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

                                    FORM 10-K

(MARK ONE)
   [X]            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                    FOR THE FISCAL YEAR ENDED MARCH 31, 2004
                                       or
   [ ]          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 1-12282

                             CORRPRO COMPANIES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                  OHIO                                     34-1422570
                  ----                                     ----------
     (STATE OR OTHER JURISDICTION OF                    (I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)                    IDENTIFICATION NO.)

   1090 ENTERPRISE DRIVE, MEDINA, OHIO                        44256
   -----------------------------------                        -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                   (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (330) 723-5082

  SECURITIES REGISTERED PURSUANT              SECURITIES REGISTERED PURSUANT TO
   TO SECTION 12(b) OF THE ACT:                   SECTION 12(g) OF THE ACT:

  COMMON SHARES WITHOUT PAR VALUE                           NONE
  -------------------------------                           ----
         (TITLE OF CLASS)                             (TITLE OF CLASS)

                             AMERICAN STOCK EXCHANGE
                             -----------------------
                  (NAME OF EACH EXCHANGE ON WHICH REGISTERED)

      Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                YES [X]                       NO [ ]

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

                YES [ ]                       NO [X]

      The aggregate market value of Common Shares held by nonaffiliates of the
Registrant was approximately $15,160,097 at September 30, 2003. For purposes of
this calculation, the Registrant deems the Common Shares held by its Directors,
executive officers and holders of 10% or more of its Common Shares to be Common
Shares held by affiliates.

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

                                    8,447,942
                                    ---------
           (Number of Common Shares outstanding as of June 25, 2004.)

                       DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Registrant's Proxy Statement to be filed with the
Securities and Exchange Commission in connection with its 2004 Annual Meeting of
Shareholders are incorporated by reference in Part III of this Annual Report on
Form 10-K.

                                                                               1

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                             CORRPRO COMPANIES, INC.
                           ANNUAL REPORT ON FORM 10-K

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                          PAGE
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<S>           <C>                                                                                                         <C>
                                                           PART I

Item 1:       Business..................................................................................................    3
Item 2:       Properties................................................................................................   17
Item 3:       Legal Proceedings.........................................................................................   18
Item 4:       Submission of Matters to a Vote of Security Holders.......................................................   21
Item 4A:      Executive Officers of the Registrant......................................................................   23

                                                           PART II

Item 5:       Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
              Equity Securities ........................................................................................   25
Item 6:       Selected Financial Data...................................................................................   30
Item 7:       Management's Discussion and Analysis of Financial Condition and Results of Operations.....................   31
Item 7A:      Quantitative and Qualitative Disclosures about Market Risk................................................   41
Item 8:       Consolidated Financial Statements and Supplementary Data..................................................   42
Item 9:       Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......................   71
Item 9A:      Controls and Procedures...................................................................................   71

                                                          PART III

Item 10:      Directors and Executive Officers of the Registrant........................................................   73
Item 11:      Executive Compensation....................................................................................   73
Item 12:      Securities Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters..........   73
Item 13:      Certain Relationships and Related Transactions............................................................   73
Item 14:      Principal Accountant Fees and Services....................................................................   73

                                                           PART IV

Item 15:      Exhibits, Consolidated Financial Statement Schedules and Reports on Form 8-K..............................   74
              Signatures................................................................................................   82
</TABLE>

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                                     PART I

ITEM 1. BUSINESS

GENERAL

      Corrpro Companies, Inc. was founded in 1984 and is organized under the
laws of the State of Ohio. As used in this report, the terms "we," "us," "our,"
"Corrpro" and the "Company" mean Corrpro Companies, Inc. and its consolidated
subsidiaries unless the context indicates otherwise.

RECENT EVENTS

      On March 30, 2004, we completed a refinancing and recapitalization,
pursuant to which CorrPro Investments, LLC ("CPI"), an affiliate of Wingate
Partners III, L.P. ("Wingate Partners"), purchased 13,000 shares of our Series B
Cumulative Redeemable Voting Preferred Stock, no par value ("Series B Preferred
Stock"), and warrants to acquire approximately 12.1 million of our common shares
at a nominal exercise price for aggregate consideration of $13.0 million. We
also entered into a new $40.0 million senior secured credit facility with
CapitalSource Finance LLC ("CapitalSource"). The facility consists of a
revolving credit line, a term loan with a five-year maturity and a letter of
credit sub-facility. In addition, we issued $14.0 million in senior secured
subordinated notes to American Capital Strategies, Ltd. ("American Capital") as
well as warrants to acquire approximately 3.9 million of our common shares at a
nominal exercise price. As part of the refinancing and recapitalization, we
repaid and terminated our prior revolving credit facility due March 31, 2004 and
our outstanding senior notes due January 15, 2008.

      In connection with the refinancing and recapitalization, we increased the
size of our Board of Directors from seven to nine. Messrs. Jay I. Applebaum,
James A. Johnson, and Jason H. Reed, executives affiliated with Wingate
Partners, were appointed to the Board, with Mr. Johnson serving as Chairman of
the Board. Messrs. C. Richard Lynham, Harry W. Millis, Neal R. Restivo, Joseph
W. Rog, and Dr. Warren F. Rogers continue to serve on the Board. American
Capital has the right to designate a director to serve on the Board of
Directors. In May 2004, Joseph P. Lahey was named Chief Executive Officer and
President of Corrpro and was elected to serve on Corrpro's Board of Directors.

PRODUCTS AND SERVICES

      We provide corrosion control related services, systems, equipment and
materials to the infrastructure, environmental and energy markets. Our products
and services include:

      -     corrosion control engineering services, systems and equipment
            ("corrosion control");

      -     coatings services ("coatings"); and

      -     pipeline integrity and risk assessment services.

      CORROSION CONTROL. Our specialty in the corrosion control market is
cathodic protection. We offer a comprehensive range of services in this area,
which includes the design, manufacture, installation, maintenance and monitoring
of cathodic protection systems. Cathodic protection is an electrochemical
process that prevents corrosion for new structures and stops the corrosion
process for existing structures. It can provide a cost-effective alternative to
the replacement of corroding structures. In order to understand how cathodic
protection works, it is helpful to first understand the corrosion process.
Steel, the most common metal protected by cathodic protection, is produced from
iron ore. To produce steel, iron ore is subjected to a refining process that
adds energy. Once steel is put back into the environment, it begins to revert
back to its original state (i.e., iron ore) by releasing the added energy back
into the surrounding environment. This process of dispersing energy is called
corrosion. Cathodic protection electrodes, called anodes, are placed near, and
connected to, the structure to be protected (i.e., the cathode). Anodes are
typically made from cast iron, graphite, aluminum, zinc or magnesium. A cathodic
protection system works by passing an electrical current from the anode to the
cathode. This process maintains the energy level on the cathode, thus stopping
it from

                                                                               3

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corroding. Instead, the anode corrodes, sacrificing itself to maintain the
integrity of the structure. In order for the electrical current to pass from the
anode to the cathode, they both must be in a common environment. Therefore,
cathodic protection can only be used to protect structures that are buried in
soil, submerged in water or encased in concrete. Structures commonly protected
against corrosion by the cathodic protection process include oil and gas
pipelines, offshore platforms, above and underground storage tanks, ships,
electric power plants, bridges, parking garages, transit systems and water and
wastewater treatment equipment.

      In addition to cathodic protection, our corrosion control services include
corrosion engineering, material selection, inspection services, advanced
corrosion research and testing. We also sell a variety of materials and
equipment used in cathodic protection and corrosion monitoring systems,
including anodes, rectifiers and corrosion monitoring probes. Corrosion control
revenues as a percentage of our total revenues were approximately 81% for fiscal
year 2004, 82% for fiscal year 2003 and 68% for fiscal year 2002.

      COATINGS. We offer a wide variety of coatings-related services designed to
provide our customers with longer coatings life, reduced corrosion, improved
aesthetics and lower life-cycle costs for their coated structures. Coatings
services include research, testing, evaluation and application of coatings. In
addition, we provide project management services for coatings maintenance
programs, including condition surveys, failure analysis, selection of site
surface preparation methods and selection and application of coatings. We also
provide specialized coatings application services for structures with aggressive
corrosion conditions such as the inside and outside of storage tanks and
pipelines. Coatings revenues as a percentage of our total revenues were
approximately 15% for fiscal year 2004, 14% for fiscal year 2003 and 28% for
fiscal year 2002.

      PIPELINE INTEGRITY AND RISK ASSESSMENT SERVICES. We offer a comprehensive
line of pipeline integrity, risk assessment and inspection services, including
assessment, surveys, inspection, analysis, repairs and ongoing maintenance. By
offering a wide range of services, we are able to provide pipeline owners with
one-stop shopping for the preservation of their pipeline systems. Pipeline
integrity and risk assessment services represented approximately 4% of our
revenues in each of fiscal years 2004, 2003 and 2002.

DISPOSITIONS

      In July 2002, our Board of Directors approved a formal business
restructuring plan. The multi-year plan included a series of initiatives to
improve operating income and reduce debt by selling non-core business units. We
engaged outside professionals to assist in the disposition of our domestic and
international non-core business units. Prior to the quarter ended September 30,
2002, our non-core domestic and international units were reported as the Other
Operations and International Operations reporting segments. Effective as of the
quarter ended September 30, 2002, the Other Operations and the International
Operations reporting segments were eliminated and the non-core domestic and
international units were reported as discontinued operations. Prior-year
financial statements were reclassified to reflect these non-core units as
discontinued operations, which were also referred to as "assets and liabilities
held for sale."

      In the second quarter of fiscal 2004, our Board of Directors removed our
European Operations from discontinued operations. The Board concluded that our
value would be enhanced by maintaining our European presence rather than by
selling the European Operations at this time, based in part on the strength of
the local management team, the similar characteristics of the served markets,
and the favorable prospects for this business. Therefore, effective in the
second quarter of fiscal 2004, we reported quarterly and annual results of our
European Operations in our continuing operations, and prior-year financial
statements have been reclassified to reflect our European Operations as
continuing operations.

      During fiscal 2004, we substantially completed the sales of our Middle
East subsidiaries, and we recorded impairment charges relating to our Middle
East Operations of $3.5 million. During the first quarter of fiscal 2004, we
sold our Asia Pacific Operations for a net loss of $46,000 after taking into
account an impairment charge on net assets that was recorded during the fourth
quarter of fiscal 2003 totaling $1.6 million. During fiscal 2003, we disposed of
four non-strategic business units. First, in March 2003, we sold our Bass-Trigon
Software business unit for $3.2 million and recognized a gain of $0.2 million.
Also, in March 2003, we sold our Rohrback Cosasco Systems subsidiary and
recorded a note receivable for $6.2 million, which we collected during fiscal
2004 and recognized a gain of $1.8 million. We also

                                                                               4

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disposed of two smaller international offices resulting in a net gain of $0.1
million during fiscal 2003. The net proceeds from these dispositions were used
to reduce our then outstanding debt. For further information about our
discontinued operations see Note 2, Assets and Liabilities Held for Sale, Notes
to Consolidated Financial Statements included in Item 8 of this Annual Report on
Form 10-K.

SEGMENTS

      We have organized our operations into three business segments by
geographic region: Domestic Core Operations, Canadian Operations and European
Operations. Our former non-core domestic, Middle East and Asia Pacific
operations are reported as discontinued operations. Our business segments and a
description of the products and services they provide are described below:

      DOMESTIC CORE OPERATIONS. Our Domestic Core Operations segment provides
products and services, which include corrosion control, coatings and pipeline
integrity and risk assessment. We provide these products and services to a
wide-range of customers in the United States in a number of industries,
including energy, utilities, water and wastewater treatment, chemical and
petrochemical, pipelines, defense and municipalities. In addition, this segment
provides coatings services to customers in the entertainment, aerospace,
transportation, petrochemical and electric power industries, as well as the
United States military. Finally, the Domestic Core Operations segment includes a
production facility in the United States that assembles and distributes cathodic
protection products, such as anodes, primarily to the United States market.
Revenues relating to this segment totaled $92.9 million (or 72% of consolidated
revenues) for fiscal year 2004, $85.0 million (or 72% of consolidated revenues)
for fiscal year 2003 and $101.8 million (or 76% of consolidated revenues) for
fiscal 2002.

      CANADIAN OPERATIONS. Our Canadian Operations segment provides corrosion
control, pipeline integrity and risk assessment services to customers in Canada
that are primarily in the oil and gas industry. These customers include pipeline
operators and petrochemical plants and refineries. The Canadian Operations
segment has a production facility that assembles products such as anodes and
rectifiers. Revenues relating to this segment totaled $24.1 million (or 18% of
consolidated revenues) for fiscal year 2004, $19.3 million (or 17% of
consolidated revenues) for fiscal year 2003 and $21.3 million (or 16% of
consolidated revenues) for fiscal year 2002.

      EUROPEAN OPERATIONS. Our European Operations segment provides corrosion
control products and services to customers in the petroleum, utility,
industrial, marine and offshore markets, as well as to governmental entities in
connection with their infrastructure assets. Revenues relating to this segment
totaled $13.1 million (or 10% of consolidated revenues) for fiscal year 2004,
$13.4 million (or 11% of consolidated revenues) for fiscal year 2003 and $11.7
million (or 8% of consolidated revenues) for fiscal year 2002.

      Further information about our business segments is included in Note 10,
Business Segments, Notes to Consolidated Financial Statements included in Item 8
of this Annual Report on Form 10-K.

SALES AND MARKETING

      We market our products and services in the United States, Canada and
Europe primarily through our sales personnel. The technical nature of our
products and services requires a highly trained, professional sales force, and,
as a result, many of our sales personnel have engineering or technical expertise
and experience. Due to the problem solving experience of our engineering staff,
potential and existing customers regularly seek out advice from our technical
personnel, which can result in business opportunities on an ongoing basis.

SOURCES AND AVAILABILITY OF RAW MATERIALS

      With regard to our corrosion control services, we assemble components of
cathodic protection systems, which include aluminum, zinc, magnesium and other
metallic anodes. With regard to our coatings-related services, we manufacture,
develop and apply coatings. We do not believe that we are dependent upon any
single outside vendor as a source of supply and we believe that sufficient
alternative sources of supply for the same, similar or alternative products

                                                                               5

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are available. The prices paid for our raw materials may be affected by, among
other things, energy, petroleum, steel and other commodity prices, tariffs and
duties on imported materials, and foreign currency and exchange rates. We may
experience higher energy, petroleum and steel prices in fiscal year 2005 than we
experienced in fiscal year 2004, based on increasing prices for such
commodities.

INTELLECTUAL PROPERTY

      Through internal development programs and strategic acquisitions, we have
assembled an extensive array of technologies protected by a significant number
of trade and service marks, patents, trade secrets and other proprietary rights.
As of March 31, 2004, we were the licensee of certain patents and held a
significant number of patents and pending patent applications. Expiration dates
of such patents range from 2004 to 2021. In addition, we maintain a significant
number of trade and service marks and trade secrets. Although we believe that
our intellectual property has value, we consider the quality and timely delivery
of our products, the service we provide to our customers and the technical
knowledge and skills of our personnel to be more important in our ability to
compete. While our intellectual property rights may be of importance to
individual components of our operations, our business as a whole is not
materially dependent on any single intellectual property right or such
intellectual property rights as a group.

RESEARCH AND DEVELOPMENT

      Our engineering and product development activities are primarily directed
toward designing new products and services to meet the specific requirements of
our customers. Product development costs were minimal in fiscal 2004, 2003 and
2002. While we stress the importance of our research and development programs,
the expense and market uncertainties associated with the development and
successful introduction of new products are such that there can be no assurance
that we will realize future revenues from new products.

SEASONAL TRENDS

      Each of our segments is subject to seasonal fluctuations that may affect
our operating performance. A large portion of our service activity is performed
in the field. Therefore, adverse climatic conditions, such as cold weather,
snow, heavy or sustained rainfall, hurricanes and typhoons, may reduce the level
of our service activity or result in work stoppages. Since a large portion of
our business can be adversely impacted by inclement weather, we usually
experience a reduction in sales during our fourth fiscal quarter reflecting the
effect of the winter season in our principal markets in North America and
Europe. For these reasons, our revenues during the fourth quarter of our fiscal
year typically have been lower than revenues during each of the other three
fiscal quarters.

FOREIGN OPERATIONS

      The Company's foreign operations are subject to the usual risks of
operating in foreign jurisdictions. They include, but are not limited to,
exchange controls, currency restrictions and fluctuations, changes in local
economics and changes in political conditions.

CUSTOMERS

      We sell our products and services to a broad range of customers. During
the fiscal year ended March 31, 2004, no one customer accounted for more than
10% of our sales. We do not believe that the loss of any one customer would have
a material adverse effect on our business.

      We sell products and services to the U.S. government and agencies and
municipalities thereof, including the U.S. Navy. Sales to these customers as a
percentage of our net sales were approximately 9% for fiscal year 2004, 8% for
fiscal year 2003 and 10% for fiscal year 2002. Our contracts with the U.S.
government contain standard provisions permitting the government to terminate
these contracts without cause. In the event of termination, we are entitled to
receive reimbursement on the basis of the

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work completed (cost plus a reasonable profit). These contracts are also subject
to renegotiation of profits. In addition, many of our contracts with the U.S.
government are subject to certain completion schedule requirements that include
liquidated damages in the event schedules are not met as the result of
circumstances within our control. Government procurement programs are also
subject to budget cutbacks and policy changes that could impact the revenue for,
or alter the demand for, our products or services. Accordingly, our future sales
to the government are subject to these budgetary and policy changes.

BACKLOG

      Backlog consists of our anticipated revenue from the uncompleted portions
of our existing contracts and contracts whose award is reasonably assured. As of
March 31, 2004, our backlog of unshipped orders was $52.5 million, compared to
$49.6 million as of March 31, 2003. We believe that the backlog figures are
firm, subject to the cancellation and modification provisions contained in
various contracts. We estimate that a substantial portion of our backlog as of
March 31, 2004 will be filled during fiscal 2005. The level of our backlog at
any particular time is not necessarily indicative of our future operating
performance.

COMPETITIVE CONDITIONS

      Within the corrosion control market, we face competition from a large
number of domestic and international companies, most of which we believe are
considerably smaller than we are. Although some of our competitors offer a broad
range of corrosion control engineering services, systems and products, we do not
believe that any of our competitors offer the comprehensive range of products
and services that we provide. In the service area, we compete principally on the
basis of quality, customer service and technical expertise and capabilities, and
to some degree on price, particularly when we are providing construction and
installation services. In the product area, we typically compete on the basis of
quality, service and price.

GOVERNMENT REGULATIONS

      Other than as disclosed under "Item 3 - Legal Proceedings," we believe
that our current operations and our current use of property, plant and equipment
conform in all material respects to applicable environmental laws and
regulations, and we have not experienced, nor do we anticipate, any material
claim or material capital expenditure in connection with environmental laws and
other regulations impacting our operations. Further information about
environmental and foreign regulatory risks is included under this Item in
"Factors Influencing Future Results and Accuracy of Forward Looking
Information." Circumstances or developments that are not currently known as well
as the future cost of compliance with environmental laws and regulations could
be substantial and could have a material adverse effect on our results of
operations and financial condition.

EMPLOYEES

      As of March 31, 2004, we had 869 employees, 308 of whom were located
outside the United States. We believe that our relationship with our employees
is good.

FACTORS INFLUENCING FUTURE RESULTS AND ACCURACY OF FORWARD LOOKING INFORMATION

      This document includes certain statements that may be deemed
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements are based on management's expectations and beliefs
concerning future events and discuss, among other things, anticipated future
performance and revenues, expected growth and future business plans. Words such
as "anticipates," "expects," "intends," "plans," "believes," "seeks,"
"estimates" or variations of such words and similar expressions are intended to
identify such forward-looking statements. In addition, any forward-looking
statement speaks only as of the date on which such statement is made and we do
not undertake any obligation to update any forward-looking statements, whether
as a result of new information, future events or otherwise. We believe that the
following factors, among others, could affect our future performance or the
price and liquidity of our common shares and cause our

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actual results to differ materially from those that are expressed or implied by
forward-looking statements, or diminish the liquidity of our common shares:

      OUR COMPLIANCE WITH THE LISTING STANDARDS AND REPORTING REQUIREMENTS OF
THE STOCK EXCHANGE ON WHICH OUR COMMON SHARES TRADE. We are required by the
American Stock Exchange to maintain certain listing standards and meet certain
reporting requirements in order for our common shares to continue trading and to
remain listed on the exchange. The exchange notified us in September 2003 that
we were not in compliance with the shareholders' equity requirement of its
continued listing requirements and that we should submit a plan to regain
compliance. In December 2003, the American Stock Exchange accepted the plan that
we submitted in accordance with its request. There can be no assurances that we
will comply with the plan, the applicable shareholders' equity requirement, or
other continued listing requirements. If the exchange determines for any reason,
including non-compliance with our plan, that our common shares should be
de-listed from the exchange:

      -     the market liquidity and price of our common shares would likely be
            negatively affected;

      -     it may be more difficult to dispose of, or to obtain accurate
            quotations of, our common shares;

      -     we may be unable to list our shares for trading on any exchange or
            quotation on any automated quotation system;

      -     we may be unable to remain a reporting company; and

      -     we could face difficulty raising capital necessary for our continued
            operations.

      ADVERSE DEVELOPMENTS IN PENDING LITIGATION OR REGULATORY MATTERS COULD
NEGATIVELY IMPACT OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
From time to time, we are involved in litigation and regulatory proceedings,
including those disclosed in "Item 3 - Legal Proceedings" of this Annual Report
on Form 10-K and in our other periodic reports filed with the Securities and
Exchange Commission. There are always significant uncertainties involved in
litigation and regulatory proceedings and we cannot guarantee the result of any
particular action. Regulatory compliance is often complex and subject to
variation and unexpected changes, including changing interpretations and
enforcement agendas affecting the regulatory community. We may need to expend
significant financial resources in connection with legal and regulatory
procedures and our management may be required to divert attention from other
portions of our business. If, as a result of any proceeding, a judgment is
rendered, decree is entered or administrative action is taken against us or our
customers, it may materially and adversely affect our business, financial
condition and results of operations.

      OUR COMPLIANCE WITH THE SEC SETTLEMENT. In addition to significant
expenditures we may have to make to comply with the terms of the SEC settlement
described in "Item 3 - Legal Proceedings - SEC Enforcement Proceeding," we must
comply with the terms of the permanent injunction and the undertakings, which
require us to take affirmative actions to ensure compliance with the federal
securities laws. Our failure to adequately comply with the provisions of the
injunction or any of the undertakings therein may result in additional
enforcement action by the SEC, severe penalties against us and our officers and
directors, and may have an impact on our business, financial condition and
results of operations. Additionally, the publicity surrounding the SEC
investigation and subsequent settlement and injunction may adversely affect our
reputation with our customers and suppliers and have an adverse impact on our
revenues and expenses.

      OUR PRINCIPAL SHAREHOLDER IS A CONTROLLING SHAREHOLDER. As of March 31,
2004, CPI beneficially owned approximately 58.9% of our common shares, assuming
the exercise of its warrant to purchase an aggregate of 12,113,744 of our common
shares. In addition, CPI has the right to vote 51% of the voting power of
Corrpro and to elect a majority of our Board of Directors through its ownership
of our Series B Preferred Stock. As a result, CPI has the ability to determine
the outcome of all matters requiring approval by our shareholders, including the
election and removal of directors and any proposed merger, consolidation or sale
of all or substantially all of our assets. In addition, CPI could dictate the
management of our business and affairs. This concentration of ownership could
have the effect of delaying, deferring, or preventing a change in control, or
impeding a merger or consolidation, takeover, or other business

                                                                               8

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combination that could be favorable to our shareholders. This significant
concentration of share ownership and voting power may adversely affect the
trading price for our common shares because investors often perceive
disadvantages in owning stock in companies with controlling shareholders.

      OUR SHAREHOLDERS ARE EXPOSED TO DILUTION AND OTHER RISKS ASSOCIATED WITH
OUR OUTSTANDING WARRANTS AND OPTIONS. As of March 31, 2004, we had outstanding:

      -     options to purchase an aggregate of approximately 1,351,611 shares
            of our common shares that were issued pursuant to our stock option
            plans; and

      -     warrants to purchase an aggregate of approximately 17,278,859 shares
            of our common shares, which represents approximately 63.8% of our
            common shares on a fully diluted basis, that were issued in
            connection with financing arrangements.

      All of these warrants, which have nominal exercise prices, and many of
these options have exercise prices below the current market price of our common
shares. In addition, we may issue additional stock, warrants and/or options
pursuant to stock option plans or to raise capital in the future. Assuming the
exercise of all warrants and options, our current outstanding common shares
would represent approximately 31.2% of our common shares. The significant number
of common shares issuable upon exercise of these warrants and options could have
any or all of the following effects:

      -     the exercise of these options and warrants may have an adverse
            effect on the market value of our common shares;

      -     the existence of these options and warrants may adversely affect the
            terms on which we can obtain additional equity financing; and

      -     to the extent the exercise prices of these options and warrants are
            less than the net tangible book value of our common shares at the
            time these options and warrants are exercised, our shareholders will
            experience immediate dilution in the net tangible book value of
            their investment.

      OUR DEBT INSTRUMENTS CONTAIN COVENANTS THAT LIMIT OUR OPERATING AND
FINANCIAL FLEXIBILITY. On March 30, 2004, we entered into a new $40.0 million
senior secured credit facility and issued $14.0 million of senior secured
subordinated notes, which replaced our previous $26.4 million revolving credit
facility and $24.4 million of senior notes. Both the new senior secured credit
facility and the new senior secured subordinated notes require us to maintain a
minimum level of earnings before interest, taxes, and depreciation/amortization,
a minimum fixed charge coverage ratio and comply with, among other things,
leverage ratios. Our ability to meet these financial ratios and tests under our
new credit agreements is affected by our results of operations and by events
beyond our control. We may be unable to satisfy these ratios and tests. If we
fail to comply with these ratios and tests, and we are unable to obtain a waiver
for such failure, no further borrowings would be available under the new senior
secured credit facility and our lenders will be entitled to, among other things,
accelerate the debt outstanding under the new credit agreements so that it is
immediately due and payable and ultimately foreclose on our assets that secure
the debt. Any significant inability to draw on the new senior secured credit
facility or acceleration of the debt outstanding under the new credit agreements
would have a material adverse effect on our financial condition and operations.
In addition, our new senior secured credit facility restricts our ability and
the ability of certain of our subsidiaries to, among other things:

      -     incur additional debt and make certain investments or acquisitions;

      -     incur or permit to exist certain liens;

                                                                               9

<PAGE>

      -     sell, lease or transfer assets; and

      -     merge or consolidate with another company.

      OUR LEVEL OF INDEBTEDNESS AND OTHER DEMANDS ON OUR CASH RESOURCES COULD
MATERIALLY AFFECT OUR OPERATIONS AND BUSINESS STRATEGY. As of March 31, 2004, we
had approximately $34.5 million of total consolidated debt. In addition, we have
approximately $4.5 million available under our new senior secured credit
facility. Subject to the limits contained in our new credit agreements and our
other debt agreements, our total consolidated debt could increase due to this
additional borrowing capacity. In addition to the debt service requirements on
our outstanding debt, we have other demands on our cash resources, including,
among others, capital expenditures and operating expenses. Our level of
indebtedness and the significant debt servicing costs associated with that
indebtedness could significantly impact on our operations and business strategy.
For example, they could:

      -     require us to dedicate a substantial portion of our cash flow from
            operations to payments on our debt, thereby reducing the amount of
            our cash flow available for working capital, capital expenditures,
            acquisitions and other general corporate purposes;

      -     limit our flexibility in planning for, or reacting to, changes in
            the industries in which we compete;

      -     place us at a competitive disadvantage compared to our competitors,
            some of which have lower debt service obligations and greater
            financial resources than we do;

      -     limit our ability to borrow additional funds;

      -     increase our vulnerability to general adverse economic and industry
            conditions; and

      -     result in our failure to satisfy the financial covenants contained
            in our new credit agreements or in other debt agreements, which, if
            not cured or waived, could have a material adverse effect on our
            business, financial condition or results of operations.

      WE MAY BE UNABLE TO GENERATE A SUFFICIENT AMOUNT OF CASH FLOW TO SERVICE
OUR DEBT. Our ability to make payments on and to refinance our indebtedness and
to fund planned capital expenditures will depend on our ability to generate cash
in the future. This, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are
beyond our control. If we are unable to generate sufficient cash flow from
operations, achieve currently anticipated operating improvements or have access
to future borrowings, we may be unable to repay our indebtedness or to fund our
other liquidity needs. In addition, we may need to refinance all or a portion of
our indebtedness on or before maturity, and we may be unable to refinance any of
our indebtedness on commercially reasonable terms or at all.

      THE MANNER IN WHICH WE ARE REQUIRED TO ACCOUNT FOR OUR OUTSTANDING
WARRANTS COULD IMPACT OUR RESULTS OF OPERATIONS. Under applicable accounting
rules and regulations, we are required to use marked-to-market accounting to
value our outstanding warrants. This accounting treatment will result in charges
and credits to our results of operations which are based on the market price for
our common shares. If the market price for our common shares on the last day of
our fiscal quarter is higher than that of the previous quarter, we are required
to take a charge against our earnings for that quarter. Conversely, if the
market price for our common shares on the last day of our fiscal quarter is
lower than that of

                                                                              10

<PAGE>

the previous quarter, we are required to make a credit to our earnings for that
quarter. Due to the large percentage of our fully diluted common shares that is
issuable upon exercise of our outstanding warrants, the changes to our reported
earnings as a result of such accounting treatment could be significant.

