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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



| |  |                                                                                     
| |  | ------------------------------------------------------------------------------------
| |  | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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| |  | For the fiscal year ended March 31, 2001                                            

OR

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| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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)

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|Michigan                                                       |  | 38-1792842                             
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|(State or other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification Number)
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|1118
Centennial Way, Lansing, Michigan                         |  | 48917                                  
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|(Address of principal executive offices)                       |  | (Zip Code)                             
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|Registrants Telephone Number, including area code:            |  | (517) 321-3130                         

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|Securities registered pursuant to Section 12(b) of the Act:
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|Title of each class                                         |  | Name of each exchange on which registered
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|NONE                                                        |  | NONE                                     
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|Securities registered pursuant to Section 12(g) of the Act:
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|Common
stock                                                |  | Series Three Preferred Stock             
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|(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         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.

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of May 31, 2001: $10,036,600.

At May 31, 2001, 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, 2001 are
incorporated by reference into Part III.



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TABLE OF CONTENTS



|                                                                                             |                                                                |  |  |  |  |  |  | 
|-------------------------------------------------------------------------------------------- | -------------------------------------------------------------- |  |  |  |  |  |  | 
|ITEM 1 BUSINESS                                                                             
|ITEM 2 PROPERTIES                                                                           
|ITEM 3 LEGAL PROCEEDINGS                                                                    
|ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|ITEM 5 MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS                
|ITEM 6 SELECTED FINANCIAL DATA                                                              
|ITEM 7 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA                                           
|ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS                                        
|ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|ITEM 11 EXECUTIVE COMPENSATION                                                              
|ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                     
|                                                                                             | SIGNATURES                                                    
|                                                                                             | LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
|Amended and Restated Loan Agreement                                                         
|Subsidiaries of Maxco, Inc.                                                                 
|Consent of Ernst & Young LLP                                                                
|Consent of Moore Stephens Doeren Mayhew                                                     



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|     |  | List of Financial Statements and Financial Statement Schedules                        |  |      | 20 | 

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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; a limited partnership that has
equity investments in companies focused on the information technology,
telecommunications, and medical technology markets; three technology-related
businesses; and one energy-related business.

During the year ended March 31, 2001, Maxco invested in its operating companies
through the purchase of additional property and equipment. In April 2000, the
Company invested in Vertical VC, a limited partnership that has equity
investments in companies focused on the information technology,
telecommunications, and medical technology markets. As discussed below, the
Company completed the sale of its investment in Axson in August 2000. The
Company also recorded its share of the minimum additional consideration to be
paid to former shareholders of Strategic Interactive (Maxcos former 45% owned
affiliate sold to Provant, Inc. in October 1998).

During the year ended March 31, 2000, the Company invested in 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.
Consequently, 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 was completed in August
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 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.

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. Competition is intense and larger
project orders are secured on a competitive bid basis. During the years ended

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March 31, 2001, 2000, and 1999, net sales of the construction supplies group
were approximately 65%, 64% and 58%, respectively, of consolidated net sales.

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 56 days sales on hand and represented 72% of Maxcos total inventories at
March 31, 2001. 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 construction supplies 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 11% of
Maxcos total inventories at March 31, 2001. 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 25%, 26%, and 29% of consolidated net sales for the years ended
March 31, 2001, 2000, and 1999, 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

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Midwest area by its own sales personnel, manufacturers representatives, and
paper jobbers. Manufacturing facilities are located in Sparta, Michigan.

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 40 days sales on
hand and represented 17% of Maxcos total inventories at March 31, 2001. 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, 2001, 2000, and 1999. The segment is not dependent on any
patents, trademarks, licenses, franchises, or concessions. This segment
accounted for approximately 10%, 10%, and 13% of consolidated net sales for the
years ended March 31, 2001, 2000, and 1999, respectively.

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

INVESTMENT IN REAL ESTATE

Maxco has an ownership interest ranging from approximately 30  50% in two
LLCs involved in development and leasing of real estate. The real estate
portfolio of the LLCs has an aggregate market value of approximately $137
million at March 31, 2001. This portfolio consists of properties located in
central Michigan, and includes approximately 80 offices and retail buildings,
and more than 144 acres of property zoned for commercial retail development and
residential building sites.

In fiscal 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 ventures:

|                            |  |                           |         |     |                   |           |        | 
|--------------------------- |  | ------------------------- | ------- | --- | ----------------- | --------- | ------ | 
|                            |  | Year Ended March 31, 2001 |        
|                            |  |                           |        
|                            |  | (in thousands)            |        
|                            |  | Completed                 |         |     | Under Development |          
|                            |  |                           |         |     |                   |          
|Square footage              |  |                           | 970     |     |                   |           | 36     | 
|                           
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|Net rental income           |  | $                         | 13,700  | (1)
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|Estimated fair market value |  | $                         | 113,800 | (2) |                   | $         | 3,300  | 
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|Outstanding debt            |  | $                         | 81,000  |     |                   | $         | 2,670  | 
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|Funds from operations       |  | $                         | 2,700   | (1)
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|Land inventory              |  |                           |         |     |                   | 144 acres |       
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|Land value                  |  |                           |         |     |                   | $         | 19,900 | 
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|Outstanding debt on land    |  |                           |         |     |                   | $         | 9,649  | 



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

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OTHER INVESTMENTS

In addition to its investments in real estate, 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 registered investor advisory firm; approximately a 12.5%
direct (37.5% indirect) 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; and a 50% interest in Robinson Oil Company, LLC, which is in
the business of acquiring and developing oil and gas interests.

Maxcos equity interest is less than 20% in the following companies and
consequently is accounted for using the cost method: 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 a 16% interest in Vertical VC, a limited partnership that has equity
investments in companies focused on the information technology,
telecommunications, and medical technology markets.

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, 2001, the unrealized loss on this stock was approximately
$1.1 million 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 2001,
2000, or 1999.

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, 2001, Maxco and its wholly owned subsidiaries employed
approximately 700 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, 2001, 2000, or 1999.

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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,
2001. The Company considers its facilities to be in good operating condition.

|                           |  |                  |              |  |        |        |        |     |  |                                  |  | 
|-------------------------- |  | ---------------- | ------------ |  | ------ | ------ | ------ | --- |  | -------------------------------- |  | 
|                           |  |                  |              |  |        | OWNED/ |       
|LOCATION                   |  | APPROXIMATE SIZE |              |  | LEASED |        |        | USE | 
|                           |  |                  |              |  |        |        |        |     | 
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|DISTRIBUTION              
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|Ersco Corporation         
|                          
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|Okemos, MI                 |  | 7,300 sq ft      |              |  |        |        | Leased |     |  | Administrative offices           | 
|                          
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|Southfield, MI             |  | 24,000 sq ft     |              |  |        |        | Leased |     |  | Warehouse and distribution       | 
|                          
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|Saginaw, MI                |  | 15,000 sq ft     |              |  |        |        | Leased |     |  | Warehouse and distribution       | 
|                          
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|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 2001 to 2016. Leases expiring within 12 months are expected to be renewed
at substantially the same terms as the present leases.




ITEM 3  LEGAL PROCEEDINGS

None




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

None

7



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##### Table of Contents






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, 2001 was 1,000.

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

|     |  |               |  |  |      |       |  |     |  |      |  | 
|---- |  | ------------- |  |  | ---- | ----- |  | --- |  | ---- |  | 
|YEAR |  | QUARTER ENDED |  |  | HIGH |       |  | LOW | 
|     |  |               |  |  |      |       |  |     | 
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|1999 |  | March 31      |  |  |      | 8.75  |  |     |  | 5.50 | 
|    
|    
|    
|    
|     |  | June 30       |  |  |      | 7.19  |  |     |  | 4.50 | 
|    
|    
|    
|    
|     |  | September 30  |  |  |      | 8.50  |  |     |  | 5.88 | 
|    
|    
|    
|    
|     |  | December 31   |  |  |      | 9.88  |  |     |  | 6.25 | 
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|2000 |  | March 31      |  |  |      | 10.75 |  |     |  | 6.63 | 
|    
|    
|    
|    
|     |  | June 30       |  |  |      | 9.25  |  |     |  | 6.00 | 
|    
|    
|    
|    
|     |  | September 30  |  |  |      | 9.63  |  |     |  | 5.06 | 
|    
|    
|    
|    
|     |  | December 31   |  |  |      | 9.13  |  |     |  | 5.72 | 
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|    
|2001 |  | March 31      |  |  |      | 9.50  |  |     |  | 5.25 | 

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

8



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##### Table of Contents






ITEM 6  SELECTED FINANCIAL DATA

|                                                                                          |                         |   |                                   |       |   |      |         |      |      |   |         |      |  |   |         |     |  |   |        |      | 
|----------------------------------------------------------------------------------------- | ----------------------- | - | --------------------------------- | ----- | - | ---- | ------- | ---- | ---- | - | ------- | ---- |  | - | ------- | --- |  | - | ------ | ---- | 
|                                                                                          |                         |   | Year Ended March 31,              |      
|                                                                                          |                         |   |                                   |      
|                                                                                          |                         |   | 2001                              |       |   | 2000 |         |      | 1999 |   |         | 1998 |  |   | 1997    |    
|                                                                                          |                         |   |                                   |       |   |      |         |      |      |   |         |      |  |   |         |    
|                                                                                          |                         |   | (in thousands, except share data) |      
|                                                                                          |                         |   |                                   |      
|Net sales                                                                                 |                         | $ | 157,315                           |       |   | $    | 156,490 |      |      | $ | 124,732 |      |  | $ | 102,544 |     |  | $ | 74,277 |     
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Loss on investment(1)                                                                     |                         |   |                                   |       |   |      | (860    | )   
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Income (loss) from continuing
operations before equity in
net income (loss) of affiliates |                         |   | (1,808                            | )     |   |      | 38      |      |      |   | 1,183   |      |  |   | 2,784   |     |  |   | 1,482  |     
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Equity in net income (loss) of
affiliates, net of tax                                     |                         |   | (2,997                            | )     |   |      | 278     |      |      |   | (395    | )    |  |   | (1,373  | )   |  |   | (250   | )   
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Income (loss) from continuing
operations                                                  |                         |   | (4,805                            | )     |   |      | 316     |      |      |   | 788     |      |  |   | 1,411   |     |  |   | 1,232  |     
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Income from discontinued
operations(2)(4)                                                 |                         |   |                                   |       |   |      |         |      |      |   |         |      |  |   |         |     |  |   | 21,322 |     
|                                                                                          |                         |   |                                   |       |   |      |         |      |      |   |         |      |  |   |        
|Net income (loss)(2)                                                                      |                         |   | (4,805                            | )     |   |      | 316     |      |      |   | 788     |      |  |   | 1,411   |     |  |   | 22,554 |     
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Net income (loss) per share:(3)                                                          
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Continuing operations   |   | $                                 | (1.68 | ) |      | $       | (.03 | )    |   | $       | .12  |  |   | $       | .30 |  |   | $      | .26  | 
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Discontinued operations |   |                                   |       |   |      |         |      |      |   |         |      |  |   |         |     |  |   |        | 5.20 | 
|                                                                                          |                         |   |                                   |       |   |      |         |      |      |   |         |      |  |   |        
|Net income (loss) per share(3)                                                            |                         |   | (1.68                             | )     |   |      | (.03    | )    |      |   | .12     |      |  |   | .30     |     |  |   | 5.46   |     
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|At March 31:                                                                             
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Total assets                                                                              |                         | $ | 97,450                            |       |   | $    | 102,222 |      |      | $ | 85,430  |      |  | $ | 76,055  |     |  | $ | 68,161 |     
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Long-term obligations
(net of current maturities)                                         |                         |   | 24,831                            |       |   |      | 22,390  |      |      |   | 32,856  |      |  |   | 27,698  |     |  |   | 16,027 |     
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Working capital                                                                           |                         |   | (12,242                           | )     |   |      | (7,687  | )    |      |   | 9,858   |      |  |   | 9,232   |     |  |   | 7,402  |     

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 (loss is anti-dilutive).                                                                                                                                                                                                             
|   
|   
|   
|   
|   
|   
|   
|   
|   
|   
|   
|   
|(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



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##### 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 2001 compared with 2000, and 2000 compared
with 1999. 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

2001 versus 2000

Net sales increased to $157.3 million in 2001 compared to $156.5 million in
2000. Operating earnings were $679,000 in 2001 compared to $4.0 million for the
comparable period in 2000. Net loss was $4.8 million, a loss of $5.2 million
after preferred dividends, or a loss of $1.68 per share assuming dilution
compared to last years net income of $316,000, a loss of $92,000 after
preferred dividends, or a loss of $.03 per share assuming dilution.

