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                       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, 2002

   [ ]    Transition report pursuant to Section 13 of 15(d) of the Securities
          Exchange Act of 1934
          For the transition period from _____________ to _____________

                        Commission file number: 333-51355

                             NUMATICS, INCORPORATED
             (Exact Name of Registrant as Specified in Its Charter)

          MICHIGAN                                         38-2955710
(State or Other Jurisdiction of                  I.R.S. Employer Identification
 Incorporation or Organization)                              Number)

                1450 North Milford Road, Milford, Michigan 48357
               (Address of Principal Executive Offices) (Zip Code)

                                 (248) 887-4111
              (Registrant's Telephone Number, Including Area Code)

        Securities registered pursuant to Section 12(b) of the Act: None

        Securities registered pursuant to Section 12(g) of the Act: None

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 this Form 10-K or any amendment to this
Form 10-K. [x]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). YES [ ] NO [x]

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant. $0 (Registrant's common equity has no
trading market.)

Indicate the number of shares outstanding of each of registrant's classes of
common stock, as of the latest practicable date: Common Stock 2,397,235 shares
as of March 27, 2003

                    DOCUMENTS INCORPORATED BY REFERENCE: None

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                  CAUTIONS REGARDING FORWARD-LOOKING STATEMENTS

        This Form 10-K report, including the information provided under item 1
and under item 7, contains forward-looking statements, which can be identified
by the use of the future tense or other forward-looking terms such as "may,"
"intend," "will," "expect," "anticipate," "plan," "management believes,"
"estimate," "continue," "should," "strategy," or "position" or the negatives of
those terms or other variations on them or by comparable terminology. In
particular, any statements, express or implied, concerning future operating
results or the ability to generate net sales, income, future compliance with
debt covenants, or cash flow to service indebtedness are forward-looking
statements. Investors are cautioned that reliance on any of those
forward-looking statements involves risks and uncertainties and that, although
Numatics' management believes that the assumptions on which those
forward-looking statements are based are reasonable, any of those assumptions
could prove to be inaccurate. As a result, the forward-looking statements based
on those assumptions also could be incorrect, and actual results may differ
materially from any results indicated or suggested by those assumptions. The
uncertainties in this regard include, but are not limited to, those identified
in "Risk Factors" under item 1. In light of these and other uncertainties, the
inclusion of a forward-looking statement in this report should not be regarded
as a representation by Numatics that its plans and objectives will be achieved.
All forward-looking statements are expressly qualified by the cautionary
statements contained in this paragraph and in "Risk Factors" below. Numatics
undertakes no duty to update any forward-looking statements.

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                                     PART I

ITEM 1.    BUSINESS

        Numatics, Incorporated ("Numatics" and, together with its subsidiaries,
the "Company") is a global manufacturer and marketer, both directly and through
its subsidiaries, of pneumatic valves, actuators, and related specialty
products. The Company's principal market is the United States, in which it is
the largest manufacturer in its core product: directional control, base mounted,
4-way pneumatic valves. The Company also conducts operations in several foreign
countries, including Canada, Germany, England, Italy, France, the Netherlands,
Hungary, Taiwan and Mexico.

        Numatics was incorporated in 1990 to purchase the assets of its
predecessor corporation. Its common stock is privately held, principally by
management.

        In 1998, in an exchange offer registered under the Securities Act of
1933, Numatics issued $115.0 million of Series B 9 5/8% senior subordinated
notes (the "Series B Notes") in exchange for a substantially identical series of
senior subordinated notes it had issued in a private placement earlier that
year. The Series B Notes are guaranteed by all of Numatics' domestic
subsidiaries. Some additional information concerning the Series B Notes and the
indenture under which they were issued is provided below under "Risk Factors
--Leverage," "--Subordination," and "--Possible Inability to Repurchase Series B
Notes Upon a Change in Control," and in Note 2 to the Company's 2002 audited
consolidated financial statements. More extensive information concerning the
Series B Notes is contained in the Form S-4 registration statement (SEC File No.
333-51355) under which the Series B Notes were registered for purposes of the
exchange offer, which can be found at the SEC's web site (www.sec.gov).

New Senior Financing

        Effective January 6, 2003, the Company entered into a new senior loan
agreement with a group of lenders for which Foothill Capital Corporation acts as
agent. The loan agreement provides for: (a) $25,000,000 of three-year revolving
credit facilities, subject to borrowing base requirements; (b) an additional
$7,500,000 of three-year revolving credit facilities, subject to borrowing base
requirements and monthly reductions beginning April 1, 2003; (c) $23,500,000 of
three-year term loans; and (d) an additional $10,000,000 of term loans that
could be made during the next six months (all of which was drawn during late
February and March of 2003), subject to conditions specified in the loan
agreement, to provide additional funds in connection with repurchases of the
Company's 9-5/8% senior subordinated notes. The term loans are payable in
monthly installments of $114,583 beginning April 1, 2003. The Company repaid all
of the indebtedness outstanding under its former senior credit facilities with
LaSalle Business Credit, Inc. and its Canadian affiliate and all of its
indebtedness to American Capital

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Strategies, Ltd. from proceeds of the initial borrowings under the new loan
agreement.

        The new revolving credit and term loans are secured by liens on
substantially all of the assets of Numatics, Incorporated and its U.S.,
Canadian, and German subsidiaries. The new revolving credit loans bear interest
at variable rates based on prime or LIBOR, at the Company's election. The
weighted average of the initial rates is approximately 5.31% per annum.
$5,500,000 of the new term loans bears interest at the greater of prime plus 4%
per annum or 9% per annum. The remaining $18,000,000 of the new term loan bear
interest at the greater of prime plus 6% per annum or 11% per annum, plus 2% per
annum which may be paid in kind at the Company's option. The additional
$10,000,000 of term loans that could be made during the next six months bears
interest at 13% per annum.

Risk Factors

        As noted above under "Cautions Regarding Forward-Looking Statements,"
the information provided under this item 1, as well as elsewhere in this Form
10-K report, includes forward-looking statements. Although management believes
that the plans, intentions, and expectations concerning the Company reflected in
those forward-looking statements are reasonable, it can give no assurance that
those plans, intentions, or expectations will be achieved. Important factors
that could cause actual results to differ materially from those included in or
suggested by any forward-looking statements are set forth below and elsewhere in
this report. All forward-looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in their entirety by the
Risk Factors set forth below.

        Leverage. The Company is highly leveraged. On January 31, 2003, the
Company had total indebtedness of approximately $161.4 million and an
accumulated deficiency of approximately $88.7 million. As of that date, the
aggregate debt of the Company to which the Series B Notes are subordinated
("Senior Debt"), which includes borrowings under its term loan and revolving
credit facilities, was approximately $41.0 million, and approximately $15.0
million would have been available for additional borrowing under the revolving
credit facility, subject to borrowing base limitations. The indenture governing
the Series B Notes permits the incurrence of additional indebtedness, including
Senior Debt, by Numatics and its subsidiaries in the future, subject to certain
limitations.

        The Company's current annual debt service requirement is approximately
$17.7 million. The Company's ability to make scheduled payments of principal or
interest on, or to refinance, its indebtedness (including the Series B Notes)
will depend on its future performance, which to some extent is subject to
general economic, financial, competitive, legislative, regulatory, and other
factors that are beyond its control. Based upon the Company's current level of
operations and future business which has been awarded, management believes that
cash flow from operations and available cash, together with available borrowings
under the revolving credit facility, will be adequate to meet the Company's
future liquidity needs until the scheduled expiration of the credit facilities
at

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which time the Company would expect to replace the credit facilities. However,
there can be no assurance that the Company's business will generate sufficient
cash flow from operations, that anticipated growth opportunities and operating
improvements will be realized, or that future borrowings will be available under
the revolving credit facility, or a replacement credit facility, in an amount
sufficient to enable the Company to service its indebtedness, including the
Series B Notes, or to fund its other liquidity needs. The revolving and term
loans under the senior loan agreement and a letter of credit supporting a $2.3
million industrial revenue bond for which the Company is responsible under the
senior loan agreement mature prior to the maturity of the Series B Notes, and
there can be no assurance that the Company will be able to replace the credit
facilities, or refinance any other indebtedness, on commercially reasonable
terms or at all.

        The degree to which the Company is leveraged could have important
consequences to investors, including, but not limited to, making it more
difficult for the Company to satisfy its obligations with respect to the Series
B Notes, increasing the Company's vulnerability to general adverse economic and
industry conditions, limiting the Company's ability to obtain additional
financing to fund future working capital, capital expenditures, and other
general corporate requirements, or to fund acquisitions, requiring the
dedication of a substantial portion of the Company's cash flow from operations
to the payment of principal of, and interest on, its indebtedness, thereby
reducing the availability of such cash flow to fund working capital, capital
expenditures, research and development or other general corporate purposes,
limiting the Company's flexibility in planning for, or reacting to, changes in
its business and the industries it serves, and placing the Company at a
competitive disadvantage compared to less leveraged competitors. In addition,
the indenture governing the Series B Notes and the credit facilities contain
financial and other restrictive covenants that limit the ability of the Company
to, among other things, borrow additional funds. Failure by the Company to
comply with such covenants could result in an event of default which, if not
cured or waived, could have a material adverse effect on the Company.

        Subordination. The Series B Notes are subordinated in right of payment
to all of Numatics' current and future Senior Debt (as defined in the indenture
governing the Series B Notes), and the guarantees of the Series B Notes by the
Guarantors (the "Subsidiary Guarantees") are subordinated in right of payment to
all current and future Senior Debt of the Guarantors. As defined in the
governing indenture, the term Senior Debt includes the loans under the Company's
senior loan agreement and the Guarantors' guarantees of those loans. The loans
under the senior loan agreement are secured by substantially all of the assets
of Numatics and its domestic, Canadian, and German subsidiaries, all of the
outstanding voting stock of Numatics' German holding company, and 65% of the
capital stock of most of Numatics' other foreign subsidiaries. Due to these
subordination provisions, upon any distribution to creditors of Numatics or any
Guarantor in a liquidation or dissolution of Numatics or the Guarantor or in a
bankruptcy, reorganization, insolvency, receivership, or similar proceeding
relating to Numatics, a Guarantor, or the property of Numatics or a Guarantor,
the holders of Senior Debt of Numatics or the

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Guarantor, respectively, will be entitled to be paid in full before any payment
may be made with respect to the Series B Notes or the related Subsidiary
Guarantee. In addition, under the governing indenture, payments with respect to
the Series B Notes and the Subsidiary Guarantees will be blocked in the event of
a payment default on Designated Senior Debt (defined in the indenture to include
the loans under the Company's senior loan agreement and the related guarantees
of those loans) and may be blocked for up to 179 days each year in the event of
certain non-payment defaults on Designated Senior Debt.

