---

United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C.
20549

Form 10-Q

(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|- | ----------------------------------------------------------------------------------------
|  |                                                                                         
|  | FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003                                            
|  |                                                                                         
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  |                                                                                         
|  | FOR THE TRANSITION PERIOD FROM N/A TO N/A                                               

Commission File Number 000 - 25161

|MODTECH HOLDINGS, INC.                                        
|--------------------------------------------------------------
|                                                              
|                                                              
|Delaware                                                      
|                                                              
|(State or other jurisdiction of Incorporation or organization)
|                                                              
|2830 Barrett Avenue, Perris, CA                               
|                                                              
|(Address of principal executive office)                       
|                                                              
|(909) 943-4014                                                
|                                                              
|Registrants telephone number                                 

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 o
|----- | ----

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

|Yes x | No o
|----- | ----

As of
August 13, 2003, there were 13,726,664 of the Registrants Common Stock outstanding.

---



---

MODTECH HOLDINGS, INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2003

PART I. FINANCIAL INFORMATION

The condensed consolidated financial statements included herein have been prepared by Modtech Holdings, Inc. and subsidiaries (the Company), without
audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the
United States of America has been omitted pursuant to such rules and regulations.  However, the Company believes that the condensed consolidated financial statements, including the disclosures herein, are adequate to make the information
presented not misleading.  The results of operations for the three months and six months ended June 30, 2002 and 2003 are not necessarily indicative of the results to be expected for the full fiscal years.  The condensed consolidated
financial statements should be read in conjunction with the Companys consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2002 as filed with the
Securities and Exchange Commission.

2



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MODTECH HOLDINGS, INC.Condensed Consolidated Balance Sheets (Unaudited)

|                                                                                                                                       |  | December 31, 2002 |             | June 30, 2003 |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | ------------- | -
|                                                                                                                                       |  |                   |             |               |  
|Assets                                                                                                                                 |  |                   |             |               |  
|Current assets:                                                                                                                        |  |                   |             |               |  
|Cash and cash equivalents                                                                                                              |  | $                 | 213,000     |               | $
|Contracts receivable, net, including costs in excess of billings of $17,923,000 and $17,888,000 in 2002 and 2003, respectively         |  |                   | 50,332,000  |               |  
|Inventories                                                                                                                            |  |                   | 8,356,000   |               |  
|Due from affiliates                                                                                                                    |  |                   | 1,368,000   |               |  
|Deferred tax assets                                                                                                                    |  |                   | 2,654,000   |               |  
|Other current assets                                                                                                                   |  |                   | 2,142,000   |               |  
|                                                                                                                                       |  |                   |             |               |  
|Total current assets                                                                                                                   |  |                   | 65,065,000  |               |  
|                                                                                                                                       |  |                   |             |               |  
|Property and equipment, net                                                                                                            |  |                   | 14,478,000  |               |  
|Other assets                                                                                                                           |  |                   |             |               |  
|Goodwill, net                                                                                                                          |  |                   | 72,384,000  |               |  
|Covenants not to compete, net                                                                                                          |  |                   | 137,000     |               |  
|Debt issuance costs, net                                                                                                               |  |                   | 1,159,000   |               |  
|Other assets                                                                                                                           |  |                   | 1,319,000   |               |  
|                                                                                                                                       |  |                   |             |               |  
|                                                                                                                                       |  | $                 | 154,542,000 |               | $
|                                                                                                                                       |  |                   |             |               |  
|Liabilities and Shareholders Equity                                                                                                   |  |                   |             |               |  
|Current liabilities:                                                                                                                   |  |                   |             |               |  
|Accounts payable and accrued liabilities                                                                                               |  | $                 | 18,821,000  |               | $
|Billings in excess of costs                                                                                                            |  |                   | 2,243,000   |               |  
|Current revolving credit line                                                                                                          |  |                   | 9,000,000   |               |  
|Current maturities of long-term debt                                                                                                   |  |                   | 7,000,000   |               |  
|                                                                                                                                       |  |                   |             |               |  
|Total current liabilities                                                                                                              |  |                   | 37,064,000  |               |  
|Deferred tax liabilities                                                                                                               |  |                   | 213,000     |               |  
|Long-term debt, excluding current portion                                                                                              |  |                   | 12,000,000  |               |  
|                                                                                                                                       |  |                   |             |               |  
|Total liabilities                                                                                                                      |  |                   | 49,277,000  |               |  
|                                                                                                                                       |  |                   |             |               |  
|Shareholders Equity:                                                                                                                  |  |                   |             |               |  
|Series A preferred stock, $.01 par.  Authorized 5,000,000 shares; issued and outstanding 388,939 in 2002; none in 2003                 |  |                   | 4,000       |               |  
|Common stock, $.01 par.  Authorized 25,000,000 shares; issued and outstanding 13,504,756 and 13,726,664 in 2002 and 2003,
respectively |  |                   | 135,000     |               |  
|Additional paid-in capital                                                                                                             |  |                   | 78,873,000  |               |  
|Retained earnings                                                                                                                      |  |                   | 26,253,000  |               |  
|                                                                                                                                       |  |                   |             |               |  
|Total shareholders equity                                                                                                             |  |                   | 105,265,000 |               |  
|                                                                                                                                       |  |                   |             |               |  
|                                                                                                                                       |  | $                 | 154,542,000 |               | $
|                                                                                                                                       |  |                   |             |               |  