Sales and operating earnings for the years ending March 31, 2001 and 2000 by
each of the Companys segments were as follows:

|                      |  |                |         |  |                |           |       |           |  |   |        |  |           |   |       |  
|--------------------- |  | -------------- | ------- |  | -------------- | --------- | ----- | --------- |  | - | ------ |  | --------- | - | ----- | -
|                      |  | Year Ended     |         |  | Year Ended     |          
|                      |  | March 31, 2001 |         |  | March 31, 2000 |          
|                      |  |                |         |  |                |          
|                      |  |                |         |  |                | Operating |       |           |  |   |        |  | Operating |  
|                      |  |                |         |  |                | Earnings  |       |           |  |   |        |  | Earnings  |  
|                      |  | Net Sales      |         |  | (Loss)         |           |       | Net Sales |  |   | (Loss) | 
|                      |  |                |         |  |                |           |       |           |  |   |        | 
|                      |  | (in thousands) |        
|Construction supplies |  | $              | 102,501 |  |                | $         | 510   |           |  | $ | 99,924 |  |           | $ | 2,770 |  
|                     
|                     
|                     
|                     
|Heat treating         |  |                | 39,229  |  |                |           | 3,670 |           |  |   | 40,368 |  |           |   | 5,245 |  
|                     
|                     
|                     
|                     
|Packaging products    |  |                | 15,255  |  |                |           | (175  | )         |  |   | 15,865 |  |           |   | (530  | )

The $2.6 million increase in net sales at the construction supplies segment was
the result of an increase in direct shipment sales and form rental revenues.
The benefit of this sales increase was lessened by a change in the mix of sales
to lower margin direct shipments. Additionally, labor strikes in two of
Erscos markets affecting the redi-mix industry adversely impacted the level of
activity of its customers in the early part of fiscal 2001. Extreme weather
conditions in the Midwest also adversely impacted Erscos customers activity
levels in the third and fourth quarters of fiscal 2001. Although the Companys
heat treating segment added capacity through additional purchases of equipment,
sales slowed dramatically beginning late in the third quarter as the automotive
industry corrected its inventory levels.

Consolidated gross profit (net sales less cost of sales and operating expenses)
decreased $1.0 million to $35.7 million or 22.7% of sales from $36.7 million or
23.5% of net sales. Gross profit decreased for the Companys heat treating
segment primarily due to the lower sales volume. Although its net sales
increased, gross profit for the Companys construction supplies segment
decreased primarily due to the fact that a greater proportion of those sales
were on a direct shipment basis, which typically have a lower margin than sales
from inventory. An improvement in gross margin percentage for the Companys
packaging products segment resulted in a modest increase in gross profit in
spite of the decrease in net sales.

Selling, general, and administrative (SG&A) expenses increased $1.1 million
or 4.0% to $28.9 million from $27.8 million. This increase was primarily
attributable to an increase in SG&A expenses for the construction supplies
segment resulting from the increase in sales, wage and other expenses incurred
to support the planned growth of this unit. Since the growth has not
materialized to the levels anticipated, management has begun a program to
reduce SG&A expenses. SG&A expenses for the Companys packaging products
segment decreased as a result of its continuing efforts to reduce costs.

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.

10



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##### Table of Contents



Depreciation and amortization expense increased $1.2 million to $6.1 million
from $4.9 million primarily due to additions of property and equipment at the
Companys construction supplies and heat treating segments.

As a result of the facts discussed above, operating profit decreased $3.3
million or 83.0% to $679,000 from $4.0 million.

Interest expense increased in 2001 from the prior year primarily due to
additional long-term borrowings, the proceeds of which were used for additional
purchases of property and equipment. Additionally, an increase in the interest
rate the Company is charged on its variable rate borrowings also contributed to
the increase in net interest expense. Investment and interest income increased
in fiscal 2001 primarily due to the fact that the Company recorded income of
$675,000 representing its share of the minimum additional consideration to be
paid to former shareholders of Strategic Interactive, Inc. (Maxcos former 45%
owned affiliate sold to Provant, Inc. in October 1998).

Equity in net income (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 $3.0 million for the year
ended March 31, 2001, compared to income of $278,000 for the prior year
comparable period. This decrease was primarily attributable to Maxcos
proportionate share of Integral Vision, Inc.s (formerly Medar, Inc.) losses
and a charge to recognize an impairment of the Companys investment in Integral
Vision. For Maxcos fiscal year ended March 31, 2001, its proportionate share
of Integral Visions net loss, net of tax, totaled $1.3 million. Additionally,
in accordance with APB 18, the Company recorded a charge of $899,000, net of
tax, in 2001 to recognize a decline in the value of its investment in Integral
Vision that has been deemed other than temporary. For Maxcos fiscal year
ended March 31, 2000, its proportionate share of Integral Visions net income,
net of tax, totaled $591,000. Integral Visions net income for that period was
primarily the result of a gain on the sale of its welding controls division in
2000.

Equity in net income of affiliates was also negatively impacted by an increase
in losses at Foresight Solutions, Inc. Maxcos proportionate share of
Foresights net loss, net of tax, totaled $452,000 in 2001 compared to $207,000
in 2000. In the first quarter of fiscal 2001, the carrying value of the
Companys investment in Foresight was reduced to zero after recognizing the
first $72,000 of its proportionate share of Foresights losses. However, in
accordance with APB 18, the Company continued to recognize its proportionate
share of Foresights losses, an additional $613,000, as a contingent liability
as Maxco has loans to Foresight totaling $1.8 million and has guaranteed
$750,000 of Foresights bank debt.

Equity in net income of affiliates was also negatively impacted by the fiscal
2001 discontinuance of AMI Energy, Inc.(AMI). Although the liquidation of AMI
is substantially complete, $365,000 remains outstanding on a line of credit
with a bank. Given that Maxco has guaranteed that facility, and based on the
estimated remaining liquidation value of AMI, Maxco has recorded a $325,000
contingent liability at March 31, 2001.

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

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
the prior 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 | )

11



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##### Table of Contents



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 was
completed in August 2000.

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.

LIQUIDITY AND SOURCES OF CAPITAL

Operating activities for 2001 generated $14.8 million in cash. Earnings, after
non-cash adjustments, generated $2.9 million of that amount. Changes in net
working capital generated $11.9 million largely due to a $7.6 million increase
in accounts payable and other current liabilities, a decrease of $2.6 million
in accounts receivable and a decrease of $1.5 million in inventory. The
changes in working capital were primarily the result of the Companys cash
management efforts necessitated by a reduction in borrowing capacity due to
amendments to the Companys agreements with its banks in fiscal 2001. The
amendments changed the Companys maximum borrowing under its lines of credit
from a fixed amount to an amount based on certain collateral levels,
specifically accounts receivable and inventory.

12



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##### Table of Contents



Overall, the Companys working capital (defined as current assets less current
liabilities) decreased from a $7.7 million deficit at March 31, 2000 to a $12.2
million deficit at March 31, 2001. This decrease was primarily
attributable to the $11.9 million decrease in working capital
previously discussed and a $7.7 million increase in working
capital resulting from reclassifications of certain of the Company's
borrowings.
At March 31, 2001, the Company was in default of financial covenants required
by certain of its borrowings and consequently reclassified $15.2 million of its
debt as short term. This debt was classified as long term at March 31, 2000.
However, there are ongoing negotiations with the bank to obtain a waiver of
default. Management anticipates that these negotiations will be successfully
completed by September 2001. At March 31, 2000, the Company was in default of
the tangible net worth ratio as required by certain other borrowings,
specifically its $18 million line of credit and its then $10 million line of
credit with a bank. As such the outstanding balance on these lines at March
31, 2000, $23.4 million, was classified as current in the accompanying
financial statements. At March 31, 2001, both of these facilities were
classified as long-term debt. In July 2000, as provided under the original
agreement with the bank, the $10 million line was converted to a $7.6 million
term loan. The $18 million line was classified as long-term due to the Company
no longer being in default under its amended loan agreement.

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.

Net cash used in financing activities during the year consisted primarily of
repayments of long-term and short-term obligations, partially offset by
proceeds from long-term obligations. At March 31, 2001 the Company had two
lines of credit, an $18 million facility and a $5 million facility. These
facilities are secured by Company assets. The amount that can be borrowed
under these facilities is dependent on certain accounts receivable and
inventory levels at the Companys construction supplies, packaging products,
and heat treating companies. At March 31, 2001, based on these specific
collateral levels, the Company could borrow up to $14.0 million under its lines
of credit of which approximately $800,000 was available.

At March 31, 2001, the 2,240,605 shares of Integral Vision (formerly Medar)
common stock that Maxco owns had an aggregate market value of approximately
$695,000 ($269,000 at July 11, 2001). 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, 2001, the 249,230 shares of Provant common stock that Maxco owns
had an aggregate market value of approximately $1.5 million
($401,000 at July
11, 2001). Maxcos investment in Provant is reflected in Maxcos financial
statements as an available-for-sale security.

Maxco believes that its current financial resources, availability under its
lines of credit, and 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 cash resources for the
Company if needed.

