##### Table of Contents



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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended March 31, 2000

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   0-2762

MAXCO, INC.
(Exact Name of Registrant as Specified in its Charter)

|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Michigan                                                       |  | 38-1792842                             
|                                                              
|                                                              
|                                                              
|                                                              
|(State or other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification Number)

|                                         |  |  |            | 
|---------------------------------------- |  |  | ---------- | 
|1118 Centennial Way, Lansing, Michigan   |  |  | 48917      | 
|                                        
|                                        
|                                        
|                                        
|(Address of principal executive offices) |  |  | (Zip Code) | 

|                                                    |               
|--------------------------------------------------- | --------------
|Registrants Telephone Number, including area code: | (517) 321-3130

Securities registered pursuant to Section 12(b) of the Act:

|                        |  |                                              
|----------------------- |  | ---------------------------------------------
|Title of each classNONE |  | Name of each exchange on which registeredNONE

Securities registered pursuant to Section 12(g) of the Act:

|                                                            |  |                             
|----------------------------------------------------------- |  | ----------------------------
|Securities registered pursuant to Section 12(g) of the Act:
|                                                           
|                                                           
|                                                           
|                                                           
|Common stock                                                |  | Series Three Preferred Stock
|                                                           
|                                                           
|                                                           
|                                                           
|(Title of Class)                                            |  | (Title of Class)            

Indicate by check mark whether the registrant (1) has filed all annual,
quarterly and other reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve months and (2) has
been subject to the filing requirements for at least the past 90 days.

|                    
|--------------------
|Yes [X]       No[  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.  [X]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of May 31, 2000: $12,955,389.

At May 31, 2000, there were 3,101,195 outstanding shares of Registrants common
stock.




Documents Incorporated By Reference

Portions of the annual proxy statement for the year ended March 31, 2000 are
incorporated by reference into Part III.

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TABLE OF CONTENTS



|                                           |                                            |  |  |  |  |  |  | 
|------------------------------------------ | ------------------------------------------ |  |  |  |  |  |  | 
|Documents Incorporated By Reference       
|PART III                                  
|PART IV                                   
|SIGNATURES                                
|                                           | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|EXHIBIT INDEX                             
|Sixth Amendment to Agreement Dated 7/12/00
|Subsidiaries of the Registrant            
|Consent of Independent Auditors           
|Financial Data Schedule                   



---



MAXCO, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

|     |  |                                                                                       |  |      |    | 
|---- |  | ------------------------------------------------------------------------------------- |  | ---- | -- | 
|ITEM |  |                                                                                       |  | PAGE
|     |  |                                                                                      
|1    |  | Business                                                                              |  |      | 3  | 
|    
|    
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|2    |  | Properties                                                                            |  |      | 7  | 
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|3    |  | Legal Proceedings                                                                     |  |      | 8  | 
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|4    |  | Submission of Matters to a Vote of Security Holders                                   |  |      | 8  | 
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|5    |  | Market for Registrants Common Equity and Related Shareholder Matters                 |  |      | 8  | 
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|6    |  | Selected Financial Data                                                               |  |      | 9  | 
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|7    |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations |  |      | 10 | 
|    
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|7A   |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |      | 15 | 
|    
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|8    |  | Financial Statements and Supplemental Data                                            |  |      | 15 | 
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|9    |  | Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure  |  |      | 15 | 
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|10   |  | Directors and Executive Officers of the Registrant                                    |  |      | 15 | 
|    
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|11   |  | Executive Compensation                                                                |  |      | 15 | 
|    
|    
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|12   |  | Security Ownership of Certain Beneficial Owners and Management                        |  |      | 15 | 
|    
|    
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|13   |  | Certain Relationships and Related Transactions                                        |  |      | 15 | 
|    
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|14   |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |  |      | 15 | 
|    
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|    
|     |  | Signatures                                                                            |  |      | 17 | 
|    
|    
|    
|    
|     |  | List of Financial Statements and Financial Statement Schedules                        |  |      | 19 | 

2



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##### Table of Contents



PART I

ITEM 1  BUSINESS
Maxco, Inc. (the Company) is a Michigan corporation incorporated in 1946.
Maxco currently operates in three business segments: construction supplies,
heat-treating, and packaging products. Maxcos businesses include Ersco
Corporation, a distributor of construction supplies; Atmosphere Annealing Inc.,
a production metal heat treating service company; and Pak-Sak Industries Inc.,
which makes polyethylene packaging. Maxco also has investments in three real
estate related companies: L/M Associates, LLC, LandEquities Corporation, and
Nilson Builders. In addition to real estate, Maxco also has investments
representing less than majority interests in the following: a registered
investor advisory firm; a registered broker-dealer of securities that is
primarily focused on the trading of fixed income investments over the internet;
a company offering a business-to-business vertical web portal
designed to bring solution-seekers together with solution-providers; a company
in the business of selling, leasing, and servicing lift trucks; three
technology-related businesses; and two energy-related businesses.

During the year ended March 31, 2000, the Company continued to expand its
construction supplies segment through the purchase of property and equipment at
its existing branches and the purchase of two businesses. Maxco also added
capacity at its heat-treating company through the purchase of property and
equipment.

Additionally, Maxco invested in Phoenix Financial Group, LTD and its subsidiary
Cambridge Group Investments, LTD (dba Bondpage.com), a registered broker-dealer
of securities that is primarily focused on the trading of fixed income
investments over the Internet. The Company also made an investment in
MYOEM.COM, a company offering a business-to-business vertical web portal
designed to bring solution-seekers together with solution-providers. Maxco
also made additional investments in Foresight Solutions, Inc. In relation to
the Companys 7% interest in Axson, S.A. of France, the majority shareholders
of Axson began negotiations with Axson management in the fourth quarter of
fiscal 2000, for a management buyout of the existing shareholders interests.
As such, Maxco classified its investment in Axson as available for sale at
March 31, 2000 and adjusted its carrying amount to its estimated fair value
which resulted in a $860,000 charge. This transaction is subject to approval
by the French government and is expected to be completed in July 2000.

The Company had several notable events occur during the year ended March 31,
1999. Maxcos construction supplies segment purchased a business in the
Columbus, Ohio market. In addition, Maxco acquired a one-third interest in
Blasen Brogan Asset Management Company, a Lansing, Michigan based registered
investor advisory firm; acquired a 50% equity interest in and agreed to finance
certain debt of Mid-State Industrial Services, Inc., which is in the business
of selling, leasing, and servicing lift trucks; and acquired a 40% equity
interest in Foresight Solutions, Inc. (acquired an additional 10% in November
1999), a developer of accounting software and e-business solutions for small to
medium size businesses. The Company also made additional investments in its
real estate activity as it acquired a 50% interest in LandEquities and Nilson
Builders, companies that manage, develop, and build commercial and residential
property.

The Company sold its 45% equity interest in Strategic Interactive, Inc. to
Provant, Inc. for cash and approximately 249,000 shares of Provants stock in
October 1998 when Provant acquired 100% of the stock of Strategic Interactive.

Maxcos investment activities during the year ended March 31, 1998 included the
following: acquiring a 50% interest in Robinson Oil Company, LLC, which is in
the business of acquiring and developing oil and gas interests; and acquiring a
33% interest in AMI Energy, Inc., which is a retail energy marketing and
consulting firm.

CONSTRUCTION SUPPLIES
Ersco Corporation

Ersco Corporation distributes concrete construction products and accessories,
fabricates reinforcing steel and rents concrete forms used in road and
commercial building construction. Their products include reinforcing steel rod
and mesh, expansion fiber and concrete curing compounds, as well as custom
fabrication of steel (rod and mesh) and fiber products used in concrete paving
and construction. The geographic market is the Midwest, primarily in Michigan,
Illinois, Indiana, Kansas, Kentucky, Missouri, Ohio, and Wisconsin. Warehouses
are located in Detroit, Grand Rapids, Saginaw and Traverse City, Michigan;
South Bend, Indiana; Louisville, Kentucky; Columbus, Ohio; Milwaukee,
Wisconsin; and St. Louis, Missouri. A sales office is located in metropolitan
Chicago, which specializes in product sales to highway contractors on a direct
shipment basis from the manufacturers. Ersco acquired branch locations in the
St. Louis, Missouri metropolitan area on April 1, 1999 and November 1, 1999.
Competition is intense and larger project orders are secured on a competitive
bid basis. During the years ended March 31, 2000, 1999, and 1998, net sales of
the construction supplies group were approximately 64%, 58% and 49%,
respectively, of consolidated net sales.

3



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This segment is not dependent on any patents, trademarks, licenses, franchises,
or concessions and is not dependent upon a single or a few customers, the loss
of which would have a significant adverse effect on the segment.

Units of this segment may carry significant amounts of inventory to meet
delivery requirements of customers. Inventories of this segment were
equivalent to 69 days sales on hand and represented 78% of Maxcos total
inventories at March 31, 2000. Credit policies have been established that
provide for extension of credit and collection of amounts due. The Companys
general policy requires payment within 30 days of invoice date. Adherence to
these policies results in accounts receivable levels that generally change with
volume levels. However, the collection periods may be extended by prior
agreement to accommodate customer cash flows. Where applicable, accounts
receivable are secured by perfected lien rights and payment bonds.

The volume of the construction supplies unit in the third and fourth quarters
is generally lower due to reduced construction activity during the winter
months in the units market area. Historically, the activities of this segment
have generally followed the economic cycles within the respective business
units market area.

Generally, the distribution segment of the Company does not enter into specific
long-term contracts with its customers. As such, no backlog exists for this
segment.

HEAT TREATING
Atmosphere Annealing, Inc.

Atmosphere Annealing, Inc. provides metal heat treating, phosphate coating and
bar shearing and sawing services to the cold forming, stamping, forging and
casting industries. Its services are sold through Atmospheres own sales
personnel and outside sales representatives, primarily to automotive companies
and automotive suppliers. This units facilities are located in Lansing,
Michigan; Canton, Ohio; and North Vernon, Indiana.

Since Atmosphere is a service business, inventory levels for this segment are
traditionally small and consist mainly of steel inventory, various lubricants
and other materials used in the heat treating, phosphate coating or bar
shearing and sawing process. Inventories of this segment represent 7% of
Maxcos total inventories at March 31, 2000. In addition to pickup and
delivery of consigned inventory by its customers, Atmosphere maintains its own
trucks, which are in operation 24 hours a day throughout the Midwest to insure
prompt pickup and delivery.

The heat treating industry is competitive with over 250 heat treaters in
Michigan, Ohio, and Indiana. Atmosphere specializes in high volume, low
priced, ferrous heat treating using large furnaces. In its market niche of
this type of heat treating, Atmosphere competes with only a limited number of
competitors. Much of the heat treating industry is comprised of smaller
companies that specialize in higher priced batch heat-treating such as
carburizing, nitriding, tool and die, brazing, salt bath or induction
hardening.

This units response time to its customer just-in-time requirements does not
result in significant backlog for this segment. Growth is possible by this
unit in the future due to its customers outsourcing of high volume heat
treating services. These services are usually outsourced by Atmospheres
customers because of extensive storage requirements, costs, and other issues.

Sales for this unit are fairly consistent throughout the year with the
exception of lower volume during model changeovers for its automotive customers
in July, and during the winter holiday season. Sales to a single or a few
customers are significant to this segment. This segment accounted for
approximately 26%, 29%, and 33% of consolidated net sales for the years ended
March 31, 2000, 1999, and 1998, respectively.

PACKAGING PRODUCTS
Pak-Sak Industries, Inc.

Pak-Sak Industries, Inc. extrudes polyethylene film and converts it into a
variety of polyethylene bags and packaging materials. A smaller portion of the
business is the purchase and resale of film products produced by other
companies. Manufactured products are both printed and plain. Products are
sold primarily throughout the Midwest area by its own sales personnel,
manufacturers representatives, and paper jobbers. Manufacturing facilities
are located in Sparta, Michigan.

4



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The customers served by this unit are primarily industrial customers, food
packagers, and specialty distributors. This segments business is primarily
affected by changing consumer demands and the general condition of the economy.
The business of this segment is relatively stable within the economic cycle of
industry in general.

Inventory levels of this segment tend to be in proportion to the level of sales
activity. Total inventories of this segment were equivalent to 37 days sales
on hand and represented 15% of Maxcos total inventories at March 31, 2000.
Credit policies are enforced to help insure that increases in accounts
receivable are primarily related to volume increases.

This units response time to its customers just-in-time inventory
requirements, which may change on a daily basis, does not result in significant
backlog for this segment.

Sales of packaging products to a single customer were not significant for the
years ended March 31, 2000, 1999, and 1998. The segment is not dependent on
any patents, trademarks, licenses, franchises, or concessions. This segment
accounted for approximately 10%, 13%, and 18% of consolidated net sales for the
years ended March 31, 2000, 1999, and 1998, respectively.

For additional information regarding the Companys industry segments, see Note
10 to Notes to Consolidated Financial Statements.

INVESTMENT IN REAL ESTATE
Effective January 1, 1997, Maxco acquired a 50% interest in L/M Associates, LLC
(L/M), a company formed to develop and lease real estate. L/M has an interest,
along with other third party investors, in a real estate portfolio having an
aggregate market value of approximately $141 million at March 31, 2000. This
portfolio consists of properties located in central Michigan, and includes
approximately 80 offices and retail buildings, and more than 155 acres of
property zoned for commercial retail development and residential building
sites.

In 1999, the Company made additional investments in related real estate
businesses as it acquired a 50% interest in LandEquities Corporation
(LandEquities) and Nilson Builders and Associates, Inc. (Nilson).

LandEquities is primarily engaged in construction, management, leasing, and
space planning for its clients including the L/M Companys portfolio. Nilson
is a residential homebuilder that constructs custom single family homes as well
as pre-designed homes.

The following table details key statistics related to properties in the real
estate portfolio of Maxcos joint venture.

|                            |  |                           |        |                   |  |   |           | 
|--------------------------- |  | ------------------------- | ------ | ----------------- |  | - | --------- | 
|                            |  | Year Ended March 31, 2000
|                            |  |                          
|                            |  | (in thousands)           
|                            |  | Completed                 |        | Under Development
|                            |  |                           |        |                  
|Square footage              |  |                           | 836    |                   |  |   | 191       | 
|                           
|                           
|                           
|                           
|Net rental income           |  | $                         | 11,200 | (1)              
|                           
|                           
|                           
|                           
|Estimated fair market value |  | $                         | 92,900 | (2)               |  | $ | 25,100    | 
|                           
|                           
|                           
|                           
|Outstanding debt            |  | $                         | 67,000 |                   |  | $ | 18,400    | 
|                           
|                           
|                           
|                           
|Funds from operations       |  | $                         | 2,200  | (1)              
|                           
|                           
|                           
|                           
|Land inventory              |  |                           |        |                   |  |   | 155 acres | 
|                           
|                           
|                           
|                           
|Land value                  |  |                           |        |                   |  | $ | 23,300    | 
|                           
|                           
|                           
|                           
|Outstanding debt on land    |  |                           |        |                   |  | $ | 11,300    | 



|(1) |  | Proforma net rental income and funds from operations based on full year
occupancy of facilities.
|--- |  | ------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Based on appraised value at the time of closing of end financing.                               

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##### Table of Contents



OTHER INVESTMENTS
In addition to its investment in various real estate entities, the Company has
other investments in 50% or less owned affiliates.

Maxcos equity interest is 20% or greater in the following companies and
consequently is accounted for using the equity method: approximately a 25%
interest in Integral Vision, Inc. (formerly Medar, Inc.), a company that
develops, manufactures, and markets microprocessor-based process monitoring and
control systems related to optical inspection for use in industrial
manufacturing environments; a one-third interest in Blasen Brogan Asset
Management Company, a Lansing, Michigan based registered investor advisory
firm; approximately a 12.5% interest in Phoenix Financial Group, LTD and its
subsidiary Cambridge Group Investments, LTD (dba Bondpage.com), a registered
broker-dealer of securities that is primarily focused on the trading of fixed
income investments over the Internet; a 50% equity interest in Mid-State
Industrial Services, Inc., which is in the business of selling, leasing, and
servicing lift trucks; a 50% equity interest in Foresight Solutions, Inc., a
developer of accounting software and e-business solutions for small to medium
size businesses; a 50% interest in Robinson Oil Company, LLC, which is in the
business of acquiring and developing oil and gas interests; and an interest in
AMI Energy, Inc., which is a retail energy marketing and consulting firm.

Maxco owns approximately 6% of the common stock of MYOEM.COM, a company
offering a business-to-business vertical web portal designed to bring
solution-seekers together with solution-providers and consequently accounts for
this investment using the cost method. Maxco has a 7% investment in Axson,
S.A. of France (Axson), a manufacturer of resins and composite materials for
advanced applications. In the fourth quarter of fiscal 2000, the majority
shareholders of Axson began negotiations with Axson management for a management
buyout of the existing shareholders interests. As such, Maxco classified its
investment in Axson as available for sale at March 31, 2000 and adjusted its
carrying amount to its estimated fair value which resulted in a $860,000
charge. This transaction is subject to approval by the French government and
is expected to be completed in July 2000.

