F O R M 10 - KSB

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

(X)  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
     OF THE SECURITIES EXCHANGE ACT OF 1934                      (FEE REQUIRED)
                                                                 --------------

For the fiscal year ended                   December 31, 2002
                          -----------------------------------------------------

                                       OR

( )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     EXCHANGE ACT OF 1934                                     (NO FEE REQUIRED)
                                                              -----------------

For the transition period from  ______________ to _______________

Commission file number   O-7267
                         -----------------------------------------------------

                              WEB PRESS CORPORATION
--------------------------------------------------------------------------------

Washington                                                   91-0851298
--------------------------------                             ------------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                              Identification No.)

22023 68th Avenue South, Kent, Washington                    98032
-----------------------------------------                    ----------
(Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code (253) 395-3343
                                                   --------------

Securities Registered Pursuant to 12(b) of the Act:

Title of each class     Name of each exchange on which registered

None                   _________________________________________
--------------

Securities Registered Pursuant to Section 12(g) of the Act:

                         Common Stock, Par Value $.025
--------------------------------------------------------------------------------
                                (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes  X  No
                                                              ---    ---

<PAGE>

All reports during the preceding 12 months have been filed.

State issuer's revenues for its most recent fiscal year: $7,303,083.

As of February 28, 2003, 3,105,413 common shares were outstanding, and the
aggregate market value of the common shares (based upon the closing bid/asked
price provided by the Pink Sheets, Inc.) held by non-affiliates was
approximately $257 thousand.

Documents incorporated by reference: Exhibits as described in Part III, Item 13.


<PAGE>

                              WEB PRESS CORPORATION

                TABLE OF CONTENTS TO ANNUAL REPORT ON FORM 10-KSB

ITEM    DESCRIPTION                                                       PAGE
----    -----------                                                       ----

                                     PART I

 1.     BUSINESS........................................................... 4
 2.     PROPERTIES......................................................... 7
 3.     LEGAL PROCEEDINGS.................................................. 8
 4.     SUBMISSION OF MATTERS TO A VOTE OF
        SECURITY HOLDERS................................................... 9

                                     PART II

 5.     MARKET FOR THE REGISTRANT'S COMMON STOCK
        AND RELATED SECURITY HOLDER MATTERS............................... 10
 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
        FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................... 10
 7      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................... 19
 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
        ON ACCOUNTING AND FINANCIAL DISCLOSURE............................ 19

                                    PART III

 9.     DIRECTORS AND EXECUTIVE OFFICERS
        OF REGISTRANT......................................................20
10.     EXECUTIVE COMPENSATION.............................................22
11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
        OWNERS AND MANAGEMENT..............................................23
12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................24
13.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES
        AND REPORTS ON FORM 8-K............................................25


                                       3
<PAGE>

                          ANNUAL REPORT ON FORM 10-KSB
                              WEB PRESS CORPORATION
                                     PART I


ITEM 1.   BUSINESS

(A)  General Development of Business

Web Press Corporation (herein referred to as "Web" or "Company") was founded in
late 1967 under the name "Web Press Aid" as a sole proprietorship. The Company
was incorporated in November, 1969 under the laws of the State of Washington.
Initially, the Company was involved primarily in the rebuilding and repair of
web-fed printing presses and related equipment. Shortly after incorporation, the
Company undertook the development of a line of printing press equipment of its
own design. During 1972, the Company commenced production of this equipment.
While the manufacture of new equipment is now the Company's primary business, it
continues to deal in rebuilt and used equipment as an adjunct to its new press
sales. The Company also sells parts and service for its new equipment. The sale
of new and used presses accounted for approximately 73% and 10%, respectively,
of the Company's revenues in 2002. The Company's presses are primarily designed
to print on absorbent paper such as newsprint. Products produced by the presses
are newspapers (both broadsheet and tabloid sizes), shoppers, advertising
inserts, and paperback books.

During 1984 and 1985, the Company developed four models of a new high-speed
press and added them to its product line. In 1992, the Company added a new size
cutoff to this line of presses, increasing the number of models to six.

In 1995, the Company introduced and sold its first integrated rollstand
perfecting unit (IRU). The IRU has a single roll position under the perfecting
unit in place of a free-standing two-position rollstand.

In June 1998, the Company introduced the Quad-Stack 4+4 perfecting unit as a new
module for the Atlas product line. The Quad-Stack prints color simultaneously on
both sides of the paper. Its unique design results in a compact size for a 4+4
press.

(B)  Financial Information About Segments

See Note 8 of Notes to Consolidated Financial Statements for information about
the Company's operations by segment and geographic area for the years ended
December 31, 2002 and 2001.


                                       4
<PAGE>

(C)  Narrative Description of Business

Equipment which Web Press Corporation manufactures consists of two basic
products, the Marc-25 and the Atlas. The Atlas is made in six different models.
The principal difference between the Marc-25 and the Atlas is that the Atlas is
twenty percent faster. Each press is composed of standard modules to unwind,
print, cutoff and fold the roll of paper into a finished product. Each is
arranged to meet the particular printer's requirements for the number of pages,
color, and size of their products. Following are descriptions of these modules:

PERFECTOR. Web's perfector is a rotary offset perfecting printing press unit,
consisting of two printing couples running "back-to-back". Each perfector will
print four broadsheet-size newspaper pages, in one color, on each revolution of
the printing couples. Perfectors can be configured to print up to four colors.
They can print up to 32 broadsheet-size pages. They are available both with and
without an integrated roll-stand.

QUADRA-COLOR UNIT. Web's Quadra-Color unit consists of four printing stations
mounted around a common impression cylinder. This unit prints four colors on two
broadsheet-size pages at a time. It offers better control over color register
and thus is capable of greater accuracy in color printing than conventional,
unit-to-unit methods for color printing. It is used in conjunction with the
Company's other products to provide close register, four-color capability in the
printing system. The Quadra-color can also be installed into press-lines
manufactured by Goss, Dauphin Graphic Machines, Heidelberg, and King.

QUAD-STACK. Web's Quad-Stack unit consists of eight printing stations positioned
in two juxtaposed vertical stacks of four printing stations each. The horizontal
layout of each printing station results in a compact 4+4 perfector that prints
four colors on four broadsheet-size pages at the same time. Like the
Quadra-Color, it offers excellent control over color register resulting in
superior color printing. It is available both with and without an integrated
roll-stand and is used in conjunction with the Atlas product line. The
Quad-Stack can also be installed into press-lines manufactured by Goss, Dauphin
Graphic Machines, Heidelberg, and King.

FOLDER. Web's folder is used in conjunction with perfecting units, Quadra-Color
units, and Quad-Stack units to fold the printed paper into a finished product.
The folder cuts the paper off in every plate cylinder revolution and folds it in
standard broadsheet-size newspapers, tabloid-size papers, and shopping-flyer or
magazine-size products. The Company also produces two folder styles which have
the capability of making a second parallel fold to produce "digest"-size
signatures which are used in printing some books and pamphlets.

                                       5
<PAGE>

TWO-POSITION ROLL ROLL-STANDS. Web's roll-stand supports two 36-inch wide rolls
of paper and is used in conjunction with the perfector, Quadra-Color, and
Quad-Stack units. The base roll-stand holds two 42-inch diameter rolls of paper.
A larger roll-stand that holds two 52-inch diameter rolls of paper is also
available. The roll-stand controls the unwinding of the paper roll and feeds it
to the printing units under controlled tension.

The Company has an agreement granting it the exclusive right to manufacture and
sell in the United States and most other countries printing equipment designed
by Color Impact International, Inc. The grantor may purchase the equipment from
the Company and resell it in Russia. Another company has the exclusive right to
manufacture and sell the equipment in India. The agreement commenced on August
17, 1998, and is for a period of 10 years. It requires the Company to pay Color
Impact International, Inc. a license fee equal to 7 percent of the gross selling
price for equipment. The minimum license fee is $70 thousand in any 12-month
period from the commencement date. The Company may enhance or modify the
equipment and commingle it with equipment of its own design.

On January 23, 2003, Color Impact International, Inc. served the Company a
Petitioner's Notice of Intention to Arbitrate the Agreement. Details of Color
Impact International, Inc. complaint and the Company's response are covered in
legal proceedings.

Web Press Corporation markets its products through Company employed
representatives in the United States and Canada. Foreign sales are made through
independent organizations in Latin America, Asia, Europe, and the Middle East.

The Company's presses are sold in a highly competitive world market. Competition
is based on a combination of price, service, quality, and the versatility of the
equipment. Web's presses are priced competitively with similar products. The
Company believes that features incorporated in its presses, as well as the
Company's policies of supporting its customers, will allow it to continue to be
very competitive. Web Press Corporation is the only manufacturer in the United
States producing a Quadra-Color unit for its market.

The primary competitors of the Company are Goss Graphic Systems, P.E.C.
Corporation (King Press Division), Dauphin Graphic Machines, Inc. and Harris
Graphics. Certain of these companies have financial resources in excess of the
Company's. King Press filed Chapter 7 Bankruptcy in January 2003.