13



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##### Table of Contents



SEASONAL AND QUARTERLY FLUCTUATIONSThe following table sets forth consolidated operating data for each of the
eight quarters ended March 31, 2001. 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.

|                                                      |  |                                       |        |   |             |   |        |          |  |   |         |   |  |         |        |   |         |   |        |          |  |   |         |  |  |   |        |   |  |   |        |  
|----------------------------------------------------- |  | ------------------------------------- | ------ | - | ----------- | - | ------ | -------- |  | - | ------- | - |  | ------- | ------ | - | ------- | - | ------ | -------- |  | - | ------- |  |  | - | ------ | - |  | - | ------ | -
|                                                      |  | Quarter Ended                         |       
|                                                      |  |                                       |       
|                                                      |  | Fiscal 2001                           |        |   | Fiscal 2000 |  
|                                                      |  |                                       |        |   |             |  
|                                                      |  | 6/30/00                               |        |   | 9/30/00     |   |        | 12/31/00 |  |   | 3/31/01 |   |  | 6/30/99 |        |   | 9/30/99 |   |        | 12/31/99 |  |   | 3/31/00 | 
|                                                      |  |                                       |        |   |             |   |        |          |  |   |         |   |  |         |        |   |         |   |        |          |  |   |         | 
|                                                      |  | (in thousands, except per share data) |       
|Net sales                                             |  | $                                     | 48,454 |   |             | $ | 49,094 |          |  | $ | 33,515  |   |  | $       | 26,252 |   |         | $ | 43,976 |          |  | $ | 47,227  |  |  | $ | 33,963 |   |  | $ | 31,324 |  
|                                                     
|                                                     
|                                                     
|                                                     
|Gross profit                                          |  |                                       | 10,540 |   |             |   | 11,086 |          |  |   | 7,684   |   |  |         | 6,400  |   |         |   | 10,501 |          |  |   | 10,658  |  |  |   | 8,209  |   |  |   | 7,373  |  
|                                                     
|                                                     
|                                                     
|                                                     
|Loss on investment(1)                                 |  |                                       |        |   |             |   |        |          |  |   |         |   |  |         |        |   |         |   |        |          |  |   |         |  |  |   |        |   |  |   | (860   | )
|                                                     
|                                                     
|                                                     
|                                                     
|Equity in net income (loss)
of affiliates, net of tax |  |                                       | (325   | ) |             |   | (297   | )        |  |   | (453    | ) |  |         | (1,922 | ) |         |   | 425    |          |  |   | 130     |  |  |   | (110   | ) |  |   | (167   | )
|                                                     
|                                                     
|                                                     
|                                                     
|Net income (loss)                                     |  |                                       | 202    |   |             |   | 853    |          |  |   | (1,709  | ) |  |         | (4,151 | ) |         |   | 1,908  |          |  |   | 1,277   |  |  |   | (493   | ) |  |   | (2,376 | )
|                                                     
|                                                     
|                                                     
|                                                     
|Net income (loss) per common
share:                   |  | $                                     | .03    |   |             | $ | .24    |          |  | $ | (.58    | ) |  | $       | (1.37  | ) |         | $ | .57    |          |  | $ | .37     |  |  | $ | (.19   | ) |  | $ | (.79   | )
|                                                      |  |                                       |        |   |             |   |        |          |  |   |         |   |  |         |        |   |         |   |        |          |  |   |         | 



|(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,and its
amendments Statements 137 and 138, in June 1999 and June 2000, respectively.
The Statement requires the Company to recognize all derivatives on the balance
sheet at fair value. Derivatives that are not hedges must be adjusted to fair
value through income. If the derivative is a hedge, depending on the nature of
the hedge, changes in the fair value of derivatives are either offset against
the change in fair value of assets, liabilities, or firm commitments through
earnings or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivatives change in
fair value will be immediately recognized in earnings. The adoption of
Statement No. 133, as amended on April 1, 2001, resulted in a pre-tax charge of
$42,000 in other comprehensive income.

14



---



##### Table of Contents



The Financial Accounting Standards Board has proposed new accounting for
business combinations, that among other things, would change the accounting for
goodwill and other intangibles recorded in business acquisitions as of the date
of the new Statement. An important part of the proposed Statement is that
amortization of goodwill and certain other intangibles with indefinite lives
would cease for both assets acquired prior to the effective date of the
statement and for any new goodwill and other intangibles acquired after the
effective date of the statement. Rather than amortizing these assets, goodwill
and other intangibles would be reviewed for impairment using a market value
approach. The proposed statement is expected to be finalized in June 2001.
The Company currently records amortization of goodwill as a non-cash expense.
As a result, if this proposed statement is finalized in its current form, it
may have a material impact on the Companys financial statements. However,
management feels that it is not appropriate to forecast the amount of the
impact until the proposed statement is finalized.




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 $23.7 million at
March 31, 2001. A 1% increase from the prevailing interest rates at March 31,
2001 on the unhedged variable rate portion of the Companys long-term
borrowings would increase interest expense by $237,000 based on principal
balances at March 31, 2001.




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






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, 2001.




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, 2001.




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, 2001.




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, 2001.

15



---



##### Table of Contents






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.                                                                                                                                                                                                                                                                                                         
|              
|              
|              
|              
|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.                                                                                                                                                                                                                                    

16



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##### Table of Contents



|      |  |                                                                                                                                                                                                  
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.21 |  | Sixth amendment to amended and restated loan agreement between
Comerica Bank and Maxco, Inc. dated July 12, 2000 is hereby
incorporated by reference from Form 10-K dated July 14, 2000.         
|     
|     
|     
|     
|10.22 |  | Seventh amendment to amended and restated loan agreement between
Comerica Bank and Maxco, Inc. dated January 11, 2000 is hereby
incorporated by reference from Form 10-Q dated February 14, 2001.
|     
|     
|     
|     
|10.23 |  | Eighth amendment to amended and restated loan agreement between
Comerica Bank and Maxco, Inc. dated March 19, 2001.                                                                              
|     
|     
|     
|     
|21    |  | Subsidiaries of the Registrant                                                                                                                                                                   
|     
|     
|     
|     
|23    |  | Consent of Independent AuditorsErnst & Young (Form S-8
filed June 2, 1992  File No. 33-48351 and Form S-8 filed November
19, 1998  File No. 333-67539).                                       
|     
|     
|     
|     
|23.1  |  | Consent of Independent AuditorsMoore Stephens Doeren
Mayhew (Form S-8 filed June 2, 1992  File No. 33-48351 and Form
S-8 filed November 19, 1998  File No. 333-67539).                        

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

| |  |  | Eighth amendment to amended and restated loan agreement between
Comerica Bank and Maxco, Inc. dated March 19, 2001.
| | - |  | -------------------------------------------------------------------------------------------------------------------
| |  |  | Subsidiaries of the Registrant                                                                                     
| |  |  | Consent of Independent AuditorsErnst & Young                                                                      
| |  |  | Consent of Independent AuditorsMoore Stephens Doeren Mayhew                                                       

17



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##### Table of Contents






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 13, 2001 |  | 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       |  | July 13, 2001                                  |  | President (Principal Executive Officer) and Director
|                     
|Max A. Coon           |  | Date                                          
|                     
|/S/ VINCENT SHUNSKY   |  | July 13, 2001                                  |  | Vice President of Finance and Treasurer (Principal  
|                      |  | Financial and Accounting Officer) and Director
|Vincent Shunsky       |  | Date                                           |  |                                                     
|                     
|/S/ ERIC L. CROSS     |  | July 13, 2001                                  |  | Director                                            
|                     
|Eric L. Cross         |  | Date                                          
|                     
|/S/ CHARLES J. DRAKE  |  | July 13, 2001                                  |  | Director                                            
|                     
|Charles J. Drake      |  | Date                                          
|                     
|/S/ JOEL I. FERGUSON  |  | July 13, 2001                                  |  | Director                                            
|                     
|Joel I. Ferguson      |  | Date                                          
|                     
|/S/ RICHARD G. JOHNS  |  | July 13, 2001                                  |  | Director                                            
|                     
|Richard G. Johns      |  | Date                                          
|                     
|/S/ DAVID R. LAYTON   |  | July 13, 2001                                  |  | Director                                            
|                     
|David R. Layton       |  | Date                                          
|                     
|/S/ MICHAEL P. SMORCH |  | July 13, 2001                                  |  | Director                                            
|                     
|Michael P. Smorch     |  | Date                                          
|                     
|/S/ MICHAEL W. WISTI  |  | July 13, 2001                                  |  | Director                                            
|                     
|Michael W. Wisti      |  | Date                                          

18



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##### 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, 2001

MAXCO, INC.

LANSING, MICHIGAN

19



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##### 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, 2001 and 2000                                                                |  |  | 22 | 
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Consolidated statements of operationsYears ended March 31, 2001, 2000, and 1999                                   |  |  | 23 | 
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Consolidated statements of stockholders equityYears ended March 31, 2001, 2000, and 1999                         |  |  | 24 | 
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Consolidated statements of cash flowsYears ended March 31, 2001, 2000, and 1999                                   |  |  | 25 | 
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Notes to consolidated financial statementsMarch 31, 2001                                                          |  |  | 26 | 
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|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                                                         |  |  | 36 | 

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, 2000, as filed with the
Securities and Exchange Commission (SEC File Number 0-12728).
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

20



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##### Table of Contents



REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Maxco, Inc.

We have audited the accompanying consolidated balance sheets of Maxco, Inc. and
subsidiaries as of March 31, 2001 and 2000, and the related consolidated
statements of operations, stockholders equity, and cash flows for each of the
three years in the period ended March 31, 2001. 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. The financial statements and schedule of
Integral Vision, Inc. (formerly Medar, Inc.), (a corporation in which the
Company has approximately a 25% interest) as of December 31, 2000 and for the
year then ended, have been audited by other auditors whose report has been
furnished to us; insofar as our opinion on the consolidated financial
statements relates to data included for Integral Vision, Inc., it is based
solely on their report. In the consolidated financial statements, the
Companys investment in Integral Vision, Inc. is stated at $1,120,303 at March
31, 2001, and the Companys equity in the net loss of Integral Vision, Inc. is
stated at $1,986,000 for the year then ended.

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 and the
report of other auditors provide a
reasonable basis for our opinion.

In our opinion, based on our audits and the report of other
auditors, 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, 2001 and 2000, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended March 31, 2001, 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

