TABLE OF CONTENTS




|                                                                                      |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|PART I                                                                               
|FINANCIAL INFORMATION                                                                
|CONSOLIDATED BALANCE SHEETS                                                          
|CONSOLIDATED STATEMENTS OF OPERATIONS (CONDENSED)                                    
|CONSOLIDATED STATEMENTS OF OPERATIONS (CONDENSED)                                    
|CONSOLIDATED STATEMENTS OF CASH FLOWS (CONDENSED)                                    
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)                               
|MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|PART II                                                                              
|SIGNATURES                                                                           
|EXHIBIT INDEX                                                                        



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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED DECEMBER 31, 1999

Commission File Number 0-2762

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

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

|                                                                               |  |                 
|------------------------------------------------------------------------------ |  | ----------------
|1118 Centennial Way
Lansing, Michigan
(Address of principal executive offices) |  | 48917
(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 12 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.

|     |   
|---- | --
|YesX | No

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 January 31, 2000
|             |  |                                
|Common Stock |  | 3,151,195 shares               

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##### Table of Contents









PART I







FINANCIAL INFORMATION







CONSOLIDATED BALANCE SHEETS

MAXCO, INC. AND SUBSIDIARIES

|                                  |                                                                                        |                      |         |                |        |           |        |         |        | 
|--------------------------------- | -------------------------------------------------------------------------------------- | -------------------- | ------- | -------------- | ------ | --------- | ------ | ------- | ------ | 
|                                  |                                                                                        |                      |         | December 31,  
|                                  |                                                                                        |                      |         | 1999           |        | March 31,
|                                  |                                                                                        |                      |         | (Unaudited)    |        | 1999     
|                                  |                                                                                        |                      |         |                |        |          
|                                  |                                                                                        |                      |         | (in thousands)
|ASSETS                           
|                                 
|                                 
|                                 
|                                 
|CURRENT ASSETS                   
|                                 
|                                 
|                                 
|                                 
|                                  | Cash and cash equivalents                                                              |                      | $       | 1,153          |        |           | $      | 1,122   |       
|                                 
|                                 
|                                 
|                                 
|                                  | Accounts and notes receivable, less allowance of
$419,000 ($558,000 at March 31, 1999) |                      |         | 24,133         |        |           |        | 19,814  |       
|                                 
|                                 
|                                 
|                                 
|                                  | Inventories                                                                            |                      |         | 8,323          |        |           |        | 5,010   |       
|                                 
|                                 
|                                 
|                                 
|                                  | Prepaid expenses and other                                                             |                      |         | 1,071          |        |           |        | 608     |       
|                                  |                                                                                        |                      |         |                |        |           |        |        
|                                  |                                                                                        | TOTAL CURRENT ASSETS |         |                | 34,680 |           |        |         | 26,554 | 
|                                 
|                                 
|                                 
|                                 
|MARKETABLE SECURITIES  LONG TERM |                                                                                        |                      | 8,545   |                |        |           | 2,501  |        
|                                 
|                                 
|                                 
|                                 
|PROPERTY AND EQUIPMENT           
|                                 
|                                 
|                                 
|                                 
|                                  | Land                                                                                   |                      |         | 732            |        |           |        | 732     |       
|                                 
|                                 
|                                 
|                                 
|                                  | Buildings                                                                              |                      |         | 12,367         |        |           |        | 11,152  |       
|                                 
|                                 
|                                 
|                                 
|                                  | Machinery, equipment, and fixtures                                                     |                      |         | 39,119         |        |           |        | 30,814  |       
|                                  |                                                                                        |                      |         |                |        |           |        |        
|                                  |                                                                                        |                      | 52,218  |                |        |           | 42,698 |        
|                                 
|                                 
|                                 
|                                 
|                                  | Allowances for depreciation                                                            |                      |         | (13,931        | )      |           |        | (10,799 | )     
|                                  |                                                                                        |                      |         |                |        |           |        |        
|                                  |                                                                                        |                      | 38,287  |                |        |           | 31,899 |        
|                                 
|                                 
|                                 
|                                 
|OTHER ASSETS                     
|                                 
|                                 
|                                 
|                                 
|                                  | Investments                                                                            |                      |         | 14,444         |        |           |        | 16,144  |       
|                                 
|                                 
|                                 
|                                 
|                                  | Notes and contracts receivable and other                                               |                      |         | 4,435          |        |           |        | 3,996   |       
|                                 
|                                 
|                                 
|                                 
|                                  | Intangibles                                                                            |                      |         | 4,310          |        |           |        | 4,336   |       
|                                  |                                                                                        |                      |         |                |        |           |        |        
|                                  |                                                                                        |                      | 23,189  |                |        |           | 24,476 |        
|                                  |                                                                                        |                      |         |                |        |           |        |        
|                                  |                                                                                        | $                    | 104,701 |                |        | $         | 85,430 |        
|                                  |                                                                                        |                      |         |                |        |           |        |        