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

3



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MODTECH HOLDINGS, INC.Condensed Consolidated Statements of Operations (Unaudited)

|                                                                                                  |  | Three Months EndedJune 30, |            | Six Months EndedJune 30, |  
|------------------------------------------------------------------------------------------------- |  | -------------------------- | ---------- | ------------------------ | -
|                                                                                                  |  |                            |            |                          |  
|                                                                                                  |  | 2002                       |            | 2003                     |  
|                                                                                                  |  |                            |            |                          |  
|Net sales                                                                                         |  | $                          | 44,569,000 |                          | $
|Cost of goods sold                                                                                |  |                            | 37,928,000 |                          |  
|                                                                                                  |  |                            |            |                          |  
|Gross profit                                                                                      |  |                            | 6,641,000  |                          |  
|Selling, general, and administrative expenses                                                     |  |                            | 1,915,000  |                          |  
|Covenant amortization                                                                             |  |                            | 73,000     |                          |  
|                                                                                                  |  |                            |            |                          |  
|Income from operations                                                                            |  |                            | 4,653,000  |                          |  
|                                                                                                  |  |                            |            |                          |  
|Other income (expense):                                                                           |  |                            |            |                          |  
|Interest expense, net                                                                             |  |                            | (377,000   | )                        |  
|Other, net                                                                                        |  |                            | 13,000     |                          |  
|                                                                                                  |  |                            |            |                          |  
|                                                                                                  |  |                            | (364,000   | )                        |  
|                                                                                                  |  |                            |            |                          |  
|Income before income taxes and cumulative effect of a change in an accounting principle           |  |                            | 4,289,000  |                          |  
|Income taxes                                                                                      |  |                            | (1,801,000 | )                        |  
|                                                                                                  |  |                            |            |                          |  
|Income before cumulative effect of a change in an accounting principle                            |  |                            | 2,488,000  |                          |  
|Cumulative effect of a change in an accounting principle                                          |  |                            |           |                          |  
|                                                                                                  |  |                            |            |                          |  
|Net income (loss)                                                                                 |  |                            | 2,488,000  |                          |  
|Series A Preferred stock dividend                                                                 |  |                            | 39,000     |                          |  
|                                                                                                  |  |                            |            |                          |  
|Net income (loss) available to common stockholders                                                |  | $                          | 2,449,000  |                          | $
|                                                                                                  |  |                            |            |                          |  
|Basic earnings per common share before cumulative effect of a change in an accounting principle   |  | $                          | 0.18       |                          | $
|                                                                                                  |  |                            |            |                          |  
|Cumulative effect of a change in an accounting principle per common share - basic                 |  | $                          |          |                          | $
|                                                                                                  |  |                            |            |                          |  
|Basic earnings (loss) per common share                                                            |  | $                          | 0.18       |                          | $
|                                                                                                  |  |                            |            |                          |  
|Basic weighted-average shares outstanding                                                         |  |                            | 13,469,000 |                          |  
|                                                                                                  |  |                            |            |                          |  
|Diluted earnings per common share before cumulative effect of a change in an accounting principle |  | $                          | 0.17       |                          | $
|                                                                                                  |  |                            |            |                          |  
|Cumulative effect of a change in an accounting principle per common share  diluted               |  | $                          |           |                          | $
|                                                                                                  |  |                            |            |                          |  
|Diluted earnings (loss) per common share                                                          |  | $                          | 0.17       |                          | $
|                                                                                                  |  |                            |            |                          |  
|Diluted weighted-average shares outstanding                                                       |  |                            | 14,885,000 |                          |  
|                                                                                                  |  |                            |            |                          |  