      OUR OPERATIONS CAN BE ADVERSELY IMPACTED BY INCLEMENT WEATHER. A large
portion of our service activity is performed in the field. Therefore, adverse
climatic conditions, such as cold weather, snow, heavy or sustained rainfall,
hurricanes and typhoons, may reduce the level of our service activity or result
in work stoppages. Working under inclement weather conditions can also reduce
our efficiencies, which can have a negative impact on our profitability. As is
common in our industry, we typically bear the risk of delays caused by some, but
not all, adverse weather conditions. If these adverse climatic conditions
present unusual intensity, occur at abnormal periods or last longer than usual
in major geographic markets, especially during peak construction periods, we
could experience a material adverse effect on our results of operations and
profitability.

      OUR BUSINESS IS SEASONAL. Since a large portion of our business can be
adversely impacted by inclement weather, we usually experience a reduction in
sales during our fourth fiscal quarter reflecting the effect of the winter
season in our principal markets in North America and Europe. Accordingly, our
results in any one quarter are not necessarily indicative of annual results or
continuing trends.

      OUR BUSINESS IS HIGHLY DEPENDENT ON THE LEVEL OF EXPENDITURES BY ENERGY
COMPANIES. The products and services we provide to our customers in the energy
markets are, to some extent, deferrable in the event that these customers reduce
their capital and discretionary maintenance expenditures. The level of spending
on these types of expenditures can be influenced by a number of factors beyond
our control, including:

      -     current and projected oil, gas and power prices;

      -     the demand for electricity;

      -     the abilities of oil, gas and power companies to generate, access
            and deploy capital;

      -     exploration, production and transportation costs;

      -     the discovery rate of new oil and gas reserves;

      -     the sale and expiration dates of oil and gas leases and concessions;

      -     regulatory restraints on the rates that power companies may charge
            their customers;

      -     local and international political and economic conditions;

      -     worldwide economic activity;

      -     economic and political conditions in the Middle East and other
            oil-producing regions;

      -     coordination by the Organization of Petroleum Exporting Countries,
            or OPEC;

      -     the ability or willingness of host country government entities to
            fund their budgetary commitments; and

      -     technological advances.

      A sustained reduction in capital and discretionary maintenance
expenditures by our energy customers has in the past, and may in the future,
have a negative impact on our business and will likely result in decreased
demand for our services, low margins and lower revenues.

                                                                              11

<PAGE>

      OUR REVENUES HAVE BEEN DEPENDENT ON GOVERNMENT CONTRACTS IN THE PAST. In
previous years, we have derived a significant portion of our revenues from
contracts with agencies of the United States government. Our contracts with the
U.S. government expose us to various business risks, including, but not limited
to the ability of the U.S. government to unilaterally:

      -     suspend us from receiving new contracts pending resolution of
            alleged violations of procurement laws or regulations;

      -     terminate existing contracts;

      -     reduce the value of existing contracts;

      -     audit our contract-related costs and fees, including allocated
            indirect costs; and

      -     control and potentially prohibit the export of our products.

      Any of our U.S. government contracts can be terminated by the U.S.
government either for its convenience or if we default by failing to perform
under the contract. Termination for convenience provisions provide only for our
recovery of costs incurred or committed, settlement expenses and profit on the
work completed prior to termination. Termination for default provisions provide
for us to be liable for excess costs incurred by the U.S. government in
procuring undelivered items from another source. If our contacts with the U.S.
government are terminated, our business, results of operations and financial
condition could be materially adversely affected.

      In addition, the U.S. government's competitive bidding process may
adversely affect our revenues. We obtain most of our U.S. government contracts
through a competitive bidding process, and competitive bidding presents a number
of risks, including, but not limited to:

      -     the need to compete against companies or teams of companies that may
            be long-term, entrenched incumbents for a particular contract for
            which we are competing;

      -     the need to compete on occasion to retain existing contracts that
            may have in the past been awarded to us on a sole-source basis; and

      -     the substantial costs and managerial time and effort, including
            design, development and marketing activities, necessary to prepare
            bids and proposals for contracts that may not be awarded to us.

      If we are unable to win particular contracts that are awarded through the
competitive bidding process, we may be unable to operate in the market for
services that are provided under those contracts for a number of years. If we
are unable to consistently retain existing contracts or win new contract awards
over any extended period, our business, prospects, financial condition and
results of operations could be adversely affected.

      OUR DEPENDENCE ON FIXED-PRICE CONTRACTS COULD ADVERSELY AFFECT OUR
OPERATING RESULTS. A substantial portion of our projects are currently performed
on a fixed-price basis. Under a fixed-price contract, we agree on the price that
we will receive for the entire project, based upon a defined scope, which
includes specific assumptions and project criteria. If our estimates of our
costs to complete the project are below the actual costs that we may incur, our
margins will decrease, and we may incur a loss. The revenue, cost and gross
profit realized on a fixed-price contract will often vary from our estimates
because of unforeseen conditions or changes in job conditions and variations in
labor and equipment productivity over the term of the contract. If we are
unsuccessful in mitigating these risks, we may realize gross profits that are
different from those originally estimated and reduced profitability or losses on
projects. Depending on the size of a project, these variations from estimated
contract performance could significantly impact our operating results for any
quarter or year. In general, our turnkey contracts to be performed on a
fixed-price basis involve an even greater risk of

                                                                              12

<PAGE>

significant variations from our estimates. This is a result of the long-term
nature of these contracts as well as the interrelationship of the integrated
services to be provided under these contracts, whereby unanticipated costs or
delays in performing part of the contract can have compounding effects by
increasing costs of performing other parts of the contract.

      WE USE PERCENTAGE-OF-COMPLETION ACCOUNTING FOR CONTRACT REVENUE WHICH MAY
RESULT IN MATERIAL ADJUSTMENTS THAT WOULD AFFECT OUR OPERATING RESULTS. We
recognize contract revenue using the percentage-of-completion method. Under this
method, estimated contract revenue is accrued based generally on the percentage
that costs to date bear to total estimated costs, taking into consideration
physical completion. Estimated contract losses are recognized in full when
determined. Accordingly, contract revenue and total cost estimates are reviewed
and revised periodically as the work progresses and as change orders are
approved, and adjustments based upon the percentage of completion are reflected
in contract revenue in the period when these estimates are revised. These
estimates are based on management's reasonable assumptions and our historical
experience and are only estimates. Variations of actual results from these
assumptions or our historical experience could be material. To the extent that
these adjustments result in an increase, a reduction or an elimination of
previously reported contract revenue, we would recognize a credit or a charge
against current earnings, which could be material.

      WE ARE REQUIRED TO OBTAIN SURETY BONDS IN CONNECTION WITH OUR BUSINESS.
Government contracting agencies and some private contracting parties from time
to time require prime contractors to furnish surety bonds guaranteeing their
performance and payment to all subcontractors and suppliers of material and
equipment under the contract. Our ability to obtain surety bonds depends upon
our capitalization, working capital, past performance, management expertise and
other variable factors. Surety companies consider such factors in light of the
amount of surety bonds then outstanding in favor of us and their current
underwriting standards, which may change from time to time. Our ability to
obtain new projects may be restricted if we are unable to obtain adequate surety
bonds.

      WE ARE SUBJECT TO PRIME CONTRACTOR LIABILITIES ON PROJECTS THAT WE
UNDERTAKE. We act as prime contractor on some of the construction projects that
we undertake. As prime contractor, we are responsible for the performance of the
entire contract, including subcontract work. Thus, we are subject to risks
associated with the failure of one or more subcontractors to perform as
anticipated. Claims may be asserted against us for construction defects,
personal injury or property damage caused by subcontractors, and if successful
these claims could expose us to liability. If unforeseen events occur with
respect to our subcontractors, including bankruptcy of, or an uninsured or
under-insured loss claimed against, our subcontractors, we may be responsible
for the losses or other obligations of those subcontractors. If any of these
situations occur, our business and results of operations could be adversely
affected.

      WE ARE EXPOSED TO LIABILITIES BEYOND OUR CONTROL AS A SUBCONTRACTOR. On
projects in which we act as a subcontractor, if the general contractor or other
subcontractors fail to perform their obligations or cause delays or failures in
the project, we

      -     may not receive all or a portion of the distributions or payments to
            which we are entitled in connection with the project;

      -     the project may be terminated by the customer; and

      -     we may be exposed to litigation or other claims in connection with
            any such delay or failure.

      OUR PROFITABILITY CAN BE IMPACTED BY OUR MIX OF PRODUCTS AND SERVICES.
Given that our selling, general and administrative costs are largely fixed in
terms of dollars, our profitability is dependent upon the amount of gross profit
that we are able to realize. We typically generate higher gross profit margins
on pure engineering service projects than on those projects that include a
material or installation component. In addition, our gross profit margins can be
negatively impacted when we utilize subcontractors. Therefore, a shift in mix
from engineering services to more construction and installation type work or an
increase in the amount of subcontracting costs could have a negative impact on
our operating

                                                                              13

<PAGE>

results. In addition, certain of the products that we sell have gross profit
margins that are considerably lower than our overall average gross profit
margin. A shift in mix which results in a greater percentage of revenues
relating to these lower margin products would also have a negative impact on our
operating results.

      THE TIMING OF PROJECTS CAN IMPACT OUR PROFITABILITY. There are a number of
factors, some of which are beyond our control, that can cause our projects to be
delayed and thus negatively impact our profitability for the related period.
These factors include the availability of labor, equipment or materials,
customer scheduling issues, delays in obtaining required permits and adverse
weather conditions. In addition, when we work as a subcontractor on a project,
our portion of the project can be delayed as a result of various factors
affecting the general contractor for such project.

      THE AVAILABILITY AND VALUE OF LARGER PROJECTS CAN IMPACT OUR
PROFITABILITY. While the majority of our projects are relatively small, we can
have a number of individual contracts in excess of $1 million in progress at any
particular time. These larger contracts typically generate more gross profit
dollars than our average size projects. Therefore, the absence of larger
projects, which can result from a number of factors, including market
conditions, can have a negative impact on our operating results.

      OUR BUSINESS EXPOSES US TO SIGNIFICANT LIABILITIES UNDER ENVIRONMENTAL AND
OTHER GOVERNMENTAL REGULATIONS. We and our customers are subject to various
federal, state, local and foreign environmental, health and safety laws and
regulations. These laws and regulations affect our operations by imposing
standards for the protection of health, welfare and the environment. Significant
fines and penalties may be imposed for non-compliance with environmental laws
and regulations, and some environmental laws provide for joint and several
strict liability for remediation of releases of hazardous substances, rendering
a company liable for environmental damage, without regard to negligence or fault
on the part of such company. These laws and regulations may expose us to
liability arising out of the conduct of operations or conditions caused by
others, or for our acts which were in compliance with all applicable laws at the
time these acts were performed. We may also be subject from time to time to
legal proceedings brought by private parties or governmental authorities with
respect to environmental matters, including matters involving alleged property
damage or personal injury.

      WE MAY INCUR SIGNIFICANT COSTS OR BE REQUIRED TO ALTER THE MANNER IN WHICH
WE CONDUCT OUR BUSINESS IN RESPONSE TO CHANGES IN GOVERNMENT REGULATIONS.
Federal, state, local and foreign environmental, health and safety laws and
regulations laws are becoming increasingly complex and stringent. The risks of
substantial costs related to compliance with these laws and regulations are an
inherent part of our business, and future conditions may develop, arise or be
discovered that create substantial environmental compliance costs. Compliance
with environmental legislation and regulatory requirements may prove to be more
limiting and costly than we anticipate. New laws and regulations or stricter
enforcement of existing laws and regulations could require us to incur
significant costs or alter the manner in which we conduct our business.

      OUR INTERNATIONAL OPERATIONS ARE SUBJECT TO POLITICAL AND ECONOMIC RISKS.
A significant portion of our revenue is derived from operations outside the
United States. The scope and extent of our operations outside of the United
States means that we are exposed to the risks inherent in doing business abroad.
These risks include, but are not limited to:

      -     foreign currency restrictions, which may prevent us from
            repatriating foreign currency received in excess of local currency
            requirements and converting it into U.S. dollars or other fungible
            currency;

      -     expropriation of assets, by either a recognized or unrecognized
            foreign government, which can disrupt our business activities and
            create delays and corresponding losses;

      -     civil uprisings, riots and war, which can make it impractical to
            continue operations, adversely affect both budgets and schedules and
            expose us to losses;

      -     availability of suitable personnel and equipment, which can be
            affected by government policy, or changes in policy, which limit the
            importation of skilled craftsmen or specialized equipment in areas
            where local resources are insufficient;

                                                                              14

<PAGE>

      -     government instability, which can cause investment in capital
            projects by our potential customers to be withdrawn or delayed,
            reducing or eliminating the viability of some markets for our
            services; and

      -     decrees, laws, regulations, interpretations and court decisions
            under legal systems, including unexpected changes in taxation and
            environmental or other regulatory requirements, which are not always
            fully developed and which may be retroactively applied and cause us
            to incur unanticipated and/or unrecoverable costs as well as delays
            which may result in real or opportunity costs.

      We cannot predict the nature of foreign governmental regulations
applicable to our operations that may be enacted in the future. In many cases,
our direct or indirect customer will be a foreign government, which can increase
our exposure to these risks. U.S. government-imposed export restrictions or
trade sanctions under the Export Administration Act, the Trading with the Enemy
Act or similar legislation or regulation may also impede our ability, or the
ability of our customers, to operate or continue to operate in specific
countries. These factors could have a material adverse effect on our financial
condition and results of operation.

      THE INTERNATIONAL NATURE OF OUR BUSINESS EXPOSES US TO FOREIGN CURRENCY
FLUCTUATIONS THAT MAY AFFECT OUR ASSET VALUES, RESULTS OF OPERATIONS AND
COMPETITIVENESS. We are exposed to the risks of foreign currency exchange rate
fluctuations as a significant portion of our net sales and certain of our costs,
assets and liabilities are denominated in currencies other than the U.S. dollar.
These risks include a reduction in our asset values, net sales, operating income
and competitiveness. For those countries outside the United States where we have
significant sales, a devaluation in the local currency will reduce the value of
our local inventory as presented in our financial statements. In addition, a
stronger U.S. dollar will result in reduced revenue, operating profit and
shareholders' equity due to the impact of foreign exchange translation on our
financial statements. Lastly, fluctuations in foreign currency exchange rates
may make our products more expensive for customers to purchase or increase our
operating costs, thereby adversely affecting our competitiveness and our
profitability.

      TERRORIST ATTACKS AND MILITARY CONFLICTS MAY ADVERSELY AFFECT OUR
OPERATIONS, OUR ABILITY TO RAISE CAPITAL OR OUR FUTURE GROWTH. The continued
threat of terrorism and the impact of military and other action, including U.S.
military operations in Iraq, will likely lead to continued volatility in prices
for crude oil and natural gas and could affect the markets for our operations.
In addition, future acts of terrorism could be directed against companies
operating both outside and inside the United States. Further, the U.S.
government has issued public warnings that indicate that pipelines and other
energy assets might be specific targets of terrorist organizations. These
developments have subjected our operations to increased risks and, depending on
their ultimate magnitude, could have a material adverse effect on our business,
adversely impact our ability to raise additional capital if needed or restrict
our anticipated growth.

      WE ARE SUBJECT TO VARIOUS RISKS ASSOCIATED WITH CHANGING GLOBAL, POLITICAL
AND ECONOMIC CONDITIONS. Changing political and economic conditions regionally
or worldwide can adversely impact our business. Deteriorating political and
general economic conditions may result in customers delaying or canceling
contracts and orders for our products and services, difficulties and
inefficiencies in the performance of our services including work stoppages, and
difficulties in collecting payment from our customers. As a result, such
conditions can negatively impact our results of operations and our cash flows.

      THE LOSS OF ONE OR MORE KEY EMPLOYEES, OR FAILURE TO ATTRACT AND RETAIN
OTHER HIGHLY QUALIFIED PERSONNEL IN THE FUTURE, COULD DISRUPT OUR OPERATIONS AND
ADVERSELY AFFECT OUR FINANCIAL RESULTS. Our continued success depends on the
active participation of our key employees. The loss of our key personnel could
adversely affect our operations. We believe that our success and continued
growth are also dependent upon our ability to attract and retain skilled
personnel. We believe that our wage rates are competitive; however, a
significant increase in the wages paid by other employers could result in a
reduction in our workforce, increases in the wage rates we pay, or both. If
these events occur for any significant period of time, our revenues and
profitability could be diminished and our growth potential could be impaired.
Further, if we are unable to attract and retain skilled workers, our business
will be adversely affected. Our operations depend substantially upon our ability
to continue to retain and attract project managers, project engineers, and
skilled construction workers, and equipment operators. Our ability to expand our
operations is impacted by our ability to increase our labor force. The demand
for skilled workers in our industry is currently high and the supply is limited.
As a

                                                                              15

<PAGE>

result of the cyclical nature of the oil and gas industry as well as the
physically demanding nature of the work, skilled workers may choose to pursue
employment in other fields.

      OUR BUSINESS INVOLVES HAZARDS AND OPERATIONAL RISKS, AND WE MAY FAIL TO
MAINTAIN ADEQUATE INSURANCE COVERAGE TO PROTECT US AGAINST THESE RISKS.
Insufficient insurance coverage and increased insurance costs could adversely
impact our cash flows, financial condition and results of operations. Although
we maintain insurance coverage that we believe is commercially reasonable for
our business circumstances, we are not fully insured against all risks. The
occurrence of a significant event that is not fully insured against could have a
material adverse effect on our financial condition. Our insurance does not cover
every potential risk associated with providing our products and services. We
cannot be certain that insurance coverage will be available in the future on
commercially reasonable terms or that the insurance proceeds received for any
covered loss or damage will be sufficient to restore the loss or damage without
a negative impact on our financial condition.

      WE HAVE NO PLANS TO PAY DIVIDENDS ON OUR COMMON SHARES. We have no plans
to pay dividends on our common shares in the foreseeable future. We intend to
invest our future earnings, if any, to fund our anticipated growth. In addition,
our senior secured credit facility limits the payment of cash dividends. Any
payment of future dividends on our common shares will be at the discretion of
our board of directors and will depend upon, among other things, our earnings,
financial condition, capital requirements, level of indebtedness, contractual
restrictions applying to the payment of any such dividends, and other
considerations that our board of directors deems relevant.

      DECLINES IN THE STOCK MARKET AND PREVAILING INTEREST RATES RESULT IN
REDUCTIONS IN OUR PENSION FUND ASSET VALUES IN THE UNITED KINGDOM, WHICH HAVE
CAUSED AND MAY CONTINUE TO CAUSE A SIGNIFICANT REDUCTION IN OUR NET WORTH. In
the fiscal year ended March 31, 2002, as a result of lower investment
performance caused by lower stock market returns and a decline in prevailing
interest rates, our projected pension fund asset values in the United Kingdom
decreased. The reduction in asset values required that we take a non-cash
after-tax charge to accumulated other comprehensive loss, which is a component
of shareholders' equity. Primarily as a result of a negative return on our
pension fund assets and further reductions in interest rate levels in fiscal
year 2003, we were required to further reduce shareholders' equity. We may be
required to take further charges related to pension liabilities in the future
and these charges may be significant. We continue to review our assumptions
regarding rates of return and discount rates in light of the factors mentioned
above and other relevant considerations, and our future pension expense may
further increase as a result.

                                                                              16

<PAGE>

ITEM 2. PROPERTIES

      As of March 31, 2004, our continuing operations utilized six locations
that are owned by us as well as over forty locations that are leased from
unrelated third parties. Some property locations may contain multiple
operations, such as an office and warehouse facility. Owned and leased
facilities with greater than 5,000 square feet are listed below.

<TABLE>
<CAPTION>
         Location                      Segment                      Description                  Owned/Leased
         --------                      -------                      -----------                  ------------
<S>                                 <C>              <C>                                         <C>
Bakersfield, California             Domestic Core    Office and Warehouse Facility                  Leased
Belle Chasse, Louisiana             Domestic Core    Office and Warehouse Facility                  Leased
Brampton, Ontario                   Canadian Ops.    Office and Warehouse Facility                  Leased
Conyers, Georgia                    Domestic Core    Office and Warehouse Facility                  Leased
Dorval, Quebec                      Canadian Ops.    Office and Warehouse Facility                  Leased
Durley, Southampton, UK             European Ops.    Office and Warehouse Facility                  Leased
Edmonton, Alberta                   Canadian Ops.    Office, Production and Warehouse Facility      Owned
Nisku, Alberta                      Domestic Core    Office and Warehouse Facility                  Owned
Estevan, Saskatchewan               Canadian Ops.    Office and Warehouse Facility                  Owned
Glendale, Arizona                   Domestic Core    Office and Warehouse Facility                  Leased
Houston, Texas                      Domestic Core    Office and Warehouse Facility                  Leased
Medina, Ohio                        Corporate        Corporate Headquarters                         Owned
Medina, Ohio                        Domestic Core    Office and Warehouse Facility                  Owned
Ocean City, New Jersey              Domestic Core    Office Facility                                Leased
San Leandro, California             Domestic Core    Office, Production and Warehouse Facility      Leased
Sand Springs, Oklahoma              Domestic Core    Office, Production and Warehouse Facility      Leased
Santa Fe Springs, California        Domestic Core    Office and Warehouse Facility                  Leased
Streamwood, Illinois                Domestic Core    Office and Warehouse Facility                  Leased
Stockton-on-Tees, UK                European Ops.    Office, Production and Warehouse Facility      Owned
West Chester, Pennsylvania          Domestic Core    Office and Warehouse Facility                  Leased
</TABLE>

      We consider the properties owned or leased by us to be generally
sufficient to meet our requirements for office, production and warehouse space.
We do not consider any one of our properties to be significant, since we believe
that if it becomes necessary or desirable to relocate any of our office,
production and warehouse facilities, other suitable properties could be found.
Our owned properties are subject to mortgages or other security interests under
our senior secured credit agreement and senior note facility and other bank
credit arrangements.

                                                                              17

<PAGE>

      ITEM 3. LEGAL PROCEEDINGS

      MICHIGAN LITIGATION. On July 25, 2002, a summons and complaint was issued
to us by the Circuit Court for the County of Ingham, Michigan. The action was
commenced by Blogett Oil Company, Inc. and other owners and operators of
underground storage tanks systems on behalf of themselves and others similarly
situated. The complaint relates to a Michigan Department of Environmental
Quality ("MDEQ") regulatory proceeding previously described in our reports filed
with the Securities and Exchange Commission, or the SEC. The complaint named
both Corrpro and MDEQ. In the complaint, the plaintiffs sought an unspecified
amount of damages in excess of $25,000 from us. The plaintiffs also sought
injunctive relief prohibiting the MDEQ from declaring that underground storage
tanks upgraded by us do not meet the current requirement for corrosion
protection set forth by law. In October 2003, Corrpro and a steering committee
representing the class of plaintiffs reached an agreement, subject to court
approval, pursuant to which the class of plaintiffs agreed to settle all
outstanding matters between the class and us and to dismiss the case as to us
with prejudice. On October 29, 2003, the Circuit Court for the County of Ingham,
Michigan approved the settlement and dismissed with prejudice the litigation as
to us. The settlement amount itself was funded pursuant to applicable policies
of insurance maintained by us.

      ASSESSMENT STANDARD. During fiscal 2001, we discovered that a former
employee used an incorrect assessment standard in connection with the evaluation
of whether certain underground storage tanks located at as many as 67 sites were
eligible for upgrade using cathodic protection. Such evaluations were done using
one of the approved assessment methodologies. The tanks at these sites, which
are located in five states, were subsequently upgraded using cathodic
protection, which arrests corrosion. These tanks are also subject to ongoing
leak detection requirements. Based on our review of available information and
governmental records, we believe that there have not been any releases from the
affected tanks as a result of the actions of the former employee. We have
contacted, and in October and November 2000 met with, officials from the
Environmental Protection Agency ("EPA") and officials from the corresponding
environmental protection agencies of the five states involved to discuss this
matter. It is our understanding that none of the states nor the EPA intend to
take any enforcement action as a result of the use of the inaccurate standard by
the former employee. We are currently working with the states and the EPA to
develop and implement field investigation procedures to assess the current
status of the affected sites. We have completed field investigation procedures
in two of the states in which affected sites are located. We have been informed
by one of the other states that, based on continuing monitoring and leak
detection procedures already required to be performed by site owners and
operators, no additional field work procedures will be required in that state.
There are currently no outstanding claims or demands that have been asserted by
any of the affected owners and operators. Based on currently available
information, including our experience in the fieldwork conducted to date, we do
not believe that the cost of field investigation procedures for this matter will
have a material effect on our future operations, financial position or cash
flows.

      AUSTRALIAN SUBSIDIARY ACCOUNTING IRREGULARITIES. We have been involved in
a class action lawsuit and were the subject of an SEC enforcement proceeding
arising out of accounting irregularities involving internal misconduct in our
Australian subsidiary. These proceedings are described in more detail below.

      At least as early as October 2000, the then managing director and the
financial controller of Corrpro Australia Ptd., Ltd., a subsidiary of Corrpro,
were involved in knowingly misstating the financial results reported by the
Australian subsidiary to our corporate management to improve the reported
results of the Australian business. Such individuals are no longer employed by
us or our subsidiaries and were named as defendants in a complaint for permanent
injunction and other equitable relief filed by the SEC in the United States
District Court for the Northern District of Ohio. The former Australian
employees are also subject to an investigation and other proceedings commenced
through the Australian Securities and Investments Commission.

      The irregularities included erroneous journal entries to the Australian
subsidiary's general ledger that increased profit and net assets. Among other
things, the former Australian employees falsified invoices and credit notes and
made erroneous entries to subledgers including accounts payable, accounts
receivable, cost of goods sold and inventory. The former Australian employees
further recorded fictitious invoices in the former Australian subsidiary's
computerized accounting records, falsified credit notes from suppliers, and
created two different versions of the accounts receivable subledger. The former
Australian employees took steps to fabricate documents to be reviewed by our
independent

                                                                              18

<PAGE>

auditors.

      Our management discovered the accounting irregularities at the Australian
subsidiary in early calendar 2002 and upon discovery immediately began an
internal investigation, conducted under the direction of the Audit Committee of
our Board of Directors. The Australian Securities and Investments Commission
commenced an independent investigation of the accounting irregularities in
March 2002. We voluntarily disclosed this matter to the SEC, which commenced
a formal investigation in March 2002. We have cooperated with both commissions.

      As a result of our discovery of the irregularities, we, by means of our
Form 10-K/A for the fiscal year ended March 31, 2002, filed with the SEC on
August 9, 2002, restated our previously issued audited financial statements for
the fiscal year ended March 31, 2001. The effect of our revisions was to
increase our loss and basic and diluted loss per share, respectively, from $4.7
million and $0.61 to $8.3 million and $1.07 for the fiscal year ended March 31,
2001. Consolidated stockholders' equity as of March 31, 2001 decreased by
approximately $3.8 million from amounts previously reported. Unaudited quarterly
financial information for the first three quarters of the fiscal year ended
March 31, 2002 and all four quarters of our fiscal year ended March 31, 2001
were also restated by means of such filing. Information concerning the restated
amounts applicable to each of the foregoing quarters is contained in Note 12,
Restated Quarterly Financial Information (Unaudited), Notes to Consolidated
Financial Statements included in Item 8 of our Form 10-K/A for the fiscal year
ended March 31, 2002 filed with the SEC on August 9, 2002.

      CLASS ACTION LAWSUIT. We are a defendant in a purported class action suit
filed on June 24, 2002, in the United States District Court, Northern District
of Ohio, Eastern Division. The complaint also names certain of our former and
current officers and directors as defendants. The lawsuit arises out of the
accounting irregularities discovered in our Australian subsidiary. The complaint
was purportedly filed on behalf of all persons who purchased our common shares
during the period April 1, 2000 through March 20, 2002 and alleges violations of
anti-fraud provisions of the federal securities laws resulting in artificially
inflated prices of our common shares during the class period. The complaint
seeks unspecified compensatory damages, fees and expenses on behalf of the
putative class.

      On or about May 27, 2003, the District Court granted, with prejudice, the
defendants' motions to dismiss the amended and consolidated class action
complaint. On June 24, 2003, the plaintiffs filed a notice of appeal to the
United States Circuit Court of Appeals for the 6th Circuit from the order of
dismissal. We are unable at this time to make a determination as to whether a
material adverse outcome is reasonably possible and whether an adverse outcome
would have a materially adverse affect on our operations or financial condition.

      SEC ENFORCEMENT PROCEEDING. In connection with its investigation of
accounting irregularities at our former Australian subsidiary, on January 20,
2004, the SEC filed a civil injunctive action against us in the United States
District Court for the Northern District of Ohio Eastern Division. The SEC's
complaint alleged that we had inadequate internal controls during fiscal year
2001 and the first three quarters of 2002. The complaint also alleged that we
violated certain reporting, record keeping and internal control requirements.
The complaint further alleged that, although we discovered the fraud through our
own investigation, we failed to discover the falsification of the Australian
financial statements until February 2002 due to inadequate internal controls.
Finally, the complaint alleged that following our discovery of these false
statements at our former Australian subsidiary, we undertook remedial measures
to strengthen our financial reporting policies and internal control structure.

      The complaint alleged that, as a result of the foregoing, we violated
Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules
12b-20, 13a-1 and 13a-13 thereunder, by filing financial statements that
contained false financial data. The complaint also alleges that we violated
Section 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, by failing to devise
and maintain an adequate system of internal accounting controls.