2



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##### Table of Contents



|                                               |                                                           |                                                                                                                          |                           |        |                |        |           |        |       |        | 
|---------------------------------------------- | --------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ | ------------------------- | ------ | -------------- | ------ | --------- | ------ | ----- | ------ | 
|                                               |                                                           |                                                                                                                          |                           |        | December 31,  
|                                               |                                                           |                                                                                                                          |                           |        | 1999           |        | March 31,
|                                               |                                                           |                                                                                                                          |                           |        | (Unaudited)    |        | 1999     
|                                               |                                                           |                                                                                                                          |                           |        |                |        |          
|                                               |                                                           |                                                                                                                          |                           |        | (in thousands)
|LIABILITIES AND STOCKHOLDERS EQUITY          
|                                              
|                                              
|                                              
|                                              
|CURRENT LIABILITIES                           
|                                              
|                                              
|                                              
|                                              
|                                               | Notes payable                                             |                                                                                                                          | $                         | 226    |                |        | $         | 226    |      
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts payable                                          |                                                                                                                          |                           | 10,292 |                |        |           | 10,489 |      
|                                              
|                                              
|                                              
|                                              
|                                               | Employee compensation                                     |                                                                                                                          |                           | 2,595  |                |        |           | 2,192  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Taxes, interest, and other liabilities                    |                                                                                                                          |                           | 2,173  |                |        |           | 1,726  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Current maturities of long-term obligations               |                                                                                                                          |                           | 4,010  |                |        |           | 2,063  |      
|                                               |                                                           |                                                                                                                          |                           |        |                |        |           |       
|                                               |                                                           |                                                                                                                          | TOTAL CURRENT LIABILITIES |        |                | 19,296 |           |        |       | 16,696 | 
|                                              
|                                              
|                                              
|                                              
|LONG-TERM OBLIGATIONS, less current maturities |                                                           |                                                                                                                          | 44,036                    |        |                |        | 32,856    |       
|                                              
|                                              
|                                              
|                                              
|DEFERRED INCOME TAXES                          |                                                           |                                                                                                                          | 3,361                     |        |                |        | 1,734     |       
|                                              
|                                              
|                                              
|                                              
|STOCKHOLDERS EQUITY                          
|                                              
|                                              
|                                              
|                                              
|                                               | Preferred stock:                                         
|                                              
|                                              
|                                              
|                                              
|                                               |                                                           | Series Three: 10% cumulative redeemable, $60 face
value; 14,799 shares issued and outstanding
(14,876 at March 31, 1999) |                           |        | 679            |        |           |        | 683   |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                                           | Series Four: 10% cumulative redeemable, $51.50 face
value; 46,414 shares issued and outstanding                          |                           |        | 2,390          |        |           |        | 2,390 |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                                           | Series Five: 10% cumulative redeemable, $120 face
value; 6,648 shares issued and outstanding                             |                           |        | 798            |        |           |        | 798   |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                                           | Series Six: 10% cumulative callable, $160 face
value; 20,000 shares authorized, issued  none                            |                           |       
|                                              
|                                              
|                                              
|                                              
|                                               | Common stock, $1 par value; 10,000,000 shares
authorized,
|                                              
|                                              
|                                              
|                                              
|                                               |                                                           | 3,151,195 issued shares (3,219,995 at
March 31, 1999)                                                                    |                           | 3,151  |                |        |           | 3,220  |      
|                                              
|                                              
|                                              
|                                              
|                                               | Net unrealized gain on marketable securities              |                                                                                                                          |                           | 1,962  |                |        |           | 9      |      
|                                              
|                                              
|                                              
|                                              
|                                               | Retained earnings                                         |                                                                                                                          |                           | 29,028 |                |        |           | 27,044 |      
|                                               |                                                           |                                                                                                                          |                           |        |                |        |           |       
|                                               |                                                           |                                                                                                                          | 38,008                    |        |                |        | 34,144    |       
|                                               |                                                           |                                                                                                                          |                           |        |                |        |           |       
|                                               |                                                           | $                                                                                                                        | 104,701                   |        |                | $      | 85,430    |       
|                                               |                                                           |                                                                                                                          |                           |        |                |        |           |       

See notes to consolidated financial statements

3



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##### Table of Contents









CONSOLIDATED STATEMENTS OF OPERATIONS (CONDENSED)

Maxco, Inc. and Subsidiaries

|                                                       |                                      |                                                       |                                                   |                                              |      |                                       |        |             |     |     |     | 
|------------------------------------------------------ | ------------------------------------ | ----------------------------------------------------- | ------------------------------------------------- | -------------------------------------------- | ---- | ------------------------------------- | ------ | ----------- | --- | --- | --- | 
|                                                       |                                      |                                                       |                                                   |                                              |      | Three Months Ended December 31,      
|                                                       |                                      |                                                       |                                                   |                                              |      |                                      
|                                                       |                                      |                                                       |                                                   |                                              |      | 1999                                  |        | 1998       
|                                                       |                                      |                                                       |                                                   |                                              |      | (Unaudited)                           |        | (Unaudited)
|                                                       |                                      |                                                       |                                                   |                                              |      |                                       |        |            
|                                                       |                                      |                                                       |                                                   |                                              |      | (in thousands, except per share data)
|Net sales                                              |                                      | $                                                     | 33,963                                            |                                              |      | $                                     | 29,697 |            
|                                                      
|                                                      
|                                                      
|                                                      
|Costs and expenses:                                   
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Cost of sales and operating expenses |                                                       |                                                   | 25,754                                       |      |                                       |        | 22,763      |    
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Selling, general and administrative  |                                                       |                                                   | 6,697                                        |      |                                       |        | 5,234       |    
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Depreciation and amortization        |                                                       |                                                   | 1,249                                        |      |                                       |        | 860         |    
|                                                       |                                      |                                                       |                                                   |                                              |      |                                       |        |            
|                                                       |                                      |                                                       | 33,700                                            |                                              |      |                                       | 28,857 |            
|                                                       |                                      |                                                       |                                                   |                                              |      |                                       |        |            
|                                                       |                                      |                                                       |                                                   | Operating Earnings                           |      |                                       | 263    |             |     |     | 840 | 
|                                                      
|                                                      
|                                                      
|                                                      
|Other income (expense)
 Investment and interest income |                                      |                                                       | 144                                               |                                              |      |                                       | 196    |            
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Interest expense                     |                                                       |                                                   | (939                                         | )    |                                       |        | (698        | )  
|                                                       |                                      |                                                       |                                                   |                                              |      |                                       |        |            
|                                                       |                                      |                                                       |                                                   | Income (Loss) Before Federal                
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                      |                                                       | Income Taxes and Equity in Earnings of Affiliates |                                              |      | (532                                  | )      |             |     | 338 |    
|                                                      
|                                                      
|                                                      
|                                                      
|Federal income tax expense (benefit)                   |                                      |                                                       | (149                                              | )                                            |      |                                       | 129    |            
|                                                       |                                      |                                                       |                                                   |                                              |      |                                       |        |            
|                                                       |                                      | Income (Loss) Before Equity in Earnings of Affiliates |                                                   |                                              | (383 | )                                     |        |             | 209 |    
|                                                      
|                                                      
|                                                      
|                                                      
|Equity in earnings (losses) of affiliates, net of tax  |                                      |                                                       | (110                                              | )                                            |      |                                       | (80    | )          
|                                                       |                                      |                                                       |                                                   |                                              |      |                                       |        |            
|                                                       |                                      |                                                       |                                                   | Net Income (Loss)                            |      |                                       | (493   | )           |     |     | 129 | 
|                                                      
|                                                      
|                                                      
|                                                      
|Less preferred stock dividends                         |                                      |                                                       | (102                                              | )                                            |      |                                       | (102   | )          
|                                                       |                                      |                                                       |                                                   |                                              |      |                                       |        |            
|                                                       |                                      |                                                       |                                                   | NET INCOME (LOSS) APPLICABLE TO COMMON STOCK |      |                                       | (595   | )           |     |     | 27  | 
|                                                       |                                      |                                                       |                                                   |                                              |      |                                       |        |            
|Net Income (Loss) Per Common Share  Basic             |                                      | $                                                     | (.19                                              | )                                            |      | $                                     | .01    |            
|                                                       |                                      |                                                       |                                                   |                                              |      |                                       |        |            
|Net Income (Loss) Per Common Share  Assuming Dilution |                                      | $                                                     | (.19                                              | )                                            |      | $                                     | .01    |            
|                                                       |                                      |                                                       |                                                   |                                              |      |                                       |        |            

