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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-K/A (AMENDMENT NO. 2)
 [X]
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For The Fiscal Year Ended June 30, 2003
or [  ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
 TRANSITION PERIOD FROM          TO
 Commission File Number 0-5888 WAXMAN INDUSTRIES, INC. 
 (Exact Name of Registrant as Specified in its Charter) Delaware
    
    34-0899894(State of Incorporation)
    
    (I.R.S. Employer Identification Number)
 24460 Aurora Road,Bedford Heights, Ohio
    
    44146(Address of Principal Executive Offices)
    
    (Zip Code)
 (440) 439-1830
(Registrants Telephone Number Including Area Code) Securities registered pursuant to Section 12(b) of the Act:
NONE Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety (90) days. Yes [X] No [  ] Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [  ] No [X] State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such common
equity, as of the last business day of the registrants most recently completed
second fiscal quarter. $4,603,000 Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [X]




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Number of shares of Common Stock outstanding as of August 20, 2003: Common Stock
    
    
    1,003,990Class B Common Stock
    
    
    214,189
 EXPLANATORY NOTE This Form 10-K/A (Amendment No. 2) amends the Registrants Annual Report
on Form 10-K for the fiscal year ended June 30, 2003, which was originally
filed on September 3, 2003 and was subsequently amended on October 22, 2003, in
order to remove the foreign audit reports appearing therein and to provide a
revised audit report from the Registrants principal accountants. This Form
10-K/A (Amendment No. 2) contains the complete text of Item 8 (Consolidated
Financial Statements and Supplementary Data) and Item 15 (Exhibits, Financial
Statements, Schedules and Reports on Form 8-K) as amended. 2




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TABLE OF CONTENTS  PART IIITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATACONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF OPERATIONSCONSOLIDATED STATEMENTS OF OPERATIONSCONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITYCONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTSSUPPLEMENTARY FINANCIAL INFORMATIONPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-KSIGNATURESExhibit IndexEX-23.1 Consent of Meaden & Moore, Ltd.EX-31.1 Section 302 Certification of CO-CEOEX-31.2 Section 302 Certification of CO-CEOEX-31.3 Section 302 Certification of CFOEX-32.1 Section 906 Certification    Table of Contents  
 PART II 
 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA MANAGEMENTS REPORT The management of Waxman Industries, Inc. has the responsibility for
preparing the accompanying financial statements and for their integrity and
objectivity. The statements were prepared in accordance with generally
accepted accounting principles. The financial statements include amounts that
are based on managements best estimates and judgments. Management also
prepared the other information in the annual report and is responsible for its
accuracy and consistency with the financial statements. The Companys financial statements have been audited by Meaden & Moore
Ltd. and EnWise CPAs & Company, independent auditors (the Auditors).
Management has made available to the Auditors all of the Corporations
financial records and related data, as well as the minutes of shareholders
and directors meetings. Furthermore, management believes that all
representations made to the Auditors during its audit were valid and
appropriate. The Company maintains a system of internal accounting controls designed
to provide reasonable assurance that the books and records properly reflect
the transactions of the Company, and that assets are safeguarded against
unauthorized acquisition, use or disposition. The design, monitoring and
revision of internal accounting controls involve, among other things,
managements judgments with respect to the relative cost and the expected
benefits of specific control measures. The Companys management reviews and
evaluates internal accounting and operating controls. The Companys
management and the Audit Committee of the Board of Directors also coordinates
with the Auditors on the audit of the Companys financial statements. The
Auditors also discusses the internal control procedures with management and
communicates with the Audit Committee regarding their understanding and
adequacy of internal control procedures. Melvin Waxman, Co-Chief Executive Officer and Chairman of the Board Armond Waxman, Co-Chief Executive Officer and President Mark Wester, Senior Vice President and Chief Financial Officer AUDIT COMMITTEE REPORT The Audit Committee of the Board of Directors is composed of directors
who are not employees of the Company and are independent, meets with
management no less than quarterly and the independent auditors to ensure
that each is carrying out its responsibilities. The Audit Committee consists
of Irving Friedman (chairman) and Mark Reichenbaum. The Audit Committee has
reviewed the integrity of the Companys financial reporting process and
systems of internal controls regarding finance, accounting and legal
compliance; and monitored the independence of the Companys independent
auditors. The independent auditors have full and free access to the Audit
Committee. The Audit Committee has also reviewed and discussed the audited and
consolidated financial statements presented in this Annual Report on Form
10-K for the fiscal year ended June 30, 2003 with the Companys management.
The Audit Committee has discussed with the independent auditors the matters
required to be discussed by the Statement on Auditing Standards 61. The
Audit Committee received written disclosures and a letter from the
independent accountants required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committee) and the Audit
Committee has discussed the Independence of Meaden & Moore Ltd. with that
firm. Based on the Audit Committees review and discussions noted above, the
Audit Committee recommended to the Board of Directors that the Companys
audited consolidated financial statements be included in the Companys
Annual Report on Form 10-K for the fiscal year ended June 30, 2003 for
filing with the Securities and Exchange Commission. MEMBERS OF THE COMMITTEE: Irving Friedman, Director and Chairman of the Audit Committee Mark Reichenbaum, Director 3