      Simultaneously with the filing of the complaint, without admitting or
denying the SEC's allegations, we consented to the entry of a final judgment
permanently enjoining us from future violations of the provisions of the federal
securities laws described above. We also agreed to certain undertakings designed
to ensure our compliance with the federal securities laws. These undertakings
require us to continue previously adopted remedial measures, and during our
fiscal years ending March 2004, 2005 and 2006, we are required to:

                                                                              19

<PAGE>

      -     engage a qualified outside firm to perform the internal audit
            function or designate an employee director of internal audit who
            would perform certain audit procedures and report directly to the
            Audit Committee;

      -     require internal audit to prepare a confidential business report at
            the end of the fiscal year describing certain aspects of the audit
            preparation, procedures and findings; and

      -     maintain an anonymous hotline on which any activity affecting the
            Company's financial results may be reported to the Audit Committee.

      We will incur costs, which may be significant, in complying with these
undertakings.

      In determining to accept our settlement offer, the SEC considered that we
undertook remedial actions and provided substantial cooperation in the
investigation. On January 27, 2004, our offer of settlement was approved and a
final judgment was entered by the court.

      COMPLIANCE ORDER. In January 2003, we received a Consolidated Compliance
Order and Notice of Potential Penalty from the Louisiana Department of
Environmental Quality pursuant to which the department alleges that our foundry
operations failed to submit required storm water monitoring information as
required by law. The alleged failure relates to periods subsequent to the
cessation of our foundry operations. We have appealed the matter and the
department has agreed to engage an informal resolution of the matter. Based on
current available information, we do not believe that it is reasonably possible
that this matter will have a material effect on our future operations, financial
position or cash flows.

      We are subject to other legal proceedings and claims from time to time
which arise in the ordinary course of business.

                                                                              20
<PAGE>

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

      On March 16, 2004, our shareholders voted to approve all of the proposals
relating to our plan of refinancing and recapitalization at a special
shareholders' meeting. Over two-thirds of our outstanding shares were voted in
favor of each of the proposals. Of the shares voting, approximately 90% were
voted to approve the proposed transactions. Below are all of the proposals that
were approved.

      Proposal One: Approval of the transactions contemplated by the Securities
Purchase Agreement, dated as of December 15, 2003, between Corrpro and CPI,
pursuant to which we agreed to issue and sell to CPI 13,000 shares of our Series
B Preferred Stock and a warrant to purchase that number of our common shares
equal to 40% of the Post Transaction Fully Diluted Shares (as defined in the
proxy statement delivered to our shareholders in connection with the special
meeting) for an aggregate consideration of $13.0 million.

      Proposal Two: Adoption of an amendment to our Amended and Restated
Articles of Incorporation, as in effect on March 16, 2004 (the "Existing
Articles"), to authorize the Series B Preferred Stock.

      Proposal Three: Approval of the issuance of the warrant to CPI and the
common shares issuable thereunder.

      Proposal Four: Adoption of an amendment to the Existing Articles to
eliminate the requirement of obtaining a 60% vote of shareholders to approve
certain future amendments to our proposed Amended and Restated Articles of
Incorporation (the "Amended Articles").

      Proposal Five: Approval of the issuance to American Capital of a warrant
to purchase the number of our common shares equal to 13% of the Post Transaction
Fully Diluted Shares and the issuance of our common shares pursuant thereto.

      Proposal Six: Adoption of an amendment to the Existing Articles providing
that the Ohio Control Share Acquisition Act shall not apply to acquisitions of
our equity securities.

      Proposal Seven: Adoption of an amendment to the Existing Articles to
entitle holders of Series B Preferred Stock to preemptive rights with respect to
certain future issuances of our equity and debt securities.

      Proposal Eight: Adoption of an amendment to our Amended and Restated Code
of Regulations, as in effect on March 16, 2004 (the "Existing Regulations"), to
declassify our Board of Directors.

      Proposal Nine: Adoption of an amendment to the Existing Regulations to
provide that holders of 20% of the outstanding shares of Series B Preferred
Stock may call a special meeting of shareholders.

      Proposal Ten: Adoption of an amendment to the provisions of the Existing
Regulations governing the procedure for director election and nomination, to
exclude from such provision's application the election and nomination of
Directors designated by CPI pursuant to its rights as set forth in the terms of
the Series B Preferred Stock (each such designee, a "Preferred Stock Director").

      Proposal Eleven: Adoption of an amendment to the provision of the Existing
Regulations relating to the procedure for removal of a director, to exclude from
such provision's application the removal of a Preferred Stock Director, which
procedure is provided in the terms of the Series B Preferred Stock.

      Proposal Twelve: Adoption of an amendment to the provision of the Existing
Regulations relating to the procedure for filling a vacancy on the board of
directors, to exclude from such provision's application a vacancy of the office
of a Preferred Stock Director.

      Proposal Thirteen: Adoption of an amendment to the provision of the
Existing Regulations to provide for the observation rights granted to CPI under
warrant issued to CPI.

                                                                              21
<PAGE>

      Proposal Fourteen: Adoption of an amendment to the Existing Regulations to
increase the minimum time required for provision of notice to shareholders of
shareholder meetings from seven to ten days.

      Proposal Fifteen: The Board of Directors solicited discretionary authority
from shareholders to adjourn or postpone the meeting to permit further
solicitation with respect to the foregoing Proposals.

      Set forth below is certain information regarding the number of common
shares voted for, voted against, abstained and subject to broker non-votes with
respect to each of the foregoing Proposals:

<TABLE>
<CAPTION>
                                                           VOTES          BROKER
PROPOSAL                VOTES FOR      VOTES AGAINST     ABSTAINING      NON-VOTE
--------                ---------      -------------     ----------      --------
<S>                     <C>            <C>               <C>             <C>
Proposal One            5,764,895         647,109           22,975          -0-
Proposal Two            5,748,770         664,609           21,600          -0-
Proposal Three          5,749,620         662,959           22,400          -0-
Proposal Four           5,728,375         695,229           11,375          -0-
Proposal Five           5,746,502         660,227           28,250          -0-
Proposal Six            5,723,979         687,775           23,225          -0-
Proposal Seven          5,716,018         690,259           28,702          -0-
Proposal Eight          5,741,254         675,500           18,225          -0-
Proposal Nine           5,743,588         675,291           16,100          -0-
Proposal Ten            5,725,532         683,147           26,300          -0-
Proposal Eleven         5,724,517         682,237           28,225          -0-
Proposal Twelve         5,757,554         657,375           20,050          -0-
Proposal Thirteen       5,744,407         662,947           27,625          -0-
Proposal Fourteen       5,752,571         659,845           22,563          -0-
Proposal Fifteen        5,606,162         808,645           20,172          -0-
</TABLE>

                                                                              22
<PAGE>

ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY

      The following table sets forth the names of all our executive officers of
the Company as of March 31, 2004 and certain other information relating to their
position held with the Company and other business experience. The following
table also includes Joseph W. Lahey who became President and Chief Executive
Officer on May 3, 2004.

<TABLE>
<CAPTION>
EXECUTIVE OFFICER       AGE              RECENT BUSINESS EXPERIENCE
-----------------       ---              --------------------------
<S>                     <C>    <C>
Joseph W. Lahey         57     President and Chief Executive Officer since May
                               3, 2004. Prior to joining Corrpro, Mr. Lahey
                               served as Chairman, President, and Chief
                               Executive Officer of Pluris Capital Advisors
                               Company from 2002 to April 2004. From 1996 to
                               2002, Mr. Lahey was President and Chief Executive
                               Officer of Furmanite Worldwide, Inc., a
                               subsidiary of Kaneb Services, Inc. From 1988 to
                               1994 Mr. Lahey was President and Chief Executive
                               Officer of Barnard and Burke Group, Inc.

Joseph W. Rog           64     Chairman of the Board of Directors from June 1993
                               to March 2004 and Chief Executive Officer since
                               the Company's formation in 1984 until May 2004.
                               President of the Company from June 1995 to May
                               2004 and from January 1984 to June 1993.

Michael K. Baach        49     Executive Vice President since April 1993 and
                               Senior Vice President from 1992 until April 1993.
                               Prior to that, Mr. Baach was Vice President of
                               Sales and Marketing since our formation in 1984.

George A. Gehring, Jr.  60     Executive Vice President since April 1993 and
                               Senior Vice President from 1991 until April 1993.
                               Prior to that, Mr. Gehring served as President of
                               Ocean City Research Corporation, our wholly-owned
                               subsidiary, since 1987.

David H. Kroon          54     Executive Vice President since April 1993 and
                               Senior Vice President from our formation in 1984
                               to April 1993.

Barry W. Schadeck       53     Executive Vice President since June 1995 and
                               President of Corrpro Canada, Inc., our
                               wholly-owned subsidiary, since its formation in
                               May 1994. Prior to that, Mr. Schadeck served as
                               President since April 1993 and Chief Financial
                               Officer since 1979 of Commonwealth Seager Group,
                               our wholly-owned subsidiary, since 1993.

Robert M. Mayer         41     Senior Vice President, Chief Financial Officer
                               and Treasurer since November 2002. Prior to that,
                               Mr. Mayer served as our Vice President and
                               Corporate Controller from August 2000, Assistant
                               Treasurer from January 2002 and Assistant
                               Corporate Controller from January 1998 until
                               August 2000. Prior to that, Mr. Mayer was with
                               Premier Farnell PLC, most recently as Director of
                               Finance. Mr. Mayer has prior experience with
                               Ernst & Young, where he was an Audit Manager.

John D. Moran           46     General Counsel since December 1996, Secretary
                               since January
</TABLE>

                                                                              23
<PAGE>

<TABLE>
<S>                     <C>    <C>
                               2002, Senior Vice President since July 2000.
                               Assistant Secretary from December 1996 to January
                               2002 and Vice President from October 1998 until
                               July 2000. Prior to that, Mr. Moran was in-house
                               counsel for Sealy Corporation, for 10 years and
                               served as Secretary. Mr. Moran also has prior
                               experience with Grant Thornton.
</TABLE>

                                                                              24
<PAGE>

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
        AND ISSUER PURCHASES OF EQUITY SECURITIES

PRICE RANGE OF COMMON SHARES

      Our common shares are listed on the American Stock Exchange under the
symbol "CO."

      The following table sets forth the high and low closing prices for our
common shares on the American Stock Exchange for the fiscal periods indicated.

<TABLE>
<CAPTION>
                          FISCAL 2004          FISCAL 2003
                          -----------          -----------
                         HIGH      LOW        HIGH      LOW
                         ----      ---        ----      ---
<S>                     <C>       <C>        <C>       <C>
First Quarter           $0.70     $0.33      $1.80     $1.08
Second Quarter           1.87      0.37       1.15      0.58
Third Quarter            2.30      0.86       0.75      0.38
Fourth Quarter           1.52      0.90       0.80      0.30
</TABLE>

      We are required by the American Stock Exchange to maintain certain listing
standards and meet certain reporting requirements in order for our common shares
to continue trading and to remain listed on the exchange. The exchange notified
us in September 2003 that we were not in compliance with the shareholder's
equity requirement of its continued listing requirements and that we should
submit a plan to regain compliance. In December 2003, the American Stock
Exchange accepted the plan that we submitted in accordance with its request. If
we fail to comply with our plan or other listing standards of the exchange, our
common shares may be delisted.

HOLDERS OF RECORD

      On June 25, 2004, there were 194 holders of record of our common shares.

DIVIDENDS

      We have never paid any cash dividends on our common shares. Our senior
secured credit facility and senior secured subordinated notes prohibit us from
paying cash dividends on our common shares without the consent of the parties
thereto. In addition, the terms of our Series B Preferred Stock prohibit us from
paying cash dividends on our common shares without the approval of a majority of
the holders of our Series B Preferred Stock. We currently anticipate that we
will retain all future earnings for use in our business and do not anticipate
paying any cash dividends in the foreseeable future.

SALES OF UNREGISTERED SECURITIES

      On March 30, 2004, we completed a refinancing and reorganization pursuant
to which we, among other things, issued and sold (i) 13,000 shares of our Series
B Preferred Stock and a warrant to purchase 12,113,744 of our common shares (the
"CPI Warrant") to CPI for $13.0 million and (ii) $14.0 million of our senior
secured subordinated notes and a warrant to purchase 3,936,967 of our common
shares to American Capital (the "American Capital Warrant"). We issued these
securities to CPI and American Capital pursuant to exemptions from registration
provided by Section 4(2) of the Securities Act of 1933 and Rule 506 thereunder.
At the time of the issuance of these securities, CPI and American Capital
represented to us that each was an accredited investor, as defined in Regulation
D under the Securities Act of 1933. The proceeds from the sales of these
securities were used to repay our outstanding indebtedness.

                                                                              25
<PAGE>

      SERIES B PREFERRED STOCK. The Series B Preferred Stock ranks, with respect
to the payment of dividends and rights upon liquidation, dissolution or
winding-up of us, senior to our common shares and each other class or series of
our capital stock the terms of which do not expressly provide that such class or
series ranks equal or senior to the Series B Preferred Stock with respect to the
payment of dividends or rights upon liquidation, dissolution or winding-up of
us.

      The Series B Preferred Stock accrues cumulative quarterly dividends at an
annual rate of 13.5%. In the event we do not maintain certain financial
covenants for the twelve months preceding any quarterly dividend payment date,
the annual dividend rate will increase to 16.5% for each subsequent calendar
quarter during which we fail to comply with such financial covenants. Dividends
on the Series B Preferred Stock are payable either (i) in cash if then permitted
under the terms of our outstanding senior indebtedness and/or subordinated
indebtedness or (ii) in additional shares of Series B Preferred Stock. Dividends
payable in cash would be paid when, as and if declared by the Board of Directors
out of funds legally available thereof. The terms of the senior financing
prohibit, unless approved by the lender, the payment of any cash dividends on
the Series B Preferred Stock while such debt is outstanding.

      The liquidation preference of each share of Series B Preferred Stock is
$1,000 per share, plus any accrued and unpaid dividends thereon. In the event of
any voluntary or involuntary liquidation, dissolution or winding-up of us, the
holders of Series B Preferred Stock will be entitled to receive the liquidation
preference per share of Series B Preferred Stock in effect on the date of such
liquidation, dissolution or winding-up, plus an amount equal to any accrued but
unpaid dividends thereon as of such date before any distribution or payment is
made to the holders of our capital stock that does not rank equal or senior to
the Series B Preferred Stock. Under the terms of the Series B Preferred Stock, a
liquidation, dissolution or winding-up of us includes any sale, conveyance,
exchange or transfer of all or substantially all of our capital stock or assets
or a merger, consolidation or other transaction or series of related
transactions in which our shareholders immediately prior to such transaction do
not retain a majority of the voting power in the surviving entity, unless the
holders of a majority of the then-outstanding shares of Series B Preferred Stock
affirmatively vote or consent in writing that any such transaction shall not be
treated as a liquidation, dissolution or winding-up of us.

      The Series B Preferred Stock is redeemable at the option of the holders of
a majority of the outstanding Series B Preferred Stock upon the occurrence of
any of the following events with respect to us:

      -     the occurrence of any change in beneficial ownership, merger,
            consolidation, sale or other disposition of assets, or other similar
            type event that constitutes a "change of control" or similar-termed
            event, or a breach or other triggering event, under the terms of our
            senior indebtedness and/or subordinated indebtedness;

      -     the acceleration of any amounts due under our senior indebtedness
            and/or subordinated indebtedness;

      -     any issuance or sale of our equity securities in a public or private
            offering resulting in aggregate net proceeds to us in excess of
            $20.0 million;

      -     any liquidation, dissolution or winding-up of us, whether voluntary
            or involuntary; or

      -     the occurrence of certain bankruptcy and insolvency events.

      In addition, if then permitted by the holders of our outstanding senior
indebtedness and/or subordinated indebtedness, the Series B Preferred Stock
would be redeemable at the option of a majority of the holders of Series B
Preferred Stock upon the occurrence of any of the following events with respect
to us:

      -     the acquisition of 20% or more of our outstanding voting securities
            by any person or group, other than through the ownership or
            acquisition of the Series B Preferred Stock, the CPI Warrant, or the
            common shares issued upon exercise of the CPI Warrant;

      -     a consolidation or merger involving us, other than a consolidation
            or merger under a transaction in

                                                                              26
<PAGE>

            which (i) our outstanding voting stock remains outstanding or (ii)
            the beneficial owners of our outstanding voting stock immediately
            prior to such transaction beneficially own less than 80% of the
            voting stock of the surviving entity immediately following such
            transaction;

      -     the sale, transfer, assignment, lease, conveyance or other
            disposition in one or a series of transactions of in excess of 20%
            of our assets, or assets of ours resulting in aggregate net proceeds
            to us in excess of $20.0 million; or

      -     the aggregate amount of our indebtedness is equal to or less than
            $2.0 million.

      Each share of Series B Preferred Stock shall entitle the holder thereof to
vote on all matters voted on by the holders of our common shares, voting
together with the holders of our common shares and other voting stock as a
single class at all annual, special and other meetings of our shareholders.
Initially the Series B Preferred Stock will have approximately 51% of our total
voting power. Such percentage is subject to adjustment based on shares
outstanding in the future at any particular time. The percentage of voting power
is mathematically calculated as follows: In any vote in which the holders of
Series B Preferred Stock are entitled to vote with the holders of our common
shares, each share of Series B Preferred Stock shall entitle the holder thereof
to cast that number of votes equal to the quotient of (i) the product of (A)
1.0408, multiplied by (B) the total number of votes that may be cast by the
holders of all Post Transaction Fully Diluted Shares (as defined in the Amended
Articles) as of the record date for such vote, divided by (ii) 13,000. Future
issuances of our voting securities not contemplated in the securities purchase
agreement will proportionately reduce the voting power of the Series B Preferred
Stock.

      In addition to the foregoing, the approval of the holders of a majority of
the outstanding Series B Preferred Stock, voting separately as a class, is
required to:

      -     amend, modify or alter any provision of the Amended Articles or the
            Amended Regulations that adversely affect the rights of the holders
            of the Series B Preferred Stock;

      -     consummate a merger or consolidation of us or sale of in excess of
            40% of our assets;

      -     consummate a liquidation, dissolution, winding up, recapitalization
            or reorganization of us;

      -     effect any material acquisition or series of acquisitions, joint
            venture or strategic alliance involving us;

      -     pay any dividends or distributions on, or make any other payment in
            respect of, our capital stock, except for dividends and
            distributions payable (i) on the Series B Preferred Stock or on any
            shares of our capital stock ranking equal or senior to the Series B
            Preferred Stock, or (ii) to the holders of our common shares in the
            form of additional shares of common shares;

      -     authorize, designate, sell or issue any capital stock or debt
            securities (other than, with respect to debt securities, any senior
            indebtedness), except for (i) issuances of our common shares after
            March 30, 2004, upon exercise of options or rights granted to our
            directors, officers or employees under our existing or future option
            plans, provided that the aggregate amount of such issuances do not
            exceed 15% of the Post Transaction Fully Diluted Shares and (ii)
            issuances of our common shares upon exercise of the CPI Warrant, the
            American Capital Warrant or the warrants issued to our previous
            lenders; or

      -     redeem or purchase our capital stock, except for (i) redemptions of
            Series B Preferred Stock contemplated by the terms of the Amended
            Articles and (ii) payments to American Capital upon exercise of its
            right to require us to redeem or repurchase the American Capital
            Warrant or the common shares issuable upon exercise of the American
            Capital Warrant.

      The terms of the Series B Preferred Stock also provide that for so long as
at least 40% of the shares of Series B

                                                                              27
<PAGE>

Preferred Stock issued to CPI on March 30, 2004, remain outstanding, the holders
of Series B Preferred Stock will have the right to appoint a majority of our
full Board of Directors.

      The terms of the Series B Preferred Stock provides that we generally may
not issue or sell any capital stock or debt securities unless prior to such
issuance or sale, each holder of Series B Preferred Stock has first been given
the opportunity to purchase, on the same terms and conditions on which such
securities are proposed to be issued or sold by us, such holder's proportionate
share of 51% of the securities to be issued or sold by us. Holders of Series B
Preferred Stock will not have preemptive rights to purchase:

      -     common shares issued after March 30, 2004, upon exercise of options
            or rights granted to our directors, officers or employees under our
            existing or future option plans, provided that the aggregate amount
            of such common shares does not exceed 15% of the Post Transaction
            Fully Diluted Shares;

      -     common shares issuable upon exercise of the warrants issued to our
            previous lenders;

      -     common shares issuable upon exercise of the CPI Warrant and the
            American Capital Warrant;

      -     common shares issuable upon conversion of our convertible securities
            outstanding on March 30, 2004; or

      -     shares of Series B Preferred Stock issued in accordance with the
            terms of the Amended Articles.

      Shares of Series B Preferred Stock generally may be sold or otherwise
transferred to a single purchaser in one transaction involving all of the
outstanding Series B Preferred Stock. Any other sale or transfer of Series B
Preferred Stock must be approved by a committee of disinterested directors of
the Board of Directors, which consent may not be unreasonably withheld. If a
committee of disinterested members of the Board of Directors approves all future
transfers of Series B Preferred Stock, then such approval will be irrevocable
and be binding upon us as to any future transfer of Series B Preferred Stock.

      CPI WARRANT. The CPI Warrant entitles CPI to purchase up to 12,113,744 of
our common shares (subject to adjustment upon the occurrence of certain
anti-dilution events) from time to time at a purchase price of $0.001 per share.
The CPI Warrant is exercisable, in whole or in part, at any time prior to March
30, 2014.

      Under the terms of the CPI Warrant, we are prohibited from taking actions
to avoid the observance or performance of our obligations under the CPI Warrant,
including, without limitation, (i) increasing the par value of the common shares
issuable upon exercise of the CPI Warrant above the exercise price then in
effect and (ii) taking any action that results in any adjustment of the exercise
price or the number of common shares issuable upon exercise of the CPI Warrant
if the total number of common shares or other securities that are issuable after
such action would exceed the total number of common shares and other securities
then authorized by the Amended Articles.

      The exercise price and the number of common shares issuable upon exercise
of the CPI Warrant are subject to (i) customary anti-dilution adjustments for
stock dividends, stock splits, recapitalizations and similar events, (ii)
customary weighted average anti-dilution adjustments for issuances of stock
options and convertible securities at prices below fair market value and (iii)
customary adjustments due to business combinations and other transactions
affecting the common shares. In addition, the number of common shares issuable
upon exercise of the CPI Warrant will be proportionately increased if, as a
result of certain anti-dilution adjustments to the warrants issued to our
previous lenders, the number of common shares issuable upon exercise of the
warrants issued to our previous lenders increases by more than 453,186 common
shares.

      AMERICAN CAPITAL WARRANT. The American Capital Warrant entitles American
Capital to purchase up to 3,936,967 of our common shares (subject to adjustment
upon the occurrence of certain anti-dilution events) from time to time at a
purchase price of $0.001 per share, except that in no event shall the total
payment required to exercise the entire

                                                                              28
<PAGE>

American Capital Warrant exceed $100. The American Capital is exercisable, in
whole or in part, at any time prior to the seventh anniversary of the date of
its issuance.

      The exercise price and the number of common shares issuable upon exercise
of the American Capital Warrant are subject to (i) customary anti-dilution
adjustments for stock dividends, stock splits, recapitalizations and similar
events, (ii) customary weighted average anti-dilution adjustments for issuances
of stock options and convertible securities at prices below fair market value
and (iii) customary adjustments due to business combinations and other
transactions affecting the common shares. In addition, the number of common
shares issuable upon exercise of the American Capital Warrant will be
proportionately increased if, as a result of certain anti-dilution adjustments
to the warrants issued to our previous lenders, the number of common shares
issuable upon exercise of the warrants issued to our previous lenders increases
by more than 453,186 common shares.

      American Capital also has the right to require us to redeem the American
Capital Warrant or the common shares issuable upon exercise thereof for cash at
any time after the earliest to occur of:

      -     the seventh anniversary of the issuance of the American Capital
            Warrant;

      -     repayment in full of our senior secured subordinated notes and/or
            redemption of all outstanding shares of our Series B Preferred
            Stock;

      -     an acceleration of our new senior credit facility;

      -     a sale of us or a material portion of our assets; or

      -     we experience a change in control.

                                                                              29
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

      The financial data presented below for each of the five years ended March
31, should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Consolidated Financial
Statements and Notes to Consolidated Financial Statements included elsewhere in
this Annual Report on Form 10-K.

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                         2004         2003         2002         2001        2000
                                                      ---------    ---------    ---------    ---------    ---------
<S>                                                   <C>          <C>          <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:
Revenues                                              $ 130,084    $ 117,623    $ 134,784    $ 131,774    $ 130,418
Operating income (loss)                                   8,530        1,960        4,313         (129)       5,289
Interest expense                                          9,565        6,725        5,878        5,244        4,288
                                                      ---------    ---------    ---------    ---------    ---------
Income (loss) before income taxes from
   continuing operations                                 (1,035)      (4,765)      (1,565)      (5,373)       1,001
Income tax provision (benefit)(1)                           576         (363)      11,155         (606)       1,270
                                                      ---------    ---------    ---------    ---------    ---------
Loss from continuing operations                          (1,611)      (4,402)     (12,720)      (4,767)        (269)
                                                      ---------    ---------    ---------    ---------    ---------
Net loss(2)                                           $  (5,479)   $ (28,825)   $ (18,217)   $  (8,281)   $  (2,668)
                                                      =========    =========    =========    =========    =========

LOSS PER SHARE FROM
  CONTINUING OPERATIONS-
           Basic                                      $   (0.19)   $   (0.52)   $   (1.57)   $   (0.62)   $   (0.04)
           Diluted                                        (0.19)       (0.52)       (1.57)       (0.62)       (0.04)

NET LOSS-
           Basic                                      $   (0.65)   $   (3.43)   $   (2.24)   $   (1.07)   $   (0.35)
           Diluted                                        (0.65)       (3.43)       (2.24)       (1.07)       (0.35)

OTHER DATA:
Total assets                                          $  72,713    $  78,540    $ 109,993    $ 137,200    $ 140,864
Working capital, excluding net assets held for sale      16,139      (25,006)     (37,918)      30,809       30,009
Net assets held for sale                                     --        6,392       31,857       29,358       40,398
Total debt                                               34,501       51,241       62,686       68,175       62,258
Shareholders' equity (deficit)                           (2,729)       1,199       23,857       41,518       54,235
</TABLE>

(1)   Includes a valuation allowance of $10,472 in fiscal 2002, related to our
      deferred tax asset. See Note 1, Summary of Significant Accounting
      Policies, Notes to Consolidated Financial Statements included in Item 8 of
      this Annual Report on Form 10-K for further information.

(2)   Includes a cumulative effect of change in accounting principle of $18,238
      in fiscal 2003, related to our evaluation of goodwill. See Note 1, Summary
      of Significant Accounting Policies, Notes to Consolidated Financial
      Statements included in Item 8 of this Annual Report on Form 10-K for
      further information.

                                                                              30
<PAGE>

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

      The following discussion and analysis contains certain statements that
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The following discussion should be
read in conjunction with the consolidated financial statements, accompanying
notes and selected financial data appearing elsewhere in this Annual Report on
Form 10-K and may contain certain statements that constitute "forward-looking
statements." Words such as "anticipates," "expects," "intends," believes,"
"seeks," "estimates" or variations of such words and similar expressions are
intended to identify such forward-looking statements. A number of risks,
uncertainties and other factors may cause our actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Important
risks, uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements appear elsewhere in this Annual Report on Form 10-K. See "Business -
Factors Influencing Future Results and Accuracy of Forward Looking Information."

OVERVIEW

      We provide a comprehensive range of corrosion control engineering
services, systems, equipment and materials; coatings services; and pipeline
integrity and risk assessment services to a wide variety of customers in the
North American and European infrastructure, environmental and energy markets,
including the U.S. government and its agencies.

      In July 2002, our Board of Directors approved a multi-year restructuring
plan that included a series of initiatives designed to improve our gross margin
and operating income and reduce our outstanding indebtedness. We believe that we
have been successful in implementing these initiatives to date. Our gross margin
has increased from 29.3% in fiscal 2002 to 31.8% in fiscal 2004 based in part on
a number of measures that we have taken, including closing underperforming
offices, improving our material purchase program, containing employee
compensation costs and restricting nonessential travel and entertainment.

      We also believe that we have enhanced our capital structure by
implementing initiatives designed to reduce our outstanding indebtedness. During
fiscal 2003 and fiscal 2004, we disposed of our Middle East operations, Asia
Pacific operations and four other non-strategic business units and used the
proceeds from such dispositions to reduce our outstanding indebtedness. In
addition, on March 30, 2004, we completed a refinancing and recapitalization
pursuant to which we (i) issued and sold 13,000 shares of our Series B Preferred
Stock and a warrant to purchase 12,113,744 of our common shares to CPI for
aggregate consideration of $13.0 million, (ii) issued and sold $14.0 million of
our secured subordinated notes and a warrant to purchase 3,936,967 of our common
shares to American Capital and (iii) entered into a $40.0 million senior secured
credit facility with CapitalSource, we used the proceeds therefrom to repay our
prior revolving credit facility and senior notes and for working capital
purposes. We believe that our new capital structure will be critical in our
efforts to expand our business and achieve our other business objectives.

CRITICAL ACCOUNTING POLICIES

      The process of preparing financial statements in conformity with
accounting principles generally accepted in the United States requires
management to use assumptions and estimates, some of which are significant, to
determine certain of the reported values on our financial statements. Although
management bases its assumptions and estimates on historical experience and
other factors that management considers relevant, these assumptions and
estimates could change materially as conditions both within and beyond our
control change. The following is a discussion of our critical accounting
policies and the related management assumptions and estimates necessary in
determining certain of the reported values on our financial statements. Our
critical accounting policies, including the assumptions and estimates

                                                                              31
<PAGE>

underlying them, are more fully described in Note 1, Summary of Significant
Accounting Policies, Notes to Consolidated Financial Statements included in Item
8 of this Annual Report on Form 10-K.