        In the event of a bankruptcy, liquidation, or reorganization of Numatics
or a Guarantor, holders of the Series B Notes will participate ratably with all
holders of subordinated indebtedness of Numatics or the Guarantor that is deemed
to be of the same class as the Series B Notes, and potentially with all general
creditors of Numatics or the Guarantor other than holders of Senior Debt, based
upon the respective amounts owed to each holder or creditor, in the remaining
assets of Numatics or the Guarantor. In any of the foregoing events, there can
be no assurance that Numatics or any or all of the Guarantors would have
sufficient assets to pay amounts due on the Series B Notes. As a result, holders
of Series B Notes may receive less, ratably, than the holders of other debt of
Numatics or of a Guarantor, including Senior Debt.

        The Company derives a significant portion of its revenue from Numatics'
foreign subsidiaries, which have not guaranteed the Series B Notes. Holders of
indebtedness of, and trade creditors of, those foreign subsidiaries generally
would be entitled to payment of their claims from the assets of the affected
subsidiaries before any of those assets are made available for distribution to
Numatics. The indenture governing the Series B Notes permits the incurrence of
substantial additional indebtedness by Numatics' foreign subsidiaries and
permits investments by Numatics or other subsidiaries in those subsidiaries. In
the event of a bankruptcy, liquidation, or reorganization of a subsidiary that
has not guaranteed the Series B Notes, holders of any of that subsidiary's
indebtedness will have a claim to the assets of the subsidiary that is prior to
Numatics' interest in those assets. As of December 31, 2002, the total
liabilities of subsidiaries that have not guaranteed the Series B Notes were
$9.0 million, excluding obligations owed to other Numatics entities, which are
eliminated in the consolidation.

        Dependence upon John Welker. The Company's continued success will be
substantially dependent upon the efforts of John Welker. Mr. Welker has been
Numatics' Chairman, President, and Chief Executive Officer since 1990. He also
owns over 80% and controls the vote of over 93% of Numatics' outstanding common
stock, which means he is in a position to elect its Board of Directors and to
control its management, policies, and operations. When he acts in his capacity
as a Numatics shareholder, Mr. Welker does not owe fiduciary duties to holders
of Series B Notes or other Numatics' investors.

        The Company could be adversely affected if Mr. Welker were to become
unwilling or unable to continue as head of Numatics' management team. It is an
event of default under the senior loan agreement if Mr. Welker ceases to be the
President and Chief

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Executive Officer of Numatics or ceases to have the ability to elect a majority
of its directors and if he is not replaced by a person satisfactory to the
senior lenders. The Company maintains $27.5 million of key-man life insurance on
Mr. Welker's life, but that amount would not be sufficient to retire all
existing indebtedness under the senior loan agreement should it become necessary
to do so.

        Possible Inability to Repurchase Series B Notes upon a Change in
Control. The indenture governing the Series B Notes requires Numatics to offer
to repurchase all outstanding Series B Notes at 101% of their principal amount
plus accrued and unpaid interest to the date of repurchase if a Change in
Control (as defined in the indenture) should occur. However, there can be no
assurance that sufficient funds will be available at the time of any Change of
Control to make any required repurchases of Series B Notes tendered or that
restrictions in the senior loan agreement will allow Numatics to make the
required repurchases.

        The Company also is permitted under the indenture to enter into certain
transactions, including certain recapitalizations, which would not constitute a
Change of Control but would increase the amount of outstanding Senior Debt or
indebtedness on parity with the Series B Notes.

        Absence of Patent Protection. The Company relies on unpatented
proprietary technology to produce its core products, particularly its "lapped
spool and sleeve" pneumatic valve manufacturing technology. To protect its trade
secrets and other proprietary information, the Company requires employees,
consultants, advisors, and collaborators who have access to this technology to
enter into confidentiality agreements and limits access to certain of its
proprietary processes. However, there can be no assurance that these agreements
or procedures will provide meaningful protection for the Company's trade
secrets, know-how, or other proprietary information in the event of any
unauthorized use, misappropriation, or disclosure of such trade secrets,
know-how, or other proprietary information. If the Company is unable to maintain
the proprietary nature of its technology, particularly its "lapped spool and
sleeve" valve manufacturing technology, the Company could be materially
adversely affected.

Segments

        The Company reports its segments based on geographic area, which it
divides between North American and International. See Note 7 of the notes to the
Company's audited consolidated financial statements filed as exhibit 99.1 to
this Form 10-K for financial information about segments.

Industry Overview

        The fluid power industry has grown out of manufacturers' needs to
automate repetitive tasks that previously had been performed manually. The
industry can generally

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be divided into two major segments: hydraulics (use of liquids) and pneumatics
(use of air or inert gas). While hydraulics can produce higher forces and, in
some applications, better control, pneumatics generally provide faster speeds,
lower cost, greater ease of use, and a more environmentally clean process. The
Company competes only in the pneumatic segment of the fluid power market.

        Major components utilized in the pneumatic fluid power process include
valves, actuators (cylinders), and air preparation equipment. A pneumatic system
begins when air enters a compressor and the volume of air is reduced. The air
then flows through a dryer and excess moisture is removed. (Typically, a
pneumatic system contains a single compressor and an air dryer.) The dry air
then flows through a system header to multiple workstations in a plant. At a
workstation, the dry air flows initially through an FRL (filter, regulator, and
lubricator). In the FRL, a filter removes particulates from the air, a regulator
reduces and stabilizes downstream pressure, and a lubricator adds the
appropriate amount of oil to the air, when necessary. This conditioned air then
enters a valve.

        A valve is the primary pneumatic component that controls the intake and
withdrawal of air into the actuator, with the valve's movement typically
controlled by a solenoid. In the Company's "lapped spool and sleeve" valve, the
position of the spool determines the direction of the air as it flows into the
actuator. The flow of air from the valve causes the actuator rod to extend or
retract, thereby moving a specific load. In many cases, an automated component,
such as a gripper or guiding unit, may be attached to the actuator for material
handling purposes.

        Certain market segments to which the Company sells its products have
been reducing the number of suppliers they deal with, including pneumatic
component suppliers. As a result, companies within these market segments
increasingly have used suppliers that can provide a full line of pneumatic
components. Continuing the product line expansion begun by the Company's
predecessor in the late 1980s, the Company now offers its customers a full line
of pneumatic components, including valves, actuators, and specialty products
such as air preparation products, specialty valves, and grippers and guiding
units.

        Applications for pneumatic fluid power are numerous and diverse. Some of
the largest industries that use pneumatic fluid power systems include packaging,
automotive, machine tool, material handling, food and beverage, textile,
printing, electronics/semiconductor, robotics, paper, and medical equipment.
Pneumatic components primarily are used in automated manufacturing applications,
but also can serve other functions, as do certain of the Company's specialty
valves used in oxygen concentrators sold by medical equipment manufacturers.

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Products

        Both in North America and internationally, the Company offers a complete
line of pneumatic components, which can be described in three groups: valves,
motion control products, and air preparation products. The Company's core
product historically has been pneumatic valves. Over recent years, the Company
has expanded into additional product lines, decreasing its dependence on valves
through its product diversification strategy. The table that follows illustrates
this diversification trend since 1997.

                                                  1997               2002
                                           -------------------------------------
       Net Sales                             $147.0 million     $112.2 million

       Valves                                     71.2%              65.4%
       Motion Control Products                    12.4%              18.4%
       Air Preparation Products                   16.4%              16.2%
                                           -------------------------------------
       Total                                     100.0%             100.0%

        Valves. The Company is widely regarded as a leading manufacturer of high
quality pneumatic valves used in fluid power applications. In a pneumatic
system, the valve controls the flow of compressed air to an actuator (cylinder).
The valve is the most important and complex component in any pneumatic system.

        The Company's success is largely derived from its proprietary "lapped
spool and sleeve" technology developed by the Company's founder in the 1950s.
The original design is used in the Company's valves today, although the
manufacturing process has been improved continuously. The inner (spool) and
outer (sleeve) components are a matched set, with the sleeve remaining
stationary and the spool moving inside it to produce the switching of air flow.
The sealing of the spool and sleeve is accomplished by the minute clearance
between the two parts, measured in millionths of an inch, rather than by using
soft rubber seals as in other designs. This minute clearance provides an air
bearing, which avoids any metal-to-metal contact and allows frictionless
movements, virtually eliminating heat and wear. This results in extremely long
product life.

        The patent on the "lapped spool and sleeve" product expired in 1973.
However, the process for manufacturing the "lapped spool and sleeve" to the
required tolerances remains a trade secret. The Company continues to closely
guard this trade secret and limits the number of visitors and employees who have
access to the manufacturing process. Several competitors have attempted to
imitate the process, but management believes none has been able to duplicate the
"lapped spool and sleeve" to the same high quality tolerances.

        The Company manufactures a wide variety of valves, most of which can
broadly be described as directional control, 4-way valves. Additionally, the
Company manufactures

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and markets 3-way valves and a variety of other valves for specific customer
applications.

        The Company's valve sales were $94.7 million, $73.8 million, and $73.4
million in 2000, 2001, and 2002, respectively.

        Motion Control Products. In a pneumatic system, the actuator (or
cylinder) serves as an "arm" for an automated task, allowing an object to be
moved. Grippers and guiding units are material handling components, often
serving as the "hands" of an automated process.

        The Company's actuator line includes: standard tie-rod cylinders, made
to National Fluid Power Association specifications, its "M" series actuator, a
non-repairable miniature cylinder, a rodless cylinder based on technology it
acquired in connection with its purchase of 12% of the stock of Univer, a large
manufacturer of pneumatic products in Italy, rotary actuators, and a variety of
small actuators.

        The Company's motion control sales were $27.1 million, $21.1 million,
and $20.6 million in 2000, 2001, and 2002, respectively.

        Air Preparation Products. The Company's air preparation products include
FRLs and air dryers. Air preparation products condition the air for use in the
pneumatic system.

        The Company's air preparation products sales were $24.0 million, $18.7
million, and $18.2 million in 2000, 2001, and 2002, respectively.

