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UNITED STATES SECURITIES AND EXCHANGE COMMISSION  FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 30, 2004 Commission File Number 0-2762 MAXCO, INC. (Exact Name of Registrant as Specified in its Charter)
 Michigan
    
    38-1792842(State or other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification Number)
 1118 Centennial WayLansing, Michigan
    
    48917(Address of principal executive offices)
    
    (Zip Code)
 Registrants Telephone Number, including area code: (517) 321-3130 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 þ No o Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes o No þ Indicate the number of shares outstanding for each of the issuers classes of
common stock, as of the latest practicable date. Class
    
    Outstanding at July 31, 2004Common Stock
    
    3,101,195 shares




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TABLE OF CONTENTS  PART I FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSCONDENSED CONSOLIDATED BALANCE SHEETSCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. DISCLOSURE CONTROLS AND PROCEDURESPART II OTHER INFORMATIONItem 1. Legal ProceedingsItem 2. Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity SecuritiesItem 3. Defaults Upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6(a) ExhibitsItem 6(b) Reports on Form 8-KSIGNATURESEXHIBIT INDEXCertification of Chief Executive Officer pursuant to Section 302Certification of Chief Financial Officer pursuant to Section 302Certification of Chief Executive Officer pursuant to 18 U.S.C.Certification of Chief Financial Officer pursuant to 18 U.S.C.    Table of Contents  
 PART I
FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS 
 CONDENSED CONSOLIDATED BALANCE SHEETS
Maxco, Inc. and Subsidiaries June 30,
    
    March 31,2004
    
    2004(Unaudited)(in thousands)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    859
    
    
    $
    78Accounts and notes receivable, less allowance of
$140,000 ($134,000 at March 31, 2004)
    
    
    5,930
    
    
    
    7,629InventoriesNote 9
    
    
    245
    
    
    
    408Prepaid expenses and other
    
    
    313
    
    
    
    429Total Current Assets
    
    
    7,347
    
    
    
    8,544Marketable SecuritiesNote 2
    
    
    2
    
    
    
    2Property and EquipmentLand
    
    
    446
    
    
    
    446Buildings
    
    
    6,171
    
    
    
    6,170Machinery, equipment, and fixtures
    
    
    29,188
    
    
    
    29,06835,805
    
    
    
    35,684Allowances for depreciation
    
    
    (15,997
    )
    
    
    (15,265
    )19,808
    
    
    
    20,419Other AssetsInvestments
    
    
    1,138
    
    
    
    1,138Notes and contracts receivable and other, less allowance
of $0 at June 30, 2004 ($350,000 at March 31, 2004)
    
    
    1,038
    
    
    
    1,338Advances to affiliate
    
    
    2,200
    
    
    
    2,200Accounts receivable, related partiesNote 11
    
    
    416
    
    
    
    416Intangibles
    
    
    1,424
    
    
    
    1,4246,216
    
    
    
    6,516$
    33,373
    
    
    $
    35,481
 2




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CONDENSED CONSOLIDATED BALANCE SHEETS  CONTINUED
Maxco, Inc. and Subsidiaries June 30,
    
    March 31,2004
    
    2004(Unaudited)(in thousands)LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesNotes payableNote 6
    
    $
    3,931
    
    
    $
    4,885Accounts payable
    
    
    4,041
    
    
    
    4,221Employee compensation
    
    
    1,579
    
    
    
    1,525Taxes, interest, and other liabilities
    
    
    3,434
    
    
    
    3,585Current maturities of long-term obligations
    
    
    4,949
    
    
    
    2,064Total Current Liabilities
    
    
    17,934
    
    
    
    16,280Long-Term Obligations, Less Current Maturities
    
    
    7,551
    
    
    
    11,480Total Liabilities
    
    
    25,485
    
    
    
    27,760Stockholders EquityPreferred stock:Series Three: 10% cumulative redeemable, $60 face
value; 14,784 shares issues and outstanding
    
    
    678
    
    
    
    678Series Four: 10% cumulative redeemable, $51.50 face
value; 46,414 shares issues and outstanding
    
    
    2,390
    
    
    
    2,390Series Five: 10% cumulative redeemable, $120 face
value; 6,648 shares issues and outstanding
    
