UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended September 30, 2010
 or
 o
    
    Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
 For the transition period from _________ to _______.
 Commission file number 0-21018
 TUFCO TECHNOLOGIES, INC.
 
 Delaware
    
    39-1723477(State or other jurisdiction
    
    (I.R.S. Employer Identification No.)of incorporation or organization)
 PO Box 23500, Green Bay, WI
    
    54305-3500(Address of principal executive offices)
    
    (Zip Code)
 920-336-0054
  Title of Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, Par Value $0.01 per share
    
    Nasdaq Capital Market
  o þ
 o þ
  þ o
 þ
 o o
  Large Accelerated Filer oAccelerated Filer oNon-Accelerated Filer o(Do not check if a smaller reporting company)
Smaller Reporting Company þ  o þ




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PART I
 ITEM 1  BUSINESS
 General
    Products and Services
  1




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##### 



Contract Manufacturing
     Business Imaging
    2




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##### 



Business Imaging (Continued)
   Manufacturing and Operations
    Sales and Marketing
   3




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##### 



Sales and Marketing (Continued)
  Competition
    Product Development and Quality Control
  4




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##### 



Product Development and Quality Control (Continued)
   Raw Materials and Suppliers
   Environmental Matters
    5




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Employees
  Working Capital
  Class of Products
  ITEM 1A   RISK FACTORS
  ITEM 1B   UNRESOLVED STAFF COMMENTS
  ITEM 2   PROPERTIES
     ITEM 3   LEGAL PROCEEDINGS
  6




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##### 



ITEM 4   [REMOVED AND RESERVED]
 PART II
 ITEM 5   MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES
OF EQUITY SECURITIES
    High
    
    Low
    
    CloseQuarter ended December 31, 2008
    
    $
    6.00
    
    
    $
    1.77
    
    
    $
    3.26Quarter ended March 31, 2009
    
    $
    5.60
    
    
    $
    2.66
    
    
    $
    3.88Quarter ended June 30, 2009
    
    $
    5.00
    
    
    $
    2.70
    
    
    $
    3.29Quarter ended September 30, 2009
    
    $
    3.65
    
    
    $
    2.24
    
    
    $
    2.90
  High
    
    Low
    
    CloseQuarter ended December 31, 2009
    
    $
    4.00
    
    
    $
    2.41
    
    
    $
    3.10Quarter ended March 31, 2010
    
    $
    5.35
    
    
    $
    2.80
    
    
    $
    4.32Quarter ended June 30, 2010
    
    $
    5.00
    
    
    $
    3.03
    
    
    $
    3.25Quarter ended September 30, 2010
    
    $
    3.49
    
    
    $
    3.06
    
    
    $
    3.43
   ITEM 6   SELECTED CONSOLIDATED FINANCIAL DATA
  7




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ITEM 7   MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward Looking Statements
  General
   Results of Operations
  8




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##### 



Percentage of
    
    
    Year-to-YearNet Sales
    
    
    Percentage Change2010
    
    
    2009
    
    
    2010 to 2009Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    4
    %Cost of sales
    
    
    94.6
    
    
    
    95.6
    
    
    
    3Gross profit
    
    
    5.4
    
    
    
    4.4
    
    
    
    30Selling, general and administrative
expenses
    
    
    6.0
    
    
    
    5.9
    
    
    
    6Operating loss
    
    
    (0.6
    )
    
    
    (1.5
    )
    
    
    (61
    )Interest expense
    
    
    (0.2
    )
    
    
    (0.1
    )
    
    
    50Interest income and other income
    
    
    (0.0
    )
    
    
    0.0
    
    
    
    NMLoss before income taxes
    
    
    (0.8
    )
    
    
    (1.6
    )
    
    
    (53
    )Income tax benefit
    
    
    (0.3
    )
    
    
    (0.6
    )
    
    
    (55
    )Net (loss)
    
    
    (0.5
    %)
    
    
    (1.0
    %)
    
    
    (51
    %)
   2010
    
    
    2009% of
    
    
    
    
    
    
    % ofAmount
    
    
    Total
    
    
    Amount
    
    
    TotalNet SalesContract Manufacturing and printing
    
    $
    66.2
    
    
    
    73
    %
    
    $
    63.9
    
    
    
    74
    %Business Imaging paper products
    
    
    24.4
    
    
    
    27
    
    
    
    22.9
    
    
    
    26Net Sales
    
    $
    90.6
    
    
    
    100
    %
    
    $
    86.8
    
    
    
    100
    %
 Margin
    
    
    
    
    
    
    MarginAmount
    
    
    %
    
    
    Amount
    
    
    %Gross ProfitContract Manufacturing and printing
    
    $
    2.9
    
    
    
    4
    %
    
    $
    2.4
    
    
    
    4
    %Business Imaging paper products
    
    
    2.0
    
    
    
    8
    %
    
    
    1.4
    
    
    
    6
    %Gross profit
    
    $
    4.9
    
    
    
    5
    %
    
    $
    3.8
    
    
    
    4
    %
 9




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##### 



Fiscal Year Ended September 30, 2010 Compared to September 30, 2009
 Net Sales
  Gross profit
 Selling, general and administrative expenses
 Interest expense
 Income tax benefit
 Basic and diluted net loss per share
 Selected Quarterly Financial Data
  10




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##### 



Liquidity and Capital Resources
        11




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##### 



Liquidity and Capital Resources (Continued)
      Inflation
  Credit Environment
  Off Balance Sheet Arrangements
  12




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##### 



Critical Accounting Policies
        13




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##### 



Critical Accounting Policies (Continued)
    ITEM 7A   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  ITEM 8   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  ITEM 9   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  ITEM 9A (T)  CONTROLS AND PROCEDURES
   14




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ITEM 9A (T)  CONTROLS AND PROCEDURES (Continued)
      ITEM 9B   OTHER INFORMATION
  15




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##### 



PART III
 ITEM 10   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 THE DIRECTORS OF THE COMPANY
  Name
    
    Age
    
    
    Position HeldRobert J. Simon
    
    
    52
    
    
    Chairman of the Board of DirectorsSamuel J. Bero
    
    
    75
    
    
    DirectorC. Hamilton Davison
    
    
    51
    
    
    DirectorBrian Kelly
    
    
    67
    
    
    DirectorLouis LeCalsey, III
    
    
    71
    
    
    Director, President and Chief Executive OfficerRichard M. Segel
    
    
    70
    
    
    DirectorWilliam R. Ziemendorf
    
    
    51
    
    
    Director
 Robert J. Simon 
  Samuel J. Bero 
  C. Hamilton Davison 
 16




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##### 



THE DIRECTORS OF THE COMPANY (Continued)
   Brian Kelly 
  Louis LeCalsey, III 
  Richard M. Segel 
  17




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##### 



THE DIRECTORS OF THE COMPANY (Continued)
 William R. Ziemendorf 
   18




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##### 



THE EXECUTIVE OFFICERS OF THE COMPANY
 Name
    
    Age
    
    Positions With the CompanyLouis LeCalsey, III
    
    
    71
    
    
    Director, President and Chief Executive
OfficerMichael B. Wheeler
    
    
    65
    
    
    Executive Vice President, Chief Financial
Officer and
Chief Operating OfficerGeorge Hare
    
    
    53
    
    
    General Manager, Business Imaging SectorJames F. Robinson
    
    
    42
    
    
    Vice President, Business Development
  Executive Officers
 Louis LeCalsey, III
 Michael B. Wheeler
 George Hare
 James F. Robinson
 19




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##### 



CERTAIN CORPORATE GOVERNANCE MATTERS
  Audit Committee Composition
   Code of Ethics
  Section 16(a) Beneficial Ownership Reporting Compliance
   ITEM 11  EXECUTIVE COMPENSATION
  Compliance with Section 162(m)
  20




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##### 



SUMMARY COMPENSATION TABLE
  Option
    
    All OtherName and Principal Position
    
    Year
    
    Salary
    
    Awards(2)
    