See notes to consolidated financial statements

4



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##### Table of Contents









CONSOLIDATED STATEMENTS OF OPERATIONS (Condensed)

Maxco, Inc. and Subsidiaries

|                                                       |                                      |                                                   |                                                |                                       |       |                                       |         |             |       |       |       | 
|------------------------------------------------------ | ------------------------------------ | ------------------------------------------------- | ---------------------------------------------- | ------------------------------------- | ----- | ------------------------------------- | ------- | ----------- | ----- | ----- | ----- | 
|                                                       |                                      |                                                   |                                                |                                       |       | Nine Months Ended December 31,       
|                                                       |                                      |                                                   |                                                |                                       |       |                                      
|                                                       |                                      |                                                   |                                                |                                       |       | 1999                                  |         | 1998       
|                                                       |                                      |                                                   |                                                |                                       |       | (Unaudited)                           |         | (Unaudited)
|                                                       |                                      |                                                   |                                                |                                       |       |                                       |         |            
|                                                       |                                      |                                                   |                                                |                                       |       | (in thousands, except per share data)
|Net sales                                              |                                      | $                                                 | 125,166                                        |                                       |       | $                                     | 100,946 |            
|                                                      
|                                                      
|                                                      
|                                                      
|Costs and expenses:                                   
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Cost of sales and operating expenses |                                                   |                                                | 95,799                                |       |                                       |         | 79,117      |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Selling, general and administrative  |                                                   |                                                | 20,156                                |       |                                       |         | 15,337      |      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Depreciation and amortization        |                                                   |                                                | 3,617                                 |       |                                       |         | 2,285       |      
|                                                       |                                      |                                                   |                                                |                                       |       |                                       |         |            
|                                                       |                                      |                                                   | 119,572                                        |                                       |       |                                       | 96,739  |            
|                                                       |                                      |                                                   |                                                |                                       |       |                                       |         |            
|                                                       |                                      |                                                   |                                                | Operating Earnings                    |       |                                       | 5,594   |             |       |       | 4,207 | 
|                                                      
|                                                      
|                                                      
|                                                      
|Other income (expense)
 Investment and interest income |                                      |                                                   | 433                                            |                                       |       |                                       | 668     |            
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       | Interest expense                     |                                                   |                                                | (2,522                                | )     |                                       |         | (1,929      | )    
|                                                       |                                      |                                                   |                                                |                                       |       |                                       |         |            
|                                                       |                                      |                                                   |                                                | Income Before Federal                
|                                                      
|                                                      
|                                                      
|                                                      
|                                                       |                                      | Income Taxes and Equity in Earnings of Affiliates |                                                |                                       | 3,505 |                                       |         |             | 2,946 |      
|                                                      
|                                                      
|                                                      
|                                                      
|Federal income tax expense                             |                                      |                                                   | 1,258                                          |                                       |       |                                       | 1,042   |            
|                                                       |                                      |                                                   |                                                |                                       |       |                                       |         |            
|                                                       |                                      |                                                   | Income Before Equity in Earnings of Affiliates |                                       |       | 2,247                                 |         |             |       | 1,904 |      
|                                                      
|                                                      
|                                                      
|                                                      
|Equity in earnings (losses) of affiliates, net of tax  |                                      |                                                   | 445                                            |                                       |       |                                       | (38     | )          
|                                                       |                                      |                                                   |                                                |                                       |       |                                       |         |            
|                                                       |                                      |                                                   |                                                | Net Income                            |       |                                       | 2,692   |             |       |       | 1,866 | 
|                                                      
|                                                      
|                                                      
|                                                      
|Less preferred stock dividends                         |                                      |                                                   | (306                                           | )                                     |       |                                       | (306    | )          
|                                                       |                                      |                                                   |                                                |                                       |       |                                       |         |            
|                                                       |                                      |                                                   |                                                | Net Income Applicable to Common Stock |       |                                       | 2,386   |             |       |       | 1,560 | 
|                                                       |                                      |                                                   |                                                |                                       |       |                                       |         |            
|Net Income Per Common Share  Basic                    |                                      | $                                                 | .75                                            |                                       |       | $                                     | .48     |            
|                                                       |                                      |                                                   |                                                |                                       |       |                                       |         |            
|Net Income Per Common Share  Assuming Dilution        |                                      | $                                                 | .75                                            |                                       |       | $                                     | .47     |            
|                                                       |                                      |                                                   |                                                |                                       |       |                                       |         |            

See notes to consolidated financial statements

5



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##### Table of Contents









CONSOLIDATED STATEMENTS OF CASH FLOWS (Condensed)