                                       6
<PAGE>

The most important materials employed in Web's product line are steel and
aluminum (plate and bar stock), tubing, bearings, and rubber coverings. All are
available through local suppliers. The Company believes that its sources of
supply for these materials are adequate for its needs and that it is not
substantially dependent upon any one supplier. Lead times of up to six months
are required at some times for certain materials. The Company has some of its
parts manufactured to its specifications by other machine shops in the United
States, China, and India.

Web Press Corporation maintains an ongoing program of product development and
improvement. This program consists primarily of technical improvements and
supplementary developments which have produced features and capabilities that
management believes will result in competitive marketing advantages for Web's
product line. In 2002, $364 thousand was expended for research and development
compared to $137 thousand in 2001.

Total employment of approximately 46 persons as of December 31, 2002, compares
with approximately 39 at December 31, 2001.

Substantially all of the Company's operations are run by electrical energy
purchased from a local utility. The Company has not experienced energy shortages
and does not anticipate any difficulties in the foreseeable future. Extended
shortages of energy would have an adverse impact on the Company.

Compliance with federal, state and local environmental protection laws during
2002 had no material effect upon capital expenditures, earnings, or the
competitive position of Web Press Corporation.

(D)  Foreign Operations

The Company's foreign operations consist entirely of export sales and related
services originating at its facilities within the United States. Export sales
accounted for 11.2% of total sales in 2002 and 30.6% in 2001. Further financial
information relating to foreign operations for the two years ended December 31,
2002, is set forth in Note 8 (Segment Information) of the Notes to Consolidated
Financial Statements.

ITEM 2.   PROPERTIES

OFFICE AND MANUFACTURING FACILITIES. The Company presently occupies
approximately 49,000 square feet of leased office and manufacturing space at
22023 68th Avenue South, Kent, Washington. The term of the lease is five years,
commencing in November 1998, with a five-year renewal option. The monthly rental
payment is $16,155.

                                       7
<PAGE>

The Company has arrangements for small offices for each of its three salesmen
who are located in St. Cloud, Minnesota; and Charlotte, North Carolina. The
Company has domestic sales agents in Burlington, Vermont and Tracy, California.

ITEM 3.   LEGAL PROCEEDINGS

On January 23, 2003, the Company received a Petitioner's Notice of Intention to
Arbitrate from Color Impact International, Inc. (CII). CII seeks arbitration for
controversies arising from an Agreement with the Company dated March 20, 1998,
and a modification to that Agreement dated February 28, 2002. That Agreement
gives the Company the exclusive right (with the exception of Russia and India)
to manufacture, market and sell certain equipment designed by CII. CII alleges
and/or seeks the following remedies from the Company through arbitration. (1)
That the Company has not computed and timely paid to CII all license fees under
the Agreement, (2) That the Company has not timely reported to CII all license
fees under the Agreement and is therefore obligated to pay CII a license fee 5
times the license fee which would have otherwise have been payable, (3) CII
seeks payment of all license fees which are due for products sold under the
Agreement, (4) CII seeks to terminate the Agreement effective August 22, 2002,
(5) CII seeks to stop the Company from manufacturing and selling the machinery
in the Agreement after August 22, 2002, (6) CII seeks the return of one copy of
all design drawings in the Company's possession for the equipment in the
Agreement, (7) CII may assert in the course of arbitration additional claims,
(8) CII asks that all defenses the Company may assert be done in arbitration,
(9) CII asks that all counterclaims which the Company may assert or arise out of
the Agreement be done in arbitration, and (10) CII asks that the Company pay its
attorney's fees.

The Company has retained an attorney for this matter. The Company disputes
and/or denies all of the controversies alleged by CII in its Petitioner's Notice
of Intention to Arbitrate. The Company intends to vigorously defend itself
against the claims alleged by CII and may assert certain claims against CII in
the future.

It is too early to predict the outcome of any arbitration findings for this
matter. The dispute is in the early stages and no discovery has been conducted.
Because of the early stage of this claim, we are unable to evaluate the
likelihood of an outcome that would be materially unfavorable for the Company.

                                       8
<PAGE>

Loss of the right to sell the products covered in the Agreement would
significantly affect the Company's sales because that equipment accounts for a
substantial portion of the Company's total sales. On December 31, 2002, the
Company's balance sheet included accrued license fees payable to CII of
$211,654, which is in dispute.

The Company is involved in certain other legal proceedings arising in the normal
course of business. An estimate of the possible loss, if any, resulting from
these matters cannot be made at this time. However, management believes, based
upon the advice of legal counsel, that the ultimate resolution of these matters
will not have a material impact on the Company's consolidated financial
statements.

ENVIRONMENTAL PROCEEDINGS. There are no proceedings against the Company
involving federal, state or local statutes or ordinances dealing with
environmental protection.


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

None.




                                       9
<PAGE>

                                     PART II


ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
                 SECURITY HOLDER MATTERS

(A)  Principal Market, Stock Price, and Dividend Information

Although certain dealers regularly provide quotations on the Company's stock,
actual trading activity is limited and is conducted in the over-the-counter
(OTC) "pink sheets". The Company's ticker symbol is WEBP.

The following table sets forth the high and low bid quotations per share for the
Company's common stock for the periods indicated. These figures were provided by
the Pink Sheets, LLC, and may reflect inter-dealer prices, without retail
mark-up, mark-down or commission. They do not necessarily represent actual
transactions.

                                2002                         2001
                                ----                         ----

  Quarter               High           Low           High             Low
  -------               ----           ---           ----             ---

    First               $.25          $.13         $.28125          $.28125
    Second               .17           .14          .28125           .15
    Third                .20           .14          .20              .15
    Fourth               .14           .09          .20              .10

The Company has paid no dividends during the two years ended December 31, 2002.

(B)  Approximate Number of Holders of Common Stock

The number of holders of record for the Company's common stock as of February
28, 2003, was 502. .

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and related notes appearing
elsewhere in this report.

CRITICAL ACCOUNTING POLICIES

The Company's analysis and discussion of its financial condition and results of
operations are based upon its consolidated financial statements that have been
prepared in accordance with

                                       10
<PAGE>

generally accepted accounting principles in the United States (US GAAP). The
preparation of financial statements in accordance with US GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses, and the disclosure of contingent
assets and liabilities. US GAAP provides the framework from which to make these
estimates, assumptions and disclosures. The Company applies accounting policies
within US GAAP that management believes are appropriate to accurately and fairly
report the Company's operating results and financial position in a consistent
manner. Management regularly assesses these policies in light of current and
forecasted economic conditions along with other factors. The Company's
accounting policies are stated in Note 3 to the consolidated financial
statements as presented herein. The Company believes the following accounting
policies and estimates are critical to understanding the results of operations
and affect the more significant judgments and estimates used in the preparation
of the consolidated financial statements.

Revenue recognition - The Company recognizes revenue from sales of manufactured
products under firm contracts generally at the time the equipment ships. All
freight and installation costs are accrued at the time revenue is recognized.
Estimated costs related to product warranties are accrued at the time of sale.
Proceeds received on contracts prior to recognition as a sale are recorded as
customer deposits. Parts and service sales are recognized when the parts ship
and after service has been performed.

Allowance for doubtful accounts - The Company actively monitors the financial
condition of its customers to determine the potential inability for nonpayment
of trade receivables. The Company also considers other economic factors, such as
advertising revenue, consumer confidence and aging trends, in determining if the
allowance for doubtful accounts is adequate. Management believes that its
process of specific review of customers combined with overall analytical review
provides an accurate evaluation of collectibility of trade receivables.

Inventories - Raw materials, work-in-progress and finished goods are stated at
the lower of average cost or market. Because of the long life cycle of the
Companies products and the large number of low sales volume parts needed in
inventory to service older presses, the Company maintains a valuation reserve
for raw materials and parts inventories to cover their obsolescence. The Company
maintains a second valuation reserve for used equipment to reduce used equipment
valuations to the lower of cost or market.

Warranty reserve - When a sale is recorded the Company establishes a warranty
reserve to cover replacement parts and field

                                       11
<PAGE>

repairs that may arise. To establish that reserve the Company determines the
number of remaining unit months outstanding for its equipment and multiplies
that number times an estimated cost per unit month. The cost per unit month is
based on several factors, including evaluation of costs per unit month over a
specified time frame by dividing total warranty costs by the number of unit
months expired during the period. The Company also analyzes all of its presses
still under warranty to determine if there are any recurring, unusual, or
significantly large problems that may require repair. If actual warranty costs
differ from our estimates, revisions to the estimated warranty liability would
be required. We evaluate our warranty obligations on a quarterly basis.

Income Taxes - The Company records an income tax valuation allowance when the
realization of certain deferred tax assets, net operating losses and capital
loss carryforwards is not assured. These deferred tax items represent expenses
recognized for financial reporting purposes, which may result in tax deductions
in the future. Certain judgments, assumptions and estimates may affect the
carrying value of the valuation allowance and income tax expense in the
consolidated financial statements.