Engineering

        The Company is widely recognized as an innovator in the design,
engineering, and manufacture of pneumatic components. The Company has a
dedicated group of engineers, both domestically and internationally. Beginning
with the "lapped spool and sleeve," the Company has continued to produce
engineering innovations which include the following:

    .   On-board electronics, which allow electronic signals to be passed
        through a single input/output source at faster transmission speeds

    .   Electrical plug-in connections, which allow assembly of systems without
        the need for costly wiring

    .   Integral speed controls and integral pressure controls, which are
        mounted between the valve and manifold to provide a complete control
        package

    .   Manifolding, which reduces piping and space and allows factory assembly,
        reducing cost

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    .   Direct solenoid, which eliminates unnecessary pilot valves, improving
        reliability due to fewer parts

    .   Die cast magnesium valves, providing maximum weight reduction and cost
        savings

    .   "Nu-Plex," the first fully integrated serial control system for fluid
        power applications

    .   Aluminum cast valve bodies, which reduces the weight and cost of valves
        that had previously been made of bronze, cast iron, and brass

    .   "Numasizing," the first precise method of determining component size so
        as to accurately match desired performance with a valve configuration
        that uses the smallest amount of energy to get the job done

        The Numasizing process is based on a computerized database containing
empirical data from more than 250,000 test firings of pneumatic cylinders under
different conditions. Numasizing is used at all of the Company's locations
throughout the world. The Company conducts seminars on Numasizing for its
customers and offers for sale a proprietary program to enable them to use
Numasizing in helping to design efficient systems for their customers.

Customers, Marketing, and Distribution

        The Company's customers consist of end users, machinery manufacturers
(which incorporate the Company's products in their machines), and distributors.
As is common practice in the U.S. market, end users and machinery manufacturers
generally purchase the Company's products through its network of distributors.
Alternatively, in international markets, customers typically purchase directly
from the Company. In some cases, the end user will specify the Company's
products, regardless of distribution channel. The products sold by the Company
are utilized in a diverse group of industries, and no one customer accounted for
more than 4.0 % of total net sales in 2002.

        Approximately 61.0% of the Company's net sales in 2002 were from sales
to distributors. The Company believes it maintains excellent relationships with
its distributor network, which consists of over 125 distributors, including over
85 in North America, 16 in Europe, 17 in Asia and 8 in South America.

        The Company's North American distributors are pneumatics specialists who
sell only pneumatic components and do not sell hydraulic components. In most
cases, the Company's products represent these distributors' principal source of
income. Additionally, the only pneumatic valves these distributors carry are
Numatics' valves. The Company maintains an interactive relationship with its
distributors, conducting periodic meetings in

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several cities and intensive training programs while encouraging feedback. The
Company employs ten regional managers in North America to train and assist its
distributors. The Company's distributors purchase products from the Company and
maintain their own inventories.

        The Company has a direct sales force of 125 employees, who sell to over
7,000 active direct customers worldwide, of which a significant portion are
outside the United States. The Company also has maintained direct selling
efforts with certain large end users and machinery manufacturers in North
America.

Manufacturing

        The Company has six domestic manufacturing facilities, including four in
Michigan and one each in Ohio and Tennessee. The Company also has manufacturing
plants in Ontario, Canada and Germany. The Company's core valve products
primarily are manufactured in its Highland, Michigan facility, which also is the
Company's headquarters. The final machining and matching of the Company's
proprietary "lapped spool and sleeve" valve components are carried out in a
specially designed, temperature and humidity controlled area. This process is
highly confidential. Visitors and employees who do not require access are not
permitted in the facility, nor are equipment suppliers. All equipment setup for
such operations is performed by the Company's own employees.

        The Company stresses quality control in all of its manufacturing and
distribution facilities, and each valve is individually tested to meet specific
tolerances before it can be shipped. Currently, all of the Company's
manufacturing facilities are ISO certified. The Company believes that the
achievement of ISO certification at each of its manufacturing facilities is a
significant factor in maintaining its competitive position.

Components and Raw Materials

        The principal raw materials and components used in manufacturing the
Company's products are aluminum castings, stainless steel, solenoids, and screw
machine parts. All of these items are readily available from multiple suppliers,
and the Company also produces a substantial portion of its own requirements of
solenoids and screw machine parts. The Company purchases a significant portion
of its aluminum castings from Taiwanese suppliers through its subsidiary in
Taiwan. The Company has never experienced significant difficulty in acquiring
needed parts and raw materials, and management believes the Company is not
substantially dependent on any particular supplier.

Competition

        The markets in which the Company operates are highly competitive.
Competition is based primarily on quality, price, timely delivery, service, and
breadth of product line. The markets in which the Company competes are highly
fragmented, and many of its

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competitors do not currently offer the full range of products sold by the
Company. However, some of the Company's competitors are significantly larger and
have greater financial and other resources than the Company.

        The Company has the largest U.S. market share in its core product of
directional control, base mounted, 4-way pneumatic valves. The Company's most
significant competitors in North America are Parker Hannifin, SMC Pneumatics and
MAC Valves. Some of the Company's major competitors in the valve market outside
North America are SMC Pneumatics, Festo, and CKD. The motion control and air
preparation products markets have different competitors such as Norgren IMI,
Wilkerson, Phd., Robohand, Lee, and Clippard.

International Operations

        Numatics, Ltd. in Ontario, Canada and Numatics GmbH in Germany operate
manufacturing facilities, both of which are ISO certified. Numatics, Ltd.
markets a full line of the Company's products to the Canadian market and
manufactures, among other products, lockout valves for the Company's worldwide
needs. Numatics GmbH manufactures some of the Company's products and markets a
full line of Numatics' components to customers in Europe and Africa. Numatics
GmbH maintains a dedicated engineering staff, which works together with the
Company's North American engineering personnel. Numatics' other foreign
operations primarily are sales and distribution facilities.

        International sales accounted for approximately 17.5% of the Company's
2002 net sales, and international assets accounted for approximately 16.5% of
its total assets as of December 31, 2002. For additional financial information
regarding foreign sales, see Note 7 of the notes to the Company's audited
consolidated financial statements filed as exhibit 99.1 to this Form 10-K.

Backlog

        The Company does not consider information concerning its backlog to be
material due to its short order to ship cycle, therefore backlog information is
not presented.

Employees

        At December 31, 2002, the Company had 715 employees. Approximately 75 of
those employees at that time were represented by the United Auto Workers under a
contract expiring on March 20, 2005. The Company considers its employee
relations to be good.

Page 13

<PAGE>

Environmental Matters

        The Company's plant on North Milford Road in Highland, Michigan, is the
site of a groundwater contamination problem that became known in the early
1980s. The contamination was caused by a chemical (trichloroethylene) that was
used for many years to degrease parts but which has not been used at the site
since the early 1970s. A soil vapor extraction system was used to clean up the
soil contamination, and a pump and treat system has been installed to purge the
groundwater. The soil cleanup has been completed, but completion of the
groundwater remediation is expected to take approximately another five years.
Based on past expenditures and its current evaluation of site conditions,
management expects to spend approximately $60,000 annually to complete the
groundwater remediation. The Company has recorded a reserve for these future
expenditures, which at December 31, 2002 was approximately $300,000. Management
believes this reserve will be adequate to complete the remediation, although
actual expenditures will depend on actual site conditions and other factors and
are subject to change.

        In 1989, a fluid spill site containing PCBs was discovered at the
Company's East Highland Road facility in Highland, Michigan. The source of the
PCBs is believed to be a transformer that was accidentally ruptured in 1973
while sitting on the ground awaiting disposal. The area of the spill has been
disturbed by subsequent paving of a portion of the area and soil removal
following a non-PCB waste oil spill. Management estimates that future soils
remedial work at this site will cost approximately $200,000, and has reserved
this amount in the Company's December 31, 2002 financial statements.

        The sites discussed above are the only sites where the Company to date
has identified any environmental contamination. However, most of the Company's
facilities have been in operation for many years, and several of the facilities
have undergone little or no invasive testing to determine the presence or
absence of environmental contamination. Except as discussed above concerning the
two identified sites, compliance by the Company with federal, state, and local
laws and regulations pertaining to the discharge of material into the
environment has not had any material effect upon the Company in conducting its
business, and management currently does not anticipate that compliance with
these laws and regulations in the future will have any material effect upon the
Company in conducting its business. However, due to the nature of its current
operations (and those of its predecessor), and the history of industrial uses at
some of its facilities, the Company does face some risk of additional exposure
to environmentally-related liabilities.

Page 14

<PAGE>

ITEM 2.    PROPERTIES

        The Company conducts its business in Company-owned facilities, totaling
approximately 339,750 square feet, and leased facilities, totaling approximately
80,900 square feet, of office, engineering, manufacturing and warehouse space.
All of these facilities are suitable to meet the current capacity needs of the
Company's various business units. Leases expire at various times through 2006,
and the Company generally has extension options.

        The table that follows provides additional information concerning each
of these facilities.

<TABLE>
<CAPTION>
               LOCATION                     SQUARE FEET   TYPE OF INTEREST                 USES
------------------------------------------  -----------   ----------------    ----------------------------------------
     <S>                                         <C>      <C>                 <C>
     United States
     N. Milford Rd., Highland, MI                76,000   Owned               Company headquarters; valve components
     Franklin, TN                                68,000   Owned               Actuators
     Sandusky, MI                                57,300   Owned               Valves and solenoids
     Lapeer, MI                                  41,600   Owned               FRLs and air dryers
     Wixom, MI                                   15,700   Leased              Specialty valves & distribution facility
     E. Highland Rd., Highland, MI               12,250   Owned               Warehousing
     Westlake, OH                                12,000   Leased              Grippers and guiding units
     Forrester, MI                               10,000   Leased              Warehousing
     Phoenix, AZ                                  3,300   Leased              Electronic componentry design and
                                                                               fabrication
     Rochester, NY                                2,700   Leased              Distribution facility
     International
     St. Augustin, Germany                       33,300   Owned               Valves and actuators
     London, ON, Canada                          40,000   Owned               Valves and actuators
     Leighton, Buzzard, England                  11,300   Owned               Distribution and sales
     Taipei, Taiwan                               8,000   Leased              Distribution and sales
     Brescia, Italy                               7,700   Leased              Distribution and sales
     Vancouver, BC, Canada                        6,000   Leased              Distribution and sales
     Puebla, Mexico                               5,000   Leased              Distribution and sales
     Montreal, QB, Canada                         3,600   Leased              Distribution and sales
     Paris, France                                3,400   Leased              Distribution and sales
     Waardenburg, The Netherlands                 1,600   Leased              Distribution and sales
     Saltillo, Mexico                             1,300   Leased              Distribution and sales
     Budapest, Hungary                              600   Leased              Distribution and sales
</TABLE>

Page 15

<PAGE>

ITEM 3.    LEGAL PROCEEDINGS

        Various legal matters arising during the normal course of business are
pending against the Company. Management does not expect that the ultimate
liability, if any, of these matters will have a material effect on future
consolidated financial statements.

