 10-K).

                               Where Incorporated
                               ------------------
                                    Part III
                                    --------

*Calculated by excluding all shares held by executive officers and directors of
Registrant without conceding that all such persons are "affiliates" of
Registrant for purposes of the federal securities laws.


<PAGE>


                                   QUIPP, INC.

                                TABLE OF CONTENTS


                                                                            PAGE
                                     PART I
Item 1.      Business ......................................................  3
Item 2.      Properties ....................................................  5
Item 3.      Legal Proceedings .............................................  5
Item 4.      Submission of Matters to a Vote of Security Holders ...........  5

                                     PART II
Item 5.      Market for Registrant's Common Equity and Related
                 Stockholder Matters .......................................  7
Item 6.      Selected Financial Data .......................................  8
Item 7.      Management's Discussion and Analysis of Financial
                 Condition and Results of Operations .......................  9
Item 7A.     Quantitative and Qualitative Disclosures About Market Risk .... 14
Item 8.      Financial Statements and Supplementary Data.................... 14
Item 9.      Changes in and Disagreements with Accountants on
                 Accounting and Financial Disclosure ....................... 31
Item 9A.     Controls and Procedures ....................................... 31

                                    PART III
Item 10.     Directors and Executive Officers of the Registrant............. 32
Item 11.     Executive Compensation......................................... 32
Item 12.     Security Ownership of Certain Beneficial Owners
                 and Management and Related Stockholder Matters ............ 32
Item 13.     Certain Relationships and Related Transactions................. 32
Item 14.     Principal Accountant Fees and Services......................... 32

                                     PART IV
Item 15.     Exhibits and Financial Statement Schedules..................... 33











                                       2

<PAGE>

                                     PART I


ITEM I - BUSINESS
-----------------

Through our wholly owned subsidiary, Quipp Systems, Inc. we design, manufacture,
sell, and install material handling equipment and systems that automate the post
press production process for newspaper publishers. In the post-press stage of
newspaper operations, newspapers move from the pressroom in a continuous stream
and are stacked, bundled, and transferred to shipping docks and loaded into
carts or stored on pallets for further distribution. Our equipment and control
systems facilitate the automated movement of newspapers from the printing press
to the delivery truck.

Our product line includes the following equipment, which we sell individually or
as part of integrated post-press system installations that include several of
our products and, in some instances, products of other manufacturers.

NEWSPAPER STACKERS - The Series 500 Stacker counts and batches stacks of
newspapers at maximum speeds of 85,000 copies per hour. The Series 500C Stacker
can be adjusted to count and stack a variety of newspaper sizes. The Quipp
Off-Press counter stacker, marketed to smaller volume newspapers, counts and
batches stacks of newspapers at maximum speeds of 30,000 copies per hour.

VIPER BOTTOMWRAPPER - The Quipp Viper applies wrapping paper to the bottom or
three sides of a newspaper bundle to protect against product damage. The Viper
can be equipped with an inkjet printing device that provides delivery location
and copy count information on the wrapping paper.

PACKMAN PACKAGING SYSTEM - The Quipp Packman packaging system combines a
stacker, bottomwrapper, ink-jet printer and a strapping unit into one integrated
machine. The Quipp Packman can be used in press and insert applications and can
stack, wrap, strap, and provide text messages on each bundle of newspapers at a
rate of up to 40 bundles per minute.

IN-LINE INSERTER - The Quipp In-Line inserting system automates the process of
inserting sections of newspapers or advertisements into the main section of the
newspaper. Our inserting system has been designed to handle inserting
requirements primarily for small to medium sized newspaper operations and can
insert documents ranging from 3" x 5" cards or coupon books to full broadsheets
at a machine speed up to 12,000 copies per hour.

AUTOMATIC CART LOADING SYSTEM - This system loads strapped bundles of newspapers
into carts for transportation to remote distribution centers. Quipp's Automatic
Cart Loading System handles bundles of various shapes and sizes. Upon completion
of loading, the cart is discharged from the cart loader and placed in a truck
for delivery to the distribution site.

AUTOMATIC PALLETIZER SYSTEM - The palletizer system receives newspaper bundles
from conveyors, stacks the bundles onto a pallet and places stretch wrap film
around the pallet and newspapers to prevent movement during transportation to a
distribution site.

NEWSPAPER CONVEYOR SYSTEMS - Our conveyor systems, including the Quipp-Gripp
III, Quipp Twin-Trak and Quipp Rollerslat, transport newspapers from pressrooms
to various locations throughout the post-press operation. The conveyor systems
include both horizontal and vertical conveyor modules, which can be integrated
with directional switches and special purpose components to accommodate the
layout of the newspaper plant. The Quipp-Gripp III uses a series of grippers
mounted on an articulating chain to pick up and transport newspapers. Each
Quipp-Gripp III gripper carries a single copy of the product. The Quipp
Twin-Trak is a twin-belt newspaper conveyor that transports newspapers in an
overlapping stream with maximum surface speeds of approximately 80,000
newspapers per hour. The Quipp Rollerslat conveyor employs an array of
independently rotating rollers and is used in the processing of newspaper stacks
prior to bundling.

OTHER PRODUCTS - We manufacture other products for post-press operations,
including stream aligners, centering pacers, fold compressors, newspaper
sensors, press production monitors, automated waste handling systems and other
equipment.

ORIGINAL EQUIPMENT MANUFACTURERS' (OEM) EQUIPMENT - We sell OEM products to
compliment our product line and provide our customers a single source for
integrated post-press material handling systems.

                                       3
<PAGE>

Our primary market includes newspaper publishers with circulation exceeding
50,000 copies daily. With some newer products, the Quipp In-Line inserter and
Quipp Off-Press counter stacker, we have also focused sales and marketing
efforts on newspapers with daily circulation under 50,000, and newspapers and
commercial printers that print weekly or monthly publications.

Our equipment prices range from $5,000 to $450,000, and post-press systems,
which usually include an integration of equipment, software, and controls, can
be priced much higher. Equipment and basic system orders normally require a
lead-time from six to 13 weeks from order date to installation date. Complex
systems may require lead-times of up to 26 weeks.

Our manufacturing activities consist primarily of the assembly of purchased
components, the fabrication of mechanical parts and the testing of completed
products. We use approximately 350 vendors to supply parts, materials and
components for our various products. We believe that alternative sources of
supply are available for all required components. If necessary, certain parts
could be manufactured in our in-house machine shop, which is used primarily for
custom engineering and development of prototype equipment.

We market, install and service our products both domestically and
internationally. All of our products have a minimum one-year warranty, and our
staff of technicians or outside vendors provide installation and repair
services. In addition to the manufacture and sale of products, we sell spare
parts for our equipment. In 2004, 2003 and 2002, spare parts sales accounted for
approximately 9%, 10%, and 12% of our net sales revenue, respectively.

We sell most of our products to newspaper publishers in the United States. Our
foreign sales accounted for 9%, 11%, and 6% of total sales in 2004, 2003 and
2002, respectively. The following table indicates the amount of sales by
geographic area during the past three years:


         SALES BY GEOGRAPHIC AREA
                                         2004           2003          2002
         --------------------------------------------------------------------

         United States               $22,517,519    $17,353,571   $15,603,503
         Canada                        1,821,042      1,478,233       342,122
         Latin America                   302,213        400,462        61,866
         Europe                               --        130,681       106,907
         Other                            49,281        157,746       416,080
                                     -----------    -----------   -----------

                                     $24,690,055    $19,520,693   $16,530,478
                                     ===========    ===========   ===========

As of December 31, 2004, our backlog of orders was approximately $8,631,000 as
compared to $12,725,000 on December 31, 2003. In addition to orders in process
at our production facility, our backlog includes orders that have been shipped
to customers but, in accordance with our revenue recognition policy, are not yet
reflected in net sales (see note 1). We expect to ship all orders included in
our December 31, 2004 backlog within the next 12 months. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Overview" in Item 7.

For the years ended December 31, 2004, 2003 and 2002, no single newspaper
customer accounted for ten percent or more of our net sales. A number of our
newspaper customers are part of large newspaper chains, but management believes
that purchase decisions are made by the individual newspapers. Newspapers owned
by Gannett Co, Inc. and Advance Publications, Inc. accounted for 17% and 10% of
our net sales in 2004, respectfully. Newspapers owned by Advance Publications,
Inc. and Gannett Co, Inc. accounted for 15% and 10% of our net sales in 2003,
respectively. Newspapers owned by Gannett Co, Inc. accounted for 16% of our net
sales in 2002. Since our equipment is designed to have an extended life, our
largest individual newspaper customers usually change from year to year.

OEM sales accounted for approximately 4.5%, 7.1% and 4.1% of our total sales in
2004, 2003 and 2002, respectively.

COMPETITION
The newspaper industry has experienced a decrease in size in recent years, as
the number of newspapers in the country has declined and ownership of newspapers
has been consolidated. Moreover, in recent years, there has been consolidation
among manufacturers of newspaper material handling equipment, as well as new
entrants into the market. These developments have increased competition in the
industry, and some of our competitors have much greater financial resources than
ours.

                                       4
<PAGE>

We believe we have two principal competitors for the newspaper post-press system
business in the United States: the post press division of Goss International
Corporation, a U.S. company and GMA, a domestic subsidiary of Muller-Martini
Versand-Systeme AG, a Swiss company. In addition, there are several companies
that compete with respect to certain of our products. We have experienced
competition on the basis of price with respect to most of our products and
anticipate that price competition will continue.

MARKETING
In North America, we sell our products through direct sales representatives. We
use international dealers to market and sell our products in the rest of the
world. Domestically, we market products by direct solicitation, trade shows and
national and regional trade journal advertising. International marketing efforts
are coordinated through foreign dealers. Some of the international dealers are
commissioned, while others purchase our products for resale. Advertising costs
totaled $71,182, $82,001, and $48,002 in 2004, 2003 and 2002, respectively.

PATENTS AND TRADEMARKS
We hold 35 U.S. and foreign patents, which expire during the period from 2005 to
2021. We have two patents pending and continue to apply for patent protection
when deemed advisable; however, we believe that the success of our products
ultimately is dependent upon performance, reliability and engineering, and that
our patents are not material to our business. "Quipp" is a registered trademark
of Quipp, Inc.

RESEARCH AND DEVELOPMENT
Research and development costs totaled $707,147, $581,121 and $458,387 in 2004,
2003 and 2002 respectively. In 2004, we focused much of our research and
development efforts on our new In-Line C inserting/collating system with
poly-wrapping capabilities. Additionally, we expended research and development
resources to redesign our gripper conveyor to enhance the performance of the
product in certain applications, and completed the software for the Quipp
Packman packaging system. In 2003, we focused much of our engineering and
technical efforts on the development of the Quipp Packman packaging system.

EMPLOYEES
As of December 31, 2004, we had 111 full-time employees. None of our employees
are represented by a union, and we consider our employee relations to be good.


ITEM 2 - PROPERTIES
-------------------

We operate our business from one facility located in Miami, Florida. We own the
property, and our facility contains approximately 63,170 square feet, of which
approximately 48,300 square feet are utilized for manufacturing operations, and
14,870 square feet are used for administrative functions. We own all of the
equipment used in our manufacturing operations. We believe our properties are
adequate and suitable for current operations.