    Compensation(1)
    
    TotalLouis LeCalsey, III
    
    
    2010
    
    
    $
    258,566
    
    
    $
    26,673
    
    
    $
    8,176
    
    
    $
    293,415Director, President
and CEO
    
    
    2009
    
    
    $
    267,881
    
    
    $
    
    
    
    $
    11,287
    
    
    $
    279,168Michael B. Wheeler
    
    
    2010
    
    
    $
    182,756
    
    
    $
    19,734
    
    
    $
    12,006
    
    
    $
    214,496Executive Vice President,
CFO, COO, Secretary
and Treasurer
    
    
    2009
    
    
    $
    188,770
    
    
    $
    
    
    
    $
    14,874
    
    
    $
    203,644Michele M. Cherney(3)
    
    
    2010
    
    
    $
    157,116
    
    
    $
    4,529
    
    
    $
    8,450
    
    
    $
    170,095Sr. Vice President,
Branded Sales and Marketing
    
    
    2009
    
    
    $
    159,736
    
    
    
    
    
    
    
    21,655
    
    
    $
    181,391
 
 (1)
    
    The compensation reported represents the Companys contributions to the Companys 401(k)
Plan, car allowances and country club dues. The Company has suspended such contributions to the
401(k) Plan since March, 2009.(2)
    
    For awards of options, the dollar amount recognized is based on the aggregate grant date fair
value of the awards computed in accordance with FASB Accounting Standards Codification Topic 718,
Compensation  Stock Compensation. No options were issued in fiscal 2009 under the 2003
Non-Qualified Stock Option Plan.(3)
    
    Ms. Cherney resigned from her position with the Company in November, 2010. Employment Agreements
   21




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##### 



Employment Agreements (Continued)
   Outstanding Equity Awards at Fiscal Year-End
  Number of SecuritiesNumber of Securities
    
    Underlying Unexercised
    
    OptionUnderlying Unexercised
    
    Options (#)
    
    Exercise
    
    
    
    
    
    Option ExpirationName
    
    Options (#) Exercisable
    
    Unexercisable
    
    Price($)
    
    Grant Date
    
    DateLouis LeCalsey, III
    
    
    30,000
    
    
    
    
    
    
    $
    7.00
    
    
    
    10/01/01
    
    
    
    10/01/1116,500
    
    
    
    
    
    
    $
    4.92
    
    
    
    10/01/02
    
    
    
    10/01/1215,000
    
    
    
    
    
    
    $
    5.71
    
    
    
    11/26/03
    
    
    
    11/26/1312,000
    
    
    
    
    
    
    $
    7.87
    
    
    
    11/19/04
    
    
    
    11/19/146,000
    
    
    
    2,000
    
    
    $
    7.60
    
    
    
    10/01/07
    
    
    
    10/01/179,000
    
    
    
    3,000
    
    
    $
    5.56
    
    
    
    9/03/08
    
    
    
    9/03/185,000
    
    
    
    5,000
    
    
    $
    3.19
    
    
    
    11/30/09
    
    
    
    11/30/196,500
    
    
    
    6,500
    
    
    $
    3.25
    
    
    
    9/14/10
    
    
    
    9/14/20Michael B. Wheeler
    
    
    15,000
    
    
    
    
    
    
    $
    5.70
    
    
    
    3/27/02
    
    
    
    3/27/1212,500
    
    
    
    
    
    
    $
    4.92
    
    
    
    10/01/02
    
    
    
    10/01/1211,000
    
    
    
    
    
    
    $
    5.71
    
    
    
    11/26/03
    
    
    
    11/26/139,000
    
    
    
    
    
    
    $
    7.87
    
    
    
    11/19/04
    
    
    
    11/19/146,000
    
    
    
    2,000
    
    
    $
    7.60
    
    
    
    10/01/07
    
    
    
    10/01/176,000
    
    
    
    2,000
    
    
    $
    5.56
    
    
    
    9/03/08
    
    
    
    9/03/183,500
    
    
    
    3,500
    
    
    $
    3.19
    
    
    
    11/30/09
    
    
    
    11/30/195,000
    
    
    
    5,000
    
    
    $
    3.25
    
    
    
    9/14/10
    
    
    
    9/14/20Michele M. Cherney
    
    
    4,000
    
    
    
    
    
    
    $
    7.00
    
    
    
    10/01/01
    
    
    
    10/01/114,500
    
    
    
    
    
    
    $
    4.92
    
    
    
    10/01/02
    
    
    
    10/01/124,000
    
    
    
    
    
    
    $
    5.71
    
    
    
    11/26/03
    
    
    
    11/26/133,000
    
    
    
    
    
    
    $
    7.87
    
    
    
    11/19/04
    
    
    
    11/19/143,000
    
    
    
    1,000
    
    
    $
    7.60
    
    
    
    10/01/07
    
    
    
    10/01/173,000
    
    
    
    1,000
    
    
    $
    5.56
    
    
    
    9/03/08
    
    
    
    9/03/182,000
    
    
    
    2,000
    
    
    $
    3.19
    
    
    
    11/30/09
    
    
    
    11/30/19James F. Robinson
    
    
    5,000
    
    
    
    5,000
    
    
    $
    3.25
    
    
    
    9/14/10
    
    
    
    9/14/20
  22




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##### 



Compensation of Individual ifCompensation Following
    
    Terminated Within 180 DaysName
    
    Termination Without Cause (1)
    
    Following Change in Control(1)Louis LeCalsey, III
    
    $
    286,500
    
    
    $
    573,000Michael B. Wheeler
    
    $
    202,500
    
    
    $
    202,500Michele M.
Cherney(2)
    
    $
    170,500
    
    
    $
    170,500James F. Robinson
    
    $
    165,000
    
    
    $
    165,000
 
 (1)
    
    Some officers would receive a bonus based upon a target for operating income determined by the
Compensation Committee.(2)
    
    Ms. Cherney resigned from the Company in November, 2010. Ms. Cherney did not receive any
termination or change in control payments. 23




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##### 



Director Compensation
  
    
    an annual fee of $12,000,
    
    a payment of $1,500 for each board meeting attended,
    
    a payment of $1,500 for each committee meeting attended, and
    
    per diem fees for supplemental Audit Committee services.
  FISCAL 2010 DIRECTOR COMPENSATION
 Fees Earned or
    
    OptionName
    
    Paid in Cash
    
    Awards (1)
    
    TotalRobert J. Simon
    
    $
    25,500
    
    
    $
    7,956
    
    
    $
    33,456Samuel J. Bero
    
    $
    25,500
    
    
    $
    7,956
    
    
    $
    33,456C. Hamilton Davison
    
    $
    24,000
    
    
    $
    7,956
    
    
    $
    31,956Brian Kelly
    
    $
    28,500
    
    
    $
    7,956
    
    
    $
    36,456Richard M. Segel
    
    $
    19,500
    
    
    $
    7,956
    
    
    $
    27,456William R. Ziemendorf
    
    $
    24,000
    
    
    $
    7,956
    
    
    $
    31,956
 
 (A)
    
    For awards of options, the dollar amount recognized is based on the aggregate
grant date fair value of the awards computed in accordance with FASB Accounting Standards
Codification Topic 718, Compensation  Stock Compensation. 24




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##### 



ITEM 12   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 Security Ownership of Certain Beneficial Owners
   AMOUNT AND NATURE OFBENEFICIAL OWNERSHIP
    
    PERCENT OF CLASSOver 5% StockholdersRobert J. Simon (1)(3)(4)(14)
    
    
    2,661,543
    
    
    
    61.3
    %Barbara M. Henagan (1)(3)
    
    
    2,621,661
    
    
    
    60.8
    %Bradford Venture Partners, L.P. (1)(6)
    
    
    2,619,740
    
    
    
    60.8
    %Overseas Equity Investors Partners (3)(2)
    
    
    2,619,740
    
    
    