June 6, 2001
Detroit, MI

21



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##### Table of Contents



CONSOLIDATED BALANCE SHEETS

MAXCO, INC. AND SUBSIDIARIES

|                                                      |                                                                              |                               |                                                          |                                       |       |                |         |         |       |       |       | 
|----------------------------------------------------- | ---------------------------------------------------------------------------- | ----------------------------- | -------------------------------------------------------- | ------------------------------------- | ----- | -------------- | ------- | ------- | ----- | ----- | ----- | 
|                                                      |                                                                              |                               |                                                          |                                       |       | March 31,      |        
|                                                      |                                                                              |                               |                                                          |                                       |       |                |        
|                                                      |                                                                              |                               |                                                          |                                       |       | 2001           |         |         | 2000  |      
|                                                      |                                                                              |                               |                                                          |                                       |       |                |         |         |       |      
|                                                      |                                                                              |                               |                                                          |                                       |       | (in thousands) |        
|ASSETS                                               
|                                                     
|                                                     
|                                                     
|                                                     
|CURRENT ASSETS                                       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cash and cash equivalents                                                    |                               | $                                                        | 968                                   |       |                | $       | 542     |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Marketable securities                                                        |                               |                                                          |                                       |       |                |         | 185     |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accounts receivable, less allowance of $570,000 in 2001 and $513,000 in 2000 |                               |                                                          | 19,998                                |       |                |         | 22,098  |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Advances to affiliate                                                        |                               |                                                          | 3,008                                 |       |                |         | 3,008   |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | InventoriesNote 1                                                           |                               |                                                          | 6,493                                 |       |                |         | 8,000   |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Investment held for saleNote 8                                              |                               |                                                          |                                       |       |                |         | 1,121   |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Prepaid expenses and other                                                   |                               |                                                          | 795                                   |       |                |         | 760     |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Income taxes receivableNote 7                                               |                               |                                                          | 1,343                                 |       |                |         | 1,802   |      
|                                                      |                                                                              |                               |                                                          |                                       |       |               
|TOTAL CURRENT ASSETS                                  |                                                                              |                               | 32,605                                                   |                                       |       |                | 37,516  |        
|                                                     
|                                                     
|                                                     
|                                                     
|MARKETABLE SECURITIES  LONG-TERMNote 1              |                                                                              |                               | 1,511                                                    |                                       |       |                | 4,240   |        
|                                                     
|                                                     
|                                                     
|                                                     
|PROPERTY AND EQUIPMENT                               
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Land                                                                         |                               |                                                          | 732                                   |       |                |         | 732     |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Buildings                                                                    |                               |                                                          | 12,144                                |       |                |         | 12,271  |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Machinery, equipment, and fixtures                                           |                               |                                                          | 53,728                                |       |                |         | 41,650  |      
|                                                      |                                                                              |                               |                                                          |                                       |       |               
|                                                      |                                                                              |                               | 66,604                                                   |                                       |       |                | 54,653  |        
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Allowances for depreciation                                                  |                               |                                                          | (19,945                               | )     |                |         | (14,893 | )    
|                                                      |                                                                              |                               |                                                          |                                       |       |               
|                                                      |                                                                              |                               | 46,659                                                   |                                       |       |                | 39,760  |        
|                                                     
|                                                     
|                                                     
|                                                     
|OTHER ASSETS                                         
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | InvestmentsNote 8                                                           |                               |                                                          | 8,224                                 |       |                |         | 12,165  |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Notes and contracts receivable and other, less                              
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                              | allowance of $335,000 in 2001 |                                                          |                                       | 4,411 |                |         |         | 4,325 |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | IntangiblesNote 1                                                           |                               |                                                          | 3,753                                 |       |                |         | 4,216   |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Deferred Income TaxesNote 7                                                 |                               |                                                          | 287                                   |      
|                                                      |                                                                              |                               |                                                          |                                       |       |               
|                                                      |                                                                              |                               | 16,675                                                   |                                       |       |                | 20,706  |        
|                                                      |                                                                              |                               |                                                          |                                       |       |               
|                                                      |                                                                              | $                             | 97,450                                                   |                                       |       | $              | 102,222 |        
|                                                      |                                                                              |                               |                                                          |                                       |       |               
|LIABILITIES AND STOCKHOLDERS EQUITY                 
|                                                     
|                                                     
|                                                     
|                                                     
|CURRENT LIABILITIES                                  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Notes payableNote 3                                                         |                               | $                                                        | 17,088                                |       |                | $       | 23,667  |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accounts payable                                                             |                               |                                                          | 19,632                                |       |                |         | 12,989  |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Employee compensation                                                        |                               |                                                          | 2,741                                 |       |                |         | 3,247   |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Taxes, interest, and other liabilities                                       |                               |                                                          | 1,906                                 |       |                |         | 2,183   |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Current maturities of long-term obligations                                  |                               |                                                          | 3,480                                 |       |                |         | 3,117   |      
|                                                      |                                                                              |                               |                                                          |                                       |       |               
|TOTAL CURRENT LIABILITIES                             |                                                                              |                               | 44,847                                                   |                                       |       |                | 45,203  |        
|                                                     
|                                                     
|                                                     
|                                                     
|LONG-TERM OBLIGATIONS, less current maturitiesNote 3 |                                                                              |                               | 24,831                                                   |                                       |       |                | 22,390  |        
|                                                     
|                                                     
|                                                     
|                                                     
|DEFERRED INCOME TAXESNote 7                          |                                                                              |                               |                                                          |                                       |       |                | 2,319   |        
|                                                     
|                                                     
|                                                     
|                                                     
|CONTINGENT LIABILITYNote 8                           |                                                                              |                               | 938                                                      |                                      
|                                                     
|                                                     
|                                                     
|                                                     
|STOCKHOLDERS EQUITYNotes 4 & 5                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Preferred stock:                                                            
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                              |                               | Series Three: 10% cumulative callable, $60 face value;  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                              |                               |                                                          | 14,784 shares issued and outstanding  |       |                | 678     |         |       |       | 678   | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                              |                               | 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, none issued
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Common stock, $1 par value; 10,000,000 shares authorized,                   
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                              |                               | 3,101,195 shares issued and outstanding                  |                                       |       | 3,101          |         |         |       | 3,101 |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accumulated other comprehensive loss                                         |                               |                                                          | (1,140                                | )     |                |         | (877    | )    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Retained earnings                                                            |                               |                                                          | 21,007                                |       |                |         | 26,220  |      
|                                                      |                                                                              |                               |                                                          |                                       |       |               
|TOTAL STOCKHOLDERS EQUITY                            |                                                                              |                               | 26,834                                                   |                                       |       |                | 32,310  |        
|                                                      |                                                                              |                               |                                                          |                                       |       |               
|                                                      |                                                                              | $                             | 97,450                                                   |                                       |       | $              | 102,222 |        
|                                                      |                                                                              |                               |                                                          |                                       |       |               

See notes to consolidated financial statements

22



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##### Table of Contents



CONSOLIDATED STATEMENTS OF OPERATIONS

MAXCO, INC. AND SUBSIDIARIES

|                                                                     |         |                                      |                                               |                                              |         |                                      |         |      |         |   |         |      |        |   |       | 
|-------------------------------------------------------------------- | ------- | ------------------------------------ | --------------------------------------------- | -------------------------------------------- | ------- | ------------------------------------ | ------- | ---- | ------- | - | ------- | ---- | ------ | - | ----- | 
|                                                                     |         |                                      |                                               |                                              |         | Year Ended March 31,                 |        
|                                                                     |         |                                      |                                               |                                              |         |                                      |        
|                                                                     |         |                                      |                                               |                                              |         | 2001                                 |         |      | 2000    |   |         | 1999 |       
|                                                                     |         |                                      |                                               |                                              |         |                                      |         |      |         |   |         |      |       
|                                                                     |         |                                      |                                               |                                              |         | (in thousands except per share data) |        
|Net sales                                                            |         | $                                    | 157,315                                       |                                              |         | $                                    | 156,490 |      |         | $ | 124,732 |     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Costs and expenses:                                                 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |         | Cost of sales and operating expenses |                                               |                                              | 121,605 |                                      |         |      | 119,749 |   |         |      | 97,403 |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |         | Selling, general and administrative  |                                               |                                              | 28,946  |                                      |         |      | 27,832  |   |         |      | 20,919 |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |         | Depreciation and amortization        |                                               |                                              | 6,085   |                                      |         |      | 4,907   |   |         |      | 3,395  |  
|                                                                     |         |                                      |                                               |                                              |         |                                      |         |      |        
|                                                                     |         |                                      | 156,636                                       |                                              |         |                                      | 152,488 |      |         |   | 121,717 |     
|                                                                     |         |                                      |                                               |                                              |         |                                      |         |      |        
|                                                                     |         |                                      |                                               | OPERATING EARNINGS                           |         |                                      | 679     |      |         |   | 4,002   |      |        |   | 3,015 | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Other income (expense):                                             
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |         | Investment and interest income       |                                               |                                              | 1,388   |                                      |         |      | 656     |   |         |      | 837    |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |         | Interest expense                     |                                               |                                              | (4,705  | )                                    |         |      | (3,624  | ) |         |      | (2,403 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |         | Loss on investmentNote 8            |                                               |                                              |         |                                      |         |      | (860    | )
|                                                                     |         |                                      |                                               |                                              |         |                                      |         |      |        
|                                                                     |         |                                      | (3,317                                        | )                                            |         |                                      | (3,828  | )    |         |   | (1,566  | )   
|                                                                     |         |                                      |                                               |                                              |         |                                      |         |      |        
|                                                                     |         |                                      | INCOME (LOSS) BEFORE FEDERAL INCOME TAXES AND
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |         |                                      |                                               | EQUITY IN NET INCOME (LOSS) OF AFFILIATES    |         |                                      | (2,638  | )    |         |   | 174     |      |        |   | 1,449 | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Federal income tax expense (benefit)Note 7                          |         |                                      | (830                                          | )                                            |         |                                      | 136     |      |         |   | 266     |     
|                                                                     |         |                                      |                                               |                                              |         |                                      |         |      |        
|                                                                     |         |                                      |                                               | INCOME (LOSS) BEFORE EQUITY IN NET          
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |         |                                      |                                               | INCOME (LOSS) OF AFFILIATES                  |         |                                      | (1,808  | )    |         |   | 38      |      |        |   | 1,183 | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Equity in net income (loss) of affiliates, net of taxNotes 2, 7 & 8 |         |                                      | (2,997                                        | )                                            |         |                                      | 278     |      |         |   | (395    | )   
|                                                                     |         |                                      |                                               |                                              |         |                                      |         |      |        
|                                                                     |         |                                      |                                               | NET INCOME (LOSS)                            |         |                                      | (4,805  | )    |         |   | 316     |      |        |   | 788   | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Less preferred stock dividends                                       |         |                                      | (408                                          | )                                            |         |                                      | (408    | )    |         |   | (409    | )   
|                                                                     |         |                                      |                                               |                                              |         |                                      |         |      |        
|                                                                     |         |                                      |                                               | NET INCOME (LOSS) APPLICABLE TO COMMON STOCK |         | $                                    | (5,213  | )    |         | $ | (92     | )    |        | $ | 379   | 
|                                                                     |         |                                      |                                               |                                              |         |                                      |         |      |        
|NET INCOME (LOSS) PER COMMON SHAREBasic and diluted               
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Note 11 |                                      | $                                             | (1.68                                        | )       |                                      | $       | (.03 | )       |   | $       | .12  |       

See notes to consolidated financial statements.

23



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##### Table of Contents



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

MAXCO, INC. AND SUBSIDIARIES

|                           |                                   |                            |                                      |     |           |   |       |        |  |      |                |   |               |          |        |        |        |      |        |        |        |        |  
|-------------------------- | --------------------------------- | -------------------------- | ------------------------------------ | --- | --------- | - | ----- | ------ |  | ---- | -------------- | - | ------------- | -------- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | ------ | -
|                           |                                   |                            |                                      |     |           |   |       |        |  |      |                |   | Accumulated   |         
|                           |                                   |                            |                                      |     |           |   |       |        |  |      |                |   | Other Compre |         
|                           |                                   |                            |                                      |     | Preferred |   |       | Common |  |      | hensive Income |   |               | Retained |       
|                           |                                   |                            |                                      |     | Stock     |   |       | Stock  |  |      | (loss)         |   |               | Earnings |        |        | Totals |     
|                           |                                   |                            |                                      |     |           |   |       |        |  |      |                |   |               |          |        |        |        |     
|                           |                                   |                            |                                      |     |           |   |       |        |  |      | (in thousands) |  
|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, net of taxes of $20,000  |     |           |   |       |        |  |      |                |   |               | (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, net of taxes of $456,000 |     |           |   |       |        |  |      |                |   |               | (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 |       
|                          
|                          
|                          
|                          
|                           | Net loss for the year             |                            |                                      |     |           |   |       |        |  |      |                |   |               |          |        | (4,805 | )      |      |        | (4,805 | )     
|                          
|                          
|                          
|                          
|                           | Net unrealized loss on marketable
|                          
|                          
|                          
|                          
|                           |                                   |                            | securities, net of taxes of $135,000 |     |           |   |       |        |  |      |                |   |               | (263     | )      |        |        |      |        |        |        | (263   | )
|                           |                                   |                            |                                      |     |           |   |       |        |  |      |                |   |               |          |        |        |        |      |       
|                           |                                   | Total Comprehensive Loss   |                                      |     |           |   |       |        |  |      |                |   |               |          |        |        |        |      |        |        | (5,068 | )     
|                          
|                          
|                          
|                          
|                           | Preferred stock dividends         |                            |                                      |     |           |   |       |        |  |      |                |   |               |          |        | (408   | )      |      |        | (408   | )     
|                           |                                   |                            |                                      |     |           |   |       |        |  |      |                |   |               |          |       
|BALANCES AT MARCH 31, 2001 |                                   | $                          | 3,866                                |     |           | $ | 3,101 |        |  | $    | (1,140         | ) |               | $        | 21,007 |        |        | $    | 26,834 |       
|                           |                                   |                            |                                      |     |           |   |       |        |  |      |                |   |               |          |       

See notes to consolidated financial statements.