    
    798
    
    
    
    798Series Six: 10% cumulative callable, $160 face
value; 20,000 shares authorized, issued  none
    
    
    
    
    
    
    3,866
    
    
    
    3,866Common stock, $1 par value; 10,000,000 shares
authorized, 3,101,195 shares issued and outstanding
    
    
    3,101
    
    
    
    3,101Accumulated comprehensive loss
    
    
    (108
    )
    
    
    (172
    )Retained earnings
    
    
    1,029
    
    
    
    926Total Stockholders Equity
    
    
    7,888
    
    
    
    7,721$
    33,373
    
    
    $
    35,481
 See notes to consolidated financial statements 3




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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Maxco, Inc. and Subsidiaries
(Unaudited) Three Months Ended June 30,2004
    
    2003(in thousands, except per share data)Net Sales
    
    $
    11,367
    
    
    $
    9,573Costs and Expenses:Cost of sales and operating expenses
    
    
    7,370
    
    
    
    6,152Selling, general and administrative
    
    
    2,778
    
    
    
    2,809Depreciation and amortization
    
    
    744
    
    
    
    75110,892
    
    
    
    9,712Operating Earnings (Loss)
    
    
    475
    
    
    
    (139
    )Other Income (Expense)Investment, interest, and other income (loss), net
    
    
    135
    
    
    
    (246
    )Gain on sale of assets
    
    
    1
    
    
    
    910Interest expense
    
    
    (407
    )
    
    
    (403
    )Net Income
    
    
    204
    
    
    
    122Less preferred stock dividends
    
    
    (102
    )
    
    
    (102
    )Net Income Applicable to Common Stock
    
    $
    102
    
    
    $
    20Net Income Per Common ShareBasic and Diluted
    
    $
    0.03
    
    
    $
    0.01
 See notes to consolidated financial statements 4




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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Maxco, Inc. and Subsidiaries
(Unaudited) Three Months Ended June 30,2004
    
    2003(in thousands)Operating
ActivitiesNet income
    
    $
    204
    
    
    $
    122Adjustments to reconcile net income to net cash
provided by operating activities:Net gains
    
    
    (1
    )
    
    
    (627
    )Depreciation and amortization
    
    
    744
    
    
    
    751Changes in operating assets and liabilities
    
    
    948
    
    
    
    1,714Net Cash Provided By Operating Activities
    
    
    1,895
    
    
    
    1,960Investing ActivitiesCollections on notes receivable
    
    
    993
    
    
    
    Purchases of property and equipment
    
    
    (131
    )
    
    
    (179
    )Proceeds from sale of assets
    
    
    
    
    
    
    939Other
    
    
    16
    
    
    
    (6
    )Net Cash Provided By Investing Activities
    
    
    878
    
    
    
    754Financing ActivitiesProceeds from new debt obligation
    
    
    2,700
    
    
    
    Net repayments on line of credit
    
    
    (941
    )
    
    
    (1,414
    )Net repayments on other debt obligations
    
    
    (3,751
    )
    
    
    (1,221
    )Net Cash Used In Financing Activities
    
    
    (1,992
    )
    
    
    (2,635
    )Increase in Cash and Cash Equivalents
    
    
    781
    
    
    
    79Cash and Cash Equivalents at Beginning of Period
    
    
    78
    
    
    
    391Cash and Cash Equivalents at End of Period
    
    $
    859
    
    
    $
    470Supplemental cash flows disclosure:Interest paid
    
    $
    227
    
    
    $
    183See notes to consolidated financial statements
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Maxco, Inc. and Subsidiaries
June 30, 2004
(Unaudited) NOTE 1  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited, condensed, consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and notes required by accounting principles
generally accepted in the United States for complete financial statements.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation of the
results of the interim periods covered have been included. For further
information, refer to the consolidated financial statements and notes thereto
included in Maxcos annual report on Form 10-K for the year ended March 31,
2004. The results of operations for the interim periods presented are not
necessarily indicative of the results for the full year. Maxcos sales and
operating results have varied substantially from quarter to quarter. Net
sales are typically lower in the second and third quarters. The most
significant factors affecting these fluctuations are the seasonal buying
patterns of the Companys customers due to a customer changeover 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. NOTE 2  MARKETABLE SECURITIES The Company classifies its investments in equity securities with readily
determinable fair values as securities available for sale under FASB 115,
Accounting for Certain Investments in Debt and Equity Securities.
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. NOTE 3  EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings
per share: Three Months EndedJune 30,2004
    