      REVENUE RECOGNITION. We record income from construction and engineering
contracts under the percentage-of-completion method, using costs incurred to
date in relation to estimated total costs of the contracts, to measure the stage
of completion. Original contract prices are adjusted for change orders and
claims when the change order or claim has been approved by the customer. Cost
budgets are revised, when necessary, in the amounts that are reasonably
estimated based on the project leaders' knowledge of the project as well as our
historical experience. The cumulative effects of changes in estimated total
contract costs and revenues are recorded in the period in which the facts
requiring such revisions become known, and are accounted for using the
percentage-of-completion method. At the time it is determined that a contract is
expected to result in a loss, the entire estimated loss is recorded. We
recognize revenue from product sales upon shipment and transfer of ownership.

      ACCOUNTS RECEIVABLE. We record estimated allowances for uncollectible
accounts receivable based upon the number of days the accounts are past due, the
current business environment, and specific information such as bankruptcy or
liquidity issues of customers. Historically, losses for uncollectible accounts
receivable have been within management's range of estimates. Corrosion control
services and products are provided to a large number of customers with no
substantial concentration in a particular industry or with an individual
customer.

      INVENTORIES. Inventories are valued at the lower of cost or market with
cost being determined on the first-in, first-out method. Management periodically
reviews inventories for excess and obsolete goods based upon a combination of
historical and forecasted usage. Additionally, discrete provisions are made when
facts and circumstances indicate that particular inventories will not be
utilized. If future market conditions are different than those estimated, a
change to the valuation of inventory may be required and would be reflected in
the period the conditions change.

      ASSET IMPAIRMENT. We periodically evaluate whether events and
circumstances have occurred that indicate the remaining estimated useful life of
any long-lived or intangible asset may warrant revision or that the remaining
balance of the asset may not be recoverable. If factors indicate that the
long-lived assets should be evaluated for possible impairment, we use an
estimate of the related asset's net undiscounted cash flows from operations over
the remaining life to determine recoverability. The measurement of the
impairment would be based on the amount by which the carrying value of the asset
exceeds its fair value.

      During fiscal 2004, we recorded an impairment charge relating to our
Middle East operations totaling $3.5 million based on the current market value
of these operations. This impairment charge was included in results from
discontinued operations. During fiscal 2003, we recorded an impairment charge
relating to our Asia Pacific operations totaling $1.6 million based on the
current market value of these operations and additionally recorded impairment
charges totaling $0.9 million based on a market value analysis for our European
and Middle East operations. The Asia Pacific and Middle East operations were
reported as discontinued operations and were sold in fiscal 2004.

      In July 2001, Statement of Financial Accounting Standards No. 141,
"Business Combinations" ("SFAS 141"), and Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), were
issued by the Financial Accounting Standards Board. SFAS 141 eliminates the
pooling-of-interests method for business combinations and requires the use of
the purchase method. SFAS 142 changes the accounting for goodwill and indefinite
life intangibles from an amortization approach to a non-amortization approach,
and require periodic tests for impairment of these assets. Upon our adoption of
SFAS 142 on April 1, 2002, the provisions of SFAS 142 required the
discontinuance of amortization of goodwill and indefinite life intangibles that
had been recorded in connection with previous business combinations. We
completed impairment testing under SFAS 142 and recorded an impairment loss, as
of April 1, 2002, totaling $18.2 million of which $11.8 million related to
discontinued operations and $6.4 million related to continuing operations. The
loss was recognized as the cumulative effect of a change in accounting
principle. This impairment testing is also done annually in the fourth quarter
and such testing resulted in no additional impairment as of March 31, 2004.

      INCOME TAXES. We use the liability method whereby income taxes are
recognized during the fiscal year in which transactions enter into the
determination of financial statement income. Deferred tax assets and liabilities
are recognized

                                                                              32
<PAGE>

for the expected future tax consequences of temporary differences between
financial statement and tax basis of assets and liabilities. We recorded a
valuation allowance for our net domestic deferred tax assets carryforwards of
$10.5 million in the fourth quarter of fiscal 2002. We maintained a valuation
allowance at March 31, 2004 and intend to maintain a full valuation allowance
for our net domestic deferred tax assets and net operating loss carryforwards
until sufficient positive evidence exists to support the reversal of the
remaining reserve. Until such time, except for foreign tax provisions, we expect
to have no reported tax provision, net of valuation allowance adjustments. In
the event we were to determine, based on the existence of sufficient positive
evidence, that we would be able to realize our deferred tax assets in the future
in excess of our net recorded amount, an adjustment to the valuation allowance
would increase income in the period such determination was made. See Note
6-Income Taxes of our consolidated financial statements for additional
information regarding income taxes.

RESULTS OF OPERATIONS

      In July 2002, our Board of Directors approved a formal business
restructuring plan. The multi-year plan included a series of initiatives to
improve operating income and reduce debt by selling non-core business units. We
engaged outside professionals to assist in the disposition of the domestic and
international non-core business units. Prior to the quarter ended September 30,
2002, our non-core domestic and international units were reported as the Other
Operations and International Operations reporting segments. Effective as of the
quarter ended September 30, 2002, the Other Operations and the International
Operations reporting segments were eliminated and the non-core domestic and
international units were reported as discontinued operations. Prior-year
financial statements were reclassified to reflect these non-core units as
discontinued operations, which were also referred to as "assets and liabilities
held for sale."

      In the second quarter of fiscal 2004, our Board of Directors removed our
European Operations from discontinued operations. The Board concluded that our
value would be enhanced by maintaining our European presence rather than by
selling our European Operations at this time, based in part on the strength of
the local management team, the similar characteristics of the served markets,
and the favorable prospects for this business. Therefore, effective in the
second quarter of fiscal 2004, we reported quarterly and annual results of the
European Operations in our continuing operations. Prior-year financial
statements have been reclassified to reflect the European Operations as
continuing operations.

YEAR ENDED MARCH 31, 2004 COMPARED TO YEAR ENDED MARCH 31, 2003

      REVENUES. Revenues from continuing operations for fiscal 2004 totaled
$130.1 million, compared with $117.6 million for fiscal 2003, an increase of
$12.5 million, or 10.6%. Revenues from the discontinued operations were $10.1
million in fiscal 2004 compared to $26.9 million in the prior fiscal year. The
decrease in discontinued operations is primarily attributable to the sale of
four non-strategic business units.

      Revenues for fiscal 2004 relating to the Domestic Core Operations totaled
$92.9 million compared to prior-year results of $85.0 million, an increase of
$7.9 million or 9.3%. The increase was primarily related to a large well casing
project being run out of our Houston office that generated $5.7 million in
revenues in fiscal 2004 compared to $0.4 million in the year-earlier period. In
addition, our commercial coatings offices experienced increased revenues of $2.1
million in fiscal 2004 compared to the year-earlier period, primarily due to
increased activity levels in our Chicago and Bakersfield offices as well as
increased inspection revenues in our Lafayette office. These increases were
partially offset by decreases in several areas of our Domestic Core Operations.
Our Eastern Region offices experienced a revenue decline of $0.2 million in
fiscal 2004 compared to the year-earlier period, primarily as a result of lower
revenues from a large bridge project in fiscal 2004 compared to the year-earlier
period. Also, our Water Tank business experienced a $0.6 million revenue decline
in fiscal 2004 compared to the year-earlier period. This decrease is attributed
to the Federal EPA mandate that all municipal water systems serving 3,300 or
more customers perform and file security and vulnerability assessments with the
EPA. As a result of this mandate, municipal water systems have been deferring
infrastructure maintenance as a means of allocating funds to pay for these
assessments.

      Revenues from our Canadian Operations for fiscal 2004 totaled $24.1
million compared to $19.3 million, for fiscal 2003, an increase of $4.8 million,
or 24.9%. Approximately $2.6 million of this increase was due to the
strengthening of the Canadian dollar against the U.S. dollar in fiscal 2004
compared to fiscal 2003. The remaining

                                                                              33
<PAGE>

increase was primarily due to increased volume of material and rectifier sales
as well as an increase in the energy segment of our business.

      Revenues from our European Operations for fiscal 2004 totaled $13.1
million compared to $13.4 million, for fiscal 2003, a decrease of $0.3 million,
or 2.2%. This decrease was primarily due to lower revenues received from a large
contract to perform work on underground storage tanks in the United Kingdom and
was offset by approximately $2.0 million due to the strengthening of the
British pound against the U.S. dollar in fiscal 2004 compared to fiscal 2003.

      GROSS PROFIT. Consolidated gross profit margins were 31.8% for fiscal year
2004 compared to 31.5% for the prior-year period. Gross margins continued to
benefit from the restructuring plans and cost containment programs implemented
in fiscal 2001 and 2002 as well as our Board of Directors decision to approve a
formal business restructuring plan in July 2002. The multi-year plan included a
series of initiatives to improve gross margins as well as operating income and
reduce debt. The initiatives that impacted gross margin in fiscal 2004 included
the following:

      -     Closure of underperforming offices. At the end of fiscal 2003, we
            closed one underperforming office. This office experienced a gross
            margin rate of 21.5% in fiscal 2003.

      -     Improved material purchase program. Efficiencies were achieved in
            purchasing certain corrosion control materials that are sold to our
            customers. Our Material Sales Center experienced a 23 basis point
            improvement in its gross margin rate in fiscal 2004 compared to the
            year-earlier period.

      -     Wage and salary freeze. We implemented a general wage and salary
            freeze for employees in fiscal 2003 in order to contain costs. This
            wage and salary freeze was not lifted until July 2003.

      -     Restrictions on travel and entertainment. Travel and entertainment
            continues to be restricted to essential, revenue producing ventures.

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses totaled $32.8 million (25.2% of revenues) for fiscal
year 2004 compared to $35.2 million (29.9% of revenues) for fiscal 2003.
Selling, general and administrative expenses for year ended March 31, 2004,
included $1.5 million related to professional fees associated with our lender
requirements and $1.1 million for severance and retirement benefits associated
with our former Chief Executive Officer. Fiscal year 2003 included $2.9 million
in professional fees related to lender requirements, $2.1 million of pension
expense related to our European Operations and a $0.5 million impairment charge
recorded for our European Operations. Selling, general and administrative
expenses continue to improve due to the informal cost containment and
restructuring plans mentioned above as well as the Board of Directors plan also
mentioned above. An activity-based analysis was performed to eliminate our
non-value added costs. In addition, we continue to see benefits pertaining to
the closure of underperforming offices. Also, we have reduced headcount in
corporate overhead areas. Headcount was reduced in both fiscal 2002 and 2003,
which resulted in annual savings in each year of approximately $4.0 million. We
continue to restrict travel and entertainment to essential, revenue producing
ventures as well as restricting the purchase of advertising materials, catalogs,
office supplies and other discretionary overhead items. Also, we had favorable
claims experience in our health care costs in both fiscal 2004 and fiscal 2003.

      OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS. Operating income from
continuing operations totaled $8.5 million for fiscal year 2004 compared to $2.0
million in fiscal 2003, an increase in earnings of $6.5 million. This increase
is primarily related to higher restructuring costs incurred in fiscal 2003 and
improved revenues generated during the fiscal year 2004.

      INTEREST EXPENSE. Interest expense totaled $9.6 million for fiscal year
2004 compared to $6.7 million in fiscal 2003. We completed our refinancing and
recapitalization transaction in the fourth quarter of fiscal 2004. As a result
of the refinancing, we expensed deferred financing costs associated with the
previous lenders of $1.3 million in fiscal year 2004. In addition, we expensed
yield maintenance amounts required under previous debt arrangements of $2.2
million in fiscal year 2004 and $1.0 million in fiscal 2003.

                                                                              34
<PAGE>

      INCOME TAX PROVISION. We recorded a provision for income taxes of $0.6
million for the year ended March 31, 2004 compared to a income tax benefit of
$0.4 million recorded for the year ended March 31, 2003. Our effective tax rate
is based on the statutory rates in effect in the countries in which we operate.
We recorded a provision greater than the statutory tax rate of 34% since we have
not realized the tax benefits of losses in our Domestic Core Operations for
which a previously recorded valuation allowance has been provided. We intend to
maintain a full valuation allowance on our domestic net deferred tax assets
including net operating loss carryforwards associated with losses generated
prior to our refinancing and recapitalization transaction. The refinancing and
recapitalization transaction resulted in a change of control for income tax
purposes as defined in U.S. tax law. As such, we will be limited as to how much
of our net operating loss carryforwards will be available for use in future
periods.

      LOSS FROM CONTINUING OPERATIONS. Loss from continuing operations totaled
$1.6 million in fiscal year 2004 compared to a loss of $4.4 million in fiscal
year 2003, an improvement of $2.8 million. The fiscal 2004 improvement was the
result of improved revenue levels, improved operating efficiencies and our
overall efforts to streamline operations.

      DISCONTINUED OPERATIONS. Loss from discontinued operations, net of income
taxes, for the year ended March 31, 2004, was $3.9 million compared to a loss,
net of income taxes, of $6.2 million in fiscal year 2003, an improvement of $2.3
million. The loss in fiscal 2004 is primarily attributable to a $3.5 million
impairment charge on net assets related to our Middle East Operations, which was
recorded in the second quarter of fiscal 2004.

      CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE. During fiscal 2003,
we, with the assistance of independent valuation experts, completed our initial
assessment test and concluded that certain of our goodwill was impaired.
Effective April 1, 2002, we recognized a transitional impairment charge of $18.2
million as the cumulative effect of a change in accounting principle to reduce
the carrying values of certain indefinite lived intangible assets and goodwill
to estimated fair values as required by SFAS No. 142. This is a non-cash charge
and does not impact compliance with the financial covenants contained in our
lender agreements.

      NET LOSS. Net loss totaled $5.5 million for the year ended March 31, 2004,
compared to a net loss of $28.8 million in fiscal year 2003, an improvement of
$23.3 million, which was primarily attributable to $18.2 million of non-cash
goodwill impairment charges as a result of a change in accounting principle in
fiscal 2003, improved revenue levels, improved operating efficiencies and our
overall efforts to streamline operations.

      Loss per share on a fully diluted basis totaled $0.65 per share for the
year ended March 31, 2004, compared to a loss per fully diluted share of $3.43
for the year ended March 31, 2003. The weighted average number of shares used in
calculating loss per share is computed based on the number of common shares
issued and outstanding. On March 30, 2004, we completed our recapitalization
which resulted in the issuance of warrants exercisable for 16.1 million common
shares. In accordance with generally accepted accounting principles for
"Participating Securities", these warrants will be included in the weighted
average shares calculation only in periods in which we generate net income
available to common shareholders. Net income available to common shareholders
represents net income less the annual preferred stock dividend.

YEAR ENDED MARCH 31, 2003 COMPARED TO YEAR ENDED MARCH 31, 2002

      REVENUES. Revenues from continuing operations for fiscal 2003 totaled
$117.6 million, compared with $134.8 million for fiscal 2002, a decrease of
12.8%.

      Our Domestic Core Operations generated revenues of $85.0 million in fiscal
2003 compared with $101.8 million in fiscal 2002, a decrease of 16.5%. This
decrease was primarily related to our Preservation Team contracts with the U.S.
Navy. Since June 2000, we have been providing Preservation Team services to the
U.S. Navy under a demonstration contract. In calendar 2002, these contracts were
placed in the normal Navy procurement process and put out for competitive bid. A
number of these contracts were designated as small business contracts and we did
not qualify as a

                                                                              35
<PAGE>

small business. Therefore, we were unable to compete for these contracts as a
prime contractor, although we were eventually awarded a number of subcontracts
for this work. The net result was a reduction in revenues for this work of
approximately $11.6 million in fiscal year 2003. In fiscal 2003, we also made
the decision to close two offices in New Mexico and South America, resulting in
lost revenues of approximately $1.9 million. The remaining decrease was
primarily due to decreased material sales of $1.1 million and lower revenues
generated by our commercial coatings offices of $1.3 million.

      Revenues relating to our Canadian Operations segment totaled $19.3 million
in fiscal year 2003, compared to $21.3 million in fiscal year 2002, a decrease
of 9.4%. The decrease was due primarily to lower material and rectifier sales
and the closure of our office in Taiwan.

      Revenues relating to our European Operations segment totaled $13.4 million
in fiscal year 2003, compared to $11.7 million in fiscal year 2002, an increase
of 14.5%. The increase was primarily due to a large contract with an energy
company to provide engineering services for their underground storage tanks.

      GROSS PROFIT. Consolidated gross profit margins for fiscal 2003 totaled
$37.1 million (31.6% of revenues) compared to $39.5 million (29.3% of revenues)
for fiscal 2002, a decrease in gross profit dollars of $2.4 million or 6.1%. The
higher gross profit as a percent to revenue (a 230 basis point increase) can be
attributed to informal restructuring plans and cost containment programs
implemented in fiscal 2001 and 2002 as well as our Board of Directors decision
to approve a formal business restructuring plan in July 2002. The multi-year
plan includes a series of initiatives to improve gross margins as well as
operating income and reduce debt. The initiatives that impacted gross margins in
fiscal 2003 included the following:

      -     Closure of underperforming offices. At the end of fiscal 2001, we
            closed five underperforming offices. Costs continued to be incurred
            in fiscal 2002 as we restructured our operations. Approximately $0.4
            million in margin costs were incurred in fiscal 2002 while none were
            incurred in fiscal 2003. In fiscal 2002, we closed our office in
            Taiwan and realized gross margin improvement of $0.4 million in
            fiscal 2003.

      -     Improved insurance programs. We moved certain insurance policies to
            deductible programs in fiscal 2003. These changes allowed us to
            reduce costs by approximately $0.7 million.

      -     Improved material purchase program. Efficiencies were achieved in
            purchasing certain corrosion control materials that are sold to our
            customers. Gross margin improvement in our Material Sales Center
            totaled $0.3 million in fiscal 2003.

      -     Wage and salary freeze. We implemented a general wage and salary
            freeze for employees in fiscal 2003 in order to contain costs.

      -     Restrictions on travel and entertainment. Travel and entertainment
            was restricted to essential, revenue producing ventures.

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for fiscal 2003 totaled $35.2 million (29.9% of
revenues), compared with $35.2 million (26.1% of revenues) for fiscal 2002. The
fiscal 2003 amount of $35.2 million includes $2.9 million in professional fees
related to lender requirements, severance expenses totaling $0.5 million, $2.1
million of pension expense related to our European Operations and a $0.5 million
impairment charge recorded for our European Operations. The overall improvement
in the base level of selling, general and administrative expenses was achieved
in part by the implementation of informal cost containment programs and
restructuring plans in fiscal 2001 and 2002 as well as in part because of the
Board of Director's approval of a formal restructuring plan in July 2002. An
activity-based analysis was performed to eliminate our non-value added costs.
Savings were achieved through the following initiatives:

                                                                              36
<PAGE>

      -     Reduced headcount in corporate overhead areas. Headcount was reduced
            in both fiscal 2002 and fiscal 2003. Savings of approximately $4.0
            million was achieved by these headcount reductions in fiscal 2003.

      -     Closed under performing offices. At the end of fiscal 2001, we
            closed five under performing offices. Costs continued to be incurred
            in fiscal 2002 as we restructured our operations. In addition, we
            closed our office in Taiwan in fiscal 2002. The total reduction in
            selling, general and administrative expenses realized by these
            closures was approximately $0.4 million in fiscal 2003.

      -     Restrictions on travel and entertainment as well as other
            discretionary overhead costs. Travel and entertainment was
            restricted to essential, revenue producing ventures. Purchase of
            advertising materials, catalogs, office supplies and other
            discretionary overhead items were also restricted. Total savings
            achieved in fiscal 2003 was approximately $0.4 million.

      -     Wage and salary freeze. We implemented a general wage and salary
            freeze for employees in fiscal 2003 in order to contain costs. In
            addition, the management incentive plan was suspended in fiscal
            2003. The savings achieved in fiscal 2003 from the suspension of the
            management incentive plan was approximately $0.4 million.

      In addition to the initiatives above, we achieved a savings from reduced
employee benefit costs. In fiscal 2003, we suspended the match feature in our
401(k) plan. In addition, we had a favorable claims experience in our health
care costs. These items resulted in savings of approximately $0.9 million in
fiscal 2003.

      OPERATING INCOME FROM CONTINUING OPERATIONS. Operating income from
continuing operations for fiscal 2003 totaled $2.0 million, compared to $4.3
million for fiscal 2002, a decrease of $2.3 million. The decrease was primarily
due to the decrease in revenue levels. The savings achieved in selling, general
and administrative expenses were offset by the additional costs outlined above.

      INTEREST EXPENSE. Interest expense for fiscal 2003 totaled $6.7 million,
compared to $5.9 million for fiscal 2002. The increase was related primarily to
a provision for yield maintenance of $1.0 million in our then-outstanding senior
notes.

      INCOME TAX PROVISION. We recorded an income tax benefit of $0.4 million
for fiscal 2003, compared to an income tax provision of $11.2 million in fiscal
2002. Our effective rate is based on the statutory rates in effect in the
countries in which we operate. See Note 6, Income Taxes, Notes to Consolidated
Financial Statements included in Item 8 for a reconciliation of our effective
tax rates. Within the fiscal 2002 tax provision is an increase in valuation
allowance for our domestic deferred tax asset of $10.5 million.

      LOSS FROM CONTINUING OPERATIONS. As a result of the foregoing, loss from
continuing operations in fiscal 2003 totaled $4.4 million, compared with a loss
from continuing operations of $12.7 million in fiscal 2002, an improvement of
$8.3 million. The improvement was primarily attributable to the valuation
allowance for our deferred tax assets taken in fiscal 2002.

      DISCONTINUED OPERATIONS. Loss from discontinued operations, net of income
taxes totaled $6.2 million for fiscal 2003, compared with a loss from
discontinued operations, net of income taxes, of $5.5 million for fiscal 2002.
This incremental loss was mainly attributable to currency translation
adjustments and impairment charges. In fiscal 2003, four non-strategic business
units were sold for a gain, net of taxes of $2.1 million.

      CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE. During fiscal 2003,
we, with the assistance of independent valuation experts, completed our initial
assessment test and concluded that certain of our goodwill was impaired.
Effective April 1, 2002, we recognized a transitional impairment charge of $18.2
million as the cumulative effect of a change in accounting principle to reduce
the carrying values of certain indefinite lived intangible assets and goodwill
to estimated fair values as required by SFAS No. 142. This is a non-cash charge
and does not impact compliance with the financial covenants contained in our
lender agreements.

                                                                              37
<PAGE>

      NET LOSS. The net loss for fiscal 2003 totaled $28.8 million, compared
with a net loss of $18.2 million in fiscal 2002. The net loss increase reflects
the impact of the change in accounting principle and increased losses from
discontinued operations. Diluted loss per share increased to a loss of $3.43 in
fiscal 2003 compared with a loss of $2.24 in fiscal 2002.

LIQUIDITY AND CAPITAL RESOURCES

      CASH FLOW. At March 31, 2004, we had working capital of $16.1 million,
compared to a deficit of $25.0 million at March 31, 2003, an improvement of
$41.1 million. This improvement in working capital was due to a number of
factors, the most significant of which was that we completed our refinancing and
recapitalization transaction on March 30, 2004. The refinancing and
recapitalization transaction resulted in a $45.2 million reduction in the
current portion of long-term debt in fiscal 2004. Accounts receivable increased
by $6.0 million in fiscal 2004 due to higher revenue levels in fiscal 2004. The
increase in accounts receivable was offset by a decrease in notes receivable of
$6.4 million. On March 31, 2003, we sold a non-strategic business unit and
recorded a $6.2 million note receivable, which increased working capital. This
note was collected in fiscal year 2004. Inventory levels increased approximately
$1.6 million in fiscal year 2004, primarily due to a large well casing project
being run out of our Houston office. Accounts payable and accrued liabilities
increased $2.4 million in fiscal year 2004 primarily due to higher activity
levels in fiscal year 2004.

      During fiscal 2004, cash provided by operating activities totaled $1.0
million, compared to $2.3 million in fiscal 2003. The overall decrease in cash
generated from operating activities was primarily due to the fact that we paid
$3.2 million in yield maintenance amounts required under previous debt
arrangements in fiscal 2004. We had accrued $1.0 million of this yield
maintenance in fiscal 2003, but it was actually paid in fiscal 2004.
Improvements in accounts and notes receivable and accounts payable and accrued
expenses were offset by unfavorable changes in inventory and prepaid expenses
and other. As discussed above, the change in inventory was primarily due to a
large well casing project being run out of our Houston office. The change in
prepaid expenses and other was primarily due to an increase in our prepaid
Directors and Officers insurance of approximately $0.5 million and an April 2,
2004 payroll payment of $0.7 million that we deposited with our payroll
processor on March 31, 2004.

      We believe that cash generated by operations and amounts available under
our credit facilities will be sufficient to satisfy our liquidity requirements
through at least fiscal 2005.

      SENIOR SECURED CREDIT FACILITY. On March 30, 2004, we entered into a $40.0
million revolving credit, term loan and security agreement with CapitalSource
that expires on March 30, 2009. Initial borrowings were used to repay existing
indebtedness. The revolving credit facility provides for a maximum principal
amount of $19.5 million. Borrowings under the revolving credit facility are
limited to borrowing base amounts as defined. The interest rate on the revolving
credit facility is at prime plus 1.75%, which was 5.75% at March 31, 2004. We
are also required to pay an unused line fee of 0.75% on the unused portion of
the revolving credit facility and a collateral management fee of 0.50% based on
the funded portion of the revolving credit facility. The revolving credit
facility includes a credit sub-facility of $7.0 million for the issuance of
standby letters of credit. Standby letter of credit fees are 3.0% on the undrawn
face amount of all outstanding standby letters of credit. At March 31, 2004, we
had $2.8 million outstanding under the revolving credit facility and $6.1
million of outstanding letters of credit. Total availability under the revolving
credit facility at March 31, 2004, was approximately $4.5 million, after giving
consideration to the borrowing base limitations under the revolving credit
facility.

      The term loan facility provided for an original principal amount of $20.5
million. The term loan bears interest at prime plus 3.5% subject to a floor of
7.5%. The term loan requires us to make monthly principal payments from
inception to March 1, 2009. The amount of the monthly payments are fixed, but
the monthly amount increases each year. In addition, notwithstanding any other
provisions in the revolving credit, term loan and security agreement, we are
required to pay 50% of our excess cash flow, as defined, each year, starting
with the year ending March 31, 2005, to further pay down the term loan. At March
31, 2004, the outstanding balance on the term loan was $20.5 million.

      Borrowings under the revolving credit, term loan and security agreement
are secured by a first priority security interest in our domestic and Canadian
accounts receivable, inventories, certain intangibles, machinery and equipment
and owned real estate. We have also pledged slightly less than two-thirds of the
capital stock of two of our foreign subsidiaries. The agreement requires us to
maintain certain financial ratios and limits our ability to pay cash dividends,

                                                                              38
<PAGE>

incur additional indebtedness and make investments, including acquisitions, and
to take certain other actions specified therein. We were in compliance with
these covenants at March 31, 2004.

      SENIOR SECURED SUBORDINATED NOTES. On March 30, 2004, we entered into a
senior secured subordinated note and equity purchase agreement with American
Capital pursuant to which we sold $14.0 million of our senior secured
subordinated notes and a warrant to purchase 3,936,967 of our common shares to
American Capital. Initial borrowings were used to repay existing indebtedness.
The interest rate on the senior secured subordinated notes is 12.5%. The senior
secured subordinated notes do not require principal payments and the notes are
due on March 29, 2011. The senior secured subordinated notes are secured by a
lien on our domestic and Canadian accounts receivable, inventories, certain
intangibles, machinery and equipment and owned real estate subordinated in lien
priority only to the liens in favor of CapitalSource. The senior secured
subordinated note and equity purchase agreement requires us to maintain certain
financial ratios and limits our ability to pay cash dividends, incur additional
indebtedness, make investments, including acquisitions, and to take certain
other actions specified therein. We were in compliance with these covenants at
March 31, 2004.

      SERIES B CUMULATIVE REDEEMABLE VOTING PREFERRED STOCK. On March 30, 2004,
we entered into a securities purchase agreement with CPI pursuant to which we
sold 13,000 shares of our Series B Preferred Stock and a warrant to purchase
12,113,744 of our common shares to CPI for aggregate consideration of $13.0
million. We used these proceeds to repay our outstanding indebtedness. The
securities purchase agreement requires us to maintain certain financial ratios
and limits our ability to incur additional indebtedness, make investments,
including acquisitions, and to take certain other actions specified therein. We
were in compliance with these covenants at March 31, 2004. In addition, the
Series B Preferred Stock is redeemable at the option of the holders of Series B
Preferred Stock upon the occurrence of certain events.

      The Series B Preferred Stock will accrue cumulative quarterly dividends at
an annual rate of 13.5%. In the event we do not maintain certain financial
covenants for the twelve months preceding any quarterly dividend payment date,
the annual dividend rate will increase to 16.5% for each subsequent calendar
quarter during which we fail to comply with such financial covenants. Dividends
on the Series B Preferred Stock are payable either (i) in cash if then permitted
under the terms of our outstanding senior secured credit facility and/or senior
secured subordinated notes or (ii) in additional shares of Series B Preferred
Stock. Dividends payable in cash would be paid when, as and if declared by the
Board of Directors out of funds legally available thereof. The terms of our
senior financing prohibit, unless approved by the lender, the payment of any
cash dividends on the Series B Preferred Stock while such debt is outstanding.