24



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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS

MAXCO, INC. AND SUBSIDIARIES

|                                                    |                                                          |                                   |                                                |                                                |   |                      |         |         |      |                |        |        |   |       |        |  
|--------------------------------------------------- | -------------------------------------------------------- | --------------------------------- | ---------------------------------------------- | ---------------------------------------------- | - | -------------------- | ------- | ------- | ---- | -------------- | ------ | ------ | - | ----- | ------ | -
|                                                    |                                                          |                                   |                                                |                                                |   | Year Ended March 31, |        
|                                                    |                                                          |                                   |                                                |                                                |   |                      |        
|                                                    |                                                          |                                   |                                                |                                                |   | 2001                 |         |         | 2000 |                |        | 1999   |  
|                                                    |                                                          |                                   |                                                |                                                |   |                      |         |         |      |                |        |        |  
|                                                    |                                                          |                                   |                                                |                                                |   |                      |         |         |      | (in thousands) |       
|OPERATING ACTIVITIES                               
|                                                   
|                                                   
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|                                                    | Net Income (loss)                                        |                                   | $                                              | (4,805                                         | ) |                      | $       | 316     |      |                | $      | 788    |  
|                                                   
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|                                                    | Adjustments to reconcile net income (loss) to net cash  
|                                                   
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|                                                    |                                                          | provided by operating activities:
|                                                   
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|                                                    |                                                          |                                   | Depreciation                                   |                                                |   | 5,380                |         |         |      | 4,232          |        |        |   | 2,930 |       
|                                                   
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|                                                   
|                                                   
|                                                    |                                                          |                                   | Amortization                                   |                                                |   | 705                  |         |         |      | 675            |        |        |   | 465   |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                          |                                   | Equity in net (income) loss of affiliates      |                                                |   | 2,997                |         |         |      | (278           | )      |        |   | 395   |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                          |                                   | Deferred federal income taxes                  |                                                |   | (669                 | )       |         |      | 855            |        |        |   | 461   |       
|                                                   
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|                                                    |                                                          |                                   | Additional consideration on sale of investment |                                                |   | (675                 | )      
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|                                                    |                                                          |                                   | Loss on investment                             |                                                |   |                      |         |         |      | 860            |       
|                                                   
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|                                                    |                                                          |                                   | Changes in operating assets and liabilities   
|                                                   
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|                                                    |                                                          |                                   |                                                | of continuing operations:                     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                          |                                   |                                                | Accounts receivable                            |   |                      | 2,635   |         |      |                | (2,014 | )      |   |       | (2,224 | )
|                                                   
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|                                                    |                                                          |                                   |                                                | Inventories                                    |   |                      | 1,507   |         |      |                | (436   | )      |   |       | (1,096 | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                          |                                   |                                                | Prepaid and other                              |   |                      | 168     |         |      |                | (132   | )      |   |       | (305   | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                          |                                   |                                                | Accounts payable and other current liabilities |   |                      | 7,560   |         |      |                | 1,735  |        |   |       | 2,828  |  
|                                                    |                                                          |                                   |                                                |                                                |   |                      |         |         |     
|NET CASH PROVIDED BY OPERATING ACTIVITIES           |                                                          |                                   | 14,803                                         |                                                |   |                      | 5,813   |         |      |                | 4,242  |       
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|INVESTING ACTIVITIES                               
|                                                   
|                                                   
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|                                                    | Purchases of property and equipment                      |                                   |                                                | (12,419                                        | ) |                      |         | (11,698 | )    |                |        | (9,198 | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Net proceeds from (investment in) marketable securities  |                                   |                                                | 2,530                                          |   |                      |         | (31     | )    |                |        | 5,491  |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Sale of investment                                       |                                   |                                                | 1,143                                          |   |                      |         |         |      |                |        | 2,160  |  
|                                                   
|                                                   
|                                                   
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|                                                    | Investment in affiliates                                 |                                   |                                                | (272                                           | ) |                      |         | (3,867  | )    |                |        | (3,961 | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Purchase of businesses                                   |                                   |                                                |                                                |   |                      |         | (4,587  | )    |                |        | (2,700 | )
|                                                   
|                                                   
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|                                                    | Payment received on note receivable                      |                                   |                                                |                                                |   |                      |         | 750     |     
|                                                   
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|                                                    | Other                                                    |                                   |                                                | 523                                            |   |                      |         | 274     |      |                |        | 74     |  
|                                                    |                                                          |                                   |                                                |                                                |   |                      |         |         |     
|NET CASH USED IN INVESTING ACTIVITIES               |                                                          |                                   | (8,495                                         | )                                              |   |                      | (19,159 | )       |      |                | (8,134 | )     
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|FINANCING ACTIVITIES                               
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|                                                    | Net proceeds from (repayments on) lines of credit        |                                   |                                                | (12,941                                        | ) |                      |         | 9,242   |      |                |        | 5,849  |  
|                                                   
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|                                                   
|                                                   
|                                                    | Proceeds
from other debt obligations                     |                                   |                                                | 11,648                                         |   |                      |         | 7,372   |      |                |        | 67     |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Repayments
on other debt obligations                     |                                   |                                                | (4,181                                         | ) |                      |         | (2,584  | )    |                |        | (1,617 | )
|                                                   
|                                                   
|                                                   
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|                                                    | Dividends paid on preferred stock                        |                                   |                                                | (408                                           | ) |                      |         | (408    | )    |                |        | (409   | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Acquisition and retirement of preferred and common stock |                                   |                                                |                                                |   |                      |         | (856    | )    |                |        | (1,076 | )
|                                                   
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|                                                    | Restricted cash for acquisition of equipment             |                                   |                                                |                                                |   |                      |         |         |      |                |        | 1,088  |  
|                                                   
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|                                                   
|                                                    | Proceeds from exercise of stock options                  |                                   |                                                |                                                |   |                      |         |         |      |                |        | 72     |  
|                                                    |                                                          |                                   |                                                |                                                |   |                      |         |         |     
|NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |                                                          |                                   | (5,882                                         | )                                              |   |                      | 12,766  |         |      |                | 3,974  |       
|                                                    |                                                          |                                   |                                                |                                                |   |                      |         |         |     
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|                                                    |                                                          |                                   |                                                | INCREASE (DECREASE) IN CASH                    |   |                      | 426     |         |      |                | (580   | )      |   |       | 82     |  
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|                                                    |                                                          |                                   |                                                | CASH AT BEGINNING OF YEAR                      |   |                      | 542     |         |      |                | 1,122  |        |   |       | 1,040  |  
|                                                    |                                                          |                                   |                                                |                                                |   |                      |         |         |     
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|                                                    |                                                          |                                   |                                                | CASH AT END OF YEAR                            |   | $                    | 968     |         |      | $              | 542    |        |   | $     | 1,122  |  
|                                                    |                                                          |                                   |                                                |                                                |   |                      |         |         |     

See notes to consolidated financial statements.

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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MAXCO, INC. AND SUBSIDIARIES

March 31, 2001

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 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; a
limited partnership that has equity investments in companies focused on the
information technology, telecommunications, and medical technology markets;
three technology-related businesses; and one energy-related business.

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
accounting principles generally accepted in the United States 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 2001.

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:

|                                   |  |                |       |  |      |   |       | 
|---------------------------------- |  | -------------- | ----- |  | ---- | - | ----- | 
|                                   |  | 2001           |       |  | 2000 |  
|                                   |  |                |       |  |      |  
|                                   |  | (in thousands) |      
|Raw materials                      |  | $              | 531   |  |      | $ | 589   | 
|                                  
|                                  
|                                  
|                                  
|Finished goods and work in process |  |                | 1,293 |  |      |   | 1,136 | 
|                                  
|                                  
|                                  
|                                  
|Purchased products for resale      |  |                | 4,669 |  |      |   | 6,275 | 
|                                   |  |                |       |  |      |  
|                                  
|                                  
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|                                  
|                                   |  | $              | 6,493 |  |      | $ | 8,000 | 
|                                   |  |                |       |  |      |  

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.

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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, 2001, the unrealized loss on this stock was approximately
$1.1 million net of tax.

Advances to Affiliate: The Company has advanced amounts to its real estate
investment holding. These advances were unsecured and bear interest. During
2000 and 1999, advances made were approximately $1.7 million and $1.3 million
respectively. No advances were made in 2001.

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 tangible 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 $1.9 million and $1.5 million at March 31, 2001
and 2000, 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.

Shipping and Handling Costs: The Company recognizes shipping and handling
costs as a component of cost of sales and operating expenses in the statement
of operations.

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 swap agreement was in a loss position of
$42,000 at March 31, 2001, and changes in the fair value as a result of changes
in market interest rates are not recognized in the financial statements pending
adoption of FAS No. 133 on April 1, 2001.

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.

Comprehensive Income: The Company displays comprehensive income in the
Consolidated Statements of Shareholders Equity. At March 31, 2001 and 2000,
accumulated other comprehensive income (loss) consisted of unrealized gain
(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.

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New Financial Accounting Pronouncements: In 1998, the Financial Accounting
Standards Board issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities,and its amendments Statements 137 and 138, in June 1999
and June 2000, respectively. The Statement requires the Company to recognize
all derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through income. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of
derivatives are either offset against the change in fair value of assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivatives change in fair value will be immediately
recognized in earnings. The adoption of Statement No. 133, as amended on April
1, 2001, resulted in a pre-tax charge of $42,000 in other comprehensive income.

The Financial Accounting Standards Board has proposed new accounting for
business combinations, that among other things, would change the accounting for
goodwill and other intangibles recorded in business acquisitions as of the date
of the new Statement. An important part of the proposed Statement is that
amortization of goodwill and certain other intangibles with indefinite lives
would cease for both assets acquired prior to the effective date of the
statement and for any new goodwill and other intangibles acquired after the
effective date of the statement. Rather than amortizing these assets, goodwill
and other intangibles would be reviewed for impairment using a market value
approach. The proposed statement is expected to be finalized in June 2001.
The Company currently records amortization of goodwill as a non-cash expense.
As a result, if this proposed statement is finalized in its current form, it
may have a material impact on the Companys financial statements. However,
management feels that it is not appropriate to forecast the amount of the
impact until the proposed statement is finalized.