OPERATING RESULTS

                             2002 Compared With 2001
                             -----------------------

Total sales for the year in both 2002 and 2001 were well below normal levels for
the Company because of the recent worldwide economic recession, the slow
recovery from that recession, uncertainty around the world about terrorist
attacks, and the possibility of war with Iraq. These have all contributed to
lower advertising revenues and higher newsprint costs for newspapers and
commercial printers during the past 27 months, causing their profits to decline
substantially. As a direct result of this, the Company's sales of printing
equipment during the last 27 months have been below normal levels.

The Company implemented a marketing program in the third quarter of 2001 aimed
at printers using competitive manufacturers' equipment. The marketing program
emphasized the growing demand for four-color printing by newspapers and stressed
the Company's ability to install its Quadra-Color and Quad-Stack four-color
printing modules into competitive manufacturers' press-lines. During the past 18
months 50 percent of the sales for those modules have been installed into
competitive manufacturers' press-lines. Based on the Company's internal analysis
of the four-page market it believes its share of this market has increased
relative to its competitions' share during this period.

                                       12
<PAGE>

Total sales were $7.303 million in 2002, an increase of 16 percent from total
sales of $6.319 million in 2001. New equipment sales were $5.283 million in
2002, and increase of $1.346 million from 2001 new equipment sales of $3.937
million. In 2002, used equipment sales and parts and service sales were $692
thousand and $1.328 million, respectively. The table below compares domestic,
international and total sales by category for 2002 with 2001.

                             (Dollars in Thousands)
              Domestic      International        Total
              --------      -------------        -----
           2002     2001    2002    2001     2002    2001
           ----     ----    ----    ----     ----    ----
 New      $4,866   $2,511   $417   $1,426   $5,283  $3,937
 Used        692      844      -       39      692     883
 Parts &
  Service    924    1,031    404      468    1,328   1,499
          ------   ------   ----   ------   ------  ------

 Total    $6,482   $4,386   $821   $1,933   $7,303  $6,319
          ======   ======   ====   ======   ======  ======

Cost of sales, as a percentage of sales, was 86.9 percent in 2002 compared with
89.9 percent in 2001. The gross profit margin on new equipment sales increased
to 21.7 percent in 2002 from 16.5 percent in 2001. The Company purchased more
parts from China and India in 2002 then it did in 2001. Those parts cost less
than if the Company manufactured them or purchased them from another supplier in
the United States, resulting in the higher gross margin in 2002. In 2002, used
equipment sales resulted in a gross profit of $64 thousand compared with a gross
profit of $127 thousand in 2001. Cost of sales included a write-down for
obsolete parts and certain equipment of $85 thousand and $38 thousand in 2002
and 2001, respectively. Engineering costs not charged to research and
development that is included in cost of sales was $261 thousand in 2002 and $246
thousand in 2001.

Selling, general and administrative expense increased $143 thousand, or 9.1
percent, in 2002 from 2001. Selling expense increased $55 thousand to $1.096
million in 2002 from $1.041 million in 2001. The Company employed more sales
personnel, paid higher commissions, and had higher benefit costs in 2002,
resulting in an increase in compensation expense of $113 thousand in 2002 from
2001. The Company decreased advertising expenditures, primarily in trade
publications, by $125 thousand to $64 thousand in 2002 from $189 thousand in
2001. Travel and expenses increased $35 thousand to $130 thousand in 2002 from
$95 thousand in 2001. Communication expense and miscellaneous expenses also
increased in 2002 from 2001. General and administrative expense increased $88
thousand in 2002 from 2001. Most of the change was in doubtful accounts expense
which was $24 thousand in 2002, compared with a credit of $43 thousand in 2001.

                                       13
<PAGE>

Professional services, primarily in the form of attorney and accounting fees,
increased by $28 thousand to $90 thousand in 2002 from $62 thousand in 2001.

Research and development expenses were $364 thousand in 2002 compared with $137
thousand in 2001. Most of the expenses in both years were to design,
manufacture, and test a new higher-speed folder, and for improvements to the
Quad-Stack four-color perfector.

Interest expense decreased $50 thousand in 2002 from 2001. A decrease in
interest expense accrued in 2002 for the IC-DISC (Web Leader International,
Inc.) of $49 thousand accounted for the change. The average interest rate on the
Company's revolving line of credit with the bank was 7.7 percent in 2002
compared with 7.1 percent in 2001. The average borrowings from the bank were
$2.423 million in 2002 and $2.308 million in 2001. The average interest rate
charged by the bank changed on January 7, 2002, to prime plus 3 percent from
prime plus 1 percent in 2001, causing the higher average interest rate in 2002.

The Company had a loss of $1.316 million from operations and a net loss of
$1.173 million in 2002. In 2002, because of continuing losses the Company was
not able to recognize on its statement of operations the full tax benefit of
$457 thousand from the operation loss. The Company can carry forward that
benefit on its 2002 federal income tax return. In 2001, the Company had a loss
of $1.322 million from operations and a net loss of $879 thousand.

                             2001 Compared With 2000
                             -----------------------

Total sales were $6.319 million in 2001, a decline of 41 percent from total
sales of $10.717 million in 2000. Most of the decrease was in new equipment
sales which were $3.937 million in 2001, a decline of $4.969 million from 2000
sales of $8.907 million. Both domestic and international new equipment sales
declined, decreasing 48.6 percent and 64.5 percent, respectively. Parts sales in
2001 were down 2.8 percent; while used equipment sales increased 228 percent.
The table below compares domestic, international and total sales by category for
2001 with 2000:


                                       14
<PAGE>

                             (Dollars in Thousands)
              Domestic      International         Total
              --------      -------------         -----
           2001     2000    2001     2000     2001     2000
           ----     ----    ----     ----     ----     ----
 New      $2,511   $4,886  $1,426   $4,021   $3,937  $ 8,907
 Used        844      175      39       94      883      269
 Parts &
  Service  1,031    1,120     468      421    1,499    1,541
          ------   ------  ------   ------   ------  -------

 Total    $4,386   $6,181  $1,933   $4,536   $6,319  $10,717
          ======   ======  ======   ======   ======  =======

Fewer presses were purchased industry-wide in 2001 than 2000 because of rising
uncertainty about the economy and future advertising revenue by newspapers and
commercial printers. Advertising revenues for newspapers started declining in
late 2000 and have continued to decline for the past 18 months. At the same
time, the paper mills lowered newsprint production resulting in higher newsprint
prices. Newsprint is the largest variable production cost printers incur. Press
sales have been declining since the fourth quarter of 2000 as a direct result of
the decline in advertising and higher newsprint prices. The Company's sales in
all four quarters of 2001 were lower compared with sales in the corresponding
quarters in 2000.

Cost of sales, as a percentage of sales, was 91.8 percent in 2001. In 2000, it
was 76.8 percent. The gross profit margin on new equipment sales decreased to
16.5 percent in 2001 from 28.7 percent in 2000. The decrease was caused by
abnormal warranty costs in 2001 to replace a bearing in the field at several
installations and by severe price-cutting by its competitors. A different type
of bearing is being used now that has not failed in the field. In 2001, used
equipment sales contributed a gross profit of $127 thousand compared with a
gross loss of $4 thousand in 2000. Cost of sales included a write-down for
obsolete parts and certain equipment of $38 thousand in 2001 compared with a $68
thousand write-down in 2000. Research and development expenses, primarily to
design and manufacture a new higher-speed folder and for enhancements to the
Quad-Stack four-color perfector, were $383 thousand in 2001. In 2000, research
and development costs were $477 thousand.

Selling, general and administrative expense declined $336 thousand, or 17.5
percent in 2001 from 2000. In 2001, selling expense decreased $117 thousand, and
administrative expense decreased $219 thousand compared with 2000 expenses. The
Company spent $49 thousand attending domestic tradeshows and $69 thousand
attending international tradeshows in 2001, compared with $130 thousand and $180
thousand in 2000, respectively. Advertising expense was $189 thousand in 2001
and $157 thousand in 2000. In 2001, the Company spent $55 thousand to develop a
new sales prospect system. Commission expense was $58 thousand in 2001 and

                                       15
<PAGE>

$110 thousand in 2000. Administrative payroll costs were $370 thousand in 2001;
a decline of $74 thousand from 2000 expense as a result of reduced staffing and
transfers to other departments. Actual bad debts in 2001 resulted in a benefit
of $43 thousand compared with an expense of $63 thousand in 2000. Professional
service fees were $61 thousand and $91 thousand in 2001 and 2000, respectively.

Interest expense increased $7 thousand in 2001 from 2000. The average interest
rate on the Company's revolving lines of credit with the bank was 7.1 percent in
2001 compared with 9.3 percent in 2000. The average borrowings from the bank
were $2.308 million in 2001 and $1.852 million in 2000. The lowering of interest
rates by the Federal Reserve Bank in 2001 caused the lower average interest
rate. The Company's operating losses during the year caused the higher average
borrowing in 2001.

