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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 1O-KSB

|ý | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------

For the fiscal year ended April 30, 2002

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

For the transition period from  to

Commission File Number: 0-25974

R-B RUBBER PRODUCTS, INC.(Name of small business issuer in its charter)

Oregon

93-0967413(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)904 E. 10th Avenue, McMinnville, Oregon

97128(Address of principal executive offices)

(Zip Code)


Issuer's
telephone number, including area code:503-472-4691

Securities
registered under Section 12(b) of the Exchange Act:None

Securities
registered under Section 12(g) of the Exchange Act: Common Stock, no par value(Title of Class)

Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ý    No o

Check
if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best
of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-KSB or any amendment to this
Form 10-KSB. ý

Issuer's
revenues for the year ended April 30, 2002, were $11,855,316. The aggregate market value of voting stock held by non-affiliates of the registrant was
$1,816,837 as of August 16, 2002 based upon the last sales price as reported on the Nasdaq System-Small Cap Market.

The
number of shares outstanding of the Registrant's Common Stock as of August 16, 2002 was 3,234,271 shares.

Transitional
Small Business Disclosure Format (check
one): Yes o    No ý

Documents Incorporated by Reference

None

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R-B RUBBER PRODUCTS, INC.  FORM 10-KSB INDEX

|         |  |                                                                                                                 |  | Page
|-------- |  | --------------------------------------------------------------------------------------------------------------- |  | ----
|PART I  
|Item 1.  |  | Description of Business                                                                                         |  | 2   
|Item 2.  |  | Description of Property                                                                                         |  | 6   
|Item 3.  |  | Legal Proceedings                                                                                               |  | 6   
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                             |  | 6   
|PART II 
|Item 5.  |  | Market for Common Equity and Related Stockholder Matters                                                        |  | 7   
|Item 6.  |  | Management's Discussion and Analysis or Plan of Operation                                                       |  | 7   
|Item 7.  |  | Financial Statements                                                                                            |  | 10  
|Item 8.  |  | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure                            |  | 10  
|PART III
|Item 9.  |  | Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act |  | 11  
|Item 10. |  | Executive Compensation                                                                                          |  | 12  
|Item 11. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                  |  | 15  
|Item 12. |  | Certain Relationships and Related Transactions                                                                  |  | 16  
|Item 13. |  | Exhibits and Reports on Form 8-K                                                                                |  | 17  
|         |  | Signatures                                                                                                      |  | 20  

1

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PART I

Item 1. Description of Business

Introduction

R-B Rubber Products, Inc. was incorporated in Oregon in September 1986. The Company is a vertically integrated recycler of scrap tires
and manufacturer of rubber products. By processing discarded tires into high quality crumb rubber, the Company then uses this material to manufacture durable rubber mats, protective surfaces and
various other rubber products. During the year ended April 30, 2002, the Company recycled over 2.5 million tires (35 million pounds of rubber) that otherwise would have been
destined for area landfills. Rubber accounts for approximately 70 percent of the weight of the tire, and the remainder consists primarily of metal wire and fiber. New equipment has been
installed to enable the Company to recycle a large portion of the metal and fiber removed from the tires as well. The recycled rubber is used to manufacture our products, which we then sell to
agribusiness concerns, sports and fitness facilities, parks, and other commercial and industrial users.

On
January 29, 1999, RB Recycling, Inc. ("RB Recycling"), a 100 percent owned subsidiary of the Company, acquired certain assets related to a tire recovery and
processing plant in Portland, Oregon from Dallas, Texas based Waste Recovery, Inc. (WRI). WRI's Portland plant had been a supplier of a portion of the Company's raw material (tire chips) since
1996. WRI was considering closing down the plant, which would have left the Company without a reliable source of raw materials. The acquisition secured a long-term source of raw material
to the Company. RB Recycling operates a tire collection and processing site in Portland, which utilizes tire collection routes, tire shredding equipment and handling systems for the collection of
tires and production of tire chips. During the year ended April 30, 2002, we used approximately 90 percent of RB Recycling's output to manufacture our products. The remaining tire chips
were sold to outside customers as tire-derived fuel and for various other rubber applications.

In
March 2001, the Company declared a 20 percent common stock split-up effected in the form of a dividend. All share and per share amounts in this
Form 10-KSB have been retroactively adjusted to reflect this common stock split-up effected in the form of a dividend.

On
August 13, 2002, the Company announced that it had entered into a definitive agreement and plan of merger (the "Agreement") with it principal shareholder,
Dash-Multi Corp, Inc. ("Dash"), which provides for the acquisition of all common stock of the Company held by shareholders other than Dash for a price of $2.80 net cash per share.
Previously, Dash purchased 2,267,146 shares, or approximately 70 percent, of the Company's outstanding common stock for $2.08 per share pursuant to a tender offer consummated on June 3,
1999. Shareholders other than Dash currently own approximately 30 percent, or 967,125 shares, of the Company's common stock. The Agreement also provides for payments to holders of outstanding
in-the-money options. Closing of the merger is subject to satisfaction or waiver of customary closing conditions, including shareholder approval.

Products

Applications for the Company's products generally fall into one of five primary markets. Within each of these, the Company manufactures and sells a variety of
products designed to meet consumer requirements. Below is a discussion of these primary markets:

Agribusiness.During the year ended April 30, 2002, approximately 61 percent of the Company's net sales were
for rubber matting used in agricultural surfacing. These products include the Company's "Tenderfoot" line of flooring for horse and livestock trailers, stalls and wash areas. Management believes that
our rubber matting has significant advantages over other flooring options, such as straw, dirt or wood, because of its improved comfort and safety for the animal and the reduction of cleaning

2

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time and bedding costs. This category also includes the Company's line of pet products that include mats for kennels and dog agility courses.

Fitness and sports facilities.Sales of flooring for sports and fitness applications accounted for approximately
15 percent of net sales during the year ended April 30, 2002. These sales were primarily for flooring in gyms, private clubs, military bases, colleges and high schools. Supplementing its
manufactured products, the Company also offers a line of rolled recycled rubber, natural rubber and PVC flooring options, which it imports and resells to its customers.

Tire chip sales and disposal fee revenues.The Company's tire collection facility in Portland, Oregon (RB
Recycling, Inc.) receives tire disposal fees and sells excess tire chips produced to customers in the ordinary course of business. The tire chips produced from whole tire disposal are primarily
used internally in the production of the Company's products. Disposal fee revenue and sales of excess tire
chip revenue have been presented as a reduction of cost of goods sold. These fees and incidental sales reduce the cost to produce tire chips, which are a component in the manufacturing process.

Molded products.Sales of products from the Company's molded products division accounted for approximately 8 percent
of net sales during the year ended April 30, 2002. Molded products include high-end rubberized weight plates for athletic facilities. This category also includes a line of
playground safety tiles and ballistic matting for shooting ranges and target facilities. Child playground safety is a major concern of school districts, parks and property management companies across
the nation. To meet this very urgent need, the Company manufactures a line of playground tiles offering tested and consistent fall height protection that ranges from four to ten feet.

Commercial.Sales of products from the Company's commercial products category amounted for 5 percent of the Company's
sales for the year ended April 30, 2002. Commercial products include a line of roofing pathway tiles, truck bed liners, cellular telephone tower insulators and products for original equipment
manufacturers. Roofing pathway tiles are used on commercial flat roofs for access ways to equipment located on the roof. The tiles prevent damage to the roofing membrane.

Ancillary.The Company imports and sells a line of natural rubber mats and a line of rolled rubber matting. Sales of these
ancillary products accounted for 11 percent of sales for the year ended April 30, 2002. Natural rubber mats are sold into various industries and retail outlets primarily for
anti-fatigue purposes. Rolled rubber matting is sold primarily into the fitness industry as rubber flooring.

Product Distribution

The Company sells its products through several channels including distributors, retailers, original equipment manufacturers ("OEMs") and directly to users. This
strategy enables the Company to diversify distribution of its products while at the same time maintaining direct contact with many of its end-users. During the year ended April 30,
2002, most sales were to distributors and retailers.

Distributors and Retailers.The majority of the Company's products were sold through independent distributor and retailer
channels during the year ended April 30, 2002. These customers include major agricultural supply retailers, automotive tire and accessory retailers, as well as fitness equipment suppliers.

Original Equipment Manufacturers.During the year ended April 30, 2002, approximately 6 percent of the
Company's revenues were from sales to OEMs. This is primarily from sales to horse trailer and farm implement manufacturers.

3

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End Users.Individuals contact the Company (via an 800 number and the Company's website at www.rbrubber.com), generally in
response to Company advertisements or referrals from other users. In most cases, these callers are referred to dealers in their local area. Because of this, only a relatively small portion of the
Company's total sales has been at retail prices, directly to end-users. The Company believes this distribution channel is important because of the direct feedback it receives from these
customers and the referral value enjoyed by its dealers.

The
Company utilizes six strategically located public warehouses to facilitate product availability and reduce shipping costs. These warehouses, located in North Carolina, Nebraska,
Missouri, Texas, Florida and Pennsylvania, enable the Company to transport by rail larger quantities of mats per shipment. The mats are then shipped in smaller quantities to the customers.

Marketing

The Company markets its products through advertising in trade magazines, participating in trade shows in related industries, and targeting of prospective retail
outlets and distributors. The Company has developed a point of sale program in order to improve in store presentation and marketing. This program includes the use of in store representatives to ensure
proper inventory levels and attractive presentation of point of sale information.

Competition

The Company is one of the largest manufacturers of heavy rubber matting in North America. However, the market for the Company's products is highly competitive.
Some of the Company's competitors may be larger, have greater financial resources, or have more advanced technology than the Company. Its principal competition in the agribusiness market comes from
approximately five competitors in the Midwest and Canada. Management believes that one agribusiness competitor holds a market share approximately equal to the Company's; while the others hold smaller
market shares than the Company. Raw material availability and cost have a great impact on the market, and certain competitors may enjoy certain subsidies that are not available to the Company. These
subsidies provide a competitive advantage to those companies.