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

At March 31, 2001, Maxco owned 2,240,605 shares of Integral Visions common
stock (aggregate market value of $695,000), 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 all outstanding and exercisable at
March 31, 2001. 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 (loss) of affiliates. Also, as a result of this
transaction, Maxco received payment on June 30, 1999 of the 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.

Integral Vision had a net loss for the year ended March 31, 2001 of
approximately $8.0 million, net income of $3.8 million in 2000, and a net loss
of $2.6 million in 1999. Accordingly, Maxcos equity share of Integral Visions
results of operations for the years ended March 31, 2001, 2000, and 1999 were
approximately a loss of $2.0 million, income of $896,000, and a loss of
$627,000 respectively, and are recorded net of deferred tax for these periods
in equity in net income (loss) 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, 2001, 2000, and 1999, Integral Visions restated
sales were $5.0 million, $11.0 million and $9.5 million, respectively.

Additionally, in accordance with APB 18, the Company recorded a charge of
$899,000, net of tax, in 2001 to recognize a decline in the value of its
investment in Integral Vision that has been deemed other than temporary. The
charge is included in equity in net income (loss) of affiliates for the year
ended March 31, 2001.

NOTE 3  DEBT

At March 31, 2001 the Company had two lines of credit, an $18 million facility and a $5 million facility. These
facilities are secured by Company assets. The amount that can be borrowed under these facilities is dependent on certain accounts receivable and inventory
levels at the Company's construction supplies, packaging products, and heat treating companies. At March 31, 2001, based on these
specific collateral levels, the Company could
borrow up to $14.0 million under its lines of credit of which approximately $800,000 was available.  The $5 million line matures in March 2002 and the $18 million line matures in August 2002.

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

|                                                     |                                             |   |                |        |  |      |        |       | 
|---------------------------------------------------- | ------------------------------------------- | - | -------------- | ------ |  | ---- | ------ | ----- | 
|                                                     |                                             |   | 2001           |        |  | 2000 |       
|                                                     |                                             |   |                |        |  |      |       
|                                                     |                                             |   | (in thousands) |       
|Revolving lines of credit (various variable interest
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | rates ranging up to 9.5% at March 31, 2001) |   | $              | 9,000  |  |      | $      | 2,800 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Tax exempt revenue bonds (variable interest rates)   |                                             |   | 1,690          |        |  |      | 3,990  |      
|                                                    
|                                                    
|                                                    
|                                                    
|Taxable revenue bonds                                |                                             |   |                |        |  |      | 4,508  |      
|                                                    
|                                                    
|                                                    
|                                                    
|Mortgage notes payable (various interest rates      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | ranging up to 9.0%)                         |   |                | 1,994  |  |      |        | 2,060 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Equipment purchase contracts and capitalized lease  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | obligations (various interest rates)        |   |                | 11,808 |  |      |        | 7,785 | 
|                                                    
|                                                    
|                                                    
|                                                    
|Subordinated debt (fixed interest rate of 10%)       |                                             |   | 2,842          |        |  |      | 3,357  |      
|                                                    
|                                                    
|                                                    
|                                                    
|Other                                                |                                             |   | 977            |        |  |      | 1,007  |      
|                                                     |                                             |   |                |        |  |     
|                                                     |                                             |   | 28,311         |        |  |      | 25,507 |      
|                                                    
|                                                    
|                                                    
|                                                    
|Less current maturities                              |                                             |   | 3,480          |        |  |      | 3,117  |      
|                                                     |                                             |   |                |        |  |     
|                                                     |                                             | $ | 24,831         |        |  | $    | 22,390 |      
|                                                     |                                             |   |                |        |  |     



At March 31, 2001, the Company was in default of financial covenants required
by certain of its borrowings and consequently reclassified $15.2 million of its
debt as short term. This debt was classified as long term at March 31, 2000.
However, there are ongoing negotiations with the bank to obtain a waiver of
default. Management anticipates that these negotiations will be successfully
completed by September 2001. At March 31, 2000, the Company was in default of
the tangible net worth ratio as required by certain other borrowings,
specifically its $18 million line of credit and its then $10 million line of
credit with a bank. As such the outstanding balance on these lines at March
31, 2000, $23.4 million, was classified as current in the accompanying
financial statements. At March 31, 2001, both of these facilities were
classified as long-term debt. In July 2000, as provided under the original
agreement with the bank, the $10 million line was converted to a $7.6 million
term loan. The $18 million line was classified as long-term due to the Company
no longer being in default under its amended loan agreement.

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 equity investments that could be used to meet its short term and long term debt service requirements
and fund operating cash flows.

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 swap agreement
was in a loss position of $42,000 at March 31, 2001.

Notes and contracts payable are generally collateralized by assets purchased
with proceeds of the borrowings. The aggregate principal maturities of
long-term debt from 2003  2006 are as follows:

|       |  |      |       |  |      |   |       |      |  |   |       | 
|------ |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|2003   |  | 2004 |       |  | 2005 |   |       | 2006 | 
|       |  |      |       |  |      |   |       |      | 
|$3,583 |  | $    | 3,897 |  |      | $ | 3,446 |      |  | $ | 1,645 | 

Interest paid approximates interest expensed for the years presented.

The Company is guaranteeing various debt obligations of certain real estate and
other investments in an aggregate amount of approximately $54.0 million as of
May 31, 2001. Except as specifically accrued, the Company 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.

29



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##### Table of Contents



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 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:

|                            |                      |  |        |     |  |       |          |      |        |  |     |       |  |          |        |      |  |       |     |     |          |   |      |      | 
|--------------------------- | -------------------- |  | ------ | --- |  | ----- | -------- | ---- | ------ |  | --- | ----- |  | -------- | ------ | ---- |  | ----- | --- | --- | -------- | - | ---- | ---- | 
|                            |                      |  | 2001   |     |  | 2000  |          |      | 1999   | 
|                            |                      |  |        |     |  |       |          |      |        | 
|                            |                      |  |        |     |  |       | Weighted |      |        |  |     |       |  | Weighted |        |      |  |       |     |     | Weighted |  
|                            |                      |  |        |     |  |       | Average  |      |        |  |     |       |  | Average  |        |      |  |       |     |     | Average  |  
|                            |                      |  | Shares |     |  | Price |          |      | Shares |  |     | Price |  |          | Shares |      |  | Price |    
|                            |                      |  |        |     |  |       |          |      |        |  |     |       |  |          |        |      |  |       |    
|Outstanding and exercisable
|                           
|                           
|                           
|                           
|                            | at beginning of year |  |        | 145 |  |       | $        | 7.90 |        |  |     | 145   |  |          | $      | 7.90 |  |       |     | 188 |          |   | $    | 6.09 | 
|                           
|                           
|                           
|                           
|Granted and exercisable     |                      |  |        |     |  |       |          |      |        |  |     |       |  |          |        |      |  |       | 10  |     |          |   | 7.50 |     
|                           
|                           
|                           
|                           
|Exercised                   |                      |  |        |     |  |       |          |      |        |  |     |       |  |          |        |      |  |       | (53 | )   |          |   | 1.38 |     
|                            |                      |  |        |     |  |       |          |      |        |  |     |       |  |          |        |      | 
|Outstanding and exercisable
|                           
|                           
|                           
|                           
|at end of year              |                      |  | 145    |     |  | $     | 7.90     |      |        |  | 145 |       |  | $        | 7.90   |      |  |       | 145 |     |          | $ | 7.90 |     
|                            |                      |  |        |     |  |       |          |      |        |  |     |       |  |          |        |      |  |      

The exercise price for options outstanding as of March 31, 2001 ranged from
$7.00 to $8.00. There were no options granted during the years ended March 31,
2000 and 2001. The weighted average fair value of options granted during the
year ended March 31, 1999 was $2.94. The weighted average remaining contractual
life of those options is approximately seven 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-Scholes
option-pricing model.

After adjusting for the proforma effect of stock compensation, the net loss is
estimated to be approximately $4.8 million ($1.68 per share after preferred
dividends) for 2001, net income of $316,000 (loss of $.03 per share after
preferred dividends) for 2000 and $759,000 ($.11 per share after preferred
dividends) for 1999.

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, and a five year weighted average life of these options.
These proforma results reflect only stock options granted in 1999 (none were
granted in 2000 or 2001).

30



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##### Table of Contents



NOTE 6  EMPLOYEE SAVINGS PLAN

Company contributions charged to operations under the employee savings plans
were approximately $403,000, $335,000 and $351,000 for the years ended March
31, 2001, 2000 and 1999, respectively.

NOTE 7  FEDERAL INCOME TAXES

The provision (benefit) for federal income taxes consists of the following:

|                                       |                      |   |        |        |                |      |      |     |      |   |      |      |  
|-------------------------------------- | -------------------- | - | ------ | ------ | -------------- | ---- | ---- | --- | ---- | - | ---- | ---- | -
|                                       |                      |   | 2001   |        |                | 2000 |      |     | 1999 |  
|                                       |                      |   |        |        |                |      |      |     |      |  
|                                       |                      |   |        |        | (in thousands) |     
|                                      
|                                      
|                                      
|                                      
|Current expense (benefit)              |                      | $ | (161   | )      |                | $    | (719 | )   |      | $ | (195 | )   
|                                      
|                                      
|                                      
|                                      
|Deferred expense (benefit)             |                      |   | (669   | )      |                |      | 855  |     |      |   | 461  |     
|                                       |                      |   |        |        |                |      |      |     |     
|                                       |                      |   | (830   | )      |                |      | 136  |     |      |   | 266  |     
|                                      
|                                      
|                                      
|                                      
|Deferred amount allocated to equity in
|                                      
|                                      
|                                      
|                                      
|                                       | income of affiliates |   |        | (1,544 | )              |      |      | 143 |      |   |      | (203 | )
|                                       |                      |   |        |        |                |      |      |     |     
|                                       |                      | $ | (2,374 | )      |                | $    | 279  |     |      | $ | 63   |     
|                                       |                      |   |        |        |                |      |      |     |     

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

|                          |                                    |   |                |      |   |      |     |    |      |   |      |     | 
|------------------------- | ---------------------------------- | - | -------------- | ---- | - | ---- | --- | -- | ---- | - | ---- | --- | 
|                          |                                    |   | 2001           |      |   | 2000 |     |    | 1999 |  
|                          |                                    |   |                |      |   |      |     |    |      |  
|                          |                                    |   | (in thousands) |     
|Income taxes computed at 
|                         
|                         
|                         
|                         
|                          | United States statutory rate (34%) |   | $              | (897 | ) |      | $   | 59 |      |   | $    | 493 | 
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|Prior year tax adjustment |                                    |   |                |      |   |      |     |    |      |   | (294 | )  
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|                         
|Other                     |                                    |   | 67             |      |   |      | 77  |    |      |   | 67   |    
|                          |                                    |   |                |      |   |      |     |    |     
|                          |                                    | $ | (830           | )    |   | $    | 136 |    |      | $ | 266  |    
|                          |                                    |   |                |      |   |      |     |    |     

Federal income taxes paid by Maxco were $150,000 in 2001, $350,000 in 2000, and
$600,000 in 1999.

As of March 31, 2001, the Company has a net operating loss carryforward of
approximately $5.1 million which will expire in 2021.