The Company had a loss of $1.322 million from operations and a net loss of $879
thousand in 2001. There is a bright spot within these disappointing numbers and
that is that the Company had earnings of $195 thousand from operations and net
earnings of $122 thousand in the fourth quarter of 2001. In 2000, the Company
had an operating profit of $342 thousand and net earnings of $235 thousand.

                                      2003
                                      ----

Because of the high value of each order for the Company's equipment and the
irregular timing of orders, and uncertainty about the economic environment in
foreign and domestic markets, projections for future time periods are very
difficult to make.

The Company has noticed an increase in orders and interest in its equipment
starting in the third quarter of 2002. As of March 6, 2003, the Company has firm
orders for approximately $3.665 million in sales for 2003, plus the number of
"hot" prospects it is working with has increased substantially, too. Both firm
sales and the "hot" prospect list include a higher number of complete
press-lines in 2003 than in the past several years. The Company is also working
diligently to increase sales in certain foreign markets. The Company's
management believes newspaper advertising will grow slightly in 2003, but that
the number of orders placed for complete press-lines in 2003 will continue to be
below normal levels, resulting in aggressive competition and severe price
cutting for most orders. To compete, the Company will continue to stress the
color capabilities of both the Quadra-Color and Quad-Stack modules and continue
to reduce the cost of its equipment by purchasing more parts from foreign
sources.

                                       16
<PAGE>

In 2003, the Company will, for the first time, purchase some parts for the
Marc-25 perfector from India and China. This will lower the cost of the Marc-25
perfector, allowing the Company to offer more aggressive pricing to prospects
for Marc-25 press-lines.

Most of the Company's press sales in both 2002 and 2001 consisted of adding
four-color models to operating press installations. We expect that trend to
continue in 2003 with newspapers adding more color pages to their papers to
attract advertisers and please their readers. The Company's Quadra-Color and
Quad-Stack models are ideal for this application. The market for the
Quadra-Color and the Quad-Stack is essentially every 30,000 impression per hour
four-page press installation extant. Since the introduction of the Quad-Stack in
August 1998, approximately 50 percent of the units shipped have been installed
with competitive manufacturers' equipment.

LIQUIDITY

Net working capital was $3.077 million and the current ratio was 3.2:1 on
December 31, 2002. Changes in working capital components include a decrease in
accounts receivable of $614 thousand; inventories decreased $281 thousand;
accounts payable increased by $85 thousand; customer deposits decreased $54
thousand; accrued expenses increased by $217 thousand; and refundable income
taxes decreased by $137 thousand. Net cash provided from operations was $169
thousand in 2002.

Raw materials and parts inventories and finished goods inventory increased $169
thousand and $73 thousand, respectively, in 2002 from 2001. Work-in-progress and
used equipment inventory decreased $485 thousand and $47 thousand, respectively,
in 2002 from 2001.

Funds provided by operations are the Company's primary source of liquidity. In
addition, the Company uses short-term debt from a revolving line of credit with
a commercial bank to finance fluctuating working capital requirements. On
December 31, 2002, the Company had additional borrowing capacity of $624
thousand from its $2.750 million line of credit.

On May 17, 2002, the bank and the Company modified their existing business loan
agreement. The maturity date was extended to February 1, 2004, and the bank
waived the existing covenants on the loan, some of which the Company had been in
default of. The Company agreed to reduce the maximum amount of the loan to $2.8
million by July 1, 2002, and by an additional $50 thousand on each of the
following dates: October 1, 2002; February 1, 2003; June 1, 2003; October 1,
2003; and repay the then outstanding balance

                                       17
<PAGE>

(a maximum of $2.6 million) on the note on February 1, 2004. The interest rate
charged is the bank's prime rate, plus 3 percent.

CAPITAL RESOURCES

Total assets decreased $1.182 million from December 31, 2001, to $5.081 million
on December 31, 2002. In 2002, stockholders' equity decreased by $1.173 million;
working capital increased by $558 thousand; non-current deferred income taxes
decreased by $129 thousand; and long-term debt (excluding the long-term
revolving line of credit in 2002) decreased by $49 thousand.

Long-term financing in the form of secured notes is used to acquire
manufacturing equipment. The Company did not incur any new long-term debt in
2002.

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

This Form 10-KSB contains forward-looking statements. Forward-looking statements
do not relate strictly to historical or current facts and anticipate results
based on management's plans that are subject to uncertainty. Forward-looking
statements may be identified by the use of words like "plans," "expects,"
"believes," "will," "anticipates," "estimates" and other works of similar
meaning in conjunction with, among other things, discussions of future
operations, financial performance, the Company's strategy for growth, product
development, regulatory requirements, market position and expenditures.

Forward-looking statements are based on current expectations of future events.
The Company cannot guarantee that any forward-looking statement will be
accurate, although the Company believes that it has been reasonable in its
expectations and assumptions. Investors should realized that if underlying
assumptions proved inaccurate or that unknown risks or uncertainties
materialize, actual results could vary materially from the Company's
expectations and projections. Investors are therefore cautioned not to place
undue reliance on any forward-looking statements. Furthermore, the Company
assumes no obligation to update any forward-looking statements as a result of
new information or future events or developments.

CONTROLS AND PROCEDURES

Within 90 days prior to the date of this report, we carried out an evaluation,
under the supervision and with the participation of our principal executive
officer and principal financial officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on this evaluation,
our principal executive officer and principal financial officer

                                       18
<PAGE>

concluded that our disclosure controls and procedures are effective in timely
alerting them to material information required to be included in our periodic
Securities and Exchange Commission reports. It should be noted that the design
of any system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions,
regardless of how remote.

In addition, we reviewed our internal controls, and there have been no
significant changes in our internal controls or in other factors that could
significantly affect those controls subsequent to the date of their last
evaluation.

ITEM 7.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary data filed as part of this report are
listed in the index appearing in Item 13 to this Form 10-KSB Annual Report.

ITEM 8.   CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURES

None.



                                       19
<PAGE>

                                    PART III


ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers and directors of the Company are:

Name                       Position                                     Age
----                       --------                                     ---

G. B. Palmer               President and Director                       54


E. P. Beierlorzer          Vice President of Engineering                63
                             and Director

R. G. Mercer               Vice President of Manufacturing              61
                             and Director

R. B. Thompson             Vice President of Technical                  62
                             Services and Director

A. W. White                Vice President of Purchasing                 48
                             and Director

R. M. Sprague              Director                                     63

P. F. Dunn                 Director                                     53

C. L. Mathison             Vice President of Finance                    60
                             and Secretary/Treasurer

G. C. Knutzen              Director                                     56


There are no family relationships between any directors or executive officers of
the registrant. Officers are appointed by the Board of Directors and serve at
its will or until they resign.

BUSINESS EXPERIENCE:

G. B. Palmer
------------

Mr. Palmer has been president and a director of the Company since December 1996.
He served as the Company's director of manufacturing from August 1990 to
December 1996, and has been employed by the Company since 1986. Prior to joining
the Company, he was director of manufacturing of Pacific Hoe Corporation. He is
a metallurgical engineer.

                                       20
<PAGE>

E. P. Beierlorzer
-----------------

Mr. Beierlorzer rejoined the Company as director of engineering in June 1997. He
was elected to the board of directors at that time and appointed vice president
of engineering in November 1997. From July 1996 to June 1997, he was a
consultant. Mr. Beierlorzer was chief engineer with the Ecopak division of
Ranpak Corporation from August 1992 to June 1996. From March 1984 to August
1992, he was director of engineering for the Company. He is a mechanical
engineer and has four patents for equipment design.

R. G. Mercer
------------

Mr. Mercer has worked for the Company in manufacturing since 1972. He was
elected to the board of directors in June 1997 and appointed vice president of
manufacturing in November 1997. He was director of manufacturing from December
1996 to November 1997. From August 1990 to December 1996, he was production
manager.

R. B. Thompson
--------------

Mr. Thompson has worked for the Company in technical services since 1970. He was
elected to the board of directors in June 1997 and appointed vice president of
technical services in November 1997. He was customer service manager from
October 1985 to November 1997.

A. W. White
-----------

Mr. White has worked for the Company in purchasing since 1976. He was elected to
the board of directors in June 1997 and appointed vice president of purchasing
in November 1997. He has been the Company's purchasing manager for 21 years.

R. M. Sprague
-------------

Mr. Sprague has been a director of the Company since January 1997. He is the
founder and owner of Sprague Metal Company, a manufacturer of specialty sheet
metal products. He founded the company in 1974 and has been employed in the
metal trades business for over 30 years.

P. F. Dunn
----------

Mr. Dunn has been a director of the Company since February 1997. Since July
2000, he has been the tax manager for the State and Local Division with
Amazon.com. Prior to that, he was employed by the Boeing Company in various
financial positions since 1973.