      CONTRACTUAL OBLIGATIONS. The following table summarizes our contractual
obligations at March 31, 2004:

<TABLE>
<CAPTION>
                                                       PAYMENTS DUE BY PERIOD
                                         -----------------------------------------------
                                                  LESS THAN   1 - 3     4 - 5    AFTER 5
(IN THOUSANDS)                            TOTAL    ONE YEAR   YEARS     YEARS     YEARS
                                         -------  ---------  -------   -------   -------
<S>                                      <C>       <C>       <C>       <C>       <C>
Indebtedness:
  Revolving Credit Facility, Due 2009    $ 2,779   $ 2,779   $    --   $    --   $    --
  Term Loan, Due 2009                     20,500     2,500    12,000     6,000        --
  Senior Secured Subordinated Notes(1)    14,000        --        --        --    14,000
  Other Debt Obligations                     154        --       154        --        --
  Management Fee                           3,200       400     1,200       800       800
  Operating Leases                         7,424     2,475     3,842       907       200
                                         -------   -------   -------   -------   -------
Total Contractual Cash
    Obligations                          $48,057   $ 8,154   $17,196   $ 7,707   $15,000
                                         =======   =======   =======   =======   =======
</TABLE>

   (1) The Senior Secured Subordinated Notes is net of discount of $2,932 as
reported on the Consolidated Financial Statements.

                                                                              39
<PAGE>

RELATED PARTY TRANSACTIONS

      On March 30, 2004, we entered into a services agreement with Wingate
Partners, an affiliate of CPI. The services agreement provides that Wingate
Partners agrees to consult with the Board of Directors in such a manner and on
such business and financial matters as would be reasonably requested from time
to time by the Board, including financial advisory, management advisory,
strategic planning, monitoring and other related services, in exchange for which
we will pay an annual non-refundable services fee of $0.4 million payable
quarterly in advance, to such persons designated by Wingate Partners. In lieu of
paying any quarterly installment of the services fee in cash, we may, at our
option, or if we are restricted from paying any such quarterly installment in
cash under, or the Board determines that payment of such quarterly installment
in cash would result in a default under, the terms of our new senior secured
credit facility or senior secured subordinated notes, delay payment and accrue
any unpaid portion of the services fee, without interest. The services agreement
will have an initial term of eight years, which term will automatically renew
for successive one year periods thereafter unless either party notifies the
other of its desire to terminate the services agreement.

EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

      In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51." This Interpretation
addresses the consolidation by business enterprises of various interest entities
as defined in the Interpretation. We do not expect the adoption of this
Interpretation to have a material impact on our results of operations or
financial position.

      In December 2003, the FASB revised SFAS No. 132, "Employers' Disclosures
about Pensions and Other Post Retirement Benefits." This revision requires
additional disclosures to those in the original SFAS No. 132 about assets,
obligations, cash flows and the periodic benefit cost of deferred benefit
pension plans and other deferred benefit post-retirement plans. The required
information should be provided separately for pension plans and for other
post-retirement benefit plans. This statement revision is in effect for our
fiscal years ended June 14, 2004, and interim periods beginning after June 15,
2004, for foreign plans. The adoption of this revision is not expected to have a
material impact on our results of operations, financial position or disclosures.

      In November 2003, the Emerging Issues Task Force ("EITF") issued EITF
03-06, "Participating Securities and the Two-Class Method under FASB Statement
No. 128", FASB Statement No. 128, "Earning Per Share". This EITF provides
clarification on the earning per share calculation for participating securities
as defined under FASB No. 128. The EITF is effective for the reporting period
after March 31, 2004. Prior period earnings per share amounts presented for
comparative purposes should be restated to conform to the guidance in the
consensus. We do not expect the adoption of this EITF to have a material effect
on our consolidated financial statements or our results from operations.

                                                                              40
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK DISCLOSURES

      In the normal course of business, our operations are exposed to continuing
fluctuations in foreign currency values and interest rates that can affect the
cost of operating and financing. We do not enter into interest rate or foreign
currency transactions for speculative purposes.

INTEREST RATE RISK

      Our primary interest rate risk exposure results from our revolving credit
and term loan facilities, senior secured subordinated notes and various smaller
lines of credit that we maintain with foreign banks. If interest rates were to
increase 200 basis points (2%) from March 31, 2004, rates, and assuming no
changes in debt from the March 31, 2004, levels, the additional annual interest
expense would be approximately $0.7 million.

FOREIGN OPERATIONS AND FOREIGN CURRENCY EXCHANGE RISK

      Our foreign subsidiaries generally conduct business in local currencies.
Changes in foreign currency exchange rates could impact the translation of our
investments in foreign operations and our foreign currency denominated earnings,
cash flows and assets. During fiscal 2004, we recorded a favorable foreign
currency translation adjustment of $1.7 million in our stockholders'equity
related to net assets located outside the United States. This foreign currency
translation adjustment resulted primarily from the weakening of the United
States dollar in relation to the Canadian dollar and the British pound. Our
foreign operations are also subject to other customary risks of operating in a
global environment, such as unstable political situations, the effect of local
laws and taxes, tariff increases and regulations and requirements for export
licenses, the potential imposition of trade or foreign exchange restrictions and
transportation delays.

                                                                              41
<PAGE>

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
      Corrpro Companies, Inc.:

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

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

      In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Corrpro
Companies, Inc. and subsidiaries as of March 31, 2004 and 2003, and the results
of their operations and their cash flows for each of the years in the three-year
period ended March 31, 2004, in conformity with accounting principles generally
accepted in the United States of America.

      As discussed in note 1, to the accompanying consolidated financial
statements, effective April 1, 2002, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other
Intangible Assets.

/s/ KPMG LLP

Cleveland, Ohio

June 17, 2004

                                                                              42
<PAGE>

                    CORRPRO COMPANIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                             MARCH 31, 2004 AND 2003

                                 (In Thousands)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                     2004        2003
                                                                   --------    --------
<S>                                                                <C>         <C>
CURRENT ASSETS:
    Cash and cash equivalents                                      $  2,498    $  7,037
    Accounts receivable, less allowance for doubtful accounts of
        $729 and $660 at March 31, 2004 and 2003, respectively       24,139      18,156
    Note receivable                                                     768       7,192
    Inventories                                                       9,807       8,233
    Prepaid expenses and other                                        5,974       4,246
    Assets held for sale                                                 --       9,846
                                                                   --------    --------
         Total current assets                                        43,186      54,710
                                                                   --------    --------

PROPERTY, PLANT AND EQUIPMENT:

    Land                                                                548         443
    Buildings and improvements                                        6,153       4,897
    Equipment, furniture and fixtures                                17,242      15,610
                                                                   --------    --------
                                                                     23,943      20,950
    Less accumulated depreciation                                   (16,794)    (13,968)
                                                                   --------    --------
    Property, plant and equipment, net                                7,149       6,982
                                                                   --------    --------

OTHER ASSETS:
    Goodwill, net                                                    14,560      13,343
    Deferred income taxes                                               763         482
    Other assets                                                      7,055       3,023
                                                                   --------    --------
         Total other assets                                          22,378      16,848
                                                                   --------    --------

                                                                   $ 72,713    $ 78,540
                                                                   ========    ========
</TABLE>

           The accompanying Notes to Consolidated Financial Statements
                    are an integral part of these statements.

                                                                              43
<PAGE>

                    CORRPRO COMPANIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                             MARCH 31, 2004 AND 2003

                                 (In Thousands)

                 LIABILITIES AND SHAREHOLDERS' EQUITY(DEFICIT)

<TABLE>
<CAPTION>
                                                                                  2004        2003
                                                                                --------    --------
<S>                                                                             <C>         <C>
CURRENT LIABILITIES:
  Revolving credit facility                                                     $  2,779    $ 22,192
  Current portion of long-term debt                                                2,500      28,284
  Accounts payable                                                                10,894       9,081
  Accrued liabilities and other                                                   10,874      10,313
  Liabilities held for sale                                                           --       3,454
                                                                                --------    --------
      Total current liabilities                                                   27,047      73,324
                                                                                --------    --------

LONG-TERM DEBT
  Long-term debt, net of current portion                                          18,154         765
  Senior secured subordinated notes, net of discount of $2,932                    11,068          --
                                                                                --------    --------
        Total long-term debt                                                      29,222         765
                                                                                --------    --------

OTHER LONG-TERM LIABILITIES                                                        4,186       3,252

WARRANTS                                                                           8,994          --

COMMITMENTS AND CONTINGENCIES                                                         --          --

SERIAL PREFERRED SHARES
  Serial Preferred Shares issued and outstanding 13 shares of
    Series B Cumulative Redeemable Voting Preferred Stock, without par value,
    liquidation value of $13,000                                                   5,993          --

  SHAREHOLDERS' EQUITY (DEFICIT):
  Common Shares, voting, no par value, at stated value; 40,000 shares
    authorized; 8,507 shares issued in 2004 and 2003; 8,443 and
    8,408 shares outstanding in 2004 and 2003                                      2,276       2,276
  Additional paid-in capital                                                      46,266      46,560
  Accumulated deficit                                                            (50,555)    (45,076)
  Accumulated other comprehensive loss                                               (95)     (1,597)
  Common Shares in treasury, at cost;
    64 and 99 shares held in 2004 and 2003                                          (621)       (964)
                                                                                --------    --------
         Total shareholders' equity (deficit)                                     (2,729)      1,199
                                                                                --------    --------

                                                                                $ 72,713    $ 78,540
                                                                                ========    ========
</TABLE>

           The accompanying Notes to Consolidated Financial Statements
                    are an integral part of these statements.

                                                                              44
<PAGE>

                    CORRPRO COMPANIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                FOR THE YEARS ENDED MARCH 31, 2004, 2003 AND 2002

                      (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>
                                                                     2004         2003         2002
                                                                  ---------    ---------    ---------
<S>                                                               <C>          <C>          <C>
Revenues                                                          $ 130,084    $ 117,623    $ 134,784

Operating costs and expenses:
  Cost of sales                                                      88,713       80,506       95,292
  Selling, general and administrative expenses                       32,841       35,157       35,179
                                                                  ---------    ---------    ---------
Operating income                                                      8,530        1,960        4,313

Interest expense                                                      9,565        6,725        5,878
                                                                  ---------    ---------    ---------
Loss from continuing operations before
  Income taxes                                                       (1,035)      (4,765)      (1,565)
Provision (benefit) for income taxes                                    576         (363)      11,155
                                                                  ---------    ---------    ---------
Loss from continuing operations                                      (1,611)      (4,402)     (12,720)
Discontinued operations:
  Loss from operations, net of income taxes                          (3,822)      (8,280)      (5,497)
  Gain (loss) on disposals, net of income taxes                         (46)       2,095           --
                                                                  ---------    ---------    ---------
Loss before Cumulative effect of change in accounting principle      (5,479)     (10,587)     (18,217)
Cumulative effect of change in accounting principle                      --      (18,238)          --
                                                                  ---------    ---------    ---------
Net Loss                                                          $  (5,479)   $ (28,825)   $ (18,217)
                                                                  =========    =========    =========

Loss per share - Basic:
  Loss from continuing operations                                 $   (0.19)   $   (0.52)   $   (1.57)
  Discontinued operations:
  Loss from operations, net of income taxes                           (0.45)       (0.99)       (0.67)
  Gain (loss) on disposal, net of income taxes                        (0.01)        0.25           --
                                                                  ---------    ---------    ---------
Loss before Cumulative effect of change in accounting principle       (0.65)       (1.26)       (2.24)
Cumulative effect of change in accounting principle                      --        (2.17)          --
                                                                  ---------    ---------    ---------
Net Loss                                                          $   (0.65)   $   (3.43)   $   (2.24)
                                                                  =========    =========    =========

Weighted average shares outstanding - Basic                           8,419        8,387        8,119
                                                                  =========    =========    =========

Loss per share - Diluted:
  Loss from continuing operations                                 $   (0.19)   $   (0.52)   $   (1.57)
  Discontinued operations:
  Loss from operations, net of income taxes                           (0.45)       (0.99)       (0.67)
  Gain (loss) on disposal, net of income taxes                        (0.01)        0.25           --
                                                                  ---------    ---------    ---------
Loss before Cumulative effect of change in accounting principle       (0.65)       (1.26)       (2.24)

Cumulative effect of change in accounting principle                      --        (2.17)          --
                                                                  ---------    ---------    ---------
Net Loss                                                          $   (0.65)   $   (3.43)   $   (2.24)
                                                                  =========    =========    =========

Weighted average shares outstanding - Diluted                         8,419        8,387        8,119
                                                                  =========    =========    =========
</TABLE>

           The accompanying Notes to Consolidated Financial Statements
                    are an integral part of these statements.

                                                                              45
<PAGE>

                    CORRPRO COMPANIES, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY(DEFICIT)
                FOR THE YEARS ENDED MARCH 31, 2004, 2003 AND 2002

                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                          ACCUMULATED
                                                                                             OTHER
                                                 COMMON SHARES                              COMPRE-      COMMON
                                              -------------------  ADDITIONAL    ACCUM-     HENSIVE      SHARES
                                                            PAR      PAID-IN     ULATED      INCOME        IN
                                               NUMBER      VALUE     CAPITAL     DEFICIT     (LOSS)     TREASURY     TOTAL
                                              --------   --------  ----------   --------  -----------   --------    --------
<S>                                           <C>        <C>       <C>          <C>       <C>           <C>         <C>
March 31, 2001                                   7,866   $  2,276   $ 49,979    $  1,966    $ (6,679)   $ (6,024)   $ 41,518
Comprehensive Loss:
     Net loss                                       --         --         --     (18,217)         --          --     (18,217)
     Minimum pension liability, net of
       tax of $74                                   --         --         --          --        (132)         --        (132)
     Cumulative translation adjustment              --         --         --          --        (191)         --        (191)
                                                                                                                    --------
  Total Comprehensive Loss                          --         --         --          --          --          --     (18,540)

  Issuance of 391 Treasury Shares                  391         --     (2,986)         --          --       3,865         879
                                              --------   --------   --------    --------    --------    --------    --------
March 31, 2002                                   8,257      2,276     46,993     (16,251)     (7,002)     (2,159)     23,857
  Comprehensive Loss:
     Net loss                                       --         --         --     (28,825)         --          --     (28,825)
     Write-off Translation adjustment
        related to Discontinued operations          --         --         --          --       3,301          --       3,301
     Write-off of minimum pension liability
        related to Discontinued operations          --         --         --          --         498          --         498
     Cumulative translation adjustment              --         --         --          --       1,606          --       1,606
                                                                                                                    --------
  Total Comprehensive Loss                          --         --         --          --          --          --     (23,420)

  Issuance of 934 Stock Warrants                    --         --        626          --          --          --         626
  Issuance of 151 Treasury Shares                  151         --     (1,059)         --          --       1,195         136
                                              --------   --------   --------    --------    --------    --------    --------
 March 31, 2003                                  8,408      2,276     46,560     (45,076)     (1,597)       (964)      1,199
  Comprehensive Loss:
     Net loss                                       --         --         --      (5,479)         --          --      (5,479)
       Minimum pension liability, net
         of tax of $66                              --         --         --          --        (155)         --        (155)
     Cumulative translation adjustment              --         --         --          --       1,657          --       1,657
                                                                                                                    --------
  Total Comprehensive Loss                          --         --         --          --          --          --      (3,977)

  Issuance of 35 Treasury Shares                    35         --       (294)         --          --         343          49
                                              --------   --------   --------    --------    --------    --------    --------

March 31, 2004                                   8,443   $  2,276   $ 46,266    $(50,555)   $    (95)   $   (621)   $ (2,729)
                                              ========   ========   ========    ========    ========    ========    ========
</TABLE>

           The accompanying Notes to Consolidated Financial Statements
                    are an integral part of these statements.

                                                                              46
<PAGE>

                    CORRPRO COMPANIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE YEARS ENDED MARCH 31, 2004, 2003 AND 2002

                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                 2004        2003        2002
                                                               --------    --------    --------
<S>                                                            <C>         <C>         <C>
Cash flows from operating activities:
  Net loss                                                     $ (5,479)   $(28,825)   $(18,217)
  Adjustments to reconcile net loss
    to net cash provided by continuing operations:
    Loss on discontinued operations                               3,868       6,185       5,497
    Depreciation and amortization                                 3,641       3,130       4,257
    401(k) matching contributions in Treasury shares                 --         136         841
    Minimum pension liability                                        --         498          --
    Deferred income taxes                                          (264)     (1,014)      7,297
    Gain (loss) on sale of assets                                   (24)         11         (87)
    Cumulative effect of change in accounting principle              --      18,238          --
Changes in operating assets and liabilities,
    net of effects of acquisitions:
        Accounts and notes receivable                             1,196         787       4,844
        Inventories                                              (1,138)      1,525       4,459
        Prepaid expenses and other                               (2,426)       (990)      3,218
        Other assets                                               (836)       (780)      3,819
        Accounts payable and accrued expenses                     2,418       3,588      (1,158)
                                                               --------    --------    --------
         Total adjustments                                        6,435      31,314      32,987
                                                               --------    --------    --------
         Net cash provided by continuing operations                 956       2,489      14,770
                                                               --------    --------    --------

Cash flows from investing activities:
  Additions to property, plant and equipment                       (712)       (396)       (663)
  Proceeds from disposal of property, plant and equipment           182         499         796
                                                               --------    --------    --------
         Net cash provided (used) by investing activities          (530)        103         133
                                                               --------    --------    --------

Cash flows from financing activities:
  Net borrowing from new revolving credit facility                2,779          --          --
  Net proceeds from issuance of Preferred Shares and warrants    12,055          --          --
  Proceeds from senior subordinated notes and warrants           14,000          --          --
  Proceeds from senior secured notes                             20,500          --          --
  Payment of old senior notes                                   (27,108)     (1,609)     (1,714)
  Payment of old revolving credit facility and other debt       (24,500)     (9,707)     (3,699)
  Payment of financing cost                                      (5,281)       (203)        (61)
    Net proceeds from issuance of Common Shares                      49          --          40
                                                               --------    --------    --------
         Net cash used by financing activities                   (7,506)    (11,519)     (5,434)
                                                               --------    --------    --------

Effect of changes in foreign currency exchange rates on cash         16         154          (7)
                                                               --------    --------    --------

Cash provided by (used for) discontinued operations               2,525      10,994      (8,259)
                                                               --------    --------    --------

Net increase (decrease) in cash                                  (4,539)      2,221       1,203
Cash and cash equivalents at beginning of year                    7,037       4,816       3,613
                                                               --------    --------    --------
Cash and cash equivalents at end of year                       $  2,498    $  7,037    $  4,816
                                                               ========    ========    ========
</TABLE>

           The accompanying Notes to Consolidated Financial Statements
                    are an integral part of these statements.

                                                                              47
<PAGE>

                    CORRPRO COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                FOR THE YEARS ENDED MARCH 31, 2004, 2003 AND 2002

                      (In Thousands, Except Per Share Data)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

CONSOLIDATION AND BASIS OF PRESENTATION

      The consolidated financial statements include the accounts of Corrpro
Companies, Inc. and its subsidiaries (the "Company"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
Certain fiscal 2003 and 2002 amounts have been reclassified to conform with the
fiscal 2004 presentation.

      The Company's operations provide corrosion control engineering and
services, systems and equipment to the infrastructure, environmental and energy
markets throughout the world.

      In July 2002, the Company's Board of Directors approved a formal business
restructuring plan. The multi-year plan included a series of initiatives to
improve operating income and reduce debt by selling non-core business units. The
Company engaged outside professionals to assist in the disposition of its
domestic and international non-core business units. Prior to the quarter ended
September 30, 2002, the Company's non-core domestic and international units were
reported as the Other Operations and International Operations reporting
segments. Effective as of the quarter ended September 30, 2002, the Other
Operations and the International Operations reporting segments were eliminated
and the non-core domestic and international units were reported as discontinued
operations. Prior-year financial statements were reclassified to reflect these
non-core units as discontinued operations, which were also referred to as
"assets and liabilities held for sale."

      In the second quarter of fiscal 2004, the Company's Board of Directors
approved a resolution to keep the European Operations and remove them from
discontinued operations. After careful deliberation, the Board concluded that
due to the strength of the local management team, the similar characteristics of
the served markets, and the favorable prospects for this business, the Company's
value would be enhanced by maintaining our European presence rather than by
selling the operations at this time. Therefore, effective in the second quarter
of fiscal 2004, the Company reported quarterly and annual results of the
European Operations in its continuing operations. Prior-year financial
statements have been reclassified to reflect the European Operations as
continuing operations.

CASH AND CASH EQUIVALENTS

      Cash and cash equivalents consist of cash and highly liquid investments
with an original maturity of three months or less.

ACCOUNTS RECEIVABLE

      The Company records estimated allowances for uncollectible accounts
receivable based upon the number of days the accounts are past due, the current
business environment and specific information such as bankruptcy or liquidity
issues of customers. Historically, losses for uncollectible accounts receivable
have been within management's estimates. Corrosion control services and products
are provided to a large number of customers with no substantial concentration in
a particular industry or with an individual customer. The Company performs
ongoing credit evaluations of its customers' financial condition.

      Accounts receivable are presented net of allowances for doubtful accounts
of $729 and $660 at March 31, 2004 and 2003, respectively. Bad debt expense
totaled $193, $467 and $617 in fiscal 2004, 2003 and 2002, respectively. Trade
receivables written off, net of recoveries of prior years write-offs, totaled
$124, $1,703 and $874 in fiscal 2004,

                                                                              48
<PAGE>

2003 and 2002, respectively.

INVENTORIES

      Inventories are valued at the lower of cost or market with cost being
determined on the first-in, first-out method. Inventories consist of the
following at March 31, 2004 and 2003:

<TABLE>
<CAPTION>
                                     2004     2003
                                    ------   ------
<S>                                 <C>      <C>
Component parts and raw materials   $5,156   $5,250
Finished goods                       4,651    2,983
                                    ------   ------
                                    $9,807   $8,233
                                    ======   ======
</TABLE>

      Disposals of obsolete inventory, net of proceeds, totaled $84, $149 and
$183 in fiscal 2004, 2003 and 2002, respectively.

PROPERTY, PLANT AND EQUIPMENT

      Property, plant and equipment are stated at cost. Major renewals and
improvements are capitalized, while maintenance and repairs are expensed when
incurred. The cost and accumulated depreciation for property, plant and
equipment sold, retired or otherwise disposed of are removed from the accounts
and resulting gains or losses are reflected in income.

      Substantially all of the Company's operations compute depreciation on the
straight-line method. Depreciation for the Company's Canadian operations segment
is computed on the declining balance method. Estimated useful lives range from
25 to 40 years for buildings and from 4 to 10 years for equipment, furniture and
fixtures. Leasehold improvements are depreciated over the term of the lease. For
income tax reporting purposes, depreciation is computed principally using
accelerated methods.

      Depreciation expense totaled $1,485, $1,907 and $2,300 in fiscal 2004,
2003 and 2002, respectively.

GOODWILL, PATENTS AND OTHER INTANGIBLES

      In July 2001, Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142"), were issued by the
Financial Accounting Standards Board. SFAS 142 changes the accounting for
goodwill and indefinite life intangibles from an amortization approach to a
non-amortization approach, and require periodic tests for impairment of these
assets. Upon the Company's adoption of SFAS 142 on April 1, 2002, the provisions
of SFAS 142 required the discontinuance of amortization of goodwill and
indefinite life intangibles that had been recorded in connection with previous
business combinations. The Company has completed its initial impairment testing
as of April 1, 2002 under SFAS 142 and recorded an impairment loss totaling
$18,238 of which $11,832 related to discontinued operations and $6,406 related
to continuing operations. The loss is being recognized as the cumulative effect
of a change in accounting principle. This impairment testing is also done
annually in the fourth quarter and such testing indicated no additional
impairment as of March 31, 2004 and 2003.

      The following table reflects the reconciliation of reported net loss and
net loss per share to the amounts adjusted for the exclusion of goodwill
amortization:

<TABLE>
<CAPTION>
                                               2002
                                             --------
<S>                                          <C>
NET LOSS:
Reported Net Loss                            $(18,217)
Add back Goodwill Amortization                  1,723
                                             --------
Adjusted Net Loss                            $(16,494)
                                             ========
</TABLE>

                                                                              49
<PAGE>

<TABLE>
<S>                                          <C>
Income (loss) per share - Basic & Diluted:
    As reported                              $  (2.24)
    Adjusted Net Loss                        $  (2.03)
</TABLE>

      Goodwill balances as of March 31, 2004, totaled $14,560 compared to
$13,343 at March 31, 2003. The increase in goodwill was primarily the result of
Canadian foreign currency translation adjustments.

      In determining the fair value of the reporting units for SFAS 142, the
Company uses the income approach, market approach and the allocation of market
capitalization as its measures of valuation to periodically review the
impairment of goodwill.

      Included in other assets are amortizable assets consisting primarily of
patents, trademarks and covenants not to compete. Such assets, with a net book
value of $888 and $1,083 at March 31, 2004 and 2003, respectively, are amortized
on the straight-line method over their estimated useful lives ranging from 4 to
20 years. Amortization expense for such assets totaled $237, $217 and $227 in
fiscal 2004, 2003 and 2002, respectively. Amortization expense is anticipated to
be approximately $237 for each of the next five fiscal years.

      The Company uses an undiscounted cash flow method to periodically review
the net realizable value of other intangible assets and believes that such
assets are realizable.

FAIR VALUE OF FINANCIAL INSTRUMENTS

      The recorded value of cash and cash equivalents, receivables, payables,
accrued liabilities, short-term borrowings and assets and liabilities held for
sale approximates fair value because of the short maturity of these instruments.
The recorded value of the Company's long-term debt is considered to approximate
fair value based on the borrowing rates currently available to the Company for
loans with similar terms and maturities.

REVENUE RECOGNITION

      The Company records income from construction and engineering contracts
under the percentage-of- completion method, using costs incurred to date in
relation to estimated total costs of the contracts, to measure the stage of
completion. Original contract prices are adjusted for change orders and claims
when the change order or claim has been approved by the customer. Cost budgets
are revised, when necessary, in the amounts that are reasonably estimated based
on the Project Leaders' knowledge of the project as well as the Company's
historical experience. The cumulative effects of changes in estimated total
contract costs and revenues are recorded in the period in which the facts
requiring such revisions become known, and are accounted for using the
percentage-of-completion method. At the time it is determined that a contract is
expected to result in a loss, the entire estimated loss is recorded. Accounts
receivable includes $1,180 and $1,218 at March 31, 2004 and 2003, respectively,
of amounts billed but not paid by customers under retainage provisions of
contracts. Prepaid expenses and other includes $2,928 and $2,321 at March 31,
2004 and 2003, respectively, of amounts related to costs and estimated earnings
in excess of billings on uncompleted contracts. Accrued liabilities and other
includes $1,422 and $1,252 at March 31, 2004 and 2003, respectively, of amounts
related to billings in excess of costs and estimated earnings on uncompleted
contracts. The Company recognizes revenue from product sales upon shipment and
transfer of ownership.

PRODUCT DEVELOPMENT EXPENSES

      Expenditures for product development costs were minimal in fiscal 2004,
2003 and 2002.

WARRANTIES

      In the normal course of business, we provide warranties and
indemnifications for our products and services. We provide warranties that the
products we distribute are in compliance with prescribed specifications. In
addition, we have

                                                                              50
<PAGE>

indemnity obligations to our customers for these products, which have also been
provided to us from our suppliers, either through express agreement or by
operation of law.

      At March 31, 2004, warranty costs were not material to the consolidated
financial statements.

INCOME TAXES

      The Company uses the liability method whereby income taxes are recognized
during the fiscal year in which transactions enter into the determination of
financial statement income. Deferred tax assets and liabilities are recognized
for the expected future tax consequences of temporary differences between
financial statement and tax basis of assets and liabilities. The Company
recorded a valuation allowance for its net domestic deferred tax assets and net
operating loss carryforwards of $10,472 in the fourth quarter of fiscal 2002.
The Company intends to maintain a full valuation allowance for its net domestic
deferred tax assets until sufficient positive evidence exists to support the
reversal of the remaining reserve. Until such time, except for foreign and state
tax provisions, the Company will have no reported tax provision, net of changes
in the valuation allowance. In the event the Company was to determine, based on
the existence of sufficient positive evidence, that it would be able to realize
its deferred tax assets in the future in excess of its net recorded amount, an
adjustment to the valuation allowance would increase income in the period such
determination was made. See Note 6 of Notes to Consolidated Financial Statements
of the Company for additional information regarding income taxes.

EARNINGS PER SHARE

      Basic Earnings Per Share ("EPS") is computed by dividing net income (loss)
for the period by the weighted average number of common shares outstanding for
the period. Diluted EPS is computed by dividing net income (loss) by the
weighted average number of common shares and potential shares outstanding for
the period. Stock options and warrants are the only potential common shares and
are considered in the Company's diluted EPS calculation. Potential common shares
are computed using the treasury stock method. The effect of the 150 and 45
incremental shares stock options in fiscal 2004 and 2003, respectively, have
been excluded from dilutive weighted average shares, as the net loss for the
year would cause the incremental shares to be antidilutive. Moreover, the effect
of the 818 and 477 weighted average incremental shares from the issuance of
stock warrants in fiscal 2004 and 2003, respectively, have been excluded from
dilutive weighted average shares, as the net loss for the year would cause the
incremental shares to be antidilutive. On March 30, 2004, the Company completed
a recapitalization that resulted in the issuance of warrants exercisable for
Common Shares. In accordance with generally accepted accounting principles for
"Participating Securities," these warrants will be included in the weighted
average shares calculation only in periods in which the Company generates net
income available to common shareholders. Net income available to common
shareholders represents net income less the annual preferred stock dividend.