ITEM 3 - LEGAL PROCEEDINGS
--------------------------

Not applicable


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

Not applicable










                                       5

<PAGE>

EXECUTIVE OFFICERS OF THE REGISTRANT

The names, business experience and ages of the executive officers of Quipp are
listed below:

      NAME             BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS      AGE
     -----             ----------------------------------------------      ----

MICHAEL S. KADY        Mr. Kady became President and Chief                  55
                       Executive Officer of Quipp, Inc. in February
                       2002 and President of Quipp Systems, Inc. in
                       March 2002. Mr. Kady was President of GMP
                       Metal Products, a manufacturer of components
                       supplied to major original equipment
                       manufacturers in the agricultural equipment,
                       construction machinery and transportation
                       equipment markets, from January 2000 to
                       January 2001. From May 1999 to January 2000,
                       Mr. Kady was a private consultant engaged in
                       strategy development for privately held
                       companies. From May 1996 to May 1999, he was
                       President and Chief Operating Officer of
                       Shuttleworth, Inc., a designer and builder
                       of automated material handling systems and
                       equipment for the electronics, automotive,
                       food and beverage and printing industries.

CHRISTER A. SJOGREN    Mr. Sjogren, Executive Vice President of             62
                       Quipp Systems, Inc. since 1994, has served
                       Quipp or Quipp Systems in various capacities
                       since 1983. He is currently responsible for
                       our research and development activities.

DAVID SWITALSKI        Mr. Switalski, Vice President of Operations          45
                       of Quipp Systems, Inc. since July 2000, has
                       served Quipp or Quipp Systems in various
                       capacities since 1984. He is currently
                       responsible for production, electrical and
                       mechanical engineering and information
                       systems.

ANGEL ARRABAL          Mr. Arrabal, Vice President of Sales of Quipp        45
                       Systems, Inc since 1997, has served Quipp or
                       Quipp Systems in various capacities since 1986.
                       He is currently responsible for worldwide sales
                       and marketing.

ERIC BELLO             Mr. Bello, Director of Finance and Treasurer         41
                       of Quipp, Inc. since February 2002 and Vice
                       President of Finance and CFO of Quipp
                       Systems, Inc. since February 2005, has
                       served Quipp or Quipp Systems, Inc. in
                       various capacities since 1999. Prior to
                       joining Quipp, he served as Corporate
                       Controller of Med-Waste, Inc., a company
                       involved in medical waste management from
                       February 1999 to October 1999; Controller of
                       Nature's Products, Inc., a vitamin
                       manufacturer; and Controller of the U.S.
                       Division of Althin Medical, Inc., a medical
                       device manufacturer. Mr. Bello, who is a
                       Certified Public Accountant, also was on the
                       auditing staff of KPMG Peat Marwick (now
                       KPMG LLP).



                                       6

<PAGE>

                                     PART II

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
--------------------------------------------------------------------------
MATTERS
-------

Our Common Stock, $.01 par value, is traded on the Nasdaq National Market under
the symbol, "QUIP." The following table sets forth the high and low sales prices
of our Common Stock as reported by Nasdaq for each calendar quarter in 2004 and
2003:

         ---------------------------------------------------------------------
                                               2004                 2003
                                         HIGH        LOW       High       Low
         ---------------------------------------------------------------------
         FIRST QUARTER                  $19.49     $11.50     $12.75     $9.26
         SECOND QUARTER                  16.00      13.88      10.93      9.00
         THIRD QUARTER                   14.97      13.04      13.36     10.25
         FOURTH QUARTER                  14.00      12.45      12.91     11.00
         -----------------------------------------------------------------------


We did not pay any dividends in 2004 or 2003.



















                                       7

<PAGE>

ITEM 6 - SELECTED FINANCIAL DATA
--------------------------------

The selected consolidated financial data for each of the years in the five-year
period ended December 31, 2004 are derived from the audited financial statements
of the Company. The following data should be read in conjunction with the
financial statements and related notes and with Management's Discussion and
Analysis of Financial Condition and Results of Operations, which are included
elsewhere in this Annual Report on Form 10-K.

                             SELECTED FINANCIAL DATA
                 (IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED                                                2004          2003           2002           2001           2000
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>            <C>            <C>            <C>            <C>
STATEMENT OF OPERATION INFORMATION:
Net sales                                                 $24,690        $19,521        $16,530        $21,669        $35,352
  Gross profit                                              6,437          5,579          4,133          5,250         13,219
  Selling, general and administrative expenses              5,271          4,832          4,143          5,061          5,623
  Research and development                                    707            581            458            379            670
  Operating profit (loss)                                     459            166          (469)          (191)          6,926
  Other income (expense), net                                 307            141            289            461            793
---------------------------------------------------------------------------------------------------------------------------------
  Net income (loss)                                           486            201           (106)           190          5,013
---------------------------------------------------------------------------------------------------------------------------------
PER SHARE AMOUNTS:
  Net income (loss) per share (basic)                         .34            .14           (.07)           .12           2.65
  Net income (loss) per share (diluted)                       .34            .14           (.07)           .11           2.57
  Book value per share                                       8.38           8.04           7.91           8.00          11.28
  Market price per share (unaudited) - high                 19.49          13.36          15.10          26.44          26.06
                                     - low                  11.50           9.00           8.25          12.31          14.50
---------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET INFORMATION
  Current assets                                          $18,441        $17,109        $14,723        $15,029        $28,970
  Total assets                                             20,901         19,793         16,902         17,839         31,477
  Current liabilities                                       8,623          7,894          5,139          5,854          9,381
  Long-term liabilities                                       350            450            550            650            750
  Shareholders' equity                                     11,928         11,450         11,212         11,336         21,345
Weighted average number of equivalent
shares outstanding                                      1,425,497      1,422,707      1,417,682      1,658,296      1,948,956

---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

In May 2001, we purchased 550,000 shares of our common stock for $11,000,000 in
a modified "Dutch auction" tender offer. We also incurred $461,136 in related
fees and expenses. The reduction in shareholders' equity in 2001 reflects this
transaction.



                                       8

<PAGE>

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
OF OPERATIONS
-------------

OVERVIEW
--------

NEWSPAPER INDUSTRY CONSIDERATIONS
Our financial performance reflects, to a meaningful extent, conditions in the
newspaper industry. We believe that our customers' spending for capital
investment, and therefore, demand for our equipment, are affected by
fluctuations in advertising revenue and newsprint cost. Specifically, we believe
the growth in our business is somewhat reflective of the growth in newspaper
advertising revenues, offset by any increases in newsprint costs. Similarly, we
believe that a decline in advertising revenues generally will adversely affect
capital equipment spending by newspapers and, as a result, will adversely affect
our financial performance. On a longer-term basis, we believe that capital
investment patterns have been, and will continue to be, affected by reduction in
newspaper circulation and industry consolidation. According to published
reports, newspaper circulation in the United States has decreased by an average
of approximately 1% each year from 1987 to 2003. With news and other information
immediately available on competing media such as television, radio and the
Internet, we anticipate that this circulation trend will continue. While reduced
circulation could negatively affect demand for our products, we believe the
consolidation of newspaper ownership in recent years has had a positive impact
on our business. In many cases, when large newspaper and media groups have
acquired small newspapers and newspaper chains, the acquiring groups centralize
the production and distribution of multiple newspapers located in a geographic
area to one or a few sites. The operation of centralized production and
distribution facilities typically require the purchase of additional automated
equipment. Therefore, consolidation could enhance demand for our products.

Based on published financial reports and discussions with our customers, we
believe that major newspaper chains generally derive over 70% of their revenues
from advertising. Preliminary statistics obtained from the Newspaper Association
of America (NAA) indicate that newspaper advertising revenue increased 3.9% in
2004 compared to 2003. This increase is lower than historical levels.
Additionally, recent estimates by NAA and other published reports by analysts
indicate an expectation that the trend of lower than historical increases in
advertising revenue will continue into 2005, mostly due to competition for
advertising dollars by other media and reports of newspaper circulation
misstatements.

Based on public filings of financial reports of many newspaper chains, newsprint
represents a significant operating expense for newspaper publishers. According
to published reports, newsprint prices increased approximately 10% in 2004 with
an expected similar increase in 2005. We believe that the higher newsprint
pricing trends may have an adverse effect on capital spending demands of
newspaper publishers in 2005.

Our 2004 booked orders totaled $19,913,000 compared to $27,121,000 in 2003. We
believe that the larger volume of orders received in 2003 reflected pent-up
demand by newspaper publishers, who deferred capital spending during the prior
two-year period due to adverse economic conditions affecting the newspaper
industry. Furthermore, we believe our 2004 order levels reflect current
advertising revenue growth trends in the newspaper industry.

We do not believe that we will be able to maintain the rate of growth in net
sales that we experienced in the last two years solely through our current
product line. Therefore, we will be seeking to identify and effect strategic
acquisitions that can enhance our position in the newspaper post-press market or
provide reasonable modest diversification. We cannot assure, however, that we
will be successful identifying and completing such acquisitions.

EFFECT OF CONTRACT TERMS ON CASH GENERATION, REVENUE RECOGNITION
Most of our sales are made on a contract basis. A typical sales contract
requires a customer to pay for its purchase in installments as follows: 30% due
at the time of the order; 30% due 60 days prior to shipment; 30% due 30 days
prior to shipment; 5% due upon installation and 5% due upon acceptance. Contract
payment terms vary for some orders and may be based on achieving agreed upon
milestones. While cash is collected throughout the order process, revenue is
recognized only when all significant contract obligations are satisfied and
collection of outstanding receivables are reasonably assured in accordance with
our revenue recognition policy (see note 1).

We normally receive larger orders several months in advance of delivery.
Therefore, backlog can be an important, though by no means conclusive,
indication of our short-term revenue stream. The timing of revenues can be
affected by pending orders, the amount of custom engineering required, the
timetable for delivery, the time required to complete installation and the
receipt of new orders. Our backlog, as of December 31, 2004 and December 31,
2003, was $8,631,000 and $12,725,000, respectively. We expect to ship all orders
in our December 31, 2004 backlog within 12 months.

                                       9

<PAGE>

RESULTS OF OPERATIONS
2004 vs. 2003

NET SALES
Net sales for 2004 were $24,690,055, an increase of $5,169,362 (26.5%) from 2003
net sales of $19,520,693. Most of the increase is due to higher sales volume of
core products including stackers, bottomwrappers and conveyor equipment. The
greater net sales are due mostly to the higher volume of orders booked in the
second half of 2003 and the resulting strong backlog entering into 2004.
Additionally, in 2004 we recognized net sales of approximately $1,245,000 from
our recently introduced Quipp Packman packaging system. Sales to foreign
customers were $2,172,536 in 2004 compared to $2,167,122 in 2003. Most of our
foreign sales presently are made to newspapers in Canada where equipment
specifications are similar to those in the U.S. Sales to foreign customers
fluctuate from year to year as opportunities to sell our equipment outside the
United States arise.

GROSS PROFIT
Gross profit for 2004 was $6,436,962, an increase of $858,095 (15.4%) from gross
profit of $5,578,867 for the corresponding period in 2003. As a percentage of
net sales, gross profit decreased to 26.1% in 2004 from 28.6% in 2003. The
decrease in gross profit margin as a percentage of sales is mainly due to the
production and installation of complex systems. In general, we expected margins
to be lower on these projects due to competitive pricing pressures, system
complexity and additional customization requirements. Nevertheless, we incurred
higher than expected costs on complex systems, including custom software
development costs for systems integration; additional production and
installation costs on newer products for which we had limited experience,
including an In-Line inserter system and waste handling systems; and rework
costs for a gripper conveyor system that was subsequently returned by the
customer. Our gripper conveyor has been redesigned to enhance its performance in
certain applications. Costs related to the redesign of the gripper conveyor were
charged to research and development.