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

        No matter was submitted to a vote of Numatics' shareholders during the
quarter ended December 31, 2002.

Page 16

<PAGE>

                                     PART II

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

        Numatics' only authorized class of equity security is its common stock.
On March 27, 2003, there were six holders of the outstanding shares of the
common stock, all but one of whom were Numatics employees. The common stock has
no public trading market, all outstanding shares are subject to transfer
restrictions, and the shares held by employees are subject to a Numatics
repurchase option. See "Compensation Committee Interlocks and Insider
Participation" under item 11.

        The common stock of the Company was split on the basis of 125 shares for
each issued and outstanding share effective May 15, 2000. In connection with the
stock split, the authorized share capital was changed from the previously
authorized 250,000 shares of common stock to 9,950,000 shares of common stock.

        No dividends have been paid on the common stock during the last two
fiscal years. The senior loan agreement and the indenture governing the Series B
Notes substantially limit the payment of future dividends on the common stock,
and no such dividends are expected to be declared or paid for the foreseeable
future.

        Information about securities authorized for issuance under equity
compensation plans appears in Item 12 of this report.

Page 17

<PAGE>

ITEM 6.    SELECTED FINANCIAL DATA

SELECTED FINANCIAL DATA (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                               YEAR ENDED DECEMBER 31
                                                        2002          2001            2000             1999           1998
                                                     ------------------------------------------------------------------------
<S>                                                  <C>           <C>            <C>             <C>              <C>
INCOME STATEMENT DATA
Net sales                                            $  112,240    $  113,563     $    145,861    $     140,120    $  139,415
Cost of products sold                                    69,558        70,528           92,328           87,686        87,956
                                                     ------------------------------------------------------------------------
Gross profit                                             42,682        43,035           53,533           52,434        51,459
Marketing, engineering, general and
 administrative expenses (1)                             26,230        27,428           34,350           31,843        30,771
Michigan single business tax (2)                            238           (62)             219              391          (609)
                                                     ------------------------------------------------------------------------
Operating income                                         16,214        15,669           18,964           20,200        21,297
Interest and other financing expenses                    18,265        16,345           16,819           16,062        15,927
Other expense (income)                                     (749)        1,176            1,729            1,732           236
                                                     ------------------------------------------------------------------------
Income (loss) before income taxes and
 extraordinary item                                      (1,302)       (1,852)             416            2,406         5,134
Income taxes (3)                                         (4,794)         (372)           1,075            1,520         2,283
                                                     ------------------------------------------------------------------------
Income (loss) before extraordinary
 item                                                    (6,096)       (1,480)            (659)             886         2,851
Extraordinary item, net of income tax(4)                      -          (304)               -                -        (4,918)
                                                     ------------------------------------------------------------------------
Net income (loss)
                                                     $   (6,096)   $   (1,784)    $       (659)             886    $   (2,067)
                                                     ========================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                               YEAR ENDED DECEMBER 31
                                                        2002          2001            2000             1999           1998
                                                     ------------------------------------------------------------------------
<S>                                                  <C>           <C>            <C>             <C>              <C>
OTHER FINANCIAL DATA
Cash provided by operating activities                $    7,813    $    9,410     $      3,146    $       4,294    $    7,578
Cash used in investing activities                          (440)       (2,013)          (5,330)          (6,403)       (6,913)
Cash provided by (used in) financing
 activities                                              (7,674)       (6,785)           1,987            2,502          (139)
EBITDA (5)                                               21,904        21,095           25,320           26,036        26,137
Depreciation and amortization (1)                         5,452         5,488            6,137            5,444         5,449
Capital expenditures                                        452         1,972            5,588            6,407         6,605

BALANCE SHEET DATA
Working capital                                      $   38,630    $   41,337     $     44,283    $      41,161    $   37,724
Total assets                                             97,457       104,943          114,564          114,553       109,212
Total long-term debt                                    158,645       161,847          164,199          162,392       160,375
Total shareholders' deficit                             (88,711)      (78,737)         (74,850)         (73,894)      (75,292)
Common stock dividend                                         -             -                -                -         6,000
</TABLE>

Page 18

<PAGE>

(1)  On January 1, 2002, we adopted SFAS No. 142, under which goodwill is no
     longer amortized but is subject to annual impairment analysis.

(2)  The Michigan Single Business Tax is a state tax which is calculated based
     on operating activity and capital expenditure levels and is in lieu of a
     state income tax.

(3)  For 2002, the Company's income tax expense included the creation of a
     valuation allowance on the Company's U.S. deferred tax assets of $5.3
     million.

(4)  For 2001, represents write off of deferred financing costs, net of $0.1
     million tax. For 1998, represents $1.6 million (net of income taxes) write
     off of deferred financing costs, $2.1 million (net of income taxes) for the
     amortization of the previously unamortized discount on a series of
     subordinated notes that was prepaid during the year and $1.2 million (net
     of income taxes) for associated prepayment penalties.

(5)  "EBITDA" represents the sum of operating income plus depreciation and
     amortization (less amortization of deferred financing costs) and Michigan
     Single Business Tax. Information regarding EBITDA is presented because
     management believes (i) it is a widely accepted financial indicator of a
     company's ability to incur and service debt, (ii) it reflects the non-cash
     effect on earnings of amortization and depreciation expense, and (iii) it
     is the basis on which compliance with certain of the financial covenants
     contained in the credit facility is principally determined. However, EBITDA
     does not purport to represent cash provided by operating activities as
     reflected in the Company's consolidated statements of cash flow, is not a
     measure of financial performance under generally accepted accounting
     principles and should not be considered in isolation or as a substitute for
     measures of performance prepared in accordance with generally accepted
     accounting principles. Also, the measure of EBITDA may not be comparable to
     similar measures reported by other companies.

Page 19

<PAGE>

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

        The following discussion should be read in conjunction with the
Company's financial statements and the notes thereto, included elsewhere in this
report.

Overview

        The Company is a leading global manufacturer and marketer of pneumatic
components. The Company's net sales are principally derived from the sale of its
products worldwide to over 7,000 customers, including a network of over 125
distributors. In recent years, the Company has diversified its revenue base
through its expanded product lines and an increase in its percentage of
international sales. In the U.S., the Company's products are principally sold
through a network of 50 distributors who purchase and stock Numatics' products.
In non-U.S. markets, a majority of sales are derived from direct customers.

        The Company's cost of products sold consists primarily of raw materials,
labor, manufacturing overhead and purchased product costs. The Company has
generally had success in passing through price increases in raw materials to its
customers, although there can be no assurance that it will be able to continue
to do so.

Results of Operations

Year Ended December 31, 2002 Compared with Year Ended December 31, 2001

        Net Sales. The Company's net sales for 2002 decreased 1.2%, or $1.4
million, from $113.6 million in 2001 to $112.2 million in 2002 as a continued
result of the recession and general economic slowdown, which began in the United
States in the fourth quarter of 2000. Net sales in North America decreased 1.5%,
or $1.3 million, while international sales increased 0.3%, or $0.1 million. For
the year, Valves sales were down 0.5%, or $0.4 million, Motion Control sales
were down 2.0%, or $0.5 million, and other sales were down 2.8%, or $0.5
million. Although the total year 2002 was down compared to 2001, the fourth
quarter was 17.9% higher, with North American sales up 14.5% and International
sales up 34.7%.

        Gross Profit. Gross profit for 2002 increased to 38.0% of net sales from
37.9% in 2001. The full-year effect of cost savings and containment programs
implemented during 2001 in response to the economic downturn were responsible
for the continued improvement in gross profit.

        Marketing, Engineering, General and Administrative. Marketing,
engineering, general and administrative expenses decreased $1.2 million in 2002,
ending the year at $26.2 million. This continued improvement resulted from the
full-year's realization of

Page 20

<PAGE>

cost savings begun during 2001 in response to the economic downturn, as well as
the $0.5 million effect of not amortizing goodwill in 2002.

        Single Business Tax. Single business tax for 2002 was a charge of $0.2
million compared to a credit in 2001 of $0.1 million.

        Operating Income. Operating income in 2002 was $16.2 million, or 14.4%
of sales, compared to $15.7 million, or 13.8% of sales, in 2001. Improved gross
profit and lower marketing, engineering, general and administrative expenses
(including the $0.5 million pre-tax effect of not amortizing goodwill in 2002),
offset the lower sales levels, resulting in the incremental $0.5 million
improvement in operating income.

        Interest and Other Financing Expenses. Interest expense increased $2.0
million from $16.3 million in 2001 to $18.3 million in 2002 as a result of the
higher interest rates on the Company's senior debt and a $0.5 million increase
in amortization of deferred financing costs.

        Other. Other income of $0.7 million in 2002 consisted primarily of
unrealized foreign exchange gains, offset by minority interest and miscellaneous
expense. Other expense in 2001 of $1.2 million was primarily unrealized and
realized foreign exchange losses, coupled with minority interest and
miscellaneous expense.

        Income Taxes. The Company's income tax expense in 2002 of $4.8 million
included the recording of a valuation allowance on the Company's U.S. deferred
tax assets of $5.3 million and was $5.2 million greater than the $0.4 million
benefit recorded in 2001.

        Extraordinary Item. The write off of unamortized debt financing costs
related to the refinancing of the Company's senior credit facility in 2001
resulted in an extraordinary expense of $0.3 million, net of $0.1 million in tax
benefit.

        Net Loss. Due to the factors discussed above, net loss increased $4.3
million, to a loss of $6.1 million for 2002.

Year Ended December 31, 2001 Compared with Year Ended December 31, 2000

        Net Sales. The Company's net sales for 2001 decreased 22.1%, or $32.3
million, from $145.9 million in 2000 to $113.6 million in 2001 as a result of
the recession and general economic slowdown. Net sales in North America
decreased 24.2%, or $30.0 million, while international sales decreased 10.5%, or
$2.3 million, approximately $0.4 million of which was a result of currency
translation losses. The slowdown was experienced first in the United States,
which suffered a decline of 25.7%. The drop in sales in Canada and Mexico began
early 2001, bringing their total sales decreases to 18.2% and 11.1%,
respectively. The international group sales began falling mid-year for

Page 21

<PAGE>

the total drop in international sales of 10.5%. The sales decline was spread
equally among products groups with valves, motion control, and air preparation
products all down 22% for the year.