Maxco, Inc. and Subsidiaries

|                     |                                                                                   |                                             |                                                  |        |                                |         |             |        |        |        |  
|-------------------- | --------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------------------ | ------ | ------------------------------ | ------- | ----------- | ------ | ------ | ------ | -
|                     |                                                                                   |                                             |                                                  |        | Nine Months Ended December 31,
|                     |                                                                                   |                                             |                                                  |        |                               
|                     |                                                                                   |                                             |                                                  |        | 1999                           |         | 1998       
|                     |                                                                                   |                                             |                                                  |        | (Unaudited)                    |         | (Unaudited)
|                     |                                                                                   |                                             |                                                  |        |                                |         |            
|                     |                                                                                   |                                             |                                                  |        | (in thousands)                
|Operating Activities
|                    
|                    
|                    
|                    
|                     | Net Income                                                                        |                                             | $                                                | 2,692  |                                |         | $           | 1,866  |       
|                    
|                    
|                    
|                    
|                     | Adjustments to reconcile net income to net cash provided
by operating activities:
|                    
|                    
|                    
|                    
|                     |                                                                                   | Depreciation and other non-cash items       |                                                  |        | 3,580                          |         |             |        | 2,303  |       
|                    
|                    
|                    
|                    
|                     |                                                                                   | Changes in operating assets and liabilities |                                                  |        | (4,071                         | )       |             |        | (2,713 | )     
|                     |                                                                                   |                                             |                                                  |        |                                |         |             |       
|                     |                                                                                   |                                             | Net Cash Provided By Operating Activities        |        |                                | 2,201   |             |        |        | 1,456  |  
|                    
|                    
|                    
|                    
|Investing Activities
|                    
|                    
|                    
|                    
|                     | Purchase of businesses                                                            |                                             |                                                  | (4,587 | )                              |         |             | (2,700 | )     
|                    
|                    
|                    
|                    
|                     | Payment received on note receivable                                               |                                             |                                                  | 750    |                               
|                    
|                    
|                    
|                    
|                     | Redemption of (investment in) marketable securities                               |                                             |                                                  | (28    | )                              |         |             | 5,650  |       
|                    
|                    
|                    
|                    
|                     | Investment in affiliates                                                          |                                             |                                                  | (833   | )                              |         |             | (3,881 | )     
|                    
|                    
|                    
|                    
|                     | Advances to affiliates                                                            |                                             |                                                  | (780   | )                             
|                    
|                    
|                    
|                    
|                     | Purchases of property and equipment                                               |                                             |                                                  | (9,140 | )                              |         |             | (6,971 | )     
|                    
|                    
|                    
|                    
|                     | Sale of Investment                                                                |                                             |                                                  |        |                                |         |             | 2,160  |       
|                    
|                    
|                    
|                    
|                     | Other                                                                             |                                             |                                                  | 102    |                                |         |             | 152    |       
|                     |                                                                                   |                                             |                                                  |        |                                |         |             |       
|                     |                                                                                   |                                             | Net Cash Used In Investing Activities            |        |                                | (14,516 | )           |        |        | (5,590 | )
|                    
|                    
|                    
|                    
|Financing Activities
|                    
|                    
|                    
|                    
|                     | Proceeds from long-term obligations                                               |                                             |                                                  | 15,386 |                                |         |             | 5,645  |       
|                    
|                    
|                    
|                    
|                     | Proceeds from restricted cash for acquisitions of equipment                       |                                             |                                                  |        |                                |         |             | 1,088  |       
|                    
|                    
|                    
|                    
|                     | Repayments on long-term obligations and notes payable                             |                                             |                                                  | (2,258 | )                              |         |             | (1,298 | )     
|                    
|                    
|                    
|                    
|                     | Changes in capital stock                                                          |                                             |                                                  | (476   | )                              |         |             | (839   | )     
|                    
|                    
|                    
|                    
|                     | Dividends paid on preferred stock                                                 |                                             |                                                  | (306   | )                              |         |             | (306   | )     
|                     |                                                                                   |                                             |                                                  |        |                                |         |             |       
|                     |                                                                                   |                                             | Net Cash Provided by Financing Activities        |        |                                | 12,346  |             |        |        | 4,290  |  
|                     |                                                                                   |                                             |                                                  |        |                                |         |             |       
|                     |                                                                                   |                                             | Increase in Cash and Cash Equivalents            |        |                                | 31      |             |        |        | 156    |  
|                    
|                    
|                    
|                    
|                     |                                                                                   |                                             | Cash and Cash Equivalents at Beginning of Period |        |                                | 1,122   |             |        |        | 1,040  |  
|                     |                                                                                   |                                             |                                                  |        |                                |         |             |       
|                     |                                                                                   |                                             | Cash and Cash Equivalents at End of Period       |        | $                              | 1,153   |             |        | $      | 1,196  |  
|                     |                                                                                   |                                             |                                                  |        |                                |         |             |       

See notes to consolidated financial statements

6



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAXCO, INC. AND SUBSIDIARIES
DECEMBER 31, 1999
(Unaudited)

NOTE 1  Basis of Presentation and Significant Accounting Policies

The accompanying unaudited, condensed, consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles 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 generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting 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, 1999.

The results of operations for the interim periods presented are not
necessarily indicative of the results for the full year. Certain other
amounts in the consolidated financial statements have been reclassified to
conform to the current presentation.

NOTE 2  Inventories

The major classes of inventories, at the dates indicated were as follows:

|                                    |  |                |  |           |  |      |       |  |  |  |  |      |  |   |       | 
|----------------------------------- |  | -------------- |  | --------- |  | ---- | ----- |  |  |  |  | ---- |  | - | ----- | 
|                                    |  | December 31,   |  | March 31,
|                                    |  |                |  |           |  | 1999 |       |  |  |  |  | 1999
|                                    |  |                |  |           |  |      |       |  |  |  |  |     
|                                    |  | (unaudited)   
|                                    |  | (in thousands)
|Raw materials                       |  |                |  |           |  | $    | 528   |  |  |  |  |      |  | $ | 732   | 
|                                   
|                                   
|                                   
|                                   
|Finished goods and
work in progress |  |                |  |           |  |      | 1,272 |  |  |  |  |      |  |   | 1,283 | 
|                                   
|                                   
|                                   
|                                   
|Purchased products
for resale       |  |                |  |           |  |      | 6,523 |  |  |  |  |      |  |   | 2,995 | 
|                                    |  |                |  |           |  |      |       |  |  |  |  |      |  |   |       | 
|                                    |  |                |  |           |  | $    | 8,323 |  |  |  |  |      |  | $ | 5,010 | 
|                                    |  |                |  |           |  |      |       |  |  |  |  |      |  |   |       | 

NOTE 3  Marketable Securities

The Company classifies its marketable securities 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. Beginning in November 1999, Maxco accounted for its
investment in Provant Inc. common stock as securities available for sale, as
these shares are no longer restricted stock as defined by FASB 115. At December
31,1999 the unrealized gain on this stock and other securities available for
sale was approximately $1,962,000 net of deferred tax.

7



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Maxco, Inc. and Subsidiaries

NOTE 4  Investment in Integral Vision, Inc.

On June 30, 1999, Integral Vision, Inc. (formerly Medar, Inc.), Maxcos 25%
owned affiliated company sold its welding division for cash and debt. Maxco
recognized its proportionate share of the gain on this transaction as part of
equity in earnings of affiliates. Also, as a result of this transaction, Maxco
received payment on June 30, 1999 of the full balance due on subordinated
debentures of $750,000.

NOTE 5  Long Term Debt

At December 31, 1999 Maxco had available $6.3 million on its lines of credit
which provide for up to $33.0 million for acquisitions and general corporate
purposes.