    2003(in thousands, except per share data)NUMERATOR:Net income
    
    
    204
    
    
    
    122Preferred stock dividends
    
    
    (102
    )
    
    
    (102
    )Numerator for basic and diluted earnings per share
income available to common stockholders
    
    $
    102
    
    
    $
    20DENOMINATOR:Denominator for basic and diluted earnings per
shareweighted average shares
    
    
    3,101
    
    
    
    3,101BASIC AND DILUTED EARNINGS PER SHARE
    
    $
    0.03
    
    
    $
    0.01
 6




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NOTE 4  COMPREHENSIVE INCOME The components of comprehensive income for the three months ended June 30,
2004 and 2003 are as follows: Three Months EndedJune 30,2004
    
    2003(in thousands)Net income
    
    $
    204
    
    
    $
    122Unrealized gain on swap agreement
    
    
    64
    
    
    
    Comprehensive income
    
    $
    268
    
    
    $
    122
 Accumulated comprehensive loss, net of related tax at June 30, 2004 and March
31, 2004 consists of an unrealized loss on an interest rate swap agreement. NOTE 5  INDUSTRY SEGMENT INFORMATION The following summarizes Maxcos industry segment information: June 30,
    
    March 31,2004
    
    2004(in thousands)Identifiable Assets:Heat treating
    
    $
    27,782
    
    
    $
    29,472Corporate and other
    
    
    2,253
    
    
    
    2,671Investments and advances
    
    
    3,338
    
    
    
    3,338Total Identifiable Assets
    
    $
    33,373
    
    
    $
    35,481
 Three Months EndedJune 30,2004
    
    2003(in thousands)Net Sales:Heat treating
    
    $
    11,367
    
    
    $
    9,573Corporate and other
    
    
    
    
    
    
    Total Net Sales
    
    $
    11,367
    
    
    $
    9,573Operating Earnings (Loss):Heat treating
    
    $
    963
    
    
    $
    452Corporate and other
    
    
    (488
    )
    
    
    (591
    )Total Operating Earnings (Loss)
    
    $
    475
    
    
    $
    (139
    )Depreciation and Amortization Expense:Heat treating
    
    $
    736
    
    
    $
    743Corporate and other
    
    
    8
    
    
    
    8Total Depreciation and Amortization Expense
    
    $
    744
    
    
    $
    751Capital Expenditures:Heat treating
    
    $
    131
    
    
    $
    179Corporate and other
    
    
    
    
    
    
    Total Capital Expenditures
    
    $
    131
    
    
    $
    179
 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 or export sales. The nature of the Companys services may produce sales to one or a small
number of customers in excess of 10% of total sales in any one period. It is
possible that the specific customers reaching this threshold may change from
year to year. Loss of any one of these customers could have a material
impact on the Companys results of operations. 7




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NOTE 6  DEBT At June 30, 2004 the Companys heat treating segment, Atmosphere Annealing
(Atmosphere), had a $6 million line of credit facility. This facility is
secured by Atmospheres assets. The amount that can be borrowed under this
facility is dependent on certain accounts receivable levels at Atmosphere.
At June 30, 2004, based on these specific collateral levels, Atmosphere could
borrow up to $3.5 million under its line of credit, approximately $1.6
million of which was borrowed. The agreement matures in November 2004 and,
as such, outstanding borrowings are recorded as current in the accompanying
balance sheets. A summary of the Companys debt obligations as of June 30, 2004 and March 31,
2004 is as follows: June 30,
    
    March 31,2004
    
    2004(in thousands)Short term obligations:Notes payable (various interest rates)
    
    $
    2,319
    
    
    $
    2,333Revolving
line of credit (LIBOR1 + 2.25%)
    
    
    1,612
    
    
    
    2,552$
    3,931
    
    
    $
    4,885Long term obligations:Term notes (various variable interest rates)
    