The
Company's principal competition in the fitness market consists of one competitor located in Germany and two firms in the Midwest. The Company has competitors in other product
categories, which are discussed above.

The
number of competitors within specific product categories in the rubber mat industry has increased in number. There is an increasing amount of rubber matting that is being imported
from government subsidized Canadian manufacturers. Additionally, the Company believes there are 30 U.S. states that offer recycling incentives to rubber processors. The Company actively promotes tire
recycling and is participating in the Oregon task force to evaluate recycling incentives in that state.

Competitive
factors include quality of products, service (including product availability and timely delivery), price and reliability. The Company believes that it currently competes
favorably with respect to these factors. There can be no assurance, however, that competitors will not substantially increase their investment in developing and marketing products competitive with
ours or that foreign government subsidies will not adversely affect the competitive environment.

Raw Materials

The Company's raw materials are predominately tire chips, which are processed from scrap tires and tire "buffings" which are purchased from tire recapping
operations. In 1999, the Company, through RB Recycling, acquired certain tire processing equipment in Portland, Oregon from WRI. This acquisition provided the Company a reliable source of raw
materials to meet its growing needs.

4

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During the year ended April 30, 2002, due to increased tire flow and processing efficiencies, tire chip utilization increased to approximately 72 percent of the Company's total raw
material supply. The RB Recycling facility charges a disposal fee for the collection of discarded tires. These tires are then processed into tire chips for utilization at the Company's McMinnville
facility. Excess tire chips are sold to outside customers for tire-derived fuel or other rubber applications. The ability to efficiently process tires into tire chips at RB Recycling
directly affects the cost of tire chips to supply the mat manufacturing facility in McMinnville.

The
Company also relies on tire grindings or "buffings" from tire recapping operations. In prior years, the Company also purchased granulated rubber from other material processors.
Buffings and granulated rubber require less processing before being used for mat or molded product manufacturing, however they also are purchased at a higher cost than the cost to produce tire chips.
The Company's reliance on buffings and purchased granulated rubber decreased from approximately 77 percent of total raw materials in 1998 to approximately 28 percent of total raw
materials in the year ended April 30, 2002 due to the Company's increased processing capabilities.

The
Company continually researches additional processing techniques that would allow it to process tire chips, buffings and granulated rubber more efficiently, helping to ensure an
adequate supply of raw material in the future. However, there can be no assurance that the Company will be able to continue to increase its utilization and processing of lower cost tire chips or that
the cost of tire chips, buffings and granulated rubber will not increase.

Significant Customers and Concentrations of Credit Risk

In each of the years ended April 30, 2002 and 2001, approximately 11 percent of net sales were to one customer. This customer represented
10 percent of the accounts receivable balance at April 30, 2002 and 11 percent of the accounts receivable balance at April 30, 2001. The balance outstanding at
April 30, 2002 for this customer was collected in the first quarter of fiscal 2003.

Backlog

The Company's customers generally order products for immediate delivery, and the Company generally is able to meet such demand. However, at April 30, 2002,
due to logistical and delivery constraints caused by cross-country delivery of the Company's products, the Company had a backlog of approximately $633,000 compared with a backlog of $214,000 at
April 30, 2001. The April 2002 backlog shipped during the first quarter of fiscal 2003. The stated backlog is not necessarily indicative of Company sales for any future period nor is a
backlog any assurance that the Company will realize a profit from filling the orders.

Intellectual Property

The Company employs a portfolio of intellectual property in its business including trademarks, tradenames, trade secrets and know-how. The Company is
contemplating whether to implement a patent protection program for certain aspects of its intellectual property. Currently, the Company protects its proprietary and trade secret information and
know-how by the use of confidentiality agreements and other security measures. There can be no assurance that these measures will provide adequate protection for its proprietary and trade
secret information and know-how. The Company's business may be adversely affected by competitors that independently develop substantially equivalent products, equipment and processes. The
Company uses the following trademarks and tradenames: RB Rubber Products®, Bounce Back®, Tenderfoot, Monster Mat, Arobitile, Shower Tile, and Pooch Mat. The Company is not
aware of any conflicting uses of its material trademarks and tradenames. The Company does not maintain any intellectual property insurance coverage.

5

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Research and Development

Research and development expenses, included in general and administrative expense, totaled $5,690 and $7,119 during the years ended April 30, 2002 and
2001, respectively.

Environmental Regulations

The Company's operations are subject to federal, state and local environmental laws and regulations that impose limitations on the discharge of pollutants in the
environment and establish standards for the handling, generation, emission, release, discharge, treatment, storage and disposal of certain materials, substances and wastes. To the best knowledge of
management, the Company's operations are in substantial compliance with the terms of all applicable environmental laws and regulations as currently interpreted. While historically the Company has not
had to make significant capital expenditures for environmental compliance, the Company cannot predict with any certainty its future capital expenditures for environmental compliance because of
continually changing compliance standards and technology. Furthermore, actions by federal, state and local governments concerning environmental matters could result in laws or regulations that could
increase the cost of producing the products manufactured by the Company or otherwise adversely affect the demand for its products. The Company has not purchased any separate insurance policies for
environmental liabilities and does not presently anticipate purchasing such coverage in the future.

Employees

At April 30, 2002, the Company had 107 employees. None of the Company's employees are covered by collective bargaining agreements, and the Company believes
its relations with its employees are good.

Item 2. Description of Property

The
Company's corporate headquarters, mat and molded product manufacturing space are housed in the same facility, which is located in McMinnville, Oregon, approximately 35 miles
southwest of Portland, Oregon. The facility consists of approximately 34,000 square feet of space on approximately four acres of land, all of which is owned by the Company. At April 30, 2002,
the Company had an outstanding debt in the amount of $902,336 collateralized by this facility payable at 7.97 percent interest, payable $8,373 per month including principal and interest,
through August 15, 2008, at which time the remaining balance of $695,954 becomes due. The Company also operates RB Recycling, a tire collection and processing facility and a 100 percent
owned subsidiary of the Company, located on approximately 2 acres of land in north Portland, Oregon. The property includes a modular office space, processing facility and maintenance shop. RB
Recycling, Inc. leases the property under operating leases that expire in 2004.

Item 3. Legal Proceedings

As
of the date of filing of this Form 10-KSB, there were no material, pending legal proceedings to which the Company or its subsidiaries were a party. From time to
time, the Company may become involved in ordinary regulatory matters or legal proceedings incidental to the business of the Company.

Item 4. Submission of Matters to a Vote of Security Holders

None.

6

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PART II

Item 5. Market for Common Equity and Related Stockholder Matters

The
Company's Common Stock is quoted on the NASDAQ Small Cap Market under the symbol "RBBR." The following table sets forth the high and low sales prices (adjusted for the
20 percent common stock split effected in March 2001) as reported by Nasdaq for the periods indicated.

Year Ended April 30, 2002High

LowQuarter 1

$
3.30

$
2.00Quarter 2


2.07


1.75Quarter 3


2.50


1.60Quarter 4


3.15


2.00Year Ended April 30, 2001Quarter 1

$
3.35

$
1.46Quarter 2


3.28


2.19Quarter 3


2.50


1.77Quarter 4


2.45


1.46


The
number of shareholders of record and the approximate number of beneficial holders on August 16, 2002 was 127 and 650, respectively. There were no cash dividends declared or
paid during the years ended April 30, 2002 and 2001. The Company does not anticipate declaring dividends in the foreseeable future.

Item 6. Management's Discussion and Analysis or Plan of Operation

Forward Looking Statements

This section, as well as various other portions of this report, contains forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. Many of these statements can be identified by reference to words or phrases of a predictive nature such as "we expect," "should," "plan," "believe," "will," "may" and
other words or phrases of a similar construction. The Company has provided these statements in order to convey to the reader management's expectations about future events and prospects based on
information currently available. However, future events and conditions are inherently difficult to predict, and the actual results we experience will vary from management's expectations to some
degree. These variations may be both material and adverse, and readers are cautioned not to read forward looking-statements as assurances of future performance. A variety of factors may cause material
adverse variations from managements expectations, including, but not limited to, increases in the cost of raw materials; increasing competition; declining markets for our products; the development of
new technologies that render our products or processes obsolete; changes in government regulation; changes in domestic or foreign government policies relating to subsidies and tariffs; product
liability issues; changes in the general economy or in the market sectors into which we sell our products; and various other risks and uncertainties. Some, but not all, of those other risks and
uncertainties are described herein; others are described in our other reports and statements on file with the Securities and Exchange Commission.

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Results of Operations

The following table sets forth, as a percentage of sales, certain statement of operations data for the years ended April 30, 2002 and 2001:

Year Ended April 30,2002

2001Sales, net

100
%
100
%Cost of sales

68

69Gross profit

32

31Selling expenses

10

10General and administrative expenses

13

13Operating income

9

8Other expense

(2
)
(1
)Income before income taxes

7

7Income tax expense

(2
)
(3
)Net income

5
%
4
%


Year Ended April 30, 2002 Compared to the Year Ended April 30, 2001

Sales.Sales for the year ended April 30, 2002 (fiscal 2002) of $11.9 million were up $1.3 million, or
12.1 percent, over sales of $10.6 million in the year ended April 30, 2001 (fiscal 2001). Sales of the Company's matting products sold in the agribusiness, fitness and commercial
markets were up $254,000, or 2.7 percent, to $9.6 million (80.8 percent of net sales) in fiscal 2002 from $9.3 million (88.3 percent of net sales) in fiscal 2001.
Sales of ancillary products, including imported natural and rolled rubber products purchased for resale, were up $672,000, or 108.9 percent, to $1.3 million (10.8 percent of net
sales) in fiscal 2002 from $617,000 (5.8 percent of net sales) in fiscal 2001. The increase relates primarily to the addition of a line of rolled rubber products that was added during the year.
These sales are in anticipation of the Company developing its own capacity to produce rolled rubber products in fiscal 2003. Sales of molded products increased $340,000, or 55.6 percent, to
$952,000 (8.0 percent of net sales) in fiscal 2002 from $612,000 (5.8 percent of net sales) in fiscal 2001. The increase relates primarily to increased sales efforts.