NOTE 6  Earnings Per Share

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

|                                                                                                    |                                                                  |   |                                       |       |                   |   |       |       |      |   |       |       |   |   |       |       |  
|--------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | - | ------------------------------------- | ----- | ----------------- | - | ----- | ----- | ---- | - | ----- | ----- | - | - | ----- | ----- | -
|                                                                                                    |                                                                  |   | Three Months Ended                    |       | Nine Months Ended
|                                                                                                    |                                                                  |   | December 31,                          |       | December 31,     
|                                                                                                    |                                                                  |   |                                       |       |                  
|                                                                                                    |                                                                  |   | 1999                                  |       | 1998              |   | 1999  |       | 1998
|                                                                                                    |                                                                  |   |                                       |       |                   |   |       |       |     
|                                                                                                    |                                                                  |   | (in thousands, except per share data)
|NUMERATOR:                                                                                         
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    | Net income (loss)                                                |   | $                                     | (493  | )                 |   | $     | 129   |      |   | $     | 2,692 |   |   | $     | 1,866 |  
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    | Preferred stock dividends                                        |   |                                       | (102  | )                 |   |       | (102  | )    |   |       | (306  | ) |   |       | (306  | )
|                                                                                                    |                                                                  |   |                                       |       |                   |   |       |       |      |   |       |       |   |   |       |      
|Numerator for basic earnings
per shareincome
(loss) available to common stockholders               |                                                                  |   | (595                                  | )     |                   |   | 27    |       |      |   | 2,386 |       |   |   | 1,560 |      
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Effect of dilutive securities:                                                                     
|                                                                                                    |                                                                  |   |                                       |       |                   |   |       |       |      |   |       |       |   |   |       |      
|Numerator for diluted earnings
per shareincome
(loss) available to common stockholders after      
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    | assumed conversions                                              |   |                                       | (595  | )                 |   |       | 27    |      |   |       | 2,386 |   |   |       | 1,560 |  
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|DENOMINATOR:                                                                                       
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    | Denominator for basic earnings per
shareweighted-average shares
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    |                                                                  |   |                                       | 3,151 |                   |   |       | 3,226 |      |   |       | 3,170 |   |   |       | 3,265 |  
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Effect of dilutive securities:                                                                     
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    | Employee stock options                                           |   |                                       |       |                   |   |       | 36    |      |   |       |       |   |   |       | 45    |  
|                                                                                                    |                                                                  |   |                                       |       |                   |   |       |       |      |   |       |       |   |   |       |      
|Dilutive potential common shares                                                                    |                                                                  |   |                                       |       |                   |   | 36    |       |      |   |       |       |   |   | 45    |      
|                                                                                                    |                                                                  |   |                                       |       |                   |   |       |       |      |   |       |       |   |   |       |      
|Denominator for diluted
earnings per shareadjusted
weighted-average shares and assumed conversions |                                                                  |   | 3,151                                 |       |                   |   | 3,262 |       |      |   | 3,170 |       |   |   | 3,310 |      
|                                                                                                    |                                                                  |   |                                       |       |                   |   |       |       |      |   |       |       |   |   |       |      
|BASIC EARNINGS
(LOSS) PER SHARE                                                                     |                                                                  | $ | (.19                                  | )     |                   | $ | .01   |       |      | $ | .75   |       |   | $ | .48   |      
|                                                                                                    |                                                                  |   |                                       |       |                   |   |       |       |      |   |       |       |   |   |       |      
|DILUTED EARNINGS
(LOSS) PER SHARE                                                                   |                                                                  | $ | (.19                                  | )     |                   | $ | .01   |       |      | $ | .75   |       |   | $ | .47   |      
|                                                                                                    |                                                                  |   |                                       |       |                   |   |       |       |      |   |       |       |   |   |       |      

8



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MAXCO, INC. AND SUBSIDIARIES

NOTE 7  Comprehensive Income

The components of comprehensive income for the three and nine months ended
December 31, 1999 and 1998 are as follows:

|                                                   |  |                    |       |                   |  |      |     |      |  |   |       |  |  |   |       |  
|-------------------------------------------------- |  | ------------------ | ----- | ----------------- |  | ---- | --- | ---- |  | - | ----- |  |  | - | ----- | -
|                                                   |  | Three Months Ended |       | Nine Months Ended
|                                                   |  | December 31,       |       | December 31,     
|                                                   |  |                    |       |                  
|                                                   |  | 1999               |       | 1998              |  | 1999 |     | 1998
|                                                   |  |                    |       |                   |  |      |     |     
|                                                   |  | (in thousands)    
|Net earnings (loss)                                |  | $                  | (493  | )                 |  | $    | 129 |      |  | $ | 2,692 |  |  | $ | 1,866 |  
|                                                  
|                                                  
|                                                  
|                                                  
|Unrealized gains (losses) on marketable
securities |  |                    | 2,001 |                   |  |      | (21 | )    |  |   | 1,953 |  |  |   | (13   | )
|                                                   |  |                    |       |                   |  |      |     |      |  |   |       |  |  |   |       |  
|                                                   |  | $                  | 1,508 |                   |  | $    | 108 |      |  | $ | 4,645 |  |  | $ | 1,853 |  
|                                                   |  |                    |       |                   |  |      |     |      |  |   |       |  |  |   |       |  

The components of accumulated comprehensive income, net of related tax at
December 31, 1999 and March 31, 1999 are as follows:

|                                          |  |                |       |           |  |   |   | 
|----------------------------------------- |  | -------------- | ----- | --------- |  | - | - | 
|                                          |  | December 31,   |       | March 31,
|                                          |  | 1999           |       | 1999     
|                                          |  |                |       |          
|                                          |  | (in thousands)
|Unrealized gains on marketable securities |  | $              | 1,962 |           |  | $ | 9 | 

NOTE 8  INDUSTRY SEGMENT INFORMATION

The following summarizes Maxcos industry segment information:

|                     |                                      |                           |   |                |         |           |   |        |        | 
|-------------------- | ------------------------------------ | ------------------------- | - | -------------- | ------- | --------- | - | ------ | ------ | 
|                     |                                      |                           |   | December 31,   |         | March 31,
|                     |                                      |                           |   | 1999           |         | 1999     
|                     |                                      |                           |   |                |         |          
|                     |                                      |                           |   | (in thousands)
|Identifiable assets:
|                    
|                    
|                    
|                    
|                     | Distribution  construction supplies |                           | $ | 33,132         |         |           | $ | 21,275 |       
|                    
|                    
|                    
|                    
|                     | Heat treating                        |                           |   | 28,816         |         |           |   | 26,211 |       
|                    
|                    
|                    
|                    
|                     | Packaging products                   |                           |   | 6,579          |         |           |   | 7,402  |       
|                    
|                    
|                    
|                    
|                     | Corporate and other                  |                           |   | 21,729         |         |           |   | 14,398 |       
|                    
|                    
|                    
|                    
|                     | Investments and advances             |                           |   | 14,445         |         |           |   | 16,144 |       
|                     |                                      |                           |   |                |         |           |   |       
|                     |                                      | Total Identifiable Assets |   | $              | 104,701 |           |   | $      | 85,430 | 
|                     |                                      |                           |   |                |         |           |   |       

9



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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAXCO, INC. AND SUBSIDIARIES