    $
    9,763
    
    
    $
    6,720Mortgage
note payable (prime1 plus 1.75%)
    
    
    
    
    
    
    218Equipment purchase contracts and capitalized
lease obligations (various interest rates)
    
    
    2,353
    
    
    
    4,581Subordinated debt (fixed rate of 10.00%)
    
    
    384
    
    
    
    2,02512,500
    
    
    
    13,544Less current maturities
    
    
    4,949
    
    
    
    2,064$
    7,551
    
    
    $
    11,480
 1
At June 30, 2004 the London Interbank Offered Rate
(LIBOR) was 1.125% and the prime rate was 4.25%. In May 2004, the Company reached an agreement with a new financial
institution to repay lenders with which the Company was in default. The
principal amount repaid was approximately $2.3 million. The new debt
facility of $2.7 million requires interest only payments for one year and
matures in May 2005. The remaining proceeds of approximately $400,000 were
used for working capital requirements. Maxco has provided the guarantee of various debt obligations of certain real
estate and other investments in an aggregate amount of approximately $3.0
million as of June 30, 2004. Certain of the debt agreements related to its
real estate investments, which Maxco and other guarantors have guaranteed,
are in default at June 30, 2004. An extension has been issued by one of the
banks and the applicable entities are currently working to liquidate the
properties to satisfy the requirements of the lenders. The Company does not
believe that there is any unusual degree of risk related to the guarantees
because of sufficient underlying asset values supporting the respective debt
obligations. Maxco and other interested parties, as guarantors, have reached agreements
with two lenders. As a result, Maxcos guarantee exposure under these
agreements is limited to $257,000. The current estimate of the actual
exposure under these agreements is $232,000 which the Company has recorded in
the accompanying financial statements. Additionally, the Company has
recorded an additional $85,000 related to the anticipated exposure under
another real estate guarantee. The accompanying financial statements have been prepared on the basis that
the Company will continue as a going concern which contemplates the
realization of assets and the satisfaction of liabilities in the normal
course of business. Although there is concern about the Companys ability to
operate as a going concern due to current debt service requirements and
recurring losses, Management believes it has substantially reduced the risk
as debt previously in 8




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default has been refinanced and the Companys
exposures relative to outstanding guarantees have been significantly reduced.
The Companys ability to meet its short term and long term debt service and
other obligations (including compliance with financial covenants) will
continue to be dependent upon its future operating performance. This
dependency will be subject to financial, business and other factors, certain
of which, such as prevailing economic conditions, are beyond the Companys
control. The Company believes that funds generated by its operations, funds
available under its credit facilities, and funds that could be available
under other credit facilities will be sufficient to finance near term capital
needs, as well as to fund existing operations for the reasonably foreseeable
future. Additionally the Company has long term equity investments that could
be liquidated to meet its debt service requirements. NOTE 7  FEDERAL INCOME TAXES The Company assumed the utilization of net operating loss carryforwards to
offset taxable income in the first quarter of fiscal 2004. NOTE 8  PREFERRED STOCK DIVIDENDS Effective January 1, 2002, the Maxco Board of Directors suspended the payment
of dividends on all preferred stock. These dividend payments have been
accrued in the accompanying financial statements and totaled approximately
$1.1 million at June 30, 2004. NOTE 9  INVENTORIES Inventories are stated at the lower of first-in, first-out cost or market and
consisted of the following: June 30,
    
    March 31,2004
    
    2004(in thousands)Raw materials
    
    $
    97
    
    
    $
    174Work in progress
    
    
    78
    
    
    
    190Finished goods
    
    
    70
    
    
    