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

4



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MODTECH HOLDINGS, INC.Condensed Consolidated Statements of Cash Flows (Unaudited)

|                                                                                         |  | Six Months Ended June 30, |            
|---------------------------------------------------------------------------------------- |  | ------------------------- | -----------
|                                                                                         |  |                           |            
|                                                                                         |  | 2002                      |            
|                                                                                         |  |                           |            
|Cash flows from operating activities:                                                    |  |                           |            
|Net income (loss)                                                                        |  | $                         | (33,246,000
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                           |            
|Cumulative effect of a change in an accounting principle                                 |  |                           | 37,288,000 
|Depreciation and amortization                                                            |  |                           | 1,353,000  
|Loss on sale of equipment                                                                |  |                           |           
|(Increase) decrease in assets                                                            |  |                           |            
|Contracts receivable                                                                     |  |                           | (4,151,000 
|Inventories                                                                              |  |                           | (1,327,000 
|Due from affiliates                                                                      |  |                           | 479,000    
|Other current and noncurrent assets                                                      |  |                           | (91,000    
|Increase (decrease) in liabilities                                                       |  |                           |            
|Accounts payable and accrued liabilities                                                 |  |                           | 5,603,000  
|Billings in excess of costs                                                              |  |                           | 502,000    
|                                                                                         |  |                           |            
|Net cash provided by operating activities                                                |  |                           | 6,410,000  
|                                                                                         |  |                           |            
|Cash flows from investing activities:                                                    |  |                           |            
|Proceeds from sale of equipment                                                          |  |                           |           
|Purchase of property and equipment                                                       |  |                           | (672,000   
|Acquisition of subsidiaries, net of cash acquired                                        |  |                           | (60,000    
|                                                                                         |  |                           |            
|Net cash used in investing activities                                                    |  |                           | (732,000   
|                                                                                         |  |                           |            
|Cash flows from financing activities:                                                    |  |                           |            
|Net principal borrowings (payments) under revolving credit line                          |  |                           | (1,600,000 
|Principal payments on long-term debt                                                     |  |                           | (3,500,000 
|Payment of debt issuance costs                                                           |  |                           | (27,000    
|Proceeds from exercise of stock options                                                  |  |                           | 106,000    
|                                                                                         |  |                           |            
|Net cash provided by (used in) financing activities                                      |  |                           | (5,021,000 
|                                                                                         |  |                           |            
|Net increase in cash and cash equivalents                                                |  |                           | 657,000    
|Cash and cash equivalents at beginning of period                                         |  |                           | 130,000    
|                                                                                         |  |                           |            
|Cash and cash equivalents at end of period                                               |  | $                         | 787,000    
|                                                                                         |  |                           |            

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

5



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MODTECH HOLDINGS, INC.

Notes to Condensed Consolidated Financial
Statements

June 30, 2003

1)  Basis of Presentation

| | In the opinion of management, the condensed consolidated financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present
fairly the financial position and results of operations as of and for the periods presented.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                          
| | The results of operations for the three and six months ended June 30, 2002 and 2003 are not necessarily indicative of the results to be expected for the full fiscal years.                                                                                              

2)  Inventories

Inventories consist of the following:

|                |  | Dec. 31, 2002 |           | June 30, 2003 |  
|--------------- |  | ------------- | --------- | ------------- | -
|                |  |               |           |               |  
|Raw materials   |  | $             | 6,623,000 |               | $
|Work in process |  |               | 1,733,000 |               |  
|                |  |               |           |               |  
|                |  | $             | 8,356,000 |               | $
|                |  |               |           |               |  