In November 1999, Maxco began accounting for its investment in Provant, Inc.
common stock as securities available for sale as defined by FASB 115.
Consequently, the securities are carried at market value with the unrealized
gains and losses net of tax, reported as a separate component of stockholders
equity. At March 31, 2000, the unrealized loss on this stock was approximately
$822,000 net of tax.

RESEARCH AND DEVELOPMENT
Expenditures on research activities related to development or improvement of
products were not significant.

MAJOR CUSTOMERS
No sales to any single customer exceeded 10% of consolidated sales for 2000,
1999, or 1998.

ENVIRONMENTAL FACTORS
Compliance by Maxco and its operating subsidiaries with environmental
protection laws had no material effect on capital expenditures, earnings, or
competitive position.

EMPLOYEES
At March 31, 2000, Maxco and its wholly owned subsidiaries employed
approximately 800 full time employees.

EXPORT SALES AND FOREIGN OPERATIONS
The Company and its operating subsidiaries had no foreign operations or
material export sales during the years ended March 31, 2000, 1999, or 1998.

6



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##### Table of Contents



ITEM 2  PROPERTIES
The following table provides information relative to the principal properties owned or leased by the Company and its operating subsidiaries as of March 31, 2000. The Company considers its facilities to be in good operating condition.

|                           |  |                           |  |          |  |                                         
|-------------------------- |  | ------------------------- |  | -------- |  | ----------------------------------------
|                           |  |                           |  | OWNED/  
|LOCATION                   |  | APPROXIMATE SIZE          |  | LEASED   |  | USE                                     
|                           |  |                           |  |          |  |                                         
|                          
|                          
|                          
|                          
|DISTRIBUTION              
|                          
|                          
|                          
|                          
|Ersco Corporation         
|                          
|                          
|                          
|                          
|Okemos, MI                 |  | 7,300 sq ft               |  | Leased   |  | Administrative offices                  
|                          
|                          
|                          
|                          
|Southfield, MI             |  | 24,000 sq ft              |  | Leased   |  | Warehouse and distribution              
|                          
|                          
|                          
|                          
|Saginaw, MI                |  | 15,000 sq ft              |  | Leased   |  | Warehouse and distribution              
|                          
|                          
|                          
|                          
|Traverse City, MI          |  | 7,800 sq ft               |  | Leased   |  | Warehouse and distribution              
|                          
|                          
|                          
|                          
|Wyoming, MI                |  | 7,500 sq ft               |  | Leased   |  | Warehouse and distribution              
|                          
|                          
|                          
|                          
|Mishawaka, IN              |  | 21,200 sq ft on 1.3 acres |  | Owned(A) |  | Warehouse and distribution              
|                          
|                          
|                          
|                          
|Chicago, IL                |  | 1,850 sq ft               |  | Leased   |  | Direct highway sales office             
|                          
|                          
|                          
|                          
|Louisville, KY             |  | 11,400 sq ft              |  | Leased   |  | Warehouse and distribution              
|                          
|                          
|                          
|                          
|Columbus, OH               |  | 9,000 sq ft               |  | Leased   |  | Warehouse and distribution              
|                          
|                          
|                          
|                          
|Brookfield, WI             |  | 15,000 sq ft on 1.6 acres |  | Owned(A) |  | Warehouse and distribution              
|                          
|                          
|                          
|                          
|Brookfield, WI             |  | 5,900 sq ft on .75 acres  |  | Owned(A) |  | Held for sale                           
|                          
|                          
|                          
|                          
|Fairview Heights, IL       |  | 29,000 sq ft              |  | Leased   |  | Warehouse and distribution              
|                          
|                          
|                          
|                          
|Bridgeton, MO              |  | 6,000 sq ft               |  | Leased   |  | Warehouse and distribution              
|                          
|                          
|                          
|                          
|Maplewood, MO              |  | 7,500 sq ft               |  | Leased   |  | Warehouse and distribution              
|                          
|                          
|                          
|                          
|HEAT TREATING             
|                          
|                          
|                          
|                          
|Atmosphere Annealing, Inc.
|                          
|                          
|                          
|                          
|Lansing, MI                |  | 145,000 sq ft             |  | Leased   |  | Plant and administrative offices        
|                          
|                          
|                          
|                          
|Lansing, MI                |  | 58,000 sq ft              |  | Leased   |  | Heat treating plant                     
|                          
|                          
|                          
|                          
|Canton, OH                 |  | 160,000 sq ft on 8 acres  |  | Owned(A) |  | Heat treating plant                     
|                          
|                          
|                          
|                          
|N. Vernon, IN              |  | 88,000 sq ft on 6 acres   |  | Owned(A) |  | Heat treating plant                     
|                          
|                          
|                          
|                          
|PACKAGING PRODUCTS        
|                          
|                          
|                          
|                          
|Pak-Sak Industries, Inc.  
|                          
|                          
|                          
|                          
|Sparta, MI                 |  | 78,000 sq ft on 2.5 acres |  | Owned(A) |  | Manufacturing and
administrative offices
|                          
|                          
|                          
|                          
|Sparta, MI                 |  | 12,000 sq ft              |  | Leased   |  | Manufacturing                           
|                          
|                          
|                          
|                          
|CORPORATE                 
|                          
|                          
|                          
|                          
|Maxco, Inc.               
|                          
|                          
|                          
|                          
|Lansing, MI                |  | 7,200 sq ft on 1.9 acres  |  | Owned(A) |  | Executive offices                       
|                          
|                          
|                          
|                          
|Thornapple Township, MI    |  | 150 acres                 |  | Owned    |  | Held for investment                     
|                          
|                          
|                          
|                          
|Lansing, MI                |  | 6,000 sq ft on 1.0 acre   |  | Owned(A) |  | Leased to FinishMaster, Inc.            
|                          
|                          
|                          
|                          
|Eaton Rapids, MI           |  | 44,200 sq ft on 5 acres   |  | Owned(A) |  | Leased to Axson, N.A.                   
|                          
|                          
|                          
|                          
|Eaton Rapids, MI           |  | 9,300 sq ft on 1.5 acres  |  | Owned    |  | Leased to Axson, N.A.                   



---

|(A) |  | Subject to a mortgage
|--- |  | ---------------------

Expiration dates of leases relative to the Companys principal properties range
from 2000 to 2016. Leases expiring within 12 months are expected to be renewed
at substantially the same terms as the present leases.

7



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##### Table of Contents



ITEM 3  LEGAL PROCEEDINGS
None

ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None

PART II

ITEM 5  MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Maxcos common stock trades on the Nasdaq Stock Market under the symbol MAXC.
The approximate number of record and beneficial holders of Maxcos common stock
at May 31, 2000 was 1,500.

The range of high and low sales prices for the last two years as reported by
NASDAQ were:

|     |  |               |  |          |  |        
|---- |  | ------------- |  | -------- |  | -------
|YEAR |  | QUARTER ENDED |  | HIGH     |  | LOW    
|     |  |               |  |          |  |        
|1998 |  | March 31      |  | 11  1/2 |  | 7  1/2
|    
|    
|    
|    
|     |  | June 30       |  | 10  1/4 |  | 7      
|    
|    
|    
|    
|     |  | September 30  |  | 9  3/8  |  | 7  1/4
|    
|    
|    
|    
|     |  | December 31   |  | 9        |  | 6      

|     |  |              |  |          |  |        
|---- |  | ------------ |  | -------- |  | -------
|1999 |  | March 31     |  | 8  3/4  |  | 5  1/2
|    
|    
|    
|    
|     |  | June 30      |  | 7  3/16 |  | 4  1/2
|    
|    
|    
|    
|     |  | September 30 |  | 8  1/2  |  | 5  7/8
|    
|    
|    
|    
|     |  | December 31  |  | 9  7/8  |  | 6  1/4

|     |  |          |  |          |  |        
|---- |  | -------- |  | -------- |  | -------
|2000 |  | March 31 |  | 10  3/4 |  | 6  5/8

No cash dividends on common stock have been paid during any period.

8



---



##### Table of Contents



ITEM 6  SELECTED FINANCIAL DATA

|                                                                                      |                         |   |                      |      |      |   |                                   |     |      |   |         |     |  |   |        |      |  |   |        |      |  
|------------------------------------------------------------------------------------- | ----------------------- | - | -------------------- | ---- | ---- | - | --------------------------------- | --- | ---- | - | ------- | --- |  | - | ------ | ---- |  | - | ------ | ---- | -
|                                                                                      |                         |   | Year Ended March 31,
|                                                                                      |                         |   |                     
|                                                                                      |                         |   | 2000                 |      | 1999 |   | 1998                              |     | 1997 |   | 1996   
|                                                                                      |                         |   |                      |      |      |   |                                   |     |      |   |        
|                                                                                      |                         |   |                      |      |      |   | (in thousands, except share data)
|Net sales                                                                             |                         | $ | 156,490              |      |      | $ | 124,732                           |     |      | $ | 102,544 |     |  | $ | 74,277 |      |  | $ | 59,330 |     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Loss on investment (1)                                                                |                         |   | (860                 | )   
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Income (loss) from continuing
operations before equity in
income (loss) of affiliates |                         |   | 38                   |      |      |   | 1,183                             |     |      |   | 2,784   |     |  |   | 1,482  |      |  |   | (1,098 | )   
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Equity in income (loss) of
affiliates, net of tax                                     |                         |   | 278                  |      |      |   | (395                              | )   |      |   | (1,373  | )   |  |   | (250   | )    |  |   | (1,501 | )   
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Income (loss) from continuing
operations                                              |                         |   | 316                  |      |      |   | 788                               |     |      |   | 1,411   |     |  |   | 1,232  |      |  |   | (2,599 | )   
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Income (loss) from discontinued
operations(2)(4)                                      |                         |   |                      |      |      |   |                                   |     |      |   |         |     |  |   | 21,322 |      |  |   | (94    | )   
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Net income (loss)(2)                                                                  |                         |   | 316                  |      |      |   | 788                               |     |      |   | 1,411   |     |  |   | 22,554 |      |  |   | (2,693 | )   
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Net income (loss) per share:(3)                                                      
|                                                                                      | Continuing operations   |   | $                    | (.03 | )    |   | $                                 | .12 |      |   | $       | .30 |  |   | $      | .26  |  |   | $      | (.66 | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Discontinued operations |   |                      |      |      |   |                                   |     |      |   |         |     |  |   |        | 5.20 |  |   |        | (.02 | )
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Net income (loss) per share(3)                                                        |                         |   | (.03                 | )    |      |   | .12                               |     |      |   | .30     |     |  |   | 5.46   |      |  |   | (.68   | )   
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|At March 31:                                                                         
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Total assets                                                                          |                         | $ | 100,420              |      |      | $ | 85,430                            |     |      | $ | 76,055  |     |  | $ | 68,161 |      |  | $ | 57,531 |     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Long-term obligations
(net of current maturities)                                     |                         |   | 22,390               |      |      |   | 32,856                            |     |      |   | 27,698  |     |  |   | 16,027 |      |  |   | 26,815 |     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Working capital                                                                       |                         |   | (7,687               | )    |      |   | 9,858                             |     |      |   | 9,232   |     |  |   | 7,402  |      |  |   | 31,551 |     



NOTES



|(1) |  | Represents an $860,000 charge for the year ended March 31, 2000 for an adjustment of the Company's
         Axson investment to estimated fair value.                                                                                                                                                            
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes a $22.0 million gain net of tax for the year ended March 31,
1997, from the sale of FinishMaster stock.                                                                                                                                                                                                 
|   
|   
|   
|   
|(3) |  | Net income (loss) per share amounts assume dilution for all years
presented.                                                                                                                                                                                                                                     
|   
|   
|   
|   
|(4) |  | Maxcos discontinued operations included Wright Plastic Products, Inc. a
custom plastic injection molder and tool builder; Akemi, Inc., which
formulates and compounds polyester and epoxy thermoset plastics; and
FinishMaster, Inc. a distributor of automotive paints, coatings and
paint-related accessories.

No cash dividends on common stock have been paid during any period.

The above selected financial data should be read in conjunction with the
consolidated financial statements, which appear in Part II, Item 8 of this
report.

9



---



##### Table of Contents



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

The following is a discussion of the major elements relating to Maxcos
financial and operating results for 2000 compared with 1999, and 1999 compared
with 1998. The comments that follow should be read in conjunction with Maxcos
Consolidated Financial Statements and related notes, contained in Part II, Item
8 of this report.

Except for the historical information contained herein, the matters discussed
in this report are forward-looking statements made pursuant to the safe harbor
provisions of Section 27A of the securities Act of 1933 and Section 21 E of the
Securities Act of 1934. Such statements are based on managements current
expectations and are subject to a number of factors and uncertainties, which
could cause actual results to differ materially from those described in the
forward-looking statements. These forward-looking statements represent the
companys best estimates as of the date of this report. The company assumes no
obligation to update such estimates except as required by the rules and
regulations of the Securities and Exchange Commission.

RESULTS OF OPERATIONS
2000 versus 1999
Net sales increased to $156.5 million in 2000 compared to $124.7 million in
1999. Operating earnings were $4.0 million in 2000 compared to $3.0 million
for the comparable period in 1999. Net income was $316,000 or after preferred
dividends of $408,000, a loss of $.03 per share assuming dilution compared to
last years $788,000 or $.12 per share assuming dilution.

Sales and operating earnings for the years ending March 31, 2000 and 1999 by
each of the Companys segments were as follows:

|                      |  |                |        |                |  |                |       |        |  |   |        |           |  |   |        |  
|--------------------- |  | -------------- | ------ | -------------- |  | -------------- | ----- | ------ |  | - | ------ | --------- |  | - | ------ | -
|                      |  | Year Ended     |        | Year Ended    
|                      |  | March 31, 2000 |        | March 31, 1999
|                      |  |                |        |               
|                      |  |                |        |                |  | Operating      |       |        |  |   |        | Operating
|                      |  |                |        |                |  | Earnings       |       |        |  |   |        | Earnings 
|                      |  | Net Sales      |        | (Loss)         |  | Net Sales      |       | (Loss)
|                      |  |                |        |                |  |                |       |       
|                      |  |                |        |                |  | (in thousands)
|Construction supplies |  | $              | 99,924 |                |  | $              | 2,770 |        |  | $ | 72,440 |           |  | $ | 2,538  |  
|                     
|                     
|                     
|                     
|Heat treating         |  |                | 40,368 |                |  |                | 5,245 |        |  |   | 35,700 |           |  |   | 3,434  |  
|                     
|                     
|                     
|                     
|Packaging products    |  |                | 15,865 |                |  |                | (530  | )      |  |   | 16,251 |           |  |   | (1,006 | )

The growth in net sales at the construction supplies segment was the result of
an increase in same branch sales of approximately 20.6%, and sales of
approximately $12.6 million generated by new Ersco branches. The
same branch sales increase was primarily attributable to additional activity
due to an overall strong general construction market fueled in part by
increased availability of federal highway repair dollars. Maxcos heat
treating segment also experienced an increase in net sales primarily due to the
fact that in 1999, a labor strike occurred at one of its major customers and
there were delays in making a new process line operationally efficient, neither
of which occurred in 2000.

Consolidated gross profit (net sales less cost of sales and operating expenses)
increased, as a result of the overall sales increase, to $36.7 million or 23.5%
of sales from $27.3 million or 21.9% of net sales. The increase in gross
profit was primarily attributable to the increase in net sales at the
construction supplies and heat treating segments.

Selling, general, and administrative expenses increased $6.9 million or 33.0%
to $27.8 million from $20.9 million. This increase was primarily attributable
to an increase in selling, general, and administrative expenses for the
construction supplies segment resulting from the increase in sales, additional
operating costs associated with the newly acquired locations, and wage and
other expenses incurred to support the planned growth of this unit. An
increase in costs at Maxcos corporate office also contributed to the overall
increase in selling, general, and administrative expenses over the 1999 level.
These costs included wages, state taxes, and general insurances.

In the fourth quarter of fiscal 2000, the majority shareholders of Axson began
negotiations with Axson management for a management buyout of the existing
shareholders interests. As such, Maxco classified its investment in Axson as
available for sale at March 31, 2000 and adjusted its carrying amount to its
estimated fair value which resulted in a
$860,000 charge. This transaction is subject to approval by the French
Government and is expected to be completed in July 2000.

10



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##### Table of Contents



2000 versus 1999  continued
Depreciation and amortization expense increased primarily due to the additional
amortization of intangibles and depreciation related to the acquisitions at the
Companys construction supplies segment. Additions of property and equipment
by the Companys heat-treating and packaging products segments also contributed
to the increase in depreciation expense for the year.

Operating profit increased $1.0 million or 32.7% to $4.0 million from $3.0
million. Operating results at all of Maxcos operating companies improved over
1999. The increase in operating profit for the Companys heat treating segment
was primarily the result of the increased sales level. The reduced operating
loss for the Companys packaging products segment was primarily the result of
the improved gross margin. The operating profit at the Companys construction
supplies segment also improved, however, the operating profit as a percentage
of sales decreased. This was primarily due to increased costs incurred to
support the planned growth of this unit. The operating earnings were also
impacted by the increase in selling, general, and administrative costs at
Maxcos corporate office.