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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Waxman Industries, Inc.: We have audited the accompanying consolidated balance sheets of Waxman
Industries, Inc. (a Delaware corporation) and Subsidiaries (the Company) as of
June 30, 2003 and 2002 and the related consolidated statements of operations,
stockholders equity and cash flows for the years ended June 30, 2003, 2002 and
2001. These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion. In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Waxman Industries,
Inc. and Subsidiaries as of June 30, 2003 and 2002 and the results of their
operations and their cash flows for the years ended June 30, 2003, 2002 and
2001, in conformity with accounting principles generally accepted in the United
States. Meaden & Moore, Ltd.
Cleveland, Ohio,
August 6, 2003 4




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WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES




CONSOLIDATED BALANCE SHEETS
June 30, 2003 and 2002
(in thousands)


ASSETS

|                                                                   |                           |                      |        |        |        |      |        |        |        | 
|------------------------------------------------------------------ | ------------------------- | -------------------- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | 
|                                                                   |                           |                      |        | 2003   |        | 2002
|                                                                   |                           |                      |        |        |        |     
|Current Assets:                                                    |                           |                      |        |        |        |      |        |       
|                                                                   | Cash and cash equivalents |                      | $      | 1,507  |        |      | $      | 1,420  |       
|                                                                   | Trade receivables, net    |                      |        | 12,129 |        |      |        | 11,529 |       
|                                                                   | Other receivables         |                      |        | 1,236  |        |      |        | 1,979  |       
|                                                                   | Inventories               |                      |        | 10,119 |        |      |        | 10,497 |       
|                                                                   | Prepaid expenses          |                      |        | 1,299  |        |      |        | 1,902  |       
|                                                                   |                           |                      |        |        |        |      |        |       
|                                                                   |                           | Total current assets |        |        | 26,290 |      |        |        | 27,327 | 
|                                                                   |                           |                      |        |        |        |      |        |       
|Property and Equipment:                                            |                           |                      |        |        |        |      |        |       
|                                                                   | Land                      |                      |        | 542    |        |      |        | 554    |       
|                                                                   | Buildings                 |                      |        | 4,645  |        |      |        | 4,662  |       
|                                                                   | Equipment                 |                      |        | 12,043 |        |      |        | 11,427 |       
|                                                                   |                           |                      |        |        |        |      |        |       
|                                                                   |                           |                      | 17,230 |        |        |      | 16,643 |       
|Less accumulated depreciation and amortization                     |                           |                      | (9,080 | )      |        |      | (8,302 | )     
|                                                                   |                           |                      |        |        |        |      |        |       
|Property and equipment, net                                        |                           |                      | 8,150  |        |        |      | 8,341  |       
|                                                                   |                           |                      |        |        |        |      |        |       
|Receivables from Premiums Paid on Officers Life
Insurance Policies |                           |                      | 3,405  |        |        |      | 3,265  |       
|Unamortized Debt Issuance Costs, Net                               |                           |                      | 209    |        |        |      | 315    |       
|Notes Receivable from Related Parties                              |                           |                      | 476    |        |        |      | 574    |       
|Other Assets                                                       |                           |                      | 639    |        |        |      | 474    |       
|                                                                   |                           |                      |        |        |        |      |        |       
|                                                                   |                           | $                    | 39,169 |        |        | $    | 40,296 |       
|                                                                   |                           |                      |        |        |        |      |        |       