    60.8
    %Other Directors And Executive OfficersSamuel J. Bero (7)
    
    
    207,500
    
    
    
    4.9
    %Louis LeCalsey, III (8)
    
    
    218,546
    
    
    
    5.0
    %C. Hamilton Davison (5)
    
    
    33,842
    
    
    
    
    *Richard M. Segel (9)
    
    
    11,000
    
    
    
    
    *Brian Kelly (15)
    
    
    37,790
    
    
    
    
    *William R. Ziemendorf (16)
    
    
    9,000
    
    
    
    
    *Michael B. Wheeler (10)
    
    
    59,667
    
    
    
    1.4
    %George Hare (11)
    
    
    2,333
    
    
    
    
    *Michele M. Cherney (12)
    
    
    21,167
    
    
    
    
    *James F. Robinson
    
    
    0
    
    
    
    
    *Directors and Executive Officers as a Group (10 persons) (1)(3)(13)
    
    
    3,262,388
    
    
    
    70.9
    %
 
 *
    
    Less than one percent(1)
    
    The amounts shown for Mr. Simon and Ms. Henagan include the shares owned of record by
Bradford Venture Partners, L.P., as to which they may be deemed to share beneficial ownership
due to their having voting and dispositive power over such shares. Bradford Associates, a
general partnership of which such two persons are the partners, is the sole general partner of
Bradford Venture Partners, L.P. and, as such, holds a 1% interest in that partnership. The
business address of each of Mr. Simon and Ms. Henagan is 92 Nassau Street, Princeton, New
Jersey, 08542.(2)
    
    The address of the stockholder is 92 Nassau Street, Princeton, New Jersey 08542. The amount
shown for the stockholder includes 709,870 shares owned of record by Overseas Equity Investors
Partners (Overseas Equity), as to which the stockholder may be deemed to share beneficial
ownership due to the formation of a group comprised of the stockholder and Overseas Equity
for purposes of SEC rules.(3)
    
    The amounts shown for Mr. Simon and Ms. Henagan includes the shares owned of record by
Overseas Equity as to which they may be deemed to share beneficial ownership due to their
having voting power over such shares. Mr. Simon serves as chairman of the board of directors
of the corporation that acts as the managing partner of Overseas Equity. Bradford Associates
holds a 1% partnership interest in Overseas Equity, which may increase upon the satisfaction
of certain contingencies related to the overall performance of Overseas Equitys investment
portfolio, and also acts as an investment advisor for Overseas Equity. 25




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##### 



Security Ownership of Certain Beneficial Owners (Continued)
 (4)
    
    The stockholder is also one of our directors.(5)
    
    The amount shown includes 30,000 shares that may be acquired under options exercisable within
60 days of December 17, 2010.(6)
    
    The address of the stockholder is Clarendon House, Church Street, Hamilton 5-31, Bermuda.
The amount shown for the stockholder includes 1,909,870 shares owned of record by Bradford
Venture Partners, L.P., as to which the stockholder may be deemed to share beneficial
ownership due to the information of a group comprised of the stockholder and Bradford
Venture Partners, L.P. for purposes of SEC rules.(7)
    
    The amount shown includes 30,000 shares that may be acquired under options exercisable within
60 days of December 17, 2010.(8)
    
    The amount shown includes 87,167 shares that may be acquired under options exercisable within
60 days of December 17, 2010.(9)
    
    The amount shown includes 11,000 shares that may be acquired under options exercisable within
60 days of December 17, 2010.(10)
    
    The amount shown includes 58,667 shares that may be acquired under options exercisable within
60 days of December 17, 2010.(11)
    
    The amount shown includes 2,333 shares that may be acquired under options exercisable within
60 days of December 17, 2010.(12)
    
    The amount shown includes 21,167 shares that may be acquired under options exercisable within
60 days of December 17, 2010.(13)
    
    The amount shown includes an aggregate of 293,334 shares that may be acquired under options
exercisable within 60 days of December 17, 2010.(14)
    
    The amount shown includes 30,000 shares that may be acquired under options exercisable
within 60 days of December 17, 2010.(15)
    
    The amount shown includes 14,000 shares that may be acquired under options exercisable
within 60 days of December 17, 2010.(16)
    
    The amount shown includes 9,000 shares that may be acquired under options exercisable within
60 days of December 17, 2010.
 Equity Compensation Plan Information
  (C)(A)
    
    
    
    
    
    Number of SecuritiesNumber of
    
    (B)
    
    Remaining Available forSecurities to be Issued
    
    Weighted Average
    
    Future Issuance underUpon Exercise of
    
    Exercise Price of
    
    Equity Compensation PlansOutstanding Options,
    
    Outstanding Options,
    
    (Excluding SecuritiesPlan Category
    
    Warrants and Rights
    
    Warrants and Rights
    
    Reflected in Column (A))Equity compensation plans approved
by security holders (1)
    
    
    342,650
    
    
    $
    5.90
    
    
    
    204,150Equity compensation plans not
approved by security holders (2)
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Plans represent (i) the 1992 Non-Qualified Stock Option Plan, which expired in April 2002,
(ii) the 2003 Non-Qualified
Stock Option Plan, which expires April 2013 and the 1993 Non-Employee Director Stock Option
Plan, which expired March
2004, and (iii) the 2004 Non-Employee Director Stock Option Plan, which expires March 2014.(2)
    
    There are no equity compensation plans not approved by security holders. 26




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##### 



ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
      27




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##### 



ITEM 14  PRINCIPAL ACCOUNTING FEES AND SERVICES
  McGladrey & Pullen
    
    McGladrey & PullenFY 2010
    
    FY 2009Audit Fees
    
    $
    183,839
    
    
    $
    169,700Audit-Related Fees
    
    
    0
    
    
    
    0Tax Fees
    
    
    0
    
    
    
    0All Other Fees
    
    
    0
    
    
    
    0
    28




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##### 



PART IV
 ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 (a)
    
    
    1.
    
    
    Financial Statements. Financial statements are attached as an Appendix to this Report. The
index to the consolidated financial statements is found on F-1 of the Appendix.2.
    
    
    Financial Statement Schedules. All schedules are omitted because the information
required is
included in the consolidated financial statements and notes thereto or are not required
for a smaller
reporting company.3.
    
    
    Exhibits. See Exhibit Index in Item 15(b), below.
 (b)
    
    ExhibitNumber
    
    Description3.1
    
    
    Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Companys
Registration Statement
as filed with the Commission on December 16, 1992, incorporated by reference herein).3.2
    
    
    Bylaws (filed as Exhibit 3.2 to the Companys Registration Statement as filed with the
Commission
on December 16, 1992, incorporated by reference herein).10.1
    
    
    Stock Purchase and Contribution Agreement, dated as of February 25, 1992, among the
Company, Tufco Industries, Inc. (Tufco), and the Stockholders of Tufco (filed as Exhibit 10.1 to
the Companys Registration Statement as filed with the Commission on December 16, 1992,
incorporated by reference herein).10.2
    
    
    Amended and Restated Consulting Agreement with Bradford Investment Partners,
L.P. (filed as
Exhibit 10 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended March
31, 1995, incorporated by reference herein).10.3
    
    
    1992 Non-Qualified Stock Option Plan (filed as Exhibit 10.12 to the Companys Registration
Statement as filed with the Commission on December 16, 1992, incorporated by reference herein).10.4
    
    
    1993 Non-Employee Director Stock Option Plan (filed as Exhibit 10.19 to the Companys
Amendment No. 1 to the Registration Statement as filed with the Commission on November 23,
1993, incorporated by reference herein).10.5
    
    
    Lease between Bero and McClure Partnership and Tufco, L.P, dated October 15, 2002 (filed as
Exhibit 10.8 to the Companys Annual Report on Form 10-K for the period ended September 30,
2002, incorporated by reference herein).10.6
    
    
    Employment Agreement with Louis LeCalsey, III dated September 19, 1996 (filed as Exhibit
10.18 to the Companys Report on Form 10-K for the period ended September 30, 1997,
incorporated by reference herein).10.7
    