        Gross Profit. Gross profit for 2001 increased to 37.9% of net sales from
36.7% in 2000. Cost savings and containment programs implemented in response to
the economic downturn were responsible for the overall improvement in gross
profit. These cost savings included decreases in direct and indirect labor as a
result of an overall 28% headcount reduction, depreciation savings on reduced
capital expenditures, reduced scrap costs and the elimination of discretionary
spending in manufacturing overhead.

        Marketing, Engineering, General and Administrative. Marketing,
engineering, general and administrative expenses decreased $6.9 million in 2001,
ending the year at $27.4 million. This decrease was a result of cost savings and
containment programs implemented in response to the economic downturn. In
addition to an overall 28% headcount reduction, the Company eliminated or
reduced discretionary spending to offset the effects of the lower sales volume,
including the elimination of management bonuses. Unusual expenditures in 2000,
such as the $0.7 million for implementation and enhancement of the computer
system, did not recur in 2001.

        Single Business Tax. Single business tax for 2001 was a credit of $0.1
million compared to an expense of $0.2 million in 2000 as a result of the loss
in 2001.

        Operating Income. Operating income in 2001 was $15.7 million, or 13.8%
of sales, compared to $19.0 million, or 13.0% of sales, in 2000. This $3.3
million decrease was a direct result of the lower sales volume.

         Interest and Other Financing Expenses. Interest expense decreased $0.5
million from $16.8 million in 2000 to $16.3 million in 2001 as a result of the
general decrease in interest rates and less long-term debt.

        Other. Other expense consisted primarily of unrealized foreign exchange
gains and losses, along with minority interest. Expense in 2001 was $0.6 million
lower than 2000.

        Income Taxes. The Company's income taxes at the statutory rate differed
from its recorded income tax expense primarily due to international rate
differences.

        Extraordinary Item. The write off of unamortized debt financing costs
related to the refinancing of the Company's senior credit facility in November
2001 resulted in an extraordinary expense of $0.3 million, net of $0.1 million
tax benefit.

        Net Loss. Due to the factors discussed above, net loss increased $1.1
million, to a loss of $1.8 million for 2001.

Page 22

<PAGE>

Liquidity and Capital Resources

        Working capital was $38.6 million at December 31, 2002, compared with
$41.3 million at December 31, 2001. Historically, the Company has utilized cash
from operations and borrowings under its credit facilities to satisfy its
operating and capital needs and to service its indebtedness.

        Effective January 6, 2003, the Company entered into a new senior loan
agreement with a group of lenders for which Foothill Capital Corporation acts as
agent. The loan agreement provides for: (a) $25,000,000 of three-year revolving
credit facilities, subject to borrowing base requirements; (b) an additional
$7,500,000 of three-year revolving credit facilities, subject to borrowing base
requirements and monthly reductions beginning April 1, 2003; (c) $23,500,000 of
three-year term loans; and (d) an additional $10,000,000 of term loans that
could be made during the next six months (all of which was drawn during late
February and March of 2003), subject to conditions specified in the loan
agreement, to provide additional funds in connection with repurchases of the
Company's 9-5/8% senior subordinated notes. The term loans are payable in
monthly installments of $114,583 beginning April 1, 2003. The Company repaid all
of the indebtedness outstanding under its former senior credit facilities with
LaSalle Business Credit, Inc. and its Canadian affiliate and all of its
indebtedness to American Capital Strategies, Ltd. from proceeds of the initial
borrowings under the new loan agreement.

        The new revolving credit and term loans are secured by liens on
substantially all of the assets of Numatics, Incorporated and its U.S.,
Canadian, and German subsidiaries. The new revolving credit loans bear interest
at variable rates based on prime or LIBOR, at the Company's election. The
weighted average of the initial rates is approximately 5.31% per annum.
$5,500,000 of the new term loans bears interest at the greater of prime plus 4%
per annum or 9% per annum. The remaining $18,000,000 of the new term loan bears
interest at the greater of prime plus 6% per annum or 11% per annum, plus 2% per
annum which may be paid in kind at the Company's option. The additional
$10,000,000 of term loans that could be made during the next six months bears
interest at 13% per annum.

        The revolving credit facilities permit Numatics and its Canadian and
Germany subsidiaries to borrow up to the lesser of the total amount of its
respective revolving credit facility or a borrowing base computed as a
percentage of inventory and accounts receivable. Management estimates that the
borrowing base limitations would have limited the Company's total revolving
credit availability to approximately $24.1 million as of January 31, 2003. All
borrowings under the revolving credit facilities mature in January 2006. The
term loans are payable in monthly installments of beginning April 2003, with
total required principal payments of $1.0 million for 2003 and $1.4 million for
2004. The loan agreement includes certain financial and operating covenants,
which among other things restrict the ability of the Company to incur additional
indebtedness, make investments, and take other actions. The Company expects to
be in compliance with its covenants through 2003.

Page 23

<PAGE>

Off Balance Sheet Arrangements and Aggregate Contractual Obligations

        Off balance sheet arrangements and aggregate contractual obligations for
the Company as of December 31, 2002 were as follows:

<TABLE>
<CAPTION>
                                                                         PAYMENTS DUE BY PERIOD
                                        ---------------------------------------------------------------------------------------
                                             TOTAL             2003            2004-2005         2006-2007        BEYOND 2007
<S>                                     <C>               <C>               <C>               <C>               <C>
Long-term debt                          $   158,644,843   $     2,083,842   $     4,531,639   $    27,071,615   $   124,957,747
Operating leases                              2,688,345         1,456,062           926,484           272,397            33,402
</TABLE>

        The Company had no capital lease obligations, material purchase
obligations or other long-term liabilities.

Significant Accounting Policies

        The Company's significant accounting policies are more fully described
in Note 1 of the consolidated financial statements. Certain of the accounting
policies require the application of significant judgment by management in
selecting appropriate assumptions for calculating financial estimates. By their
nature, these judgments are subject to an inherent degree of uncertainty.

        Long-Lived Assets. The Company evaluates its properties for impairment
whenever events or changes in circumstances indicate that the carrying amounts
of such assets may not be recoverable. The recoverability estimates are based on
the projected future cash flows expected to result from the use of the assets at
various facilities. An impairment loss in measured as the amount by which the
carrying amount of the assets exceeds the fair value.

        Goodwill is evaluated for impairment annually following the provisions
of SFAS No. 142 whereby the fair values of the Company's reporting units are
compared to their carrying amount, including goodwill.

        The Company periodically evaluates its other intangible assets for
indicators of impairment in value. If impairment is indicated, the Company
evaluates its related undiscounted cash flows and, if appropriate, revalues the
asset based on its fair value.

        Pension and Other Postretirement Benefits. The Company maintains defined
benefit pension plans on substantially all United States hourly employees and
postretirement benefit plans for certain domestic employees. For financial
reporting purposes, net periodic pension and other postretirement benefit costs
are calculated based upon a number of actuarial assumptions including discount
rate, rate of return on assets and certain demographic data. Each of these
assumptions is based on Company judgment,

Page 24

<PAGE>

considering all known trends and uncertainties. Any future changes to the
discount rate will impact future net periodic pension expense. Actual asset
returns for our pension plans significantly below our assumed rate of return
would result in higher net periodic expense in future years. Actual annual rates
of increase in costs of covered postretirement healthcare above assumed rates of
increase would result in higher net periodic postretirement benefit costs in
future years.

        Income Taxes. The Company must provide an estimate of actual current tax
exposure together with an assessment of temporary differences resulting from
differing treatment of items for tax and accounting purposes. These differences
result in deferred tax assets and liabilities, which are included within the
consolidated balance sheet. Based on known and projected earnings information
and tax planning strategies, the Company must then assess the likelihood that
the deferred tax assets, including net operating loss carryforwards, will be
recovered. To the extent that the Company believes recovery is not likely, it
must establish a valuation allowance. Significant management judgment is
required in determining provision for income taxes, deferred tax assets and
liabilities and any valuation allowance recorded against net deferred tax
assets. For the period ended December 31, 2002 Numatics recorded a $5.3 million
valuation allowance. In the event that actual results differ from the estimates
or facts or circumstances change in future periods, the effects of these
adjustments could materially impact the financial position and results of
operations.

Other Matters

        As further discussed in item 11, under "Compensation Committee
Interlocks and Insider Participation," Numatics, Mr. Welker, and all of the
Company's other employee-shareholders are parties to an agreement under which
the Company has the option, but not the obligation, to redeem the shares of any
such shareholder upon the happening of certain events, including death,
disability, or termination of employment. This agreement covers over 93.0% of
the Numatics' shares currently outstanding. At December 31, 2002, the total
redemption value of these optioned shares was $12.8 million. The indenture
governing the Series B Notes and the senior loan agreement contain substantial
limitations on Numatics' ability to redeem shares but permit redemptions,
including limited cash redemptions, in certain cases. If one of the triggering
events were to occur, the Numatics Board of Directors would decide whether to
exercise the option based on the facts and circumstances existing at that time.
In making such a determination, the Board could be expected to consider the
following factors, among others: the limitations contained in the indenture and
the senior loan agreement, the Company's ability to pay or finance the
redemption price, the Company's other anticipated cash needs, and other
then-existing business and economic conditions.

        Each of the management shareholders of certain Numatics subsidiaries
(Numation, Numatech and the Company's subsidiary in Taiwan) is required to sell
his subsidiary shares to Numatics (or the subsidiary) upon such shareholder's
(i) death, (ii) permanent

Page 25

<PAGE>

disability or (iii) termination of employment with the Company. The price to be
paid by the Company for such shares will be determined by a formula based upon a
multiple of earnings of the relevant subsidiary. The obligations of the Company
to purchase such shares are not subject to any limitations. However, the payment
of these amounts may be prohibited by the terms of the Series B Note indenture.
Currently, the amounts that would be payable under these agreements are
approximately $693,000.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Information with respect to the levels of indebtedness subject to
interest rate fluctuation is contained in Note 2 to the consolidated financial
statements filed with this Form 10-K as exhibit 99.1. Information with respect
to the Company's level of business outside the United States that is subject to
foreign currency exchange rate market risk is contained in Note 7 to those
consolidated financial statements under the caption "Segment and Geographic
Information." Those notes are hereby incorporated in this item by reference.