The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

5



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WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2003 and 2002
(in thousands, except per share data)

LIABILITIES AND STOCKHOLDERS EQUITY

|                                                                                                                                                                      |                                   |                                      |                            |       |        |        |        |       |      |        | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | ------------------------------------ | -------------------------- | ----- | ------ | ------ | ------ | ----- | ---- | ------ | 
|                                                                                                                                                                      |                                   |                                      |                            |       | 2003   |        | 2002  
|                                                                                                                                                                      |                                   |                                      |                            |       |        |        |       
|Current Liabilities:                                                                                                                                                  |                                   |                                      |                            |       |        |        |        |      
|                                                                                                                                                                      | Short-term borrowings             |                                      | $                          | 7,529 |        |        | $      | 7,596 |     
|                                                                                                                                                                      | Current portion of long term debt |                                      |                            | 195   |        |        |        | 235   |     
|                                                                                                                                                                      | Accounts payable                  |                                      |                            | 5,904 |        |        |        | 6,754 |     
|                                                                                                                                                                      | Accrued liabilities               |                                      |                            | 3,605 |        |        |        | 3,975 |     
|                                                                                                                                                                      |                                   |                                      |                            |       |        |        |        |      
|                                                                                                                                                                      |                                   |                                      | Total current liabilities  |       |        | 17,233 |        |       |      | 18,560 | 
|                                                                                                                                                                      |                                   |                                      |                            |       |        |        |        |      
|Term Debt  Long-Term Portion                                                                                                                                         |                                   |                                      | 770                        |       |        |        | 935    |      
|                                                                                                                                                                     
|Other Long-Term Debt, Net of Current Portion                                                                                                                          |                                   |                                      | 126                        |       |        |        | 15     |      
|                                                                                                                                                                     
|Commitments and Contingencies                                                                                                                                         |                                   |                                      |                            |       |        |        |        |      
|                                                                                                                                                                     
|Stockholders Equity:                                                                                                                                                 |                                   |                                      |                            |       |        |        |        |      
|Preferred
stock, $0.01 par value per share: 200 and 2,000
shares authorized at June 30, 2003 and 2002, respectively and none issued                                   |                                   |                                      |                           |       |        |        |       |      
|Common
stock, $0.01 par value per share: 8,000 and 22,000 shares authorized
at June 30, 2003 and 2002, respectively; 1,003 shares issued and
outstanding in each year |                                   |                                      | 99                         |       |        |        | 99     |      
|Class B common stock, $.01 par value per
share: 1,500 and 6,000 shares authorized at June 30, 2003 and 2002,
respectively; 214 issued and
outstanding in each year    |                                   |                                      | 21                         |       |        |        | 21     |      
|Paid-in capital                                                                                                                                                       |                                   |                                      | 21,760                     |       |        |        | 21,760 |      
|Retained equity (deficit)                                                                                                                                             |                                   |                                      | 298                        |       |        |        | (123   | )    
|                                                                                                                                                                      |                                   |                                      |                            |       |        |        |        |      
|                                                                                                                                                                      |                                   |                                      | 22,178                     |       |        |        | 21,757 |      
|                                                                                                                                                                      |                                   | Accumulated other comprehensive loss |                            |       | (1,138 | )      |        |       | (971 | )     
|                                                                                                                                                                      |                                   |                                      |                            |       |        |        |        |      
|                                                                                                                                                                      |                                   |                                      | Total stockholders equity |       |        | 21,040 |        |       |      | 20,786 | 
|                                                                                                                                                                      |                                   |                                      |                            |       |        |        |        |      
|                                                                                                                                                                      |                                   | $                                    | 39,169                     |       |        | $      | 40,296 |      
|                                                                                                                                                                      |                                   |                                      |                            |       |        |        |        |      

The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

6



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WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES




CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)


|                                                                         |  |                            |        |      |  |      |        |   |  |   |         |  
|------------------------------------------------------------------------ |  | -------------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------- | -
|                                                                         |  | Fiscal Year Ended June 30,
|                                                                         |  |                           
|                                                                         |  | 2003                       |        | 2002 |  | 2001
|                                                                         |  |                            |        |      |  |     
|Net sales                                                                |  | $                          | 67,142 |      |  | $    | 70,425 |   |  | $ | 71,370  |  
|Cost of sales                                                            |  |                            | 44,689 |      |  |      | 47,253 |   |  |   | 49,890  |  
|                                                                         |  |                            |        |      |  |      |        |   |  |   |         |  
|Gross profit                                                             |  |                            | 22,453 |      |  |      | 23,172 |   |  |   | 21,480  |  
|Selling, general and administrative expenses                             |  |                            | 21,958 |      |  |      | 21,629 |   |  |   | 21,877  |  
|Restructuring and impairment charges (Note 4)                            |  |                            |       |      |  |      |       |   |  |   | 350     |  
|                                                                         |  |                            |        |      |  |      |        |   |  |   |         |  
|Operating income (loss)                                                  |  |                            | 495    |      |  |      | 1,543  |   |  |   | (747    | )
|Gain on sale of Barnett, net (Note 2)                                    |  |                            |       |      |  |      |       |   |  |   | 47,473  |  
|Loss on sale of Medal, net (Note 5)                                      |  |                            |       |      |  |      |       |   |  |   | (1,105  | )
|Equity earnings of Barnett                                               |  |                            |       |      |  |      |       |   |  |   | 1,370   |  
|Amortization of deferred U.S. Lock gain                                  |  |                            |       |      |  |      |       |   |  |   | 7,815   |  
|Other Income (Note 1, O)                                                 |  |                            | 210    |      |  |      | 94     |   |  |   | 114     |  
|Interest expense                                                         |  |                            | 531    |      |  |      | 723    |   |  |   | 5,414   |  
|                                                                         |  |                            |        |      |  |      |        |   |  |   |         |  
|Income before extraordinary item and income
taxes and extraordinary gain |  |                            | 174    |      |  |      | 914    |   |  |   | 49,506  |  
|(Benefit) provision for income taxes                                     |  |                            | (247   | )    |  |      | (671   | ) |  |   | 1,680   |  
|                                                                         |  |                            |        |      |  |      |        |   |  |   |         |  
|Income before extraordinary gain                                         |  |                            | 421    |      |  |      | 1,585  |   |  |   | 47,826  |  
|Extraordinary gain                                                       |  |                            |       |      |  |      |       |   |  |   | 52,222  |  
|                                                                         |  |                            |        |      |  |      |        |   |  |   |         |  
|Net income                                                               |  | $                          | 421    |      |  | $    | 1,585  |   |  | $ | 100,048 |  
|                                                                         |  |                            |        |      |  |      |        |   |  |   |         |  
|Other comprehensive income (loss):                                       |  |                            |        |      |  |      |        |   |  |   |         |  
|Foreign currency translation adjustment                                  |  |                            | (167   | )    |  |      | 161    |   |  |   | (473    | )
|                                                                         |  |                            |        |      |  |      |        |   |  |   |         |  
|Comprehensive income                                                     |  | $                          | 254    |      |  | $    | 1,746  |   |  | $ | 99,575  |  
|                                                                         |  |                            |        |      |  |      |        |   |  |   |         |  

The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

7



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WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES




CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)