    
    2003 Non-Qualified Stock Option Plan (filed as Exhibit 10.19 to the Companys Annual
Report
on Form 10-K for the period ended September 30, 2003, incorporated by reference
herein).10.9
    
    
    2004 Non-Employee Director Stock Option Plan (incorporated by reference to the
Companys
definitive proxy statement filed on January 29, 2004).10.11
    
    
    Amended lease between Bero and McClure Partnership and Tufco LP dated November 22,
2006
(filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed on November
22, 2006,
incorporated by reference herein).10.14
    
    
    Credit Agreement dated May 13, 2009 (filed as Exhibit 10.1 to the Companys
Current Report on
Form 8-K filed on May 14, 2009, incorporated by reference herein).10.15
    
    
    First Amended and Restated Credit Agreement, dated March 15, 2010 (filed as
Exhibit 10.1 to the Companys Current Report on Form 8-K filed March 24, 2010,
incorporated by reference herein).10.16
    
    
    *First Amendment to the Amended and
Restated Credit Agreement, dated December 28, 2010.14.1
    
    
    Code of Ethics (filed as Exhibit 14.1 to the Companys Annual Report on Form 10-K
for the period
ended September 30, 2003, incorporated by reference herein).21.1
    
    
    Subsidiaries of the Company (filed as Exhibit 23.1 to the Companys Annual Report on
Form 10-K
for the period ended September 30, 2006, incorporated by reference herein).23.1
    
    
    *Consent of McGladrey & Pullen, LLP31.1
    
    
    *Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange
Act of 1934 of Louis LeCalsey, III31.2
    
    
    *Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of
1934 of Michael B. Wheeler
 29




---



##### 



ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES (Continued)
 ExhibitNumber
    
    Description32.1
    
    **Certification furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 of Louis LeCalsey, III32.2
    
    **Certification furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 of Michael B. Wheeler
 
 *
    
    Filed herewith**
    
    Furnished herewith 30




---



##### 



Tufco Technologies, Inc.By:
    /s/ Louis LeCalsey, IIILouis LeCalsey, IIIPresident and Chief Executive Officer  Signature
    
    Title
    
    Date/s/ Louis LeCalsey, III
    
    President, Chief Executive
    
    December 29, 2010Louis LeCalsey, III
    
    Officer and Director(Principal Executive Officer)/s/ Robert J. Simon

Robert J. Simon
    
    Chairman of the Board
    
    December 29, 2010/s/ Michael B. Wheeler
    
    Executive VP, Chief Financial
    
    December 29, 2010Michael B. Wheeler
    
    Officer and Chief Operating
Officer (Principal Financial Officer
and Principal Accounting Officer)/s/ Samuel J. Bero
    
    Director
    
    December 29, 2010Samuel J. Bero/s/ C. Hamilton Davison
    
    Director
    
    December 29, 2010C. Hamilton Davison/s/ Brian Kelly
    
    Director
    
    December 29, 2010Brian Kelly/s/ Richard M. Segel
    
    Director
    
    December 29, 2010Richard M. Segel/s/ William R. Ziemendorf
    
    Director
    
    December 29, 2010William R. Ziemendorf
 31




---



##### 



PageREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    
    F-2CONSOLIDATED FINANCIAL STATEMENTS:Balance Sheets as of September 30, 2010 and 2009
    
    
    F-3Statements of Operations for the
Years Ended September 30, 2010 and 2009
    
    
    F-4Statements of Stockholders Equity for the
Years Ended September 30, 2010 and 2009
    
    
    F-5Statements of Cash Flows for the
Years Ended September 30, 2010 and 2009
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7  F-19
 
 F-1




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    /s/ McGladrey & Pullen, LLPSchaumburg, Illinois  F-2




---



##### 



TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2010 AND 2009
 2010
    
    
    2009ASSETSCURRENT ASSETS:Cash
    
    $
    7,899
    
    
    $
    4,092Accounts receivablenet
    
    
    14,211,275
    
    
    
    11,077,258Inventoriesnet
    
    
    14,329,857
    
    
    
    10,645,168Prepaid expenses and other current assets
    
    
    157,269
    
    
    
    245,534Income taxes receivable
    
    
    16,430
    
    
    
    604,144Deferred income taxes
    
    
    364,680
    
    
    
    381,661Total current assets
    
    
    29,087,410
    
    
    
    22,957,857PROPERTY, PLANT, AND EQUIPMENTNet
    
    
    18,640,263
    
    
    
    17,892,453GOODWILL
    
    
    7,211,575
    
    
    
    7,211,575OTHER ASSETSNet
    
    
    135,865
    
    
    
    128,684TOTAL
    
    $
    55,075,113
    
    
    $
    48,190,569LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Revolving line of credit
    
    $
    4,476,736
    
    
    $
    1,270,099Current portion of note payable
    
    
    244,577
    
    
    
    Accounts payable
    
    
    9,974,560
    
    
    
    6,861,167Accrued payroll, vacation, and payroll taxes
    
    
    554,967
    
    
    
    542,534Other current liabilities
    
    
    435,167
    
    
    
    463,736Total current liabilities
    
    
    15,686,007
    
    
    
    9,137,536LONG-TERM PORTION OF NOTE PAYABLE
    
    
    1,026,966
    
    
    
    DEFERRED INCOME TAXES
    
    
    2,257,071
    
    
    
    2,611,572COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Common stock, $.01 par value9,000,000 shares authorized;
4,708,741 shares issued
    
    
    47,087
    
    
    
    47,087Non-voting common stock, $.01 par value2,000,000 shares
authorized and unissued
    
    
    
    
    
    
    Preferred stock, $.01 par value1,000,000 shares authorized
and unissued
    
    
    
    
    
    
    Additional paid-in capital
    
    
    25,497,814
    
    
    
    25,421,007Retained earnings
    
    
    12,717,625
    
    
    
    13,130,824Treasury stock 399,794 common shares at cost
    
    
    (2,157,457
    )
    
    
    (2,157,457
    )Total stockholders equity
    
    
    36,105,069
    
    
    
    36,441,461TOTAL
    
    $
    55,075,113
    
    
    $
    48,190,569
  F-3




---



##### 



TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009
 2010
    
    
    2009NET SALES
    
    $
    90,613,851
    
    
    $
    86,775,764COST OF SALES
    
    
    85,707,198
    
    
    
    82,988,739GROSS PROFIT
    
    
    4,906,653
    
    
    
    3,787,025OPERATING EXPENSES:Selling, general, and administrative
    
    
    5,415,163
    
    
    
    5,126,711Loss (gain) on asset sales
    
    
    483
    
    
    
    (37,900
    )OPERATING LOSS
    
    
    (508,993
    )
    
    
    (1,301,786
    )OTHER (EXPENSE) INCOME:Interest expense
    
    
    (165,710
    )
    
    
    (110,166
    )Interest income and other income
    
    
    15,694
    
    
    
    13,580Total
    
    
    (150,016
    )
    
    
    (96,586
    )LOSS BEFORE INCOME TAXES
    
    
    (659,009
    )
    
    
    (1,398,372
    )INCOME TAX BENEFIT
    
    
    (245,810
    )
    
    
    (548,165
    )NET LOSS
    
    $
    (413,199
    )
    
    $
    (850,207
    )NET LOSS PER SHARE:Basic
    
    $
    (0.10
    )
    
    $
    (0.20
    )Diluted
    
    $
    (0.10
    )
    
    $
    (0.20
    )WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:Basic
    
    
    4,308,947
    
    
    
    4,345,211Diluted
    
    
    4,308,947
    
    
    
    4,345,211
  F-4




---



##### 



TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009
 Common Stock
    
    
    Non-voting
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    
    
    
    