NOTE 8  INDUSTRY SEGMENT INFORMATION  Continued

|                                       |                                      |                 |                                             |                            |        |                    |       |                   |        |      |       |        |         |       |       |        |         |       |       | 
|-------------------------------------- | ------------------------------------ | --------------- | ------------------------------------------- | -------------------------- | ------ | ------------------ | ----- | ----------------- | ------ | ---- | ----- | ------ | ------- | ----- | ----- | ------ | ------- | ----- | ----- | 
|                                       |                                      |                 |                                             |                            |        | Three Months Ended |       | Nine Months Ended
|                                       |                                      |                 |                                             |                            |        | December 31,       |       | December 31,     
|                                       |                                      |                 |                                             |                            |        |                    |       |                  
|                                       |                                      |                 |                                             |                            |        | 1999               |       | 1998              |        | 1999 |       | 1998  
|                                       |                                      |                 |                                             |                            |        |                    |       |                   |        |      |       |       
|                                       |                                      |                 |                                             |                            |        | (in thousands)    
|Net sales:                            
|                                      
|                                      
|                                      
|                                      
|                                       | Distribution  construction supplies |                 | $                                           | 20,524                     |        |                    | $     | 16,744            |        |      | $     | 83,177 |         |       | $     | 62,508 |        
|                                      
|                                      
|                                      
|                                      
|                                       | Heat treating                        |                 |                                             | 9,793                      |        |                    |       | 9,087             |        |      |       | 29,579 |         |       |       | 25,746 |        
|                                      
|                                      
|                                      
|                                      
|                                       | Packaging products                   |                 |                                             | 3,562                      |        |                    |       | 3,782             |        |      |       | 12,161 |         |       |       | 12,443 |        
|                                      
|                                      
|                                      
|                                      
|                                       | Corporate and other                  |                 |                                             | 84                         |        |                    |       | 84                |        |      |       | 249    |         |       |       | 249    |        
|                                       |                                      |                 |                                             |                            |        |                    |       |                   |        |      |       |        |         |       |       |       
|                                       |                                      | Total Net Sales |                                             | $                          | 33,963 |                    |       | $                 | 29,697 |      |       | $      | 125,166 |       |       | $      | 100,946 |      
|                                       |                                      |                 |                                             |                            |        |                    |       |                   |        |      |       |        |         |       |       |       
|Operating earnings (loss):            
|                                      
|                                      
|                                      
|                                      
|                                       | Distribution  construction supplies |                 | $                                           | 86                         |        |                    | $     | 467               |        |      | $     | 4,565  |         |       | $     | 3,938  |        
|                                      
|                                      
|                                      
|                                      
|                                       | Heat treating                        |                 |                                             | 1,321                      |        |                    |       | 1,035             |        |      |       | 3,700  |         |       |       | 2,334  |        
|                                      
|                                      
|                                      
|                                      
|                                       | Packaging products                   |                 |                                             | (514                       | )      |                    |       | (302              | )      |      |       | (562   | )       |       |       | (561   | )      
|                                      
|                                      
|                                      
|                                      
|                                       | Corporate and other                  |                 |                                             | (630                       | )      |                    |       | (360              | )      |      |       | (2,109 | )       |       |       | (1,504 | )      
|                                       |                                      |                 |                                             |                            |        |                    |       |                   |        |      |       |        |         |       |       |       
|                                       |                                      |                 |                                             | Total Operating Earnings   |        | $                  | 263   |                   |        | $    | 840   |        |         | $     | 5,594 |        |         | $     | 4,207 | 
|                                       |                                      |                 |                                             |                            |        |                    |       |                   |        |      |       |        |         |       |       |       
|Depreciation and amortization expense:
|                                      
|                                      
|                                      
|                                      
|                                       | Distribution  construction supplies |                 | $                                           | 489                        |        |                    | $     | 277               |        |      | $     | 1,360  |         |       | $     | 598    |        
|                                      
|                                      
|                                      
|                                      
|                                       | Heat treating                        |                 |                                             | 481                        |        |                    |       | 359               |        |      |       | 1,444  |         |       |       | 1,012  |        
|                                      
|                                      
|                                      
|                                      
|                                       | Packaging products                   |                 |                                             | 192                        |        |                    |       | 163               |        |      |       | 546    |         |       |       | 506    |        
|                                      
|                                      
|                                      
|                                      
|                                       | Corporate and other                  |                 |                                             | 87                         |        |                    |       | 61                |        |      |       | 267    |         |       |       | 169    |        
|                                       |                                      |                 |                                             |                            |        |                    |       |                   |        |      |       |        |         |       |       |       
|                                       |                                      |                 | Total Depreciation and Amortization Expense |                            | $      | 1,249              |       |                   | $      | 860  |       |        | $       | 3,617 |       |        | $       | 2,285 |      
|                                       |                                      |                 |                                             |                            |        |                    |       |                   |        |      |       |        |         |       |       |       
|Capital expenditures:                 
|                                      
|                                      
|                                      
|                                      
|                                       | Distribution  construction supplies |                 | $                                           | 1,413                      |        |                    | $     | 376               |        |      | $     | 4,163  |         |       | $     | 1,651  |        
|                                      
|                                      
|                                      
|                                      
|                                       | Heat treating                        |                 |                                             | 1,637                      |        |                    |       | 1,611             |        |      |       | 4,332  |         |       |       | 4,629  |        
|                                      
|                                      
|                                      
|                                      
|                                       | Packaging products                   |                 |                                             | 119                        |        |                    |       | 216               |        |      |       | 617    |         |       |       | 656    |        
|                                      
|                                      
|                                      
|                                      
|                                       | Corporate and other                  |                 |                                             | 19                         |        |                    |       | 4                 |        |      |       | 28     |         |       |       | 35     |        
|                                       |                                      |                 |                                             |                            |        |                    |       |                   |        |      |       |        |         |       |       |       
|                                       |                                      |                 |                                             | Total Capital Expenditures |        | $                  | 3,188 |                   |        | $    | 2,207 |        |         | $     | 9,140 |        |         | $     | 6,971 | 
|                                       |                                      |                 |                                             |                            |        |                    |       |                   |        |      |       |        |         |       |       |       

Accounting policies of the business segments are consistent with those described
in the summary of significant accounting policies (see Note 1).

Identifiable assets are those assets that are used in Maxcos operations in each
industry segment. Corporate assets are principally cash, notes receivable,
investments, and corporate office properties.

Maxco has no significant foreign operations, export sales, or inter-segment
sales.

10



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##### Table of Contents









MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MAXCO, INC. AND SUBSIDIARIES
DECEMBER 31, 1999

MATERIAL CHANGES IN FINANCIAL CONDITION

Operating activities generated $2.2 million in cash for the nine months.
Individual working capital component levels increased over the March 31, 1999
level, primarily due to the higher sales levels by the Companys construction
supplies unit (Ersco) as well as the addition of working capital components of
acquired businesses added to this unit.