                                       21
<PAGE>

C. L. Mathison
--------------

Mr. Mathison was appointed vice president of finance in June 1998. He has been
secretary/treasurer of the Company since January 1997, and the Company's
controller since October 1979. Prior to joining the Company, he was assistant
controller of Bayliner Marine Corporation.

G. C. Knutzen
-------------

Mr. Knutzen was a partner for 12 years with the public accounting firm Deloitte
& Touche, before retiring in 1995. He was partner in charge of the Company's
audit during many of those years. Mr. Knutzen consults part-time on financial
and accounting matters to a variety of private companies.

401(K) PLAN:

Effective January 1, 1988, the Company established a 401(K) plan under the
Internal Revenue Service Regulations. Employees are eligible to participate
after one year of service. Plan participants self-direct their investments
choosing from eleven options sponsored by Merrill Lynch. An employee who elects
to participate may contribute in a year up to the lower of 15% of gross pay or
the dollar limit under the regulations, which in 2002 was $11,000. The Company
contributes a matching amount of 25% of the first $4,000 contributed by an
employee in a year. In addition, the Company may make a discretionary matching
contribution. The total amount is determined by the Company's Board of Directors
and allocated to the participants based on their contributions. There were no
discretionary contributions in 2002 and 2001. Fees paid the administrator, plus
the company's matching contribution, totaled approximately $22 thousand in both
2002 and 2001.

ITEM 10.  EXECUTIVE COMPENSATION

The following table sets forth the aggregate total cash compensation accrued
during the fiscal years ended December 31, 2002, 2001, and 2000 for the chief
executive officer of the Company.

                                 Annual Compensation

                                                   Long-Term    All Other
Name/Principal                 Salary    Bonus    Compensation Compensation
   Position           Year       ($)      ($)           $           $
-------------------   ----     ------    -----    ------------  --------

G.B. Palmer           2002     76,000    2,095          0           0
President/            2001     86,292    2,099          0           0
General Manager       2000     95,000    2,392          0           0


                                       22
<PAGE>

The officers and directors are under no formal compensation agreements.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of February 28, 2003, information with respect
to the beneficial ownership of common stock of the Company by each person who is
known by the Company to have owned beneficially more than 5% of the Company's
common stock, by each of its officers and directors, and by its officers and
directors as a group:

                                                                     Percent
Name and Address                        Shares Owned                 Of Class

Alan W. White                             551,400                     17.76%
3025 196th Ave. Ct. E
Sumner, WA  98390

Rolynn G. Mercer                          520,667 (1)                 16.77%
23326 51st Avenue South
Kent, WA  98032

Roy B. Thompson                           513,000 (2)                 16.52%
3901 NE 22
Renton, WA  98056

Gary B. Palmer                            264,833                      8.53%
285 Mt. Rainier Pl.
Issaquah, WA  98027

Edwin P. Beierlorzer                      256,500                      8.26%
4714 - 161 Ave. SE
Bellevue, WA  98006

Rufus M. Sprague                           63,200                      2.04%
417 Milwaukee Blvd. N.
Pacific, WA  98047

Gerald C. Knutzen                            -0-                         *
222 S. W. 292nd Street
Federal Way, WA 98023

                                       23
<PAGE>

Patrick F. Dunn                              -0-                         *
9768 Waters Ave. S
Seattle, WA  98118

Craig L. Mathison                            -0-                         *
9553 49th Ave. N.E.
Seattle, WA  98115

All Directors and Officers
 as a Group (9 persons)                 2,169,600                     79.99%

*  Less than 1%

(1)      Includes 73,894 shares owned by Mr. Mercer's wife.

(2)      Includes 54,605 shares owned by Mr. Thompson's wife.

Except as noted, each person named in the table is believed to have sole voting
and investment power over the shares owned.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

No officer, director, nominee or associate of any officer, director, or nominee
was indebted to the Company in an amount in excess of $60,000 at any time during
the fiscal year ended December 31, 2002.

R. M. Sprague, a director of the Company and owner of Sprague Metal Company, has
an ongoing relationship with the Company as a supplier of sheet metal products
and other miscellaneous parts. This relationship is expected to continue in the
future. During the fiscal year ended December 31, 2002, the Company purchased
parts costing $113,228 from the Sprague Metal Company. The Company's management
negotiates purchase orders and prices for the items purchased. Management
believes the prices paid are competitive with other sources.

Two non-management employees of the Company operate a part-time business
rebuilding and selling used equipment manufactured by the Company. The Company
contracts with them to rebuild some of its used presses. Most, but not all of
their business, is with the company. The Company sells parts to them at its
normal selling prices. In 2002 and 2001, they purchased parts totaling $62,915
and $86,976, respectively, from the Company. In 2002 and 2001, the Company
purchased from them used equipment, rebuilding services, and used parts totaling
$169,199 and $116,188, respectively. The Company, also, paid them storage fees
of $10,000 in 2002 and $9,600 in 2001.



                                       24
<PAGE>

ITEM 13.  EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K

(a) (1) and (2) The response to this portion of Item 13 is submitted as a
separate section of this report.


(a) (3)  The following exhibits are incorporated herein by reference:

         (3)      Articles of Incorporation and by-laws. Exhibit 1 to
                  Registrant's Form 10-K for the year ended December 31, 1980,
                  File No. 0-7267.

 (10)    Material Contracts

         (10a)    being the lease for the Company's facilities between Web Press
                  Corporation (lessee) and William J. Bennett (lessor) dated
                  October 16, 1987.

         (10b)    being the Business Loan Agreement between Web Press
                  Corporation and KeyBank National Association dated April 7,
                  1999.

         (10c)    being the modification and extension of the Business Loan
                  Agreement between Web Press Corporation and KeyBank National
                  Association dated May 17, 2002.

         (10d)    being the Agreement to manufacture and sell equipment between
                  Web Press Corporation and Color Impact International, Inc.

(21)  Subsidiaries of Registrant

         (21a)    Web Leader International, Inc.

 (b)   Report on Form 8-K

             There have been no reports on Form 8-K filed during the three
months ended December 31, 2002.


                                       25
<PAGE>

                                   SIGNATURES

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


                                             WEB PRESS CORPORATION


March 17, 2003                        By:    /s/ Gary B. Palmer
                                             ------------------
                                             Gary B. Palmer
                                             President and Chairman
                                             of the Board


March 17, 2003                        By:    /s/ Craig L. Mathison
                                             ---------------------
                                             Craig L. Mathison
                                             Vice President of Finance
                                             (Principal Accounting
                                             Officer)


                                       26
<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
was signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.

/s/ Gary B. Palmer                                        March 17, 2003
------------------
Gary B. Palmer
President and Chairman
of the Board


/s/ Edwin P. Beierlorzer                                  March 17, 2003
------------------------
Edwin P. Beierlorzer
Vice President of Engineering
and Director


/s/ Rolynn G. Mercer                                      March 17, 2003
--------------------
Rolynn G. Mercer
Vice President of Manufacturing
and Director


/s/ Roy B. Thompson                                       March 17, 2003
-------------------
Roy B. Thompson
Vice President of Technical Services
and Director


/s/ Alan W. White                                         March 17, 2003
-----------------
Alan W. White
Vice President of Purchasing
and Director


/s/ Rufus M. Sprague                                      March 17, 2003
--------------------
Rufus M. Sprague
Director


/s/ Patrick F. Dunn                                       March 17, 2003
-------------------
Patrick F. Dunn
Director


/s/ Gerald C. Knutzen                                     March 17, 2003
---------------------
Gerald C. Knutzen
Director

                                       27
<PAGE>


                              WEB PRESS CORPORATION
                                   FORM 10-KSB
                           ITEMS 7, 13(a) (1) AND (2)
                          INDEX OF FINANCIAL STATEMENTS


         The following financial statements of the registrant and its subsidiary
required to be included in Item 7 are listed below:

                                                                  Page

Consolidated Financial Statements:
  Report of Independent Certified Public
    Accountants...........................................         29
  Balance Sheet as of December 31, 2002...................         30
  Statements of Operations for each of the two
    years ended December 31, 2002.........................         32
  Statements of Stockholders' Equity for each of
    the two years ended December 31, 2002.................         33
  Statements of Cash Flows for each of the two
    years ended December 31, 2002.........................         34
  Notes to Consolidated Financial Statements..............         36




                                       28
<PAGE>

               Report of Independent Certified Public Accountants
               --------------------------------------------------


Board of Directors and Stockholders
Web Press Corporation
Kent, Washington

We have audited the accompanying consolidated balance sheet of Web Press
Corporation (a Washington corporation) and Subsidiary as of December 31, 2002,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the two years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Web Press
Corporation and Subsidiary as of December 31, 2002, and the consolidated results
of their operations and their consolidated cash flows for each of the two years
then ended, in conformity with accounting principles generally accepted in the
United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 2 of the
financial statements, the Company has suffered significant losses from
operations. This factor, among others, as discussed in note 2 to the financial
statements, raises substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also
described in note 2. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ Grant Thornton LLP

Seattle, Washington
March 5, 2003

                                       29
<PAGE>

                              WEB PRESS CORPORATION

                           CONSOLIDATED BALANCE SHEET
                             (Dollars in Thousands)


ASSETS                                                     December 31, 2002
                                                           -----------------

Current Assets:
Cash .........................................................   $   --
Accounts receivable, less allowance for
  doubtful accounts of $15 (Note 5) ..........................      557
Inventories (Notes 3 and 5) ..................................    3,455
Deferred tax assets ..........................................      321
Deposits .....................................................       54
Prepaid expenses .............................................       66
                                                                 ------

Total Current Assets .........................................    4,453

Machinery and Leasehold Improvements, at cost (Notes 3 and 5):
   Machinery and equipment ...................................    3,621
   Leasehold improvements ....................................      235
                                                                 ------
                                                                  3,856

   Less accumulated depreciation
    and amortization .........................................    3,228
                                                                 ------

Machinery and Leasehold Improvements (Net) ...................      628
                                                                 ------

Total Assets .................................................   $5,081
                                                                 ======


The accompanying notes are an integral part of the Consolidated Financial
Statements.