3)  Earnings (Loss) Per Share

The following table illustrates the calculation of basic and diluted earnings (loss) per common share:

|                                                                                                |  | Three Months Ended June 30, |            | Six Months Ended June 30, |  
|----------------------------------------------------------------------------------------------- |  | --------------------------- | ---------- | ------------------------- | -
|                                                                                                |  |                             |            |                           |  
|                                                                                                |  | 2002                        |            | 2003                      |  
|                                                                                                |  |                             |            |                           |  
|Basic                                                                                           |  |                             |            |                           |  
|Income before cumulative effect of a change in an accounting principle                          |  | $                           | 2,488,000  |                           | $
|Cumulative effect of a change in an accounting principle                                        |  |                             |           |                           |  
|                                                                                                |  |                             |            |                           |  
|Net income (loss)                                                                               |  |                             | 2,488,000  |                           |  
|Dividends on preferred stock                                                                    |  |                             | (39,000    | )                         |  
|                                                                                                |  |                             |            |                           |  
|Net income (loss) available to common stockholders                                              |  | $                           | 2,449,000  |                           | $
|                                                                                                |  |                             |            |                           |  
|Basic weighted-average common shares outstanding                                                |  |                             | 13,469,000 |                           |  
|                                                                                                |  |                             |            |                           |  
|Basic earnings per common share before cumulative effect of a change in an accounting principle |  | $                           | 0.18       |                           | $
|                                                                                                |  |                             |            |                           |  

6



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|                                                                                                  |  | Three Months Ended June 30, |            | Six Months Ended June 30, |  
|------------------------------------------------------------------------------------------------- |  | --------------------------- | ---------- | ------------------------- | -
|                                                                                                  |  |                             |            |                           |  
|                                                                                                  |  | 2002                        |            | 2003                      |  
|                                                                                                  |  |                             |            |                           |  
|Cumulative effect of a change in an accounting principle per common share - basic                 |  |                             |           |                           |  
|                                                                                                  |  |                             |            |                           |  
|Basic earnings (loss) per common share                                                            |  | $                           | 0.18       |                           | $
|                                                                                                  |  |                             |            |                           |  
|Diluted                                                                                           |  |                             |            |                           |  
|Net income (loss)                                                                                 |  | $                           | 2,488,000  |                           | $
|                                                                                                  |  |                             |            |                           |  
|Weighted-average common shares outstanding                                                        |  |                             | 13,469,000 |                           |  
|Add:                                                                                              |  |                             |            |                           |  
|Conversion of preferred stock                                                                     |  |                             | 389,000    |                           |  
|Exercise of stock options                                                                         |  |                             | 1,027,000  |                           |  
|                                                                                                  |  |                             |            |                           |  
|Diluted weighted-average shares outstanding                                                       |  |                             | 14,885,000 |                           |  
|                                                                                                  |  |                             |            |                           |  
|Diluted earnings per common share before cumulative effect of a change in an accounting principle |  | $                           | 0.17       |                           | $
|                                                                                                  |  |                             |            |                           |  
|Cumulative effect of a change in an accounting principle per common share - diluted               |  |                             |           |                           |  
|                                                                                                  |  |                             |            |                           |  
|Diluted earnings (loss) per common share                                                          |  | $                           | 0.17       |                           | $
|                                                                                                  |  |                             |            |                           |  

| | Options to purchase 198,000 shares of common stock were outstanding during the three and six months ended June 30, 2002, and options to purchase 1,104,000 and 1,422,000 shares
of common stock were outstanding during the three and six months ended June 30, 2003, respectively, but were not included in the computation of diluted earnings (loss) per share because the option exercise price was greater than the average market
price of the common shares and therefore, the effect would be anti-dilutive.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4)  Debt

| | The credit facility contains various covenants.  The Company was in compliance with such covenants or has received a waiver as of June 30, 2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------

5)  Goodwill

| | The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, as of January 1, 2002. In
accordance with SFAS No. 142, quoted market prices in active markets are the best evidence of fair value and shall be used as the basis for measurement, if available.  The Company used quoted market prices to perform the assessment of whether
there was an indication that goodwill may be impaired.  As a result of this assessment, there was an indication that goodwill was impaired.  As required by SFAS No. 142, the Company performed a fair market valuation analysis, using market
multiples, and other factors, on its business that had previously recorded goodwill.  As a result of this analysis, the Company recorded an impairment charge of $37,288,000 during the three months ended March 31, 2002.  The impairment loss
was recognized as a cumulative effect of a change in accounting principle in the Companys 2002
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7



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| | consolidated statement of operations.  There was no impairment of goodwill during the three months or six months ended June 30, 2003.
| | -------------------------------------------------------------------------------------------------------------------------------------