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:

|                          |                                                |                                   |                                |                       |     |                |       |       |        |       |     | 
|------------------------- | ---------------------------------------------- | --------------------------------- | ------------------------------ | --------------------- | --- | -------------- | ----- | ----- | ------ | ----- | --- | 
|                          |                                                |                                   |                                |                       |     | 2001           |       |       | 2000   |      
|                          |                                                |                                   |                                |                       |     |                |       |       |        |      
|                          |                                                |                                   |                                |                       |     | (in thousands) |      
|DEFERRED TAX ASSETS:     
|                         
|                         
|                         
|                         
|                          | Net operating loss carry forward               |                                   |                                | 1,740                 |    
|                         
|                         
|                         
|                         
|                          | Allowance for doubtful accounts                |                                   |                                | 308                   |     |                |       | 174   |       
|                         
|                         
|                         
|                         
|                          | Inventory                                      |                                   |                                | 158                   |     |                |       | 123   |       
|                         
|                         
|                         
|                         
|                          | Marketable securities                          |                                   |                                | 588                   |     |                |       | 452   |       
|                         
|                         
|                         
|                         
|                          | Excess capital loss                            |                                   |                                | 276                   |    
|                         
|                         
|                         
|                         
|                          | Amortization of intangibles                    |                                   |                                | 117                   |     |                |       | 87    |       
|                         
|                         
|                         
|                         
|                          | Net cumulative unrealized equity losses        |                                   |                                | 806                   |    
|                         
|                         
|                         
|                         
|                          | Other                                          |                                   |                                | 126                   |    
|                          |                                                |                                   |                                |                       |     |               
|                          |                                                |                                   |                                | Total Deferred Assets |     |                | 4,119 |       |        |       | 836 | 
|                         
|                         
|                         
|                         
|DEFERRED TAX LIABILITIES:
|                         
|                         
|                         
|                         
|                          | Depreciation                                   |                                   | $                              | 3,003                 |     |                | $     | 2,087 |       
|                         
|                         
|                         
|                         
|                          | Net undistributed earnings                     |                                   |                                |                       |     |                |       | 705   |       
|                         
|                         
|                         
|                         
|                          | Additional consideration on sale of investment |                                   |                                | 230                   |    
|                         
|                         
|                         
|                         
|                          | Other                                          |                                   |                                |                       |     |                |       | 105   |       
|                          |                                                |                                   |                                |                       |     |               
|                          |                                                |                                   | Total Deferred Tax Liabilities |                       |     | 3,233          |       |       |        | 2,897 |    
|                          |                                                |                                   |                                |                       |     |               
|                          |                                                | Net Deferred Assets (Liabilities) |                                | $                     | 886 |                |       | $     | (2,061 | )    
|                          |                                                |                                   |                                |                       |     |               

31



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##### Table of Contents



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

|             |                         |                                   |     |                |     |  |      |       |        |  
|------------ | ----------------------- | --------------------------------- | --- | -------------- | --- |  | ---- | ----- | ------ | -
|             |                         |                                   |     | 2001           |     |  | 2000 |      
|             |                         |                                   |     |                |     |  |      |      
|             |                         |                                   |     | (in thousands) |    
|ASSETS:     
|            
|            
|            
|            
|             | Income taxes receivable |                                   | $   | 599            |     |  | $    | 258   |       
|            
|            
|            
|            
|             | Deferred income taxes   |                                   |     | 287            |     |  |      |       |       
|             |                         |                                   |     |                |     | 
|             |                         |                                   | 886 |                |     |  | 258  |      
|            
|            
|            
|            
|LIABILITIES:
|            
|            
|            
|            
|             | Deferred income taxes   |                                   |     |                |     |  |      | 2,319 |       
|             |                         |                                   |     |                |     | 
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|            
|             |                         | Net Deferred Assets (Liabilities) |     | $              | 886 |  |      | $     | (2,061 | )
|             |                         |                                   |     |                |     | 

Components of accumulated comprehensive income are shown net of tax.

NOTE 8  OTHER INVESTMENTS

Real Estate:



| |  |  | Maxco has an ownership interest ranging from approximately 30  50% in two
LLCs involved in the development and leasing of 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.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Technology Related:



| |  |  | In addition to its investment in Integral Vision, Inc., the Company has an
equity interest in two other technology related businesses. In October 1998,
Provant, Inc. acquired 100% of the stock of Strategic Interactive. Maxco
received cash and approximately 249,000 shares of Provant, Inc. common stock
in exchange for its 45% equity interest in Strategic Interactive. The sale
also included an earn-out provision. In fiscal 2001, Maxco recognized
$675,000 as its share of the minimum additional consideration to be paid to
the former shareholders of Strategic Interactive.                                                                                                                                                                                                                                                                
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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. In the first quarter of fiscal 2001, the carrying value of
the Companys investment in Foresight was reduced to zero after recognizing
the first $72,000 of its proportionate share of Foresights losses. However,
in accordance with APB 18, the Company continued to recognize its
proportionate share of Foresights losses, an additional $613,000, as a
contingent liability given that Maxco has loans to Foresight totaling $1.8
million and has guaranteed $750,000 of Foresights bank debt. These charges
are included in equity in net income of affiliates for the year ended March
31, 2001.

Energy Related:



| |  |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Effective January 1, 1998, Maxco acquired an interest in AMI Energy, Inc.
(AMI), which is a retail energy marketing and consulting firm. AMI was
discontinued during the year ended March 31, 2001. Although the liquidation
of AMI is substantially complete, $365,000 remains outstanding on a line of
credit with a bank. Given that Maxco has guaranteed that facility, and based
on the estimated remaining liquidation value of AMI, Maxco has recorded a
$325,000 contingent liability at March 31, 2001. This charge is included in
equity in net income of affiliates.

Other:



| |  |  | Effective June 1, 1998, Maxco acquired a one-third interest in Blasen Brogan
Asset Management Company, a 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.

32



---



##### Table of Contents



| |  |  | Effective June 1, 1999, Maxco acquired a 12.5% direct (37.5% indirect) 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.                                                                                                                                                                                                                                                                                                                                       
|
| |  |  | In April 2000, the Company acquired a 16% equity interest in Vertical VC, a
limited partnership that has equity investments in companies focused on the
information technology, telecommunications, and medical technology markets.                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | Maxco had 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 was completed in
August 2000.

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

|                                        |  |             |         |   |                    |           |         |            |      |   |                |   |  |      |        |   |           |   |        |  |  |   |        |  
|--------------------------------------- |  | ----------- | ------- | - | ------------------ | --------- | ------- | ---------- | ---- | - | -------------- | - |  | ---- | ------ | - | --------- | - | ------ |  |  | - | ------ | -
|                                        |  | Real Estate |         |   | Technology Related |          
|                                        |  |             |         |   |                    | March 31, |         |            |      |   |                |   |  |      |        |   | March 31, |  
|                                        |  |             |         |   |                    |          
|                                        |  |             |         |   |                    | 2000      |         |            | 1999 |   |                |   |  |      |        |   |          
|                                        |  | 2001        |         |   | (restated)         |           |         | (restated) |      |   | 2001           |   |  | 2000 |        |   | 1999      |  
|                                        |  |             |         |   |                    |           |         |            |      |   |                |   |  |      |        |   |           |  
|                                        |  |             |         |   |                    |           |         |            |      |   | (in thousands) |  
|Condensed income statement information:
|                                       
|                                       
|                                       
|                                       
|Net Sales                               |  | $           | 30,379  |   |                    | $         | 22,917  |            |      | $ | 15,271         |   |  | $    | 6,095  |   |           | $ | 12,974 |  |  | $ | 13,267 |  
|Gross Margin                            |  |             | 16,058  |   |                    |           | 13,125  |            |      |   | 10,036         |   |  |      | (188   | ) |           |   | 2,433  |  |  |   | 4,151  |  
|                                       
|                                       
|                                       
|                                       
|Net Income (Loss)                       |  |             | (768    | ) |                    |           | 280     |            |      |   | (387           | ) |  |      | (9,302 | ) |           |   | 3,153  |  |  |   | (2,769 | )
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|Condensed balance sheet information:   
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|Current Assets                          |  | $           | 26,919  |   |                    | $         | 33,524  |            |      |   |                |   |  | $    | 3,143  |   |           | $ | 8,814  |  |  |   |        |  
|                                       
|                                       
|                                       
|                                       
|Non-Current Assets                      |  |             | 104,982 |   |                    |           | 84,688  |            |      |   |                |   |  |      | 7,243  |   |           |   | 9,285  |  |  |   |        |  
|                                        |  |             |         |   |                    |           |         |            |      |   |                |   |  |      |        |   |           |   |        | 
|                                        |  | $           | 131,901 |   |                    | $         | 118,212 |            |      |   |                |   |  | $    | 10,386 |   |           | $ | 18,099 |  |  |   |        |  
|                                        |  |             |         |   |                    |           |         |            |      |   |                |   |  |      |        |   |           |   |        | 
|Current Liabilities                     |  | $           | 70,888  |   |                    | $         | 58,405  |            |      |   |                |   |  | $    | 3,312  |   |           | $ | 2,780  |  |  |   |        |  
|                                       
|                                       
|                                       
|                                       
|Non-Current Liabilities                 |  |             | 54,480  |   |                    |           | 51,358  |            |      |   |                |   |  |      | 5,454  |   |           |   | 2,933  |  |  |   |        |  
|                                       
|                                       
|                                       
|                                       
|Minority Interest                       |  |             | 1,887   |   |                    |           | 1,542   |           
|                                       
|                                       
|                                       
|                                       
|Stockholders Equity                    |  |             | 4,646   |   |                    |           | 6,907   |            |      |   |                |   |  |      | 1,620  |   |           |   | 12,386 |  |  |   |        |  
|                                        |  |             |         |   |                    |           |         |            |      |   |                |   |  |      |        |   |           |   |        | 
|                                        |  | $           | 131,901 |   |                    | $         | 118,212 |            |      |   |                |   |  | $    | 10,386 |   |           | $ | 18,099 |  |  |   |        |  
|                                        |  |             |         |   |                    |           |         |            |      |   |                |   |  |      |        |   |           |   |        | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                        |  |                |        |  |      |                |        |      |  |   |       | 
|--------------------------------------- |  | -------------- | ------ |  | ---- | -------------- | ------ | ---- |  | - | ----- | 
|                                        |  | Energy Related |       
|                                        |  |                |        |  |      | and Other      |       
|                                        |  |                |        |  |      | March 31,      |       
|                                        |  |                |       
|                                        |  | 2001           |        |  | 2000 |                |        | 1999 | 
|                                        |  |                |        |  |      |                |        |      | 
|                                        |  |                |        |  |      | (in thousands) |       
|                                       
|                                       
|                                       
|                                       
|Condensed income statement information:
|                                       
|                                       
|                                       
|                                       
|Net Sales                               |  | $              | 12,775 |  |      | $              | 12,247 |      |  | $ | 7,627 | 
|                                       
|                                       
|                                       
|                                       
|Gross Margin                            |  |                | 4,631  |  |      |                | 3,900  |      |  |   | 2,744 | 
|                                       
|                                       
|                                       
|                                       
|Net Income (Loss)                       |  |                | 685    |  |      |                | 104    |      |  |   | 95    | 
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|Condensed balance sheet information:   
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|Current Assets                          |  | $              | 2,632  |  |      | $              | 2,447  |     
|                                       
|                                       
|                                       
|                                       
|Non-Current Assets                      |  |                | 4,215  |  |      |                | 4,232  |     
|                                        |  |                |        |  |      |               
|                                        |  | $              | 6,847  |  |      | $              | 6,679  |     
|                                        |  |                |        |  |      |               
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|                                       
|Current Liabilities                     |  | $              | 1,538  |  |      | $              | 2,689  |     
|                                       
|                                       
|                                       
|                                       
|Non-Current Liabilities                 |  |                | 1,880  |  |      |                | 2,347  |     
|                                       
|                                       
|                                       
|                                       
|Minority Interest                       |  |                |        | 
|                                       
|                                       
|                                       
|                                       
|Stockholders Equity                    |  |                | 3,429  |  |      |                | 1,643  |     
|                                        |  |                |        |  |      |               
|                                        |  | $              | 6,847  |  |      | $              | 6,679  |     
|                                        |  |                |        |  |      |               



| |  |  | 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 after the writedown of the Companys
investment in Integral Vision, Inc., is being amortized over a 15 year life.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