|                                                     |  |                            |       |      |  |      |       |  |  |   |       | 
|---------------------------------------------------- |  | -------------------------- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                                     |  | Fiscal Year Ended June 30,
|                                                     |  |                           
|                                                     |  | 2003                       |       | 2002 |  | 2001
|                                                     |  |                            |       |      |  |     
|Basic income per share:                              |  |                            |       |      |  |      |       |  |  |   |       | 
|Income before extraordinary gain                     |  | $                          | 0.35  |      |  | $    | 1.30  |  |  | $ | 39.46 | 
|Extraordinary gain                                   |  |                            |      |      |  |      |      |  |  |   | 43.09 | 
|                                                     |  |                            |       |      |  |      |       |  |  |   |       | 
|Net income                                           |  | $                          | 0.35  |      |  | $    | 1.30  |  |  | $ | 82.55 | 
|                                                     |  |                            |       |      |  |      |       |  |  |   |       | 
|Diluted income per share:                            |  |                            |       |      |  |      |       |  |  |   |       | 
|Income before extraordinary gain                     |  | $                          | 0.35  |      |  | $    | 1.30  |  |  | $ | 39.46 | 
|Extraordinary gain                                   |  |                            |      |      |  |      |      |  |  |   | 43.09 | 
|                                                     |  |                            |       |      |  |      |       |  |  |   |       | 
|Net income                                           |  | $                          | 0.35  |      |  | $    | 1.30  |  |  | $ | 82.55 | 
|                                                     |  |                            |       |      |  |      |       |  |  |   |       | 
|Weighted average number of common
shares outstanding |  |                            | 1,218 |      |  |      | 1,215 |  |  |   | 1,212 | 
|                                                     |  |                            |       |      |  |      |       |  |  |   |       | 

The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

8



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WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES




CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
For the Fiscal Years Ending June 30, 2003, 2002 and 2001
(in thousands)


|                      |                                        |   |        |   |        |   |         |   |           |   |               |   |           |   |          |         |               |   |             |      |       |   |         |         |  
|--------------------- | -------------------------------------- | - | ------ | - | ------ | - | ------- | - | --------- | - | ------------- | - | --------- | - | -------- | ------- | ------------- | - | ----------- | ---- | ----- | - | ------- | ------- | -
|                      |                                        |   |        |   |        |   |         |   |           |   |               |   |           |   |          |         |               |   | Accumulated |      | Total
|                      |                                        |   |        |   |        |   | Class B |   |           |   |               |   | Retained  |   | Other    |         | Stockholders
|                      |                                        |   | Common |   | Common |   | Paid-in |   | Equity    |   | Comprehensive |   | (Deficit)
|                      |                                        |   | Stock  |   | Stock  |   | Capital |   | (Deficit) |   | Income (Loss) |   | Equity   
|                      |                                        |   |        |   |        |   |         |   |           |   |               |   |          
|Balance June 30, 2000 |                                        | $ | 99     |   |        | $ | 21      |   |           | $ | 21,752        |   |           | $ | (101,756 | )       |               | $ | (659        | )    |       | $ | (80,543 | )      
|                      | Net income                             |   |        |  |        |   |         |  |           |   |               |  |           |   |          | 100,048 |               |   |             |     |       |   |         | 100,048 |  
|                      | Currency translation adjustment        |   |        |  |        |   |         |  |           |   |               |  |           |   |          |        |               |   |             | (473 | )     |   |         | (473    | )
|                      |                                        |   |        |   |        |   |         |   |           |   |               |   |           |   |          |         |               |   |             |      |       |   |         |        
|Balance June 30, 2001 |                                        |   | 99     |   |        |   | 21      |   |           |   | 21,752        |   |           |   | (1,708   | )       |               |   | (1,132      | )    |       |   | 19,032  |        
|                      | Net income                             |   |        |  |        |   |         |  |           |   |               |  |           |   |          | 1,585   |               |   |             |     |       |   |         | 1,585   |  
|                      | Employee Stock Purchase Plan
purchases |   |        |  |        |   |         |  |           |   |               | 8 |           |   |          |        |               |   |             |     |       |   |         | 8       |  
|                      | Currency translation adjustment        |   |        |  |        |   |         |  |           |   |               |  |           |   |          |        |               |   |             | 161  |       |   |         | 161     |  
|                      |                                        |   |        |   |        |   |         |   |           |   |               |   |           |   |          |         |               |   |             |      |       |   |         |        
|Balance June 30, 2002 |                                        |   | 99     |   |        |   | 21      |   |           |   | 21,760        |   |           |   | (123     | )       |               |   | (971        | )    |       |   | 20,786  |        
|                      | Net income                             |   |        |  |        |   |         |  |           |   |               |  |           |   |          | 421     |               |   |             |     |       |   |         | 421     |  
|                      | Currency translation adjustment        |   |        |  |        |   |         |  |           |   |               |  |           |   |          |        |               |   |             | (167 | )     |   |         | (167    | )
|                      |                                        |   |        |   |        |   |         |   |           |   |               |   |           |   |          |         |               |   |             |      |       |   |         |        
|Balance June 30, 2003 |                                        | $ | 99     |   |        | $ | 21      |   |           | $ | 21,760        |   |           | $ | 298      |         |               | $ | (1,138      | )    |       | $ | 21,040  |        
|                      |                                        |   |        |   |        |   |         |   |           |   |               |   |           |   |          |         |               |   |             |      |       |   |         |        