Investing activities included the purchases by Ersco of businesses in the St.
Louis market area. Cash was also used in investing activities during the nine
months at Ersco to purchase forms used for rental to its customers and
additional equipment for Maxcos heat-treating unit (Atmosphere Annealing).

During the quarter ended June 30, 1999, Integral Vision, Inc. (formerly Medar,
Inc.), Maxcos 25% owned affiliated company, sold its welding division for cash
and debt. Consequently, payment was received of the full balance due of $750,000
on subordinated debentures held by Maxco.

Net proceeds from additional long-term debt were used primarily to fund the
acquisition of Erscos St. Louis branch and the purchase of equipment at Ersco
and Atmosphere Annealing.

At December 31, 1999 Maxco had available $6.3 million on its lines of credit
which provide for up to $33.0 million for acquisitions and general corporate
purposes.

Beginning in November 1999 Maxco accounted for its investment in Provant Inc.
common stock as securities available for sale as these shares are no longer
restricted stock as defined by FASB 115. Consequently, the securities are
carried at fair value with the unrealized gains and losses net of tax, reported
as a separate component of stockholders equity. At December 31,1999 the
unrealized gain on this stock was approximately $2.0 million net of tax.

The Company believes that its current financial resources, together with cash
generated from operations and its available resources under its lines of credit,
will be adequate to meet its cash requirements for the next twelve months.

MATERIAL CHANGES IN RESULTS OF OPERATIONS

Three Months Ended December 31, 1999 Compared to 1998

Net sales increased to $34.0 million compared to $29.7 million in last years
third quarter. Third quarter results reflect operating earnings of $263,000
compared to $840,000 for the comparable period in 1998. Net loss was $493,000 or
$.19 per share assuming dilution compared to last years net income of $129,000
or $.01 per share assuming dilution.

11



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
MAXCO, INC. AND SUBSIDIARIES

Higher sales in the current period occurred at Maxcos construction supplies
unit (Ersco) over the comparable 1998 period primarily as a result of sales
generated by branches added since the third quarter of last year in the St.
Louis and Columbus metropolitan areas. Sales at Atmosphere Annealing and Pak-Sak
were relatively comparable with the prior year comparable period.

Consolidated gross profit (net sales less cost of sales and operating expenses)
increased to $8.2 million or approximately 24% of sales from $6.9 million or 23%
of sales. The construction supplies unit generated additional gross profit in
the current period over last year due to its increased sales level. Gross margin
at this unit was higher in the current quarter due primarily to the increase in
sales of higher margin products such as rentals and associated accessories. A
higher proportion of these sales were from inventory which generally have a
higher margin as compared to sales made on a direct shipment basis. The higher
proportion of sales from inventory were attributable in part to the recently
acquired St. Louis branches of Ersco. Improvements in gross margin also occurred
at Maxcos heat-treating unit as efficiency improvements resulting from the
completion of certain major capital projects were realized.

Selling, general, and administrative expenses increased to $6.7 million from
$5.2 million. The increase is primarily attributable to the construction
supplies segment due to additional operating costs associated with new
locations, increases in staffing levels, and other expenses incurred to support
the planned growth of this unit.

The increase in depreciation expense in 1999 was attributable to depreciation by
Ersco on purchases of rental forms and shoring equipment and depreciation of
assets from its acquired businesses, as well as depreciation by Atmosphere
Annealing on new equipment, including a new coating line, additional furnaces,
and facility improvements made late in the prior year. The increase in
amortization expense was attributable to the goodwill recorded as a result of
acquisitions by Ersco since the third quarter of last year.

As a result of the above, operating earnings decreased to approximately $263,000
from $840,000 in last years comparable period.

Net interest expense increased in 1999 from the prior year quarter due to
additional long-term borrowings and reduction in marketable securities, the
proceeds of which were used primarily for additional purchases of property and
equipment and the purchase of businesses.

12



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Maxco, Inc. and Subsidiaries

Nine Months Ended December 31, 1999 Compared to 1998

Net sales increased to $125.2 million compared to $100.9 million in last years
comparable nine-month period. Results for this period include operating earnings
of $5.6 million compared to $4.2 million for the comparable period in 1998. Net
income was $2.7 million or $.75 per share assuming dilution compared to last
years $1.9 million or $.47 per share assuming dilution.

Higher sales in the current nine-month period occurred at Maxcos construction
supplies unit (Ersco) over the comparable 1998 period primarily as a result of a
8.1% increase in same branch sales, and sales of approximately $15.6 million
generated by branches added since the third quarter of last year in the St.
Louis, Columbus, and Louisville metropolitan areas. A strong general
construction market resulting from an overall stable and growing general
economy, increased availability of federal highway repair dollars, as well as an
increase in form rental revenues were primary reasons for the increase in same
branch sales for the nine months. Sales at Atmosphere Annealing increased in the
current nine-month period over the comparable nine-month period last year in
part because last years sales levels were depressed due to a labor strike at
one of its automotive customers. Additionally, sales of coating and other
services increased due to greater processing capabilities of equipment and
facilities recently placed in service.

Consolidated gross profit (net sales less cost of sales and operating expenses)
increased to $29.4 million or approximately 23% of sales from $21.8 million or
22% of sales. The construction supplies unit generated additional gross profit
in the current period over last year due to its increased sales level. Gross
margin at this unit was higher for the current nine-month period due to
increased levels of rental revenues, sales of higher margin products, as well as
a higher proportion of sales from inventory. Inventory sales generally have
higher margins as compared to sales on a direct shipment basis. The higher
proportion of products sold from inventory was primarily attributable to Erscos
acquisition of its St. Louis branch where sales are primarily made on this
basis. Improvements in gross margin also occurred at Maxcos heat-treating unit
as efficiency improvements resulting from the completion of certain major
capital projects were realized.

Selling, general, and administrative expenses increased to $20.2 million from
$15.3 million. The increase was in large part attributable to the construction
supplies segment where selling expenses were higher due to increased sales.
Also, additional operating costs associated with its new locations and their
related selling activities were incurred since the third quarter of last year.
Additionally, staffing levels were increased at Atmosphere Annealing and Ersco
to support their planned growth. At December 31,1999 Maxcos total number of
employees was 795 compared to 670 at December 31, 1998.

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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
MAXCO, INC. AND SUBSIDIARIES

The increase in depreciation expense in 1999 was attributable to depreciation by
Ersco on purchases of rental forms and shoring equipment as well as assets of its
acquired businesses. Additionally, depreciation by Atmosphere Annealing also
increased as a result of new equipment including a new coating line, additional
furnaces, and facility improvements placed in service late in the prior year.
The increase in amortization expense was attributable to the goodwill recorded
as a result of acquisitions by Ersco since the third quarter of last year.