COMPREHENSIVE INCOME (LOSS)

      Accumulated other comprehensive income (loss) is reported separately from
retained earnings and additional paid-in-capital in the Consolidated Balance
Sheets. Items considered to be other comprehensive income (loss) include
adjustments made for foreign currency translation (under SFAS No. 52) and
pensions (under SFAS No. 87).

                                                                              51
<PAGE>

Components of other accumulated comprehensive income (loss) consist of the
following:

<TABLE>
<CAPTION>
                         MARCH 31,   MARCH 31,
                           2004        2003
                         ---------   ---------
<S>                      <C>         <C>
Translation adjustment    $    60     $(1,597)
Pensions                     (155)         --
                          -------     -------
Ending Balance            $   (95)    $(1,597)
                          =======     =======
</TABLE>

      Components of comprehensive income (loss) consist of the following:

<TABLE>
<CAPTION>
                                            TWELVE MONTHS ENDED
                                                 MARCH 31,
                                             2004        2003
                                           --------    --------
<S>                                        <C>         <C>
Net loss                                   $ (5,479)   $(28,825)
OTHER COMPREHENSIVE INCOME (LOSS):
Translation adjustment                        1,657       1,606
Pensions                                       (155)         --
Write-off translation adjustment related
    to European operations                       --        (152)
Write-off translation adjustment related
    to discontinued operations                   --       3,453
Write-off pensions related to European
    operations                                   --         498
                                           --------    --------
Total comprehensive loss                   $ (3,977)   $(23,420)
                                           ========    ========
</TABLE>

FOREIGN CURRENCY TRANSLATION

      The functional currency of each foreign subsidiary is the respective local
currency. Assets and liabilities are translated at the year-end exchange rates
and revenues and expenses are translated at average exchange rates for the
period. Resulting translation adjustments are recorded as a component of
shareholders' equity in other comprehensive income (loss).

FINANCIAL STATEMENT ESTIMATES

      The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect reported amounts and
related disclosures. Actual results could differ from these estimates.

STOCK-BASED COMPENSATION

      In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure." SFAS No. 148 amends SFAS
No. 123, "Accounting for Stock-Based Compensation" in that it requires
additional disclosures about our stock-based compensation plans. SFAS No. 148 is
effective for periods beginning after December 15, 2002. We account for our
stock-based compensation plans using the intrinsic value method of recognition
and measurement principles under APB Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. We adopted the
disclosure-only provisions of SFAS No. 123. Assuming that we had accounted for
our stock-based compensation programs using the fair value method promulgated by
SFAS No. 123, proforma net loss and net loss per share would have been as
follows (for the fiscal years ended):

                                                                              52
<PAGE>

<TABLE>
<CAPTION>
                                                          2004          2003          2002
                                                       ----------    ----------    ----------
<S>                                                    <C>           <C>           <C>
Loss from continuing operations:
     As reported                                       $   (1,611)   $   (4,402)   $  (12,720)
     Pro forma                                             (2,504)       (4,658)      (12,899)

Loss from continuing operations per share - Basic:
     As reported                                       $    (0.19)   $    (0.52)   $    (1.57)
     Pro forma                                              (0.30)        (0.56)        (1.59)

Loss from continuing operations per share - Diluted:
     As reported                                       $    (0.19)   $    (0.52)   $    (1.57)
     Pro forma                                              (0.30)        (0.56)        (1.59)
</TABLE>

      All options were granted at an exercise price equal to the market price of
the Company's common stock at the date of the grant. The weighted-average fair
value price at the date of grant for options granted during fiscal 2004, 2003
and 2002 was $1.52, $0.32 and $3.70 per option, respectively. For purposes of
this pro forma, the fair value of each option grant was estimated on the date of
grant using the Black-Scholes option-pricing model. The significant assumptions
used were risk-free interest rates ranging from 3.3% to 4.75%, expected
volatility of 118.7% for 2004, 142.0% for 2003 and 113.5% for 2002, an expected
life of 10 years and no expected dividends. As a result of the change in
control, 854 options vested.

2.  ASSETS AND LIABILITIES HELD FOR SALE

      In July 2002, the Company's Board of Directors approved a formal business
restructuring plan. The multi-year plan included a series of initiatives to
improve operating income and reduce debt by selling non-core business units. The
Company engaged outside professionals to assist in the disposition of its
domestic and international non-core business units. Prior to the quarter ended
September 30, 2002, the Company's non-core domestic and international units were
reported as the Other Operations and International Operations reporting
segments. Effective as of the quarter ended September 30, 2002, the Other
Operations and the International Operations reporting segments were eliminated
and the non-core domestic and international units were reported as discontinued
operations. Prior-year financial statements were reclassified to reflect these
non-core units as discontinued operations, which were also referred to as
"assets and liabilities held for sale."

      In the second quarter of fiscal 2004, the Company's Board of Directors
removed our European Operations from discontinued operations. The Board
concluded that the Company's value would be enhanced by maintaining its European
presence rather than by selling the European Operations at this time, based in
part on the strength of the local management team, the similar characteristics
of the served markets, and the favorable prospects for this business. Therefore,
effective in the second quarter of fiscal 2004, the Company reported quarterly
and annual results of its European Operations in its continuing operations, and
prior-year financial statements have been reclassified to reflect its European
Operations as continuing operations.

      Assets and liabilities held for sale consisted of the following at March
31, 2003:

<TABLE>
<S>                                  <C>
Cash                                 $ 1,296
Accounts Receivable                    4,656
Inventory                              1,394
Prepaid Expenses                       2,173
Property, plant and equipment, net        --
Goodwill and Other Assets                327
                                     -------
Assets held for sale                 $ 9,846
                                     =======

Current Liabilities                  $ 3,525
</TABLE>

                                                                              53
<PAGE>

<TABLE>
<S>                                  <C>
Deferred Taxes & Minority Interest       (71)
                                     -------
Liabilities held for sale            $ 3,454
                                     =======
</TABLE>

      Operating gains or losses have been experienced with the disposition of
the non-core assets at the time of disposal during implementation of the
restructuring plan. Statements of operations for the discontinued operations for
the years ended March 31, 2004, 2003 and 2002 are shown below.

<TABLE>
<CAPTION>
                                                   FOR THE TWELVE MONTHS ENDED
                                                            MARCH 31,
                                                --------------------------------
                                                  2004        2003        2002
                                                --------    --------    --------
<S>                                             <C>         <C>         <C>
Revenues                                        $ 10,058    $ 26,906    $ 37,406
Operating cost and expenses:
   Cost of sales                                   7,863      17,918      26,742
   Selling, general & administrative expenses      5,651      15,549      14,584
                                                --------    --------    --------
Operating loss                                    (3,456)     (6,561)     (3,920)
(Gain) loss on disposal                               46      (2,095)         --
Interest expense                                     366       1,637       1,474
                                                --------    --------    --------
Loss from discontinued operations
   before income taxes                            (3,868)     (6,103)     (5,394)
Provision for income taxes                            --          82         103
                                                --------    --------    --------
Loss from discontinued operations               $ (3,868)   $ (6,185)   $ (5,497)
                                                ========    ========    ========
</TABLE>

      The Company allocated interest to discontinued operations of $366, $1,637
and $1,474 for fiscal 2004, 2003 and 2002, respectively, based on estimated
proceeds from the discontinued operations dispositions that were used to pay
down the Revolving Credit Facility and Senior Notes (see Note 3 - Long-Term
Debt). The interest rate used to calculate the interest expense allocated was
the weighted average interest rate of the Revolving Credit Facility and Senior
Notes.

      During fiscal 2004, the Company substantially completed the sale of its
Middle East subsidiaries after recording impairment charges relating to these
operations of $3,530. In March 2004, the Company recorded a remaining note
receivable for $768, which the Company collected in fiscal 2005, for its Middle
East subsidiaries. During the first quarter of fiscal 2004, the Company sold its
Asia Pacific operations for a net loss of $46 after taking into account an
impairment charge on net assets which was recorded during the fourth quarter of
fiscal 2003 totaling $1,575. During fiscal 2003, the Company disposed of four
non-strategic business units. First, in March 2003, the Company sold its
Bass-Trigon Software business unit for $3,150 and recognized a gain of $194.
Also, in March 2003, the Company recorded a note receivable for $6,232, which
the Company collected in fiscal 2004, for its Rohrback Cosasco Systems
subsidiary and recognized a gain of $1,809. The Company also disposed of two
smaller international offices resulting in a net gain of $92 during fiscal 2003.
The net proceeds from dispositions were used to pay down debt.

      During fiscal 2003, the Company recorded an impairment charge relating to
its Asia Pacific operations totaling $1,575 based on current market value of
these operations and additionally recorded an impairment charge totaling $450
based on market value analysis of its Middle East operations. Additionally, an
impairment charge totaling $450, based on a market value analysis, was recorded
for its European operations which is now reported in continuing operations in
fiscal 2003. Also during fiscal 2003, discontinued operations recorded charges
to selling, general and administrative expenses totaling $3,813 related to
currency translation.

3.  LONG-TERM DEBT:

      Long-term debt at March 31, 2004 and 2003 consisted of the following:

                                                                              54
<PAGE>

<TABLE>
<CAPTION>
                                           2004      2003
                                         -------   -------
<S>                                      <C>       <C>
New Term Loan,                           $20,500   $    --
New Senior Secured Subordinated Notes,
   due 2011, net of discount $2,932       11,068        --
New Revolving Credit Facility              2,779        --
Old Senior Notes, due 2008                    --    26,824
Old Revolving Credit Facility                 --    22,192
Other                                        154     2,225
                                         -------   -------
                                          34,501    51,241
Less: current portion                      5,279    50,476
                                         -------   -------
                                         $29,222   $   765
                                         =======   =======
</TABLE>

      On March 30, 2004, the Company entered into a $40.0 million revolving
credit, term loan and security agreement that expires on March 30, 2009. Initial
borrowings were used to repay existing indebtedness. The revolving credit
facility provides for a maximum principal amount of $19.5 million. Borrowings
under the revolving credit facility are limited to borrowing base amounts as
defined. The interest rate on the revolving credit facility is at prime plus
1.75%, which was 5.75% at March 31, 2004. The Company is also required to pay an
unused line fee of 0.75% on the unused portion of the revolving credit facility
and a collateral management fee of 0.50% based on the funded portion of the
revolving credit facility. The revolving credit facility includes a credit
sub-facility of $7.0 million for the issuance of standby letters of credit.
Standby letter of credit fees are 3.0% on the undrawn face amount of all
outstanding standby letters of credit. At March 31, 2004, the Company had $2.8
million outstanding under the revolving credit facility. The Company also had
$6.1 million of outstanding letters of credit as of March 31, 2004. Total
availability under the revolving credit facility at March 31, 2004, was
approximately $4.5 million, after giving consideration to the borrowing base
limitations under the revolving credit facility. The Company paid $3,448 in
deferred financing costs, which is classified in other assets on the
Consolidated Balance Sheets. This amount will be amortized over the life of the
debt, using the effective interest rate method.

      The term loan facility provided for an original principal amount of $20.5
million. The term loan bears interest at prime plus 3.5% subject to a floor of
7.5%. The term loan requires the Company to make monthly principal payments from
inception to March 1, 2009. The amount of the monthly payments are fixed, but
the monthly amount increases each year. In addition, notwithstanding any other
provisions in the revolving credit, term loan and security agreement, the
Company is required to pay 50% of its excess cash flow, as defined, each year,
starting with the year ending March 31, 2005, to further pay down the term loan.
At March 31, 2004, the outstanding balance on the term loan was $20.5 million.

      Borrowings under the revolving credit, term loan and security agreement
are secured by a first priority security interest in the Company's domestic and
Canadian accounts receivable, inventories, certain intangibles, machinery and
equipment and owned real estate. The Company has also pledged slightly less than
two-thirds of the capital stock of two of its foreign subsidiaries. The
agreement requires the Company to maintain certain financial ratios and places
limitations on its ability to pay cash dividends, incur additional indebtedness,
make investments, including acquisitions, and take certain other actions. The
Company was in compliance with these covenants at March 31, 2004.

      On March 30, 2004, the Company entered into a $14.0 million senior secured
subordinated note and equity purchase agreement. Initial borrowings were used to
repay existing indebtedness. The interest rate on the senior secured
subordinated notes is 12.5%. The notes do not require principal payments and are
due on March 29, 2011. The senior secured subordinated notes are secured by a
lien on the Company's domestic and Canadian accounts receivable, inventories,
certain intangibles, machinery and equipment and owned real estate subordinated
in lien priority only to the liens in favor of the senior lender. In addition,
the holder of the senior secured subordinated notes received a warrant to
purchase 3.9 million shares of the Company's Common Shares at an exercise price
of $.001. A valuation was performed to determine the fair market value of the
warrants at March 31, 2004. This value was recorded as a liability on the
Company's balance sheet and the debt balance was recorded at a discount. The
amount of the discount will be amortized using the effective interest method
over the life of the senior secured subordinated debt agreement. The fair market
value of warrant is

                                                                              55
<PAGE>

required to be updated on a quarterly basis. The primary input into this
valuation is the market price of the Common Shares. As the Company's stock price
increases, the value of the warrant will increase and as the stock price
decreases, the value of the warrant decreases. The change in the value of the
warrant will be recorded as income or expense in future period quarterly
results. This has the potential to cause volatility in reported results in
future periods. In addition, the warrant agreement provides for the warrant to
participate in dividend distributions, even if the warrant has not been
exercised. However, the warrant is not required to participate in losses.
Therefore, the warrant is considered to be a "Participating Security" by
Financial Accounting Standards No. 128 for Earnings Per Share (EPS)
calculations. This means that the warrant is included in the weighted average
share calculation only in periods in which the Company generates net income
available to common shareholders. As such, the Company's EPS calculations also
have the potential to be volatile. The senior secured subordinated note and
equity purchase agreement requires the Company to maintain certain financial
ratios and places limitations on its ability to pay cash dividends, incur
additional indebtedness, make investments, including acquisitions, and take
certain other actions. The Company was in compliance with these covenants at
March 31, 2004. The Company paid $1,832 in deferred financing costs, which is
classified in other assets on the consolidated balance sheets. This amount will
be amortized over the life of the debt, using the effective interest rate
method.

      On March 30, 2004, the Company entered into a securities purchase
agreement with a purchaser providing for a $13.0 million private equity
investment. The proceeds were used to repay existing indebtedness. Under the
terms of the securities purchase agreement, the Company issued 13,000 shares of
newly-created Series B Preferred Stock. In addition, the purchaser received a
warrant to purchase 12.1 million shares of Common Shares at an exercise price of
$.001. A valuation was performed to determine the fair market value of the
warrants at March 31, 2004. This value was recorded as a liability on the
Company's balance sheet and the Series B Preferred Stock was recorded net of the
value of the warrant. The fair market value of warrant is required to be updated
on a quarterly basis. The primary input into this valuation is the market price
of the Common Shares. As the Company's stock price increases, the value of the
warrant will increase and as the stock price decreases, the value of the warrant
decreases. The change in the value of the warrant will be recorded as income or
expense in future period quarterly results. This has the potential to cause
volatility in reported results in future periods. In addition, the warrant
agreement provides for the warrant to participate in dividend distributions,
even if the warrant has not been exercised. However, the warrant is not required
to participate in losses. Therefore, the warrant is considered to be a
"Participating Security" by Financial Accounting Standards No. 128 for Earnings
Per Share (EPS) calculations. This means that the warrant is included in the
weighted average share calculation only in periods in which the Company
generates net income available to common shareholders. As such, the Company's
EPS calculations also have the potential to be volatile. The securities purchase
agreement requires the Company to maintain certain financial ratios and places
limitations on its ability to incur additional indebtedness, make investments,
including acquisitions, and take certain other actions. The Company was in
compliance with these covenants at March 31, 2004.

      Previous Revolving Credit Facility. In March 1999, the Company entered
into an $80 million revolving credit facility that originally expired on April
30, 2002 (the "Revolving Credit Facility"). Initial borrowings were used to
repay existing domestic bank indebtedness. Through a series of subsequent
amendments, the size of the Revolving Credit Facility was reduced to $26.4
million and the expiration date was extended to March 31,2004. Borrowings under
the Revolving Credit Facility were limited to borrowing base amounts as defined.
The Revolving Credit Facility provided for interest on borrowings at prime plus
5.0% and required the Company to pay a facility fee of 1.0% on the commitment
amount. The Revolving Credit Facility was repaid on March 30, 2004. The Company
expensed deferred financing costs of $0.2 million for the twelve months ended
March 31, 2004.

      Senior Notes. In January 1998, the Company issued, through a private
placement, $30 million of Senior Notes that were due 2008 (the "Senior Notes").
Through a series of subsequent amendments, the terms and conditions of the
Senior Notes were modified to, among other things, change the interest rate
payable on the Senior Notes and to defer certain principal payments thereunder.
The Senior Notes, as amended, provided for interest at 11.35% until March
31, 2004. The Senior Notes were repaid on March 30, 2004. The Company expensed
deferred financing costs of $1.1 million for the twelve months ended March 31,
2004.

      Within the Senior Notes Agreement was a yield maintenance amount
provision, which ensured that the lender was paid the entire interest amount of
the Senior Notes. The yield maintenance amount provisions applied to certain
optional prepayments of principal under the Senior Notes and provided that the
Senior Notes were subject to prepayment, in whole at any time or from time to
time in part, at the option of the Company, at 100% of the principal amount so
prepaid plus interest thereon to the prepayment date and the yield maintenance
amount, if any, with respect to each Senior Note. Any partial prepayment of the
Senior Notes, which met certain criteria, were applied against the principal
amount of the Senior Notes scheduled to become due in the inverse order of
maturity thereof. The Company paid and expensed yield maintenance amounts of
$2.2 million for the twelve months ended March 31, 2004 as interest expense on
the Consolidated Statement of Operations.

      The Company believes that cash generated by operations and amounts
available under its credit facilities will be sufficient to satisfy its
liquidity requirements through at least fiscal 2005.

      Cash paid for interest totaled $4,996, $6,083 and $6,636 for fiscal years
2004, 2003, and 2002, respectively.

4.  SERIAL PREFERRED SHARES

      The Series B Preferred Stock will accrue cumulative quarterly dividends at
an annual rate of 13.5%. In the event the Company does not maintain certain
financial covenants for the twelve months preceding any quarterly dividend
payment date, the annual dividend rate will increase to 16.5% for each
subsequent calendar quarter during which the Company fails to comply with such
financial covenants.

      Dividends on the Series B Preferred Stock are payable either (i) in cash
if then permitted under the terms of the outstanding senior indebtedness and/or
subordinated indebtedness or (ii) in additional shares of Series B Preferred
Stock. Dividends payable in cash would be paid when, as and if declared by the
Board of Directors out of funds legally available thereof. The terms of the
senior financing prohibit, unless approved by the lender, the payment of any
cash dividends on the Series B Preferred Stock while such debt is outstanding.

      The Series B Preferred Stock will rank, with respect to the payment of
dividends and rights upon liquidation, dissolution or winding up of the Company,
senior to the Common Stock and each other class or series of capital stock of
the Company the terms of which do not expressly provide that such class or
series shall rank equal or senior to the Series B Preferred Stock with respect
to the payment of dividends or rights upon liquidation, dissolution or winding
up (collectively, "Junior Stock").

      The liquidation preference of each share of Series B Preferred Stock is
$1,000 per share, plus any accrued and unpaid dividends thereon. In the event of
any voluntary or involuntary liquidation, dissolution or winding up of the

                                                                              56
<PAGE>

Company, the holders of Series B Preferred Stock will be entitled to receive the
liquidation preference per share of Series B Preferred Stock in effect on the
date of such liquidation, dissolution or winding up, plus an amount equal to any
accrued but unpaid dividends thereon as of such date before any distribution or
payment is made to the holders of Junior Stock.

      Under the terms of the Series B Preferred Stock, a liquidation,
dissolution or winding up of the Company shall be deemed to include any sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the capital stock or assets of the
Company or a merger, consolidation or other transaction or series of related
transactions in which the Company's shareholders immediately prior to such
transaction do not retain a majority of the voting power in the surviving
entity, unless the holders of a majority of the then-outstanding shares of
Series B Preferred Stock affirmatively vote or consent in writing that any such
transaction shall not be treated as a liquidation, dissolution or winding up.

      The Series B Preferred Stock is redeemable at the option of the holders of
a majority of the outstanding Series B Preferred Stock upon the occurrence of
any of the following events with respect to the Company:

      -     the occurrence of any change in beneficial ownership, merger,
            consolidation, sale or other disposition of assets, or other similar
            type event that constitutes a "change of control" or similar-termed
            event, or a breach or other triggering event, under the terms of our
            senior indebtedness and/or subordinated indebtedness;

      -     the acceleration of any amounts due under the senior indebtedness
            and/or subordinated indebtedness;

      -     any issuance or sale of the Company's equity securities in a public
            or private offering resulting in aggregate net proceeds to the
            Company in excess of $20.0 million;

      -     any liquidation, dissolution or winding-up of the Company, whether
            voluntary or involuntary; or

      -     the occurrence of certain bankruptcy and insolvency events.

      In addition, if then permitted by the holders of the senior indebtedness
and/or subordinated indebtedness, the Series B Preferred Stock would be
redeemable at the option of a majority of the holders of Series B Preferred
Stock upon the occurrence of any of the following events with respect to the
Company:

      -     the acquisition of 20% or more of the outstanding voting securities
            of the Company by any person or group, other than through the
            ownership or acquisition of the Series B Preferred Stock, the
            Purchaser Warrant, or the shares of Common Stock issued upon
            exercise of the Purchaser Warrant;

      -     a consolidation or merger involving the Company, other than a
            consolidation or merger under a transaction in which (i) the
            outstanding voting stock of the Company remains outstanding or (ii)
            the beneficial owners of the outstanding voting stock of the Company
            immediately prior to such transaction beneficially own less than 80%
            of the voting stock of the surviving entity immediately following
            such transaction;

      -     the sale, transfer, assignment, lease, conveyance or other
            disposition in one or a series of transactions in excess of 20% of
            the assets of the Company, or assets of the Company resulting in
            aggregate net proceeds to the Company in excess of $20.0 million; or

      -     the aggregate amount of indebtedness of the Corporation is equal to
            or less than $2.0 million.

      Each share of Series B Preferred Stock shall entitle the holder thereof to
vote on all matters voted on by the holders of Common Stock, voting together
with the holders of Common Stock and all other voting stock of the Company

                                                                              57
<PAGE>

as a single class at all annual, special and other meetings of the shareholders
of the Company. Initially the Series B Preferred Stock will have approximately
51% of the total voting power of the Company. Such percentage is subject to
adjustment based on shares outstanding in the future at any particular time. The
percentage of voting power is mathematically calculated as follows: In any vote
in which the holders of Series B Preferred Stock are entitled to vote with the
holders of Common Stock, each share of Series B Preferred Stock shall entitle
the holder thereof to cast that number of votes equal to the quotient of (i) the
product of (A) 1.0408, multiplied by (B) the total number of votes that may be
cast by the holders of all Post Transaction Fully Diluted Shares as of the
record date for such vote, divided by (ii) 13,000. Future issuances of voting
securities of the Company not contemplated in the securities purchase agreement
will proportionately reduce the voting power of the Series B Preferred Stock.

      In addition to the foregoing, the approval of the holders of a majority of
the outstanding Series B Preferred Stock, voting separately as a class, is
required to:

      -     amend, modify or alter any provision of the Amended Articles or the
            Amended Regulations that adversely affect the rights of the holders
            of the Series B Preferred Stock;

      -     consummate a merger or consolidation of the Company or sale in
            excess of 40% of the assets of the Company;

      -     consummate a liquidation, dissolution, winding up, recapitalization
            or reorganization of the Company;

      -     effect any material acquisition or series of acquisitions, joint
            venture or strategic alliance involving the Company;

      -     pay any dividends or distributions on, or make any other payment in
            respect of, any capital stock of the Company, except for dividends
            and distributions payable (i) on the Series B Preferred Stock or on
            any shares of capital stock of the Company ranking equal or senior
            to the Series B Preferred Stock, or (ii) to the holders of Common
            Stock in the form of additional shares of Common Stock;

      -     authorize, designate, sell or issue any capital stock or debt
            securities (other than, with respect to debt securities, any senior
            indebtedness) of the Company and/or its subsidiaries, except for (i)
            issuances of shares of Common Stock after the initial issue date of
            the Series B Preferred Stock issuable upon exercise of options or
            rights granted to directors, officers or employees of the Company
            under existing or future option plans of the Company, provided that
            the aggregate amount of such issuances do not exceed 15% of the Post
            Transaction Fully Diluted Shares, (ii) issuances of Common Stock
            upon exercise of the Existing Warrants or (iii) issuances of Common
            Stock upon exercise of the Warrants; or

      -     redeem or purchase any capital stock of the Company, except for (i)
            redemptions of Series B Preferred Stock contemplated by the terms of
            the Amended Articles, and (ii) payments to holder of the senior
            secured subordinate note upon exercise of its right to require the
            Company to redeem or repurchase the Warrant or the shares of Common
            Stock issuable upon exercise of the Warrant.

      The terms of the Series B Preferred Stock also provide that for so long as
at least 40% of the shares of Series B Preferred Stock issued at the Closing
remain outstanding, the holders of Series B Preferred Stock will have the right
to appoint a majority of the full Board of Directors.

      After the initial issue date of the Series B Preferred Stock, the Company
cannot issue or sell any capital stock or debt securities (other than senior
secured indebtedness of the Company) unless prior to such issuance or sale, each
holder of Series B Preferred Stock has first been given the opportunity to
purchase, on the same terms and conditions on which such securities are proposed
to be issued or sold by the Company, such holder's proportionate share of 51% of
the securities to be issued or sold by the Company. Holders of Series B
Preferred Stock will not have preemptive rights to purchase:

                                                                              58
<PAGE>

      -     shares of Common Stock issued after the initial issue date of the
            Series B Preferred Stock upon exercise of options or rights granted
            to directors, officers or employees of the Company under existing or
            future option plans of the Company, provided that the aggregate
            amount of such shares does not exceed 15% of the Post Transaction
            Fully Diluted Shares;

      -     shares of Common Stock issuable upon exercise of the Existing
            Warrants;

      -     shares of Common Stock issuable upon exercise of the Warrants;

      -     shares of Common Stock issuable upon conversion of convertible
            securities of the Company outstanding on the initial issue date of
            the Series B Preferred Stock; or

      -     shares of Series B Preferred Stock issued in accordance with the
            terms of the Amended Articles.

      Shares of Series B Preferred Stock generally may be sold or otherwise
transferred to a single purchaser in one transaction involving all of the
outstanding Series B Preferred Stock. Any other sale or transfer of Series B
Preferred Stock must be approved by a committee of disinterested directors of
the Board of Directors, which consent may not be unreasonably withheld. If a
committee of disinterested members of the Board of Directors approves all future
transfers of Series B Preferred Stock, then such approval will be irrevocable
and be binding upon the Company as to any future transfer of Series B Preferred
Stock.

5.  LEASES:

      The Company leases certain office and warehouse space and equipment under
operating leases and capital leases, which expire at various dates through 2012.
Future minimum rental payments under long-term lease agreements are as follows:
$2,635 in 2005, $1,914 in 2006, $1,290 in 2007, $638 in 2008, $405 in 2009 and
$702 after 2009 with a cumulative total of $7,584. In addition, the Company
rents other properties on a month-to-month basis.

      Total rental expense was $4,729, $4,745 and $3,926 for fiscal 2004, 2003
and 2002, respectively.

6.  INCOME TAXES:

      Components of income (loss) from continuing operations before income taxes
as follows:

<TABLE>
<CAPTION>
                  2004       2003       2002
                -------    -------    -------
<S>             <C>        <C>        <C>
United States   $(3,713)   $(4,633)   $(3,294)
Foreign           2,678       (132)     1,729
                -------    -------    -------
                $(1,035)   $(4,765)   $(1,565)
                =======    =======    =======
</TABLE>

      Components of the provision for income taxes for continuing operations by
jurisdiction follow:

<TABLE>
<CAPTION>
                                  2004        2003        2002
                                --------    --------    --------
<S>                             <C>        <C>          <C>
Current  -- Federal             $     24   $      --    $     --
         -- State and local           --         120          --
         -- Foreign                  833         718       1,618
                                --------    --------    --------
                                     857         838       1,618
Deferred -- Federal                   --          --       9,351
         -- State and local           --          --         (56)
         -- Foreign                 (281)     (1,201)        242
                                --------    --------    --------
                                    (281)     (1,201)      9,537
                                --------    --------    --------
                                $    576    $   (363)   $ 11,155
                                ========    ========    ========
</TABLE>

                                                                              59
<PAGE>

      Differences between the statutory United States federal income tax rate
(34%) and the effective income tax rate for continuing operations are as
follows:

<TABLE>
<CAPTION>
                                           2004        2003        2002
                                         --------    --------    --------
<S>                                      <C>         <C>         <C>
Federal income tax provision (benefit)
  at statutory rate                      $   (352)   $ (1,620)   $   (532)
State income taxes, net                       (82)         78         (36)
Foreign tax rate differential                (359)        686       1,182
Meals and entertainment                       151         169         178
Valuation allowance                         1,210         364      10,472
Other                                           8         (40)       (109)
                                         --------    --------    --------
Effective income tax                     $    576    $   (363)   $ 11,155
                                         ========    ========    ========
</TABLE>

      Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities were comprised of the following at March 31, 2004 and
2003:

<TABLE>
<CAPTION>
                                               2004        2003
                                             --------    --------
<S>                                          <C>         <C>
DEFERRED TAX ASSETS
  Bad debts                                  $    183    $    208
  Other accruals                                  899         860
  Uniform cost capitalization                      19           9
  Accrued expenses                              1,031         473
  Pension and other benefit accruals              718       1,264
  Minimum tax credit                              557         557
  Federal net operating loss carryforwards      2,877       7,060
  State net operating loss carryforwards          772         772
  Other                                         1,573         835
                                             --------    --------
         Total deferred tax assets              8,629      12,038
</TABLE>

<TABLE>
<CAPTION>
                                               2004        2003
                                             --------    --------
<S>                                          <C>         <C>
DEFERRED TAX LIABILITIES
  Property, plant and equipment                  (274)       (353)
  Other                                          (409)       (367)
                                             --------    --------
         Total deferred tax liabilities          (683)       (720)
                                             --------    --------
Valuation allowance                            (7,183)    (10,836)
                                             --------    --------
Total net deferred taxes                     $    763    $    482
                                             ========    ========
</TABLE>

      In fiscal year 2002, the Company established a full valuation allowance
for its net domestic deferred tax assets due to its recurring losses. The
valuation allowance was calculated in accordance with SFAS 109. The Company
intends to maintain a full valuation allowance on its net domestic deferred tax
assets including net operating loss carryforwards until sufficient positive
evidence exists to support a reversal of the remaining allowance.