Interest Rate Risk

        The Company is subject to market risk associated with adverse changes in
interest rates and foreign currency exchange rates, but does not hold any market
risk sensitive instruments for trading purposes. The Company had total debt of
$161.4 million at January 31, 2003, of which $43.3 million was variable rate
debt. The Company measures its interest rate risk by estimating the net amount
by which potential future net earnings would be impacted by hypothetical changes
in market interest rates related to all interest rate sensitive assets and
liabilities. Assuming a hypothetical 20% increase from the interest rates in
effect as of January 31, 2003 and consistent levels of debt and cash, the
estimated annual reduction in future earnings, before tax, would be
approximately $ 0.8 million.

Foreign Currency Risk

        The Company mitigates its foreign currency exchange rate risk
principally by establishing local production and sales facilities in the markets
it serves and by invoicing customers in the same currency as the source of the
products. The Company also monitors its foreign currency exposure in each
country and implements strategies to respond to changing economic and political
environments.

        As of December 31, 2002, the Company's net current assets (defined as
current assets less current liabilities) subject to foreign currency translation
risk were $15.4 million. The potential decrease in net current assets from a
hypothetical 10% adverse change in quoted foreign currency exchange rates would
be approximately $1.5 million.

        The sensitivity analysis presented assumes a parallel shift in all
foreign currency

Page 26

<PAGE>

exchange rates. Exchange rates for different currencies do not
necessarily move in the same direction. Accordingly, this assumption may
overstate the impact of changing exchange rates on the Company's assets and
liabilities denominated in a foreign currency.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The information required by this item is incorporated in this item by
reference to the Company's audited consolidated financial statements filed with
this Form 10-K as exhibit 99.1.

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

        None.

Page 27

<PAGE>

                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The table that follows sets forth the name, age at December 31, 2002,
and position with the Company of each person who currently is a Numatics
director or an executive officer of the Company. Information concerning the
business experience for at least the past five years of each of the persons
named is provided after the table. All Numatics directors are elected for terms
of one year and until their successors are elected and qualified.

             Name              Age                 Position
    ----------------------------------------------------------------------------
       John H. Welker           62      Chairman, President and Chief Executive
                                        Officer

       Robert P. Robeson        56      Vice President, Treasurer, Secretary and
                                        Chief Financial Officer

       David K. Dodds           54      Vice President--Sales & Marketing

       David M. Tenniswood      66      Director

       Albert A. Koch           60      Director

       John P. Musat            57      Director

       John J. Collins          51      Director

        John H. Welker has been with Numatics (and its predecessor) for a total
of 37 years. He has been Numatics' Chairman of the Board, President, and CEO
since 1990. He was President of Numatics' predecessor from 1983 until 1990 and
prior to 1983 held a variety of management positions within that predecessor
company. Mr. Welker is also a Director of Clarkston Financial Corporation.

        Robert P. Robeson joined Numatics' predecessor as Chief Financial
Officer in 1988 and in 1990 also was named Vice President, and its Treasurer and
Secretary. Prior to joining Numatics' predecessor, Mr. Robeson was CFO of Gelman
Sciences, a publicly traded company.

        David K. Dodds has been Vice President-Sales & Marketing since 1994.
Prior to that, he was President of Numatics, Ltd., the Company's Canadian
subsidiary, a position he was appointed to in 1980.

Page 28

<PAGE>

        David M. Tenniswood has been a Numatics Director since 1990. He has been
the President and Chief Executive Officer of Aqua-Chem, Inc. (manufacturer of
boilers and water purification and treatment products) since October 20, 1999.
Prior to that he was Vice President - European Operations of the Company from
1996 through March 31, 1998 and prior to 1996, Mr. Tenniswood was President of
the Controls Group at MascoTech for ten years.

        Albert A. Koch has been a Numatics Director since 1990. He is the
Chairman of AlixPartners, LLC (formerly known as Jay Alix & Associates), where
he has been since 1995. Prior to joining Jay Alix & Associates, he was a
Managing Director of Equity Partners of America, Ltd. (investment banking and
financial consulting).

        John P. Musat has been a Numatics Director since 1996. He is Vice
President, Manufacturing Technology at Metaldyne Precision Forming (cold steel
extruder) and has been with them since 1982.

        John J. Collins has been a Numatics Director since 2000. He is the
Senior Vice President and General Counsel of Champion Enterprises, Inc. where he
has been since 1997. Prior to joining Champion Enterprises, Inc. he was a Senior
Principal and Managing Director of Miller, Canfield, Paddock and Stone, P.L.C.
(law firm).

Page 29

<PAGE>

ITEM 11.   EXECUTIVE COMPENSATION

Summary Compensation Information

        The table that follows provides information for the Company's last three
fiscal years concerning the compensation of John H. Welker, Numatics' CEO, and
the two other individuals who were the highest paid executive officers of
Numatics during 2002.

                           SUMMARY COMPENSATION TABLE
                                                    ANNUAL COMPENSATION (1)
  ------------------------------------------------------------------------------
        NAME AND PRINCIPAL                                         ALL OTHER
           POSITION            YEAR      SALARY       BONUS     COMPENSATION (2)
  John H. Welker,              2002   $  415,148   $        0   $         8,250
  Chairman,President and       2001      239,422            0             6,900
  CEO                          2000      351,020      125,250             6,500

  Robert P. Robeson, Vice      2002      142,785            0             7,106
  President, Treasurer, and    2001      137,490       45,639             6,900
  CFO                          2000      150,300       64,610             6,500

  David K. Dodds,              2002      132,687            0             6,900
  Vice President--Sales and    2001      127,624       44,027             6,900
  Marketing                    2000      139,460       59,233             6,500

(1)  Does not include perquisites and other personal benefits provided to named
     executives, the incremental cost of which to the Company in each case was
     less than 10% of the pertinent executive's salary and bonus for the year.

(2)  For each executive, includes a Company contribution of $4,250 in 2002 and
     $3,500 in 2001 and 2000 to the Company's defined contribution and employee
     savings plan and, in each year, a Company matching contribution to that
     plan based on the executive's contribution.

Page 30

<PAGE>

Welker Employment Agreement

        Numatics has an agreement with John Welker for his employment as CEO
through December 31, 2003. Under this agreement, he is entitled to salary at
specified rates ($410,000 for 2002, increasing to $440,000 for 2003), and to a
cash performance bonus supplementing his salary determined pursuant to a formula
based on the Company's operating performance relative to its operating budget.
The agreement also contemplates that Numatics' Board of Directors annually will
consider whether he should be paid a discretionary bonus, whether or not a
performance bonus also is payable.

        During the term of the agreement, Numatics is entitled to terminate Mr.
Welker's employment at any time for any reason, upon 60 days' prior notice to
him, and also is entitled to terminate him for "cause" or in certain cases of
"permanent disability" (as defined in the agreement), upon less prior notice. If
the Company were to terminate him not for cause or permanent disability, or
terminated him for permanent disability without having maintained certain
disability insurance in effect for his benefit, he would be entitled to
continuation of his regular salary for a one-year period commencing on his
termination date. In addition, if Mr. Welker were to die while employed by the
Company, the equivalent of his regular salary for a 60-day period thereafter
would be payable to his estate.

        The agreement imposes non-competition obligations upon Mr. Welker during
his employment and for one year thereafter and also imposes confidentiality
obligations upon him, which continue for five years after his employment
termination date.

        For 2001, Mr. Welker voluntarily accepted less salary than he was
entitled to under the agreement.

Deferred Compensation Plan

        Numatics has a "top-hat" non-qualified deferred compensation plan, under
which a small group of management-level employees could become entitled to
receive cash distributions if certain conditions are satisfied. In general,
under the plan as currently in effect, if a plan participant's employment with
the Company continues until his death, retirement at or after age 65, or
disability (determined as specified in the plan), or if a participant remains in
active Company service through the twelfth anniversary of the commencement of
his employment, and his employment thereafter terminates other than in an
Involuntary Discharge for Cause (as defined in the plan), which involuntary
discharge would cause the forfeiture of his right to any distribution, then
Numatics would become obligated to pay his distribution, without interest, in
regular installments over a five-year period commencing within 60 days of his
employment termination date. Similar five-year installment payment obligations
also would arise under the plan with respect to all participants if Numatics
elected to terminate the plan or if a Company Change in Control (as defined in
the plan) should occur.

Page 31

<PAGE>

        However, the current terms of the plan also provide for a pro rata
reduction in the amounts of annual installment payments to distributees and for
lengthening the installment payment period if Numatics becomes obligated to make
payments to more than one distributee at the same time, to the extent (if any)
necessary to prevent total annual payments to the distributees in excess of 3.0%
of the Company's prior year earnings before interest, taxes, depreciation, and
amortization. In addition, the plan provides that no distribution payments
whatsoever may be made prior to January 31, 2004.

        Six of the Company's employees participate in this plan, including all
of the named executives. The distribution amounts for the named executives are
as follows: Mr. Welker, $2,643,546; Mr. Robeson, $105,398; Mr. Dodds, $151,757.

Directors' Compensation

        Numatics pays a meeting fee of $1,600 to each director not also employed
by the Company for each meeting of the Numatics Board of Directors that he
attends.

        During 2000, Numatics issued three of its non-employee directors options
to purchase shares of Numatics common stock for $17.50 per share. Messrs.
Tenniswood and Koch were each issued options to purchase 6,000 shares; Mr. Musat
was issued options to purchase 3,000 shares. Each option is currently
exercisable with respect to 60% of the covered shares and will become
exercisable as to an additional 20% each year for the next two years if the
holder continues to be a director. As a condition to exercising an option, the
director will be required to enter into a stock transfer agreement that will,
among other things, restrict the transfer of the purchased shares, give Mr.
Welker the right to vote them, give the Company the right to repurchase them in
certain events (including the death or resignation of the director), and give
the director the right to sell them to the Company (subject to certain
limitations and in any event only if the Board of directors determines that the
purchase would be in the Company's best interest). Repurchases under the stock
transfer agreement would be at a formula price based on the Company's operating
income for its most recently completed twelve-month period. None of the options
has been exercised.

        Employee directors are not paid any additional compensation for Board
service.

Compensation Committee Interlocks and Insider Participation

        All decisions concerning the 2002 compensation of the Company's
executive officers were reviewed by the Numatics Board of Directors. Except as
described below, no current or former officer and no current employee of
Numatics or of any of its subsidiaries participated in deliberations of the
Board concerning executive compensation during 2002.

        Mr. Welker is the controlling shareholder of Numatics and its Chairman,
CEO, and

Page 32

<PAGE>

President. Until March 24, 1998, Mr. Tenniswood also was an executive officer of
the Company. None of the other directors is or ever has been an officer or
employee of Numatics or of any of its subsidiaries.