                                       30
<PAGE>

                              WEB PRESS CORPORATION

                           CONSOLIDATED BALANCE SHEET
                             (Dollars in Thousands)


LIABILITIES AND STOCKHOLDERS'                     December 31, 2002
                                                  -----------------
EQUITY

Current Liabilities:
Accounts payable ................................   $   436
Customer deposits ...............................        51
Accrued expenses ................................       835
Current portion of long-term debt (Note 5) ......        54
                                                    -------

Total Current Liabilities .......................     1,376

Long-Term Debt, less current
  portion (Note 5) ..............................     2,274

Deferred taxes ..................................       321

Commitments (Note 7)
                                                    -------

Stockholders' Equity (Note 7):
     Common stock, par value $.025
     per share:
       Authorized, 4,000,000 shares
       Issued, 3,436,513 shares .................        86
     Paid-in capital ............................       320
     Retained earnings ..........................       801
                                                    -------
                                                      1,207

     Treasury stock, 331,100 shares
       at cost ..................................       (97)
                                                    -------

Total Stockholders' Equity ......................     1,110
                                                    -------

Total Liabilities and Stockholders' Equity ......   $ 5,081
                                                    =======


The accompanying notes are an integral part of the Consolidated Financial
Statements.

                                       31
<PAGE>

                              WEB PRESS CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Dollars in Thousands Except Per Share Data)


                                          Year Ended December 31,
                                          -----------------------
                                             2002       2001
                                             ----       ----

Sales (Note 9) .........................   $ 7,303    $ 6,319
Cost of sales ..........................     6,345      5,679
                                           -------    -------
                                               958        640

    Selling, general and
      administrative expenses (Note 8) .     1,723      1,580
    Research & development expenses ....       364        137
                                           -------    -------
                                            (1,129)    (1,077)

    Other income .......................        11          3
    Interest expense ...................      (198)      (248)
                                           -------    -------
                                              (187)      (245)
                                           -------    -------

    Earnings (loss) before taxes .......    (1,316)    (1,322)

    Taxes (benefit) on earnings (loss)
      (Note 6) .........................      (143)      (443)
                                           -------    -------

    Net earnings (loss) ................   $(1,173)   $  (879)
                                           =======    =======

    Basic and diluted earnings (loss)
      per share ........................   $  (.38)   $  (.28)
                                           =======    =======


The accompanying notes are an integral part of the Consolidated Financial
Statements.

                                       32
<PAGE>

                              WEB PRESS CORPORATION

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                             (Dollars in Thousands)


<TABLE>
<CAPTION>
                                    Common Stock
                                    ------------         Treasury       Paid-in     Retained
                                Shares       Amount       Stock         Capital     Earnings
                                ------       ------       -----         -------     --------
<S>                           <C>          <C>          <C>           <C>          <C>
Balance, January 1, 2001      3,436,513    $       86   $      (97)   $      320   $    2,853
                             ----------    ----------   ----------    ----------   ----------

Net earnings for the year                                                                (879)
                             ----------    ----------   ----------    ----------   ----------

Balance, December 31, 2001    3,436,513            86          (97)          320        1,974

Net loss for the year                                                                  (1,173)
                             ----------    ----------   ----------    ----------   ----------

Balance, December 31, 2002    3,436,513    $       86   $      (97)   $      320   $      801
                             ==========    ==========   ==========    ==========   ==========
</TABLE>




The accompanying notes are an integral part of the Consolidated Financial
Statements.


                                       33
<PAGE>

                              WEB PRESS CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                  Year Ended December 31,
                                                                  -----------------------
                                                                      2002       2001
                                                                      ----       ----
<S>                                                                 <C>        <C>
Cash flows from operating activities:
  Net earnings (loss) ...........................................   $(1,173)   $  (879)
  Adjustments to reconcile net
     earnings (loss) to net cash
     provided (used) by operating
     activities:
         Depreciation and amortization ..........................       146        150
         Provision for losses on accounts
           receivable ...........................................       (22)      (110)
         Inventory valuation reserve ............................        85         46
         Deferred taxes .........................................      (141)      (282)
         Gain from retirement
           of plant assets ......................................        (1)        --

  Increase (Decrease) in cash from changes in operating accounts:
         Accounts receivable ....................................       614        205
         Refundable income taxes ................................       137        (88)
         Inventory ..............................................       281        716
         Deposits ...............................................         3        (24)
         Prepaid expenses .......................................        (8)       (11)
         Accounts payable .......................................        85       (118)
         Customer deposits ......................................       (54)        33
         Accrued expenses .......................................       217       (254)
                                                                    -------    -------

         Total adjustments ......................................     1,342        263
                                                                    -------    -------

     Net cash provided (used) by operating
         activities .............................................       169       (616)
                                                                    -------    -------

Cash flows from investing activities:
     Capital expenditures .......................................       (38)       (42)
     Proceeds from sale of plant assets .........................         1         --
                                                                    -------    -------

     Net cash used in investing activities ......................       (37)       (42)
                                                                    -------    -------
</TABLE>

(Continued on following page)

                                       34
<PAGE>

(Continued from previous page)

Cash Flows from financing activities:
     Proceeds from issuance of
        Long-term, debt ..........................      --       24
     Payments on long-term debt ..................     (49)     (48)
     Net borrowings (payments) on
       long-term line of credit ..................     (83)     679
                                                     -----    -----

     Net cash provided (used) by
       financing activities ......................    (132)     658
                                                     -----    -----

Net increase (decrease) of period ................      --       --

Cash at beginning of period ......................      --       --
                                                     -----    -----

Cash at end of period ............................   $  --    $  --
                                                     =====    =====

Supplemental disclosures of cash flow information:

Cash was paid during the year for:

     Interest ....................................   $ 223    $ 240
     Taxes .......................................       1        1

Non-cash investing and financing activities:

     Inventory transferred
    from leased equipment ........................      --      (52)


The accompanying notes are an integral part of the Consolidated Financial
Statements.



                                       35
<PAGE>

                              WEB PRESS CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        TWO YEARS ENDED DECEMBER 31, 2002


Note 1 - Nature of the Company's Business:

         The Company manufactures web-fed offset printing presses. It has two
product lines, the Web Leader and the Atlas. The primary difference between the
Web Leader and the Atlas is that the Atlas is twenty percent faster and is
manufactured in three different broadsheet newspaper page lengths. The Company's
presses are designed to print on absorbent paper such as newsprint. Among the
products produced by the presses are newspapers (both broadsheet and tabloid
sizes), shoppers, advertising inserts, and paperback books. Each press is
composed of standard modules to unwind, print, cut-off and fold the roll of
paper into a finished product. The equipment is arranged to meet the particular
printer's requirements for the number of pages, color, and size of products.

         The Company markets its presses worldwide. Company employed sales
representatives sell the Company's presses in the United States and Canada.
Foreign sales are made through independent agents in Central and South America,
Asia, Europe, and the Middle East. Sales are based on a combination of price,
service, quality, and the versatility of the equipment.

Note 2 - Management Plans:

         The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As shown in the financial
statements, the Company incurred a net loss of $1.173 million in 2002 and $879
thousand in 2001.

         The Company must reduce its line of credit with the bank by $50
thousand on February 1, 2003; June 1, 2003; October 1, 2003; and repay the then
outstanding balance on the note (a maximum of $2.6 million) on February 1, 2004.
The bank has asked the Company to secure financing from another lender by
February 1, 2004. The Company has contacted several other commercial banks and
lenders about its financing needs and believes that it will be able to secure
new financing by that date.