Gross Profit.Gross profit increased $533,000, or 16.4 percent, to $3.8 million (31.9 percent of net
sales) in fiscal 2002 from $3.2 million (30.7 percent of net sales) in fiscal 2001. Through improvements made at our recycling plant in Portland, Oregon the Company was able to increase
its tire chip utilization from 60 percent in fiscal 2001 to 72 percent in fiscal 2002, while holding operating costs at the fiscal 2001 level. Cost reductions related to these improved
efficiencies were partially offset by the higher cost of purchased materials and higher utilities expenses.

Selling Expenses.Selling expenses increased $140,000, or 13.7 percent, to $1.2 million (9.8 percent of
net sales) in fiscal 2002 from $1.0 million (9.7 percent of net sales) in fiscal 2001. The increase relates primarily to increased salaries and commissions paid to sales staff and sales
representatives related to increased sales efforts.

General and Administrative Expenses.General and administrative expenses increased $153,000, or 11.0 percent, to
$1.5 million (13.0 percent of net sales) in fiscal 2002 from $1.4 million (13.1 percent of net sales) in fiscal 2001. The increase is primarily due to an increase in bad
debt expense, increased travel expenses, and increased compensation. These increases were partially offset by a reduction in the cost of employee benefit costs.

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Other Income (expense).Other expense increased $37,000, or 26.5 percent, to a net expense of $178,000 in fiscal 2002
from a net expense of $141,000 in fiscal 2001. The increase was primarily due to reductions in interest income and other miscellaneous income.

Income Taxes.Income tax expense, totaling $249,000 in fiscal 2002, was recorded at an effective rate of approximately
27.8 percent compared to $257,000 in fiscal 2001 at an effective rate of 37.1 percent. The reduction in the effective rate resulted from the deferred tax benefit of State of Oregon state
tax credits.

Net Income.Net income increased $210,000, or 48.3 percent, to $645,000 (5.4 percent of net sales) in fiscal
2002 from $435,000 (4.1 percent of net sales) in fiscal 2001. The increase is primarily the result of increased sales and improved operating margins.

Liquidity and Capital Resources

Since inception, and continuing through the fiscal year ended April 30, 2002, the Company has financed its operations and capital expenditures through the
private sale of equity securities, cash from operations, conventional bank financings and leasing arrangements.

Working
capital increased to $2.0 million at April 30, 2002 from $1.9 million at April 30, 2001 due primarily to retained profits for the year, offset by
purchases of property, plant and equipment.

Accounts
receivable increased $204,000, or 16.7 percent, to $1.4 million at April 30, 2002 from $1.2 million at April 30, 2001. The increase is
attributed to higher year-end sales and a small increase in the average days outstanding.

At
April 30, 2002, the Company had accounts receivablerelated party of $104,000. Amounts due from the related party are due to an accrued refund of management fees
and an estimated adjustment to workers' compensation premiums for the period.

Inventories
increased $508,000, or 33.4 percent, to $2.0 million at April 30, 2002 from $1.5 million at April 30, 2001. During the year ended
April 30, 2002, the Company added a line of rolled rubber products imported for resale in the fitness market. The Company chose to import this line of products in anticipation of adding rolled
rubber production capabilities at its McMinnville manufacturing plant in fiscal 2003. At April 30, 2002, the Company was nearly complete with the construction of this new manufacturing
equipment and had increased inventories of imported rolled rubber product in order to build new markets for this equipment. Additionally, inventories of the Company's manufactured items were up
slightly to support the increased sales volume.

Capital
expenditures in fiscal 2002 totaled $1.1 million primarily for new equipment to develop the capability to produce rolled rubber products. To produce rolled rubber, the
Company will manufacture a log of solid rubber material and then scathe the logs into sheets with a thickness ranging from 2mm to 12mm. Sheets are typically rolled in lengths of 25 to 500 feet.

The
Company has a $1,000,000 operating line of credit with a commercial bank, which expires October 1, 2002, with interest at prime (4.75 percent at April 30, 2002).
The line of credit is collateralized by accounts receivable and inventory. The Company had $335,000 outstanding under the line of credit at April 30, 2002. The Company also has a $500,000 term
loan due September 20, 2002 with interest at prime (4.75 percent at April 30, 2002). The term loan is collateralized by accounts receivable and inventory. The Company is
contemplating various alternatives relating to the refinancing of the $835,000 currently outstanding on these facilities, which was used to purchase new equipment, and management believes various
suitable alternatives will be available.

The
Company believes its existing cash, cash generated from operations and available credit facilities will be sufficient to fund its operations for the next 12 months.

9

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The
Company believes that the impact of inflation on its results of operations for the years ended April 30, 2002 and 2001 was not material.

New Accounting Pronouncements

See Note 12 of Notes to Consolidated Financial Statements.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates, including those related to inventory reserves and allowance for doubtful accounts. We base our
estimates on historical experience and on various other assumptions. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical
accounting policies and the related judgments and estimates affect the preparation of our financial statements.

Inventory Reserves

We regularly evaluate the realizability of our inventory based on a combination of factors including the following: historical usage rates, forecasted sales or
usage, estimated market values and other factors. Raw materials and work in progress are reviewed periodically by our operating personnel for obsolescence. Finished goods are reviewed periodically by
operating personnel to determine if inventory carrying costs exceed market selling prices. If circumstances related to our inventories change, our estimates of the realizability of inventory could
materially change. We have not experienced losses related to our inventories in the past and we do not currently have any reserves against our inventory.

Allowance for Doubtful Accounts

Credit limits are established through a process of reviewing the financial history and stability of each customer. We regularly evaluate the collectability of our
trade receivable balances by monitoring past due balances. If it is determined that a customer will be unable to meet its financial obligation, we record a specific reserve for bad debt to reduce the
related receivable to the amount we expect to recover. Bad debts have not historically been significant. If circumstances related to specific customers change, our estimates of the recoverability of
receivables could materially change.

Revenue Recognition

Revenue is recorded from customers upon product completion and delivery and title and risk of loss have been passed to the customer. Sales returns have not
historically been significant, thus no reserve for sales returns has generally been provided. Fees from tire disposal services are recorded as a reduction of inventory and cost of goods sold.

Item 7. Financial Statements

The
information required by this item begins on page F-1 of this report.

Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

On
July 11, 2002, based on a recommendation of the Audit Committee, the Company's Board of Directors approved the dismissal of the Company's independent public accountants, Arthur
Andersen LLP. Arthur Andersen LLP issued an unqualified audit opinion on each of the past two fiscal years'

10

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financial statements. There have not been any disagreements between the Company and Arthur Andersen LLP on any matters of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, nor have there been any reportable events as defined under Item 304(a)(1)(iv) of Regulation S-B.

Also
on July 11, 2002, the Company engaged the firm of KPMG LLP to be its independent public accountants. There were not any consultations with KPMG LLP within the Company's last
two fiscal years nor from the period between April 30, 2002 and the date the Company engaged KPMG LLP, regarding the application of accounting principles to a specific transaction, or the type
of audit opinion that might be rendered, nor were there any discussions between KPMG LLP and the Company about disagreements between the Company and Arthur Andersen LLP.

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange  Act

Directors

Name

Age

Position with Company

Has Been a
Director SinceMarvin S. Wool

73

Chairman of the Board

June 1999Ronald L. Bogh

59

Director

1985Paul M. Gilson

54

Director and Senior Vice President

June 1999Gregory J. Divis

61

Director and President

June 1999Sandon L. Wool

48

Director

June 1999Lawrence J. Young

58

Director

June 1999Leland B. Curtis

58

Director

October 1999


Mr. Sandon
L. Wool is the son of Mr. Marvin S. Wool. Otherwise, there are no family relationships among any director or executive officer of the Company.

Marvin S. Woolwas named the Chairman of the Board in June 1999. Since 1973, Mr. Wool has served as the President, Chief
Executive Officer and Chairman of the Board of Dash Multi-Corp, Inc., a St. Louis, Missouri based holding company for subsidiary companies located in Georgia, Mississippi, Missouri,
New Jersey, North Carolina and California that are in the chemical, cloth coating and floor covering industries. Mr. Wool is also Chairman of the Board of Directors of Allegiant
Bancorp, Inc. in St. Louis, Missouri.

Ronald L. Boghfounded the Company in 1985 and was named President of the Company. Mr. Bogh served as Chairman of the Board and
Chief Executive Officer from 1995 to June 1999. Prior to his founding of the Company in 1985, Mr. Bogh was the Southern U.S. Sales Manager for Cascade Steel in McMinnville, Oregon. In
June 2002, Mr. Bogh resigned from his position as President, but continues to work with the Company in a part time management consulting position. Mr. Bogh also remains on the
Board of Directors.

Paul M. Gilsonjoined the Company in 1990 as Vice President of Operations and has served as Senior Vice President since 1996.
Mr. Gilson served as Chief Operating Officer, Secretary and Treasurer from 1996 to June 1999. Prior to joining the Company, Mr. Gilson was a commercial account executive with
Hagan Hamilton Insurance in McMinnville, Oregon.

Dr. Gregory J. Diviswas named President in June 2002 following the resignation of Ron Bogh. Prior to being named President,
Dr. Divis served as Director, Vice President and Secretary of the

11

---



Company since June 1999. Dr. Divis has served as a Director of Dash Multi-Corp since 1988 and as Senior Vice President of Subsidiaries for Dash
Multi-Corp, Inc. since 1995.