33



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| |  |  | NOTE 9  CONTINGENCIES AND COMMITMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Maxco and certain operating subsidiaries occupy facilities and use equipment
under operating lease agreements requiring annual rental payments approximating
$2,118,000 in 2002, $1,811,000 in 2003, $1,474,000 in 2004, $508,000 in 2005,
$147,000 in 2006, and $541,000 thereafter for a total commitment aggregating
$6,599,000. Rent expense charged to operations, including short-term leases,
aggregated $2,503,000 in 2001, $2,285,000 in 2000, and $1,580,000 in 1999.
|
| |  |  | 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 on its financial statements.                                                                                                                        
|
| |  |  | NOTE 10  INDUSTRY SEGMENT INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  |  | The following summarizes Maxcos industry segment information:                                                                                                                                                                                                                                                                                                                                                                                                                 

|                                            |                          |   |         |         |   |      |                |        |      |   |         |        |  
|------------------------------------------- | ------------------------ | - | ------- | ------- | - | ---- | -------------- | ------ | ---- | - | ------- | ------ | -
|                                            |                          |   | 2001    |         |   | 2000 |                |        | 1999 |  
|                                            |                          |   |         |         |   |      |                |        |      |  
|                                            |                          |   |         |         |   |      | (in thousands) |       
|Net sales:                                 
|                                           
|                                           
|                                           
|                                           
|                                            | Construction supplies    |   | $       | 102,501 |   |      | $              | 99,924 |      |   | $       | 72,440 |  
|                                           
|                                           
|                                           
|                                           
|                                            | Heat treating            |   |         | 39,229  |   |      |                | 40,368 |      |   |         | 35,700 |  
|                                           
|                                           
|                                           
|                                           
|                                            | Packaging products       |   |         | 15,255  |   |      |                | 15,865 |      |   |         | 16,251 |  
|                                           
|                                           
|                                           
|                                           
|                                            | Corporate and other      |   |         | 330     |   |      |                | 333    |      |   |         | 341    |  
|                                            |                          |   |         |         |   |      |                |        |     
|Total Net Sales                             |                          | $ | 157,315 |         |   | $    | 156,490        |        |      | $ | 124,732 |       
|                                            |                          |   |         |         |   |      |                |        |     
|Operating earnings (loss):                 
|                                           
|                                           
|                                           
|                                           
|                                            | Construction supplies    |   | $       | 510     |   |      | $              | 2,770  |      |   | $       | 2,538  |  
|                                           
|                                           
|                                           
|                                           
|                                            | Heat treating            |   |         | 3,670   |   |      |                | 5,245  |      |   |         | 3,434  |  
|                                           
|                                           
|                                           
|                                           
|                                            | Packaging products       |   |         | (175    | ) |      |                | (530   | )    |   |         | (1,006 | )
|                                           
|                                           
|                                           
|                                           
|                                            | Corporate and other      |   |         | (3,326  | ) |      |                | (3,483 | )    |   |         | (1,951 | )
|                                            |                          |   |         |         |   |      |                |        |     
|Total Operating Earnings                    |                          | $ | 679     |         |   | $    | 4,002          |        |      | $ | 3,015   |       
|                                            |                          |   |         |         |   |      |                |        |     
|Identifiable assets:                       
|                                           
|                                           
|                                           
|                                           
|                                            | Construction supplies    |   | $       | 32,759  |   |      | $              | 32,902 |      |   | $       | 21,275 |  
|                                           
|                                           
|                                           
|                                           
|                                            | Heat treating            |   |         | 34,714  |   |      |                | 30,367 |      |   |         | 26,211 |  
|                                           
|                                           
|                                           
|                                           
|                                            | Packaging products       |   |         | 5,538   |   |      |                | 6,565  |      |   |         | 7,402  |  
|                                           
|                                           
|                                           
|                                           
|                                            | Corporate and other      |   |         | 16,215  |   |      |                | 20,223 |      |   |         | 17,639 |  
|                                           
|                                           
|                                           
|                                           
|                                            | Investments and advances |   |         | 8,224   |   |      |                | 12,165 |      |   |         | 12,903 |  
|                                            |                          |   |         |         |   |      |                |        |     
|Total Identifiable Assets                   |                          | $ | 97,450  |         |   | $    | 102,222        |        |      | $ | 85,430  |       
|                                            |                          |   |         |         |   |      |                |        |     
|Depreciation and amortization expense:     
|                                           
|                                           
|                                           
|                                           
|                                            | Construction supplies    |   | $       | 2,507   |   |      | $              | 1,870  |      |   | $       | 1,017  |  
|                                           
|                                           
|                                           
|                                           
|                                            | Heat treating            |   |         | 2,375   |   |      |                | 1,852  |      |   |         | 1,400  |  
|                                           
|                                           
|                                           
|                                           
|                                            | Packaging products       |   |         | 750     |   |      |                | 742    |      |   |         | 674    |  
|                                           
|                                           
|                                           
|                                           
|                                            | Corporate and other      |   |         | 453     |   |      |                | 443    |      |   |         | 304    |  
|                                            |                          |   |         |         |   |      |                |        |     
|Total Depreciation And Amortization Expense |                          | $ | 6,085   |         |   | $    | 4,907          |        |      | $ | 3,395   |       
|                                            |                          |   |         |         |   |      |                |        |     
|Capital expenditures:                      
|                                           
|                                           
|                                           
|                                           
|                                            | Construction supplies    |   | $       | 5,822   |   |      | $              | 5,310  |      |   | $       | 2,208  |  
|                                           
|                                           
|                                           
|                                           
|                                            | Heat treating            |   |         | 6,455   |   |      |                | 5,656  |      |   |         | 5,920  |  
|                                           
|                                           
|                                           
|                                           
|                                            | Packaging products       |   |         | 135     |   |      |                | 693    |      |   |         | 960    |  
|                                           
|                                           
|                                           
|                                           
|                                            | Corporate and other      |   |         | 7       |   |      |                | 39     |      |   |         | 110    |  
|                                            |                          |   |         |         |   |      |                |        |     
|Total Capital Expenditures                  |                          | $ | 12,419  |         |   | $    | 11,698         |        |      | $ | 9,198   |       
|                                            |                          |   |         |         |   |      |                |        |     



| |  |  | 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 2001,
2000 or 1999.                                                                                                               

34



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NOTE 11  EARNINGS PER SHARE

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

|                                                   |                                                     |   |                                      |        |   |      |      |       |      |   |     |       |  
|-------------------------------------------------- | --------------------------------------------------- | - | ------------------------------------ | ------ | - | ---- | ---- | ----- | ---- | - | --- | ----- | -
|                                                   |                                                     |   | 2001                                 |        |   | 2000 |      |       | 1999 |  
|                                                   |                                                     |   |                                      |        |   |      |      |       |      |  
|                                                   |                                                     |   | (in thousands except per share data) |       
|NUMERATOR:                                        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net income (loss)                                   |   | $                                    | (4,805 | ) |      | $    | 316   |      |   | $   | 788   |  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Preferred stock dividends                           |   |                                      | (408   | ) |      |      | (408  | )    |   |     | (409  | )
|                                                   |                                                     |   |                                      |        |   |      |      |       |     
|Numerator for basic and diluted earning per share
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | income (loss) available to common stockholders      |   |                                      | (5,213 | ) |      |      | (92   | )    |   |     | 379   |  
|                                                   |                                                     |   |                                      |        |   |      |      |       |     
|DENOMINATOR:                                      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Denominator for basic earnings per share          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Weighted-average shares                             |   |                                      | 3,101  |   |      |      | 3,157 |      |   |     | 3,256 |  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                  
|Effect of dilutive securities:                    
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Employee stock options                              |   |                                      |        |   |      |      |       |      |   |     | 34    |  
|                                                   |                                                     |   |                                      |        |   |      |      |       |     
|Dilutive potential common shares                   |                                                     |   |                                      |        |   |      |      |       |      |   | 34  |      
|                                                   |                                                     |   |                                      |        |   |      |      |       |     
|                                                   | Denominator for diluted earnings per shareadjusted
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Weighted-average shares and assumed conversions     |   |                                      | 3,101  |   |      |      | 3,157 |      |   |     | 3,290 |  
|                                                   |                                                     |   |                                      |        |   |      |      |       |     
|                                                  
|                                                   |                                                     |   |                                      |        |   |      |      |       |     
|BASIC EARNINGS (LOSS) PER SHARE                    |                                                     | $ | (1.68                                | )      |   | $    | (.03 | )     |      | $ | .12 |      
|                                                   |                                                     |   |                                      |        |   |      |      |       |     
|                                                  
|                                                   |                                                     |   |                                      |        |   |      |      |       |     
|DILUTED EARNINGS (LOSS) PER SHARE                  |                                                     | $ | (1.68                                | )      |   | $    | (.03 | )     |      | $ | .12 |      
|                                                   |                                                     |   |                                      |        |   |      |      |       |     

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|                           |                                 |           |            |     |          |            |           |          |            |  |            |              |  |           |        |         |     |  |   |     | 
|-------------------------- | ------------------------------- | --------- | ---------- | --- | -------- | ---------- | --------- | -------- | ---------- |  | ---------- | ------------ |  | --------- | ------ | ------- | --- |  | - | --- | 
|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, 2001:
|                          
|                          
|                          
|                          
|                           | Allowance for doubtful accounts |           | $          | 513 |          |            | $         | 894      |            |  |            |              |  |           | $      | 502     | (A) |  | $ | 905 | 
|                          
|                          
|                          
|                          
|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 | 

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

36



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|            |  |                                                                                                                                                                         
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                             
|            |  |                                                                                                                                                                         
|10.23       |  | Eighth amendment to amended and restated loan agreement
between Comerica Bank and Maxco, Inc. dated March 19, 2001.                                                     
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|21          |  | Subsidiaries of the Registrant                                                                                                                                          
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|23          |  | Consent of Independent AuditorsErnst & Young (Form S-8
filed June 2, 1992  File No. 33-48351 and Form S-8 filed
November 19, 1998  File No. 333-67539)               
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|23.1        |  | Consent of Independent AuditorsMoore Stephens Doeren
Mayhew (Form S-8 filed June 2, 1992  File No. 33-48351 and
Form S-8 filed November 19, 1998  File No. 333-67539)