      Undistributed earnings of foreign subsidiaries amounted to $17,745 as of
March 31, 2004. Deferred income taxes are not provided on these earnings as it
is intended that these earnings are indefinitely re-invested in these entities.

                                                                              60
<PAGE>

      The Company had state net operating loss carryforwards and federal net
operating loss carryforwards, which expire through 2022. The Company also has
federal credit carryforwards relating to non-expiring alternative minimum tax
credits. As a result of the refinancing and recapitalization transaction Corrpro
experienced a change of control for income tax purposes as defined in U.S. tax
law. As such, our net operating loss carryforwards available for use are
limited as defined in section 382 of the U.S. tax code. Accordingly, the
deferred tax asset associated with the federal net operating loss carry
forwards, was reduced by $4,183, as well as the corresponding valuation
allowance.

      Cash paid for income taxes totaled $1,394, $552 and $1,598 for fiscal
2004, 2003 and 2002, respectively.

7.  EMPLOYEE BENEFIT PLANS:

      One of the Company's foreign operations has a contributory defined benefit
pension plan. Employees of such foreign subsidiary no longer accrue benefits
under the plan, however, the Company continues to be obligated to fund prior
period benefits. The Company funds the plan in accordance with recommendations
from independent actuaries. Pension benefits generally depend on length of
service and job grade.

      The following table sets forth the change in benefit obligation, change in
plan assets, funded status, Consolidated Balance Sheets presentation, net
periodic pension benefit cost and the relevant assumptions for the Company's
defined benefit pension plan at March 31:

<TABLE>
<CAPTION>
                                                      2004        2003
                                                    -------     -------
<S>                                                 <C>         <C>
Change in benefit obligation:
  Benefit obligation at beginning of year           $ 5,168     $ 3,816
    Service cost                                         --          --
    Interest cost                                       288         249
    Assumption change                                   (88)        771
    Effects of currency translation                     886         398
    Benefits paid                                       540         (66)
                                                    -------     -------
Benefit obligation at end of year                   $ 6,794     $ 5,168

Change in plan assets
  Fair value of plan assets at beginning of year    $ 3,031     $ 3,034
    Employer contributions                              253         193
    Benefits paid                                       (88)        (66)
    Effects of currency translation                     504         319
    Investment return                                   553        (449)
                                                    -------     -------
  Fair value of plan assets at end of year          $ 4,253     $ 3,031

Funded status                                       $(2,541)    $(2,137)

Amounts recognized in Consolidated Balance Sheets
  Accrued benefit liability                         $(2,320)    $(2,137)
  Minimum pension liability                            (221)         --
</TABLE>

<TABLE>
<CAPTION>
                                                      2004        2003        2002
                                                    -------     -------     -------
<S>                                                 <C>         <C>         <C>
Net periodic pension benefit cost
  Service cost                                      $    --     $    --     $    --
  Interest cost                                         288         247         218
  Expected return on assets                            (215)       (274)       (239)
  Net amortization and deferral                          --         749          17
                                                    -------     -------     -------
Net periodic pension cost                           $    73     $   722     $    (4)

Weighted-average assumptions as of March 31
  Discount rate                                        5.25%        5.0%        6.0%
  Long-term rate of return on plan assets               6.5%        8.0%        8.0%
  Rate of increase in compensation level                N/A         N/A         N/A
</TABLE>

                                                                              61
<PAGE>

      The Company also maintains the Corrpro Companies, Inc. 401(k) Savings Plan
for all eligible employees in the United States under Section 401(k) of the
Internal Revenue Code. The Company may, at its discretion, make contributions to
the plan. In addition, the plan permits matching contributions. Effective
October 1, 2000, the Company began matching employee contributions with treasury
shares. For fiscal year 2004 and 2003, the Company issued 0 and 121 treasury
shares for the Company's matching portion. Total matching contributions in cash
and treasury shares totaled $0, $199 and $977 in fiscal 2004, 2003 and 2002,
respectively. Effective April 6, 2002, the Company suspended the Company match
and no matching contributions were made with respect to fiscal 2004.

      The Company has entered into an agreement with one of its former
executives, which provides, among other things, that such employee shall be
eligible to receive retirement income, with a lifetime survivor benefit, in an
amount equal to 50% of base salary. The Company has provided for this deferred
compensation benefit in the accompanying Consolidated Balance Sheets.

8.  SHAREHOLDERS' EQUITY:

    Shareholder Rights Plan

      On July 23, 1997, the Company adopted a Shareholder Rights Plan and
declared a dividend of one Right on each outstanding common share of the
Company. Each Right would entitle shareholders to buy, upon certain triggering
events, one one-hundredth of a newly created Series A Junior Participating
Preferred Share at an exercise price of $75 (subject to certain adjustments).
The record date for the distribution was August 7, 1997.

      Subject to certain exceptions, Rights will become exercisable only after a
person or group acquires 20% or more of the Company's common shares or announces
a tender offer for 20% or more of the Company's common shares. The Company's
Board of Directors can redeem the Rights at $0.01 per Right at any time before a
person acquires 20% or more of the Company's common shares. If a person or group
acquires 20% or more of the Company's common shares, each Right will entitle
holders, other than the acquiring party, to purchase common shares of the
Company having a market value of twice the exercise price of the Right. If,
after the Rights have become exercisable, the Company merges or otherwise
combines with another entity, each Right then outstanding will entitle its
holder to purchase a number of the acquiring party's common shares having a
market value of twice the exercise price of the Right. The Plan also contains
other customary provisions and is similar to plans adopted by many other
companies. The Shareholder Rights Plan was terminated on March 30, 2004.

    Warrants

      On March 30, 2004, the Company completed a recapitalization that resulted
in the issuance of warrants to its Series B Preferred Stockholder (see Note 3 -
Long-Term Debt) exercisable for 12,114 Common Shares. The warrants are
exercisable any time after March 30, 2004 until March 30, 2014. The warrants are
duly authorized, validly issued, fully paid and nonassessable shares, at a
purchase price of $0.001 per share. In addition, the warrant agreement provides
for the warrant to participate in dividend distributions, even if the warrant
has not been exercised. However, the warrant is not required to participate in
losses. Therefore, the warrant is considered to be a "Participating Security" by
Financial Accounting Standards No. 128 for Earnings Per Share (EPS)
calculations. This means that the warrant is included in the weighted average
share calculation only in periods in which the Company generates net income
available to common shareholders.

      On March 30, 2004, the Company completed a recapitalization that resulted
in the issuance of warrants to its Senior Secured Subordinated Note holder (see
Note 3 - Long-Term Debt) exercisable for 3,937 Common Shares. The warrants are
exercisable any time after March 30, 2004 until March 30, 2011. The warrants are
duly authorized, validly issued, fully paid and nonassessable shares, at a
purchase price of $0.001 per share. In addition, the warrant agreement provides
for the warrant to participate in dividend distributions, even if the warrant
has not been exercised. However, the warrant is not required to participate in
losses. Therefore, the warrant is considered to be a "Participating Security" by
Financial Accounting Standards No. 128 for Earnings Per Share (EPS)
calculations. This means that the warrant is included in the weighted average
share calculation only in periods in which the Company generates net income
available to common shareholders.

      During the quarter ended September 30, 2002, the Company issued warrants
to its lenders under its previous Revolving Credit Facility and Senior Notes.
The warrant issued to the Revolving Credit Facility lender permits the lender to
purchase 467 shares at a purchase price of $0.01 per share exercisable any time
after July 31, 2003 until September 23, 2012, and the warrant issued to the
Senior Notes lender permits the lender to purchase 467 shares at a purchase
price of $0.01 per share exercisable any time after July 31, 2003 until
September 23, 2012. For purposes of financial reporting, the warrants were
valued at $313 each and the aggregate amount of $626 increased paid-in-capital
and reduced short-term and long-term debt. In connection with refinancing and
recapitalization, effective March 30, 2004, the warrants were subject to certain
adjustments and as a result they each were adjusted upward by 227 shares
outstanding at a new adjusted exercise price of $0.00631.

                                                                              62
<PAGE>

9.  STOCK PLANS:

      In June 1999, the Company adopted an Employee Stock Purchase Plan under
which employees have a systematic long-term investment opportunity to own
Company shares. Shareholder approval for such adoption was obtained on July 22,
1999. The Employee Stock Purchase Plan has been suspended.

      The Company has options outstanding under various option plans including
the 1997 Long-Term Incentive Plan (the "1997 Option Plan") and the 1997
Non-Employee Directors' Stock Option Plan (the "1997 Directors Plan"). The
Company's 1994 Corrpro Stock Option Plan (the "1994 Plan") and the 1994 Corrpro
Outside Directors' Stock Option Plan (the "Directors Plan") were terminated upon
adoption of the 1997 Option Plan and the 1997 Directors Plan. In addition, prior
to its initial public offering in September 1993, the Company issued stock
options under various arrangements.

      The 1997 Option Plan was adopted on April 28, 1997, subject to shareholder
approval, which was obtained on July 23, 1997. The 1997 Option Plan, as amended,
provides for the granting of up to 469 non-qualified stock options, stock
appreciation rights, restricted stock awards or stock bonus awards to officers,
key employees and consultants of the Company. In addition, the 1997 Option Plan
provides that shares exercised, forfeited or otherwise terminated under
previously granted stock awards, other than awards under the 1994 Directors
Plan, will also be available for grant under the new plan. The option price per
share will generally be the fair market value of the Company's common shares on
the date of grant and the term of the options will not exceed 10 years. The 1997
Option Plan will terminate on April 28, 2007. On April 30, 1998, the Company
adopted an amendment to the 1997 Option Plan increasing the number of shares
available for issuance by 300.

      The 1997 Directors Plan was also adopted on April 28, 1997. The 1997
Directors Plan provides for the granting of up to 63 non-qualified stock options
to current and future non-employee directors of the Company. Under this plan,
each non-employee director will annually be granted options to purchase 3 common
shares. The option price per share will be the fair market value of the
Company's common shares on the date of grant and the term of the options will be
10 years. The 1997 Directors Plan will terminate on April 28, 2007.

      In fiscal 2001, the Company adopted a plan whereby holders of stock
options covered under the 1997 Option Plan could surrender options previously
granted with the understanding that a like number of options would be granted no
sooner than six months after surrender. Accordingly, options for 654 shares with
exercise prices ranging from $5.25 to $14.96 were surrendered during December
2000. Subsequently, in June 2001, the Company reissued options for 648 shares
with a price of $2.55, the market price.

      Shares for issuance under equity compensation plans does not include the
Company's 2001 Non-Employee Directors' Stock Appreciation Rights Plan which has
not been approved by its shareholders. Under this plan, non-employee directors
received a one-time grant of vested stock appreciation rights as part of their
compensation for serving as directors. The stock appreciation rights entitle
each eligible director to be paid in cash, subject to the applicable terms and
conditions of the grant, on or after May 17, 2006, the amount of appreciation in
the fair market value of 10,000 Common Shares between May 17, 2001 and May 17,
2006. Currently, three such non-employee directors hold such stock appreciation
rights.

      Stock option activity for the Company during fiscal 2004, 2003, and 2002
was as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES                          2004         2003         2002
----------------                         ------       ------       ------
<S>                                      <C>          <C>          <C>
Options outstanding, beginning of year    1,399        1,303          757
Granted                                     108          270          676
Exercised                                   (35)          --           --
Expired, canceled or surrendered           (120)        (174)        (130)
                                         ------       ------       ------
Outstanding, end of year                  1,352        1,399        1,303
                                         ------       ------       ------
</TABLE>

                                                                              63

<PAGE>

<TABLE>
<S>                                      <C>          <C>          <C>
Exercisable, end of year                  1,226          270          305
Available for grant, end of year            289          248        1,014

Price range of options:
   Granted                               $ 1.52 to    $ 0.32 to    $ 1.30 to
                                         $ 1.69       $ 1.24       $ 3.05

   Exercised                             $ 0.32 to       N/A       $ 1.86
                                         $ 0.59

   Options outstanding, end of year      $ 0.32 to    $ 1.30 to    $ 1.86 to
                                         $13.78       $13.78       $13.78
</TABLE>

      Of the options shares outstanding at March 31, 2004, 1,183 shares
outstanding were in a price range of $0.32 to $3.75. The remaining 169 options
shares outstanding were at a price range from $4.00 to $13.78. As a result of
the change in control, 854 options vested.

10. BUSINESS SEGMENTS:

      In July 2002, the Company's Board of Directors approved a formal business
restructuring plan. The multi-year plan included a series of initiatives to
improve operating income and reduce debt by selling non-core business units. The
Company engaged outside professionals to assist in the disposition of its
domestic and international non-core business units. Prior to the quarter ended
September 30, 2002, the Company's non-core domestic and international units were
reported as the Other Operations and International Operations reporting
segments. Effective as of the quarter ended September 30, 2002, the Other
Operations and the International Operations reporting segments were eliminated
and the non-core domestic and international units were reported as discontinued
operations. Prior-year financial statements were reclassified to reflect these
non-core units as discontinued operations, which were also referred to as
"assets and liabilities held for sale."

      In the second quarter of fiscal 2004, the Company's Board of Directors
removed our European Operations from discontinued operations. The Board
concluded that the Company's value would be enhanced by maintaining its European
presence rather than by selling the European Operations at this time, based in
part on the strength of the local management team, the similar characteristics
of the served markets, and the favorable prospects for this business. Therefore,
effective in the second quarter of fiscal 2004, the Company reported quarterly
and annual results of its European Operations in its continuing operations, and
prior-year financial statements have been reclassified to reflect its European
Operations as continuing operations.

      The Company has organized its operations into three business segments:
Domestic Core Operations, Canadian Operations and European Operations. The
Company's former non-core domestic, Middle East and Asia Pacific Operations are
reported as discontinued operations. Its business segments and a description of
the products and services they provide are described below:

      Domestic Core Operations. The Company's Domestic Core Operations segment
provides products and services, which include corrosion control, coatings and
pipeline integrity and risk assessment. The Company provides these products and
services to a wide-range of customers in the United States in a number of
industries, including energy, utilities, water and wastewater treatment,
chemical and petrochemical, pipelines, defense and municipalities. In addition,
this segment provides coatings services to customers in the entertainment,
aerospace, transportation, petrochemical and electric power industries, as well
as the United States military. Finally, the Domestic Core Operations segment
includes a production facility in the United States that assembles and
distributes cathodic protection products, such as anodes, primarily to the
United States market. Revenues relating to this segment totaled $92,947 (or 72 %
of consolidated revenues), $84,965 (or 72% of consolidated revenues) and
$101,781 (or 76% of consolidated revenues) during fiscal 2004, 2003 and 2002,
respectively. The Domestic Core operations had goodwill of $6,460 at March 31,
2004 and $6,397 at March 31, 2003.

                                                                              64
<PAGE>

      Canadian Operations. The Company's Canadian Operations segment provides
corrosion control, pipeline integrity and risk assessment services to customers
in Canada that are primarily in the oil and gas industry. These customers
include pipeline operators and petrochemical plants and refineries. The Canadian
Operations segment has a production facility that assembles products such as
anodes and rectifiers. Revenues relating to this segment totaled $24,071 (or 18%
of consolidated revenues), $19,254 (or 17% of consolidated revenues) and $21,277
(or 16% of consolidated revenues) during fiscal 2004, 2003 and 2002,
respectively. The Canadian operations had goodwill of $8,100 at March 31, 2004
and $6,946 at March 31, 2003.

      European Operations. The Company's European Operations segment provides
corrosion control products and services to customers in the petroleum, utility,
industrial, marine and offshore markets, as well as to governmental entities in
connection with their infrastructure assets. Revenues relating to this segment
totaled $13,066 (or 10 % of consolidated revenues), $13,403 (or 11% of
consolidated revenues) and $11,726 (or 8% of consolidated revenues) during
fiscal 2004, 2003 and 2002, respectively. The European operations had no
goodwill as of March 31, 2004 and 2003, respectively.

      Financial information relating to the Company's operations by segment are
presented below:

<TABLE>
<CAPTION>
                                                       2004         2003         2002
                                                    ---------    ---------    ---------
<S>                                                 <C>          <C>          <C>
Revenue:
  Domestic Core Operations                          $  92,947    $  84,966    $ 101,781
  Canadian Operations                                  24,071       19,254       21,277
  European Operations                                  13,066       13,403       11,726
                                                    ---------    ---------    ---------
                                                    $ 130,084    $ 117,623    $ 134,784
                                                    =========    =========    =========
Operating Income (Loss):
  Domestic Core Operations                          $  14,457    $  11,061    $  13,544
  Canadian Operations                                   4,153        3,634        2,850
  European Operations                                     947         (865)         908
  Corporate Related Costs and Other                   (11,027)     (11,870)     (12,989)
                                                    ---------    ---------    ---------
                                                    $   8,530    $   1,960    $   4,313
                                                    =========    =========    =========
Total Assets:
  Domestic Core Operations                          $  26,133    $  30,780
  Canadian Operations                                  32,626       22,669
  European Operations                                   7,448        6,311
  Corporate Related Assets and Other                    6,506        8,934
  Assets held for Sale                                     --        9,846
                                                    ---------    ---------
                                                    $  72,713    $  78,540
                                                    =========    =========
Capital Expenditures:
  Domestic Core Operations                          $    (560)   $    (282)   $    (511)
  Canadian Operations                                     (36)         (48)         (77)
  European Operations                                     (28)         (45)         (75)
  Corporate Related Capital Expenditures                  (88)         (21)          --
                                                    ---------    ---------    ---------
                                                    $    (712)   $    (396)   $    (663)
                                                    =========    =========    =========
Depreciation and Amortization:
  Domestic Core Operations                          $   1,182    $   1,925    $   2,458
  Canadian Operations                                     247          281          677
  European Operations                                      82          103          115
  Corporate Related Depreciation and Amortization       2,130          821        1,007
                                                    ---------    ---------    ---------
                                                    $   3,641    $   3,130    $   4,257
                                                    =========    =========    =========
</TABLE>

11. LEGAL MATTERS:

      MICHIGAN LITIGATION. On July 25, 2002, a summons and complaint was issued
to the Company by the Circuit Court for the County of Ingham, Michigan. The
action was commenced by Blogett Oil Company, Inc. and other owners and operators
of underground storage tanks systems on behalf of themselves and others
similarly situated. The complaint

                                                                              65
<PAGE>

relates to a Michigan Department of Environmental Quality ("MDEQ") regulatory
proceeding previously described in our reports filed with the Securities and
Exchange Commission, or the SEC. The complaint named both Corrpro and MDEQ. In
the complaint, the plaintiffs sought an unspecified amount of damages in excess
of $25,000 from us. The plaintiffs also sought injunctive relief prohibiting the
MDEQ from declaring that underground storage tanks upgraded by us do not meet
the current requirement for corrosion protection set forth by law. In October
2003, Corrpro and a steering committee representing the class of plaintiffs
reached an agreement, subject to court approval, pursuant to which the class of
plaintiffs agreed to settle all outstanding matters between the class and
us and to dismiss the case as to us with prejudice. On October 29, 2003, the
Circuit Court for the County of Ingham, Michigan approved the settlement and
dismissed with prejudice the litigation as to the Company. The settlement amount
itself was funded pursuant to applicable policies of insurance maintained by the
Company.

      ASSESSMENT STANDARD. During fiscal 2001, the Company discovered that a
former employee used an incorrect assessment standard in connection with the
evaluation of whether certain underground storage tanks located at as many as 67
sites were eligible for upgrade using cathodic protection. Such evaluations were
done using one of the approved assessment methodologies. The tanks at these
sites, which are located in five states, were subsequently upgraded using
cathodic protection, which arrests corrosion. These tanks are also subject to
ongoing leak detection requirements. Based on the Company's review of available
information and governmental records, the Company believes that there have not
been any releases from the affected tanks as a result of the actions of the
former employee. The Company has contacted, and in October and November 2000 met
with, officials from the Environmental Protection Agency ("EPA") and officials
from the corresponding environmental protection agencies of the five states
involved to discuss this matter. It is the Company's understanding that none of
the states nor the EPA intend to take any enforcement action as a result of the
use of the inaccurate standard by the former employee. The Company is currently
working with the states and the EPA to develop and implement field investigation
procedures to assess the current status of the affected sites. The Company has
completed field investigation procedures in two of the states in which affected
sites are located. The Company has been informed by one of the other states
that, based on continuing monitoring and leak detection procedures already
required to be performed by site owners and operators, no additional field work
procedures will be required in that state. There are no currently outstanding
claims or demands that have been asserted by any of the affected owners and
operators. Based on currently available information, including our experience in
the fieldwork conducted to date, the Company does not believe that the cost of
field investigation procedures for this matter will have a material effect on
its future operations, financial position or cash flows.

      AUSTRALIAN SUBSIDIARY ACCOUNTING IRREGULARITIES. The Company has been
involved in a class action lawsuit and was the subject of an SEC enforcement
proceeding arising out of accounting irregularities involving internal
misconduct in our Australian subsidiary. These proceedings are described in more
detail below.

      At least as early as October 2000, the then managing director and the
financial controller of Corrpro Australia Ptd., Ltd., a subsidiary of Corrpro,
were involved in knowingly misstating the financial results reported by the
Australian subsidiary to our corporate management to improve the reported
results of the Australian business. Such individuals are no longer employed by
the Company or the Company's subsidiaries and were named as defendants in a
complaint for permanent injunction and other equitable relief filed by the SEC
in the United States District Court for the Northern District of Ohio. The
former Australian employees are also subject to an investigation and other
proceedings commenced through the Australian Securities and Investments
Commission.

      The irregularities included erroneous journal entries to the Australian
subsidiary's general ledger that increased profit and net assets. Among other
things, the former Australian employees falsified invoices and credit notes and
made erroneous entries to subledgers including accounts payable, accounts
receivable, cost of goods sold and inventory. The former Australian employees
further recorded fictitious invoices in the former Australian subsidiary's
computerized accounting records, falsified credit notes from suppliers, and
created two different versions of the accounts receivable subledger. The former
Australian employees took steps to fabricate documents to be reviewed by our
independent auditors.

      The Company's management discovered the accounting irregularities at the
Australian subsidiary in early calendar 2002 and upon discovery immediately
began an internal investigation, conducted under the direction of the

                                                                              66

<PAGE>

Audit Committee of our Board of Directors. The Australian Securities and
Investments Commission commenced an independent investigation of the accounting
irregularities in March 2002. The Company voluntarily disclosed this matter to
the SEC, which commenced a formal investigation in March 2002. The Company
has cooperated with both commissions.

      As a result of our discovery of the irregularities, the Company, by means
of our Form 10-K/A for the fiscal year ended March 31, 2002 filed with the SEC
on August 9, 2002, restated its previously issued audited financial statements
for the fiscal year ended March 31, 2001. The effect of its revisions was to
increase its loss and basic and diluted loss per share, respectively, from $4.7
million and $0.61 to $8.3 million and $1.07 for the fiscal year ended March 31,
2001. Consolidated stockholders' equity as of March 31, 2001 decreased by
approximately $3.8 million from amounts previously reported. Unaudited quarterly
financial information for the first three quarters of the fiscal year ended
March 31, 2002 and all four quarters of our fiscal year ended March 31, 2001
were also restated by means of such filing. Information concerning the restated
amounts applicable to each of the foregoing quarters is contained in Note 12,
Restated Quarterly Financial Information (Unaudited), Notes to Consolidated
Financial Statements included in Item 8 of our Form 10-K/A for the fiscal year
ended March 31, 2002 filed with the SEC on August 9, 2002.

      CLASS ACTION LAWSUIT. The Company is a defendant in a purported class
action suit filed on June 24, 2002, in the United States District Court,
Northern District of Ohio, Eastern Division. The complaint also names certain of
the Company's former and current officers and directors as defendants. The
lawsuit arises out of the accounting irregularities discovered in its Australian
subsidiary. The complaint was purportedly filed on behalf of all persons who
purchased the Company's common shares during the period April 1, 2000 through
March 20, 2002 and alleges violations of anti-fraud provisions of the federal
securities laws resulting in artificially inflated prices of our common shares
during the class period. The complaint seeks unspecified compensatory damages,
fees and expenses on behalf of the putative class.

      On or about May 27, 2003, the District Court granted, with prejudice, the
defendants' motions to dismiss the amended and consolidated class action
complaint. On June 24, 2003, the plaintiffs filed a notice of appeal to the
United States Circuit Court of Appeals for the 6th Circuit from the order of
dismissal. The Company is unable at this time to make a determination as to
whether a material adverse outcome is reasonably possible and whether an adverse
outcome would have a materially adverse affect on its operations or financial
condition.

      SEC ENFORCEMENT PROCEEDING. In connection with its investigation of
accounting irregularities at the Company's former Australian subsidiary, on
January 20, 2004, the SEC filed an civil injunctive action against the Company
in the United States District Court for the Northern District of Ohio Eastern
Division. The SEC's complaint alleged that the Company had inadequate internal
controls during fiscal year 2001 and the first three quarters of 2002. The
complaint also alleged that the Company violated certain reporting, record
keeping and internal control requirements. The complaint further alleged that,
although the Company discovered the fraud through its own investigation, the
Company failed to discover the falsification of the Australian financial
statements until February 2002 due to inadequate internal controls. Finally, the
complaint alleged that following the Company's discovery of these false
statements at its former Australian subsidiary, the Company undertook remedial
measures to strengthen its financial reporting policies and internal control
structure.

      The complaint alleged that, as a result of the foregoing, the Company
violated Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and
Rules 12b-20, 13a-1 and 13a-13 thereunder, by filing financial statements that
contained false financial data. The complaint also alleges that the Company
violated Section 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, by failing to
devise and maintain an adequate system of internal accounting controls.

      Simultaneously with the filing of the complaint, without admitting or
denying the SEC's allegations, the Company consented to the entry of a final
judgment permanently enjoining the Company from future violations of the
provisions of the federal securities laws described above. The Company also
agreed to certain undertakings designed to ensure its compliance with the
federal securities laws. These undertakings require the Company to continue
previously adopted remedial measures, and during its fiscal years ending March
2004, 2005 and 2006, the Company is required to:

                                                                              67
<PAGE>

      -     engage a qualified outside firm to perform the internal audit
            function or designate an employee director of internal audit who
            would perform certain audit procedures and report directly to the
            Audit Committee;

      -     require internal audit to prepare a confidential business report at
            the end of the fiscal year describing certain aspects of the audit
            preparation, procedures and findings; and

      -     maintain an anonymous hotline on which any activity affecting the
            Company's financial results may be reported to the Audit Committee.

      The Company will incur costs, which may be significant, in complying with
these undertakings.

      In determining to accept the Company's settlement offer, the SEC
considered that the Company undertook remedial actions and provided substantial
cooperation in the investigation. On January 27, 2004, the Company's offer of
settlement was approved and a final judgment was entered by the court.

      COMPLIANCE ORDER. In January 2003, the Company received a Consolidated
Compliance Order and Notice of Potential Penalty from the Louisiana Department
of Environmental Quality pursuant to which the department alleges that the
Company's foundry operations failed to submit required storm water monitoring
information as required by law. The alleged failure relates to periods
subsequent to the cessation of the Company's foundry operations. The Company has
appealed the matter and the department has agreed to engage an informal
resolution of the matter. Based on current available information, the Company
does not believe that it is reasonably possible that this matter will have a
material effect on its future operations, financial position or cash flows.

      The Company is subject to other legal proceedings and claims from time to
time which arise in the ordinary course of business.

12. RELATED PARTY TRANSACTIONS:

      On March 30, 2004, we entered into a services agreement with Wingate
Partners III, L.P. ("Wingate Partners"), an affiliate of CorrPro Investments,
LLC. The services agreement provides that Wingate Partners agrees to consult
with the Board of Directors in such a manner and on such business and financial
matters as would be reasonably requested from time to time by the Board,
including financial advisory, management advisory, strategic planning,
monitoring and other related services, in exchange for which we will pay an
annual non-refundable services fee of $400 payable quarterly in advance, to such
persons designated by Wingate Partners. In lieu of paying any quarterly
installment of the services fee in cash, we may, at our option, or if we are
restricted from paying any such quarterly installment in cash under, or the
Board determines that payment of such quarterly installment in cash would result
in a default under, the terms of our new senior secured credit facility or
senior secured subordinated notes, delay payment and accrue any unpaid portion
of the services fee, without interest. The services agreement will have an
initial term of eight years, which term will automatically renew for successive
one year periods thereafter unless either party notifies the other of its desire
to terminate the services agreement.