Sandon L. Woolwas named a Director of the Company in June 1999. Mr. Sandon L. Wool has served as a Director of Dash
Multi-Corp, Inc. since 1980 and as Vice President and Secretary since 1994. Since 1997, Mr. Sandon L. Wool has also served as President of MarChem Corporation, a subsidiary
Dash Multi-Corp., Inc.

Lawrence J. Youngwas named Director of the Company in June 1999. Mr. Young is a CPA and the retired Chairman and Chief
Executive Officer of Angelica Corporation (textile and uniform rental, laundry and sales) of Chesterfield, Missouri. Mr. Young served as Chairman and Chief Executive Officer of Angelica
Corporation from 1990 to July 1997 and as Executive Vice President from August 1997 to June 1998.

Leland B. Curtiswas named Director of the Company in October 1999. Mr. Curtis has been a partner with the St. Louis,
Missouri based law firm of Curtis Oetting Heinz Garrett & Soule since 1986. Mr. Curtis is on the Board of Directors of Allegiant Bancorp, Inc. in St. Louis, Missouri.

Executive Officers

The names, ages and positions of the Company's executive officers as of August 20, 2002 are as follows:

Name

Age

Current Position(s) with Company

SinceGregory J. Divis

61

Director and President

June 2002Paul M. Gilson

54

Director and Senior Vice President

1996


For
information on the business backgrounds of Messrs. Gilson and Divis, see "Directors" above.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") requires the Company's executive officers and Directors, and persons who own more
than ten percent of a registered class of the Company's equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission ("SEC"). Based solely on its
review of the copies of such forms received by the Company, or written representations from certain reporting persons, the Company believes that, for the year ended April 30, 2002, all
executive officers, Directors and greater than 10 percent shareholders complied with all applicable filing requirements.

Item 10. Executive Compensation

Summary of Cash and Certain Other Compensation

The following table provides certain summary information concerning compensation awarded to, earned by or paid to Ronald L. Bogh, the Company's former President
and Paul M. Gilson, Senior Vice President (the "named executive officers"), on an annualized basis for the fiscal years ended April 30, 2002, 2001 and 2000.

12

---

SUMMARY COMPENSATION TABLE

|                                   |  |                |  | Annual Compensation |                         | 
|---------------------------------- |  | -------------- |  | ------------------- | ----------------------- | 
|
|Ronald L. Bogh
Former President(1) |  | 2002
2001
2000 |  | $                   | 179,200
170,267
166,415 | 
|Paul M. Gilson
Sr. Vice President  |  | 2002
2001
2000 |  |                     | 125,500
119,900
113,400 | 

---

Options Granted in Last Fiscal Year

The following table contains information concerning the grant of stock options under the Company's Directors Stock Option Plan (the "Plan") to the named executive
officers during the year ended April 30, 2002.

OPTION GRANTS IN LAST FISCAL YEAR

|Individual Grants(1) |  | Potential
Realizable Value
At Assumed Annual
Rates of Stock Price
Appreciation for
Option Term(2)
|-------------------- |  | -------------------------------------------------------------------------------------------------
|
|Ronald L. Bogh       |  | 8,400                                                                                            
|Paul M. Gilson       |  | 8,400                                                                                            

---

13

---

Option Exercises and Holdings

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR  AND FY-END OPTION VALUES

Name

Shares
Acquired
On Exercise
(#)

Value
Realized
($)

Number of
Securities
Underlying
Unexercised
Options
At FY-End (#)
Exercisable/
Unexercisable

Value of Unexercised
In-The-Money Options
At FY-End ($)(1)
Exercisable/
UnexercisableRonald L. Bogh





16,800 / 


 / Paul M. Gilson





96,000 / 

$
47,664 / 


---

Director Compensation

Non-employee, non-salaried directors receive $500 per meeting they attend where official Board action is taken, including special
meetings, annual meetings and telephonic meetings, plus out-of-pocket expenses associated with attending such meetings. Employee, salaried directors receive no additional cash
compensation beyond their salaries for attending any Board meetings.

The
Company's current policy as to option grants to directors is that, as of the date of each annual shareholders meeting, each director who has been a member of the Board for at least
three months receives an option to purchase 8,400 shares of the Company's common stock. Each option continues for a term of five years, with a per-share exercise price of
115 percent of the average closing price of the Company's stock for the two week period preceding the annual shareholders meeting. All options are fully vested and exercisable upon grant.
Directors who are also employees of the Company (or a related corporation) will receive incentive stock options, designed to qualify under Section 422 of the Internal Revenue Code. Directors
who are not also employees of the Company (or a related corporation) will receive nonqualified stock options.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND  CHANGE-IN-CONTROL ARRANGEMENTS

Change-in-Control Arrangements

In the event of a change in control of the Company, unless otherwise determined by the Board of Directors prior to the occurrence of such change in control, any
options or portions of such options outstanding as of the date such change in control is determined to have occurred, that are not yet fully vested on such date, shall become immediately exercisable
in full.

Employment Contracts

Ronald L. Bogh.Mr. Bogh resigned as the Company's President in June 2002. From June 1999 until his
resignation, Mr. Bogh was a party to a three-year employment agreement with the Company and Dash Multi-Corp with compensation at the rate of: (a) $160,800 per
annum in year one, (b) $170,400 per annum in year two, and (c) $180,000 per annum in year three. Mr. Bogh's compensation under the Employment Agreement also included the use of a
Company owned vehicle, medical and health care coverage, life insurance coverage, country club dues and a bonus plan. Following his resignation, Mr. Bogh is serving as a consultant to the
Company for one year at a rate of

14

---

pay of $100,000 per annum. Mr. Bogh remains a party to a Continuance of Employment Agreement, under which Mr. Bogh is to receive $60,000 per annum through December 2008 for
services as a technical advisor to operational and management functions of the Company. The Continuance of Employment Agreement becomes effective upon expiration of the one-year consulting
agreement.

Paul M. Gilson.In June 1999, the Company, Dash Multi-Corp and Paul M. Gilson agreed to a
four-year Employment Agreement with compensation at the rate of: (a) $114,000 per annum in year one, (b) $120,000 per annum in year two, (c) $126,000 per annum in year
three, and (d) $132,000 per annum in year four. In June 2002, this contract was extended for one additional year at the current rate of pay of $132,000 per annum. The compensation rate
may change at the sole discretion of Dash Multi-Corp, as directed by the Company. Mr. Gilson's compensation under the Employment Agreement also includes the use of a Company owned
vehicle, medical and health care coverage, life insurance coverage and a bonus plan.

Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of Common Stock of the Company as of August 16, 2002 as to
(i) each person who is known by the Company to own beneficially 5 percent or more of the outstanding shares of Common Stock, (ii) each Director or Nominee for Director of the
Company, (iii) each of the executive officers named in the Summary Compensation Table above and (iv) all Directors and executive officers as a group. Except as otherwise noted, the
Company believes the persons listed below have sole investment and voting power with respect to the Common Stock owned by them.

Common StockFive Percent Shareholders, Directors
and Named Executive Officers

Shares
Beneficially Owned(1)

Approximate Percentage
OwnedDash Multi-Corp, Inc.(2)

2,267,146

70.0
%Marvin S. Wool(2)(3)(7)

2,283,946

70.4
%Ronald L. Bogh(4)(5)

282,937

8.7
%Paul M. Gilson(6)

97,632

2.9
%Gregory J. Divis(7)

16,800

*Sandon L. Wool(7)

16,800

*Lawrence J. Young(7)

21,600

*Leland B. Curtis(7)

18,528

*All Directors and executive officers as a group (7 persons)(8)

2,738,243

80.2
%


---

15

---



EQUITY COMPENSATION PLAN INFORMATION

The following table summarizes equity securities authorized for issuance as of April 30, 2002.

|Plan Category                                          |       | Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights (a) |         | Weighted average
exercise price of
outstanding
options, warrants
and rights (b) |      | Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a)) (c)
|------------------------------------------------------ | ----- | ----------------------------------------------------------------------------------------------- | ------- | ------------------------------------------------------------------------------- | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by shareholders     |       | 360,240                                                                                         |         | $                                                                               | 2.01 |                                                                                                                                                
|Equity compensation plans not approved by shareholders |       |                                                                                                |         |                                                                                 |     |                                                                                                                                                
|                                                       |       |                                                                                                 |         |                                                                                 |      |                                                                                                                                                
|                                                       | Total |                                                                                                 | 360,240 |                                                                                 | $    | 2.01                                                                                                                                           
|                                                       |       |                                                                                                 |         |                                                                                 |      |                                                                                                                                                

Item 12. Certain Relationships and Related Transactions

MarChem
Pacific, Inc. ("MarChem"), a wholly owned subsidiary of Dash, is the Company's primary supplier of bonding materials used in its mat-making process. During the
year ended April 30, 2002, the Company paid a total of $867,547 to MarChem. At April 30, 2002, the Company owed MarChem $77,957 for such materials.

During
the year ended April 30, 2002, the Company paid $300,000 to Dash for management services and $108,369 for travel services. During the year ended April 30, 2002, the
Company contracted for its group health insurance and general liability insurance as a related group with Dash, which procures the policies for the entire related group. Premiums paid to Dash under
these plans in fiscal 2002 totaled $233,109. The premiums are allocated to the Company based upon formulas provided by the insurance carrier, which may not be indicative of the Company premiums if the
Company was independent in the procurement of its insurance. In June 2001, the Company withdrew from the Dash sponsored group health insurance plan. In addition to the related party
transactions

16

---

discussed above, the Company also reimbursed Dash for other expenditures made on its behalf. During the year ended April 30, 2002, the Company also reimbursed Dash for premiums paid on its
behalf for automobile and worker's compensation insurance, totaling $188,865. During the year ended April 30, 2002, the Company paid $66,124 to Dash for computer hardware and software related
to a computer system implementation scheduled for fiscal 2003. The Company also reimburses Dash for certain out-of-pocket travel and entertainment expenses charged by Company
employees on credit cards supplied by Dash. These expenses totaled $33,442 for the year ended April 30, 2002. Also during the year ended April 30, 2002, the Company reimbursed Dash for
out-of-pocket expenses related to joint participation in a trade show and other items totaling $27,496.