6)  Recently Adopted Accounting Pronouncements

| | In September 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, Accounting for Asset Retirement Obligations (SFAS 143).  SFAS 143 is
effective for fiscal years beginning after June 15, 2002, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs.  The adoption
of SFAS 143 did not have a material effect on the Companys consolidated results of operations or financial position.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | In April 2002, the FASB issued SFAS No.  145 Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections (SFAS
145). This statement eliminates the automatic classification of gain or loss on extinguishment of debt as an extraordinary item of income and requires that such gain or loss be evaluated for extraordinary classification under the criteria of
Accounting Principles Board No. 30 Reporting Results of Operations. This statement also requires sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions,
and makes various other technical corrections to existing pronouncements. The Company is required to adopt SFAS 145 for the year ending December 31, 2003.  The adoption of SFAS 145 did not have a material effect on the Companys
consolidated results of operations or financial position.                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS 146).  SFAS 146 requires companies to recognize costs
associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan.  Examples of such costs covered by the standard include lease termination costs and certain employee
severance costs that are associated with a restructuring, discontinued operations, plant closings or other exit or disposal activities.  SFAS 146 is effective prospectively for exit and disposal activities initiated after December 31, 2002,
with earlier application encouraged.  The adoption of SFAS 146 did not have a material effect on the Companys consolidated results of operations or financial position.                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | In November 2002, the FASB issued Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others (Interpretation 45), an interpretation of FASB Statements No. 5, 57 and 107 and rescission of FASB Interpretation No. 34.  Interpretation 45 elaborates on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain guarantees that it has issued.  It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee.  Interpretation 45s initial recognition and initial measurement provisions are effective on a prospective basis to guarantees issued or modified after December 31, 2002.  The disclosure
requirements are effective for financial statements of interim or annual periods ending after December 15, 2002.  The Company adopted the disclosure requirements of Interpretation 45 effective December 31, 2002 and has not entered into any
guarantees since December 31, 2002.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | On December 31, 2002 the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure, which amends SFAS No. 123, Accounting for
Stock-Based Compensation.  SFAS No. 148 amends the disclosure requirements in SFAS No. 123 for stock-based compensation for annual periods ending after December 15, 2002 and for interim periods beginning after December 15, 2002, including
those companies that continue to recognize stock-based compensation under APB Opinion No. 25, Accounting for Stock Issued to Employees.   In addition, SFAS No. 148 provides three alternative transition methods for companies that
choose to adopt the fair value measurement provisions of SFAS No. 123.  The Company has not determined whether it will adopt the fair value measure provisions of SFAS No. 123 but has adopted the disclosure provisions of SFAS No. 148 as of
December 31, 2002.                                                                                                                                                                                                                                                     

7)  Stock Options Plans

| | The Company accounts for stock option plans in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations.  As such, compensation expense would be recognized on the date of grant only if the current market price of the underlying stock exceeded the exercise price.  On January 1, 1996, the Company
adopted SFAS No. 123, Accounting for Stock-Based Compensation, which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant.  Alternatively, SFAS No. 123
also allows entities to continue to apply the intrinsic method provisions of APB Opinion No. 25 and provide pro forma net income (loss) and pro forma earnings (loss) per share disclosures for employee stock option grants made in 1995 and future
years as if the fair-value-based method defined in SFAS No. 123 had been applied.  The Company has elected to continue to apply the provision of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123 and SFAS
No. 148.  The following pro forma disclosures are provided as required by
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8



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| | SFAS No. 148 for the three months and six ended June 30, 2002 and June 30, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | The per share weighted-average fair value of stock options granted during the three months ended June 30, 2003 were $4.85 with none granted during the three months ended June 30, 2002. The
per share weighted-average fair value of stock options granted during the six months ended June 30, 2002 and 2003 were $4.81 and $5.00, respectively.  The fair value of stock options on the date of grant were estimated using the Black Scholes
option-pricing model with the following weighted-average assumptions:

|                                |  | Three Months Ended June 30, |     | Six Months Ended June 30, | 
|------------------------------- |  | --------------------------- | --- | ------------------------- | 
|                                |  |                             |     |                           | 
|                                |  | 2002                        |     | 2003                      | 
|                                |  |                             |     |                           | 
|Expected dividend yield         |  |                             | n/a |                           | 
|Average risk-free interest rate |  |                             | n/a |                           | 
|Volatility factor               |  |                             | n/a |                           | 
|Expected life                   |  |                             | n/a |                           | 
|                                |  |                             |     |                           | 