Net interest expense increased in 2000 from the prior year due to additional
long-term borrowings, the proceeds of which were used for investments in new
affiliates to fund the construction segment acquisition, repurchase of the
Companys stock, and additional purchases of property and equipment.

Equity in net income of affiliates consists of Maxcos share of the operating
results of 50% or less owned entities. On a consolidated basis, equity in net
income of affiliates, net of tax, was $278,000 for the year ended March 31,
2000, compared to a loss of $395,000 for the prior year comparable period.
This improvement was primarily attributable to Maxcos proportionate share of
the gain on the sale of Integral Vision, Inc.s (formerly Medar, Inc.) welding
controls division in 2000.

The Company's effective tax rate varied from the statutory rate of 34% due to certain expenses
which are not deductible for tax purposes.

1999 versus 1998
Net sales increased to $124.7 million in 1999 compared to $102.5 million in
1998. Operating earnings were $3.0 million in 1999 compared to $5.3 million
for the comparable period in 1998. Net income was $788,000 or $.12 per share
assuming dilution compared to $1.4 million or $.30 per share assuming dilution
in 1998

Sales and operating earnings for the years ending March 31, 1999 and 1998 by
each of the Companys segments were as follows:

|                      |  |                |        |                |  |                |        |        |  |   |        |           |  |   |       |  
|--------------------- |  | -------------- | ------ | -------------- |  | -------------- | ------ | ------ |  | - | ------ | --------- |  | - | ----- | -
|                      |  | Year Ended     |        | Year Ended    
|                      |  | March 31, 1999 |        | March 31, 1998
|                      |  |                |        |               
|                      |  |                |        |                |  | Operating      |        |        |  |   |        | Operating
|                      |  |                |        |                |  | Earnings       |        |        |  |   |        | Earnings 
|                      |  | Sales          |        | (Loss)         |  | Sales          |        | (Loss)
|                      |  |                |        |                |  |                |        |       
|                      |  |                |        |                |  | (in thousands)
|Construction supplies |  | $              | 72,440 |                |  | $              | 2,538  |        |  | $ | 50,677 |           |  | $ | 2,819 |  
|                     
|                     
|                     
|                     
|Heat treating         |  |                | 35,700 |                |  |                | 3,434  |        |  |   | 33,328 |           |  |   | 4,452 |  
|                     
|                     
|                     
|                     
|Packaging products    |  |                | 16,251 |                |  |                | (1,006 | )      |  |   | 18,200 |           |  |   | (431  | )

The growth in sales in 1999 was primarily a result of the $21.8 million
increase for the construction supplies segment. An increase in sales for the
heat-treating segment was offset by a decline in sales for the packaging
products segment.

The growth in net sales at the construction supplies segment was the result of
an increase in same branch sales of approximately 13%, and sales of
approximately $15.5 million generated by new Ersco branches in Illinois, Ohio,
and Kentucky. The same branch sales increase was primarily attributable to
additional activity due to an overall strong general construction market fueled
in part by increased availability of federal highway repair dollars.

Consolidated gross profit (net sales less cost of sales and operating expenses)
increased as a result of the overall sales increase, to $27.3 million or 21.9%
of sales from $24.8 million or 24.2% of sales. The decline in gross margin was
primarily attributable to the construction supplies segment. Gross margin for
this segment was lower as a higher portion of their increased sales level was
product sales on a direct shipment basis, which generally have a lower gross
margin than sales from inventory.

11



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##### Table of Contents



1999 versus 1998  continued
Selling, general, and administrative expenses increased $3.9 million or 22.7%
to $20.9 million from $17.0 million. Selling, general, and administrative
expenses increased at both the construction supplies and heat treating
segments. The increase in selling, general, and administrative expenses for
the construction supplies segment was primarily the result of the increase in
sales, additional operating costs associated with the newly acquired locations,
and wage and other expenses incurred to support the planned growth of this
unit. Operating earnings for this segment were affected by the timing of the
acquisition of the Companys branch in Columbus, Ohio and the startup of its
Louisville, Kentucky branch. Since these locations began operations at the end
of the traditional construction season, they were unable to adequately cover
their expense levels due to limited sales volume during the winter months. In
addition, the severity of the winter, especially in January 1999, affected this
units sales levels in the fourth quarter of the fiscal year. The increase in
selling, general, and administrative expenses by the heat-treating segment was
caused primarily by increased employee benefit expenses plus higher costs
incurred in anticipation of increased sales. The planned sales increase did
not occur in part due to a labor strike at one of its major customers as well
as delays, which occurred in making a new process line operationally efficient.

Depreciation and amortization expense increased primarily due to the
amortization of intangibles and additional depreciation related to the
acquisitions at the Companys construction supplies segment. Additions of
property and equipment by the Companys heat-treating and packaging products
segments also contributed to the increase in depreciation expense for the year.

Operating profit decreased from $5.3 million to $3.0 million primarily as a
result of the reduced operating profit for the heat treating segment that
resulted from the additional selling, general, and administrative costs; an
operating loss of approximately $1.0 million which occurred at Maxcos
packaging products segment, due to this segments lower sales and gross margin
percentage; and additional state tax expense in the current year because tax
benefits used in the prior year were not available at the same level in 1999.

Net interest expense increased in 1999 from the prior year due to additional
long-term borrowings and a reduction in marketable securities, the proceeds of
which were used for investments in new affiliates, repurchase of the Companys
stock, and additional purchases of property and equipment.

Equity in net loss of affiliates consists of Maxcos share of the operating
results of 50% or less owned entities. On a consolidated basis, equity in net
loss of affiliates, net of tax, was $395,000 for the year ended March 31, 1999,
compared to $1.4 million for the prior year comparable period. This
improvement was primarily attributable to Maxcos proportionate share of
charges incurred in 1998 at Integral Vision, Inc. (formerly Medar, Inc.) as a
result of the discontinuance of certain product lines.

Federal income tax expense in 1999 differs from the amount computed by applying
statutory rates due primarily to a prior year tax adjustment.

LIQUIDITY AND SOURCES OF CAPITAL
Maxco continued to strengthen its financial condition through operations as net
cash provided by operating activities generated $5.8 million in 2000. The cash
generated from operating activities and the proceeds from long-term obligations
were invested in long-term value opportunities.

Operating activities for 2000 generated cash primarily due to the Companys net
income of $316,000 and non-cash items of approximately $6.3 million in the
current year. Changes in working capital items resulted primarily from the
continued growth of the construction supplies segment.

The Companys investing activities included the purchase of two businesses by
its construction supplies segment, investments in various 50% or less owned
affiliates, and the acquisition of property and equipment. Specifically,
during the period, Maxcos construction supplies segment acquired two branches
in the St. Louis, Missouri metropolitan area. The Company acquired an equity
interest in Phoenix Financial Group, LTD and its subsidiary Cambridge Group
Investments, LTD (dba Bondpage.com), a registered broker-dealer of securities
that is primarily focused on the trading of fixed income investments over the
Internet. Additionally, the Company acquired an equity interest in MYOEM.COM,
a company offering a business-to-business vertical web portal designed to bring
solution-seekers together with solution-providers. Maxco also made additional
investments in Foresight Solutions, Inc.

In fiscal 2000, Integral Vision, Inc. (formerly Medar, Inc.) sold its welding
controls division for cash. As a result, on June 30, 1999, Maxco received
payment on the full balance due on subordinated debentures of $750,000.

12



---



##### Table of Contents



LIQUIDITY AND SOURCES OF CAPITAL  continued
Net cash provided by financing activities during the year consisted primarily
of proceeds from long-term obligations, partially offset by repayments on
long-term obligations and the acquisition and retirement of common stock. At March
31, 2000 the Company had lines of credit totaling $33.0 million of which approximately $6.8
million was available. The lines of credit consisted of an
$18 million secured facility, a $5.0 million facility secured by the assets at
Atmosphere, and a $10.0 million acquisition line for Ersco acquisitions.

The Companys working capital (defined as current assets less current
liabilities) decreased from $9.9 million at March 31, 1999 to a working capital
deficit of $7.7 million at March 31, 2000. This decrease in working capital
was the result of a reclassification of certain lines of credit at March 31,
2000 of $23.4 million from long term to short term due to the Company currently
being in default of the tangible net worth ratio required under its $18 million
and $10 million lines of credit with a bank. Due to this default, these lines
of credit have been classified as short term. These lines of credit were
amended in July 2000, increasing the availability under the $18 million line to
$20 million, and as provided under the original agreement with the bank, the
$10 million acquisition line was converted to a $7.6 million term loan.
However, there are still ongoing negotiations with the bank to obtain a waiver
of default. Management anticipates that these negotiations will be completed
by September 30, 2000.

The Companys ability to meet its short term and long term debt service and
other obligations (including compliance with financial covenants) will be
dependent upon its future operating performance and the successful
renegotiation of its credit facilities. These dependencies will be subject to
financial, business and other factors, certain of which are beyond the
Companys control, such as prevailing economic conditions. There can be no
assurance that, in the event the Company were to require additional financing,
such additional financing would be available on satisfactory terms. The
Company believes that funds generated by its operations and funds available
under other credit facilities will be sufficient to finance short term capital
needs, as well as to fund existing operations for the foreseeable future.
However, in the event that the Company is unable to successfully renegotiate
its credit facilities, the Company has liquid long term equity investments that
could be used to meet its short term and long term debt service requirements
and fund operating cash flows.

In fiscal 2000, the Company repurchased 118,800 shares of its common stock for
approximately $851,000.

At March 31, 2000, the 2,240,605 shares of Integral Vision (formerly Medar)
common stock that Maxco owns had an aggregate market value of approximately
$7.6 million. Maxcos investment in Integral Vision is reflected in Maxcos
financial statements under the equity method for all periods presented as the
Company owns greater than 20% of Integral Visions outstanding stock.

At March 31, 2000, the 249,230 shares of Provant common stock that Maxco owns
had an aggregate market value of approximately $2.0 million ($1.4 million at
July 13, 2000). Maxcos investment in Provant is reflected in Maxcos
financial statements under the cost method as an available-for-sale security as
the Company owns less than 20% of Provants outstanding stock.

Maxco believes that its current financial resources, together with cash
generated from operations will be adequate to meet its cash requirements for
the next year.

Additionally, the Company believes the value that has been created in its
portfolio of investments could provide additional resources for the Company if
needed.

SEASONAL AND QUARTERLY FLUCTUATIONS
The following table sets forth consolidated operating data for each of the
eight quarters ended March 31, 2000. The unaudited quarterly information has
been prepared on the same basis as the annual information and, in managements
opinion, includes all adjustments, consisting of only normal recurring entries,
necessary for a fair presentation of the information for the quarters
presented. The operating results for any quarter are not necessarily
indicative of results for any future period.

13



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##### Table of Contents



SEASONAL AND QUARTERLY FLUCTUATIONS  continued

|                                                  |  |   |        |               |                                       |             |        |          |  |         |        |         |  |         |        |          |  |         |        |  |  |   |        |   |  |   |        |   |  |   |        |   |  | 
|------------------------------------------------- |  | - | ------ | ------------- | ------------------------------------- | ----------- | ------ | -------- |  | ------- | ------ | ------- |  | ------- | ------ | -------- |  | ------- | ------ |  |  | - | ------ | - |  | - | ------ | - |  | - | ------ | - |  | 
|                                                  |  |   |        | Quarter Ended
|                                                  |  |   |        | Fiscal 2000   |                                       | Fiscal 1999
|                                                  |  |   |        |               |                                       |            
|                                                  |  |   |        | 6/30/99       |                                       | 9/30/99     |        | 12/31/99 |  | 3/31/00 |        | 6/30/98 |  | 9/30/98 |        | 12/31/98 |  | 3/31/99
|                                                  |  |   |        |               |                                       |             |        |          |  |         |        |         |  |         |        |          |  |        
|                                                  |  |   |        |               | (in thousands, except per share data)
|Net sales                                         |  | $ | 43,976 |               |                                       | $           | 47,227 |          |  | $       | 33,963 |         |  | $       | 31,324 |          |  | $       | 35,696 |  |  | $ | 35,553 |   |  | $ | 29,697 |   |  | $ | 23,786 |  
|                                                 
|                                                 
|                                                 
|                                                 
|Gross margin                                      |  |   | 10,501 |               |                                       |             | 10,658 |          |  |         | 8,209  |         |  |         | 7,373  |          |  |         | 7,488  |  |  |   | 7,407  |   |  |   | 6,934  |   |  |   | 5,500  |  
|                                                 
|                                                 
|                                                 
|                                                 
|Loss on investment(1)                             |  |   |        |               |                                       |             |        |          |  |         |        |         |  |         | (860   | )        |  |         |        |  |  |   |        |   |  |   |        |   |  |   |        |  
|                                                 
|                                                 
|                                                 
|                                                 
|Equity in income (loss) of affiliates, net of tax |  |   | 425    |               |                                       |             | 130    |          |  |         | (110   | )       |  |         | (167   | )        |  |         | 130    |  |  |   | (88    | ) |  |   | (80    | ) |  |   | (357   | )
|                                                 
|                                                 
|                                                 
|                                                 
|Net income (loss)                                 |  |   | 1,908  |               |                                       |             | 1,277  |          |  |         | (493   | )       |  |         | (2,376 | )        |  |         | 1,128  |  |  |   | 609    |   |  |   | 129    |   |  |   | (1,078 | )
|                                                 
|                                                 
|                                                 
|                                                 
|Net income (loss) per common share:               |  | $ | .57    |               |                                       | $           | .37    |          |  | $       | (.19   | )       |  | $       | (.79   | )        |  | $       | .31    |  |  | $ | .15    |   |  | $ | .01    |   |  | $ | (.37   | )
|                                                  | 
|                                                  |  |   |        |               |                                       |             |        |          |  |         |        |         |  |         |        |          |  |         |        |  |  |   |        |   |  |   |        |   |  |   |        |   |  | 



|(1) |  | Represents an $860,000 charge for the quarter ended March 31, 2000 for an adjustment of the
Company's Axson investment to estimated fair value.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The sum of the quarterly net income per share amounts may not equal the
annual amounts reported. Net income per share is computed independently for
each quarter and the full year and is based on the respective weighted
average common shares outstanding.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Maxcos sales and operating results have varied substantially from quarter to
quarter. Net sales are typically lower in the third and fourth quarters.
The most significant factors affecting these fluctuations are the seasonal
buying patterns of the Companys customers due to inclement weather and the
reduced number of business days during the holiday season. In addition, the
timing of acquisitions or the occasional sale of corporate investments may
cause substantial fluctuations of operating results from quarter to quarter.
Maxco expects its net sales and operating results to continue to fluctuate
from quarter to quarter.

IMPACT OF INFLATION
Inflation impacts Maxcos costs for materials, labor and related costs of
manufacturing and distribution. To the extent permitted by competition, Maxco
has offset these higher costs through selective price increases.

NEW FINANCIAL ACCOUNTING PRONOUNCEMENT
In 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities. Statement 133 is
effective for fiscal years beginning after June 15, 2000. The Company expects
to adopt the new statement effective April 1, 2001. The statement requires the
Company to recognize all derivatives on the balance sheet at fair value. The
Company has not evaluated the potential effect the adoption of this statement
will have on its results of operations or financial condition.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements. SAB 101 provides guidance for revenue recognition under certain
circumstances. The accounting and disclosures prescribed by SAB 101 will be
effective for the fourth quarter of fiscal year 2001. The Company believes
there will be no material impact resulting from the application of SAB 101.

In March 2000, the FASB issued Interpretation No. 44, (FIN44), Accounting for
Certain Transactions Involving Stock Compensation  an Interpretation of APB
25. This Interpretation clarified (a) the definition of employee for purposes
of applying Opinion 25, (b) the criteria for determining whether a plan
qualifies as a non-compensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. This Interpretation is effective July 1, 2000, but certain
conclusions in this Interpretation cover specific events that occur after
either December 15, 1998, or January 12, 2000. To the extent that this
Interpretation covers events occurring during the period after December 15,
1998, or January 12, 2000 but before the effective date of July 1, 2000, the
effects of applying this Interpretation are recognized on a prospective basis
from July 1, 2000. The Company has not yet determined the impact, if any, of
adopting this Interpretation.

14



---



##### Table of Contents



ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Companys variable interest expense is sensitive to changes in the general
level of United States interest rates. Some of the Companys interest expense
is fixed through long-term borrowings to mitigate the impact of such potential
exposure. Additionally, the Company entered into an interest rate swap
agreement based on a notional amount of $5.0 million to manage its exposure to
interest rate changes. The swap involves the exchange of fixed and variable
interest payments without changing the notional principal amount. The Company
had total outstanding variable rate long-term borrowings of $21.0 million at
March 31, 2000. A 1% increase from the prevailing interest rates at March 31,
2000 on the unhedged variable rate portion of the Companys long-term
borrowings would increase interest expense by $165,000 based on principal
balances at March 31, 2000.