At
April 30, 2002, Dash owed the Company $103,510 related to an accrued refund of management fees and an estimated adjustment to workers' compensation premiums for the period.

Item 13. Exhibits and Reports on Form 8-K

Exhibits

The following exhibits are filed herewith and this list is intended to constitute the exhibit index. An asterisk (*) beside the exhibit number indicates the
subset of the exhibits containing each management contract, compensatory plan, or arrangement required to be identified separately in this report.

|Exhibit
Number |  | Description                                                                                                                           
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------
|3.1            |  | Articles of Incorporation(1)                                                                                                          
|3.2            |  | Bylaws(1)                                                                                                                             
|4.1            |  | Reference is made to Exhibits 3.1 and 3.2(1)                                                                                          
|4.2            |  | Form of Common Stock Certificate(1)                                                                                                   
|10.1*          |  | R-B Rubber Products, Inc. 1995 Stock Option Plan(1)                                                                                   
|10.2*          |  | Form of Stock Option Agreement(1)                                                                                                     
|10.3*          |  | Amendment No. 1 to R-B Rubber Products, Inc. 1995 Stock Option Plan(3)                                                                
|10.4*          |  | Employment Agreement dated effective June 3, 1999 between R-B Rubber Products, Inc. and Ronald L. Bogh(9)                             
|10.5*          |  | Employment Agreement dated effective June 3, 1999 between R-B Rubber Products, Inc. and Paul M. Gilson(9)                             
|10.6*          |  | R-B Rubber Products, Inc. Directors Stock Option Plan(11)                                                                             
|10.7           |  | $992,000 Business Loan Agreement by and between KeyBank National Association and R-B Rubber Products, Inc., dated August 3, 1998.(5)  
|10.8           |  | $450,000 Business Loan Agreement, dated January 19, 1999, by and between KeyBank National Association and R-B Rubber Products, Inc.(6)
|10.9           |  | $1,000,000 Line of Credit Agreement by and between KeyBank National Association and R-B Rubber Products, Inc. dated July 31, 1998.(5) 
|10.10          |  | Amendment No. 1 (Extension Agreement) dated September 1, 1999 to Line of Credit Agreement dated July 31, 1998.(8)                     
|10.11          |  | Funding Agreement, dated May 12, 1997, by and between Keycorp Leasing Ltd. And R-B Rubber Products, Inc.(2)                           
|               |  |                                                                                                                                       

17

---

|10.12 |  | Consent to Assignment and Agreement and Assignment of Purchase Agreement, dated May 12, 1997, by R-B Rubber Products, Inc. to Keycorp Leasing Ltd.(2)                     
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.13 |  | Master Lease Agreement, dated as of May 12, 1997 by and between KeyCorp Leasing Ltd. and R-B Rubber Products, Inc.(3)                                                     
|10.14 |  | Schedule, dated December 22, 1997, to Master Lease Agreement dated as of May 12, 1997 by and between KeyCorp Leasing Ltd. and R-B Rubber Products, Inc.(7)                
|10.15 |  | Schedule, dated February 2, 1999, to Master Lease Agreement dated as of May 12, 1997, by and between KeyCorp Leasing Ltd. and R-B Rubber Products, Inc.(7)                
|10.16 |  | Master Lease Agreement, dated as of October 19, 1995, by and between U.S. Bancorp Leasing & Financial and R-B Rubber Products, Inc.(12)                                   
|10.17 |  | Schedule, dated October 19, 1995, to Master Lease Agreement dated as of October 19, 1995 by and between U.S. Bancorp Leasing & Financial and R-B Rubber Products, Inc.(12)
|10.18 |  | Schedule, dated June 4, 1998, to Master Lease Agreement dated as of October 19, 1995, by and between U.S. Bancorp Leasing & Financial and R-B Rubber Products, Inc.(4)    
|10.19 |  | Schedule, dated December 8, 1998, to Master Lease Agreement dated as of October 19, 1995, by and between U.S. Bancorp Leasing & Financial and R-B Rubber Products, Inc.(7)
|10.20 |  | Lease Agreements dated December 21, 1999 between Banc of America Leasing & Capital, LLC and RB Rubber Products, Inc. together with Schedules thereto.(10)                 
|21    |  | Subsidiaries of the Registrant(7)                                                                                                                                         
|23.1  |  | Consent of KPMG LLP                                                                                                                                                       
|99.1  |  | Certification of President                                                                                                                                                
|99.2  |  | Certification of Chief Financial Officer                                                                                                                                  

---

18

---

Reports on Form 8-K

No reports on Form 8-K were filed during the quarter ended April 30, 2002.

19

---



SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Dated:
August 22, 2002

| |  | R-B RUBBER PRODUCTS, INC.
| |  | -------------------------
| |  | By:                      

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in their capacities
indicated on August 22, 2002:

|Signature                             |  | Title                                                               
|------------------------------------- |  | --------------------------------------------------------------------
|                                      |  |                                                                     
|/s/MARVIN S. WOOLMarvin S. Wool       |  | Chairman of the Board                                               
|/s/RONALD L. BOGHRonald L. Bogh       |  | Director                                                            
|/s/DONALD OVERTURFDonald Overturf     |  | Chief Financial Officer
(Principal Accounting and Financial Officer)
|/s/PAUL M. GILSONPaul M. Gilson       |  | Director and Senior Vice President                                  
|/s/GREGORY J. DIVISGregory J. Divis   |  | Director and President
(Principal Executive Officer)                
|/s/SANDON L. WOOLSandon L. Wool       |  | Director                                                            
|/s/LAWRENCE J. YOUNGLawrence J. Young |  | Director                                                            
|/s/LELAND B. CURTISLeland B. Curtis   |  | Director                                                            

20

---



Independent Auditors' Report

To
the Shareholders and Board of Directors of
R-B Rubber Products, Inc.

We
have audited the accompanying consolidated balance sheet of R-B Rubber Products, Inc., and subsidiary as of April 30, 2002, and the related consolidated
statements of operations, shareholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.

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

In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of R-B Rubber Products, Inc. and subsidiary
as of April 30, 2002, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of
America.

KPMG
LLP
Portland, Oregon
August 15, 2002

F-1

---

THIS REPORT IS A CONFORMED COPY  OF THE REPORT PREVIOUSLY ISSUED BY  ARTHUR ANDERSEN LLP AND HAS NOT BEEN REISSUED.

REPORT
OF INDEPENDENT PUBLIC ACCOUNTANTS

To
the Shareholders and Board of Directors of
R-B Rubber Products, Inc.

We
have audited the accompanying consolidated balance sheet of R-B Rubber Products, Inc., and subsidiary as of April 30, 2001, and the related consolidated
statements of operations, shareholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of R-B Rubber Products, Inc. and subsidiary
as of April 30, 2001, and the results of their operations and their cash flows for year then ended, in conformity with accounting principles generally accepted in the United States.

/s/
Arthur Andersen LLP
Portland, Oregon
June 15, 2001

F-2

---



R-B RUBBER PRODUCTS, INC.  CONSOLIDATED BALANCE SHEETS

|                                                                                            |                                                                                                   | April 30
2002                              |           | April 30,
2001
|------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ------------------------------------------ | --------- | --------------
|ASSETS                                                                                     
|Current assets:                                                                             |                                                                                                   |                                            |           |               
|                                                                                            | Cash and cash equivalents                                                                         |                                            | $         | 546,891       
|                                                                                            | Accounts receivable, net of allowance of $55,700 and $38,105                                      |                                            |           | 1,426,149     
|                                                                                            | Accounts receivablerelated party                                                                 |                                            |           | 103,510       
|                                                                                            | Inventories                                                                                       |                                            |           | 2,027,841     
|                                                                                            | Prepaid expenses and other                                                                        |                                            |           | 135,306       
|                                                                                            | Deferred tax asset                                                                                |                                            |           | 68,000        
|                                                                                            |                                                                                                   |                                            |           |               
|                                                                                            |                                                                                                   | Total current assets                       |           |               
|Property, plant and equipment, net of accumulated depreciation of $5,005,431 and $4,051,446 |                                                                                                   |                                            | 5,660,182 |               
|Deferred tax asset                                                                          |                                                                                                   |                                            | 4,898     |               
|Other assets                                                                                |                                                                                                   |                                            | 430,505   |               
|                                                                                            |                                                                                                   |                                            |           |               
|                                                                                            |                                                                                                   | Total assets                               |           | $             
|                                                                                            |                                                                                                   |                                            |           |               
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                       
|Current liabilities:                                                                        |                                                                                                   |                                            |           |               
|                                                                                            | Current portion of long-term debt                                                                 |                                            | $         | 132,406       
|                                                                                            | Current portion of capital lease obligations                                                      |                                            |           | 253,979       
|                                                                                            | Short-term borrowings                                                                             |                                            |           | 835,000       
|                                                                                            | Accounts payable                                                                                  |                                            |           | 570,174       
|                                                                                            | Accounts payablerelated party                                                                    |                                            |           | 77,957        
|                                                                                            | Accrued expenses                                                                                  |                                            |           | 228,281       
|                                                                                            | Income taxes payable                                                                              |                                            |           | 179,951       
|                                                                                            |                                                                                                   |                                            |           |               
|                                                                                            |                                                                                                   | Total current liabilities                  |           |               
|Long-term debt, net of current portion                                                      |                                                                                                   |                                            | 950,740   |               
|Capital lease obligations, net of current portion                                           |                                                                                                   |                                            | 565,434   |               
|Deferred income taxes                                                                       |                                                                                                   |                                            |          |               
|                                                                                            |                                                                                                   |                                            |           |               
|                                                                                            |                                                                                                   | Total liabilities                          |           |               
|                                                                                            |                                                                                                   |                                            |           |               
|Commitments and contingencies                                                               |                                                                                                   |                                            |           |               
|Shareholders' equity:                                                                       |                                                                                                   |                                            |           |               
|                                                                                            | Common stock, no par value, 24,000,000 shares authorized; 3,234,271 shares issued and outstanding |                                            |           | 4,311,999     
|                                                                                            | Retained earnings                                                                                 |                                            |           | 2,297,361     
|                                                                                            |                                                                                                   |                                            |           |               
|                                                                                            |                                                                                                   | Total shareholders' equity                 |           |               
|                                                                                            |                                                                                                   |                                            |           |               
|                                                                                            |                                                                                                   | Total liabilities and shareholders' equity |           | $             
|                                                                                            |                                                                                                   |                                            |           |               

The
accompanying notes are an integral part of these statements.