The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

9



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WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES




CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)


|                             |                                                                                    |                                       |                                             |                             |        |                            |      |       |        |        |       |         |        |         |        |  
|---------------------------- | ---------------------------------------------------------------------------------- | ------------------------------------- | ------------------------------------------- | --------------------------- | ------ | -------------------------- | ---- | ----- | ------ | ------ | ----- | ------- | ------ | ------- | ------ | -
|                             |                                                                                    |                                       |                                             |                             |        | Fiscal Year Ended June 30,
|                             |                                                                                    |                                       |                                             |                             |        |                           
|                             |                                                                                    |                                       |                                             |                             |        | 2003                       |      | 2002  |        | 2001  
|                             |                                                                                    |                                       |                                             |                             |        |                            |      |       |        |       
|Cash Provided By (Used For): |                                                                                    |                                       |                                             |                             |        |                            |      |       |        |        |       |        
|Operations:                  |                                                                                    |                                       |                                             |                             |        |                            |      |       |        |        |       |        
|                             | Net income                                                                         |                                       | $                                           | 421                         |        |                            | $    | 1,585 |        |        | $     | 100,048 |       
|                             | Adjustments to reconcile net income to net cash provided
by (used for) operations: |                                       |                                             |                             |        |                            |      |       |        |        |       |         |       
|                             | Extraordinary item  debt defeasance                                               |                                       |                                             |                            |        |                            |      |      |        |        |       | (52,222 | )     
|                             | Non-cash restructuring and impairment charges                                      |                                       |                                             |                            |        |                            |      |      |        |        |       | 1,050   |       
|                             | Gain on sale of Barnett stock, net                                                 |                                       |                                             |                            |        |                            |      |      |        |        |       | (47,473 | )     
|                             | Loss on sale of Medal                                                              |                                       |                                             |                            |        |                            |      |      |        |        |       | 1,105   |       
|                             | Loss on retirement of fixed assets                                                 |                                       |                                             | 134                         |        |                            |      |      |        |        |       |        |       
|                             | Amortization of financing costs                                                    |                                       |                                             | 130                         |        |                            |      | 182   |        |        |       | 83      |       
|                             | Amortization of deferred U.S. Lock gain                                            |                                       |                                             |                            |        |                            |      |      |        |        |       | (7,815  | )     
|                             | Equity earnings of Barnett                                                         |                                       |                                             |                            |        |                            |      |      |        |        |       | (1,370  | )     
|                             | Depreciation and amortization                                                      |                                       |                                             | 1,539                       |        |                            |      | 1,346 |        |        |       | 2,314   |       
|                             | Deferred income taxes                                                              |                                       |                                             |                            |        |                            |      |      |        |        |       | 367     |       
|                             | Bad debt provision                                                                 |                                       |                                             | 90                          |        |                            |      | 371   |        |        |       | 215     |       
|                             | Changes in assets and liabilities:                                                 |                                       |                                             |                             |        |                            |      |       |        |        |       |         |       
|                             |                                                                                    |                                       |                                             | Trade and other receivables |        |                            | 53   |       |        |        | 113   |         |        |         | 1,307  |  
|                             |                                                                                    |                                       |                                             | Inventories                 |        |                            | 378  |       |        |        | 1,398 |         |        |         | 1,860  |  
|                             |                                                                                    |                                       |                                             | Prepaid expenses and other  |        |                            | 396  |       |        |        | (52   | )       |        |         | (1,922 | )
|                             |                                                                                    |                                       |                                             | Accounts payable            |        |                            | (850 | )     |        |        | (178  | )       |        |         | 749    |  
|                             |                                                                                    |                                       |                                             | Accrued liabilities         |        |                            | (370 | )     |        |        | (316  | )       |        |         | (8,484 | )
|                             |                                                                                    |                                       |                                             | Other, net                  |        |                            | (116 | )     |        |        | 161   |         |        |         | (473   | )
|                             |                                                                                    |                                       |                                             |                             |        |                            |      |       |        |        |       |        
|                             |                                                                                    |                                       | Net cash provided by (used for) operations  |                             |        | 1,805                      |      |       |        | 4,610  |       |         |        | (10,661 | )     
|                             |                                                                                    |                                       |                                             |                             |        |                            |      |       |        |        |       |        
|Investments:                 |                                                                                    |                                       |                                             |                             |        |                            |      |       |        |        |       |        
|                             |                                                                                    | Capital expenditures, net             |                                             |                             | (1,533 | )                          |      |       | (1,399 | )      |       |         | (1,229 | )      
|                             |                                                                                    | Change in other assets                |                                             |                             |       |                            |      |       | (388   | )      |       |         | 2,764  |        
|                             |                                                                                    | Net proceeds from sales of businesses |                                             |                             |       |                            |      |       |       |        |       |         | 94,503 |        
|                             |                                                                                    |                                       |                                             |                             |        |                            |      |       |        |        |       |        
|                             |                                                                                    |                                       | Net cash (used for) provided by investments |                             |        | (1,533                     | )    |       |        | (1,787 | )     |         |        | 96,038  |       
|                             |                                                                                    |                                       |                                             |                             |        |                            |      |       |        |        |       |        