Additionally, as a result of slow incoming orders during the third quarter in
2004, our overhead absorption was negatively affected by a one-week plant
shutdown and shortened work-weeks for production personnel, coupled with a
shutdown for two days due to hurricane conditions.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for 2004 were $5,271,015, an
increase of $439,496 (9.1%) as compared to $4,831,519 for 2003. We incurred
higher variable selling and administrative costs such as commission and warranty
expense due to improved net sales. Additionally, we incurred higher test
equipment expenses due to a greater number of prospective customers evaluating
our equipment as we recently introduced the Quipp Packman packaging system.
Also, we incurred an increase in selling, general and administrative costs from
expenses associated with compliance requirements of the Sarbanes-Oxley Act of
2002.

Selling, general and administrative costs in 2003 included costs related to
professional fees associated with the implementation of a shareholder rights
plan and a special meeting of shareholders held in response to the demand of a
shareholder.

We expect that our selling, general and administrative expenses will increase in
2005 due to expenses related to compliance requirements of the Sarbanes-Oxley
Act of 2002 and related regulations. Because we are not an "accelerated filer"
for purposes of SEC regulations, we will be required to comply with provisions
of the Sarbanes-Oxley Act of 2002 relating to management's assessment of
internal control over financial reporting and an audit of internal control over
financial reporting in connection with our financial statements for the year
ended December 31, 2006. We have retained and are working with consultants to
assist us in our compliance efforts.

RESEARCH AND DEVELOPMENT
Research and development expenses for 2004 were $707,147, an increase of
$126,026 (21.7%) as compared to $581,121 in 2003. In 2004, we devoted much of
our research and development resources to our new In-Line "C"
inserting/collating system with poly-wrapping capabilities. In addition, we
expended research and development resources to redesign our gripper conveyor to
enhance the performance of the product in certain applications, and we completed
the software for the Quipp Packman packaging system. For the same period in
2003, we focused much of our engineering and technical efforts on the
development of the Quipp Packman packaging system.

                                       10

<PAGE>

OTHER INCOME AND EXPENSE (NET)
Other income and expense (net) in 2004 was $306,778 as compared to $140,591 for
the same period in 2003. Interest income increased to $194,953 from $133,332
mostly due to the collection of the final installment of an outstanding note
receivable from an international customer. All principal and interest payments
on the note receivable had previously been applied only to the principal balance
due to uncertainties regarding collectability of the note. Interest relating to
the note was recognized upon receipt of the final installment. Additionally, we
received $120,000 of royalty income relating to our patented automatic cart
loading system technology used by another supplier of post-press material
handling equipment. We received $15,000 of royalty income during the same period
in 2003.


RESULTS OF OPERATIONS
2003 vs. 2002

NET SALES
Net sales for 2003 were $19,520,693, an increase of $2,990,215 (18.1%) from 2002
net sales of $16,530,478. We believe that our newspaper customers curtailed
post-press capital equipment purchases in 2002 due to a decline in advertising
revenue during 2001 and the first half of 2002. Published reports indicate that
advertising revenues for newspapers have increased modestly beginning in the
second half of 2002 and through 2003; we believe that our 2003 sales reflect
this growth. In addition, we recognized sales totaling $948,959 from our new
inserter product line obtained through the acquisition of assets from USA
Leader, Inc.

GROSS PROFIT
Gross profit for 2003 was $5,578,867, an increase of $1,446,132 (35.0%) from
gross profit of $4,132,735 for the corresponding period in 2002. As a percentage
of net sales, gross profit increased to 28.6% in 2003 from 25.0% in 2002. The
improvement of gross profit as a percentage of sales was due in part to the
allocation of fixed manufacturing overhead costs to a greater volume of
production and shipments. Additionally, we incurred lower production and
installation cost overruns in 2003 than in 2002. During the first six months of
2002, we generated higher than expected costs from the production and
installation on some larger custom orders.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for 2003 were $4,831,519, an
increase of $688,138 (16.6%) as compared to $4,143,381 for 2002. The increase
was due primarily to changes in the allowance for doubtful accounts, incurrence
of non-recurring costs, and increase in selling, marketing and amortization
costs. We increased our allowance for doubtful accounts by $64,000 in 2003, in
contrast to a $155,000 reduction in allowance for doubtful accounts for the
corresponding period in 2002. The 2003 net increase in our allowance for
doubtful accounts was due to the deterioration of the financial condition of one
of our customers, offset in part by collection of old accounts receivable
balances that were previously reserved. The reduction in the accounts receivable
reserve in 2002 resulted from our collecting customer receivable balances that
were previously reserved. Non-recurring costs of approximately $160,000 related
to a special meeting of shareholders held in response to the demand by a
shareholder and professional fees associated with the implementation of a
shareholder rights plan. The remaining increase in selling, general and
administrative costs relate to marketing costs for our recently introduced
In-Line and Packman product lines, amortization expense relating to identifiable
intangible assets from USA Leader acquisition and higher variable selling
expenses.

RESEARCH AND DEVELOPMENT
Research and development expenses for 2003 were $581,121, an increase of
$122,734 (26.8%) as compared to $458,387 in 2002. In 2003 we devoted engineering
and technical efforts to develop the Quipp Packman packaging system. The
majority of our 2002 research and development costs represented expenditures for
the development of our 500 Stacker, a high-resolution ink-jet printer for our
Viper bottomwrapper product line and initiation of our Quipp Packman project.

OTHER INCOME AND EXPENSE (NET)
Other income and expense (net) in 2003 was $140,591 as compared to $288,962 for
the same period in 2002. The decrease is primarily due to lower royalty income
relating to our automatic cart loading system and lower interest rates on our
securities available for sale. Additionally, in 2002, we realized gains of
$49,000 on the sale of securities.


                                       11

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
Over the past several years, our cash generation has been more than sufficient
to support our operations. While our cash, cash equivalents and securities
available for sale decreased by $1,144,187 at December 31, 2004 compared to the
same date in the previous year, much of the decrease relates to increased
inventory and receivables related to progress billings in connection with the
sale of a large and complex order that required an extended period of time to
design, manufacture and install. Accordingly, we expect our balance of cash,
cash equivalents and securities available for sale to improve when we recognize
revenue and cost of sales and collect the receivables that are contractually due
upon system start-up and acceptance.

On March 25, 2005, we entered into a $3,000,000 line of credit arrangement.
Interest is payable monthly at a rate equal to the One-Month LIBOR rate plus
2.4%. Collateral on the line of credit includes all accounts receivable,
inventory, intangibles and contract rights as well as securities with value of
no less than $1,000,000. As of the date of this report, we have not drawn on the
line of credit .

Our long-term debt consists solely of obligations under variable rate industrial
revenue bonds that were issued through the Dade County Industrial Development
Authority in 1988. At December 31, 2004, the balance due on the bonds was
$450,000, of which $100,000 is classified as a current liability on our balance
sheet. During 2004, the bonds bore interest at an average rate of 1.6%.

The following table provides information relating to certain of our material
contractual obligations at December 31, 2004.

                             PAYMENTS DUE BY PERIOD
                             ----------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
                                               LESS THAN 1                                  MORE THAN 5
CONTRACTUAL OBLIGATIONS             TOTAL          YEAR        1-3 YEARS     4-5 YEARS          YEARS
--------------------------------------------------------------------------------------------------------
<S>                                <C>           <C>           <C>            <C>              <C>
Purchase Commitments               $353,116      $353,116      $      0       $      0         $    0
Industrial Revenue Bonds           $450,000      $100,000      $200,000       $150,000         $    0
--------------------------------------------------------------------------------------------------------
</TABLE>

On December 31, 2004, cash, cash equivalents and securities available for sale
totaled $8,739,207, as compared to $9,883,394 at December 31, 2003. The
reduction in cash and cash equivalents and securities available for sale
resulted principally from increased inventory and receivables in connection with
the sale of a large and complex order that required an extended period of time
to design, manufacture and install. As this system is completed, the Company
expects to recognize revenue and cost of sales and collect the receivables that
are contractually due upon system start-up and acceptance. Also, our receivables
increased as a high volume of fourth quarter shipments occurred during the last
30 days of the year.

Working capital at December 31, 2004 was $9,817,803 an increase of $602,252 from
$9,215,551 at December 31, 2003. The improved working capital is due mostly to
net income generated in 2004.

As noted in the "Overview" section above, we may effect strategic acquisitions
to enhance our position in the newspaper post-press market or provide reasonable
market diversification. If any acquisition is effected, it may require a
significant cash investment, Nevertheless, we believe that our cash, cash
equivalents and securities available for sale together with cash generated from
operations will be sufficient to fund operations at the current level.


CRITICAL ACCOUNTING ESTIMATES

In preparing our financial statements, management is required to make estimates
and assumptions that, among other things, affect the reported amounts of assets,
revenues and expenses. These estimates and assumptions are most significant
where they involve levels of subjectivity and judgment necessary to account for
highly uncertain matters or matters susceptible to change, and where they can
have a material impact on our financial condition and operating performance. We
discuss below the more significant estimates and related assumptions used in the
preparation of our consolidated financial statements. If actual results were to
differ materially from the estimates made, the reported results could be
materially affected. Our senior management has discussed the application of
these estimates with our Audit Committee.


                                       12

<PAGE>

Revenue recognition
-------------------

Revenue from contracts that include multiple element arrangements, such as a
sale of standard equipment and basic installation services, is recognized as
each element is earned based on the relative fair value of each element. Revenue
on standard equipment is recognized upon delivery in accordance with contractual
terms, net of discounts. The fair value of installation services is deferred
until the installation is completed. Management reviews objective evidence such
as prices charged when each element is sold separately and selling prices on
similar elements sold by competitors in making judgment as to the fair value for
each element of the contract.

Revenue from long-term complex system arrangements, such as a sale of complex
equipment, controls and software, is recognized using the percentage of
completion method of accounting. Revenue recognition is measured by units
delivered. On such contracts, management makes judgments regarding costs and
profitability estimates measuring progress toward completion. These judgments
are subject to some degree of uncertainty, and unanticipated efforts necessary
to complete a complex system could adversely affect operating results in future
periods.

Allowance for doubtful accounts
-------------------------------

We continuously monitor collections and payments from our customers and maintain
an allowance for doubtful accounts based upon our historical experience and any
specific customer collection issues that we have identified. Nevertheless, there
is a risk that credit losses in the future will exceed our expectations, in
which case our operating results would be adversely affected.

Warranty reserves
-----------------

We record a warranty reserve based on our actual historical return rates and
repair costs at the time of sale. While our warranty costs have generally been
within our expectations and the provisions established, future returns or repair
costs could be in excess of our warranty reserves. Additionally, we do not have
extensive warranty claims experience with recently introduced products. A
significant increase in product return rates or a significant increase in the
costs to repair our products would adversely affect our operating results for
the period or periods in which such returns or additional costs materialize.