ITEM 8  FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The response to this item is submitted in a separate section of this report.

ITEM 9  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None




PART III

ITEM 10  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Item 10 is hereby incorporated by reference from the Registrants definitive
proxy statement to be filed within 120 days of March 31, 2000.

ITEM 11  EXECUTIVE COMPENSATION
Item 11 is hereby incorporated by reference from the Registrants definitive
proxy statement to be filed within 120 days of March 31, 2000.

ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Item 12 is hereby incorporated by reference from the Registrants definitive
proxy statement to be filed within 120 days of March 31, 2000.

ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13 is hereby incorporated by reference from the Registrants definitive
proxy statement to be filed within 120 days of March 31, 2000.




PART IV

ITEM 14  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) and (2)The response to this portion of Item 14 is submitted as a
separate section of this report.
(3) Listing of Exhibits

|               |     |  |  |                                                                                                                                                                                                                                  
|-------------- | --- |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |     |  | 
|               |     |  | 
|               | 3   |  |  | Restated Articles of Incorporation are hereby
incorporated by reference from Form 10-Q dated February 13, 1998.                                                                                                                  
|              
|              
|              
|              
|               | 3.1 |  |  | By-laws are hereby incorporated by reference from Form
S-4 dated November 4, 1991 (File No. 33-43855).                                                                                                                           
|              
|              
|              
|              
|               | 4.2 |  |  | Resolution establishing Series Three Preferred Shares is
hereby incorporated by reference from Form S-4 dated November 4,
1991 (File No. 33-43855).                                                                              
|              
|              
|              
|              
|               | 4.3 |  |  | Resolution authorizing the redemption of Series Two
Preferred Stock, establishing Series Four Preferred Stock and the
terms of the subordinated notes is hereby incorporated by
reference from Form 10-Q dated February 14, 1997.
|              
|              
|              
|              
|               | 4.4 |  |  | Resolution establishing Series Five Preferred Shares is
hereby incorporated by reference from Form 10-K dated June 5,
1997.                                                                                                      
|              
|              
|              
|              
|               | 4.5 |  |  | Resolution establishing Series Six Preferred Shares is
hereby incorporated by reference from Form 10-K dated June 23,
1999.                                                                                                      

15



---



##### Table of Contents



|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1  |  | Incentive stock option plan adopted August 15, 1983,
including the amendment (approved by shareholders August 25, 1987)
to increase the authorized shares on which options may be granted
by two hundred fifty thousand (250,000), up to five hundred
thousand (500,000) shares of the common stock of the company is
hereby incorporated by reference from the annual report on Form
10-K for the fiscal year ended March 31, 1988.
|     
|     
|     
|     
|10.9  |  | Asset Purchase Agreement  Wright Plastic Products, Inc.
is hereby incorporated by reference from registrants Form 10-Q
dated November 14, 1996.                                                                                                                                                                                                                                                                                    
|     
|     
|     
|     
|10.10 |  | Amended and restated loan agreement between Comerica
Bank and Maxco, Inc. dated September 30, 1996, is hereby
incorporated by reference from registrants Form 10-Q dated
November 14, 1996.                                                                                                                                                                                                                                         
|     
|     
|     
|     
|10.11 |  | Asset purchase agreement for the purchase of Atmosphere
Annealing, Inc. is hereby incorporated by reference from
registrants Form 8-K dated January 17, 1997.                                                                                                                                                                                                                                                                       
|     
|     
|     
|     
|10.12 |  | Asset Purchase Agreement  Axson North America Inc. is
hereby incorporated by reference from registrants Form 10-Q dated
February 14, 1997.                                                                                                                                                                                                                                                                                         
|     
|     
|     
|     
|10.13 |  | Loan agreement between Michigan Strategic Fund and
Atmosphere Annealing, Inc. is hereby incorporated by reference
from registrants Form 10-Q dated February 13, 1998.                                                                                                                                                                                                                                                               
|     
|     
|     
|     
|10.14 |  | Loan agreement between LAM Funding, L.L.C. and borrower
including Guaranty-Maxco, Inc. is hereby incorporated by reference
from registrants Form 10-Q dated February 13, 1998.                                                                                                                                                                                                                                                      
|     
|     
|     
|     
|10.15 |  | First Amendment to amended and restated loan agreement
between Comerica Bank and Maxco, Inc. dated August 1, 1997, is
hereby incorporated by reference from Form 10-K dated June 24,
1998.                                                                                                                                                                                                                                          
|     
|     
|     
|     
|10.16 |  | Second amendment to amended and restated loan agreement
between Comerica Bank and Maxco, Inc. dated June 24, 1998, is
hereby incorporated by reference from Form 10-K dated June 24,
1998.                                                                                                                                                                                                                                          
|     
|     
|     
|     
|10.17 |  | Third amendment to amended and restated loan agreement
between Comerica Bank and Maxco, Inc. dated September 24, 1998, is
hereby incorporated by reference from Form 10-Q dated November 12,
1998.                                                                                                                                                                                                                                  
|     
|     
|     
|     
|10.18 |  | Maxco, Inc. 1998 Employee Stock Option Plan is hereby
incorporated by reference from Form 10-Q dated November 12, 1998.                                                                                                                                                                                                                                                                                                             
|     
|     
|     
|     
|10.19 |  | Fourth amendment to amended and restated loan agreement
between Comerica Bank and Maxco, Inc. dated June 22, 1999 is
hereby incorporated by reference from Form 10-K dated June 23,
1999.                                                                                                                                                                                                                                           
|     
|     
|     
|     
|10.20 |  | Fifth amendment to amended and restated loan agreement between
Comerica Bank and Maxco, Inc. dated September 1, 1999 is hereby
incorporated by reference from Form 10-Q dated November 12, 1999.                                                                                                                                                                                                                                    
|     
|     
|     
|     
|10.21 |  | Sixth amendment to amended and restated loan agreement between
Comerica Bank and Maxco, Inc. dated July 12, 2000                                                                                                                                                                                                                                                                                                                    
|     
|     
|     
|     
|21    |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                                                                                                                                      
|     
|     
|     
|     
|23    |  | Consent of Independent Auditors (Form S-8 filed June 2,
1992  File No. 33-48351 and Form S-8 filed November 19, 1998 
File No. 333-67539).                                                                                                                                                                                                                                                                                        
|     
|     
|     
|     
|27    |  | Financial Data Schedules                                                                                                                                                                                                                                                                                                                                                                                                            

(b) Reports on Form 8-K:
      None
(c) Exhibits

|     Sixth amendment to amended and restated loan agreement between Comerica Bank and Maxco, Inc.
         dated July 12, 2000. |  | 
|-------------------------------------------------------------------------------------------------------------------------------- |  | 
|
|     Subsidiaries of the Registrant                                                                                             |  | 
|
|     Consent of Independent Auditors                                                                                            |  | 
|
|     Financial Data Schedules                                                                                                   |  | 
|(d) Financial Statement Schedules                                                                                                |  | 
|The response to this portion of Item 14 is submitted as a separate section of
this report.                                       |  | 

16



---



##### Table of Contents






SIGNATURES

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

|     |               |  |  |                                                                                                       | 
|---- | ------------- |  |  | ----------------------------------------------------------------------------------------------------- | 
|Date | July 14, 2000 |  |  | MAXCO, INC.                                                                                          
|     |               |  |  |                                                                                                      
|    
|     |               |  |  | By /S/ VINCENT SHUNSKY                                                                                | 
|     |               |  |  |                                                                                                       | 
|     |               |  |  | Vincent Shunsky, Vice President of Finance and Treasurer
(Principal Financial and Accounting 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.

|                      |            |                                                     
|--------------------- | ---------- | ----------------------------------------------------
|/S/ MAX A. COON       | 07/14/2000 | President (Principal Executive Officer) and Director
|Max A. Coon           | Date      
|                     
|/S/ VINCENT SHUNSKY   | 07/14/2000 | Vice President of Finance and Treasurer (Principal  
|Vincent Shunsky       | Date       | Financial and Accounting Officer) and Director      
|                     
|/S/ ERIC L. CROSS     | 07/14/2000 | Director                                            
|Eric L. Cross         | Date      
|                     
|/S/ CHARLES J. DRAKE  | 07/14/2000 | Director                                            
|Charles J. Drake      | Date      
|                     
|/S/ JOEL I. FERGUSON  | 07/14/2000 | Director                                            
|Joel I. Ferguson      | Date      
|                     
|/S/ RICHARD G. JOHNS  | 07/14/2000 | Director                                            
|Richard G. Johns      | Date      
|                     
|/S/ J. MICHAEL WARREN | 07/14/2000 | Director                                            
|J. Michael Warren     | Date      
|                     
|/S/ MICHAEL W. WISTI  | 07/14/2000 | Director                                            
|Michael W. Wisti      | Date       |                                                     

17



---



##### Table of Contents



ANNUAL REPORT ON FORM 10-K

ITEM 14(a)(1) AND (2), (c), AND (d)

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

CERTAIN EXHIBITS

FINANCIAL STATEMENT SCHEDULE

YEAR ENDED MARCH 31, 2000

MAXCO, INC.

LANSING, MICHIGAN

18



---



##### Table of Contents



FORM 10-KITEM 14(a)(1) AND (2)

MAXCO, INC. AND SUBSIDIARIES

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

The following consolidated financial statements of Maxco, Inc. and subsidiaries
are included in Item 8:

|                                                                                                                                                                                                                                                                                                                                                                                       |  |  |                | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | -------------- | 
|Consolidated balance sheetsMarch 31, 2000 and 1999
   Consolidated statements of operationsYears ended March 31, 2000, 1999, and 1998
   Consolidated statements of stockholders equityYears ended March 31, 2000, 1999, and 1998
   Consolidated statements of cash flowsYears ended March 31, 2000, 1999, and 1998
   Notes to consolidated financial statementsMarch 31, 2000 |  |  | 21
22
23
24
25 | 

The following consolidated financial statement schedule of Maxco, Inc. and subsidiaries is included in Item 14(d):

|                                                           |    | 
|---------------------------------------------------------- | -- | 
|Schedule IIValuation and qualifying accounts and reserves | 37 | 

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.



| |                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Financial statements of the Registrants significant unconsolidated affiliate
(Integral Vision, Inc.) are hereby incorporated by reference from the
Integral Vision, Inc. Form 10-K for the year ended December 31, 1999, as
filed with the Securities and Exchange Commission (SEC File Number 0-12728).

19



---



##### Table of Contents



REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Maxco, Inc.

We have audited the consolidated balance sheets of Maxco, Inc. and subsidiaries
as of March 31, 2000 and 1999, and the related consolidated statements of
operations, stockholders equity, and cash flows for each of the three years in
the period ended March 31, 2000. Our audits also included the financial
statement schedule listed in the index at Item 14(a). These financial
statements and schedule are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our 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 consolidated financial position of Maxco,
Inc. and subsidiaries at March 31, 2000 and 1999, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended March 31, 2000, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

/S/ ERNST & YOUNG LLP

Detroit, Michigan
July 12, 2000

20



---



##### Table of Contents



CONSOLIDATED BALANCE SHEETS

MAXCO, INC. AND SUBSIDIARIES

|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |                |         |        |         |       |        | 
|--------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ------------------------- | ------- | -------------- | ------- | ------ | ------- | ----- | ------ | 
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         | March 31,     
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |               
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         | 2000           |         | 1999  
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |                |         |       
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         | (in thousands)
|ASSETS
CURRENT ASSETS
    Cash and cash equivalents                               |                                                                                                                               | $                                                                                                    | 542                       |         |                | $       | 1,122  |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Marketable securities                                                                                                         |                                                                                                      |                           | 185     |                |         |        |         |      
|                                                                                  | Accounts receivable, less allowance of
    $513,000 in 2000 and $558,000 in 1999                                              |                                                                                                      |                           | 22,098  |                |         |        | 18,506  |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Advances to affiliate                                                                                                         |                                                                                                      |                           | 3,008   |                |         |        | 1,308   |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | InventoriesNote 1                                                                                                            |                                                                                                      |                           | 8,000   |                |         |        | 5,010   |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Investment held for saleNote 8                                                                                               |                                                                                                      |                           | 1,121   |               
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Prepaid expenses and other                                                                                                    |                                                                                                      |                           | 760     |                |         |        | 608     |      
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |                |         |        |         |       |        | 
|                                                                                  |                                                                                                                               |                                                                                                      | TOTAL CURRENT ASSETS      |         |                | 35,714  |        |         |       | 26,554 | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|MARKETABLE SECURITIES  LONG TERMNote 1                                          |                                                                                                                               |                                                                                                      | 4,240                     |         |                |         | 2,501  |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|PROPERTY AND EQUIPMENT
    Land                                                   |                                                                                                                               |                                                                                                      | 732                       |         |                |         | 732    |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Buildings                                                                                                                     |                                                                                                      |                           | 12,271  |                |         |        | 11,152  |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Machinery, equipment, and fixtures                                                                                            |                                                                                                      |                           | 41,650  |                |         |        | 30,814  |      
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |                |         |        |         |       |        | 
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |                | 54,653  |        |         |       | 42,698 | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Allowances for depreciation                                                                                                   |                                                                                                      |                           | (14,893 | )              |         |        | (10,799 | )    
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |                |         |        |         |       |        | 
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |                | 39,760  |        |         |       | 31,899 | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|OTHER ASSETS
    InvestmentsNote 8                                               |                                                                                                                               |                                                                                                      | 12,165                    |         |                |         | 16,144 |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Notes and contracts receivable and other                                                                                      |                                                                                                      |                           | 4,325   |                |         |        | 3,996   |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | IntangiblesNote 1                                                                                                            |                                                                                                      |                           | 4,216   |                |         |        | 4,336   |      
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |                |         |        |         |       |        | 
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |                | 20,706  |        |         |       | 24,476 | 
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |                |         |        |         |       |        | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         | $              | 100,420 |        |         | $     | 85,430 | 
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |                |         |        |         |       |        | 
|LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
    Notes payableNote 3 |                                                                                                                               | $                                                                                                    | 23,667                    |         |                | $       | 226    |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Accounts payable                                                                                                              |                                                                                                      |                           | 12,989  |                |         |        | 10,489  |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Employee compensation                                                                                                         |                                                                                                      |                           | 3,247   |                |         |        | 2,192   |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Taxes, interest, and other liabilities                                                                                        |                                                                                                      |                           | 381     |                |         |        | 1,726   |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Current maturities of long-term obligations                                                                                   |                                                                                                      |                           | 3,117   |                |         |        | 2,063   |      
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |                |         |        |         |       |        | 
|                                                                                  |                                                                                                                               |                                                                                                      | TOTAL CURRENT LIABILITIES |         |                | 43,401  |        |         |       | 16,696 | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|LONG-TERM OBLIGATIONS, less current maturitiesNote 5                             |                                                                                                                               |                                                                                                      | 22,390                    |         |                |         | 32,856 |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|DEFERRED INCOME TAXESNote 7                                                      |                                                                                                                               |                                                                                                      | 2,319                     |         |                |         | 1,734  |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|STOCKHOLDERS EQUITYNotes 4 & 5
    Preferred stock:                            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                                                               | Series Three: 10% cumulative callable, $60 face value;
       14,784 shares issued and outstanding   |                           |         | 678            |         |        |         | 683   |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                                                               | Series Four: 10% cumulative callable, $51.50 face value;
       46,414 shares issued and outstanding |                           |         | 2,390          |         |        |         | 2,390 |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                                                               | Series Five: 10% cumulative callable, $120 face value;
       6,648 shares issued and outstanding    |                           |         | 798            |         |        |         | 798   |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                                                               | Series Six: 10% cumulative callable, $160 face value;
       20,000 shares authorized, issued  none
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Common stock, $1 par value; 10,000,000 shares authorized,
    3,101,195 shares (19993,219,995 shares) issued and outstanding |                                                                                                      |                           | 3,101   |                |         |        | 3,220   |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Accumulated other comprehensive income (loss)                                                                                 |                                                                                                      |                           | (877    | )              |         |        | 9       |      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Retained earnings                                                                                                             |                                                                                                      |                           | 26,220  |                |         |        | 27,044  |      
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |                |         |        |         |       |        | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |                | 32,310  |        |         |       | 34,144 | 
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |                |         |        |         |       |        | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         | $              | 100,420 |        |         | $     | 85,430 | 
|                                                                                  |                                                                                                                               |                                                                                                      |                           |         |                |         |        |         |       |        | 

See notes to consolidated financial statements

21



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CONSOLIDATED STATEMENTS OF OPERATIONS