        Numatics advanced $185,000 to Mr. Welker during 1996 to purchase the
stock of a departing executive, all of which remains outstanding. In February
1998, Numatics advanced an additional $400,000 to Mr. Welker, all of which also
remains outstanding. These loans are unsecured, bear interest at 6.5% per annum,
and are payable on demand.

        Numatics, Mr. Welker, each other current executive officer of the
Company, and all of its other employees who own Numatics' stock are party to a
shareholder agreement that gives Numatics the option, but not the obligation, to
purchase the shares of any shareholder party, including Mr. Welker, if the
shareholder ceases to be a Company employee due to his death, his Total and
Permanent Disability or Involuntary Discharge Without Cause (each as defined in
the agreement), his retirement at or after age 65, or his resignation (if after
the later of (i) November 29, 2002 or (ii) the twelfth anniversary of his date
of hire by Numatics or its predecessor) for a redemption price to be determined
by a formula intended to approximate the shares' fair market value at the time
of employment termination. This agreement covers 93.34% of the outstanding
shares of Numatics common stock, 82.23% of which are held by Mr. Welker.

        The Company employs Mr. Jeffrey Welker, son of John Welker, as
Application Engineer. His total 2002 compensation was $65,606.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Securities Authorized for Issuance Under Equity Compensation Plans

        The Numatics, Incorporated Incentive Plan is a stock option plan adopted
by the board of directors in 2000 for the purpose of providing incentive
compensation to certain directors, key executives, and employees of the Company
based on their contributions to long-term growth and profitability. The plan
provides for the issuance of "non-qualified" stock options (i.e., options that
are not intended to qualify for the special treatment provided for in Section
422 of the Internal Revenue Code) to employees and non-employee directors
selected by a committee designated by the board. Subject to the terms of the
plan, the committee has authority to establish the amount and other terms and
conditions of each option granted. The plan provides that, unless the committee
specifies a higher price at the time of grant, the per share exercise price of
each option will be the value (determined pursuant to a formula specified in the
plan) of a share of Numatics stock on a date determined by the committee. The
plan authorizes the issuance of options covering a maximum of 200,000 shares,
subject to adjustment for splits, reverse splits, and other changes in capital
structure. Shares covered by options that expire or are terminated

Page 33

<PAGE>

for any reason become eligible for issuance under future option grants. The
following table provides information about outstanding options and shares
remaining available for future issuance under the plan, which is the Company's
only equity compensation plan.

<TABLE>
<CAPTION>
                           EQUITY COMPENSATION PLAN INFORMATION
---------------------------------------------------------------------------------------------------
PLAN CATEGORY             NUMBER OF SECURITIES      WEIGHTED-AVERAGE        NUMBER OF SECURITIES
                          TO BE ISSUED UPON         EXERCISE PRICE OF       REMAINING AVAILABLE
                          EXERCISE OF               OUTSTANDING OPTIONS,    FOR FUTURE ISSUANCE
                          OUTSTANDING OPTIONS,      WARRANTS, AND RIGHTS    UNDER EQUITY
                          WARRANTS, AND RIGHTS                              COMPENSATION PLANS
                                                                            (EXCLUDING SECURITIES
                                                                            REFLECTED IN COLUMN
                                                                            (a))
---------------------------------------------------------------------------------------------------
                                 (a)                      (b)                        (c)
---------------------------------------------------------------------------------------------------
<S>                           <C>                 <C>                          <C>
Equity compensation
plans approved by             66,000 shares       $   17.50 per share          134,000 shares
shareholders
---------------------------------------------------------------------------------------------------
Equity compensation
plans not approved by             -0-                (not applicable)                -0-
shareholders
---------------------------------------------------------------------------------------------------
         Total                66,000 shares       $   17.50 per share          134,000 shares
---------------------------------------------------------------------------------------------------
</TABLE>

Over 5% Owners

        So far as is known to the Company, the only persons who are beneficial
owners (within the meaning of SEC Rule 13d-3) of over 5.0% of Numatics'
outstanding common shares are: (a) John H. Welker, whose ownership information
is set forth below under "Management and Directors" and who maintains an address
at the Company's principal executive office; and (b) Harvard Private Capital
Holdings, Inc. (the address of which is c/o Charlesbank Capital Partners LLC,
600 Atlantic Avenue, Boston, Massachusetts 02210), which holds 159,575 shares,
representing 6.66% of the outstanding shares.

Page 34

<PAGE>

Management and Directors

        The table that follows sets forth the beneficial ownership (for purposes
of SEC Rule 13d-3) of shares of Numatics' common stock by each Numatics
director, each executive officer named in the Summary Compensation Table above,
and all directors and current executive officers as a group.

       NAME OF BENEFICIAL OWNER                SHARES OWNED    PERCENTAGE OWNED
       ------------------------------------------------------------------------
       John H. Welker (1)                      2,237,660.00              93.34%
       Robert P. Robeson                          78,391.25               3.27%
       David K. Dodds                            112,881.25               4.71%
       David M. Tenniswood                                0                  --
       Albert A. Koch                                     0                  --
       John P. Musat                                      0                  --
       John J. Collins                                    0                  --
       All directors and executive officers    2,237,660.00              93.34%
       as a group (7 persons) (1)

(1)     Mr. Welker has sole voting and dispositive power over 1,971,196.25
        (82.23%) of the reported shares, which are his own, and sole voting
        power over all other outstanding shares, excluding those owned by
        Harvard Private Capital Holdings, pursuant to a voting agreement among
        Numatics, Mr. Welker and all of Numatics' other shareholders who are
        Company employees.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information required in response to this item is included under item
12 and incorporated herein by this reference.

ITEM 14.   CONTROLS AND PROCEDURES

        The Company's Chief Executive Officer and its Chief Financial Officer
have evaluated the Company's disclosure controls and procedures within 90 days
of the filing of this report and have concluded that there are no significant
deficiencies or material weaknesses. Subsequent to the evaluation, there have
been no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls.

Page 35

<PAGE>

                                     PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  1. Financial Statements. (All contained in Exhibit 99.1 to this report.
        Page numbers shown below.)

                        Consolidated Financial Statements
                             Numatics, Incorporated
                  Years ended December 31, 2002, 2001, and 2000
                       with Report of Independent Auditors

                                                                      Page in
                                                                    Exhibit 99.1
                Report of Independent Auditors                          1
                Consolidated Balance Sheets                             2
                Consolidated Statements of Operations                   4
                Consolidated Statements of Stockholders' Deficiency     5
                Consolidated Statements of Cash Flows                   6
                Notes to Consolidated Financial Statements              7

     2. Financial Statement Schedule.

           Schedule II - Valuation and Qualifying Accounts
           (found at page F-1 of this report)

     3. Exhibits. The following exhibits are filed with this Form 10-K or
           incorporated herein by reference:

Exhibit No            Description
--------------------------------------------------------------------------------

(e)  3.1.1      Article of Incorporation of Numatics, as amended

(a)  3.1.2      Bylaws of Numatics

(a)  3.2.1      Articles of Incorporation of Numation, Inc., as amended

(a)  3.2.2      Bylaws of Numation, Inc., as amended

(a)  3.3.1      Articles of Incorporation of Numatech, Inc., as amended

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<PAGE>

(a)  3.3.2      Bylaws of Numatech, Inc., as amended

(a)  3.4.1      Articles of Incorporation of Micro-Filtration, Inc. as amended

(a)  3.4.2      Bylaws of Micro-Filtration, Inc., as amended

(a)  3.5.1      Articles of Incorporation of Ultra Air Products, Inc. as amended

(a)  3.5.2      Bylaws of Ultra Air Products, Inc., as amended

(a)  3.6.1      Articles of Incorporation of Microsmith, Inc., as amended

(a)  3.6.2      Bylaws of Microsmith, Inc., as amended

(a)  3.7.1      Articles of Incorporation of I.A.E. Incorporated

(a)  3.7.2      Bylaws of I.A.E. Incorporated

(a)  4.1.1      Indenture, dated as of March 23, 1998, among Numatics, the
                Guarantors identified there, and First Trust National
                Association, as trustee

(a)  4.1.2      Form of Series B Notes (including related Subsidiary Guarantees
                by the Guarantors identified in Indenture)

(a)  4.1.3      Supplemental Indenture, dated as of January 25, 1999, by which
                Empire Air Systems, Inc. became a Guarantor

(f)  4.2        Loan and Security Agreement dated as of January 6, 2003 among
                Numatics, Incorporated, certain of its subsidiaries, the lenders
                named therein, and Foothill Capital Corporation, as arranger and
                administrative agent (exhibits and schedules omitted)

(a)  10.1.1     Securities Purchase Agreement, dated as of January 3, 1996,
                between Numatics and Harvard Private Capital Holdings

(a)  10.1.2     Numatics, Incorporated Tag-Along and Drag-Along Agreement, dated
                January 3, 1996, among Numatics, Harvard Private Capital
                Holdings, and shareholders of Numatics

(a)  10.1.3     Registration Agreement, dated as of January 3, 1996, between
                Numatics and Harvard Private Capital Holdings

(a)  10.1.4     Form of Guaranty Agreement between Harvard Private Capital
                Holdings

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<PAGE>

                and I.A.E. Incorporated, dated as of March 23, 1998 (Each of the
                other guarantors has executed an Amended and Restated Guaranty
                Agreement in substantially the same form.)