The Company applies APB Opinion No. 25 in accounting for its stock option plans and no compensation cost
has been recognized for its stock options in the condensed consolidated financial statements.  Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Companys
net income (loss) and earnings (loss) per share would have been reduced to the pro forma amounts indicated below:

|                                  |  | Three Months Ended June 30, |           | Six Months Ended June 30, |  
|--------------------------------- |  | --------------------------- | --------- | ------------------------- | -
|                                  |  |                             |           |                           |  
|                                  |  | 2002                        |           | 2003                      |  
|                                  |  |                             |           |                           |  
|Net income (loss)                 |  |                             |           |                           |  
|As reported                       |  | $                           | 2,488,000 |                           | $
|Pro forma                         |  |                             | 2,278,000 |                           |  
|                                  |  |                             |           |                           |  
|Basic earnings (loss) per share   |  |                             |           |                           |  
|As reported                       |  | $                           | 0.18      |                           | $
|Pro forma                         |  |                             | 0.17      |                           |  
|                                  |  |                             |           |                           |  
|Diluted earnings (loss) per share |  |                             |           |                           |  
|As reported                       |  | $                           | 0.17      |                           | $
|Pro forma                         |  |                             | 0.15      |                           |  
|                                  |  |                             |           |                           |  

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

This quarterly report contains statements which, to the extent that they are not recitations of historical fact, such as our belief that we have sufficient liquidity to meet our near-term operating needs, constitute
forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934.  The words believe, estimate, anticipate, project, intend,
expect, plan, outlook, forecast, may, will, should, predict, and similar expressions are intended to identify forward-looking statements.  Such
forward-looking statements are intended to be subject to the safe harbor protection within the meaning of that term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Future events and actual
results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements.  Statements in this quarterly report, including the Notes to the Condensed Consolidated Financial Statements and
in this Managements Discussion and Analysis of Financial Condition and Results of Operations, describe factors, among others, that could contribute to or cause such differences.  Although we believe the expectations reflected
in our forward-looking statements are based upon reasonable assumptions, there is no assurance that our expectations will be attained.

Results of Operations

The following table sets forth certain items in the Condensed Consolidated Statements of Operations as a percent of net sales.

|                                                                                        |  | Percent of Net Sales        |        | Percent of Net Sales      | 
|--------------------------------------------------------------------------------------- |  | --------------------------- | ------ | ------------------------- | 
|                                                                                        |  |                             |        |                           | 
|                                                                                        |  | Three Months Ended June 30, |        | Six Months Ended June 30, | 
|                                                                                        |  |                             |        |                           | 
|                                                                                        |  | 2002                        |        | 2003                      | 
|                                                                                        |  |                             |        |                           | 
|Net sales                                                                               |  |                             | 100.0% |                           | 
|Gross profit                                                                            |  |                             | 14.9   |                           | 
|Selling, general and administrative expenses                                            |  |                             | 4.3    |                           | 
|Covenant amortization                                                                   |  |                             | 0.2    |                           | 
|Income from operations                                                                  |  |                             | 10.4   |                           | 
|Interest expense, net                                                                   |  |                             | (0.8)  |                           | 
|Income before income taxes and cumulative effect of a change in an accounting principle |  |                             | 9.6    |                           | 
|Income taxes                                                                            |  |                             | 4.0    |                           | 
|Income before cumulative effect of a change in an accounting principle                  |  |                             | 5.6    |                           | 

Net sales for the three and six months ended June 30, 2003, increased by $1,144,000 or 2.6% and
$6,070,000 or 7.6%, respectively, when compared to the same periods in 2002.  Compared to the same periods in the prior year, sales of California classrooms decreased by 1.9% for the three months ended June 30, 2003 but increased by 10.9% for
the six months then ended.  Sales of commercial and industrial buildings increased by 12.3% and 1.9% for the three and six months ended June 30, 2003 respectively, when compared to the same periods in 2002.

Gross profit as a percentage of net sales for the three and six months ended June 30, 2003 decreased to 11.4% and 10.4%, respectively, from 14.9% and 14.7%, for the same periods in 2002. The decline in gross profit as a
percent of sales was due principally to competitive pressures in the classroom, commercial and industrial markets.