As a result of the above, operating earnings increased to approximately $5.6
million from $4.2 million in last years comparable period.

Net interest expense increased from the prior year due to additional long-term
borrowings and reduction in marketable securities, the proceeds of which were
used primarily for additional purchases of property and equipment and the
purchase of businesses.

NEW FINANCIAL ACCOUNTING PRONOUNCEMENT

The Financial Accounting Standards Board issued Statement No. 137, Accounting
for Derivative Instruments and Hedging Activities. Statement 137 is effective
for fiscal years beginning after June 15, 2000. The Company expects to adopt the
new statement effective April 1, 2001. The statement requires the Company to
recognize all derivatives on the balance sheet at fair value. The Company has
not evaluated the potential effect the adoption of this statement will have on
its results of operations or financial condition.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Companys variable interest expense is sensitive to changes in the general
level of United States interest rates. Some of the Companys interest expense is
fixed through long-term borrowings to mitigate the impact of such potential
exposure. Additionally, the Company entered into an interest rate swap agreement
based on a notional amount of $5.0 million to manage its exposure to interest
rate changes. The swap involves the exchange of fixed and variable interest
payments without changing the notional principal amount. The Company had total
outstanding variable rate long-term borrowings of $43.2 million at December 31,
1999. A 1% increase from the prevailing interest rates at December 31, 1999 on
the unhedged variable rate portion of the Companys long-term borrowings would
increase interest expense by $386,000 based on principal balances at December
31, 1999.

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PART II

OTHER INFORMATION

|          |  |                                                                                                                                                                                                                                     
|--------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 1.   |  | Legal Proceedings                                                                                                                                                                                                                   
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|          |  | None                                                                                                                                                                                                                                
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|Item 2.   |  | Changes in Securities and Use of Proceeds                                                                                                                                                                                           
|         
|         
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|         
|          |  | None                                                                                                                                                                                                                                
|         
|         
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|         
|Item 3.   |  | Defaults Upon Senior Securities                                                                                                                                                                                                     
|         
|         
|         
|         
|          |  | None                                                                                                                                                                                                                                
|         
|         
|         
|         
|Item 4.   |  | Submission of Matters to a Vote of Security Holders                                                                                                                                                                                 
|         
|         
|         
|         
|          |  | None                                                                                                                                                                                                                                
|         
|         
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|         
|Item 5.   |  | Other Information                                                                                                                                                                                                                   
|         
|         
|         
|         
|          |  | None                                                                                                                                                                                                                                
|         
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|         
|         
|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.                                                                                                         

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##### Table of Contents



PART II
OTHER INFORMATION (CONTINUED)

|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.
|     
|     
|     
|     
|10.9  |  | Asset purchase agreement  Wright Plastic Products, Inc. is hereby
incorporated by reference from registrants Form 10-Q dated
November 14, 1996.                                                                                                                                                                                                                                                                                                 
|     
|     
|     
|     
|10.10 |  | Amended and restated loan agreement between Comerica Bank and
Maxco, Inc. dated September 30, 1996 is hereby incorporated by
reference from Form 10-Q dated November 14, 1996.                                                                                                                                                                                                                                                                   
|     
|     
|     
|     
|10.11 |  | Asset purchase agreement for the purchase of Atmosphere Annealing,
Inc. is hereby incorporated by reference from Form 8-K dated
January 17, 1997.                                                                                                                                                                                                                                                                                                
|     
|     
|     
|     
|10.12 |  | Asset purchase agreement  Axson North America, Inc. is hereby
incorporated by reference from Form 10-Q dated February 14, 1997.                                                                                                                                                                                                                                                                                                                 
|     
|     
|     
|     
|10.13 |  | Loan agreement between Michigan Strategic Fund and Atmosphere
Annealing, Inc. is hereby incorporated by reference from Form 10-Q
dated February 13, 1998.                                                                                                                                                                                                                                                                                        
|     
|     
|     
|     
|10.14 |  | Loan agreement between LAM Funding, L.L.C. and borrower including
Guaranty-Maxco, Inc. is hereby incorporated by reference from Form
10-Q dated February 13, 1998.                                                                                                                                                                                                                                                                               
|     
|     
|     
|     
|10.15 |  | First Amendment to amended and restated loan agreement between
Comerica Bank and Maxco, Inc. dated August 1, 1997, is hereby
incorporated by reference from Form 10-K dated June 24, 1998.                                                                                                                                                                                                                                                       
|     
|     
|     
|     
|10.16 |  | Second amendment to amended and restated loan agreement between
Comerica Bank and Maxco, Inc. dated June 24, 1998 is hereby
incorporated by reference from Form 10-K dated June 24, 1998.                                                                                                                                                                                                                                                        
|     
|     
|     
|     
|10.17 |  | Third amendment to amended and restated loan agreement between
Comerica Bank and Maxco, Inc. dated September 24, 1998, is
hereby incorporated by reference from Form 10-Q dated November
12, 1998.                                                                                                                                                                                                                                               

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##### Table of Contents



PART II
OTHER INFORMATION (Continued)

|          |  |                                                                                                                                                                                                  
|--------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.18     |  | Maxco, Inc. 1998 Employee Stock Option Plan is hereby incorporated
by reference from Form 10-Q dated November 12, 1998.                                                                          
|         
|         
|         
|         
|10.19     |  | Fourth amendment to amended and restated loan agreement between
Comerica Bank and Maxco, Inc. dated June 22, 1999, is hereby
incorporated by reference from Form 10-K dated June 23, 1999.       
|         
|         
|         
|         
|10.20     |  | Fifth amendment to amended and restated loan agreement between
Comerica bank and Maxco, Inc. dated September 1, 1999, is hereby
incorporated by reference from Form 10-Q dated November 12, 1999.
|         
|         
|         
|         
|27*       |  | Financial Data Schedule                                                                                                                                                                          
|         
|         
|         
|         
|Item 6(b) |  | Reports on Form 8-K
None                                                                                                                                                                         



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|* |  | Filed herewith
|- |  | --------------

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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: |  | February 11, 1999 |  | /S/ VINCENT SHUNSKY                                                                              
|      |  |                   |  |                                                                                                  
|      |  |                   |  | Vincent Shunsky, Vice President-Finance
andTreasurer (Principal Financial and
Accounting Officer)

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EXHIBIT INDEX

|            |  |                         |  | 
|----------- |  | ----------------------- |  | 
|Exhibit No. |  | Description            
|            |  |                        
|EX-27       |  | Financial Data Schedule