MAXCO, INC. AND SUBSIDIARIES

|                                                                 |                                      |                                              |         |                                      |       |      |         |        |       |   |         |        |       | 
|---------------------------------------------------------------- | ------------------------------------ | -------------------------------------------- | ------- | ------------------------------------ | ----- | ---- | ------- | ------ | ----- | - | ------- | ------ | ----- | 
|                                                                 |                                      |                                              |         | Year Ended March 31,                
|                                                                 |                                      |                                              |         |                                     
|                                                                 |                                      |                                              |         | 2000                                 |       | 1999 |         | 1998  
|                                                                 |                                      |                                              |         |                                      |       |      |         |       
|                                                                 |                                      |                                              |         | (in thousands except per share data)
|Net sales                                                        |                                      | $                                            | 156,490 |                                      |       | $    | 124,732 |        |       | $ | 102,544 |       
|                                                                
|                                                                
|                                                                
|                                                                
|Costs and expenses:                                             
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Cost of sales and operating expenses |                                              |         | 119,749                              |       |      |         | 97,403 |       |   |         | 77,707 |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Selling, general and administrative  |                                              |         | 27,832                               |       |      |         | 20,919 |       |   |         | 17,044 |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Depreciation and amortization        |                                              |         | 4,907                                |       |      |         | 3,395  |       |   |         | 2,481  |      
|                                                                 |                                      |                                              |         |                                      |       |      |         |        |       |   |         |       
|                                                                 |                                      |                                              | 152,488 |                                      |       |      | 121,717 |        |       |   | 97,232  |       
|                                                                 |                                      |                                              |         |                                      |       |      |         |        |       |   |         |       
|                                                                 |                                      | OPERATING EARNINGS                           |         |                                      | 4,002 |      |         |        | 3,015 |   |         |        | 5,312 | 
|                                                                
|                                                                
|                                                                
|                                                                
|Other income (expense):                                         
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Investment income                    |                                              |         | 656                                  |       |      |         | 837    |       |   |         | 1,048  |      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Interest expense                     |                                              |         | (3,624                               | )     |      |         | (2,403 | )     |   |         | (2,114 | )    
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Loss on investmentNote 8            |                                              |         | (860                                 | )    
|                                                                 |                                      |                                              |         |                                      |       |      |         |        |       |   |         |       
|                                                                 |                                      |                                              | (3,828  | )                                    |       |      | (1,566  | )      |       |   | (1,066  | )     
|                                                                 |                                      |                                              |         |                                      |       |      |         |        |       |   |         |       
|                                                                 |                                      | INCOME BEFORE FEDERAL INCOME TAXES AND      
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 |                                      | EQUITY IN INCOME (LOSS) OF AFFILIATES        |         |                                      | 174   |      |         |        | 1,449 |   |         |        | 4,246 | 
|                                                                
|                                                                
|                                                                
|                                                                
|Federal income tax expenseNote 7                                |                                      |                                              | 136     |                                      |       |      | 266     |        |       |   | 1,462   |       
|                                                                 |                                      |                                              |         |                                      |       |      |         |        |       |   |         |       
|                                                                 |                                      | INCOME BEFORE EQUITY IN                     
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 |                                      | INCOME (LOSS) OF AFFILIATES                  |         |                                      | 38    |      |         |        | 1,183 |   |         |        | 2,784 | 
|                                                                
|                                                                
|                                                                
|                                                                
|Equity in income (loss) of affiliates, net of taxNotes 2, 7 & 8 |                                      |                                              | 278     |                                      |       |      | (395    | )      |       |   | (1,373  | )     
|                                                                 |                                      |                                              |         |                                      |       |      |         |        |       |   |         |       
|                                                                 |                                      | NET INCOME                                   |         |                                      | 316   |      |         |        | 788   |   |         |        | 1,411 | 
|                                                                
|                                                                
|                                                                
|                                                                
|Less preferred stock dividends                                   |                                      |                                              | (408    | )                                    |       |      | (409    | )      |       |   | (390    | )     
|                                                                 |                                      |                                              |         |                                      |       |      |         |        |       |   |         |       
|                                                                 |                                      | NET INCOME (LOSS) APPLICABLE TO COMMON STOCK |         | $                                    | (92   | )    |         | $      | 379   |   |         | $      | 1,021 | 
|                                                                 |                                      |                                              |         |                                      |       |      |         |        |       |   |         |       
|NET INCOME (LOSS) PER COMMON SHAREBasicNote 11                 |                                      | $                                            | (.03    | )                                    |       | $    | .12     |        |       | $ | .30     |       
|                                                                
|                                                                
|                                                                
|                                                                
|NET INCOME (LOSS) PER COMMON SHAREAssuming dilution  Note 11   |                                      | $                                            | (.03    | )                                    |       | $    | .12     |        |       | $ | .30     |       

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

MAXCO, INC. AND SUBSIDIARIES

|                           |                                               |                            |       |                |   |        |       |                |   |          |      |             |   |   |        |        |   |   |        |        |       |  
|-------------------------- | --------------------------------------------- | -------------------------- | ----- | -------------- | - | ------ | ----- | -------------- | - | -------- | ---- | ----------- | - | - | ------ | ------ | - | - | ------ | ------ | ----- | -
|                           |                                               |                            |       |                |   |        |       |                |   |          |      | Accumulated
|                           |                                               |                            |       | Preferred      |   | Common |       | Other Compre-  |   | Retained
|                           |                                               |                            |       | Stock          |   | Stock  |       | hensive Income |   | Earnings |      | Totals     
|                           |                                               |                            |       |                |   |        |       |                |   |          |      |            
|                           |                                               |                            |       | (in thousands) |   |        |       |                |  
|Balances at April 1, 1997  |                                               | $                          | 3,106 |                |   | $      | 3,518 |                |   | $        | (68  | )           |   | $ | 28,423 |        |   | $ | 34,979 |       
|                          
|                          
|                          
|                          
|                           | Net income for the year                       |                            |       |                |   |        |       |                |   |          |      |             |   |   |        | 1,411  |   |   |        | 1,411  |      
|                          
|                          
|                          
|                          
|                           | Net unrealized gain on marketable
securities  |                            |       |                |   |        |       |                |   |          |      | 115         |   |   |        |        |   |   |        | 115    |      
|                           |                                               |                            |       |                |   |        |       |                |   |          |      |             |   |   |        |        |   |   |        |       
|                           |                                               | Total Comprehensive Income |       |                |   |        |       |                |   |          |      |             |   |   |        |        |   |   |        |        | 1,526 |  
|                          
|                          
|                          
|                          
|                           | Preferred stock dividends                     |                            |       |                |   |        |       |                |   |          |      |             |   |   |        | (390   | ) |   |        | (390   | )    
|                          
|                          
|                          
|                          
|                           | Exercise of stock options for
25,000 shares   |                            |       |                |   |        |       | 25             |   |          |      |             |   |   |        | 10     |   |   |        | 35     |      
|                          
|                          
|                          
|                          
|                           | Acquisition and retirement of
132,900 shares  |                            |       |                |   |        |       | (133           | ) |          |      |             |   |   |        | (1,123 | ) |   |        | (1,256 | )    
|                          
|                          
|                          
|                          
|                           | Redemption of preferred stock                 |                            |       | (36            | ) |        |       |                |   |          |      |             |   |   |        | (1     | ) |   |        | (37    | )    
|                          
|                          
|                          
|                          
|                           | Conversion of common stock to
preferred stock |                            |       | 812            |   |        |       | (102           | ) |          |      |             |   |   |        | (760   | ) |   |        | (50    | )    
|                           |                                               |                            |       |                |   |        |       |                |   |          |      |             |   |   |        |        |   |   |        |       
|Balances at March 31, 1998 |                                               |                            | 3,882 |                |   |        | 3,308 |                |   |          | 47   |             |   |   | 27,570 |        |   |   | 34,807 |       
|                          
|                          
|                          
|                          
|                           | Net income for the year                       |                            |       |                |   |        |       |                |   |          |      |             |   |   |        | 788    |   |   |        | 788    |      
|                          
|                          
|                          
|                          
|                           | Net unrealized loss on marketable
securities  |                            |       |                |   |        |       |                |   |          |      | (38         | ) |   |        |        |   |   |        | (38    | )    
|                           |                                               |                            |       |                |   |        |       |                |   |          |      |             |   |   |        |        |   |   |        |       
|                           |                                               | Total Comprehensive Income |       |                |   |        |       |                |   |          |      |             |   |   |        |        |   |   |        |        | 750   |  
|                          
|                          
|                          
|                          
|                           | Preferred stock dividends                     |                            |       |                |   |        |       |                |   |          |      |             |   |   |        | (409   | ) |   |        | (409   | )    
|                          
|                          
|                          
|                          
|                           | Exercise of stock options for
52,500 shares   |                            |       |                |   |        |       | 52             |   |          |      |             |   |   |        | 20     |   |   |        | 72     |      
|                          
|                          
|                          
|                          
|                           | Acquisition and retirement of
140,415 shares  |                            |       |                |   |        |       | (140           | ) |          |      |             |   |   |        | (925   | ) |   |        | (1,065 | )    
|                          
|                          
|                          
|                          
|                           | Redemption of preferred stock                 |                            |       | (11            | ) |        |       |                |   |          |      |             |   |   |        |        |   |   |        | (11    | )    
|                           |                                               |                            |       |                |   |        |       |                |   |          |      |             |   |   |        |        |   |   |        |       
|Balances at March 31, 1999 |                                               |                            | 3,871 |                |   |        | 3,220 |                |   |          | 9    |             |   |   | 27,044 |        |   |   | 34,144 |       
|                          
|                          
|                          
|                          
|                           | Net income for the year                       |                            |       |                |   |        |       |                |   |          |      |             |   |   |        | 316    |   |   |        | 316    |      
|                          
|                          
|                          
|                          
|                           | Net unrealized loss on marketable
securities  |                            |       |                |   |        |       |                |   |          |      | (886        | ) |   |        |        |   |   |        | (886   | )    
|                           |                                               |                            |       |                |   |        |       |                |   |          |      |             |   |   |        |        |   |   |        |       
|                           |                                               | Total Comprehensive Loss   |       |                |   |        |       |                |   |          |      |             |   |   |        |        |   |   |        |        | (570  | )
|                          
|                          
|                          
|                          
|                           | Preferred stock dividends                     |                            |       |                |   |        |       |                |   |          |      |             |   |   |        | (408   | ) |   |        | (408   | )    
|                          
|                          
|                          
|                          
|                           | Redemption of preferred stock                 |                            |       | (5             | ) |        |       |                |   |          |      |             |   |   |        |        |   |   |        | (5     | )    
|                          
|                          
|                          
|                          
|                           | Acquisition and retirement of
118,800 shares  |                            |       |                |   |        |       | (119           | ) |          |      |             |   |   |        | (732   | ) |   |        | (851   | )    
|                           |                                               |                            |       |                |   |        |       |                |   |          |      |             |   |   |        |        |   |   |        |       
|BALANCES AT MARCH 31, 2000 |                                               | $                          | 3,866 |                |   | $      | 3,101 |                |   | $        | (877 | )           |   | $ | 26,220 |        |   | $ | 32,310 |       
|                           |                                               |                            |       |                |   |        |       |                |   |          |      |             |   |   |        |        |   |   |        |       

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

MAXCO, INC. AND SUBSIDIARIES

|                                          |                                                                                   |                                                                       |                                                |         |                      |        |        |        |       |        |        |        |       |        |  
|----------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------------------------------------------- | ---------------------------------------------- | ------- | -------------------- | ------ | ------ | ------ | ----- | ------ | ------ | ------ | ----- | ------ | -
|                                          |                                                                                   |                                                                       |                                                |         | Year Ended March 31,
|                                          |                                                                                   |                                                                       |                                                |         |                     
|                                          |                                                                                   |                                                                       |                                                |         | 2000                 |        | 1999   |        | 1998 
|                                          |                                                                                   |                                                                       |                                                |         |                      |        |        |        |      
|                                          |                                                                                   |                                                                       |                                                |         | (in thousands)      
|OPERATING ACTIVITIES                     
|                                         
|                                         
|                                         
|                                         
|                                          | Net Income                                                                        |                                                                       | $                                              | 316     |                      |        | $      | 788    |       |        | $      | 1,411  |      
|                                         
|                                         
|                                         
|                                         
|                                          | Adjustments to reconcile net income to net cash provided
by operating activities:
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                                   | Depreciation                                                          |                                                |         | 4,232                |        |        |        | 2,930 |        |        |        | 2,240 |       
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                                   | Amortization                                                          |                                                |         | 675                  |        |        |        | 465   |        |        |        | 241   |       
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                                   | Equity in net (income) loss of affiliates                             |                                                |         | (278                 | )      |        |        | 395   |        |        |        | 1,373 |       
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                                   | Deferred federal income taxes                                         |                                                |         | 855                  |        |        |        | 461   |        |        |        | (688  | )     
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                                   | Loss on investment                                                    |                                                |         | 860                  |       
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                                   | Changes in operating assets and liabilities
of continuing operations:
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                                   |                                                                       | Accounts receivable                            |         |                      | (2,014 | )      |        |       | (2,224 | )      |        |       | (3,496 | )
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                                   |                                                                       | Inventories                                    |         |                      | (436   | )      |        |       | (1,096 | )      |        |       | 88     |  
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                                   |                                                                       | Prepaid and other                              |         |                      | (132   | )      |        |       | (305   | )      |        |       | (34    | )
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                                   |                                                                       | Accounts payable and other current liabilities |         |                      | 1,735  |        |        |       | 2,828  |        |        |       | 612    |  
|                                          |                                                                                   |                                                                       |                                                |         |                      |        |        |        |       |        |        |       
|NET CASH PROVIDED BY OPERATING ACTIVITIES |                                                                                   |                                                                       | 5,813                                          |         |                      |        | 4,242  |        |       |        | 1,747  |       
|                                         
|                                         
|                                         
|                                         
|INVESTING ACTIVITIES                     
|                                         
|                                         
|                                         
|                                         
|                                          | Payment received on note receivable                                               |                                                                       |                                                | 750     |                      |        |        |        |       |        |        | 3,443  |      
|                                         
|                                         
|                                         
|                                         
|                                          | Sale of investment                                                                |                                                                       |                                                |         |                      |        |        | 2,160  |      
|                                         
|                                         
|                                         
|                                         
|                                          | Purchase of businesses                                                            |                                                                       |                                                | (4,587  | )                    |        |        | (2,700 | )     |        |        | (468   | )    
|                                         
|                                         
|                                         
|                                         
|                                          | Purchases of property and equipment                                               |                                                                       |                                                | (11,698 | )                    |        |        | (9,198 | )     |        |        | (7,474 | )    
|                                         
|                                         
|                                         
|                                         
|                                          | Investment in affiliates                                                          |                                                                       |                                                | (3,867  | )                    |        |        | (3,961 | )     |        |        | (6,452 | )    
|                                         
|                                         
|                                         
|                                         
|                                          | Net proceeds from (investment in) marketable securities                           |                                                                       |                                                | (31     | )                    |        |        | 5,491  |       |        |        | 2,881  |      
|                                         
|                                         
|                                         
|                                         
|                                          | Other                                                                             |                                                                       |                                                | 274     |                      |        |        | 74     |       |        |        | 191    |      
|                                          |                                                                                   |                                                                       |                                                |         |                      |        |        |        |       |        |        |       
|NET CASH USED IN INVESTING ACTIVITIES     |                                                                                   |                                                                       | (19,159                                        | )       |                      |        | (8,134 | )      |       |        | (7,879 | )     
|                                         
|                                         
|                                         
|                                         
|FINANCING ACTIVITIES                     
|                                         
|                                         
|                                         
|                                         
|                                          | Restricted cash for acquisition of equipment                                      |                                                                       |                                                |         |                      |        |        | 1,088  |       |        |        | (1,088 | )    
|                                         
|                                         
|                                         
|                                         
|                                          | Proceeds from long-term obligations                                               |                                                                       |                                                | 18,014  |                      |        |        | 6,517  |       |        |        | 13,724 |      
|                                         
|                                         
|                                         
|                                         
|                                          | Repayments on long-term obligations                                               |                                                                       |                                                | (3,984  | )                    |        |        | (2,218 | )     |        |        | (5,375 | )    
|                                         
|                                         
|                                         
|                                         
|                                          | Proceeds from exercise of stock options                                           |                                                                       |                                                |         |                      |        |        | 72     |       |        |        | 35     |      
|                                         
|                                         
|                                         
|                                         
|                                          | Dividends paid on preferred stock                                                 |                                                                       |                                                | (408    | )                    |        |        | (409   | )     |        |        | (390   | )    
|                                         
|                                         
|                                         
|                                         
|                                          | Acquisition and retirement of preferred and common stock                          |                                                                       |                                                | (856    | )                    |        |        | (1,076 | )     |        |        | (1,343 | )    
|                                          |                                                                                   |                                                                       |                                                |         |                      |        |        |        |       |        |        |       
|NET CASH PROVIDED BY FINANCING ACTIVITIES |                                                                                   |                                                                       | 12,766                                         |         |                      |        | 3,974  |        |       |        | 5,563  |       
|                                          |                                                                                   |                                                                       |                                                |         |                      |        |        |        |       |        |        |       
|                                          |                                                                                   |                                                                       | INCREASE (DECREASE) IN CASH                    |         |                      | (580   | )      |        |       | 82     |        |        |       | (569   | )
|                                         
|                                         
|                                         
|                                         
|                                          |                                                                                   |                                                                       | CASH AT BEGINNING OF YEAR                      |         |                      | 1,122  |        |        |       | 1,040  |        |        |       | 1,609  |  
|                                          |                                                                                   |                                                                       |                                                |         |                      |        |        |        |       |        |        |       
|                                          |                                                                                   |                                                                       | CASH AT END OF YEAR                            |         | $                    | 542    |        |        | $     | 1,122  |        |        | $     | 1,040  |  
|                                          |                                                                                   |                                                                       |                                                |         |                      |        |        |        |       |        |        |       

See notes to consolidated financial statements.