    TotalVoting
    
    
    Common
    
    
    Preferred
    
    
    Paid-In
    
    
    Retained
    
    
    Treasury
    
    
    StockholdersShares
    
    
    Amount
    
    
    Stock
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Stock
    
    
    EquityBALANCESSeptember 30, 2008
    
    
    4,708,741
    
    
    $
    47,087
    
    
    $
    
    
    
    $
    
    
    
    $
    25,374,211
    
    
    $
    13,981,031
    
    
    $
    (1,620,242
    )
    
    $
    37,782,087Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,796
    
    
    
    
    
    
    
    
    
    
    
    46,796Purchase of treasury stock 
147,757 common shares at cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (537,215
    )
    
    
    (537,215
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (850,207
    )
    
    
    
    
    
    
    (850,207
    )BALANCESSeptember 30, 2009
    
    
    4,708,741
    
    
    
    47,087
    
    
    
    
    
    
    
    
    
    
    
    25,421,007
    
    
    
    13,130,824
    
    
    
    (2,157,457
    )
    
    
    36,441,461Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,807
    
    
    
    
    
    
    
    
    
    
    
    76,807Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (413,199
    )
    
    
    
    
    
    
    (413,199
    )BALANCESSeptember 30, 2010
    
    
    4,708,741
    
    
    $
    47,087
    
    
    $
    
    
    
    $
    
    
    
    $
    25,497,814
    
    
    $
    12,717,625
    
    
    $
    (2,157,457
    )
    
    $
    36,105,069
  F-5




---



##### 



TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009
 2010
    
    
    2009OPERATING ACTIVITIES:Net loss
    
    $
    (413,199
    )
    
    $
    (850,207
    )Noncash items in net loss:Depreciation and amortization
    
    
    2,715,413
    
    
    
    2,407,859Deferred income taxes
    
    
    (337,520
    )
    
    
    (94,508
    )Loss (gain) on sale of property, plant and equipment
    
    
    483
    
    
    
    (37,900
    )Stock-based compensation expense
    
    
    76,807
    
    
    
    46,796Changes in operating working capital:Accounts receivable
    
    
    (3,134,017
    )
    
    
    693,723Inventories
    
    
    (3,684,689
    )
    
    
    4,294,800Prepaid expenses and other assets
    
    
    81,084
    
    
    
    168,316Accounts payable
    
    
    3,113,393
    
    
    
    (1,458,844
    )Accrued and other current liabilities
    
    
    (16,136
    )
    
    
    (256,423
    )Income taxes receivable
    
    
    587,714
    
    
    
    (485,153
    )Net cash (used in) provided by operating activities
    
    
    (1,010,667
    )
    
    
    4,428,459INVESTING ACTIVITIES:Additions to property, plant, and equipment
    
    
    (2,113,806
    )
    
    
    (2,263,548
    )Proceeds from disposals of property, plant and equipment
    
    
    100
    
    
    
    37,900Net cash used in investing activities
    
    
    (2,113,706
    )
    
    
    (2,225,648
    )FINANCING ACTIVITIES:Net borrowings of revolving debt
    
    
    3,206,637
    
    
    
    (1,729,901
    )Purchase of treasury stock
    
    
    
    
    
    
    (537,215
    )Principal payments of note payable
    
    
    (78,457
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    3,128,180
    
    
    
    (2,267,116
    )NET INCREASE (DECREASE) IN CASH
    
    
    3,807
    
    
    
    (64,305
    )CASH:Beginning of year
    
    
    4,092
    
    
    
    68,397End of year
    
    $
    7,899
    
    
    $
    4,092SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:Note payable incurred for the purchase of equipment
    
    
    1,350,000
    
    
    
    SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash payments for:Interest
    
    
    164,967
    
    
    
    109,305Income Taxes
    
    
    59,212
    
    
    
    32,605
  F-6




---



##### 



TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009
 1.
    
    SIGNIFICANT ACCOUNTING POLICIES
 Consolidated Financial StatementsConsolidated financial statements include the accounts of
Tufco Technologies, Inc., and its subsidiaries, Tufco LLC, and Tufco LP and its wholly owned
subsidiary Hamco Manufacturing and Distributing LLC (the Company). Significant intercompany
transactions and balances are eliminated in consolidation. The Company provides integrated
manufacturing services including wide web flexographic printing, wet and dry wipe converting,
hot melt adhesive laminating, folding, integrated downstream packaging and on-site quality
microbiological process management and manufactures and distributes business imaging paper
products.
 Financial Statement PreparationFinancial statement preparation requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingencies at the date of the financial statements and the reported amounts of
revenues and expenses for the period. Actual amounts could differ from the amounts estimated.
Differences from those estimates are recognized in the period they become known.
 Accounts ReceivableManagement estimates allowances for collectability related to
its accounts receivable balances. These allowances are based on the customer relationships, the
aging and turns of accounts receivable, credit worthiness of customers, credit concentrations
and payment history. Managements estimates include providing for 100 percent of specific
customer balances when it is deemed probable that the balance is uncollectable. Management
estimates the allowance for doubtful accounts by analyzing accounts receivable balances by age,
applying historical trend rates to the most recent 12 months sales, less actual write-offs to
date. Although management monitors collections and credit worthiness, the inability of a
particular customer to pay its debts could impact collectability of receivables and could have
an impact on future revenues if the customer is unable to arrange other financing. Management
does not believe these conditions are reasonably likely to have a material impact on the
collectability of its receivables or future revenues. Recoveries of accounts receivables
previously written off are recorded when received. Credit terms to customers in the Contract
Manufacturing segment are generally net 30 days. Credit terms to customers in the Business
Imaging segment are generally discounted net 30 terms.
 InventoriesInventories are carried at the lower of cost or market, with cost determined
under the first-in, first-out (FIFO) method of inventory valuation. The Company estimates
reserves for inventory obsolescence and shrinkage based on its judgment of future realization.
 Property, Plant, and EquipmentProperty, plant, and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are provided using the
straight-line method over the following estimated useful lives: 20 to 40 years for buildings, 3
to 10 years for machinery and equipment, 3 to 5 years for computer equipment and software, 5 to
7 years for furniture and fixtures, and the shorter of the estimated useful life or the lease
term for leasehold improvements.
 
 F-7




---



##### 



Impairment of Long-Lived AssetsImpairment of long-lived assets is reviewed in accordance with
Accounting Standards Codification (ASC) 360-10. The Company evaluates the recoverability of
the recorded amount of long-lived assets whenever events or changes in circumstances indicate that
the recorded amount of an asset may not be fully recoverable. An impairment is assessed when
the undiscounted expected future cash flows derived from an asset are less than its carrying
amount. If an asset is determined to be impaired, the impairment to be recognized is measured
as the amount by which the recorded amount of the asset exceeds its fair value. Assets to be
disposed of are reported at the lower of the recorded amount or fair value less cost to sell.
The Company determines fair value using discounted future cash flow analysis or other accepted
valuation techniques.
 GoodwillThe Company tests goodwill annually at the reporting unit level for impairment as of
June 30. The operating segments herein also represent the Companys reporting units for
goodwill purposes. The Company uses a discounted cash flow analysis to estimate reporting unit
fair values and also considers multiples of relevant companies. In determining the fair values
of the reporting units, the Company was required to make certain assumptions and cannot predict
what future events may occur that could adversely affect the reported value of its goodwill.
Management has completed the Companys annual impairment test and determined there were no
changes in the carrying amount of goodwill by reporting unit at June 30, 2010. However, there
can be no assurance that valuation multiples will not decline, growth rates will not be lower
than expected, discount rates will not increase, or the projected cash flows of the individual
reporting units will not decline. The Company prepared the discounted cash flow analysis in
the same manner as in prior years. The Company further updated all significant assumptions in
light of current market and regulatory conditions. The key assumptions used in preparing the
discounted cash flow analysis were (1) projected cash flows, (2) risk of adjusted discount
rates, and (3) expected long term growth rates. Because each of the reporting units has
distinct characteristics, the Company developed these assumptions separately. Any variance in
the underlying assumptions could have a material impact on the evaluation of goodwill
impairment. These assumptions included the Companys actual operating results, future business
plans, economic projections and market data, as well as estimates by its management regarding
future cash flows and operating results. For example, lower than expected growth or an increase
to the discount rate due to changes in risk premiums or other factors may suggest that an
impairment has occurred under Step 1 and require the Company to proceed to Step 2 to measure
the fair value of assets and liabilities of the reporting units. At the annual measurement
date of June 30, 2010, the estimated fair value of Contract Manufacturing exceeded its carrying
value by approximately 30%. The estimated fair value of Business Imaging exceeded its carrying
value by approximately 63% at June 30, 2010. The current discount rate would need to increase
1.7% for Contract Manufacturing and increase 4.5% for Business Imaging before the Company would
be required to proceed to Step 2. The Company recognizes that its common stock regularly
trades below book value per share and will continue to monitor the relationship of its market
capitalization to both its book value and tangible book value. While management plans to
return the Companys business fundamentals to levels that support the book value per share,
there is no assurance that the plan will be successful, or that the market price of the common
stock will increase to such levels in the foreseeable future.
 There were no changes in the carrying amount of goodwill by reporting unit for the years ended
September 30, 2010 and 2009. Goodwill by reporting unit is:
 Contract
    