                                                                              68
<PAGE>

      SUPPLEMENTAL FINANCIAL INFORMATION

Quarterly Results of Operations (Unaudited):

      The following is a summary of the unaudited quarterly results of
operations of the Company for the fiscal years ended March 31, 2004 and 2003.
The sum of the quarterly per share figures does not equal annual per share
figures due to rounding.

<TABLE>
<CAPTION>
Three Months Ended                              06/30/03   09/30/03(6)   12/31/03    03/31/04      Total
-----------------------------------------------------------------------------------------------------------
(In Thousands, Except per Share Data)
<S>                                            <C>         <C>          <C>         <C>          <C>
Revenues                                       $  33,052   $  34,433    $  32,939   $  29,660    $ 130,084

Operating income (loss)                            3,092       3,607        2,848      (1,017)       8,530

Net Income (loss) from continuing operations       1,260       1,343          647      (4,861)      (1,611)

Net income (loss)                                    833      (1,880)         442      (4,874)      (5,479)

Earnings (loss) per share - Basic:
    Income (loss) from continuing operations   $    0.15   $    0.16    $    0.07   $   (0.58)   $   (0.19)
    Net income (loss)                               0.10       (0.22)        0.05       (0.58)       (0.65)

Weighted average number of shares - Basic          8,408       8,408        8,420       8,436        8,419

Earnings (loss) per share - Diluted:
    Income (loss) from continuing operations   $    0.13   $    0.14    $    0.07   $   (0.58)   $   (0.19)
    Net income (loss)                               0.09       (0.20)        0.05       (0.58)       (0.65)

Weighted average number of shares - Diluted        9,383       9,356        9,361       8,436        8,419
</TABLE>

<TABLE>
<CAPTION>
Three Months Ended                             06/30/02(1)  09/30/02(2)(3)    12/31/02   03/31/03(4)(5)     Total
--------------------------------------------------------------------------------------------------------------------
(In Thousands, Except per Share Data)
<S>                                            <C>          <C>              <C>         <C>              <C>
Revenues                                       $  29,689      $  31,473      $  31,781     $  24,680      $ 117,623

Operating income (loss)                              499          1,419          2,577        (2,535)         1,960

Net Income (loss) from continuing operations      (1,156)          (530)           419        (3,135)        (4,402)

Net income (loss)                                (20,685)        (3,358)           449        (5,231)       (28,825)

Earnings (loss) per share - Basic:
    Income (loss) from continuing operations   $   (0.14)     $   (0.06)     $    0.04     $   (0.37)     $   (0.52)
    Net income (loss)                              (2.47)         (0.40)          0.05         (0.62)         (3.43)

Weighted average number of shares - Basic          8,350          8,403          8,408         8,408          8,387

Earnings (loss) per share - Diluted:
    Income (loss) from continuing operations   $   (0.14)     $   (0.06)     $    0.04     $   (0.37)     $   (0.52)
    Net income (loss)                              (2.47)         (0.40)          0.05         (0.62)         (3.43)

Weighted average number of shares - Diluted        8,350          8,403          9,325         8,408          8,387
</TABLE>

      (1)   Included in the first quarter of fiscal 2003 was goodwill impairment
            of $18,238

      (2)   Included in discontinued operations in the second quarter of fiscal
            2003 was an asset impairment charge of $450

      (3)   Included in continuing operations in the second quarter of fiscal
            2003 was an asset impairment charge of $450

      (4)   Included in discontinued operations in the fourth quarter of fiscal
            2003 was a gain on sale of discontinued operations of $2,095

      (5)   Included in discontinued operations in the fourth quarter of fiscal
            2003 was an asset impairment charge of $1,575

      (6)   Included in discontinued operations in the second quarter of fiscal
            2004 was an asset impairment charge of $3,278

                                                                              69
<PAGE>

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

      None.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Controls and Procedures.

      Following the commencement of an internal review of its accounting records
and procedures and the investigation initiated by our Audit Committee of the
Board of Directors in connection with the restatement process (the "Audit
Committee Investigation"), we initiated a significant restructuring plan. The
multi-year plan included a series of initiatives to improve operating income and
reduce debt, including the sale of non-core business units and use of the
proceeds to reduce debt. These activities, while critical to our successful
restructuring, complicated our ability to assess the overall effectiveness of
internal controls.

      Since the inception of the restatement process and Audit Committee
Investigation, we have made a number of significant changes that strengthened
the internal controls over our financial accounting, reporting and disclosure
procedures (the "Reporting and Disclosure Procedures"). These changes included,
but were not necessarily limited to, (i) communicating clearly and consistently
a tone from senior management regarding the proper conduct in these matters,
(ii) strengthening the North American financial management organizational
reporting chain, (iii) requiring stricter account reconciliation standards, (iv)
updating and expanding the distribution of our business conduct questionnaire,
(v) requiring quarterly as well as annual business units written
representations, (vi) expanding the financial accounting procedures in the
current year, (vii) commencing a comprehensive, team-based process to further
assess and enhance the efficiency and effectiveness of our financial processes,
including support efforts which better integrate current and evolving financial
information system initiatives, and addressing any remaining weaknesses, and
(viii) establishing of an internal audit function.

      We will continue the process of identifying and implementing corrective
actions where required to improve the effectiveness of our Reporting and Control
Procedures. Significant supplemental resources will continue to be required to
prepare the required financial and other information during this process. The
changes made to date as discussed above have enabled us to restate our previous
filings where required, as well as subsequently prepare and file the remainder
of the required periodic reports on a current basis.

(b) Evaluation of Disclosure Controls and Procedures.

      Our Chief Executive Officer and Chief Financial Officer (the "Senior
Officers"), with the participation of other members of our management, have
evaluated the effectiveness of our disclosure controls and procedures (as such
term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of
the end of the period covered by this Annual Report on Form 10-K. Based on that
evaluation, and subject to inherent limitations on the effectiveness of internal
controls as described below, the Senior Officers have concluded that to their
knowledge as of the end of the period covered by this Annual Report on Form
10-K, our disclosure controls and procedures are effective in ensuring that
information required to be disclosed by us is recorded, processed, summarized
and reported within the time periods specified in the SEC's rules and forms.
There were no changes in our internal control over financial reporting that
occurred during our fourth fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

(c) Inherent Limitations on the Effectiveness of Controls.

      A control system, no matter how well designed and operated, can provide
only reasonable, not absolute,

                                                                              70
<PAGE>

assurance that the objectives of the control system are met. In addition, a
control system is subject to implementation based on the cost effectiveness of
such controls. Further, because of the inherent limitations in all control
systems, including faulty judgments in decision making or breakdowns resulting
from simple errors or mistakes, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, have been
detected. Additionally, controls can be circumvented by individual acts,
collusion or by management override of the controls in place. Over time,
controls may become inadequate because of changes in conditions, or
deterioration of the degree of compliance with the policies or procedures. Due
to the inherent limitation of control systems, misstatements due to error or
fraud may occur and not be detected. Given such inherent limitations, the Senior
Officers and other members of our management, do not expect our disclosure
controls or procedures to prevent all possible instances of error and fraud.

                                                                              71
<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The information required by Item 10 regarding our executive officers is
submitted as a separate section of this Annual Report on Form 10-K. See "Item
4A: Executive Officers of the Registrant." The additional information required
by Item 10 is incorporated herein by reference from our definitive proxy
statement for our 2004 Annual Meeting of Shareholders.

ITEM 11. EXECUTIVE COMPENSATION

      The information required by Item 11 is incorporated herein by reference
from our definitive proxy statement for our 2004 Annual Meeting of Shareholders.

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

      The information required by Item 12 is incorporated herein by reference
from our definitive proxy statement for our 2004 Annual Meeting of Shareholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information required by Item 13 is incorporated herein by reference
from our definitive proxy statement for our 2004 Annual Meeting of Shareholders.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

      The information required by Item 14 is incorporated herein by reference
from our definitive proxy statement for our 2004 Annual Meeting of Shareholders.

                                                                              72

<PAGE>

                                     PART IV

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

      (a)(1) THE FOLLOWING CONSOLIDATED FINANCIAL STATEMENTS ARE INCLUDED IN
             PART II, ITEM 8 OF THIS ANNUAL REPORT ON FORM 10-K:

             Report of Independent Registered Public Accounting Firm

             Consolidated Balance Sheets at March 31, 2004 and 2003

             Consolidated Statements of Operations for the years ended March 31,
               2004, 2003 and 2002

             Consolidated Statements of Shareholders' Equity(Deficit) for the
               years ended March 31, 2004, 2003 and 2002

             Consolidated Statements of Cash Flows for the years ended March 31,
               2004, 2003 and 2002

             Notes to Consolidated Financial Statements

                                                                              73

<PAGE>

      (a)(3) INDEX TO EXHIBITS:

<TABLE>
<CAPTION>
EXHIBIT
  NO.             EXHIBIT
  ---             -------
<S>       <C>
3.1       Amended and Restated Articles of Incorporation of the Company. (1)

3.2       Amended and Restated Code of Regulations of the Company. (2)

4.1       Specimen certificate for the Common Shares. (3)

4.2       Amended and Restated Credit Agreement dated as of June 9, 2000 among
          the Company, CSI Coating Systems, Inc. and the Lenders Party thereto.
          Other long-term debt agreements of the Company, except for Note
          Purchase Agreement, are not filed pursuant to Item 601(b)(4)(iii)(A)
          of Regulation S-K. The Company will furnish copies of any such
          agreements to the Securities and Exchange Commission upon its request.
          (4)

4.3       First Amendment to Credit Agreement dated October 19, 2000 relating to
          the Amended and Restated Credit Agreement dated as of June 9, 2000
          among the Company, CSI Coating Systems, Inc. and the Lenders Party
          thereto. (12)

4.4       Letter Agreement dated October 19, 2000 relating to the Amended and
          Restated Credit Agreement dated as of June 9, 2000 among the Company,
          CSI Coating Systems, Inc. and the Lenders Party thereto. (12)

4.5       Second Amendment to Credit Agreement dated as of June 29, 2001
          relating to the Amended and Restated Credit Agreement dated as of June
          9, 2000 among the Company, CSI Coating Systems, Inc. and the Lenders
          Party thereto. (12)

4.6       Third Amendment to Credit Agreement dated as of August 10, 2001
          relating to the Amended and Restated Credit Agreement dated as of June
          9, 2000 among the Company, CSI Coating Systems, Inc. and
          the Lenders Party thereto. (13)

4.7       Fourth Amendment to Credit Agreement dated as of November 12, 2001
          relating to the Amended and Restated Credit Agreement dated as of June
          9, 2000 among the Company, CSI Coating Systems, Inc. and the Lenders
          Party thereto. (14)

4.8       Fifth Amendment to Credit Agreement dated as of February 11, 2002
          relating to the Amended and Restated Credit Agreement dated as of June
          9, 2000 among the Company, CSI Coating Systems, Inc. and the Lenders
          Party thereto. (15)

4.9       Sixth Amendment to Credit Agreement dated as of September 23, 2002
          relating to the Amended and Restated Credit Agreement dated as of June
          9, 2000 among the Company, CSI Coating Systems, Inc. and the Lenders
          party thereto. (17)

4.10      Seventh Amendment to Credit Agreement dated as of November 1, 2002
          relating to the Amended and Restated Credit Agreement dated as of June
          9, 2000 among the Company, CSI Coating Systems, Inc. and the Lenders
          party thereto. (18)

4.11      Eighth Amendment to Credit Agreement dated as of February 10, 2003
          relating to the Amended and Restated Credit Agreement dated as of June
          9, 2000 among the Company, CSI Coatings Systems, Inc. and the Lenders
          party thereto. (24)

4.12      Ninth Amendment to Credit Agreement dated as of July 31, 2003 relating
          to the Amended and Restated Credit Agreement dated as of June 9, 2000
          among the Company, CSI Coating Systems, Inc. and the Lenders
</TABLE>

                                                                              74
<PAGE>

<TABLE>
<S>       <C>
          party thereto. (19)

4.13      Tenth Amendment to Credit Agreement dated as of October 31, 2003
          relating to the Amended and Restated Credit Agreement dated as of June
          9, 2000 among the Company, CSI Coating Systems, Inc. and the Lenders
          party thereto. (20)

4.14      Eleventh Amendment to Credit Agreement dated as of January 31, 2004
          relating to the Amended and Restated Credit Agreement dated as of June
          9, 2000 among the Company, CSI Coating Systems, Inc. and the Lenders
          party thereto. (21)

4.15      Note Purchase Agreement dated as of January 21, 1998 by and among the
          Company and The Prudential Insurance Company of America therein. (5)

4.16      Rights Agreement dated as of July 23, 1997 between the Company and
          Fifth Third Bank, successor Rights Agent. (6), including [Amendments 1
          and 2 thereto].

4.17      Amendment dated June 9, 2000 to Note Purchase Agreement dated January
          21, 1998. (4)

4.18      Amendment dated October 18, 2000 to Note Purchase Agreement dated
          January 21, 1998. (12)

4.19      Letter Agreement dated October 18, 2000 by and between The Prudential
          Insurance Company of America and the Company relating to the Note
          Purchase Agreement dated as of January 21, 1998. (12)

4.20      Amendment dated as of June 29, 2001 by and between The Prudential
          Insurance Company of America and the Company relating to the Note
          Purchase Agreement dated as of January 21, 1998. (12)

4.21      Letter Agreement dated July 31, 2003 by and between The Prudential
          Insurance Company of America and the Company relating to the Note
          Purchase Agreement dated as of January 21, 1998. (19)

4.22      Letter Agreement dated October 31, 2003 by and between The Prudential
          Insurance Company of America and the Company relating to the Note
          Purchase Agreement dated as of January 21, 1998. (20)

4.23      Letter Agreement dated January 31, 2004 by and between The Prudential
          Insurance Company of America and the Company relating to the Note
          Purchase Agreement dated as of January 21, 1998. (21)

4.24      Securities Purchase Agreement dated December 15, 2003 by and between
          the Company and CorrPro Investments, LLC. (22)

4.25      Note and Equity Purchase Agreement dated March 30, 2004 by and among
          the Company, CCFC, Inc., Ocean City Research Corp., Corrpro
          International, Inc. (collectively, "US Borrowers"), Corrpro Canada,
          Inc., Commonwealth Seager Holdings Ltd., and Borza Inspections Ltd.
          (collectively, "Canadian Borrowers"), and American Capital Financial
          Services, Inc., as Agent, and the Purchasers thereto. (23)

4.26      Form of Senior Secured Subordinated Note to the Note and Equity
          Purchase Agreement dated March 30, 2004 by and among the US Borrowers,
          and American Capital Financial Services, Inc., as Agent, and the
          Purchasers thereto. (23)

4.27      Form of Senior Secured Subordinated Note to the Note and Equity
          Purchase Agreement dated March 30, 2004 by and among the Canadian
          Borrowers, and American Capital Financial Services, Inc., as Agent,
          and the Purchasers thereto. (23)

4.28      Revolving Credit, Term Loan and Security Agreement dated March 30,
          2004 among the US Borrowers and Canadian Borrowers, and CapitalSource
          Finance LLC and other Lenders thereto. (23)

4.29      Form of Revolving Note to the Revolving Credit, Term Loan and Security
          Agreement dated March 30, 2004 between the US Borrowers, and
          CapitalSource Finance LLC and other Lenders thereto. (23)

4.30      Form of Revolving Note to the Revolving Credit, Term Loan and Security
          Agreement dated March 30, 2004 between the Canadian Borrowers, and
          CapitalSource Finance LLC and other Lenders thereto. (23)

4.31      Form of Term Note to the Revolving Credit, Term Loan and Security
          Agreement dated March 30, 2004 between the US Borrowers, and
          CapitalSource Finance LLC and other Lenders thereto. (23)

4.32      Form of Term Note to the Revolving Credit, Term Loan and Security
          Agreement dated March 30, 2004 between the Canadian Borrowers, and
          CapitalSource Finance LLC and other Lenders thereto. (23)

4.33      Security Agreement dated as of March 30, 2004 between the US Borrowers
          and American Financial Services, Inc., as Agent, for the Purchasers
          thereto. (23)

4.34      Security Agreement dated as of March 30, 2004 between the Canadian
          Borrowers and American Financial Services, Inc., as Agent, for the
          Purchasers thereto. (23)

4.35      Security Agreement dated as of March 30, 2004 between the Canadian
          Borrowers and CapitalSource Finance LLC, as Agent, for the Lenders
          thereto. (23)

</TABLE>

                                                                              75

<PAGE>

<TABLE>
<S>       <C>
4.36      Common Stock Purchase Warrant issued to Bank One, NA dated as of
          September 23, 2002. (17)

4.37      Common Stock Purchase Warrant issued to The Prudential Insurance
          Company of America dated as of September 23, 2002. (17)

4.38      Common Stock Purchase Warrant issued to CorrPro Investments, LLC dated
          as of March 30, 2004. (23)

4.39      Common Stock Purchase Warrant issued to American Capital Strategies,
          Ltd. dated as of March 30, 2004. (23)

4.40      Registration Rights Agreement dated as of September 23, 2002 between
          the Company and Bank One, NA. (17)

4.41      Registration Rights Agreement dated as of September 23, 2002 between
          the Company and The Prudential Insurance Company of America. (17)

4.42      Investor and Registration Rights Agreement by and between CorrPro
          Investments, LLC and the Company dated as of March 30, 2004. (23)

4.43      Amendment dated September 23, 2002 between the Company and The
          Prudential Insurance Company of America to Note Purchase
          Agreement dated January 21, 1998. (17)

4.44      Services Agreement by and between the Company and Wingate Partners
          III, LP dated as of March 30, 2004. (23)

*10.1     Corrpro Companies, Inc. 2001 Non-Employees Directors' Stock
          Appreciation Rights Plan and form of Award Agreement. (16)

*10.2     1997 Long-Term Incentive Plan of Corrpro Companies, Inc. (7)

*10.3     Amendment to 1997 Long-Term Incentive Plan of Corrpro Companies, Inc.
          (8)

*10.4     1997 Non-Employee Directors' Stock Option Plan. (7)

 10.5     Corrpro Companies, Inc. Employee Stock Purchase Plan. (9)

*10.6     December 2000 Stock Option Agreement Surrender form. (12)

*10.7     Form of Indemnification Agreement for certain Officers and Directors
          of the Company and schedule thereto. (10)

 10.8     Form of Indemnification Agreement for certain Directors of the Company
          and schedule thereto.

 10.9     Consulting Agreement dated April 1, 2003 by and between Commonwealth
          Seager Holdings Ltd. and Corrtech Consulting Group. (11)

*10.10    Employment Agreement effective March 31, 2004 by and between the
          Company and Joseph W. Rog.

 10.11    Amendment and Termination Agreement by and between the Company and
          Joseph W. Rog.
</TABLE>

                                                                              76
<PAGE>

<TABLE>
<S>       <C>
10.12     Agreement and General Release by and between the Company and Joseph W.
          Rog effective as of May 3, 2004.

10.13     Employment Agreement effective as of May 3, 2004 by and between the
          Company and Joseph P. Lahey.

10.14     Form of Amendment and Termination Agreement by and between the Company
          and certain executive officers and schedule thereto.

10.15     Form of Amendment to Executive Officer Employment Agreement by and
          between the Company and certain executive officers and schedule
          thereto.

*10.16    Form of Executive Officer Employment Agreement by and between the
          Company and certain executive officers and schedule thereto. (10)

10.17     Waiver of Director's Compensation executed by Joseph W. Rog, effective
          May 3, 2004.

10.18     Form of Waiver of Director's Compensation effective March 30, 2004 and
          schedule thereto.

*10.20    Company Incentive Option Plan as amended. (3)

*10.21    Company Deferred Compensation Plan. (12)

*10.22    Consulting Agreement dated January 26, 2001 by and between the Company
          and Neal R. Restivo. (12)

*10.23    Form of Change in Control Agreement entered into between the Company
          and certain of its executive officers and schedule thereto. (10)

**21.1    Subsidiaries of the Company.

**23.1    Consent of KPMG LLP.

**31.1    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of
          the Exchange Act.

**31.2    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of
          the Exchange Act.

**32.1    Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of
          the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to
          Section 906 of the Sarbanes-Oxley Act of 2002.

**32.2    Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of
          the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to
          Section 906 of the Sarbanes-Oxley Act of 2002.
</TABLE>

      ----------

*     Management contract or compensatory plan or arrangement identified
      pursuant to Item 15(a)(3) of this Annual Report on Form 10-K.

**    Filed herewith.

(1)   A copy of this exhibit filed as Exhibit 3.1 to our Current Report on Form
      8-K filed April 14, 2004 is incorporated herein by reference.

                                                                              77

<PAGE>

(2)   A copy of this exhibit filed as Exhibit 3.2 to our Current Report on Form
      8-K filed April 14, 2004 is incorporated herein by reference.

(3)   Copies of the exhibits to which this footnote applies were filed,
      respectively, as Exhibit 4.1 (Stock certificate specimen), and 10.25
      (Incentive Option Plan) to our Registration Statement on Form S-1
      (Registration No. 33-64482) and are hereby incorporated by reference.

(4)   Copies of the exhibits to which this footnote applies were filed,
      respectively, as Exhibits 4.3 (Amended and Restated Credit Agreement)
      and, 4.6 (Note Purchase Agreement Amendment) to our Annual Report on Form
      10-K for the period ended March 31, 2000 and are hereby incorporated by
      reference.

(5)   A copy of this exhibit filed as Exhibit 4.2 to our Quarterly Report on
      Form 10-Q for the quarterly period ended December 31, 1997 is incorporated
      herein by reference.

(6)   A copy of this exhibit filed as Exhibit 1.1 to our Registration Statement
      on Form 8-A filed August 7, 1997 is incorporated herein by reference.

(7)   Copies of the exhibits to which this footnote applies were filed,
      respectively, as Exhibits 4.4 (1997 Long-Term Inventive Plan) and 4.5
      (1997 Non-Employee Directors' Stock Option Plan) to our Registration
      Statement on Form S-8 filed October 24, 1997 (SEC File No. 333-38767), and
      are hereby incorporated by reference.

(8)   A copy of this exhibit filed as Exhibit 4.5 to our Registration Statement
      on Form S-8 filed January 19, 2000 (SEC File No. 333-94989) is
      incorporated herein by reference.

(9)   A copy of this exhibit contained in our Definitive Proxy Statement on
      Schedule 14A filed with the Securities and Exchange Commission on June 16,
      1999 is incorporated herein by reference.

(10)  Copies of the exhibits to which this footnote applies were filed,
      respectively, as Exhibits 10.2 (Change in Control Agreement) and 10.3
      (Indemnification Agreement) to our Quarterly Report on Form 10-Q for the
      quarterly period ended December 31, 2000, and are hereby incorporated by
      reference.

(11)  A copy of this exhibit filed as Exhibit 10.2 to our Annual Report on
      Form 10-K for the period ended March 31, 1998 is hereby incorporated by
      reference.

(12)  Copies of the exhibits filed to which this footnote applies were filed,
      respectively, as Exhibits 4.3 (First Amendment to Credit Agreement), 4.4
      (Letter Agreement), 4.5 (Second Amendment to Credit Agreement), 4.9
      (Amendment to Note Purchase Agreement), 4.10 (Letter Agreement), 10.7
      (Deferred Compensation Plan) and 10.8 (Consulting Agreement) to our Annual
      Report on Form 10-K for the period ended March 31, 2001 and are hereby
      incorporated by reference.

(13)  A copy of this exhibit filed as Exhibit 4.3 to our Quarterly Report on
      Form 10-Q for the quarterly period ended June 30, 2001 and is incorporated
      herein by reference.

(14)  A copy of this exhibit filed as Exhibit 4.2 to our Quarterly Report on
      Form 10-Q for the quarterly period ended September 30, 2001 and is
      incorporated herein by reference.

(15)  A copy of this exhibit filed as Exhibit 4.2 to our Quarterly Report on
      Form 10-Q for the quarterly period ended December 31, 2001 and is
      incorporated herein by reference.

(16)  A copy of this exhibit filed as Exhibit 4.9 to our Annual Report on Form
      10-K for the period ended March 31, 2002 is hereby incorporated by
      reference.

(17)  Copies of the exhibits filed to which this footnote applies were filed,
      respectively, as Exhibits 4.1 (Bank One

                                                                              78

<PAGE>

      Purchase Warrant), 4.2 (Prudential Purchase Warrant), 4.3 (Bank One Rights
      Agreement), 4.4 (Prudential Rights Agreement), 10.1 (Sixth Amendment to
      Credit Agreement) and 10.2 (Prudential Amendment) to our Quarterly Report
      on Form 10-Q for the quarterly period ended September 30, 2002 and is
      incorporated herein by reference.

(18)  A copy of this exhibit filed as Exhibit 10.1 to our Quarterly Report on
      Form 10-Q for the quarterly period ended December 31, 2002 and is
      incorporated herein by reference.

(19)  Copies of the exhibits filed to which this footnote applies were filed,
      respectively as Exhibit 10.1 (Ninth Amendment to Credit Agreement), and
      10.2 (Letter Agreement) to our Current Report on Form 8-K filed August 14,
      2003, and are incorporated herein by reference.

(20)  Copies of the exhibits filed to which this footnote applies were filed,
      respectively as Exhibit 10.4 (Tenth Amendment to Credit Agreement), and
      10.5 (Letter Agreement) to our Quarterly Report on Form 10-Q/A for the
      quarterly period ended September 30, 2003, and are incorporated herein by
      reference.

(21)  Copies of the exhibits filed to which this footnote applies were filed,
      respectively as Exhibit 10.1 (Eleventh Amendment to Credit Agreement), and
      10.2 (Letter Agreement) to our Current Report on Form 8-K filed February
      10, 2004, and are incorporated herein by reference.

(22)  A copy of this exhibit filed as Exhibits 10.1 to our Current Report on
      Form 8-K filed December 12, 2003 is incorporated herein by reference.

(23)  Copies of the exhibits filed to which this footnote applies were filed,
      respectively as Exhibits 10.4 (Note & Equity Purchase Agreement), 10.6 and
      10.7 (form of Senior Secured Subordinated Note), 10.10 (Revolving Credit,
      Term Loan and Security Agreement), 10.11 and 10.12 (form of Revolving
      Note), 10.13 and 10.14 (form of Term Note), 10.8 and 10.9 (American
      Financial Services, Inc. Security Agreement), 10.15 (CapitalSource
      Finance, LLC Security Agreement), 10.1 (CorrPro Investments, LLC Warrant),
      10.5 (American Capital Strategies, Ltd. Warrant), 10.2 (Investor &
      Registration Rights Agreement), and 10.3 (Services Agreement) to our
      Current Report on Form 8-K filed April 14, 2004, and are incorporated
      herein by reference.

(24)  A copy of this exhibit filed as Exhibit 4.11 to our Annual Report on Form
      10-K for the period ended March 31, 2003 is incorporated herein by
      reference.

      (B)   REPORTS ON FORM 8-K:

            During the quarter ended March 31, 2004, we filed four Current
            Reports on Form 8-K.

            On February 10, 2004, a Current Report on Form 8-K was filed, under
            Item 5, announcing that we had secured an extension of the maturity
            date of our previous revolving credit facility and obtained a
            deferral of a significant scheduled principal payment due under our
            previous senior notes.

            On February 26, 2004, a Current Report on Form 8-K was filed, under
            Item 5, announcing that we had called a special meeting of
            shareholders to vote on proposals relating to our refinancing and
            recapitalization plan and furnished, under Item 12, announcing our
            operating results for the third quarter and the nine months ended
            December 31, 2003.

            On March 10, 2004, a Current Report on Form 8-K was filed, under
            Item 5, announcing that Institutional Shareholder Services had
            issued a formal recommendation to its institutional clients that
            they vote in favor of the proposals relating to our refinancing and
            recapitalization plan.

      On March 23, 2004, a Current Report on Form 8-K was filed, under Item 5,
      announcing that our shareholders voted to approve the proposals relating
      to our refinancing and recapitalization plan and filed, under Item 11,
      announcing that we had issued a notice to our executive officers and
      directors concerning a stock trading blackout in connection with a change
      in the record keepers for our 401(k) Savings Plan.

                                                                              79

<PAGE>

      (c)   EXHIBITS

            See "Index to Exhibits" at Item 15(a) above.

                                                                              80
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 of 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this Form 10-K for the
fiscal year ended March 31, 2004 to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                        CORRPRO COMPANIES, INC.

June 29, 2004                           By: /s/ Joseph P. Lahey
                                           _________________________________
                                           Joseph P. Lahey
                                           President and Chief Executive Officer

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

June 29, 2004                              /s/ Joseph P. Lahey
                                           ______________________
                                           Joseph P. Lahey
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)

June 29, 2004                              /s/ Robert M. Mayer
                                           ______________________
                                           Robert M. Mayer
                                           Senior Vice President and
                                           Chief Financial Officer
                                           (Principal Financial and
                                           Accounting Officer)

June 29, 2004                              /s/ James A. Johnson
                                           ______________________
                                           James A. Johnson
                                           Chairman of the Board of Directors

June 29, 2004                              /s/ Jay I. Applebaum
                                           ______________________
                                           Jay I. Applebaum, Director

June 29, 2004
                                           ______________________
                                           Jason H. Reed, Director

June 29, 2004                              /s/ Joseph W. Rog
                                           ______________________
                                           Joseph W. Rog, Director

June 29, 2004                              /s/ C. Richard Lynham
                                           ______________________
                                           C. Richard Lynham, Director

June 29, 2004                              /s/ Harry W. Millis
                                           ______________________
                                           Harry W. Millis, Director

June 29, 2004                              /s/ Neal R. Restivo
                                           ______________________
                                           Neal R. Restivo, Director

June 29, 2004                              /s/ Warren F. Rogers
                                           ______________________
                                           Warren F. Rogers, Director

                                                                              81