    44$
    245
    
    
    $
    408
 NOTE 10  ADVANCES TO AFFILIATE (SALE OF REAL ESTATE PORTFOLIO) Maxco has ownership interests ranging from 25-50% in primarily two LLCs
which have been involved in the development and ownership of real estate in
central Michigan. Effective January 1, 2000, a Master LLC (L/M Associates
II) was formed consisting of the majority of the stabilized buildings in
which Maxco and others had an ownership interest. At June 30, 2004 Maxcos
effective ownership interest in the Master LLC was approximately 31%. The
other LLC (L/M Associates) includes properties that are not fully leased or
individual properties not included in the Master LLC. In early 2002, Maxco, as managing member of L/M Associates, which is the
managing member of L/M Associates II, began negotiations to sell
substantially all of the properties in the real estate portfolio of L/M
Associates II. In June 2002, L/M Associates II entered into an agreement to
sell the properties within the Master LLC to an outside investor. The
transaction was approved by more than 75% of the member interests in July
2002. This transaction was completed in January 2003. As part of this
transaction, L/M Associates agreed to reinvest a portion of its
distributable share of the proceeds to acquire approximately a 16% interest
in the acquiring entity. By agreement, this investment may be repurchased by
a member of the acquiring entity. However, pursuant to the agreement, in
July 2004, L/M Associates exercised its option to require the same member to
repurchase the investment. The member has 60 days to respond. Any real risks or guarantees that Maxco would be required to satisfy is
estimated at $233,000 and has been recorded in the accompanying financial
statements and Maxcos investment has been adjusted to the net realizable
value of the remaining assets. Impairment charges totaling $749,000 and $4.7
million were recognized during the years ended March 31, 2004 and 2003,
respectively, to further reduce the carrying value of the Companys
investment in real estate to the estimated net realizable value. This real estate investment is discontinued and Maxco is actively pursuing
its liquidation. 9




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NOTE 11  ACCOUNTS RECEIVABLE AND PAYABLERELATED PARTIES Accounts receivable, related parties consists primarily of unsecured cash
advances to officers, stockholders, and affiliates. Certain of the amounts
are non-interest bearing. The ultimate settlement of the balances is
generally expected to be made in cash, although not necessarily within the
next year. Included in accounts payable is $128,000 at both June 30, 2004 and March 31,
2004, which is due to entities in which Company President Max A. Coon has an
interest. 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS MATERIAL CHANGES IN FINANCIAL CONDITION Cash provided by operating activities amounted to $1.9 million for the three
months. Earnings, after non-cash adjustments, generated $947,000 while changes
in working capital components generated $948,000. Cash was generated by investing activities during the period from the receipt
of payments on certain notes receivable, primarily $950,000 from the purchaser
of the Companys formerly wholly owned subsidiary, Wright Plastic Products.
These proceeds were used primarily for working capital requirements. The
Companys heat treating segment purchased approximately $131,000 of equipment
during the quarter. In May 2004, the Company reached an agreement with a new financial institution
to repay lenders with which the Company was in default. The new debt facility
of $2.7 million requires interest only payments for one year and matures in May
2005. Atmosphere Annealing repaid $941,000 on its line of credit during the
quarter. Net repayments on other debt obligations amounted to $3.8 million for
the three month period. Overall, the Companys working capital deficit (defined as current assets less
current liabilities) increased from $7.7 million at March 31, 2004 to $10.6
million at June 30, 2004. This is primarily due to the fact that $2.7 million
of debt became due within one year during the current quarter. While this debt
is due in May 2005, the Company anticipates it will be able to extend the
maturity date. The Companys ability to meet its short term and long term debt service and
other obligations (including compliance with financial covenants) will continue
to be dependent upon its future operating performance. This dependency will be
subject to financial, business and other factors, certain of which, such as
prevailing economic conditions, are beyond the Companys control. The Company
believes that funds generated by its operations, funds available under its
credit facilities, and funds that could be available under other credit

facilities will be sufficient to finance near term capital needs, as well as to
fund existing operations for the reasonably foreseeable future. Additionally
the Company has long term equity investments that could be liquidated to meet
its debt service requirements. At June 30, 2004, the 2,240,605 shares of Integral Vision (formerly Medar)
common stock that Maxco owns had an aggregate market value of approximately
$3.9 million. Maxcos investment in Integral Vision is reflected in Maxcos
financial statements under the equity method for all periods presented as the
Company maintains representation on Integral Visions Board of Directors. At June 30, 2004, the 2,837,089 shares of Provant common stock that Maxco owns
had an aggregate market value of approximately $57,000. Maxcos investment in
Provant is reflected in Maxcos financial statements under the cost method as
an available-for-sale security as the Company owns less than 20% of Provants
outstanding stock. 10