         The Company's backlog of firm orders at any point in time is not
sufficient to meet a full year's operating needs. It is management's belief that
sufficient orders will continue to be re-

                                       36
<PAGE>


ceived from domestic and foreign markets, along with additional financing, to
meet liquidity requirements in the upcoming year. As of March 6, 2003, the
Company's firm orders for 2003 are approximately $3.665 million.

         The Company believes it will be able to obtain new financing if it
operates profitably during the first nine months of 2003; however, there can be
no assurance that this will occur. Likewise, new financing may not be available
in a sufficient amount or on acceptable terms even if the Company operates
profitably in the first nine months of 2003.

         The accompanying financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

Note 3 - Summary of Significant Accounting Policies:

Principles of consolidation
---------------------------

         The accompanying consolidated financial statements include the accounts
of Web Press Corporation and Web Leader International, Inc., its wholly-owned
Domestic International Sales Corporation (DISC). All significant inter-company
accounts and transactions have been eliminated in consolidation.

Inventories
-----------

         Raw materials, work-in-progress and finished goods are stated at the
lower of average cost or market. Used presses and other related press equipment
are stated at the lower of cost(specific identification basis) or market.
Inventory costs include material, labor, and manufacturing overhead. Inventories
were classified as follows at December 31, 2002:

                                          (Dollars in Thousands)

         Raw materials and parts
         (including subassemblies)........      $1,568
         Work-in-progress.................         748
         Finished goods...................         738
         Used equipment...................         401
                                                ------

                                                $3,455

Machinery and leasehold improvements
------------------------------------

         Machinery and equipment are depreciated on the straight-line method for
financial statement purposes, based upon useful lives of three to ten years.
Leasehold improvements are amortized over their useful lives or the term of the
lease, whichever is shorter. For income tax purposes, accelerated methods are
used for all eligible assets.

                                       37
<PAGE>

         Maintenance and repairs are charged directly to costs or expenses as
incurred. Equipment of only nominal value and renewals and betterments which do
not appreciably extend the life of the asset are charged directly to costs or
expenses.

         Fully depreciated or fully amortized assets which are no longer in use
or are not identifiable are written off by charges to the allowance for
accumulated depreciation and amortization. When assets are retired or disposed
of, the costs and accumulated depreciation of such assets are removed from the
accounts and the difference between the net depreciated cost and the amount
received is recorded in the statements of operations.

Research and development costs
------------------------------

         Research and development costs are expensed as incurred. Total research
and development costs charged to operations during the years ended December 31,
2002 and 2001 were $364 thousand and $137 thousand, respectively.

Advertising
-----------

         Advertisements placed primarily in periodical printing-trade magazines
and newspapers and direct-response mail campaigns followed by phone calls are
used to promote the Company's printing presses. Advertising costs are expensed
in the period the advertising initially takes place. Total advertising costs
charged to operations during the years ended December 31, 2002 and 2001 were $64
thousand and $190 thousand, respectively. Direct-response mail campaigns
included in advertising were $26 thousand in 2002 and $9 thousand in 2001.

Revenue recognition
-------------------

         The Company recognizes revenue from sales of manufactured products
under firm contracts generally at the time the equipment ships. All freight and
installation costs are accrued at the time revenue is recognized. Estimated
costs related to product warranties are accrued at the time of sale. Proceeds
received on contracts prior to recognition as a sale are recorded as customer
deposits. Parts and service sales are recognized when the parts ship and after
service has been performed.

Accounts receivable
-------------------

         Equipment sales are made using a "sales agreement" negotiated with the
purchaser that specifies the payment terms. Typically, the Company receives a
deposit when the sales agreement is signed, a second payment one week prior to
shipment of the equipment,

                                       38
<PAGE>

and a final payment upon completion of the installation. The sales agreement
includes conditions of default and remedies available to the Company if default
occurs. The Company maintains a security interest in the equipment until all
payments are received. International sales of equipment are generally made using
irrevocable letters of credit confirmed by a United States bank.

         The Company extends credit to its customers for parts sales and
service. Accounts receivable are due within 30 days of shipment.

         Accounts receivable are stated at amounts due from customers net of an
allowance for doubtful accounts. The Company determines its allowance for
doubtful accounts by considering a number of factors, including the length of
time amounts are past due, the customer's current ability to pay its obligations
to the Company, the Company's previous loss history, and the condition of the
general economy and the industry as a whole. The Company writes-off accounts
receivable when they become uncollectible, and payments subsequently received on
such receivables are credited to the allowance for doubtful accounts.

Earnings per share
------------------

         Earnings per share-basic and diluted were calculated based on the
weighted average number of shares outstanding. The weighted average-basic and
diluted number of shares outstanding was 3,105,413 in 2002 and 2001.

Estimates
---------

         The Company makes certain cost estimates when it records a press sale
and uses other estimates and assumptions regarding certain types of assets,
liabilities, revenues, and expenses. Such estimates primarily relate to
unsettled transactions and events as of the date of the financial statements.
All are reported in conformity with generally accepted accounting principles.
Company management believes the basis for these estimates are accurately
reflected in the financial statements; however, actual results may differ from
estimated amounts.

Warranties
----------

         The Company records a liability for estimated costs that it expects to
incur for product warranty claims. Factors affecting the Company's warranty
liability include the number of units sold and historical and anticipated rates
of warranty claims and costs per claim. The Company periodically assesses the
adequacy of its warranty liability based on changes in these factors.


                                       39
<PAGE>

Recently issued accounting standards
------------------------------------

         The FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44,
and 64, Amendment of FASB Statement No. 13, and Technical Corrections, on April
30, 2002. Statement No. 145 rescinds Statement No. 4, which required all gains
and losses from extinguishments of debt to be aggregated and, if material,
classified as an extraordinary item, net of related income tax effect. Upon
adoption of Statement No. 145, companies will be required to apply the criteria
in APB Opinion No. 30,: Reporting the Results of Operations - reporting the
Effects of Disposal of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions: in determining the classification of gains
and losses resulting from the extinguishments of debt. Statement No. 145 is
effective for fiscal years beginning after May 15, 2002. The initial application
of SFAS 145 did not have a material effect on the Company's financial
statements.

         In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This standard requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by the standard include lease termination costs and
certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity. SFAS
No. 146 is to be applied prospectively to exit or disposal activities initiated
after December 31, 2002. The initial application of SFAS 146 did not have a
material effect on the Company's financial statements.

         In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure. This standard amends FASB
Statement No. 123, Accounting for Stock-Based Compensation, to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this
Statement amends the discourse in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The amendments to Statement 123
of this Statement shall be effective for financial statements for fiscal years
ending after December 15, 2002. The initial application of SFAS 148 is not
expected to have a material effect on the Company's financial statements.


                                       40
<PAGE>

Note 4 - Legal Proceedings:

         On January 23, 2003, the Company received a Petitioner's Notice of
Intention to Arbitrate from Color Impact International, Inc. (CII). CII seeks
arbitration for controversies arising from an Agreement with the Company dated
March 20, 1998, and a modification to that Agreement dated February 28, 2002.
That Agreement gives the Company the exclusive right (with the exception of
Russia and India) to manufacture, market and sell certain equipment designed by
CII. CII alleges and/or seeks the following remedies from the Company through
arbitration. (1) That the Company has not computed and timely paid to CII all
license fees under the Agreement, (2) That the Company has not timely reported
to CII all license fees under the Agreement and is therefore obligated to pay
CII a license fee 5 times the license fee which would have otherwise have been
payable, (3) CII seeks payment of all license fees which are due for products
sold under the Agreement, (4) CII seeks to terminate the Agreement effective
August 22, 2002, (5) CII seeks to stop the Company from manufacturing and
selling the machinery in the Agreement after August 22, 2002, (6) CII seeks the
return of one copy of all design drawings in the Company's possession for the
equipment in the Agreement, (7) CII may assert in the course of arbitration
additional claims, (8) CII asks that all defenses the Company may assert be done
in arbitration, (9) CII asks that all counterclaims which the Company may assert
or arise out of the Agreement be done in arbitration, and (10) CII asks that the
Company pay CII's attorney's fees.

         The Company has retained an attorney for this matter. The Company
disputes and/or denies all of the controversies alleged by CII in its
Petitioner's Notice of Intention to Arbitrate. The Company intends to vigorously
defend itself against the claims alleged by CII and may assert certain claims
against CII in the future.

         It is too early to predict the outcome of any arbitration findings for
this matter. The dispute is in the early stages and no discovery has been
conducted. Because of the early stage of this claim, we are unable to evaluate
the likelihood of an outcome that would be materially unfavorable for the
Company.

         Loss of the right to sell the products covered in the Agreement would
significantly affect the Company's sales because that equipment accounts for a
substantial portion of the Company's total sales. On December 31, 2002, the
Company's balance sheet included accrued license fees payable to CII of
$211,654, which is in dispute.

         The Company is involved in certain other legal proceedings arising in
the normal course of business. An estimate of the possible loss, if any,
resulting from these matters cannot be made at this time. However, management
believes, based upon the

                                       41
<PAGE>

advice of legal counsel, that the ultimate resolution of these matters will not
have a material impact on the Company's consolidated financial statements.