(a)  10.1.5     Agreement, dated as of March 23, 1998, between Numatics and
                Harvard Private Capital Holdings

(a)  10.2.1     Amended and Restated Stock Transfer Agreement, dated
                December 28, 1995, among Numatics, John H. Welker, individually
                and as trustee of the John H. Welker Trust u/a dtd December 28,
                1995, David K. Dodds, Donald E. McGeachy, Henry Fleischer,
                individually and as trustee of the Henry Fleischer Trust u/a dtd
                March 10, 1993, Robert P. Robeson, John A. Acuff,
                Bruce W. Hoppe, David King, and Philip Robinson

(b)  10.2.2     First Amendment, dated June 30, 1998, to Amended and Restated
                Stock Transfer Agreement

(a)  10.3       Voting Agreement, dated as November 29, 1990, among Numatics
                (under its former name, Numatics Acquisition Corporation) and
                certain shareholders of Numatics

(a)  10.4       Employment Agreement, dated January 3, 1996, between Numatics
                and John H. Welker**

(a)  10.5       Numatics, Incorporated Amended and Restated Deferred
                Compensation Plan, adopted December 28, 1995, and related
                acknowledgements by Eligible Employees (as therein defined)**

(d)  10.6.1     Numatics, Incorporated Incentive Plan adopted June 29, 2000**

(d)  10.6.2     Form of Stock Transfer Agreement referred to in Incentive Plan**

 21.1           List of subsidiaries of Numatics

 99.1           Consolidated Financial Statements--Numatics, Incorporated--Years
                ended December 31, 2002, 2001 and 2000 with Report of
                Independent Auditors

 99.2           Certification of Chief Executive Officer

 99.3           Certification of Chief Financial Officer

(a)     Incorporated by reference to exhibit to Registration Statement on Form
       S-4 filed

Page 38

<PAGE>

       on April 29, 1998 (File No. 333-51355)

(b)     Incorporated by reference to Amendment No. 1 to Registration Statement
       on Form S-4 filed on July 10, 1998 (File No. 333-51355)

(c)     Incorporated by reference to exhibit to Annual Report on Form 10-K for
       the year ended December 31, 1998 (File No. 333-51355)

(d)     Incorporated by reference to exhibit to Quarterly Report on Form 10-Q
       for the quarter ended September 30, 2000 (File No. 333-51355)

(e)     Incorporated by reference to exhibit to Annual Report on Form 10-K for
       the year ended December 31, 1999 (File No. 333-51355)

(f)     Incorporated by reference to exhibit to Form 8-K filed on January 15,
       2003 (File No. 333-51355)

**      Indicates contract or compensatory plan or arrangement with one or more
       Numatics executive officers and/or directors

     (b)  Reports on Form 8-K.

            On January 15, 2003 the Company filed with the Securities and
            Exchange Commission a Form 8-K, dated December 26, 2002, reporting
            the successful refinancing of the Company's credit facility.

Page 39

<PAGE>

                 SCHEDULE II - Valuation and Qualifying Accounts
                                 (in thousands)

<TABLE>
<CAPTION>
                COLUMN A                                 COLUMN B          COLUMN C          COLUMN D              COLUMN E
     ---------------------------------------------   ---------------   ---------------   ---------------       ---------------
                                                                          ADDITION
                                                        BALANCE AT        CHARGED TO                              BALANCE AT
                                                       BEGINNING OF       COSTS AND        DEDUCTIONS -             END OF
               DESCRIPTION                               PERIOD           EXPENSES           DESCRIBE               PERIOD
     -------------------------------------------------------------------------------------------------------------------------
     <S>                                             <C>               <C>               <C>                   <C>
     Year ended December 31, 2002
       Accounts receivable allowance                 $           436   $           225   $           216(1)    $           445
       Inventory reserve                                       1,081               159               276(2)                964
       Deferred tax asset valuation allowance                      -             5,299(3)              -                 5,299

     Year ended December 31, 2001
       Accounts receivable allowance                             177               446               187(1)                436
       Inventory reserve                                         498               583                 -(2)              1,081
       Deferred tax asset valuation allowance                      -                 -                 -                     -

     Year ended December 31, 2000
       Accounts receivable allowance                             185                50                58(1)                177
       Inventory reserve                                         576                 -                78(2)                498
       Deferred tax asset valuation allowance                    118                 -               118(4)                  -
</TABLE>

(1)  Uncollectible accounts charged off net of recoveries

(2)  Reduction in inventory reserves for inventory disposed of during the year
     and allowance for valuation changes

(3)  Based on an analysis of both positive and negative evidence, including a
     three-year cumulative tax loss from its U.S. operations, the Company
     recorded a $5.3 million valuation allowance against the deferred tax asset.

(4)  Utilization of foreign net operating loss carry-forwards.

Page 40

<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.

        NUMATICS, INCORPORATED

        /s/ John H. Welker
        --------------------------------
        John H. Welker
        President and Chief Executive
        Officer

        Date:  March 27, 2003

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
NAME                                CAPACITY                                    DATE
<S>                                 <C>                                         <C>
/s/ John H. Welker                  President and Chief Executive               March 27, 2003
----------------------------        Officer and Director
    John H. Welker

/s/ Robert P. Robeson               Vice President, Treasurer and               March 27, 2003
----------------------------        Chief Financial Officer (also
    Robert P. Robeson               principal accounting officer)

/s/ David M. Tenniswood             Director                                    March 27, 2003
----------------------------
    David M. Tenniswood

/s/ Albert A. Koch                  Director                                    March 27, 2003
----------------------------
    Albert A. Koch

/s/ John P. Musat                   Director                                    March 27, 2003
----------------------------
    John P. Musat

/s/ John J. Collins                 Director                                    March 27, 2003
----------------------------
    John J. Collins
</TABLE>

                                       S-1

Page 41

<PAGE>

                                  CERTIFICATION

I, John H. Welker, certify that:

     1.   I have reviewed this annual report on Form 10-K of Numatics,
          Incorporated;

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

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

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

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

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

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

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

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

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<PAGE>

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

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

Date:  March 27, 2003

/s/ John H. Welker
-----------------------------------
John H. Welker,

Chief Executive Officer

Page 43

<PAGE>

                                  CERTIFICATION

I, Robert P. Robeson, certify that:

     1.   I have reviewed this annual report on Form 10-K of Numatics,
          Incorporated;

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

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

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

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

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

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

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

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

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

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

Date:  March 27, 2003

/s/ Robert P. Robeson
-----------------------------------
Robert P. Robeson,

Chief Financial Officer

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                                  Exhibit Index

EXHIBIT NO      DESCRIPTION
--------------------------------------------------------------------------------

(e)  3.1.1      Article of Incorporation of Numatics, as amended

(a)  3.1.2      Bylaws of Numatics

(a)  3.2.1      Articles of Incorporation of Numation, Inc., as amended

(a)  3.2.2      Bylaws of Numation, Inc., as amended

(a)  3.3.1      Articles of Incorporation of Numatech, Inc., as amended

(a)  3.3.2      Bylaws of Numatech, Inc., as amended

(a)  3.4.1      Articles of Incorporation of Micro-Filtration, Inc. as amended

(a)  3.4.2      Bylaws of Micro-Filtration, Inc., as amended

(a)  3.5.1      Articles of Incorporation of Ultra Air Products, Inc. as amended

(a)  3.5.2      Bylaws of Ultra Air Products, Inc., as amended

(a)  3.6.1      Articles of Incorporation of Microsmith, Inc., as amended

(a)  3.6.2      Bylaws of Microsmith, Inc., as amended

(a)  3.7.1      Articles of Incorporation of I.A.E. Incorporated

(a)  3.7.2      Bylaws of I.A.E. Incorporated

(a)  4.1.1      Indenture, dated as of March 23, 1998, among Numatics, the
                Guarantors identified there, and First Trust National
                Association, as trustee

(a)  4.1.2      Form of Series B Notes (including related Subsidiary Guarantees
                by the Guarantors identified in Indenture)

(a)  4.1.3      Supplemental Indenture, dated as of January 25, 1999, by which
                Empire Air Systems, Inc. became a Guarantor

(f)  4.2        Loan and Security Agreement dated as of January 6, 2003 among
                Numatics, Incorporated, certain of its subsidiaries, the lenders
                named therein, and Foothill Capital Corporation, as arranger and
                administrative

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                agent (exhibits and schedules omitted)

(a)  10.1.1     Securities Purchase Agreement, dated as of January 3, 1996,
                between Numatics and Harvard Private Capital Holdings

(a)  10.1.2     Numatics, Incorporated Tag-Along and Drag-Along Agreement, dated
                January 3, 1996, among Numatics, Harvard Private Capital
                Holdings, and shareholders of Numatics

(a)  10.1.3     Registration Agreement, dated as of January 3, 1996, between
                Numatics and Harvard Private Capital Holdings

(a)  10.1.4     Form of Guaranty Agreement between Harvard Private Capital
                Holdings and I.A.E. Incorporated, dated as of March 23, 1998
                (Each of the other guarantors has executed an Amended and
                Restated Guaranty Agreement in substantially the same form.)

(a)  10.1.5     Agreement, dated as of March 23, 1998, between Numatics and
                Harvard Private Capital Holdings

(a)  10.2.1     Amended and Restated Stock Transfer Agreement, dated
                December 28, 1995, among Numatics, John H. Welker, individually
                and as trustee of the John H. Welker Trust u/a dtd December 28,
                1995, David K. Dodds, Donald E. McGeachy, Henry Fleischer,
                individually and as trustee of the Henry Fleischer Trust u/a dtd
                March 10, 1993, Robert P. Robeson, John A. Acuff,
                Bruce W. Hoppe, David King, and Philip Robinson

(b)  10.2.2     First Amendment, dated June 30, 1998, to Amended and Restated
                Stock Transfer Agreement

(a)  10.3       Voting Agreement, dated as November 29, 1990, among Numatics
                (under its former name, Numatics Acquisition Corporation) and
                certain shareholders of Numatics

(a)  10.4       Employment Agreement, dated January 3, 1996, between Numatics
                and John H. Welker**

(a)  10.5       Numatics, Incorporated Amended and Restated Deferred
                Compensation Plan, adopted December 28, 1995, and related
                acknowledgements by Eligible Employees (as therein defined)**

(d)  10.6.1     Numatics, Incorporated Incentive Plan adopted June 29, 2000**

(d)  10.6.2     Form of Stock Transfer Agreement referred to in Incentive Plan**

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 21.1           List of subsidiaries of Numatics

 99.1           Consolidated Financial Statements--Numatics, Incorporated--Years
                ended December 31, 2002, 2001 and 2000 with Report of
                Independent Auditors

 99.2           Certification of Chief Executive Officer

 99.3           Certification of Chief Financial Officer

(a)     Incorporated by reference to exhibit to Registration Statement on Form
       S-4 filed on April 29, 1998 (File No. 333-51355)

(b)     Incorporated by reference to Amendment No. 1 to Registration Statement
       on Form S-4 filed on July 10, 1998 (File No. 333-51355)

(c)     Incorporated by reference to exhibit to Annual Report on Form 10-K for
       the year ended December 31, 1998 (File No. 333-51355)

(d)     Incorporated by reference to exhibit to Quarterly Report on Form 10-Q
       for the quarter ended September 30, 2000 (File No. 333-51355)

(e)     Incorporated by reference to exhibit to Form 8-K filed on January 15,
       2003 (File No. 333-51355)

**      Indicates contract or compensatory plan or arrangement with one or more
       Numatics executive officers and/or directors

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