Intangible assets
-----------------

In connection with our acquisition of certain assets of USA Leader, Inc., we
estimated the value of that company's patent, other technology and customer
list, as well as non-competition agreements we obtained as a part of this
transaction. Because the value of these assets is not certain, there was a
degree of subjectivity in allocating fair value to the assets. The determination
of fair value of the assets can have an impact on depreciation and amortization
expense, because the useful lives of such assets vary from 5 years to 17 years.
Moreover, in the event that the value of such assets are deemed to be impaired
in the future, we would be required to charge the amount of the impairment to
selling, general and administrative expenses.

MARKET RISK
We are exposed to various types of market risk, including changes in interest
rates. Market risk is the potential loss arising from adverse changes in market
rates and prices such as interest rates. We do not enter into derivatives or
other financial instruments for trading or speculative purposes. Because our
cash and investments exceed short and long-term debt, the exposure to interest
rates relates primarily to our investment portfolio. Due to the short-term
maturities of our investments, we believe there is no significant risk arising
from interest rate fluctuations. To ensure safety and liquidity, we only invest
in instruments with credit quality and which are traded in a secondary market.
The counterparties are major financial institutions and government agencies.

INFLATION
The rate of inflation has not had a material impact on operations.

RECENT ACCOUNTING PRONOUNCEMENTS
See Note 17 in the Notes to Consolidated Financial Statements for recent
accounting pronouncements.


                                       13

<PAGE>

FORWARD LOOKING STATEMENTS
The statements contained in this Annual Report on Form 10-K, including
statements concerning shipment of backlog orders; the effect of changes in
newspaper advertising revenue and newsprint costs on orders for our products;
newspaper circulation trends; the effect of decreasing circulation and newspaper
industry consolidation on demand for our products; anticipated improvements in
cash, cash equivalents and securities available for sale; collection of
receivables relating to a large and complex order; cash investment in strategic
acquisitions; and adequacy of available resources, are forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. A number of important factors could cause actual results to differ
materially from those in the forward looking statements including, but not
limited to, economic conditions generally and specifically in the newspaper
industry; acceleration of the decline in newspaper circulation; capital spending
reductions by newspaper publishers; demand and market acceptance for new and
existing products; the impact of competitive products and pricing; delays in
shipment; cancellation of customer orders; engineering and production
difficulties; unanticipated customer demand for additional work in connection
with large and complex orders; payment delays; and specific terms of strategic
acquisitions (if any are effected),



ITEM 7A - QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
--------------------------------------------------------------------

See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Market Risk."



ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                       PAGE
-----------------------------------------------------                      ----

Report of Independent Registered Public Accounting Firm                     15

Financial Statements:

    Consolidated Balance Sheets as of December 31, 2004 and 2003            16

    Consolidated Statements of Operations for each of the years in
        the three-year period ended December 31, 2004                       17

    Consolidated Statements of Shareholders' Equity for each of the
        years in the three-year period ended December 31, 2004              18

    Consolidated Statements of Cash Flows for each of the years in
        the three-year period ended December 31, 2004                       19

    Notes to Consolidated Financial Statements.                             20









                                       14

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------

To the Board of Directors of Quipp, Inc.:

We have audited the accompanying consolidated balance sheets of Quipp Inc. and
subsidiary (the Company) as of December 31, 2004 and 2003, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 2004. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2004 and 2003, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 2004, in
conformity with U.S. generally accepted accounting principles.



/ s / KPMG LLP
Miami, Florida
March 28, 2005









                                       15

<PAGE>

                           QUIPP, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                                2004            2003
                                                                            ------------    ------------
<S>                                                                         <C>             <C>
         ASSETS
         Current assets:
             Cash and cash equivalents                                      $  5,762,511    $  7,490,814
             Securities available for sale                                     2,976,696       2,392,580
             Accounts receivable, net                                          4,092,548       2,472,766
             Inventories                                                       4,876,677       3,692,386
             Current deferred tax asset                                          531,589         666,337
             Prepaid expenses and other current assets                           200,570         239,791
             Current portion of notes receivable                                      --         154,565
                                                                            ------------    ------------
         TOTAL CURRENT ASSETS                                                 18,440,591      17,109,239

         Property, plant and equipment, net                                    1,693,504       1,765,079
         Intangible assets, net                                                  658,412         773,605
         Goodwill                                                                 68,161          98,093
         Other assets                                                             40,459          47,179
                                                                            ------------    ------------
         TOTAL ASSETS                                                       $ 20,901,127    $ 19,793,195
                                                                            ============    ============
         LIABILITIES AND SHAREHOLDERS' EQUITY
         Current liabilities:
            Current portion of long-term debt                               $    100,000    $    100,000
            Accounts payable                                                   1,260,650       1,324,004
            Accrued salaries and wages                                           603,617         491,919
            Deferred revenues                                                  4,633,632       4,174,113
            Current tax liability                                                153,828          14,768
            Other accrued liabilities                                          1,871,061       1,788,884
                                                                            ------------    ------------
         TOTAL CURRENT LIABILITIES                                             8,622,788       7,893,688

         Long-term debt, net of current portion                                  350,000         450,000
                                                                            ------------    ------------
         TOTAL LIABILITIES                                                     8,972,788       8,343,688

         Commitments and Contingencies (Note 16)

         Shareholders' Equity:
            Common stock - par value $.01 per share, authorized 8,000,000
              shares, issued 1,433,025 and 1,433,025 shares in 2004
              and 2003, respectively)                                             14,330          14,330
           Paid-in capital                                                        83,825          72,487
           Treasury Stock, at cost                                              (148,375)       (148,375)
           Retained earnings                                                  11,994,935      11,509,149
           Other comprehensive income                                            (16,376)          1,916
                                                                            ------------    ------------

                                                                              11,928,339      11,449,507
                                                                            ------------    ------------
         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         $ 20,901,127    $ 19,793,195
                                                                            ============    ============
</TABLE>

See accompanying notes to the consolidated financial statements.


                                       16
<PAGE>

                           QUIPP, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

<TABLE>
<CAPTION>
                                                               2004            2003            2002
                                                           ------------    ------------    ------------
<S>                                                        <C>             <C>             <C>

         Net sales                                         $ 24,690,055    $ 19,520,693    $ 16,530,478
         Cost of sales                                      (18,253,093)    (13,941,826)    (12,397,743)
                                                           ------------    ------------    ------------
         GROSS PROFIT                                         6,436,962       5,578,867       4,132,735
                                                           ------------    ------------    ------------
         Operating expenses:
            Selling, general and administrative expenses     (5,271,015)     (4,831,519)     (4,143,381)
            Research and development                           (707,147)       (581,121)       (458,387)
                                                           ------------    ------------    ------------
         OPERATING  PROFIT (LOSS)                               458,800         166,227        (469,033)

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

         Other income (expense):
            Miscellaneous income (expense)                      120,000          15,019         100,864
            Interest income                                     194,953         133,332         199,789
            Interest expense                                     (8,175)         (7,760)        (11,691)
                                                           ------------    ------------    ------------

                                                                306,778         140,591         288,962

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

         INCOME (LOSS) BEFORE INCOME TAXES                      765,578         306,818        (180,071)

         Income tax (expense) benefit                          (279,792)       (105,624)         73,848
                                                           ------------    ------------    ------------
         NET INCOME (LOSS)                                 $    485,786    $    201,194    $   (106,223)
                                                           ------------    ------------    ------------



         OTHER COMPREHENSIVE INCOME, NET OF TAXES:
         Unrealized (loss) on securities held for sale          (18,292)        (36,689)        (16,863)
                                                           ------------    ------------    ------------
         Comprehensive income (loss)                       $    467,494    $    164,505    $   (123,086)
                                                           ------------    ------------    ------------

         ----------------------------------------------------------------------------------------------
         PER SHARE AMOUNTS:

            Basic income per common share                         $0.34           $0.14          ($0.07)
            Diluted income per common share                       $0.34           $0.14          ($0.07)

         Basic average number common shares                   1,423,775       1,422,707       1,417,682
              Outstanding

         Diluted average number of common and
            common equivalent shares outstanding              1,425,497       1,422,707       1,417,682
=======================================================================================================
</TABLE>

See accompanying notes to the consolidated financial statements.

                                       17

<PAGE>

                           QUIPP, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

<TABLE>
<CAPTION>
                                                        ADDITIONAL                                        OTHER          TOTAL
                                      COMMON STOCK        PAID-IN      RETAINED     TREASURY STOCK    COMPREHENSIVE   SHAREHOLDERS'
                                     SHARES    AMOUNT     CAPITAL      EARNINGS    SHARES    AMOUNT    INCOME (LOSS)     EQUITY
<S>                               <C>          <C>         <C>      <C>             <C>     <C>           <C>           <C>
Balances on
         January 1, 2002          1,426,025    14,260         --    11,414,178      9,250   (148,375)      55,468       11,335,531
Net loss                                                              (106,223)                                           (106,223)
Unrealized loss on securities
   held for sale                                                                                          (16,863)         (16,863)
------------------------------------------------------------------------------------------------------------------------------------

Balances on
         January 1, 2003          1,426,025    14,260         --    11,307,955      9,250   (148,375)      38,605       11,212,445

Net income                                                             201,194                                             201,194
Issuance of shares to employees       1,000        10     14,767                                                            14,777

Unrealized loss on securities
  held for sale                                                                                           (36,689)         (36,689)

Issuance of shares to purchase
  certain assets of USA Leader,
  Inc.                                6,000        60     57,720                                                            57,780

 Balances on
          December 31, 2003       1,433,025    14,330     72,487    11,509,149      9,250   (148,375)       1,916       11,449,507
-----------------------------------------------------------------------------------------------------------------------------------

Net income                                                             485,786                                             485,786

Stock based compensation                                  11,338                                                            11,338

Unrealized loss on securities held
  for sale                                                                                                (18,292)         (18,292)
-----------------------------------------------------------------------------------------------------------------------------------

Balances on
        December 31, 2004
                                  1,433,025    14,330     83,825    11,994,935      9,250   (148,375)     (16,376)      11,928,339
                                  =========   =======    =======   ===========     ======  =========     ========      =============
</TABLE>

See accompanying notes to the consolidated financial statements.