Note 5 - Financing:

         The Company has a revolving line of credit with a commercial bank for
borrowing up to $2.750 million. Borrowings against this line were $2.126 million
on December 31, 2002. Because the loan matures on February 1, 2004, that amount
is included in long-term debt on the balance sheet. The interest rate charged is
the bank's prime rate, plus 3 percent. The rate was 7.25 percent on December 31,
2002. Accounts receivable, firm orders in production, inventories, and values in
excess of the long-term financing on equipment are pledged as collateral.

         Long-term debt consists of the following:

                                      (Dollars in Thousands)
                                        December 31, 2002

Revolving line of credit .................   $2,126

Note payable, 9%, due in monthly
installments of $2,027 including
interest.  Final payment
due April, 2010 ..........................      130

Note payable for equipment, 9.3%,
due in monthly installments of $2,198
including interest.  Final payment due
in March, 2004 ...........................       31

Note payable for equipment, 8.97%, due in
monthly installments of $1,124 including
interest. Final payment due in March, 2003       22

Note payable for equipment, 9%, due in
monthly installments of $492 including
interest.  Final payment due in November,
2006 .....................................       19
                                             ------
                                              2,328

Less current portion .....................       54
                                             ------


                                             $2,274

         Equipment with an original cost of $215 thousand is pledged as
collateral under the notes payable for equipment.

                                       42
<PAGE>

         Maturities of the long-term debt for the next five years are as
follows:

                                        (Dollars in Thousands)
                  2003                         $    54
                  2004                           2,161
                  2005                              21
                  2006                              22
                  2007                              19
                  Thereafter                        51
                                               -------

                                               $ 2,328
                                               =======

         Maturities of the long-term debt for the next five years include $2.126
million due in February 2004 to the bank for the revolving line of credit, and
$202 thousand, excluding interest, for equipment purchase contracts. Cash flow
required to service the equipment purchase contracts over their remaining life,
including interest, totals $238 thousand.

         The estimated fair value of long-term debt approximates carrying value
at December 31, 2002, based on the borrowing rates currently available to the
Company for bank loans with similar terms and average maturities.

Note 6 - Income Taxes:

         The tax benefit from the loss consists of the following:

                                     (Dollars in Thousands)
                                     Year Ended December 31,
                                     -----------------------
                                      2002            2001
                                      ----            ----

Current tax benefit                  $(290)          $(160)
Deferred taxes                        (165)           (283)
Valuation allowance                    314              --
Other adjustment                        (2)             --
                                     -----           -----

                                     $(143)          $(443)
                                     =====           =====



                                       43
<PAGE>

         The tax benefit from the loss differs from the federal statutory rate
as follows:

                                               (Dollars in Thousands)
                                               Year Ended December 31,
                                               -----------------------
                                             2002                   2001
                                             ----                   ----

Tax benefit at statutory rate               $(447)                 $(450)
Valuation allowance                           314                     --
Permanent difference                            6                      4
Other                                         (16)                     3
                                            -----                  -----

                                            $(143)                 $(443)
                                            =====                  =====

         The components of deferred taxes included in the balance sheet as of
December 31, 2002, are as follows:

                                                     (Dollars in Thousands)
                                                     ----------------------

Current deferred tax Assets:
  NOL tax carry-forward...........                           $403
  Inventory valuation reserve.....                             83
  Warranty reserve................                             41
  Allowance for doubtful accounts.                              5
  Vacation accrual................                             31
  Product liability reserve.......                             41
  263(a) costs....................                             31
                                                             ----
                                                              635
  Valuation allowance.............                           (314)
                                                             ----

                                                             $321
                                                             ====

Non-current deferred tax liabilities:
  Deferred DISC income............                           $245
  Excess tax depreciation.........                             76
                                                             ----

                                                             $321
                                                             ====

         The Company has a net operating loss carry-forward of $1.139 million
that expires in 2017.

Note 7 - Commitments and Contingencies:

         The Company has an agreement granting it the exclusive right to
manufacture and sell in the United States and most other countries printing
equipment designed by Color Impact International, Inc. The grantor may purchase
the equipment from the Company and resell it in Russia and China. Another
company has the exclusive right to manufacture and sell the equipment in India.
The agreement commenced on August 17, 1998, and is for a period of 10 years. It
requires the Company to pay Color Impact International, Inc. a license fee equal
to 7 percent of the

                                       44
<PAGE>

gross selling price for the equipment. The minimum license fee is $70 thousand
in any 12-month period from the commencement date. The Company may enhance or
modify the equipment and commingle it with equipment of its own design. As
explained in Note 4, the Company received a Petitioner's Notice of Intention to
Arbitrate from Color Impact International, Inc. on January 23, 2003.

         The Company has leased a 49,000 square foot manufacturing and office
facility located in Kent, Washington, since May 1988. The lease expires in
November 2003, and includes a five-year renewal option. The total monthly
payment is $16,155.

         Rental expense was $215 thousand in 2002 and $212 thousand in 2001.

         Remaining minimum rental commitments are as follows:

                            (Dollars in Thousands)
                            2003                 $173
                                                 ----

                                                 $173
                                                 ====

Note 8 - Market Segment and Concentration Information:

         Substantially all of the Company's operations relate to the manufacture
and sale of printing presses and associated equipment. The Company markets its
presses worldwide. International sales accounted for 11.2% of total sales in
2002 and 30.6% in 2001. The Company is not dependent on any country or region of
the world for international sales and domestic sales are disseminated throughout
the United States.

         Export sales of equipment by geographical area were as follows:

                                                 (Dollars in Thousands)
                                                 Year Ended December 31,
                                                 -----------------------
                                                  2002             2001
                                                  ----             ----

         Europe                                   $749            $  260
         Western Hemisphere                         --             1,205
         Asia                                       --                --
                                                  ----            ------

                                                  $749            $1,465
                                                  ====            ======

         The Company normally has one or more individual press sales which
account for more than 10% of revenues in a given year. It is uncommon for a
customer to place a large order for additional equipment in the years
immediately following purchase of a press. On an ongoing basis, the Company does
not believe it is dependent on any one customer for a significant portion of its
business.

                                       45
<PAGE>

         In 2002, the Company did not have sales to any one customer that, as a
percentage of total consolidated sales, was greater than 10%. In 2001, the
Company had a sale to one customer that as a percentage of total consolidated
sales accounted for 11.8% of total sales.

Note 9 - Accounts Receivable:

         Accounts receivable consist of the following at December 31, 2002:

                                               (Dollars in Thousands)
                           Trade receivables           $572
                           Less allowance for
                             doubtful accounts          (15)
                                                       ----

                           Accounts receivable, net    $557
                                                       ====

         Changes in the Company's allowance for doubtful accounts are as follows
for the year ended December 31, 2002:

                                               (Dollars in Thousands)
                           Beginning balance           $37
                           Bad debt expense             24
                           Write-offs                  (53)
                           Recoveries                    7
                                                       ---

                           Ending balance              $15
                                                       ===

Note 10 - Product Warranty Liability:

         The changes in the Company's product warranty liability are as follows
for the year ended December 31, 2002:

                                               (Dollars in Thousands)
         Liability, January 1, 2002                   $  97
         Warranty expense                               224
         Warranty claims                               (203)
                                                      -----

         Liability, December 31, 2002                 $ 118
                                                      =====

Note 11 - Retirement Savings Plan:

        The Company has a 401(k) plan covering all employees who have completed
one year of service. Plan participants self-direct their investments choosing
from eleven options sponsored by Merrill Lynch. The Company matches up to 25% of
the first $4,000 contributed by the employee in a year. In addition, the Company
may make a discretionary matching contribution. The total amount is determined
by the Company's Board of Directors and allocated to the participants based on
their contributions. There were no discretionary contributions in 2002 and 2001.
Fees paid the administrator, plus the Company's matching contribution, totaled
approximately $22 thousand in both 2002 and 2001.

                                       46
<PAGE>

Note 12 - Related Party Transactions:

         A director of the Company has an ongoing relationship with the Company
as a supplier of sheet metal products and other miscellaneous parts. This
relationship is expected to continue in the future. During the fiscal years
ended December 31, 2002 and 2001, the Company purchased parts costing
approximately $113 thousand and $84 thousand, respectively.

         Two non-management employees of the Company operate a part-time
business rebuilding and selling used equipment manufactured by the Company. The
Company contracts with them to rebuild some of its used presses. Most, but not
all of their business, is with the company. The Company sells parts to them at
its normal selling prices. In 2002 and 2001, they purchased parts totaling
$62,915 and $86,976, respectively, from the Company. In 2002 and 2001, the
Company purchased from them used equipment, rebuilding services, and used parts
totaling $169,199 and $116,188, respectively. The Company, also, paid them
storage fees of $10,000 in 2002 and $9,600 in 2001.



                                       47