24



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAXCO, INC. AND SUBSIDIARIES

March 31, 2000

NOTE 1  SIGNIFICANT ACCOUNTING POLICIES

Nature of Business: Maxco, Inc. (the Company) is a Michigan corporation
incorporated in 1946. Maxco currently operates in three business segments:
construction supplies, heat-treating, and packaging products. Maxcos
businesses include Ersco, a distributor of construction supplies; Atmosphere
Annealing Inc., a production metal heat treating service company; and Pak-Sak
Industries Inc., which makes polyethylene packaging. Maxco also has
investments in three real estate related companies: L/M Associates, LLC,
LandEquities Corporation, and Nilson Builders. In addition to real estate,
Maxco also has investments representing less than majority interests in the
following: a registered investor advisory firm; a registered broker-dealer of
securities that is primarily focused on the trading of fixed income investments
over the internet; a company offering a business-to-business vertical web
portal designed to bring solution-seekers together with solution-providers; a
company in the business of selling, leasing, and servicing lift trucks; three
technology-related businesses; and two energy-related businesses.

Principles of Consolidation: The consolidated financial statements include the
accounts of Maxco, Inc. and its majority owned subsidiaries. Upon
consolidation, all intercompany accounts and transactions are eliminated.
Investments in greater than 20% owned investments are accounted for under the
equity method. Investments in less than 20% owned affiliates are accounted for
under the cost method.

Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.

Reclassifications: Certain items in the prior year financial statements have
been reclassified to conform with the presentation used in 2000.

Cash and Cash Equivalents: The Company considers cash and other highly liquid
investments, including investments in interest bearing repurchase agreements
with less than 90 day maturities, as cash and cash equivalents.

Receivables: Trade accounts receivable represent amounts due from customers in
the highway and general construction, automotive, and flexible packaging
industries, primarily in the mid-western United States. Accounts and notes
receivable at the Companys construction supplies unit are collateralized or
secured by perfected lien rights and payment bonds, where applicable.

Inventories: Inventories are stated at the lower of first-in, first-out cost
or market and at March 31 consisted of the following:

|                                   |  |                |       |      |  |   |       | 
|---------------------------------- |  | -------------- | ----- | ---- |  | - | ----- | 
|                                   |  | 2000           |       | 1999
|                                   |  |                |       |     
|                                   |  | (in thousands)
|Raw materials                      |  | $              | 589   |      |  | $ | 732   | 
|                                  
|                                  
|                                  
|                                  
|Finished goods and work in process |  |                | 1,136 |      |  |   | 1,283 | 
|                                  
|                                  
|                                  
|                                  
|Purchased products for resale      |  |                | 6,275 |      |  |   | 2,995 | 
|                                   |  |                |       |      |  |   |       | 
|                                   |  | $              | 8,000 |      |  | $ | 5,010 | 
|                                   |  |                |       |      |  |   |       | 

Marketable Securities: Marketable securities are classified in accordance with
FASB 115 as securities available-for-sale. Available-for-sale securities are
carried at fair value, with the unrealized gains and losses, net of tax,
reported as a separate component of stockholders equity. The amortized cost
of securities in this category is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization is included in
investment income. Realized gains and losses and declines in value judged to
be other than temporary on available-for-sale securities are included in
investment income or loss. The cost of securities sold is based on the
specific identification method. Interest and dividends on securities
classified as available-for-sale are included in investment income. The fair
value of marketable securities is based on quoted market value.

25



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued

MAXCO, INC. AND SUBSIDIARIES

NOTE 1  SIGNIFICANT ACCOUNTING POLICIES  Continued

In November 1999, Maxco began accounting for its investment in Provant, Inc.
common stock as securities available for sale as defined by FASB 115.
Consequently, the securities are carried at market value with the unrealized
gains and losses net of tax, reported as a separate component of stockholders
equity. At March 31, 2000, the unrealized loss on this stock was approximately
$822,000 net of tax.

At March 31, 2000, the Companys marketable securities consist of debt and
equity securities and United States government securities.

Advances to Affiliate: The Company periodically advances amounts to its real
estate investment holding. These advances are unsecured and bear interest.
During 2000 and 1999, advances made were approximately $1.7 million and $1.3
million respectively.

Properties and Depreciation: Property and equipment are stated on the basis of
cost and include expenditures for new facilities and equipment and those which
materially extend the useful lives of existing facilities and equipment.
Equipment capitalized under lease agreements is not significant.

Expenditures for normal repairs and maintenance are charged to operations as
incurred. Depreciation (and amortization of capitalized leases) for financial
reporting purposes is computed by the straight-line method based on the
estimated useful lives of the assets ranging from 3 to 31 years.

Federal Income Taxes: The Company provides for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes.

Intangibles: Intangibles primarily consist of the excess of cost over fair
market value of net assets of acquired businesses. Intangibles, including
non-compete agreements, are amortized on a straight-line basis over periods
ranging from 5 to 20 years. The carrying value of goodwill will be reviewed if
the facts and circumstances suggest that it may be impaired. If this review
indicates that goodwill will not be recoverable, as determined based on the
undiscounted cash flows of the entity acquired over the remaining amortization
period, the Companys carrying value of the goodwill will be reduced by the
estimated shortfall of discounted cash flows. Accumulated amortization was
approximately $1.5 million and $1.0 million at March 31, 2000 and 1999,
respectively.

Revenue Recognition: The Company recognizes revenue from product sales upon
transfer of title, which is generally upon shipment.

Gain Recognition on Sale of Subsidiary Stock: The Companys policy is to
record gains from the sale or other issuance of previously unissued stock by
its subsidiaries.

Advertising: Advertising costs are expensed as incurred. The amounts were not
material for all years presented.

Interest Rate Swap: The Company entered into an interest rate swap agreement
to modify the interest characteristics of certain of its outstanding debt. The
interest rate swap agreement is designated with the principal balance and term
of a specific debt obligation. This agreement involves the exchange of amounts
based on a fixed interest rate for amounts based on variable interest rates
over the life of the agreement without an exchange of the notional amount upon
which the payments are based. The fair value of the swap agreement, which was
approximately $259,000 at March 31, 2000, and changes in the fair value as a
result of changes in market interest rates are not recognized in the financial
statements.

Fair Value Disclosure: The carrying amounts of certain financial instruments
such as cash and cash equivalents, accounts receivable, marketable securities,
accounts payable and long-term debt approximate their fair values. The fair
value of the long-term debt is estimated using discounted cash flow analysis
and the Companys current incremental borrowing rates for similar types of
arrangements.

26



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued

MAXCO, INC. AND SUBSIDIARIES

NOTE 1  SIGNIFICANT ACCOUNTING POLICIES  Continued

Comprehensive Income: The Company displays comprehensive income in the
Consolidated Statements of Shareholders Equity. At March 31, 2000 and 1999,
accumulated other comprehensive income (loss) consisted of unrealized income
(loss) on marketable securities.

Stock Options: The Company has elected to follow APB No. 25 Accounting for
Stock Issued to Employees and related interpretations in accounting for its
employee stock options because, in managements opinion, the alternative fair
value provided for under FASB Statement No. 123, Accounting for Stock-Based
Compensation, requires the use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, because the
exercise price of the Companys employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.

New Financial Accounting Pronouncements: The Financial Accounting Standards
Board issued Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities. Statement 133 is effective for fiscal years beginning
after June 15, 2000. The Company expects to adopt the new statement effective
April 1, 2001. The statement requires the Company to recognize all derivatives
on the balance sheet at fair value. The Company has not evaluated the
potential effect the adoption of this statement will have on its results of
operations or financial condition.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements. SAB 101 provides guidance for revenue recognition under certain
circumstances. The accounting and disclosures prescribed by SAB 101 will be
effective for the fourth quarter of fiscal year 2001. The Company believes
there will be no material impact resulting from the application of SAB 101.

In March 2000, the FASB issued Interpretation No. 44, (FIN44), Accounting for
Certain Transactions Involving Stock Compensation  an Interpretation of APB
25. This Interpretation clarified (a) the definition of employee for purposes
of applying Opinion 25, (b) the criteria for determining whether a plan
qualifies as a non-compensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. This Interpretation is effective July 1, 2000, but certain
conclusions in this cover specific events that occur after either December 15,
1998, or January 12, 2000. To the extent that this Interpretation covers
events occurring during the period after December 15, 1998, or January 12, 2000
but before the effective date of July 1, 2000, the effects of applying this
Interpretation are recognized on a prospective basis from July 1, 2000. The
Company has not yet determined the impact, if any, of adopting this
Interpretation.

NOTE 2  INVESTMENT IN INTEGRAL VISION, INC.(FORMERLY MEDAR, INC.)

At March 31, 2000, Maxco owned 2,240,605 shares of Integral Visions common
stock (aggregate market value of $7.6 million), representing approximately 25%
of Integral Visions total common stock outstanding.

During the quarter ended September 30, 1997, the Company participated in a
private placement by Integral Vision of $7.0 million of subordinated
debentures. Maxco purchased $750,000 of these debentures representing 10.7% of
the total placed. Maxco also received warrants to purchase 150,000 shares of
Integral Vision stock at $6.86, which were outstanding and exercisable at March
31, 2000. In connection with this transaction, Maxco also purchased 150,000
shares of previously unissued Integral Vision stock at $5.00 a share. On June
30, 1999, Integral Vision sold its welding division for cash and debt. Maxco
recognized its proportionate share of the gain on this transaction as part of
equity in income of affiliates. Also, as a result of this transaction, Maxco
received payment on June 30, 1999 of the full balance
due on subordinated debentures of $750,000. Maxcos investment in Integral
Vision is accounted for under the equity method for all periods presented.

27



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued

MAXCO, INC. AND SUBSIDIARIES

NOTE 2  INVESTMENT IN INTEGRAL VISION, INC.(FORMERLY MEDAR, INC.)  Continued

Integral Visions net income for the year ended March 31, 2000 was
approximately $3.8 million and its net loss for the years ended March 31, 1999
and 1998 was approximately $2.6 million, and $10.1 million, respectively.
Accordingly, Maxcos equity share of Integral Visions net income for the year
ended March 31, 2000 was approximately $896,000 and Maxcos equity share of
Integral Visions net loss for the years ended March 31, 1999 and 1998 was
approximately $627,000, and $2.4 million, respectively and is recorded net of
deferred tax for these periods in equity in earnings of affiliates, along with
the equity results of other 50% or less owned affiliates accounted for under
the equity method. For the years ended March 31, 2000, 1999 and 1998, Integral
Visions restated sales were $11.0 million, $9.5 million and $13.5 million,
respectively.

The difference between the carrying amount and the underlying equity of the
Companys investment in the net assets of Integral Vision, approximately $1.5
million, is being amortized over a 30 year life.

NOTE 3  DEBT

The Company is currently in default of the tangible net worth ratio as required
by its $18 million and $10 million lines of credit with a bank. As such the
outstanding balance on the lines ($23.4 million at March 31, 2000) has been
classified as current in the accompanying financial statements. These lines of
credit were amended in July 2000, increasing the availability under the $18
million line to $20 million, and as provided under the original agreement with
the bank, the $10 million acquisition line was converted to a $7.6 million term
loan. However, there are still ongoing negotiations with the bank to obtain a
waiver of default. Management anticipates that the negotiation will be
completed by September 30, 2000.

The accompanying financial statements have been prepared on the basis that the
Company will continue as a going concern. The Companys ability to meet its
short term and long term debt service and other obligations (including
compliance with financial covenants) will be dependent upon its future
operating performance and the successful renegotiation of its credit
facilities. These dependencies will be subject to financial, business and
other factors, certain of which are beyond the Companys control, such as
prevailing economic conditions. There can be no assurance that, in the
event the Company were to require additional financing, such additional
financing would be available on satisfactory terms. The Company believes that
funds generated by its operations and funds available under other credit
facilities, will be sufficient to finance short term capital needs, as well as
to fund existing operations for the foreseeable future. However, in the event
that the Company is unable to successfully renegotiate its credit facilities,
the Company has liquid long term equity investments that could be used to meet
its short term and long term debt service requirements and fund operating cash
flows.

Long-term obligations at March 31 consisted of the following:

|                                                                                        |                         |   |                |       |      |   |        |        | 
|--------------------------------------------------------------------------------------- | ----------------------- | - | -------------- | ----- | ---- | - | ------ | ------ | 
|                                                                                        |                         |   | 2000           |       | 1999
|                                                                                        |                         |   |                |       |     
|                                                                                        |                         |   | (in thousands)
|Revolving lines of credit (variable interest rate                                     
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | 8.3% at March 31, 2000) |   | $              | 2,800 |      |   | $      | 16,999 | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Tax exempt revenue bonds (variable interest rates)                                      |                         |   | 3,990          |       |      |   | 4,472  |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Taxable revenue bonds                                                                   |                         |   | 4,508          |       |      |   | 4,915  |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Mortgage notes payable (various interest rates
ranging up to 10.0%)                     |                         |   | 2,060          |       |      |   | 2,149  |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Equipment purchase contracts and capitalized lease
obligations (various interest rates) |                         |   | 7,785          |       |      |   | 1,460  |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Subordinated debt (fixed interest rate of 10%)                                          |                         |   | 3,357          |       |      |   | 3,765  |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Other                                                                                   |                         |   | 1,007          |       |      |   | 1,159  |       
|                                                                                        |                         |   |                |       |      |   |        |       
|                                                                                        |                         |   | 25,507         |       |      |   | 34,919 |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Less current maturities                                                                 |                         |   | 3,117          |       |      |   | 2,063  |       
|                                                                                        |                         |   |                |       |      |   |        |       
|                                                                                        |                         | $ | 22,390         |       |      | $ | 32,856 |       
|                                                                                        |                         |   |                |       |      |   |        |       

The Company can borrow up to $5 million under its long term revolving line of
credit, of which $2.2 million is available at March 31, 2000. This line of
credit matures in March 2002.

28



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued

MAXCO, INC. AND SUBSIDIARIES

NOTE 3  LONG-TERM OBLIGATIONS  Continued

Certain of the agreements require a facility fee of 0.25%, a commitment fee of
0.25% of the unused line, and compensating balances equal to 5% of borrowings
under this arrangement or the fee equivalent. Certain of these agreements
require maintenance of specified financial ratios.

In December 1998, Maxco entered into a swap agreement with a notional amount of
approximately $5.0 million converting its variable rate taxable revenue bonds
to a fixed rate of 5.34%, which matures in December 2005. The fair value of
the swap is approximately $259,000 as of March 31, 2000.

Notes and contracts payable are generally collateralized by assets purchased
with proceeds of the borrowings. The aggregate principal maturities of
long-term debt from 2002  2005 are as follows:

|           |  |      |           |      |  |      |           |  |  |   |           | 
|---------- |  | ---- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|2002       |  | 2003 |           | 2004 |  | 2005
|           |  |      |           |      |  |     
|$4,285,000 |  | $    | 3,268,000 |      |  | $    | 3,743,000 |  |  | $ | 3,636,000 | 

Interest paid approximates interest expensed for the years presented.

As of March 31, 2000, the Company has guaranteed various debt obligations of
certain real estate and technology related investments in an aggregate amount
of approximately $60 million. Maxco does not believe that there is any unusual
degree of risk related to these guarantees because of sufficient underlying
asset values supporting the respective debt obligations.

NOTE 4  PREFERRED STOCK

Maxco may issue up to 100,000 shares of preferred stock with terms determined
by Maxcos Board of Directors.

Series Three Preferred Stock is voting stock on a par with the common stock,
and has twenty votes per share. Quarterly cumulative dividends are provided at
the annual rate of 10% of face value annually, subject to the restrictions of
Michigan corporate law and the discretion of the Maxco Board of Directors. The
stock is callable at the option of the Company, with the call price declining
at the rate of one percent per year to a minimum price after February 1999,
equal to face value ($60 per share).

Series Four Preferred Stock is cumulative, callable at the Companys option, is
non-voting, has no conversion rights, and will pay an annual dividend at the
rate of 10% of face value annually.

Series Five Preferred shares have a face value of $120, are callable at the
Companys option, are non-voting, have no conversion rights, and pay a
quarterly cumulative dividend at the rate of 10% of face value annually.