F-3

---

R-B RUBBER PRODUCTS, INC.  CONSOLIDATED STATEMENTS OF OPERATIONS

|                                            |                            | Year Ended April 30, |           
|------------------------------------------- | -------------------------- | -------------------- | ----------
|
|Sales, net                                  |                            | $                    | 11,855,316
|Cost of sales                               |                            |                      | 8,078,013 
|                                            |                            |                      |           
|                                            | Gross profit               |                      |           
|                                            |                            |                      |           
|Operating expenses:                         |                            |                      |           
|                                            | Selling                    |                      |           
|                                            | General and administrative |                      |           
|                                            |                            |                      |           
|                                            |                            |                      | 2,705,513 
|                                            |                            |                      |           
|Operating income                            |                            |                      | 1,071,790 
|                                            |                            |                      |           
|Other income (expense):                     |                            |                      |           
|                                            | Interest income            |                      |           
|                                            | Other income (expense)     |                      |           
|                                            | Interest expense           |                      |           
|                                            |                            |                      |           
|                                            | Other expense, net         |                      |           
|                                            |                            |                      |           
|Income before income taxes                  |                            |                      | 894,006   
|Income tax expense                          |                            |                      | (248,582  
|                                            |                            |                      |           
|Net income                                  |                            | $                    | 645,424   
|                                            |                            |                      |           
|Basic net income per share                  |                            | $                    | 0.20      
|                                            |                            |                      |           
|Shares used in basic net income per share   |                            |                      | 3,234,271 
|                                            |                            |                      |           
|Diluted net income per share                |                            | $                    | 0.20      
|                                            |                            |                      |           
|Shares used in diluted net income per share |                            |                      | 3,295,600 
|                                            |                            |                      |           

The
accompanying notes are an integral part of these statements.

F-4

---

R-B RUBBER PRODUCTS, INC.  CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                      |                                                                                   | Year Ended April 30,                       |                                  
|------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------ | ---------------------------------
|
|Cash flows from operating activities: |                                                                                   |                                            |                                  
|                                      | Net Income                                                                        |                                            | $                                
|                                      | Adjustments to reconcile net income to net cash provided by operating activities: |                                            |                                  
|                                      |                                                                                   | Depreciation and amortization              |                                  
|                                      |                                                                                   | Gain on disposal of equipment              |                                  
|                                      |                                                                                   | Deferred income taxes                      |                                  
|                                      |                                                                                   | Changes in current assets and liabilities: |                                  
|                                      |                                                                                   |                                            | Accounts receivable, net         
|                                      |                                                                                   |                                            | Accounts receivablerelated party
|                                      |                                                                                   |                                            | Inventories, net                 
|                                      |                                                                                   |                                            | Prepaid expenses and other       
|                                      |                                                                                   |                                            | Accounts payable                 
|                                      |                                                                                   |                                            | Accrued expenses                 
|                                      |                                                                                   |                                            | Income taxes payable             
|                                      |                                                                                   |                                            |                                  
|                                      |                                                                                   |                                            |                                  
|                                      |                                                                                   |                                            |                                  
|Cash flows from investing activities: |                                                                                   |                                            |                                  
|                                      | Additions to property, plant and equipment                                        |                                            |                                  
|                                      | Proceeds from sale of equipment                                                   |                                            |                                  
|                                      | Other, net                                                                        |                                            |                                  
|                                      |                                                                                   |                                            |                                  
|                                      |                                                                                   |                                            |                                  
|                                      |                                                                                   |                                            |                                  
|Cash flows from financing activities: |                                                                                   |                                            |                                  
|                                      | Net borrowings under short-term credit facilities                                 |                                            |                                  
|                                      | Proceeds from exercise of stock options                                           |                                            |                                  
|                                      | Payments on long-term debt                                                        |                                            |                                  
|                                      | Payments on capital lease obligations                                             |                                            |                                  
|                                      |                                                                                   |                                            |                                  
|                                      |                                                                                   |                                            |                                  
|                                      |                                                                                   |                                            |                                  
|Decrease in cash and cash equivalents |                                                                                   |                                            | (52,292                          
|Cash and cash equivalents:            |                                                                                   |                                            |                                  
|                                      | Beginning of period                                                               |                                            |                                  
|                                      |                                                                                   |                                            |                                  
|                                      | End of period                                                                     |                                            | $                                
|                                      |                                                                                   |                                            |                                  

The
accompanying notes are an integral part of these statements.

F-5

---

R-B RUBBER PRODUCTS, INC.  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY  For the years ended April 30, 2001 and 2002

|                          |  | Common Stock |  |   |           | 
|------------------------- |  | ------------ |  | - | --------- | 
|
|
|Balance at April 30, 2000 |  | 3,224,567    |  | $ | 4,296,959 | 
|Exercise of stock options |  | 9,704        |  |   | 15,040    | 
|Net income                |  |             |  |   |          | 
|                          |  |              |  |   |           | 
|Balance at April 30, 2001 |  | 3,234,271    |  |   | 4,311,999 | 
|Net income                |  |             |  |   |          | 
|                          |  |              |  |   |           | 
|Balance at April 30, 2002 |  | 3,234,271    |  | $ | 4,311,999 | 
|                          |  |              |  |   |           | 

The
accompanying notes are an integral part of these statements.

F-6

---



R-B RUBBER PRODUCTS, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization.R-B Rubber Products, Inc. (the "Company") was incorporated in Oregon
in September 1986. The Company is a vertically integrated rubber recycler and manufacturer that processes discarded tires into high quality, durable rubber mats, protective surfaces and various
other rubber products. The Company sells its products to agribusiness concerns, sports and fitness facilities and other commercial and industrial users throughout North America.

The
accompanying consolidated financial statements include the accounts of the Company and of its wholly owned subsidiary, RB Recycling, Inc. All significant inter-company
transactions and account balances have been eliminated.

Common Stock Split-up Effected in the Form of a Dividend.The Company declared a
20 percent common stock split-up effected in the form of a dividend on March 26, 2001 for shareholders of record on May 1, 2001 for issuance on June 1, 2001.
All share and per share amounts have been retroactively adjusted to reflect the stock split-up effected in the form of a dividend.

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

Cash and Cash Equivalents.Cash and cash equivalents consist of cash on hand and highly liquid
investments with original maturities of 90 days or less at acquisition.

Concentrations of Credit Risk.Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of bank demand deposits and cash equivalents.

During
each of the years ended April 30, 2002 and 2001, approximately 11 percent of net sales were to one customer. This customer represented 10 percent of accounts
receivable at April 30, 2002 and 11 percent of the accounts receivable balance at April 30, 2001. The balance outstanding at April 30, 2002 for this customer was collected
in the first quarter of fiscal 2003.

Inventories.Inventories are stated at the lower of average cost, which approximates the
first-in, first-out method, or market (net realizable value), and include materials, labor and manufacturing overhead. Unsalable or unusable items are carried at scrap value
and reprocessed.

Property, Plant and Equipment.Property, plant and equipment are stated at cost. Maintenance and
repairs are charged to expense as incurred, whereas renewals and betterments are capitalized.

Depreciation
is provided using the straight-line method over the estimated useful lives of the applicable assets as follows:

Buildings and Improvements:

30 yearsMachinery and Transportation Equipment:

5 - 14 yearsTrucks and Trailers:

5 - 10 yearsOffice Furniture and Equipment:

3 - 7 years


Upon
disposal of assets subject to depreciation, costs and accumulated depreciation are removed from the accounts and the resulting gains and losses are reflected in income.

F-7

---

Goodwill.Goodwill, related to the purchase of certain assets of Iowa Mat Company and Waste
Recovery, Inc., is included in other non-current assets and totaled $200,021, and $229,873, net of accumulated amortization of $109,663, and $79,811, at April 30, 2002 and
2001, respectively. Goodwill is amortized on a straight-line basis over a 10-year period. The Company assesses the recoverability of goodwill by determining whether the
amortization of the goodwill balance over its remaining life can be recovered through undiscounted future operating cash flows of the acquired operation. The assessment of the recoverability of
goodwill will be impacted if estimated future operating cash flows are less than the carrying amount of the goodwill.

Long-Lived Assets.The Company accounts for long-lived assets in accordance
with the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to sell.

Revenue Recognition.The Company recognizes revenue as of the date title and risk of loss have passed
to the customer and collectibility of any related account receivable is reasonably assured. Fees received from tire disposal services are recorded as a reduction of inventory and cost of goods sold.

Research and Development.Research and development is expensed as incurred. Included in general and
administrative expense are expenditures for research and development of $5,690 and $7,119, respectively, for the years ended April 30, 2002 and 2001.

Advertising Costs.Advertising costs are expensed when incurred. Total advertising costs for the
years ended April 30, 2002 and 2001 were $128,702 and $108,173, respectively, and are included as a selling expense.

Income Taxes.Deferred income tax assets and liabilities reflect the tax effect of temporary
differences between carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. A valuation allowance is established for deferred tax assets
if it is more likely than not that all or some portion of the deferred tax asset will not be realized. Income tax expense is
the tax payable for the period and the change during the period in net deferred tax assets and liabilities.