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RESULTS OF OPERATIONS Three Months Ended June 30, 2004 Compared to 2003 Net sales increased to $11.4 million compared to $9.6 million in last years
first quarter. First quarter results reflect operating earnings of $475,000
compared to a loss of $139,000 for the comparable period in 2003. Net income
was $204,000 or $.03 per share after preferred dividends assuming dilution
compared to last years net income of $122,000 or $.01 per share after
preferred dividends assuming dilution. Sales and operating earnings for the three months ending June 30, 2004 and 2003
by the Companys heat treating and corporate and other segments were as
follows: Three Months Ended
    
    Three Months EndedJune 30, 2004
    
    June 30, 2003Operating
    
    
    
    
    
    OperatingNet Sales
    
    Earnings (Loss)
    
    Net Sales
    
    Earnings (Loss)(in thousands)Heat treating
    
    $
    11,367
    
    
    $
    963
    
    
    $
    9,573
    
    
    $
    452Corporate and other
    
    
    
    
    
    
    (488
    )
    
    
    
    
    
    
    (591
    )$
    11,367
    
    
    $
    475
    
    
    $
    9,573
    
    
    $
    (139
    )
 The increase in net sales of $1.8 million at the Companys heat treating
segment, Atmosphere Annealing (Atmosphere), was due to increased business with
Honda of America Manufacturing, Inc. An expanded customer base also
contributed to the increase in sales. Consolidated gross profit (net sales less cost of sales and operating expenses)
increased to $4.0 million from $3.4 million. Gross margin (gross profit as a
percentage of sales) decreased to 35% from 36%. The increase in sales at
Atmosphere was the primary reason that gross profit increased over the prior
year. However, gross margin decreased primarily as a result of the increased
sales to Honda. By agreement, the Company is required to purchase and bill
Honda for the steel used in the heat treating process resulting in lower
margins. Atmosphere experienced increases in the costs of labor of $147,000
and maintenance of $94,000. Other general factory expenses at Atmosphere
decreased $28,000. Selling, general, and administrative and depreciation and amortization expenses
were comparable to the prior year. As a result of the above, operating earnings increased to $475,000 from a loss
of $139,000 in the prior year. Investment, interest, and other income (loss), net increased from a loss of
$246,000 to income of $135,000. Atmosphere received a discount of $94,000 as a
result of paying off a note in the quarter. In the prior year quarter, the
Company recorded a charge of $283,000 as an other than temporary impairment to
the value of its investment in Provant. Gain on sale of assets includes $910,000 for a gain on sale of land in the
prior year quarter. 
 ITEM 3. 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. While approximately $4.8 million of
Maxcos debt carries a fixed rate of interest, the Company entered into an
interest rate swap agreement based on a notional amount of $2.7 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 short and long term
borrowings of $11.6 million at June 30, 2004. A 1%
increase from the prevailing interest rates at June 30, 2004 on the unhedged
variable rate portion of the Companys short and long-term borrowings would
increase interest expense on an annualized basis by approximately $116,000
based on principal balances at June 30, 2004. The Companys heat treating segment experiences fluctuations in the price of
natural gas used in the heat treating process. To the extent feasible in light
of competitive factors, the Company has offset these fluctuations through
selective price adjustments. 
 ITEM 4. DISCLOSURE CONTROLS AND PROCEDURES The Companys Chief Executive Officer and Chief Financial Officer believe
Maxcos disclosure controls and procedures, as defined in Securities Exchange
Act Rules 13a-15(e) and 15d-15(e), are effective. This conclusion was reached
after an evaluation of these controls and procedures as of June 30, 2004. 11




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##### Table of Contents



PART II
OTHER INFORMATION 
 Item 1. Legal Proceedings None 
 Item 2. Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities None 
 Item 3. Defaults Upon Senior Securities None 
 Item 4. Submission of Matters to a Vote of Security Holders None 
 Item 5. Other Information The annual meeting of shareholders is delayed more than 30 days later
than it is traditionally held. An announcement will be made when the
date is determined. 
 Item 6(a)       Exhibits 3
    
    Restated Articles of Incorporation are hereby incorporated 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 and
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
registrants annual report on Form 10-K for the fiscal year ended March
31, 1988.10.11
    