Series Six Preferred Stock, established February 4, 1999, is voting stock on a
par with the common stock, and has twenty votes per share. Quarterly
cumulative dividends are provided at the annual rate of 10% of face value
annually, subject to the restrictions of Michigan corporate law and the
discretion of the Maxco Board of Directors. The stock is callable, at the
option of the Company, at any time after the second anniversary of their
issuance in whole or in part. The call price will be face value ($160 per
share) plus a declining premium amount, which shall be equal to 5% until the
third anniversary of issuance and shall decline 1% annually thereafter to zero
following the seventh anniversary.

NOTE 5  STOCK OPTIONS

Under the terms of Maxcos incentive common stock option plan, options for the
purchase of up to 500,000 shares of common stock may be granted and options are
exercisable upon grant.

A summary of incentive stock options activity follows for the year ended March
31:

29



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued

MAXCO, INC. AND SUBSIDIARIES

NOTE 5  STOCK OPTIONS  Continued

|                                                 |  |  |                                 |  |       |   |          |  |       |  |        |   |          |   |      |  |  |  |          |   |  |   |      |  |  |  |  | 
|------------------------------------------------ |  |  | ------------------------------- |  | ----- | - | -------- |  | ----- |  | ------ | - | -------- | - | ---- |  |  |  | -------- | - |  | - | ---- |  |  |  |  | 
|                                                 |  |  | 2000                            |  | 1999  |   | 1998    
|                                                 |  |  |                                 |  |       |   |         
|                                                 |  |  |                                 |  |       |   | Weighted |  |       |  |        |   | Weighted |   |      |  |  |  | Weighted
|                                                 |  |  |                                 |  |       |   | Average  |  |       |  |        |   | Average  |   |      |  |  |  | Average 
|                                                 |  |  | Shares                          |  | Price |   | Shares   |  | Price |  | Shares |   | Price   
|                                                 |  |  |                                 |  |       |   |          |  |       |  |        |   |         
|                                                 |  |  | (number of shares in thousands)
|Outstanding and exercisable at beginning of year |  |  | 145                             |  |       | $ | 7.90     |  |       |  | 188    |   |          | $ | 6.09 |  |  |  | 203      |   |  | $ | 5.47 | 
|                                                
|                                                
|                                                
|                                                
|Granted and exercisable                          |  |  |                                 |  |       |   |          |  |       |  | 10     |   |          |   | 7.50 |  |  |  | 10       |   |  |   | 7.00 | 
|                                                
|                                                
|                                                
|                                                
|Exercised                                        |  |  |                                 |  |       |   |          |  |       |  | (53    | ) |          |   | 1.38 |  |  |  | (25      | ) |  |   | 1.38 | 
|                                                
|                                                
|                                                
|                                                
|                                                 |  |  |                                 |  |       |   |          |  |       |  |        |   |          |   |      |  |  |  |          |  
|Outstanding and exercisable at end of year       |  |  | 145                             |  |       | $ | 7.90     |  |       |  | 145    |   |          | $ | 7.90 |  |  |  | 188      |   |  | $ | 6.09 | 
|                                                 |  |  |                                 |  |       |   |          |  |       |  |        |   |          |   |      |  |  |  |          |  

The exercise price for options outstanding as of March 31, 2000 ranged from
$7.00 to $8.00. There were no options granted during the year ended March 31,
2000. The weighted average fair value of options granted during the years
ended March 31, 1999 and 1998 was $2.94 and $2.68, respectively. The weighted
average remaining contractual life of those options is approximately eight
years.

Pro forma information regarding net income and income per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value of these options was estimated at the date of grant using a Black-Schole
option pricing model.

After adjusting for the proforma effect of stock compensation, the net income
is estimated to be approximately $316,000 (loss of $.03 per share after
preferred dividends) for 2000, $759,000 ($.11 per share) for 1999 and $1.4
million ($.29 per share) for 1998. Assumptions used in determining the above
proforma disclosures were risk free interest rates of approximately 6%, no
dividend yields, .323 market price volatility in 1999 (.31 for the 1998 grant),
and a five year weighted average life of these options. These proforma results
reflect only stock options granted in 1999 and 1998 (none were granted in
2000), and may not be comparable with the results of applying the fair market
value methodology to all stock options granted prior to the initial adoption of
this statement.

NOTE 6  EMPLOYEE SAVINGS PLAN

Company contributions charged to operations under the employee savings plans
were approximately $335,000, $351,000 and $251,000 for the years ended March
31, 2000, 1999 and 1998, respectively.

NOTE 7  FEDERAL INCOME TAXES

The provision for federal income taxes consists of the following:

|                                                   |  |                |      |      |  |      |      |   |  |   |       |  
|-------------------------------------------------- |  | -------------- | ---- | ---- |  | ---- | ---- | - |  | - | ----- | -
|                                                   |  | 2000           |      | 1999 |  | 1998
|                                                   |  |                |      |      |  |     
|                                                   |  | (in thousands)
|Current                                            |  | $              | (719 | )    |  | $    | (195 | ) |  | $ | 2,150 |  
|                                                  
|                                                  
|                                                  
|                                                  
|Deferred (benefit)                                 |  |                | 855  |      |  |      | 461  |   |  |   | (688  | )
|                                                   |  |                |      |      |  |      |      |   |  |   |       |  
|                                                   |  |                | 136  |      |  |      | 266  |   |  |   | 1,462 |  
|                                                  
|                                                  
|                                                  
|                                                  
|Amount allocated to equity in
income of affiliates |  |                | 143  |      |  |      | (203 | ) |  |   | (707  | )
|                                                   |  |                |      |      |  |      |      |   |  |   |       |  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |  | $              | 279  |      |  | $    | 63   |   |  | $ | 755   |  
|                                                   |  |                |      |      |  |      |      |   |  |   |       |  

The reconciliation of income taxes computed at the United States federal
statutory tax rate to income tax expense is as follows:

30



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued

MAXCO, INC. AND SUBSIDIARIES

NOTE 7  FEDERAL INCOME TAXES  Continued

|                                                            |  |                |     |      |  |      |      |   |  |   |       | 
|----------------------------------------------------------- |  | -------------- | --- | ---- |  | ---- | ---- | - |  | - | ----- | 
|                                                            |  | 2000           |     | 1999 |  | 1998
|                                                            |  |                |     |      |  |     
|                                                            |  | (in thousands)
|Income taxes computed at
United States statutory rate (34%) |  | $              | 59  |      |  | $    | 493  |   |  | $ | 1,444 | 
|                                                           
|                                                           
|                                                           
|                                                           
|Prior year tax adjustment                                   |  |                |     |      |  |      | (294 | )
|                                                           
|                                                           
|                                                           
|                                                           
|Other                                                       |  |                | 77  |      |  |      | 67   |   |  |   | 18    | 
|                                                            |  |                |     |      |  |      |      |   |  |   |       | 
|                                                            |  | $              | 136 |      |  | $    | 266  |   |  | $ | 1,462 | 
|                                                            |  |                |     |      |  |      |      |   |  |   |       | 

Federal income taxes paid by Maxco were $350,000 in 2000, $600,000 in 1999, and
$2.1 million in 1998.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Companys deferred tax liabilities and assets as of March 31 were as
follows:

|                          |                                 |                                |                          |                       |       |                |     |       |       |       |     | 
|------------------------- | ------------------------------- | ------------------------------ | ------------------------ | --------------------- | ----- | -------------- | --- | ----- | ----- | ----- | --- | 
|                          |                                 |                                |                          |                       |       | 2000           |     | 1999 
|                          |                                 |                                |                          |                       |       |                |     |      
|                          |                                 |                                |                          |                       |       | (in thousands)
|DEFERRED TAX LIABILITIES:
|                         
|                         
|                         
|                         
|                          | Depreciation                    |                                | $                        | 2,087                 |       |                | $   | 1,259 |      
|                         
|                         
|                         
|                         
|                          | Undistributed earnings          |                                |                          | 723                   |       |                |     | 457   |      
|                         
|                         
|                         
|                         
|                          | Other                           |                                |                          |                       |       |                |     | 23    |      
|                          |                                 |                                |                          |                       |       |                |     |       |      
|                          |                                 | Total Deferred Tax Liabilities |                          |                       | 2,810 |                |     |       | 1,739 |      
|                         
|                         
|                         
|                         
|DEFERRED TAX ASSETS:     
|                         
|                         
|                         
|                         
|                          | Allowance for doubtful accounts |                                |                          | 174                   |       |                |     | 190   |      
|                         
|                         
|                         
|                         
|                          | Inventory                       |                                |                          | 123                   |       |                |     | 111   |      
|                         
|                         
|                         
|                         
|                          | Marketable securities           |                                |                          | 452                   |      
|                          |                                 |                                |                          |                       |       |                |     |       |      
|                          |                                 |                                |                          | Total Deferred Assets |       |                | 749 |       |       |       | 301 | 
|                          |                                 |                                |                          |                       |       |                |     |       |      
|                         
|                         
|                         
|                         
|                          |                                 |                                | Net Deferred Liabilities |                       | $     | 2,061          |     |       | $     | 1,438 |    
|                          |                                 |                                |                          |                       |       |                |     |       |      

Deferred tax assets and liabilities are recorded in the consolidated balance
sheets as follows:

|             |                                        |   |                |       |      |   |       |       |  
|------------ | -------------------------------------- | - | -------------- | ----- | ---- | - | ----- | ----- | -
|             |                                        |   | 2000           |       | 1999
|             |                                        |   |                |       |     
|             |                                        |   | (in thousands)
|LIABILITIES:
|            
|            
|            
|            
|             | Taxes, interest, and other liabilities |   | $              | (258  | )    |   | $     | (296  | )
|            
|            
|            
|            
|             | Deferred income taxes                  |   |                | 2,319 |      |   |       | 1,734 |  
|             |                                        |   |                |       |      |   |       |      
|             |                                        | $ | 2,061          |       |      | $ | 1,438 |      
|             |                                        |   |                |       |      |   |       |      

Components of accumulated comprehensive income are shown net of tax.

NOTE 8  OTHER INVESTMENTS

Real Estate:

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Effective January 1, 1997, Maxco acquired a 50% interest in a Limited
Liability Company (LLC), L/M Associates, for approximately $4.3 million in
cash and properties. The LLC was formed to develop and lease real estate in
central Michigan. In addition, effective October 1, 1998, the Company made
additional investments in its real estate activity as it acquired a 50%
interest in LandEquities and Nilson Builders. These companies manage,
develop, and build commercial and residential properties.

31



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued

MAXCO, INC. AND SUBSIDIARIES

NOTE 8  OTHER INVESTMENTS  Continued

Technology Related:

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In addition to its investment in Integral Vision, Inc., the Company has an
equity interest in two other technology related businesses. Effective August
1, 1998, the Company acquired a 40% equity interest in Foresight Solutions,
Inc. (acquired an additional 10% in November 1999), a developer of accounting
software and e-business solutions for small to medium size businesses.
Additionally, the Company sold its 45% equity interest in Strategic
Interactive, Inc. to Provant, Inc. for cash and approximately 249,000 shares
of Provants stock in October 1998 when Provant acquired 100% of the stock of
Strategic Interactive.

Energy Related:

| |                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Effective January 1, 1998, Maxco acquired an interest in AMI Energy, Inc.,
which is a retail energy marketing and consulting firm. In addition,
effective November 1, 1997, Maxco acquired a 50% interest in Robinson Oil
Company, LLC, which is in the business of acquiring and developing oil and gas
interests.

Other:

| |                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Effective June 1, 1998, Maxco acquired a one-third interest in Blasen Brogan
Asset Management Company, a Lansing, Michigan based registered investor
advisory firm.



| |                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Effective August 1, 1998, the Company acquired a 50% equity interest in
and agreed to finance certain debt of Mid-State Industrial Services, Inc.,
which is in the business of selling, leasing, and servicing lift trucks.



| |                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Effective June 1, 1999, Maxco acquired a 12.5% equity interest in Phoenix
Financial Group, LTD and its subsidiary Cambridge Group Investments, LTD (dba
Bondpage.com), a registered broker-dealer of securities that is primarily
focused on the trading of fixed income investments over the Internet.



| |                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In October 1999, the Company invested in approximately 6% of the common stock
of MYOEM.COM, a company offering a business-to-business vertical web
portal designed to bring solution-seekers together with solution-providers.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Maxco has a 7% investment in Axson, S.A. of France (Axson), a manufacturer of
resins and composite materials for advanced applications. In the fourth
quarter of fiscal 2000, the majority shareholders of Axson and began
negotiations with Axson management for a management buyout of the existing
shareholders interests. As such, Maxco classified its investment in Axson as
available for sale at March 31, 2000 and adjusted its carrying amount to its
estimated fair value which resulted in a $860,000 charge. This transaction is
subject to approval by the French government and is expected to be completed
in July 2000.

The combined results of operations and financial position of the Companys
unconsolidated affiliates are summarized below.

32



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued

MAXCO, INC. AND SUBSIDIARIES

NOTE 8  OTHER INVESTMENTS  Continued

|                                                  |  |             |        |                    |  |           |        |             |  |                |        |      |  |      |        |   |  |                |        |  |  |   |        | 
|------------------------------------------------- |  | ----------- | ------ | ------------------ |  | --------- | ------ | ----------- |  | -------------- | ------ | ---- |  | ---- | ------ | - |  | -------------- | ------ |  |  | - | ------ | 
|                                                  |  |             |        |                    |  |           |        |             |  |                |        |      |  |      |        |   |  | Energy Related
|                                                  |  | Real Estate |        | Technology Related |  | and Other
|                                                  |  | March 31,   |        | March 31,          |  | March 31,
|                                                  |  |             |        |                    |  |          
|                                                  |  |             |        |                    |  |           |        |             |  |                |        |      |  | 1999
|                                                  |  | 2000        |        | 1999               |  | 2000      |        | (restated)* |  | 2000           |        | 1999
|                                                  |  |             |        |                    |  |           |        |             |  |                |        |     
|                                                  |  |             |        |                    |  |           |        |             |  | (in thousands)
|Condensed income statement information:          
|                                                 
|                                                 
|                                                 
|                                                 
|Net Sales                                         |  | $           | 16,100 |                    |  | $         | 7,956  |             |  | $              | 12,974 |      |  | $    | 13,267 |   |  | $              | 12,247 |  |  | $ | 7,627  | 
|                                                 
|                                                 
|                                                 
|                                                 
|Gross Margin                                      |  |             | 7,445  |                    |  |           | 4,142  |             |  |                | 2,433  |      |  |      | 4,151  |   |  |                | 3,900  |  |  |   | 2,744  | 
|                                                 
|                                                 
|                                                 
|                                                 
|Net Income(Loss)                                  |  |             | (686   | )                  |  |           | 82     |             |  |                | 3,153  |      |  |      | (2,769 | ) |  |                | 104    |  |  |   | 95     | 
|                                                 
|                                                 
|                                                 
|                                                 
|Condensed balanced sheet information:            
|                                                 
|                                                 
|                                                 
|                                                 
|Current Assets                                    |  | $           | 29,235 |                    |  | $         | 21,780 |             |  | $              | 8,814  |      |  | $    | 8,713  |   |  | $              | 2,447  |  |  | $ | 7,128  | 
|                                                 
|                                                 
|                                                 
|                                                 
|Net Current Assets of Discontinued Operations     |  |             |        |                    |  |           |        |             |  |                |        |      |  |      | 9,605  |  
|                                                 
|                                                 
|                                                 
|                                                 
|Non-Current Assets                                |  |             | 45,979 |                    |  |           | 34,413 |             |  |                | 9,285  |      |  |      | 10,184 |   |  |                | 4,232  |  |  |   | 3,823  | 
|                                                 
|                                                 
|                                                 
|                                                 
|Net Non-Current Assets of Discontinued Operations |  |             |        |                    |  |           |        |             |  |                |        |      |  |      | 6,218  |  
|                                                  |  |             |        |                    |  |           |        |             |  |                |        |      |  |      |        |   |  |                |        |  |  |   |        | 
|                                                  |  | $           | 75,214 |                    |  | $         | 56,193 |             |  | $              | 18,099 |      |  | $    | 34,720 |   |  | $              | 6,679  |  |  | $ | 10,951 | 
|                                                  |  |             |        |                    |  |           |        |             |  |                |        |      |  |      |        |   |  |                |        |  |  |   |        | 
|Current Liabilities                               |  | $           | 35,644 |                    |  | $         | 23,812 |             |  | $              | 2,780  |      |  | $    | 23,046 |   |  | $              | 2,689  |  |  | $ | 7,188  | 
|                                                 
|                                                 
|                                                 
|                                                 
|Non-Current Liabilities                           |  |             | 31,466 |                    |  |           | 23,116 |             |  |                | 2,933  |      |  |      | 2,240  |   |  |                | 2,347  |  |  |   | 2,923  | 
|                                                 
|                                                 
|                                                 
|                                                 
|Stockholders Equity                              |  |             | 8,104  |                    |  |           | 9,265  |             |  |                | 12,386 |      |  |      | 9,434  |   |  |                | 1,643  |  |  |   | 840    | 
|                                                  |  |             |        |                    |  |           |        |             |  |                |        |      |  |      |        |   |  |                |        |  |  |   |        | 
|                                                  |  | $           | 75,214 |                    |  | $         | 56,193 |             |  | $              | 18,099 |      |  | $    | 34,720 |   |  | $              | 6,679  |  |  | $ | 10,951 | 
|                                                  |  |             |        |                    |  |           |        |             |  |                |        |      |  |      |        |   |  |                |        |  |  |   |        | 



| |                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The difference between the carrying amount and the underlying equity of the
Companys investment in the net assets of the Companys 50% or less owned
investments, approximately $1,388,000, is being amortized over a 15 year life.



| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | *The amounts for Integral Vision, Inc. (formerly Medar, Inc.) have been
restated for 1999 to reflect that companys sale of its welding controls
division.