Net Income Per Share.Basic earnings per share (EPS) and diluted EPS are computed using the methods
prescribed by Statement of Financial Accounting Standard No. 128,Earnings per Share. Basic EPS is calculated using the weighted average number
of common shares outstanding for the period and diluted EPS is computed using the weighted average number of common shares and dilutive common equivalent shares outstanding.

F-8

---

Following
is a reconciliation of basic EPS and diluted EPS:

|                                        |               | Year Ended April 30,
|--------------------------------------- | ------------- | --------------------
|
|
|Income available to Common Shareholders |               | $                   
|                                        |               |                     
|Effect of Dilutive Securities:          |               |                     
|                                        | Stock Options |                     
|                                        |               |                     
|Diluted EPS                             |               |                     
|Income available to Common Shareholders |               | $                   
|                                        |               |                     

191,041
and 133,680 shares issuable pursuant to stock options have not been included in the above calculations for years ended April 30, 2002 and 2001, respectively, since they would have been
antidilutive.

Fair Value of Financial Instruments.The fair value of financial instruments are the amounts at which
the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The carrying amounts reflected in the consolidated balance sheets for
cash and cash equivalents, trade receivables, other current assets and current liabilities approximate fair value because of the short maturity for these instruments. The fair value approximates the
carrying value of the Company's borrowings under its long-term arrangements based upon interest rates available for the same or similar loans.

Segment Reporting.The Company complies with SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to
report annually entity wide disclosures about products and services, major customers and the countries in which the entity holds material assets and reports revenue. An operating segment is defined as
a component that engages in business activities whose operating results are reviewed by the chief operating decision maker and for which discrete financial information is available. Based on the
provisions of SFAS No. 131, the Company has determined that it operates in one segment. The Company manages its resources and assesses its performance on a company-wide basis.

Reclassifications.Certain amounts in the 2001 financial statements and notes have been reclassified
to conform to the 2002 presentation. Such reclassifications had no effect on net income, cash flows, or retained earnings.

F-9

---

2.    INVENTORIES

Inventories consisted of the following:

April 30,2002

2001Raw Materials

$
120,479

$
130,969Finished Goods


1,879,762


1,361,576Other


27,600


27,600$
2,027,841

$
1,520,145


3.    PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

April 30,2002

2001Land

$
167,750

$
167,750Buildings and improvements


1,355,667


1,355,667Machinery and equipment


7,054,054


6,485,032Trucks and trailers


459,284


357,760Office furniture and equipment


299,153


281,0459,335,908


8,647,254Lessaccumulated depreciation


(5,005,431
)

(4,051,446
)4,330,477


4,595,808Construction in progress


1,329,705


936,661$
5,660,182

$
5,532,469


Depreciation
expense was $953,985 and $891,045 for the years ended April 30, 2002 and 2001, respectively. Machinery and equipment includes assets under capital leases, which
totaled $676,259 and $923,063 (net of accumulated amortization of $1,077,910 and $831,106) at April 30, 2002 and 2001, respectively.

4.    SHORT-TERM LINE OF CREDIT AND TERM LOAN

The Company has a $1,000,000 operating line of credit with a commercial bank, which expires October 1, 2002 with interest at prime (4.75 percent at
April 30, 2002). The line of credit is collateralized by accounts receivable and inventory. The Company had $335,000 outstanding under the line of credit at April 30, 2002. The Company
has a $500,000 term loan due September 20, 2002 with interest at prime (4.75 percent at April 30, 2002). The term loan is collateralized by accounts receivable and inventory.

F-10

---

5.    LONG-TERM DEBT

|                                                                                                                                                                                                                                                                         |  | April 30,
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------
|
|Real estate mortgage at U.S. Treasury rate plus 2.5 percent (7.97 percent at April 30, 2002) adjusted every 5 years, payable in monthly payments of $8,373, including interest, with a balloon payment of $695,954 due on
August 15, 2008, collateralized by real estate |  | $        
|Bank term note at prime rate (4.75 percent at April 30, 2002), payable in monthly amount of $9,096, including interest through January 20, 2004, collateralized by equipment                                                                                             |  |          
|                                                                                                                                                                                                                                                                         |  |          
|                                                                                                                                                                                                                                                                         |  |          
|Lesscurrent portion                                                                                                                                                                                                                                                     |  |          
|                                                                                                                                                                                                                                                                         |  |          
|                                                                                                                                                                                                                                                                         |  | $        
|                                                                                                                                                                                                                                                                         |  |          

As
of April 30, 2002, principal maturities on long-term debt for fiscal years ending April 30 are due as follows:

2003

$
132,4062004


110,1122005


34,7312006


37,6022007


40,711Thereafter


727,584$
1,083,146


Under
the terms of the bank term note agreement at April 30, 2002, the Company is required to maintain the following covenants:



At
April 30, 2002, the Company was in compliance with these covenants.

6.    LEASE OBLIGATIONS

As a recycler of tires in the state of Oregon, many of the Company's capital purchases qualify for State of Oregon Business Energy Tax Credits. The Company sells
the related equipment to various commercial banks and leases the equipment back, net of the related tax credits. Gains resulting from these sale/leasebacks are netted against property and equipment on
the balance sheet.

Depreciation
related to the capital leases was $246,804 for each of the years ended April 30, 2002 and 2001. Total rental expense related to operating leases was $237,042 and
$208,701 for the years ended April 30, 2002 and 2001, respectively.

F-11

---

The
leases provide for an early buy-out option, generally after 5 to 6 years, at a predetermined amount specified in the lease agreement. At maturity, the Company has
the option to extend the lease term, renew the lease agreement at current market rates, purchase the equipment at fair market value or return the equipment to the lessor. The effective interest rates
implicit in the leases range from 7 percent to 13 percent.

The
Company leases certain land, vehicles, equipment and storage areas under operating leases expiring in various years through 2007.

Future
minimum lease payments under lease obligations are as follows at April 30, 2002:

Capital
Leases

Operating
Leases2003

$
323,075

$
160,5472004


278,755


137,3822005


245,098


75,4522006


118,345


55,3242007


8,080


11,912Thereafter





Total minimum lease payments


973,353

$
440,617Less amount representing interest


(153,940
)Net obligation under capital leases


819,413Less current portion


(253,979
)Non-current portion

$
565,434


Under
the terms of certain capital lease agreements, the Company is required to maintain the following covenants:



At
April 30, 2002, the Company was in compliance with these covenants.

7.    INCOME TAXES

The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109,Accounting for Income
Taxes.This statement requires that deferred taxes be established for all

F-12

---

temporary differences between the book and tax basis of assets and liabilities. The components of income tax expense (benefit) are as follows:

Year Ended April 30,2002

2001Current:Federal

$
272,287

$
201,698State


24,193


24,929296,480


226,627Deferred:Federal


(41,441
)

26,700State


(6,457
)

3,300(47,898
)

30,000Income tax expense

$
248,582

$
256,627


The
components of the net deferred tax assets and liabilities are as follows:

April 30,2002

2001Assets:Allowance for doubtful accounts

$
21,000

$
14,000Accrued vacation


5,000


16,000Capital leases


48,000


52,000Goodwill


93,000


99,000State Tax Credits


93,000


Unicap


41,000


32,000301,000


213,000Liabilities:Depreciation


(228,102
)

(188,000
)Net deferred tax asset

$
72,898

$
25,000


A
reconciliation between the federal statutory tax rate and the effective income tax rate is as follows:

Year Ended April 30,2002

2001Federal statutory income tax rate

34.0
%
34.0
%State taxes

4.4

4.4State tax credits

(10.6
)
Other



(1.3
)Effective income tax rate

27.8
%
37.1
%


F-13

---

No valuation allowance has been established for deferred tax assets as management believes it is more likely than not that future taxable income will be sufficient to realize the benefit
of deferred tax assets.

8.    SUPPLEMENTAL CASH FLOW INFORMATION

Year Ended April 30,2002

2001Cash paid for interest

$
220,388

$
221,829Cash paid for income taxes


187,133


201,950


9.    SHAREHOLDERS' EQUITY

Stock Option Plans

1995 Stock Option Plan

In March 1995, the Company adopted its 1995 stock option plan (as amended, the "1995 Plan") and has reserved 432,000 shares of Common Stock for issuance
thereunder. The 1995 Plan provides for the issuance of incentive stock options to employees of the Company and non-statutory stock options to employees, directors and consultants of the
Company. Options granted generally vest over a three-year period, but may vest over a different period at the discretion of the Board of Directors. Options granted under the 1995 Plan are
typically exercisable for a period of 10 years from the date of grant. The exercise price of options granted under the 1995 Plan must be equal to or greater than the fair market value of the
Company's Common Stock on the date of grant for incentive stock options under Section 422 of the Code and not less than 85 percent of the fair market value on the date of grant for
non-statutory stock options. At April 30, 2002, the Company had 420,007 shares of Common Stock reserved for future issuance under the 1995 Plan. The exercise price of all options
granted was equal to or greater than the market value of the Company's Common Stock on the grant date.

Director's Stock Option Plan

On February 21, 2000, the Board of Directors of the Company voted to adopt a Directors Stock Option Plan (the "Directors Plan"). The Directors Plan was
approved by the shareholders on April 25, 2000 and provides for the issuance of up to 480,000 shares of the Company's common stock.

The
Directors Plan allows for the granting of options on an annual, systematic basis. As of the date of each annual shareholders meeting, each Director who has been a member of the Board
for at least three months will receive an option to purchase 8,400 shares of the Company's common stock. Each option will continue for a term of five years, with a per-share exercise price
of 115 percent of the average closing price of the Company's common stock for the two week period preceding the annual shareholders meeting. All options will be fully vested upon grant and
immediately exercisable. Directors who are also employees of the Company (or a related corporation) will receive incentive stock options and Directors who are not also employees of the Company (or a
related corporation) will receive nonqualified stock options. The Board of Directors is the administrator of the Directors Plan. At April 30, 2002, the Company had 480,000 shares of Common
Stock reserved for future issuance under the Directors Plan. The exercise price of all options granted was equal to or greater than the market value of the Company's Common Stock on the grant date.