                                       18

<PAGE>

                           QUIPP, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDING DECEMBER 31, 2004, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                        2004            2003          2002
                                                                     -----------    -----------     ----------
<S>                                                                  <C>            <C>             <C>
Cash provided by operations:
   Net income (loss)                                                 $   485,786    $   201,194      ($106,223)
                                                                     -----------    -----------     ----------
Reconciliation of net income (loss) to net cash (used) provided by
operations:

Deferred income taxes                                                    134,748         58,021        113,090
Depreciation                                                             271,063        263,922        268,807
Intangible amortization                                                  115,193         86,395             --
Goodwill Impairment                                                       29,932         76,729        137,379
Stock-based compensation                                                  11,338         14,777             --
Charged to bad debt expense                                              117,990         64,546       (154,806)

Changes in operational assets and liabilities net of effect of
acquisition:
Accounts receivable                                                   (1,737,772)       335,305        664,294
Inventories                                                           (1,184,291)    (1,602,283)       535,831
Prepaid expenses and other assets                                         45,941        114,516         29,544
Notes receivable                                                         154,565        267,763        294,494
Accounts payable and other accrued liabilities                           130,521        291,265       (519,817)
Deferred revenues                                                        459,519      1,797,082       (194,320)
Income taxes payable                                                     139,060         14,768             --
                                                                     -----------------------------------------
NET CASH (USED IN) PROVIDED BY OPERATIONS                               (826,407)     1,984,000      1,068,273
                                                                     -----------------------------------------

Cash flows from investing activities:
Securities purchased                                                    (991,880)    (1,999,940)    (7,706,378)
Securities sold                                                          389,472      6,427,198      6,956,228
Capital expenditures                                                    (199,488)      (245,035)       (76,515)
Purchase of assets from USA Leader, Inc.                                      --       (344,954)            --
                                                                     -----------    -----------    -----------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                     (801,896)     3,837,269       (826,665)
                                                                     -----------    -----------    -----------

Cash flows from financing activities:
Repayment of debt                                                       (100,000)      (100,000)      (100,000)
                                                                     -----------    -----------    -----------
NET CASH USED IN FINANCING ACTIVITIES                                   (100,000)      (100,000)      (100,000)
                                                                     -----------    -----------    -----------

(Decrease) increase in cash and cash equivalents                      (1,728,303)     5,721,269        141,608

Cash and cash equivalents, beginning of year                           7,490,814      1,769,545      1,627,937
                                                                     -----------    -----------    -----------

Cash and cash equivalents, end of year                               $ 5,762,511    $ 7,490,814    $ 1,769,545
                                                                     ===========    ===========    ===========

SUPPLEMENTAL DISCLOSURE OF NON CASH INFORMATION:
Issuance of shares to purchase assets of USA Leader, Inc.                     --        $57,780             --
SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS:
Interest                                                                  $8,175         $7,760        $11,691
Income Taxes                                                              $5,984        $10,270         $1,931
                                                                     ===========    ===========    ===========
</TABLE>

See accompanying notes to the consolidated financial statements.

                                       19

<PAGE>

                           QUIPP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS - Through our wholly owned subsidiary, Quipp Systems, Inc.,
we manufacture, sell and install post-press material handling equipment and
systems to newspaper publishers. In the post-press stage of newspaper
operations, newspapers move from the pressroom in a continuous stream and are
stacked, bundled and transferred to the shipping docks and loaded into carts or
stored on pallets for further distribution. Our equipment and control systems
facilitate the automated movement of newspapers from the printing press to the
delivery truck.

PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements
include the accounts of Quipp, Inc. and Quipp Systems, Inc., a wholly owned
subsidiary (collectively, the "Company"). All material intercompany balances and
transactions have been eliminated in consolidation.

ACCOUNTS RECEIVABLE AND DEFERRED REVENUE - Most of the Company's sales are made
on a contract basis and require customers to make progress payments. Progress
payments are recorded as deferred revenue when received. Accounts receivable is
presented net of an allowance for doubtful accounts of $168,000 and $230,000 for
2004 and 2003, respectively.

REVENUE RECOGNITION - Revenue is recognized when all significant contractual
obligations have been satisfied and collection of the resulting accounts
receivable is reasonably assured. Revenue from the sale of standard stand-alone
equipment without installation service is recognized upon delivery according to
contractual terms and is recorded net of discounts. Revenue from
multiple-element arrangements such as the sale of standard equipment and basic
installation services is recognized in accordance with EITF 00-21 "Revenue
Arrangements with Multiple Deliverables". Revenue from the standard equipment is
recognized upon delivery according to contractual terms and is recorded net of
discounts. The fair value of the revenue related to the installation service is
deferred until installation services are provided. Fair value is determined by
the price charged to other customers when services are sold separately and is
supported by competitive market data. Revenue from long-term complex equipment
or installation arrangements is recognized using the unit of delivery method
under SOP 81-1 in accordance with contractual terms and is recorded net of
discounts. Cost and profitability estimates are revised periodically based on
changes in circumstances. Estimated losses on such contracts are recognized
immediately. The Company had one contract accounted for under SOP 81-1 as of
December 31, 2004.

The Company deferred sales totaling $2,155,199 and $869,028 at December 31, 2004
and 2003, respectively, for products that shipped but require complex
installation services. Pending the completion of installation or collection of
the outstanding receivable, the $2,155,199 and $869,028 balances are included in
our balance sheet as deferred revenue. The related cost of these products is
included in inventory.

INVENTORIES - Inventories include material, labor and factory overhead, and are
stated at the lower of cost or market. Costs are determined using the first-in,
first-out (FIFO) method. Inventories determined not likely to be sold during the
product lifecycle are written down to fair value based on the Company's
experience recovering value from similar products.

GOODWILL AND INTANGIBLE ASSETS - Goodwill represents the excess of costs over
fair value of assets of businesses acquired. The Company adopted the provisions
of Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and
Other Intangible Assets," as of January 1, 2002. Goodwill and intangible assets
acquired in a business combination and determined to have an indefinite useful
life are not amortized, but instead tested for impairment at least annually in
accordance with SFAS No. 142. The Company evaluates goodwill impairment every
quarter, calculating fair value of the reporting unit by estimating future cash
flows. If the fair value of the reporting unit is less than the carrying amount
of goodwill, an impairment loss is recognized in an amount equal to that excess.

RESEARCH AND DEVELOPMENT COSTS - Research and development costs include
expenditures for the development of new products, significant enhancements of
existing products or production processes, and the design, testing and
construction of prototypes. The Company expenses research and development costs
as they are incurred.

PROPERTY, PLANT AND EQUIPMENT, NET - Property, plant and equipment is recorded
at cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets. Repairs and maintenance are expensed as
incurred; alterations and major overhauls that improve an asset or extend the
useful lives are capitalized.

                                       20

<PAGE>

CASH AND CASH EQUIVALENTS - Cash and cash equivalents include all the Company's
operating cash balances, demand deposits and short-term investments with
original maturities of three months or less. The Company classifies investments
with an original maturity of more than three months as securities available for
sale.

INCOME TAXES - Income taxes are accounted for using the asset and liability
method under the provisions of SFAS No. 109, "Accounting For Income Taxes."
Deferred tax assets and liabilities are identified based on temporary
differences between the financial statements and the tax bases of assets and
liabilities. Deferred tax assets and liabilities are measured using tax rates
that are expected to apply to taxable income in the year the temporary
difference is expected to recover or settle. Tax rate changes are recognized in
the period in which the change occurs.

INCOME PER SHARE - Basic income per share is based on the weighted average
number of common shares outstanding during the periods presented. Diluted income
per share is computed using the weighted average number of common and dilutive
common equivalent shares outstanding in the periods presented. Dilutive common
equivalent shares assume the exercise of options, calculated under the treasury
stock method, using the average stock market prices during the periods.

WARRANTY RESERVE - Warranty reserves are calculated based on the Company's
previous experience with customers' claims arising from the sale of merchandise.
The reserve is computed at a percentage of contract revenue and is adjusted for
warranty requirements on specific projects. Additions to this reserve are
charged to selling expense. Warranty reserve is included in other accrued
liabilities.

SECURITIES AVAILABLE FOR SALE - Securities available for sale include
investments that are not held for trading or not intended to be held to
maturity. These instruments are recorded at their fair value. Unrealized holding
gains or losses, net of the related tax effect, are included as a separate
component of shareholders' equity. Realized gains and losses, arising from the
sale of securities, are computed using the specific identification method and
included in other income. Fair value of the securities is determined based upon
market prices. A decrease in the market value below cost, determined to be other
than temporary, would result in a reduction in carrying amount to fair value.
This reduction would be charged to income. Premiums and discounts are amortized
or accreted using a method that approximates the effective yield over the life
of the security. Dividend and interest income is recognized when earned. The
Company invests in short term and variable rate long-term securities and
believes there is no significant risk arising from interest rate fluctuations.
In order to ensure liquidity, the Company will only invest in instruments with
credit quality and which are traded in a secondary market.

DEFERRED BOND-FINANCING COST - Deferred bond financing costs were incurred upon
the issuance of industrial revenue bonds (see note 8) and are included in other
assets. These costs are amortized using a method that approximates the effective
yield over the term of the bonds.

USE OF ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements. These estimates could
affect the reported amounts of revenues and expenses. Significant items subject
to estimates include the allowance for doubtful accounts, warranty reserves and
inventory reserves. Actual results could differ from those estimates.

IMPAIRMENT OF LONG-LIVED ASSETS - The Company adopted SFAS No. 144, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of" on January 1, 2002. This statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. Prior to the adoption of SFAS No. 144, the Company accounted for
long-lived assets in accordance with SFAS No. 121, "Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." There was no
impairment of long-lived assets in 2004 and 2003.

COMPREHENSIVE INCOME (LOSS) - The Company had unrealized (losses) gains on
securities available for sale totaling $(16,376) and $1,916 at December 31, 2004
and 2003, respectively.

SEGMENT REPORTING - SFAS No. 131, "Disclosure about Segments of an Enterprise
and Related Information" applies a "management approach" in which the internal
reporting that is used by management for making operational decisions and
evaluating performance is the source for the Company's segment reporting. The
Company operates in one segment for management reporting purposes.

                                       21

<PAGE>

STOCK-BASED COMPENSATION - Prior to 2003, the company accounted for the grant of
stock options under its 1996 Equity Compensation Plan using the recognition and
measurement provisions of APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. No stock-based employee compensation
cost related to stock options is reflected in 2003 net income, as all options
granted under the plan had an exercise price equal to the market value of the
underlying common stock on the date of grant. Effective January 1, 2003, the
Company adopted the fair value recognition provisions of FASB Statement No. 123,
"Accounting for Stock Based Compensation," prospectively to all employee awards
granted, modified or settled after January 1, 2003. Awards under the company's
1996 Equity Compensation Plan vest over periods ranging from three to five
years. The following table illustrates the effect on net loss and loss per share
if the fair value based method had been applied to all outstanding and unvested
awards in each period.

<TABLE>
<CAPTION>
                                                                                      2004         2003         2002
                                                                                    --------     --------     --------
<S>                                                                                 <C>          <C>          <C>
Net  income (loss) as reported                                                      $485,786     $201,194     ($106,223)
Deduct total stock-based employee compensation expense determined under
fair-value-based method for all awards, net of tax                                  ($22,419)    ($33,615)     ($24,056)

Pro forma net income (loss)                                                         $463,367     $167,579     ($130,279)

EARNINGS PER SHARE:
Basic  - as reported                                                                   $0.34        $0.14        ($0.07)
Basic  - pro forma                                                                     $0.33        $0.12        ($0.09)

Diluted  - as reported                                                                 $0.34        $0.14        ($0.07)
Diluted  - pro forma                                                                   $0.33        $0.12        ($0.09)
</TABLE>

The per share average fair value of stock options granted during 2002 ranged
from $14.60 to $14.98. The fair values of the options granted were estimated on
the grant date using the Black-Scholes option pricing model. The following
weighted-average assumptions were used in calculating fair value:

                                                               2002
                                                       --------------------
             Expected Life                                 5 - 10 years
             Dividends                                         None
             Risk-free interest rate                           2.65%
             Expected volatility                              30.68%

ADVERTISING COSTS - The Company expenses advertising costs to selling, general
and administrative expenses as incurred. Advertising costs totaled $71,182,
$82,001, and $48,002 in 2004, 2003 and 2002, respectively.

RECLASSIFICATION - Certain reclassifications have been made to the 2003
financial statements to conform to the 2004 financial statement presentation.