    
    BusinessManufacturing
    
    
    Imaging
    
    
    Total$
    4,281,759
    
    
    $
    2,929,816
    
    
    $
    7,211,575
 F-8




---



##### 



Income TaxesIncome taxes are provided for the tax effects of transactions reported in the
consolidated financial statements and consist of taxes currently due, if any, plus deferred
taxes related primarily to
differences between the basis of assets and liabilities for financial and income tax reporting.
Deferred tax assets and liabilities represent the future tax return consequences of those
differences that will either be deductible or taxable when the assets and liabilities are recovered or settled. Deferred tax
assets will include recognition of operating losses that are available to offset future taxable
income and tax credits that are available to offset future income taxes. When applicable,
valuation allowances are recognized to limit recognition of deferred tax assets where
appropriate. Such allowances may be reversed when circumstances provide evidence that the
deferred tax assets will more likely than not be realized. The Company recognizes in its
financial statements, the impact of a tax position, if that position is more likely than not of
being sustained on audit, based on the technical merits of the position.
 RevenuesThe Company only has one type of revenue recognition activity which recognizes
revenue when title and risk of loss transfers to the customer and there is evidence of an
agreement and collectibility of consideration to be received is reasonably assured, all of
which generally occur at the time of shipment. Sales are recorded net of sales returns and
allowances. Shipping and handling fees billed to customers are recorded as revenue and costs
incurred for shipping and handling are recorded in cost of sales. Amounts related to raw
materials provided by customers are excluded from net sales and cost of sales.
 Stock-Based CompensationThe Company has an incentive stock plan under which the Board of
Directors may grant non-qualified stock options to employees. Additionally, the Company has a
Non-Qualified Stock Option Plan for Non-Employee Directors, under which shares are available
for grant.
 The options have an exercise price equal to the fair market value of the underlying stock at
the date of grant. Employee stock options vest ratably over a three-year period and
non-employee director stock options vest immediately. Options issued under these plans
generally expire ten years from the date of grant.
 Earnings Per ShareBasic earnings per share is computed using the weighted average number of
common shares outstanding. Diluted earnings per share includes common equivalent shares from
dilutive stock options outstanding during the year, the effect of which was zero shares in
fiscal 2010 and 2009, respectively. During fiscal 2010 and 2009, options to purchase 342,650
shares, and 296,650 shares, respectively, were excluded from the diluted earnings per share
computation, as the effects of such options would have been anti-dilutive.
 Financial InstrumentsThe Company follows the provisions of Fair Value Measurements, which
defines fair value, establishes a framework for measuring fair value, and expands the
disclosures about fair value measurements. Effective October 1, 2009, the Company adopted the
provisions of the ASC Topic, Fair Value Measurements and Disclosure, for non-recurring fair
value measurements of nonfinancial assets and liabilities. The adoption of the provisions did
not have a material effect on the consolidated financial statements.
 The Company currently does not have any instruments recorded at fair value on a recurring
basis.
 Financial instruments consist of cash, receivables, payables, debt, and letters of credit.
Their carrying values are estimated to approximate their fair values unless otherwise indicated
due to their short maturities, variable interest rates and comparable borrowing costs for
equipment loans.
 F-9




---



##### 



Recently Issued Accounting StandardsThe Financial Accounting Standards Board (FASB) has
issued Accounting Standards Update (ASU) No. 2010-06, Fair Value Measurements and Disclosures
(Topic 820)  Improving Disclosures about Fair Value Measurements,to provide more and
improved disclosures about fair value measurements.This ASU affects all entities that are
required to make disclosures about recurring and nonrecurring fair value measurements under
FASB Accounting Standards
Codification Topic 820, Fair Value Measurements and Disclosures. The ASU requires that
disclosures be provided for valuation techniques and inputs to measure fair value of both recurring and non-recurring
fair value measurements as well as for fair value measurements that fall in either Level 2 or
Level 3. The new disclosures and clarifications of existing disclosures are effective for
interim and annual reporting periods beginning after December 15, 2009, except for disclosures
about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3
fair value measurements which are effective for fiscal years beginning after December 15, 2010.
In the period of and periods after initial adoption, comparative disclosures are required only
for periods ending after initial adoption. The Company does not believe the adoption of ASU
2010-06 will have a material effect on its consolidated financial statements
 2.
    
    ACCOUNTS RECEIVABLE
 Accounts receivable are stated net of allowances for doubtful accounts of $64,000 and $63,000
at September 30, 2010 and 2009, respectively. Amounts due from two multinational consumer
products customers represent 53% and 49% of total accounts receivable at September 30, 2010 and
2009, respectively.
 3.
    
    INVENTORIES
 Inventories at September 30, 2010 and 2009, consist of the following:
 2010
    
    
    2009Raw materials
    
    $
    11,368,089
    
    
    $
    8,182,736Finished goods
    
    
    2,961,768
    
    
    
    2,462,432Total inventories
    
    $
    14,329,857
    
    
    $
    10,645,168
 Finished goods inventories are stated net of allowance for inventory obsolescence and shrinkage
of $356,000 and $455,000 at September 30, 2010 and 2009, respectively.
 F-10




---



##### 



4.
    
    PROPERTY, PLANT, AND EQUIPMENT
 Property, plant, and equipment at September 30, 2010 and 2009, consist of the following:
 2010
    
    
    2009Land and land improvements
    
    $
    660,324
    
    
    $
    647,843Buildings
    
    
    9,897,423
    
    
    
    9,897,423Leasehold improvements
    
    
    766,395
    
    
    
    762,530Machinery and equipment
    
    
    30,497,478
    
    
    
    27,110,202Computer equipment and software
    
    
    5,809,001
    
    
    
    5,717,626Furniture and fixtures
    
    
    571,616
    
    
    
    564,897Vehicles
    
    
    44,206
    
    
    
    44,20648,246,443
    
    
    
    44,744,727Less accumulated depreciation and amortization
    
    
    30,233,664
    
    
    
    27,523,818Net depreciated value
    
    
    18,012,779
    
    
    
    17,220,909Construction in progress
    
    
    627,484
    
    
    
    671,544Property, plant, and equipmentnet
    
    $
    18,640,263
    
    
    $
    17,892,453
 F-11




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##### 



5.
    