    Asset purchase agreement for the purchase of Atmosphere Annealing, Inc.
is hereby incorporated by reference from Form 8-K dated January 17, 1997.
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##### Table of Contents



10.12
    
    Asset Purchase Agreement  Axson North America Inc. is hereby
incorporated by reference from registrants Form 10-Q dated February 14,
1997.10.18
    
    Maxco, Inc. 1998 Employee Stock Option Plan is hereby incorporated by
reference from Form 10-Q dated November 12, 1998.10.29
    
    Obligor assignment agreement among Contractor Supply Incorporated,
Maxco, Inc., and Ersco Corporation dated November 14, 2002 is hereby
incorporated by reference from Form 10-Q dated November 25, 2002.10.30
    
    Stock purchase agreement between Ersco Corporation, Maxco, Inc., and
Contractor Supply Incorporated dated November 14, 2002 is hereby
incorporated by reference from Form 10-Q dated November 25, 2002.10.31
    
    Asset Purchase Agreement between Pak Sak Industries, Inc., Maxco, Inc.,
P-S Business Acquisition, Inc., and P&D Real Estate, LLC and Packaging
Personified, Inc. dated September 27, 2002 is hereby incorporated by
reference from Form 10-Q dated February 14, 2003.10.32
    
    First Amendment to Asset Purchase Agreement between Pak Sak Industries,
Inc., Maxco, Inc., P-S Business Acquisition, Inc., and P&D Real Estate,
LLC and Packaging Personified, Inc. dated October 30, 2002 is hereby
incorporated by reference from Form 10-Q dated February 14, 2003.10.33
    
    Second Amendment to Asset Purchase Agreement between Pak Sak Industries,
Inc., Maxco, Inc., P-S Business Acquisition, Inc., and P&D Real Estate,
LLC and Packaging Personified, Inc. dated November 25, 2002 is hereby
incorporated by reference from Form 10-Q dated February 14, 2003.10.34
    
    Credit Agreement between Atmosphere Annealing, Inc. and Huntington
National Bank dated November 18, 2003 is hereby incorporated by reference
from Form 10-Q dated November 19, 2003.10.35
    
    Subordination Agreement between Maxco, Inc., Atmosphere Annealing, Inc.
and Comerica Bank and Huntington National Bank dated November 18, 2003 is
hereby incorporated by reference from Form 10-Q dated November 19, 2003.10.36
    
    Incentive agreement between Sanjeev Deshpande and Maxco, Inc. dated
April 20, 2004 is hereby incorporated by reference from Form 10-K dated
July 13, 2004.10.37
    
    Business Loan Agreement between Capitol National Bank and Maxco, Inc.
dated May 28, 2004 is hereby incorporated by reference from Form 10-K
dated July 13, 2004.31.1
    
    Certification of Chief Executive Officer of periodic report pursuant to
Rule 13a-15(e) or Rule 15d-15(e).31.2
    
    Certification of Chief Financial Officer of periodic report pursuant to
Rule 13a-15(e) or Rule 15d-15(e).32.1
    
    Certification of Chief Executive Officer of periodic report pursuant to 18 U.S.C. §1350.32.2
    
    Certification of Chief Financial Officer of periodic report pursuant to 18 U.S.C. §1350.
 
 Item 6(b)       Reports on Form 8-K None 13




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SIGNATURES Pursuant to the requirements 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. MAXCO, INC.Date: August 16, 2004
    
    /s/ VINCENT SHUNSKYVincent Shunsky, Vice President-Financeand Treasurer (Principal Financial andAccounting Officer)
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##### Table of Contents



EXHIBIT INDEX EXHIBIT NO.
    
    DESCRIPTION31.1
    
    Certification of Chief Executive Officer of periodic report pursuant to
Rule 13a-15(e) or Rule 15d-15(e).31.2
    
    Certification of Chief Financial Officer of periodic report pursuant to
Rule 13a-15(e) or Rule 15d-15(e).32.1
    
    Certification of Chief Executive Officer of periodic report pursuant to
 18 U.S.C. § 1350.32.2
    
    Certification of Chief Financial Officer of periodic report pursuant to
 18 U.S.C. § 1350.