                                       22

<PAGE>

NOTE 2 - SECURITIES AVAILABLE FOR SALE

Securities available for sale are recorded at fair value and consist primarily
of federal, state and local government obligations and other short-term
investments. As of December 31, 2004 and 2003, the amortized cost of securities
available for sale approximated fair value. Securities available for sale at
December 31, 2004 and 2003 consisted of the following:

<TABLE>
<CAPTION>
                                                                                  2004
                                                     -----------------------------------------------------------
                                                      AMORTIZED      UNREALIZED       UNREALIZED        FAIR
                                                        COST            GAIN             LOSS           VALUE
                                                     -----------     ---------        ----------     -----------
<S>                                                  <C>             <C>              <C>            <C>
Federal Government Agency Securities                 $ 2,993,072     $      --        $  (16,376)    $ 2,976,696
                                                     -----------     ---------        ----------     -----------
                                                     $ 2,993,072     $      --        $  (16,376)    $ 2,976,696
                                                     ===========     =========        ==========     ===========
<CAPTION>
                                                                                  2003
                                                     -----------------------------------------------------------
                                                      Amortized      Unrealized       Unrealized        Fair
                                                        Cost            Gain             Loss          Value
                                                     -----------------------------------------------------------
<S>                                                  <C>             <C>              <C>            <C>
Federal Government Agency Securities                 $ 2,000,000     $     560        $     (620)    $ 1,999,940

 Municipal Securities                                    390,664         1,976                --         392,640
                                                     -----------     ---------        ----------     -----------
                                                     $ 2,390,664     $   2,536        $     (620)    $ 2,392,580
                                                     ===========     =========        ==========     ===========
</TABLE>

Securities available for sale totaling $2,000,000 will mature in 2005 and the
remaining balance will mature in 2006. No gains or losses were realized in 2004
or 2003. Securities sold in 2002 resulted in realized gains of $49,287.


NOTE 3 - INVENTORIES

Inventory also includes equipment shipped to customers but not yet recognized as
a sale because either risk of loss has not transferred to the customer or the
equipment requires complex installation services. The Company will recognize the
sales and cost of sales for this equipment when the risk of loss transfers to
the customer or when installation services are complete and collection of the
resulting receivable is reasonably assured. Components of inventory as of
December 31, 2004 and 2003 were as follows:

                                                2004                  2003
                                             -----------           -----------
Raw Materials                                $ 1,844,297           $ 1,865,971
Work in Process                                1,024,104             1,153,058

Finished Goods                                   162,497               199,466
                                             -----------           -----------
Subtotal                                       3,030,898             3,218,495

Shipped, not recognized                        1,845,779               473,891
                                             -----------           -----------

Total                                        $ 4,876,677           $ 3,692,386
                                             -----------           -----------


Equipment made available to prospective customers for evaluation is included in
finished goods inventory at the lower of cost or market.




                                       23

<PAGE>

NOTE 4 - NOTES RECEIVABLE

Notes receivable consisted of the following as of December 31, 2004 and 2003:

                                                            2004     2003
                                                        ---------  ----------

Notes receivable                                        $      --  $ 154,565

Allowance for doubtful accounts                                --          --
                                                        ---------  ----------
                                                               --     154,565

Less:  current portion                                         --    (154,565)
                                                        ---------  ----------

Long term notes receivable                              $      --  $       --
                                                        ---------  ----------


NOTE 5 - INCOME TAXES

Income tax benefit (expense) for the years ended December 31, 2004, 2003 and
2002 is as follows:

                                 CURRENT         DEFERRED          TOTAL
                               ----------       ----------      ----------
2004
     U.S. FEDERAL              $ (119,131)      $ (123,591)     $ (242,722)
     STATE AND LOCAL              (25,913)         (11,157)        (37,070)
                               ----------       ----------      ----------
                               $ (145,044)      $ (134,748)     $ (279,792)
                               ----------       ----------      ----------
2003
     U.S. Federal              $  (42,115)      $  (53,606)     $  (95,721)
     State and local               (5,488)          (4,415)         (9,903)
                               ----------       ----------      ----------
                               $  (47,603)      $  (58,021)     $ (105,624)
                               ----------       ----------      ----------
2002
     U.S. Federal              $  177,965       $ (101,026)     $   76,939
     State and local                8,973          (12,064)         (3,091)
                               ----------       ----------      ----------
                               $  186,938       $ (113,090)     $   73,848
                               ----------       ----------      ----------









                                       24

<PAGE>

The tax effects of the temporary differences that give rise to significant
portions of the deferred tax assets and liabilities as of December 31, 2004 and
2003 are as follows:

------------------------------------------------------------------------------
                                                      2004             2003
                                                   ---------        ---------
DEFERRED TAX ASSETS:
Warranty reserve                                   $  83,005        $  93,108
Inventory obsolescence                               131,335          134,665
Allowance for bad debts                               61,870           84,473
Contract reserves                                    123,588          187,252
Vacation accrual                                      49,391           45,426
Unicap                                                84,768          108,671
Other taxes                                               --           13,297
Amortization                                          79,907           49,116
Other                                                 82,190           10,007
                                                   ---------        ---------
Total deferred tax assets                          $ 696,054        $ 726,015

DEFERRED TAX LIABILITY:
Other Taxes                                          (70,252)              --
Depreciation                                         (94,213)         (59,678)
                                                   ---------        ---------
Total gross deferred tax liabilities
                                                    (164,465)         (59,678)
                                                   ---------        ---------
Net current deferred tax assets                    $ 531,589        $ 666,337
                                                   =========        =========

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
asset will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods that the deferred tax assets are deductible, management believes it is
more likely than not the Company will realize the benefits of these deductible
differences. The amount of the deferred tax asset considered realizable,
however, could be reduced in the near term if estimates of future taxable income
during the carryforward period are reduced.

The following table summarizes the differences between the Company's effective
income tax (expense) benefit and the statutory federal tax (expense) benefit for
the years ended December 31, 2004, 2003, and 2002:

                                             Year Ended December 31,
                                      -----------------------------------
                                         2004         2003        2002
                                      ---------    ---------    ---------
Statutory federal income tax           (260,297)    (104,318)   $  61,224

Increase (decrease) resulting from:

State and Local taxes, net of
Federal income tax benefit              (24,466)      (6,536)      (2,040)

Permanent differences                     3,692       18,052       37,777

Other                                     1,279      (12,822)     (23,113)
                                      ---------    ---------    ---------
                                       (279,792)    (105,624)   $  73,848
                                      =========    =========    =========

The Company's effective tax rate was 36.5%, 34.4% and 41.0% in 2004, 2003, and
2002, respectively.

                                       25

<PAGE>

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT, NET

The property, plant and equipment at December 31, 2004 and 2003 consist of the
following:

-------------------------------------------------------------------------------
                                                                    ESTIMATED
                                         2004            2003      USEFUL LIFE
                                                                     (YEARS)
                                     -----------    ----------     ------------
LAND                                 $   500,500    $   500,500       --
BUILDING                               1,431,771      1,431,771       31
BUILDING IMPROVEMENTS                    637,246        600,492       10
MACHINERY                                863,262        838,198        5
FURNITURE AND FIXTURES                   226,777        222,294        5
COMPUTER EQUIPMENT                     1,562,640      1,428,555        5
AUTOMOBILES                               41,115         42,627        5
                                     -----------    -----------
                                       5,263,311      5,064,437
Less: Accumulated depreciation        (3,569,807)    (3,299,358)
                                     -----------    -----------

                                     $ 1,693,504    $ 1,765,079
                                     ===========    ===========

Depreciation expense charged to income was $271,063, $263,922 and $268,807 in
2004, 2003 and 2002, respectively.


NOTE 7 - ASSET PURCHASE

On March 6, 2003, pursuant to an Asset Purchase Agreement (the "Purchase
Agreement"), the Company, through its subsidiary Quipp Systems, Inc. ("Quipp
Systems"), completed the acquisition of certain assets (the "Asset Purchase") of
USA Leader, Inc., a Missouri corporation (the "Seller"). The assets acquired
pursuant to the Purchase Agreement included the Seller's patent, know-how,
drawings, tooling, customer list, other intellectual property, inventory,
furniture, equipment and supplies. The Seller manufactured and sold proprietary
inserting and collating equipment and stacking systems (the "Products") for the
newspaper and commercial printing markets. In the newspaper industry, the Seller
historically focused on small to intermediate sized publications, a market that
has not been a traditional focus of the Company. The Company has continued the
sale of the Products following the acquisition.

As consideration for the asset purchase, the Company paid the Seller $344,954
and 6,000 shares of common stock, $0.01 par value per share, of the Company.
Also, the Company pays additional amounts ("Additional Consideration")
consisting of a percentage of sales of the Products during the three years
following the date of purchase.

The asset purchase was treated as a purchase transaction and the acquisition
price was allocated to the acquired assets and assumed liabilities based on the
estimated fair value as of the acquisition date. While there was no goodwill
recorded as of December 31, 2004, if the sum of the $402,734 total consideration
paid as of December 31, 2004 and Additional Consideration that is paid
subsequent to that date exceeds the estimated fair value of net tangible assets
and intangible assets, such excess amounts will be recorded as goodwill. The
purchase price was allocated as follows:












                                       26

<PAGE>

        Net liabilities                                              $ (112,066)

        Less:   Acquisition costs                                      (277,302)

                Accrued contingent consideration                        (67,898)
                                                                     ----------
                                                                       (457,266)
        Amortizable Intangible Assets:
                Non-competion Agreement                 150,000
                   Customer List                         10,000
                   Patent                               200,000
                   Acquired Technology                  500,000
                                                      ---------

                                                                        860,000
                                                                      ---------
                                                                        402,734
                                                                      =========

As noted above, $860,000 was allocated to amortizable intangible assets
including a customer list, non-competition agreements and patent and technology
acquired as part of the asset purchase from USA Leader, Inc. Customer list
represents USA Leader's relationships within its installed base of customers.
The non-competition agreements were entered into with the former principals of
USA Leader, Inc. Acquired technology and patent represents a combination of USA
Leader's intellectual property, processes, patent and trade secrets developed
through experience in design and development of the product lines acquired in
the asset purchase. Amortization expense charged to income was $115,193 and
$86,395 in 2004 and 2003, respectively.

Details of the amortizable intangibles follow:

                                                 FAIR
               INTANGIBLE ASSET                  VALUE      LIFE
               ---------------------------     --------     --------
               Customer List                   $ 10,000      5 Years

               Non-competition agreement       $150,000      5 Years

               Patent                          $200,000     17 Years

               Acquired Technology             $500,000      7 Years

The consolidated statement of operations for the period ended December 31, 2004
includes the operating results of the Asset Purchase for the full year. The
consolidated operations for the period ended December 31, 2003 include the
operating results of the Asset Purchase from the date of acquisition. The
following unaudited pro forma results of operation of the Company for the
periods ended December 31, 2003 and 2002 assume the acquisition occurred as of
January 1, 2002. The unaudited pro forma results have been prepared for
comparative purposes only and do not purport to indicate the results of
operations that would have actually occurred had the acquisition of assets
occurred on the dates indicated.