    REVOLVING LINE OF CREDIT AND NOTE PAYABLE
 The Company replaced its $10.0 million unsecured credit agreement on March 15, 2010 with a new
$8.0 million unsecured revolving line of credit facility with a termination date of January 31, 2011. On December 28, 2010, the Company amended its new credit agreement to increase the amount available
for borrowing to $10.0 million, extended its termination date to January 31, 2012 and modified the
required levels of after tax net income (or loss) under its financial covenants for periods
commencing December 31, 2010 and thereafter. The Companys revolving line of credit is classified
as a current liability on the accompanying balance sheets because provisions in the credit
agreement include deposit account requirements and a material adverse effect covenant which is
subjective in nature.
 Borrowings under the new credit facility bear interest at a rate equal to LIBOR plus
2.50%. The Company is required to pay a non-usage fee of .50% per annum on the unused portion
of the facility. Borrowings under the Companys revolving line of credit facility were
$4,476,736 and $1,270,099 at September 30, 2010 and 2009, respectively.Availability under the facility is based upon specified percentages of eligible accounts
receivable and inventory. The credit agreement is unsecured. The credit agreement contains
certain covenants, including requirements to maintain a minimum tangible net worth and net
income (or net loss) within specified levels.As of September 30, 2010, the Company had approximately $3.5 million available under the $8.0
million revolving line of credit facility.Tufco LP is the borrower under the credit agreement. Tufco LLC is an affiliated guarantor and
is 100% owned by the parent company, Tufco Technologies, Inc., which is also a guarantor.
Under the credit agreement, Hamco Manufacturing and Distributing LLC, a subsidiary of Tufco LP,
is also a guarantor. All guarantees are full and unconditional, as well as joint and several.
The underlying borrowings are not registered securities.In June, 2010, the Company entered into a long-term note for the purchase of a second W&H
8-color press for $1.3 million, previously accounted for as an operating lease, which is being
shown as a supplemental non-cash acquisition in the statement of cash flows. The note which has
a five-year term, bears interest at a rate of 5.75% per annum with payments, including
principal and interest, of approximately $26,000 per month. The note is collateralized by the
press with a net book value of $1,282,500 as of September 30, 2010.Future principal payments under the five-year note at September 30, 2010, are as follows:
 2011
    
    $
    244,5772012
    
    
    259,0172013
    
    
    274,3092014
    
    
    290,5042015
    
    
    203,136Total
    
    $
    1,271,543
 F-12




---



##### 



6.
    
    INCOME TAXES
 The tax effects of significant items composing the Companys net deferred tax liability as of
September 30, 2010 and 2009, are as follows:
 2010
    
    
    2009Deferred tax assets:Valuation allowances for accounts receivable
and inventoriesnot currently deductible
    
    $
    156,745
    
    
    $
    193,378Inventory costs capitalized for tax purposes
    
    
    42,052
    
    
    
    31,015Vacation and severance accrualsnot currently deductible
    
    
    85,084
    
    
    
    85,084Other accrualsnot currently deductible
    
    
    85,272
    
    
    
    72,184Net operating loss and tax credit carryforwards
    
    
    1,043,777
    
    
    
    533,637Stock compensation
    
    
    147,952
    
    
    
    119,303Total gross deferred tax assets
    
    
    1,560,882
    
    
    
    1,034,601Deferred tax liabilities:Basis difference on property and equipment
    
    
    2,360,452
    
    
    
    2,251,060Basis difference on goodwill
    
    
    1,092,821
    
    
    
    1,013,452Total gross deferred tax liabilities
    
    
    3,453,273
    
    
    
    3,264,512Net deferred tax liability
    
    $
    1,892,391
    
    
    $
    2,229,911
 Net deferred tax assets and liabilities are classified in the accompanying consolidated balance
sheets at September 30, 2010 and 2009, as follows:
 2010
    
    
    2009Current deferred tax assets
    
    $
    364,680
    
    
    $
    381,661Noncurrent deferred tax liability
    
    
    2,257,071
    
    
    
    2,611,572Net deferred tax liability
    
    $
    1,892,391
    
    
    $
    2,229,911
 As of September 30, 2010, the Company had federal and state net operating loss carryforwards of
approximately $2,253,000 and $1,883,000, respectively, for income tax purposes through 2029 for
federal and 2021 for state. The Company has federal and state tax credit carryforwards of
approximately $182,000 as of September 30, 2010.
 F-13




---



##### 



The components of income tax (benefit) expense are as follows:
 2010
    
    
    2009Current tax (benefit) expense:Federal
    
    $
    32,474
    
    
    $
    (460,805
    )State
    
    
    59,236
    
    
    
    7,148Total
    
    
    91,710
    
    
    
    (453,657
    )Deferred tax expense:Federal
    
    
    (325,230
    )
    
    
    10,459State
    
    
    (12,290
    )
    
    
    (104,967
    )Total
    
    
    (337,520
    )
    
    
    (94,508
    )Income tax (benefit) expense
    
    $
    (245,810
    )
    
    $
    (548,165
    )
 Income tax (benefit) expense varies from the amount determined by applying the applicable
statutory income tax rates to pretax income as follows:
 2010
    
    
    2009Federal income taxes computed at
statutory rates
    
    $
    (224,063
    )
    
    $
    (475,446
    )State income taxesnet of federal tax benefit
    
    
    30,985
    
    
    
    (64,560
    )Other nondeductibles
    
    
    5,291
    
    
    
    6,221Other
    
    
    (58,023
    )
    
    
    (14,380
    )Income tax (benefit) expense
    
    $
    (245,810
    )
    
    $
    (548,165
    )
 At September 30, 2010 and 2009, the Company had no material unrecognized tax benefits. The
Company files tax returns in all appropriate jurisdictions, which include a federal tax
return and all required state jurisdictions. Open tax years for all jurisdictions are fiscal
years ending September 30, 2008, 2009 and 2010.
 The Company recognizes interest and penalties related to uncertain tax positions as income
tax expense as incurred. No expense for interest and penalties was recognized for the years
ended September 30, 2010 and 2009.
 F-14




---



##### 



7.
    
    COMMITMENTS AND CONTINGENCIES
 LeasesThe Company leases facilities in Green Bay, Wisconsin, from a partnership composed of
certain current and former stockholders. In November 2006, the Company entered into a new lease
with the partnership that expires in March 2013, which is classified as an operating lease and
requires monthly rental payments of $17,070 which increase 1.65% every twelve months. Rental
expense under the related party lease totaled $213,402 for fiscal 2010 and $209,938 for fiscal
2009, respectively. On the expiration date there is an option for an additional five-year term
to be negotiated.
 The Company also leases other facilities and equipment under operating leases. Office and
warehouse leases expire on varying dates over the next five years.
 Future minimum rental commitments under operating leases with initial or remaining terms in
excess of one year at September 30, 2010, are as follows:
 2011
    
    $
    349,2662012
    
    
    335,2882013
    
    
    161,5462014
    
    
    19,3552015
    
    
    9,5072016
    
    
    1,584Total
    
    $
    876,546
 Rental expense for all operating leases totaled $1,002,684 and $1,639,545 for the years ended
September 2010 and 2009, respectively.
 LitigationThe Company is subject to lawsuits, investigations, and potential claims arising
out of the ordinary conduct of its business. The Company is not currently involved in any litigation.
 8.
    
    PROFIT SHARING SAVINGS AND INVESTMENT PLAN
 The Company has a defined contribution 401(k) plan covering substantially all employees. The
Company may make annual contributions at the discretion of the board of directors. In addition,
the Company may match certain amounts of an employees contribution. Expenses relating to the
defined contribution 401(k) plan totaled zero and $59,411 for fiscal 2010 and 2009,
respectively. The Company has currently suspended contributions to the plan.
 9.
    