F-14

---

Activity
under the 1995 Plan and the Directors Plan is summarized as follows:

Shares
Available for
Grant

Shares Subject to
Options

Weighted
Average Exercise
Price Per ShareBalances, April 30, 2000

596,160

315,840

$
1.93Options granted






Options canceled

2,407

(2,407
)

1.57Options exercised



(11,993
)

1.25Balances, April 30, 2001

598,567

301,440


1.96Options granted

(58,800
)
58,800


2.27Options canceled






Options exercised






Balances, April 30, 2002

539,767

360,240

$
2.00


Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation.SFAS No. 123 defines
a fair value based method of accounting for an employee stock option and similar equity instruments and encourages all entities to adopt that method of accounting for all of their employee stock
compensation plans. However, it also allows an entity to continue to measure compensation cost for those plans using the method of accounting prescribed by Accounting Principals Board Opinion ("APB")
No. 25,Accounting for Stock Issued to Employees. Entities electing to remain with the accounting in APB No. 25 must make pro forma
disclosures of net income and, if presented, earnings per share, as if the fair value based method of accounting defined in SFAS No. 123 had been adopted.

The
Company has elected to account for its stock-based compensation plans under APB No. 25; however, the Company has computed, for pro forma disclosure purposes, the value of all
options granted during the year ended April 30, 2002 using the Black-Scholes option pricing model as prescribed by SFAS No. 123 using the following weighted average assumptions for
grants. There were no options granted during the year ended April 30, 2001.

Year Ended
April 30, 2002Risk-free interest rate

4.75%Expected dividend yield

0%Expected lives

5.0 yearsExpected volatility

106.1%


Using
the Black-Scholes methodology, the total fair value of options granted during the year ended April 30, 2002 was $83,496, which would be amortized on a pro forma basis over
the vesting period of the options, which would have been immediately in 2002 since all options granted in 2002 were immediately vested. The weighted average fair value of options granted during the
year ended April 30, 2002 was $1.42 per share.

F-15

---

If
the Company had accounted for its stock-based compensation plans in accordance with SFAS No. 123, the Company's net income and net income per share would approximate the pro
forma disclosures below:

|                             |  | Year Ended April 30,
|---------------------------- |  | --------------------
|
|
|Net income                   |  | $                   
|Net income per sharebasic   |  | $                   
|Net income per sharediluted |  | $                   

The
following table summarizes information about stock options outstanding at April 30, 2002:

|Options Outstanding |             | Options Exercisable
|------------------- | ----------- | -------------------
|
|$                   | 1.042       |                    
|                    | 1.128       |                    
|                    | 1.303       |                    
|                    | 2.000       |                    
|                    | 2.083       |                    
|                    | 2.270       |                    
|                    | 2.604       |                    
|                    | 2.851       |                    
|                    | 2.865       |                    
|                    |             |                    
|$                   | 1.042-2.865 |                    
|                    |             |                    

At
April 30, 2001 options to purchase 300,000 shares of the Company's common stock were exercisable at an average exercise price of $1.955 per share.

10.  PROFIT SHARING PLAN

The Company has a defined contribution profit sharing plan (the "Plan"), which covers all employees who have completed 90 days of service. The Plan is
qualified under section 401 of the Internal Revenue Code. Participants may voluntarily elect to reduce their compensation by up to 15 percent of their annual compensation. The Company
provides a 50 percent match for contributions if a participant defers at least 2 percent of compensation, with no deferrals over 2 percent of compensation being matched. During
the years ended April 30, 2002 and 2001, contributions were made to the Plan by the Company in the amount of $17,350 and $13,763, respectively.

11.  RELATED PARTY TRANSACTIONS

MarChem Pacific, Inc. ("MarChem"), a wholly owned subsidiary of Dash, is the Company's primary supplier of bonding materials used in its
mat-making process. During the years ended April 30, 2002 and 2001, the Company paid a total of $867,547 and $688,964, respectively, to MarChem. At April 30, 2002 and 2001,
the Company owed MarChem $77,957 and $2,240, respectively, for such materials.

During
the years ended April 30, 2002 and 2001, the Company paid $300,000 per year to Dash for management services and $108,369 and $41,199, respectively, for travel services.
Included in accounts payable at April 30, 2002 and 2001 was $0 and $110,072 owed to Dash for management fees, travel

F-16

---

services and other company related expenses. During the years ended April 30, 2002 and 2001, the Company contracted for its group health insurance and general liability insurance as a related
group with Dash, who procures the policies for the entire related group. Premiums paid to Dash under these plans in fiscal 2002 and 2001 totaled $233,109 and $401,411, respectively. The premiums are
allocated to the Company based upon formulas provided by the insurance carrier, which may not be indicative of the Company premiums if the Company was independent in the procurement of its insurance.
In June 2001, the Company withdrew from the Dash sponsored group health insurance plan. In addition to the related party transactions discussed above the Company also reimbursed Dash for other
expenditures made on its behalf. During the years ended April 30, 2002 and 2001 the Company also reimbursed Dash for premiums paid on its behalf for automobile and worker's compensation
insurance totaling $188,865 and $129,719, respectively. During the year ended April 30, 2002, the Company paid $66,124 to Dash for computer hardware and software related to a computer system
implementation scheduled for fiscal 2003. The Company also reimburses Dash for certain out-of-pocket travel and entertainment expenses charged by Company employees on credit
cards supplied by Dash. These expenses totaled $33,442 and $44,623 for the years ended April 30, 2002 and 2001, respectively. Also during the years ended April 30, 2002 and 2001, the
Company reimbursed Dash for out-of-pocket expenses related to joint participation in a trade show and other items totaling $27,496 and $25,170, respectively. During the year
ended April 30, 2001 the Company reimbursed Dash $68,892 for Dash's out-of-pocket expenditures related to the purchase of production equipment utilized in the
McMinnville facility.

At
April 30, 2002, Dash owed the Company $103,510 related to an accrued refund of management fees and an estimated adjustment to workers' compensation premiums for the period.

12.  NEW ACCOUNTING PRONOUNCEMENTS

In June 2000, the FASB issued Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities-an amendment of FASB Statement No. 133" ("SFAS 138"). In June 1999, the FASB issued Statement of Financial Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 137"). SFAS 137 is an amendment to Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS 137 and 138 establish accounting and reporting standards for all derivative instruments. SFAS 137 and 138 are effective for fiscal
years beginning after June 15, 2000. The Company does not have any derivative instruments nor does it participate in hedging activities and
therefore, the adoption of SFAS 137 and 138 in the first quarter of fiscal 2002 did not have a material effect on its financial position or results of operations.

In
July 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Tangible Assets." SFAS
No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS No. 142 changes the accounting for goodwill from
an amortization method to an impairment-only approach. Thus, amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of SFAS
No. 142, which for the Company will be fiscal year 2003. The adoption of SFAS No. 141 did not have a material effect on the financial condition or results of operations of the Company.
Upon adoption of SFAS No. 142, the Company will not record amortization expense of approximately $30,000 on an annual basis.

In
June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 requires the Company to record the fair value of an asset
retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from acquisition,
construction, development and/or normal use of assets. The Company also records a corresponding asset which is depreciated over the life of the asset. Subsequent to the initial measurement of the
asset retirement obligation, the obligation will be adjusted at the end

F-17

---

of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. The Company is required to adopt SFAS No. 143 on May 1, 2003. The
Company does not believe the adoption of SFAS No. 143 will have a material effect on its financial position or results of operations.

In
October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets," which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This Statement supersedes SFAS No. 121, "Accounting for the Impairment Long-lived Assets and for
Long-lived Assets to Be Disposed Of," and APB Opinion No. 30, "Reporting Results of OperationReporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions for the Disposal of a Segment of a Business." SFAS No. 144 becomes effective for fiscal years beginning after
December 15, 2001. The Company expects to adopt SFAS No. 144 in the first quarter of fiscal 2003 and is currently analyzing the effects of adopting SFAS No. 144 on its financial
position and results of operations.

In
July 2002, the FASB approved SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 addresses the financial accounting and
reporting for obligations associated with an exit activity, including restructuring, or with a disposal of long-lived assets. Exit activities include, but are not limited to, eliminating
or reducing product lines, terminating employees and contracts and relocating plant facilities or personnel. SFAS No. 146 specifies that a company will record a liability for a cost associated
with an exit or disposal activity only when that liability is incurred and can be measured at fair value. Therefore, commitment to an exit plan or a plan of disposal expresses only management's
intended future actions and, therefore, does not meet the requirement for recognizing a liability and related expense. SFAS No. 146 is effective prospectively for exit plan or
disposal activities initiated after December 31, 2002, with earlier adoption encouraged. The Company does not anticipate that adoption of SFAS No. 146 will have a material effect on its
financial position or results of operations.

13.  COMMITMENTS

The Company is party to various claims arising in the ordinary course of business. Although the ultimate outcome of these matters is presently not determinable,
management, after consultation with legal counsel, does not believe that the resolution of these matters will have a material adverse effect on the Company's financial position or results of
operations.

14.  SUBSEQUENT EVENT

On August 13, 2002, the Company announced that it had entered into a definitive agreement and plan of merger (the "Agreement") with it principal
shareholder, Dash-Multi Corp, Inc. ("Dash"), which provides for the acquisition of all common stock of the Company held by shareholders other than Dash for a price of $2.80 net cash
per share. Dash presently owns approximately 70 percent of the outstanding common stock of the Company, or 2,267,146 shares, and other shareholders own approximately 30 percent, or
967,125 shares. The Agreement also provides for payments to holders of outstanding in-the-money options. Closing of the merger is subject to satisfaction or waiver of customary
closing conditions, including shareholder approval.

F-18

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