33



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued

MAXCO, INC. AND SUBSIDIARIES

NOTE 8  OTHER INVESTMENTS  Continued

The following companies represent the equity investees where Maxcos share of
their net income (loss) exceeded 20% of consolidated pre-tax income. This
financial information is also included in the combined table above.

|                                        |  |                 |       |                     |  |                |       |      |  |   |        |  |  |   |       | 
|--------------------------------------- |  | --------------- | ----- | ------------------- |  | -------------- | ----- | ---- |  | - | ------ |  |  | - | ----- | 
|                                        |  | Foresight       |       | Midstate Industrial
|                                        |  | Solutions, Inc. |       | Services, Inc.     
|                                        |  |                 |       |                    
|                                        |  | March 31,       |       | March 31,          
|                                        |  |                 |       |                    
|                                        |  | 2000            |       | 1999                |  | 2000           |       | 1999
|                                        |  |                 |       |                     |  |                |       |     
|                                        |  |                 |       |                     |  | (in thousands)
|Condensed income statement information:
|                                       
|                                       
|                                       
|                                       
|Net Sales                               |  | $               | 1,965 |                     |  | $              | 1,456 |      |  | $ | 11,933 |  |  | $ | 6,407 | 
|                                       
|                                       
|                                       
|                                       
|Gross Margin                            |  |                 | 1,654 |                     |  |                | 908   |      |  |   | 3,645  |  |  |   | 2,291 | 
|                                       
|                                       
|                                       
|                                       
|Net Income(Loss)                        |  |                 | (686  | )                   |  |                | (398  | )    |  |   | 564    |  |  |   | 416   | 
|                                       
|                                       
|                                       
|                                       
|Condensed balanced sheet information:  
|                                       
|                                       
|                                       
|                                       
|Current Assets                          |  | $               | 335   |                     |  | $              | 189   |      |  | $ | 1,722  |  |  | $ | 1,576 | 
|                                       
|                                       
|                                       
|                                       
|Non-Current Assets                      |  |                 | 807   |                     |  |                | 764   |      |  |   | 3,537  |  |  |   | 3,590 | 
|                                        |  |                 |       |                     |  |                |       |      |  |   |        |  |  |   |       | 
|                                        |  | $               | 1,142 |                     |  | $              | 953   |      |  | $ | 5,259  |  |  | $ | 5,166 | 
|                                        |  |                 |       |                     |  |                |       |      |  |   |        |  |  |   |       | 
|                                       
|                                       
|                                       
|                                       
|Current Liabilities                     |  | $               | 938   |                     |  | $              | 103   |      |  | $ | 1,865  |  |  | $ | 1,749 | 
|                                       
|                                       
|                                       
|                                       
|Non-Current Liabilities                 |  |                 | 981   |                     |  |                | 871   |      |  |   | 2,326  |  |  |   | 2,900 | 
|                                       
|                                       
|                                       
|                                       
|Stockholders Equity                    |  |                 | (777  | )                   |  |                | (21   | )    |  |   | 1,068  |  |  |   | 517   | 
|                                        |  |                 |       |                     |  |                |       |      |  |   |        |  |  |   |       | 
|                                        |  | $               | 1,142 |                     |  | $              | 953   |      |  | $ | 5,259  |  |  | $ | 5,166 | 
|                                        |  |                 |       |                     |  |                |       |      |  |   |        |  |  |   |       | 

NOTE 9  CONTINGENCIES AND COMMITMENTS

Maxco and certain operating subsidiaries occupy facilities and use equipment
under operating lease agreements requiring annual rental payments approximating
$1,839,000 in 2001, $1,650,000 in 2002, $1,304,000 in 2003, $1,032,000 in 2004,
$307,000 in 2005, and $222,000 thereafter for a total commitment aggregating
$6,354,000. Rent expense charged to operations, including short-term leases,
aggregated $2,285,000 in 2000, $1,580,000 in 1999, and $1,231,000 in 1998.

The Company is involved in various lawsuits and other claims arising in the
ordinary course of business. While the results of these matters cannot be
predicted with certainty, management, upon advice from counsel, believes that
losses, if any, arising from these proceedings will not have a material adverse
effect.

34



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Continued

MAXCO, INC. AND SUBSIDIARIES

NOTE 10  INDUSTRY SEGMENT INFORMATION

The following summarizes Maxcos industry segment information:

|                                       |                          |                                             |                            |                           |       |        |         |        |       |                |         |        |       |       |         | 
|-------------------------------------- | ------------------------ | ------------------------------------------- | -------------------------- | ------------------------- | ----- | ------ | ------- | ------ | ----- | -------------- | ------- | ------ | ----- | ----- | ------- | 
|                                       |                          |                                             |                            |                           |       | 2000   |         | 1999   |       | 1998          
|                                       |                          |                                             |                            |                           |       |        |         |        |       |               
|                                       |                          |                                             |                            |                           |       |        |         |        |       | (in thousands)
|Net sales:                            
|                                      
|                                      
|                                      
|                                      
|                                       | Construction supplies    |                                             | $                          | 99,924                    |       |        | $       | 72,440 |       |                | $       | 50,667 |      
|                                      
|                                      
|                                      
|                                      
|                                       | Heat treating            |                                             |                            | 40,368                    |       |        |         | 35,700 |       |                |         | 33,328 |      
|                                      
|                                      
|                                      
|                                      
|                                       | Packaging products       |                                             |                            | 15,865                    |       |        |         | 16,251 |       |                |         | 18,200 |      
|                                      
|                                      
|                                      
|                                      
|                                       | Corporate and other      |                                             |                            | 333                       |       |        |         | 341    |       |                |         | 349    |      
|                                       |                          |                                             |                            |                           |       |        |         |        |       |                |         |        |      
|                                      
|                                      
|                                      
|                                      
|                                       |                          |                                             |                            | Total Net Sales           |       | $      | 156,490 |        |       | $              | 124,732 |        |       | $     | 102,544 | 
|                                       |                          |                                             |                            |                           |       |        |         |        |       |                |         |        |      
|Operating earnings (loss):            
|                                      
|                                      
|                                      
|                                      
|                                       | Construction supplies    |                                             | $                          | 2,770                     |       |        | $       | 2,538  |       |                | $       | 2,819  |      
|                                      
|                                      
|                                      
|                                      
|                                       | Heat treating            |                                             |                            | 5,245                     |       |        |         | 3,434  |       |                |         | 4,452  |      
|                                      
|                                      
|                                      
|                                      
|                                       | Packaging products       |                                             |                            | (530                      | )     |        |         | (1,006 | )     |                |         | (431   | )    
|                                      
|                                      
|                                      
|                                      
|                                       | Corporate and other      |                                             |                            | (3,483                    | )     |        |         | (1,951 | )     |                |         | (1,528 | )    
|                                       |                          |                                             |                            |                           |       |        |         |        |       |                |         |        |      
|                                      
|                                      
|                                      
|                                      
|                                       |                          |                                             |                            | Total Operating Earnings  |       | $      | 4,002   |        |       | $              | 3,015   |        |       | $     | 5,312   | 
|                                       |                          |                                             |                            |                           |       |        |         |        |       |                |         |        |      
|Identifiable assets:                  
|                                      
|                                      
|                                      
|                                      
|                                       | Construction supplies    |                                             | $                          | 32,902                    |       |        | $       | 21,275 |       |                | $       | 11,863 |      
|                                      
|                                      
|                                      
|                                      
|                                       | Heat treating            |                                             |                            | 30,367                    |       |        |         | 26,211 |       |                |         | 23,058 |      
|                                      
|                                      
|                                      
|                                      
|                                       | Packaging products       |                                             |                            | 6,565                     |       |        |         | 7,402  |       |                |         | 7,543  |      
|                                      
|                                      
|                                      
|                                      
|                                       | Corporate and other      |                                             |                            | 18,421                    |       |        |         | 17,639 |       |                |         | 17,778 |      
|                                      
|                                      
|                                      
|                                      
|                                       | Investments and advances |                                             |                            | 12,165                    |       |        |         | 12,903 |       |                |         | 15,813 |      
|                                       |                          |                                             |                            |                           |       |        |         |        |       |                |         |        |      
|                                       |                          |                                             |                            | Total Identifiable Assets |       | $      | 100,420 |        |       | $              | 85,430  |        |       | $     | 76,055  | 
|                                       |                          |                                             |                            |                           |       |        |         |        |       |                |         |        |      
|Depreciation and amortization expense:
|                                      
|                                      
|                                      
|                                      
|                                       | Construction supplies    |                                             | $                          | 1,870                     |       |        | $       | 1,017  |       |                | $       | 487    |      
|                                      
|                                      
|                                      
|                                      
|                                       | Heat treating            |                                             |                            | 1,852                     |       |        |         | 1,400  |       |                |         | 1,186  |      
|                                      
|                                      
|                                      
|                                      
|                                       | Packaging products       |                                             |                            | 742                       |       |        |         | 674    |       |                |         | 585    |      
|                                      
|                                      
|                                      
|                                      
|                                       | Corporate and other      |                                             |                            | 443                       |       |        |         | 304    |       |                |         | 223    |      
|                                       |                          |                                             |                            |                           |       |        |         |        |       |                |         |        |      
|                                       |                          | Total Depreciation And Amortization Expense |                            | $                         | 4,907 |        |         | $      | 3,395 |                |         | $      | 2,481 |      
|                                       |                          |                                             |                            |                           |       |        |         |        |       |                |         |        |      
|Capital expenditures:                 
|                                      
|                                      
|                                      
|                                      
|                                       | Construction supplies    |                                             | $                          | 5,310                     |       |        | $       | 2,208  |       |                | $       | 640    |      
|                                      
|                                      
|                                      
|                                      
|                                       | Heat treating            |                                             |                            | 5,656                     |       |        |         | 5,920  |       |                |         | 5,378  |      
|                                      
|                                      
|                                      
|                                      
|                                       | Packaging products       |                                             |                            | 693                       |       |        |         | 960    |       |                |         | 1,371  |      
|                                      
|                                      
|                                      
|                                      
|                                       | Corporate and other      |                                             |                            | 39                        |       |        |         | 110    |       |                |         | 85     |      
|                                       |                          |                                             |                            |                           |       |        |         |        |       |                |         |        |      
|                                       |                          |                                             | Total Capital Expenditures |                           | $     | 11,698 |         |        | $     | 9,198          |         |        | $     | 7,474 |        
|                                       |                          |                                             |                            |                           |       |        |         |        |       |                |         |        |      



| |                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Accounting policies of the business segments are consistent with those
described in the summary of significant accounting policies (see Note 1).                                                         
|
| | Identifiable assets are those assets that are used in Maxcos operations in
each industry segment. Corporate assets are principally cash, notes
receivable, investments, and corporate office properties.
|
| | Maxco has no significant foreign operations, export sales, or inter-segment
sales.                                                                                                                       
|
| | No sales to any single customer exceeded 10% of consolidated sales for 2000,
1999 or 1998.                                                                                                               

35



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued

MAXCO, INC. AND SUBSIDIARIES

NOTE 11  EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

|                                                                                                        |                                                     |   |                                      |       |      |   |      |       |   |   |       |       |  
|------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | - | ------------------------------------ | ----- | ---- | - | ---- | ----- | - | - | ----- | ----- | -
|                                                                                                        |                                                     |   | 2000                                 |       | 1999 |   | 1998
|                                                                                                        |                                                     |   |                                      |       |      |   |     
|                                                                                                        |                                                     |   | (in thousands except per share data)
|NUMERATOR:                                                                                             
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Net income                                          |   | $                                    | 316   |      |   | $    | 788   |   |   | $     | 1,411 |  
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Preferred stock dividends                           |   |                                      | (408  | )    |   |      | (409  | ) |   |       | (390  | )
|                                                                                                        |                                                     |   |                                      |       |      |   |      |       |   |   |       |      
|Numerator for basic and diluted earning per share
      income (loss) available to common stockholders |                                                     |   | (92                                  | )     |      |   | 379  |       |   |   | 1,021 |      
|                                                                                                        |                                                     |   |                                      |       |      |   |      |       |   |   |       |       |  
|DENOMINATOR:                                                                                           
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Denominator for basic earnings per share          
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Weighted-average shares                             |   |                                      | 3,157 |      |   |      | 3,256 |   |   |       | 3,379 |  
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Effect of dilutive securities:                                                                         
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Employee stock options                              |   |                                      |       |      |   |      | 34    |   |   |       | 81    |  
|                                                                                                        |                                                     |   |                                      |       |      |   |      |       |   |   |       |       |  
|Dilutive potential common shares                                                                        |                                                     |   |                                      |       |      |   | 34   |       |   |   | 81    |      
|                                                                                                        |                                                     |   |                                      |       |      |   |      |       |   |   |       |       |  
|                                                                                                        | Denominator for diluted earnings per shareadjusted
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                        | Weighted-average shares and assumed conversions     |   |                                      | 3,157 |      |   |      | 3,290 |   |   |       | 3,460 |  
|                                                                                                        |                                                     |   |                                      |       |      |   |      |       |   |   |       |       |  
|BASIC EARNINGS (LOSS) PER SHARE                                                                         |                                                     | $ | (  .03                               | )     |      | $ | .12  |       |   | $ | .30   |      
|                                                                                                        |                                                     |   |                                      |       |      |   |      |       |   |   |       |       |  
|DILUTED EARNINGS (LOSS) PER SHARE                                                                       |                                                     | $ | (  .03                               | )     |      | $ | .12  |       |   | $ | .30   |      
|                                                                                                        |                                                     |   |                                      |       |      |   |      |       |   |   |       |       |  

36



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##### Table of Contents



MAXCO, INC. AND SUBSIDIARIES
SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

(in thousands)

|                           |                                 |           |            |          |            |          |           |          |            |           |            |  |         |  |   |     |     |  |   |     | 
|-------------------------- | ------------------------------- | --------- | ---------- | -------- | ---------- | -------- | --------- | -------- | ---------- | --------- | ---------- |  | ------- |  | - | --- | --- |  | - | --- | 
|COL. A                     |                                 | COL. B    |            | COL. C   |            | COL. D   |           | COL. E   |            | COL. F   
|                           |                                 |           |            |          |            |          |           |          |            |          
|                           |                                 |           |            |          |            |          | ADDITIONS
|                           |                                 |           |            |          |            |          |          
|                           |                                 |           |            |          |            |          |           |          |            |           | Charged to
|                           |                                 |           | Balance at |          | Charged to |          | Other     |          |            |           |            |  | Balance
|                           |                                 |           | Beginning  |          | Costs and  |          | Accounts  |          | Deductions |           | at End    
|DESCRIPTION                |                                 | of Period |            | Expenses |            | Describe |           | Describe |            | of Period
|                           |                                 |           |            |          |            |          |           |          |            |          
|Year ended March 31, 2000:
|                          
|                          
|                          
|                          
|                           | Allowance for doubtful accounts |           | $          | 558      |            |          | $         | 370      |            |           |            |  |         |  | $ | 415 | (A) |  | $ | 513 | 
|                          
|                          
|                          
|                          
|Year ended March 31, 1999:
|                          
|                          
|                          
|                          
|                           | Allowance for doubtful accounts |           | $          | 565      |            |          | $         | 191      |            |           |            |  |         |  | $ | 198 | (A) |  | $ | 558 | 
|                          
|                          
|                          
|                          
|Year ended March 31, 1998:
|                          
|                          
|                          
|                          
|                           | Allowance for doubtful accounts |           | $          | 470      |            |          | $         | 113      |            |           |            |  |         |  | $ | 18  | (A) |  | $ | 565 | 

(A) Represents uncollectible accounts written off, less recoveries.

37



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##### Table of Contents



MAXCO, INC.
ANNUAL REPORT ON FORM 10-K




EXHIBIT INDEX

Exhibit No.           
   Description



|10.21 |  |  | Sixth amendment to amended and restated loan agreement
between Comerica Bank and Maxco, Inc. dated July 12, 2000.                          
|----- |  |  | -------------------------------------------------------------------------------------------------------------------------------------------
|     
|21    |  |  | Subsidiaries of the Registrant                                                                                                             
|     
|23    |  |  | Consent of Independent Auditors (Form S-8 filed June 2, 1992  File No. 33-48351 and Form S-8 filed November 19, 1998 -
File No. 333-67539)
|     
|27    |  |  | Financial Data Schedules