    STOCKHOLDERS EQUITY
 Non-voting Common Stock and Preferred StockAt September 30, 2010 and 2009, the Company has
authorized and unissued 2,000,000 shares of $.01 par value non-voting common stock and
1,000,000 shares of $.01 par value preferred stock.
 Stock Repurchase PlanOn January 22, 2009, the Companys Board of Directors approved a further
extension of its February 2008 stock repurchase program through September 30, 2009 and an
increase in
the number of shares from 200,000 to 300,000. A total of 226,697 shares were purchased under
the plan through September 30, 2009. There was no stock repurchase program in fiscal year
2010.
 F-15




---



##### 



Stock Compensation ArrangementsThe 2003 Non-Qualified Stock Option Plan, the (2003 Plan)
reserves 300,000 shares of common stock for grants to selected employees through April 30,
2013, and provides that the price and exercise period be determined by the board of directors
which should be at least equal to fair value at the date of grant. Options vest primarily over
three years and expire 5 to 10 years from date of grant. During fiscal 2010, options to
purchase 37,000 shares of voting common stock were granted. No options were issued in fiscal
2009 under the 2003 Plan.
 The 2004 Non-Employee Director Stock Option Plan (2004 Plan) for non-employee members of the
board of directors reserves 150,000 shares of common stock for grants through March 2014 and
provides that the exercise price be at least equal to fair value at the date of grant. Options
are exercisable immediately and for a period of 10 years. During fiscal years 2010 and 2009,
options to purchase 18,000 and 18,000 shares, respectively, of voting common stock were granted
under the 2004 Plan.
 The Company estimates fair value on the date of grant using the Black-Scholes option valuation
model. The Company uses historical data regarding stock option exercise behaviors to estimate
the expected term of options granted based on the period of time that options granted are
expected to be outstanding. Compensation expense is recognized only on awards expected to vest.
Expected volatilities are based on the historical volatility of the Companys stock. The
expected dividend yield is based on the Companys historical dividend payments. The risk-free
interest rate is based on the U.S. Treasury yield curve in effect on the grant date for the
length of time corresponding to the expected term of the option.
 For the years ended September 30, 2010 and 2009, the total stock compensation expense
recognized by the Company was $76,807 and $46,796, respectively. There was $45,840 of
unrecognized compensation cost as of September 30, 2010, which will be recognized over a
remaining weighted average period of one to three years.
 F-16




---



##### 



WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at September 30, 2008
    
    
    323,150
    
    
    $
    6.62New grants
    
    
    18,000
    
    
    
    3.98Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (44,500
    )
    
    
    6.67Outstanding at September 30, 2009
    
    
    296,650
    
    
    $
    6.46New grants
    
    
    55,000
    
    
    
    3.55Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (9,000
    )
    
    
    10.00Outstanding at September 30, 2010
    
    
    342,650
    
    
    $
    5.90
    
    
    
    5.0
    
    
    $
    7,500Exercisable at September 30, 2010
    
    
    292,700
    
    
    $
    6.21
    
    
    
    4.3
    
    
    $
    0
  2010
    
    2009Risk-free interest rate
    
    
    0.63
    %
    
    
    0.90
    %Expected volatility
    
    
    124.9
    %
    
    
    113.7
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %Expected option life, standard option (years)
    
    
    2.7
    
    
    
    2.0
 In fiscal 2010 and 2009, no employee stock options were exercised. The aggregate
intrinsic value in the table above is based on the Companys closing stock price of $3.43 on
the last business day of the year ended September 30, 2010. The realized tax benefit is
recognized, when material, as an increase to additional paid-in capital or a decrease to income
tax expense with an offset to deferred tax assets, depending on the accumulation of windfalls
and shortfalls.
 10.
    
    RELATED-PARTY TRANSACTIONS
 The Company has an agreement with Bradford Ventures, Ltd., an affiliate of the two largest
stockholders of the Company, under which Bradford Ventures, Ltd. provides various financial and
management consulting services which was initially set to expire in January 2004, and is
thereafter automatically renewable on an annual basis if not terminated by either party. The
agreement calls for an annual fee of $210,000 with annual increases of 5% plus reimbursement of
reasonable out-of-pocket expenses. Consulting expense was $429,652 and $409,192 for fiscal 2010
and 2009, respectively.
 As discussed in footnote 7 Commitments and Contingencies, the Company leases facilities from
a partnership composed of current and former stockholders.
 F-17




---



##### 



11.
    
    MAJOR CUSTOMER AND SEGMENT INFORMATION
 Two significant customers of the Contract Manufacturing segment are multinational consumer
products companies with whom the Company has confidentiality and non-disclosure agreements,
accounted for the following percentage of total sales:
 2010
    
    2009Contract Manufacturing segmentCustomer A
    
    
    30
    %
    
    
    35
    %Customer B
    
    
    20
    %
    
    
    25
    %
 The current manufacturing contract with Customer A expires April 2012 and the current
manufacturing contract with Customer B expires June 2013.The Company operates in a single industry since it manufactures and distributes custom
paper-based and nonwoven products, and provides contract manufacturing, specialty printing and
related services on these types of products. The Company does, however, separate its operations
and prepares information for management use by the market segment aligned with the Companys
products and services. Corporate costs, such as interest income, interest expense and income
tax (benefit) expense are recorded under the Corporate and Other segment. Such market segment
information is summarized below. The Contract Manufacturing segment provides services to
multinational consumer products companies while the Business Imaging segment manufactures and
distributes printed and unprinted business imaging paper products for a variety of business
needs.Substantially all of the Companys revenues are attributed to domestic external customers.
There are no long-lived assets located outside of the United States.
 F-18




---



##### 



Contract
    
    
    Business
    
    
    CorporateFiscal 2010
    
    Manufacturing
    
    
    Imaging
    
    
    and Other
    
    
    ConsolidatedNet sales
    
    $
    66,237,969
    
    
    $
    24,375,882
    
    
    $
    
    
    
    $
    90,613,851Gross profit
    
    
    2,882,747
    
    
    
    2,023,906
    
    
    
    
    
    
    
    4,906,653Operating income (loss)
    
    
    1,287,323
    
    
    
    751,190
    
    
    
    (2,547,506
    )
    
    
    (508,993
    )Depreciation and amortization
expense
    
    
    2,548,270
    
    
    
    165,131
    
    
    
    2,012
    
    
    
    2,715,413Capital expenditures
    
    
    2,027,701
    
    
    
    86,105
    
    
    
    
    
    
    
    2,113,806Assets:Inventories
    
    $
    11,096,525
    
    
    $
    3,233,332
    
    
    $
    
    
    
    $
    14,329,857Property, plant, and
equipmentnet
    
    
    16,798,025
    
    
    
    1,839,374
    
    
    
    2,864
    
    
    
    18,640,263Accounts receivable and other
(including goodwill)
    
    
    15,333,831
    
    
    
    6,246,288
    
    
    
    524,874
    
    
    
    22,104,993Total assets
    
    $
    43,228,381
    
    
    $
    11,318,994
    
    
    $
    527,738
    
    
    $
    55,075,113
 Contract
    
    
    Business
    
    
    CorporateFiscal 2009
    
    Manufacturing
    
    
    Imaging
    
    
    and Other
    
    
    ConsolidatedNet sales
    
    $
    63,901,520
    
    
    $
    22,874,244
    
    
    $
    
    
    
    $
    86,775,764Gross profit
    
    
    2,360,286
    
    
    
    1,426,739
    
    
    
    
    
    
    
    3,787,025Operating income (loss)
    
    
    1,049,200
    
    
    
    145,266
    
    
    
    (2,496,252
    )
    
    
    (1,301,786
    )Depreciation and amortization
expense
    
    
    2,198,440
    
    
    
    207,045
    
    
    
    2,374
    
    
    
    2,407,859Capital expenditures
    
    
    2,228,576
    
    
    
    34,972
    
    
    
    
    
    
    
    2,263,548Assets:Inventoriesnet
    
    $
    8,642,397
    
    
    $
    2,002,771
    
    
    $
    
    
    
    $
    10,645,168Property, plant, and
equipmentnet
    
    
    15,969,177
    
    
    
    1,918,400
    
    
    
    4,876
    
    
    
    17,892,453Accounts receivable and other
(including goodwill)
    
    
    12,334,332
    
    
    
    6,200,035
    
    
    
    1,118,581
    
    
    
    19,652,948Total assets
    
    $
    36,945,906
    
    
    $
    10,121,206
    
    
    $
    1,123,457
    
    
    $
    48,190,569
 F-19