                                          December 31, 2003    December 31, 2002
                                          -----------------   ------------------
   Net Sales                                $19,391,458          $17,063,650

   Net Income (loss)                            241,900             (113,573)

   Basic and diluted income (loss)
     per common share                              0.17                (0.08)

   Basic and diluted average number of
   common shares outstanding                  1,423,775            1,423,682


                                       27

<PAGE>

NOTE 8 - LONG-TERM DEBT

INDUSTRIAL REVENUE BONDS - On October 4, 1988, the Company borrowed $2,340,000
by issuing, through the Dade County Industrial Development Authority, Variable
Rate Industrial Revenue Bonds. The remaining balances of the bonds were $450,000
and $550,000 at December 31, 2004 and 2003, respectively, of which $100,000 is
classified as current. The bonds are secured by a letter of credit from a bank,
and bore interest at an average rate of 1.6% and 1.2% during 2004 and 2003,
respectively. The bonds are payable in annual installments of $100,000 in years
2005 through 2007 and $150,000 in 2008. The letter of credit securing the
Company's obligation expires on October 1, 2005.

NOTE 9 - STOCK OPTION PLANS

1996 EQUITY COMPENSATION PLAN - The Quipp, Inc. 1996 Equity Compensation Plan
(Equity Compensation Plan) provides for grants of stock options and stock-based
awards to employees, directors, consultants and advisors of the Company. Stock
options issued in connection with the Equity Compensation Plan are granted with
an exercise price per share equal to the fair market value of a share of Company
common stock at the date of grant. All stock options have five to ten-year
maximum terms and vest, either immediately, or within four years of grant date.
The total number of shares of common stock issuable under the Equity
Compensation Plan is 600,000. At December 31, 2004, 2003 and 2002 there were
77,764, 92,764 and 59,514 shares available for grant under the Equity
Compensation Plan.

Stock option activity during the periods indicated is as follows:

<TABLE>
<CAPTION>
                                                             INCENTIVE STOCK
                                                                 OPTIONS             NONQUALIFIED OPTIONS
                                                         --------------------       ----------------------
                                                                     WEIGHTED                     WEIGHTED
                                                                     AVERAGE                      AVERAGE
                                                                     EXERCISE                     EXERCISE
                                                          SHARES      PRICE         SHARES         PRICE
                                                         --------    -------        -------       --------
<S>                                                       <C>        <C>             <C>          <C>
         Balance at December 31, 2001                     114,375    $ 15.53         40,000       $  14.83
           Issued                                           6,000      14.60          5,000          14.98
           Cancellations                                  (24,500)     15.61         (5,000)         14.00
                                                         --------    -------        -------       --------
         Balance at December 31, 2002                      95,875    $ 15.39         40,000       $  14.95
            Cancellations                                 (33,250)     14.83             --             --
                                                         --------    -------        -------       --------
         Balance at December 31, 2003                      62,625    $ 15.69         40,000       $  14.95
            Issued                                         10,000    $ 13.60         15,000          13.88
            Cancellations                                      --    $    --        (10,000)         14.00
                                                         --------    -------        -------       --------
         Balance at December 31, 2004                      72,625    $ 15.40         45,000       $  14.80
                                                         ========    =======        =======       ========
</TABLE>

At December 31, 2004, 2003, and 2002 the number of shares underlying exercisable
options were 105,625, 98,625 and 123,500, respectively, the weighted average
exercise price of those options was $15.31, $15.43 and $15.36, respectively. The
range of exercise prices and remaining contractual life of outstanding options
was $13.60 to $17.50, and .5 to 10 years at December 31, 2004 as indicated in
the table below.

                                                                   Remaining
        Range of             Options           Options            Contractual
     Exercise Prices       Outstanding       Exercisable             Life
     ---------------       -----------       -----------          -----------
     $13.60 - $14.98          78,500            66,500          1.5 to 10 years
     $17.12 - $17.50          39,125            39,125            .5 to 3.5
                            --------          --------
                             117,625           105,625

The weighted-average exercise price of options outstanding at December 31, 2004
was $15.17



                                       28

<PAGE>

NOTE 10 - EARNINGS PER SHARE

Basic net income (loss) per share is computed by dividing net income (loss)
(numerator) by the weighted average number of shares of common stock outstanding
(denominator) during the period. Diluted net income (loss) per share gives
effect to stock options considered to be potential common shares, if dilutive,
computed using the treasury stock method. The following table presents the
calculation for the number of shares used in the basic and diluted net income
(loss) per share computations:


                                        2004          2003          2002
                                    -----------    ----------    ----------
         NET INCOME (LOSS)          $   485,786       201,194     ($106,223)

         SHARES
         Basic Shares                 1,423,775     1,422,707     1,417,682

         Common stock equivalents
            from option plan              1,722            --            --
                                    -----------    ----------    ----------
         Diluted                      1,425,497     1,422,707     1,417,682
                                    ===========    ==========    ==========
         EPS
         Basic                            $ .34         $ .14         ($.07)
         Diluted                          $ .34         $ .14         ($.07)
                                    ===========    ==========    ==========

NOTE 11 - MAJOR CUSTOMERS AND  SALES BY GEOGRAPHIC AREA

For the years ended December 31, 2004, 2003 and 2002, no single newspaper
customer accounted for ten percent or more of the Company's net sales. A number
of our newspaper customers are part of large newspaper chains, but management
believes that purchase decisions are made by the individual newspapers.
Newspapers owned by Gannett Co, Inc. and Advance Publications, Inc. accounted
for 17% and 10% of the Company's net sales in 2004, respectfully. Newspapers
owned by Advance Publications, Inc. and Gannett Co, Inc. accounted for 15% and
10% of the Company's net sales in 2003, respectively. Newspapers owned by
Gannett Co, Inc. accounted for 16% of the Company's net sales in 2002. Since the
Company's equipment is designed to have an extended life, its largest individual
newspaper customers in a given year usually change from year to year.

We sell most of our products to newspaper publishers in the United States. Our
foreign sales accounted for 9%, 11%, and 6% of total sales in 2004, 2003 and
2002, respectively. The following table indicates the amount of sales by
geographic area during the past three years:


         SALES BY GEOGRAPHIC AREA
                                  2004          2003          2002
                              -----------   -----------   -----------
         United States        $22,517,519   $17,353,571   $15,603,503
         Canada                 1,821,042     1,478,233       342,122
         Latin America            302,213       400,462        61,866
         Europe                        --       130,681       106,907
         Other                     49,281       157,746       416,080
                              -----------   -----------   -----------
                              $24,690,055   $19,520,693   $16,530,478
                              ===========   ===========   ===========

NOTE 12 - EMPLOYEE BENEFIT PLAN

The Quipp Systems, Inc. Employee Savings and Investment Plan (the Savings Plan),
is a defined contribution plan that covers substantially all full-time
employees. The Savings Plan permits eligible employees to contribute up to 20%
of annual compensation, subject to the maximum allowable contribution limits of
Sections 415, 401(k) and 404 of the Internal Revenue Code. The Company matches
employee contributions to the Savings Plan at the rate of 60% for the first 8%
of compensation deferred by each participant. The amount contributed by the
Company in 2004, 2003, and 2002, was $122,531, $110,698 and $110,655
respectively.


                                       29

<PAGE>


NOTE 13 - QUARTERLY SUMMARY OF KEY FINANCIAL DATA

QUARTERLY SUMMARY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>

QUARTER ENDED                                            MARCH 31,       JUNE 30,      SEPTEMBER 30,      DECEMBER 31,
-------------------------------------------              --------        --------      -------------      ------------
<S>                                                      <C>              <C>            <C>                  <C>
2004
Net Sales                                                $ 5,789          $7,296         $ 5,309              $6,296
Gross Profit                                               1,570           1,862           1,155               1,850
Operating Profit  (Loss)                                     128              54             (93)                370
Net Income (Loss)                                             91             150             (28)                273

Basic income (loss) per common share                     $  0.06          $ 0.11          ($0.02)             $ 0.19
Diluted income (loss) per common share                   $  0.06          $ 0.10          ($0.02)             $ 0.19


2003
Net Sales                                                $ 3,371          $5,089         $ 4,973              $6,088
Gross Profit                                                 935           1,602           1,303               1,739
Operating (Loss) Profit                                     (384)             43              59                 448
Net (Loss) Income                                           (224)             48              55                 322

Basic (loss) income per common share                      ($0.16)         $ 0.03         $  0.04              $ 0.23
Diluted (loss) income per common share                    ($0.16)         $ 0.03         $  0.04              $ 0.23
</TABLE>

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the Company's financial instruments, including cash and
cash equivalents, securities available for sale, accounts receivable, other
assets, prepaid expenses and other receivables, long-term debt, accounts
payable, accrued salaries and wages and other accrued liabilities approximate
fair value.

NOTE 15 - GOODWILL

The changes in the carrying value of goodwill for the years ended December 31,
2004 and 2003 are as follows:

                                        2004       2003
                                     --------    --------
         Balance as of January 1       98,093     174,822
         Impairment loss              (29,932)    (76,729)
                                     --------    --------
         Balance as of December 31     68,161      98,093
                                     ========    ========

The Company's goodwill resulted from the purchase of certain assets of Hall
Processing Systems in 1994. The Company reviews the operating profit and cash
flow expected from these assets quarterly. The Company recognized an impairment
loss of $29,932 and $76,729 in 2004 and 2003, respectively, since the carrying
amount of the assets was greater than the fair value of the assets, as
determined using the expected present value of future cash flows. The impairment
write-off was charged to selling, general and administrative expenses.



                                       30

<PAGE>

NOTE 16 - COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company is exposed to litigation and other
asserted and unasserted claims. In the opinion of management, the resolution of
these matters would not have a material adverse effect on the Company's
financial position, results of operations or liquidity.

NOTE 17 - RECENT PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment."
This Statement replaces FASB Statement No. 123 and supersedes APB Opinion No.
25. Statement No. 123(R) will require the fair value of all stock option awards
issued to employees to be recorded as an expense over the related vesting
period. The Statement also requires the recognition of compensation expense for
the fair value of any unvested stock option awards outstanding at the date of
adoption. The Company is evaluating these new rules, but expects no impact upon
adoption.



ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------

Not applicable.


ITEM 9A - CONTROLS AND PROCEDURES
---------------------------------

(a)      Evaluation of Disclosure Controls and Procedures

The Company's management, with the participation of the Company's Chief
Executive Officer and principal financial officer, evaluated the effectiveness
of the Company's disclosure controls and procedures as of the end of the period
covered by this report. Based on that evaluation, the Chief Executive Officer
and principal financial officer concluded that our disclosure controls and
procedures as of the end of the period covered by this report are functioning
effectively to provide reasonable assurance that the information required to be
disclosed by the Company in reports filed under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms. A controls system cannot provide
absolute assurance that the objectives of the controls system are met, and no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within a company have been detected.

(b)      Change in Internal Control over Financial Reporting

No change in the Company's internal control over financial reporting occurred
during the Company's fourth fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.












                                       31

<PAGE>

                                    PART III


ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------

This information (other than the information relating to executive officers
included in Part I) will be included in our Proxy Statement relating to our
Annual Meeting of Shareholders, which will be filed within 120 days after the
close of our fiscal year covered by this report, and is hereby incorporated by
reference to such Proxy Statement.


ITEM 11 - EXECUTIVE COMPENSATION
--------------------------------

This information will be included in our Proxy Statement relating to our Annual
Meeting of Shareholders, which will be filed within 120 days after the close of
our fiscal year covered by this report, and is hereby incorporated by reference
to such Proxy Statement.


ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
----------------------------------------------------------------------------
RELATED STOCKHOLDER MATTERS
---------------------------

The following table provides information, as of December 31, 2004, regarding
securities issuable under our 1996 Equity Compensation Plan, which is our only
equity compensation plan currently in effect and was approved by our
shareholders.

                      EQUITY COMPENSATION PLAN INFORMATION
--------------------------------------------------------------------------------

                                                                    NUMBER OF
                                      NUMBER OF                   SECURITIES
                                    SECURITIES TO   WEIGHTED-      REMAINING
                                      BE ISSUED      AVERAGE     AVAILABLE FOR
                                        UPON         EXERCISE   FUTURE ISSUANCE
                                     EXERCISE OF     PRICE OF    UNDER EQUITY
                                     OUTSTANDING   OUTSTANDING   COMPENSATION
  PLAN CATEGORY                        OPTIONS       OPTIONS         PLANS
--------------------------------------------------------------------------------
Equity compensation plans approved
by security holders                    117,625        $ 15.17         77,764
-------------------------------------------------------------------------------
Equity compensation plans not
approved by security holders                --             --             --
--------------------------------------------------------------------------------
TOTAL                                  117,625        $ 15.17         77,764
--------------------------------------------------------------------------------

Other information required to be disclosed in this Item will be included in our
proxy statement relating to our Annual Meeting of Shareholders, which will be
filed within 120 days after the close of our fiscal year covered by this report,
and is hereby incorporated by reference to such Proxy Statement.


ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

Not applicable


ITEM 14 - INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES
-------------------------------------------------------------------------

This information will be included in our Proxy Statement relating to our Annual
Meeting of Shareholders, which will be filed within 120 days after the close of
our fiscal year covered by this report, and is hereby incorporated by reference
to such Proxy Statement.


                                       32

<PAGE>

                                     PART IV

ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)  1  Financial Statements - See "Index to Financial Statements" in Item 8

     2  Schedule II - Valuation and Qualifying Accounts. All other schedules are
        omitted because they are inapplicable.

     3  Exhibits (Note: The file number of all referenced reports and
        registration statements, is 0-14870.)

      Exhibit
        No.

        3.1  Articles of Incorporation, as amended (Incorporated by reference to
             Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for
             the quarter ended June 30, 2004).

        3.2  By-Laws, as amended (Incorporated by reference to Exhibit 3.3 to
             Registrants Quarterly Report on Form 10-Q for the quarter ended
             June 30, 2004).

        4.1  Rights Agreement, dated as of March 3, 2003, between the Registrant
             and American Stock Transfer & Trust Company, as Rights Agent,
             including the form of Rights Certificate attached as Exhibit A
             (incorporated by reference to Exhibit 4.1to Registrant's
             Registration Statement on Form 8-A, filed March 3, 2003).

      *10.1  Quipp, Inc. 1996 Equity Compensation Plan, as amended (incorporated
             by reference to Exhibit 10.1 to the Registrant's Annual Report on
             Form 10-K for the fiscal year ended December 31, 2001).

      *10.2  Quipp Systems, Inc. Employee Savings and Investment Plan
             (Incorporated by reference to Exhibit 10.7 to the Registrant's
             Annual Report on Form 10-K for the fiscal year ended December 31,
             1993).

      *10.3  Quipp Inc. Management Incentive Plan (Incorporated by reference to
             Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the
             fiscal year ended December 31, 1998).

      *10.4  Change of Control Agreement, dated as of December 23, 2000, among
             Quipp, Inc., Quipp Systems, Inc. and Christer Sjogren.
             (Incorporated by reference to Exhibit 10.7 to the Registrant's
             Annual Report on Form 10-K for the fiscal year ended December 31,
             2000). Identical agreements, also dated as of December 23, 2000,
             were entered into with David Switalski and Angel Arrabal. In
             accordance with Instruction 2 of Item 601 of Regulation S-K, those
             agreements need not be filed with this report.

      *10.5  Change of control agreement dated as of June 25, 2002 among Quipp,
             Inc., Quipp Systems, Inc. and Michael S. Kady (incorporated by
             reference to Exhibit 10.1 to the Registrant's Quarterly Report on
             Form 10-Q for the fiscal quarter ended June 30, 2002).

       22    Subsidiary of the Registrant (Incorporated by reference to Exhibit
             22 to the Registrant's Annual Report on Form 10-K for the fiscal
             year ended December 31, 1987).

       23    Consent of KPMG LLP.

       31.1  Certificate of the Chief Executive Officer of the Registrant
             required by Rule 13a-14(a) under the Securities Exchange Act of
             1934.

       31.2  Certificate of the principal financial officer of the Registrant
             required by Rule 13a-14(a) under the Securities Exchange Act of
             1934 .

       32.1  Certificate of the Chief Executive Officer of the Registrant
             required by Rule 13a-14(b) under the Securities Exchange Act of
             1934 and U.S.C. Section 1350.

                                       33

<PAGE>


       32.2  Certificate of the principal financial officer of the Registrant
             required by Rule 13a-14(b) under the Securities Exchange Act of
             1934 and U.S.C. Section 1350.

---------------
*   Constitutes management contract or compensatory plan or arrangement required
    to be filed as an exhibit to this form.


















                                       34

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized:

                                           QUIPP, INC.


Date:    March 29, 2005                    By: / s / Michael S. Kady
                                           -------------------------------------
                                           MICHAEL S. KADY
                                           President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in behalf of the registrant and
in the capacities and on the dates indicated:

     SIGNATURE                           TITLE                       DATE
     ---------                           -----                       ----

 / s / Michael S. Kady              Chief Executive              March 29, 2005
-----------------------------       Officer and Director
MICHAEL S. KADY


/ s / Ralph M. Branca
-----------------------------       Director                     March 29, 2005
RALPH M. BRANCA



 / s / William A. Dambrackas        Director                     March 29, 2005
-----------------------------
WILLIAM A. DAMBRACKAS



/ s / Lawrence J. Gibson            Director                     March 29, 2005
-----------------------------
LAWRENCE J. GIBSON



 / s / Cristina H. Kepner           Director                     March 29, 2005
-----------------------------
CRISTINA H. KEPNER



/ s / Arthur J. Rawl                Director                     March 29, 2005
-----------------------------
ARTHUR J. RAWL



/ s / Robert C. Strandberg          Director                     March 29, 2005
-----------------------------
ROBERT C. STRANDBERG



/ s / Eric Bello
-----------------------------       Director of Finance and      March 29, 2005
ERIC BELLO                          Treasurer (Principal
                                    Financial and Accounting
                                    Officer)





                                       35
<PAGE>

                                   QUIPP, INC.
                           ANNUAL REPORT ON FORM 10-K

                                 EXHIBIT INDEX

  Exhibit
  -------
    3.1     Articles of Incorporation, as amended (Incorporated by reference to
            Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for
            the quarter ended June 30, 2004).

    3.2     By-Laws, as amended (Incorporated by reference to Exhibit 3.3 to
            Registrants Quarterly Report on Form 10-Q for the quarter ended June
            30, 2004).

    4.2     Rights Agreement, dated as of March 3, 2003, between the Registrant
            and American Stock Transfer & Trust Company, as Rights Agent,
            including the form of Rights Certificate attached as Exhibit A
            (incorporated by reference to Exhibit 4.1to Registrant's
            Registration Statement on Form 8-A, filed March 3, 2003).

  *10.1     Quipp, Inc. 1996 Equity Compensation Plan, as amended (incorporated
            by reference to Exhibit 10.1 to the Registrant's Annual Report on
            Form 10-K for the fiscal year ended December 31, 2001).

  *10.2     Quipp Systems, Inc. Employee Savings and Investment Plan
            (Incorporated by reference to Exhibit 10.7 to the Registrant's
            Annual Report on Form 10-K for the fiscal year ended December 31,
            1993).

  *10.3     Quipp Inc. Management Incentive Plan (Incorporated by reference to
            Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the
            fiscal year ended December 31, 1998).

  *10.4     Change of Control Agreement, dated as of December 23, 2000, among
            Quipp, Inc., Quipp Systems, Inc. and Christer Sjogren. (Incorporated
            by reference to Exhibit 10.7 to the Registrant's Annual Report on
            Form 10-K for the fiscal year ended December 31, 2000). Identical
            agreements, also dated as of December 23, 2000, were entered into
            with David Switalski and Angel Arrabal. In accordance with
            Instruction 2 of Item 601 of Regulation S-K, those agreements need
            not be filed with this report.

  *10.5     Change of control agreement dated as of June 25, 2002 among Quipp,
            Inc., Quipp Systems, Inc. and Michael S. Kady (incorporated by
            reference to Exhibit 10.1 to the Registrant's Quarterly Report on
            Form 10-Q for the fiscal quarter ended June 30, 2002).

   22       Subsidiary of the Registrant (Incorporated by reference to Exhibit
            22 to the Registrant's Annual Report on Form 10-K for the fiscal
            year ended December 31, 1987).

   23       Consent of KPMG LLP.

   31.1     Certificate of the Chief Executive Officer of the Registrant
            required by Rule 13a-14(a) under the Securities Exchange Act of
            1934.

   31.2     Certificate of the principal financial officer of the Registrant
            required by Rule 13a-14(a) under the Securities Exchange Act of
            1934.

   32.1     Certificate of the Chief Executive Officer of the Registrant
            required by Rule 13a-14(b) under the Securities Exchange Act of 1934
            and U.S.C. Section 1350.

   32.2     Certificate of the principal financial officer of the Registrant
            required by Rule 13a-14(b) under the Securities Exchange Act of 1934
            and U.S.C. Section 1350.

---------------
*   Constitutes management contract or compensatory plan or arrangement required
    to be filed as an exhibit to this form.


<PAGE>


                           QUIPP, INC. AND SUBSIDIARY
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002


<TABLE>
<CAPTION>
                                                                   (A)
                                               BALANCE,          CHARGED                          BALANCE,
                                              BEGINNING             TO              (B)              END
                                               OF YEAR           EXPENSES       WRITE-OFFS         OF YEAR
                                         -----------------------------------------------------------------------
<S>                                            <C>                 <C>             <C>                <C>
Year ended December 31, 2004:
 Allowance for doubtful accounts               229,546             117,989         (179,830)          167,705

Year ended December 31, 2003:
 Allowance for doubtful accounts               165,000              64,546               --           229,546

Year ended December 31, 2002:
 Allowance for doubtful accounts               320,000            (154,806)            (194)          165,000
</TABLE>


<TABLE>
<CAPTION>

                                               BALANCE,            (C)            ACCRUED         BALANCE,
                                              BEGINNING          PAYMENTS        WARRANTY            END
                                               OF YEAR           IN KIND           COSTS           OF YEAR
                                         -----------------------------------------------------------------------
<S>                                            <C>                 <C>             <C>                <C>
Year ended December 31, 2004:
 Accrued warranty                              261,917             288,932          258,872           231,857

Year ended December 31, 2003:
 Accrued warranty                              219,950             145,031          186,998           261,917

Year ended December 31, 2002:
 Accrued warranty                              234,003             165,243          151,190           219,950
</TABLE>


(a)      Charges to expense result from increases or decreases to our allowance
         for doubtful accounts due to the assessment of the collectability of
         customer accounts and the aging of our accounts receivable.

(b)      We write-off trade accounts when we have exhausted all reasonable
         efforts to collect outstanding receivable balances.

(c)      Payments in kind represent cost to repair or replace defective items.