Selling, general and administrative expenses (SG&A) increased for the
three and six months ended June 30, 2003 by $187,000 or

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9.8% and $281,000 or 7.7%, respectively.  The increase in SG&A expenses was in line with the increase of sales.

In accordance with SFAS No. 142, the Company took a one-time impairment charge to goodwill of $37,288,000, which was recognized as a cumulative effect of a change in an accounting principle in the three month period ended
March 31, 2002.  No additional impairment was recognized during the three and six months ended June 30, 2003 or the six months ended June 30, 2002.  The Company continues to amortize its covenants not to compete over their respective
useful lives.

Net interest expense decreased for the three and six months ended June 30, 2003 by $22,000 or 5.8% and $164,000 or 18.9%, respectively, when compared to the same periods in
2002. The decrease is attributable to decreased average line of credit borrowings, decreased long-term debt due to repayments and decreased interest rates for the three and six months ended June 30, 2003.

Income before income taxes and cumulative effect of a change in an accounting principle for the three and six months ended June 30, 2003 decreased by $1,564,000, or 36.5% and $2,645,000 or 38.0%, respectively.  The
decrease in income before income taxes and cumulative effect of a change in an accounting principle was primarily due to the decrease in gross profit discussed above.

Income taxes for the three
and six months ended June 30, 2003 decreased by $656,000, or 36.4% and $1,111,000 or 38.0%, respectively.  The decrease in income taxes was a direct result of the lower gross profit and resultant lower income before income taxes and cumulative
effect of a change in an accounting principle.

Inflation

In the past, the Company has not been adversely affected by inflation, because
it has been generally able to pass along to its customers increases in the costs of labor and materials.

Liquidity and Capital Resources

To date, the Company has generated cash from operations, bank borrowings and public offerings to meet its needs. At June 30, 2003, the Company had $1,755,000 in cash and cash equivalents.  During the six months ended June
30, 2003, the Company generated cash from operating activities of $4,545,000.

The Company has a $66,000,000 credit facility, of which $40,000,000 represents a revolving loan commitment.  The
credit facility is secured by all the Companys assets, as well as the Companys stock ownership in its subsidiaries.  The credit facility expires in December 2006.  On June 30, 2003, $12,500,000 was outstanding under the
revolving loan commitment.  The credit facility contains various covenants.  The Company was in compliance with such covenants or has received a waiver as of June 30, 2003.

Management
believes that the Companys existing product lines and manufacturing capacity will enable the Company to generate sufficient cash through operations, supplemented by periodic use of its existing bank line of credit, to finance the
Companys business at current levels over the next 12 months.  Additional cash resources may be required if the Company is able to expand its business beyond current levels.  For example, it will be necessary for the Company to
construct or acquire additional manufacturing facilities in order for the Company to compete effectively in new market areas or states which are beyond a 300 mile radius from one of its production facilities.  The construction or acquisition of
new facilities would require significant additional capital.  For these reasons, among others, the Company may need additional debt or equity financing in the future.  There can be, however, no assurance that the Company will be successful
in obtaining such additional financing, or that any such financing will be available on terms acceptable to the Company.

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Commitments and Contingencies

The following table represents a list of the Companys contractual obligations
and commitments as of June 30, 2003:

|                                   |  | Payments Due by Year (amounts in thousands) |       
|---------------------------------- |  | ------------------------------------------- | ------
|                                   |  |                                             |       
|                                   |  | Total                                       |       
|                                   |  |                                             |       
|Long-term debt                     |  | $                                           | 15,500
|Operating leases                   |  |                                             | 10,619
|                                   |  |                                             |       
|Total contractual cash obligations |  | $                                           | 26,119
|                                   |  |                                             |       

Use of Estimates and Critical Accounting Policies

In December 2001, the Securities and Exchange Commission (SEC) requested that all registrants list their most critical accounting policies in Managements Discussion and Analysis of Financial Condition and
Results of Operations.  The SEC indicated that a critical accounting policy is one which is both important to the portrayal of the Companys financial condition and results of operations and requires managements most
difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  Management continually evaluates its estimates and assumptions including those related the
Companys most critical accounting policies. Management bases its estimates and assumptions on historical experience and other factors that are believed to be reasonable under the circumstances.  Actual results may differ from these
estimates under different assumptions or conditions. Changes in economic conditions could have an impact on these estimates and the Companys actual results.  Management believes that the following may involve a higher degree of judgment
or complexity:

Allowances for Contract Adjustments

The Company maintains allowances for contract adjustments that result from the inability of
its customers to make their required payments.  Management bases its allowances on analysis of the aging of accounts receivable at the date of the financial statements, assessments of historical collection trends, and an evaluation of the
impact of current economic conditions.

Revenue Recognition

Revenue from certain contracts is recognized using the percentage-of-completion
method of accounting and, therefore, take into account the costs, estimated earnings and revenue to date on contracts not yet completed.  Revenue recognized is that percentage of the total contract price that cost expended to date bears to
anticipated final total cost, based on current estimates of costs to complete.  Revenue recognized not using the percentage-of-completion method of accounting is recognized based on transfer of title.

New Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (Interpretation
46), an interpretation of ARB No. 51.  Interpretation 46 addresses consolidation by business enterprises of variable interest entities.  Interpretation 46 applies immediately to variable interest entities created after January 31,
2003, and to variable interest entities in which an enterprise obtains an interest after that date.  It applies in the first year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a
variable interest that it acquired before February 1, 2003.  The Company believes it has no variable interest entities to which Interpretation 46 would apply.

In April 2003, the FASB issued
SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (SFAS No. 149), which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities . The provisions of SFAS No. 149 are
generally effective for contracts entered into or modified after June 30, 2003 and are to be applied prospectively. The adoption of SFAS No. 149 will not have a material effect on the Companys consolidated financial statements.

12



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In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS
No. 150), which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires an issuer to classify certain instruments as
liabilities (or assets in some circumstances) which may have previously been classified as equity. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of
the first interim period beginning after June 15, 2003. The provisions of SFAS No. 150 are to be implemented by reporting the cumulative effect of a change in accounting principle for financial instruments created before the issuance date of
the statement and still existing at the beginning of the interim period of adoption. The adoption of SFAS No. 150 will not have a material effect on the Companys consolidated financial statements.

13



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Item 3.  Quantitative And Qualitative Disclosures About Market Risk

We are exposed to
market risks related to fluctuation in interest rates on our $66 million credit facility.  During the three and six months ended June 30, 2003, we did not use interest rate swaps or other types of derivative financial instruments.  The
carrying value of the credit facility approximates fair value as the interest rate is variable and resets frequently. Indebtedness under the credit facility bears interest at LIBOR plus additional interest of between 1.25% and 1.75%, or the Federal
funds rate plus additional interest of between 0% and 0.5%.  The additional interest charge is based upon certain financial ratios.  We estimate that the average amount of debt outstanding under the credit facility for 2003 will be $25
million.  Therefore, a one percentage point increase in interest rates would result in an increase in interest expense of $250,000 for the year.

Item 4.  Controls
And Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Companys Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to the Companys management, including its Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of June 30, 2003, the end of the fiscal quarter covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Companys
management, including the Companys Chief Executive Officer and the Companys Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures.  Based on the foregoing,
the Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were effective at the reasonable assurance level.

There
has been no change in the Companys internal controls over financial reporting during the companys most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal controls
over financial reporting.

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PART II.  OTHER INFORMATION

|Item 1. | Legal Proceedings.                                 
|------- | ---------------------------------------------------
|        | None                                               
|        |                                                    
|Item 2. | Changes in Securities                              
|        | None                                               
|        |                                                    
|Item 3. | Defaults upon Senior Securities                    
|        | None                                               
|        |                                                    
|Item 4. | Submission of Matters to a Vote of Security Holders
|        | None                                               
|        |                                                    
|Item 5. | Other Information                                  
|        | None                                               
|        |                                                    
|Item 6. | Exhibits and Reports on Form 8-K                   
|        |                                                    
|        | (a)                                                
|        |                                                    
|        |                                                    
|        |                                                    
|        |                                                    
|        |                                                    
|        |                                                    
|        | (b)                                                
|        |                                                    

15



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SIGNATURES

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

|                      | MODTECH HOLDINGS, INC.
|--------------------- | ----------------------
|                      |                       
|                      |                       
|Date: August 13, 2003 | by:                   
|                      |                       
|                      |                       
|                      |                       
|                      | by:                   
|                      |                       
|                      |                       

16