The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

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|                                                     |                                            |                             |       |      |      |      |       |        |        |   |     |         |         |  
|---------------------------------------------------- | ------------------------------------------ | --------------------------- | ----- | ---- | ---- | ---- | ----- | ------ | ------ | - | --- | ------- | ------- | -
|                                                     |                                            |                             |       | 2003 |      | 2002 |       | 2001  
|                                                     |                                            |                             |       |      |      |      |       |       
|Financing:                                           |                                            |                             |       |      |      |      |       |        |        |   |     |        
|                                                     | Net change in short-term borrowings        |                             |       | (67  | )    |      |       | (2,274 | )      |   |     | (10,016 | )      
|                                                     | Proceeds from long-term debt               |                             |       | 141  |      |      |       | 1,155  |        |   |     |        |        
|                                                     | Repayment of long-term debt                |                             |       | (235 | )    |      |       | (677   | )      |   |     | (248    | )      
|                                                     | Debt issuance costs                        |                             |       | (24  | )    |      |       | (355   | )      |   |     |        |        
|                                                     | Retirement
of 11 1/8% Senior Secured Notes |                             |       |     |      |      |       |       |        |   |     | (35,855 | )      
|                                                     | Retirement
of 12 3⁄4% Deferred Coupon Notes  |                             |       |     |      |      |       |       |        |   |     | (39,329 | )      
|                                                     | Issuance of common stock                   |                             |       |     |      |      |       | 8      |        |   |     |        |        
|                                                     |                                            |                             |       |      |      |      |       |        |        |   |     |        
|                                                     |                                            | Net cash used for financing |       |      | (185 | )    |       |        | (2,143 | ) |     |         | (85,448 | )
|                                                     |                                            |                             |       |      |      |      |       |        |        |   |     |        
|Net increase (decrease) in cash and cash equivalents |                                            |                             | 87    |      |      |      | 680   |        |        |   | (71 | )      
|Balance, beginning of year                           |                                            |                             | 1,420 |      |      |      | 740   |        |        |   | 811 |        
|                                                     |                                            |                             |       |      |      |      |       |        |        |   |     |        
|Balance, end of year                                 |                                            | $                           | 1,507 |      |      | $    | 1,420 |        |        | $ | 740 |        
|                                                     |                                            |                             |       |      |      |      |       |        |        |   |     |        

The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

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##### Table of Contents



WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2003, 2002 AND 2001




|1. |  | Summary of Significant Accounting Policies
|-- |  | ------------------------------------------



| | A. |  | Basis of Consolidation and Description of the Company
| | -- |  | -----------------------------------------------------

The accompanying consolidated financial statements include the accounts of
Waxman Industries, Inc. (Waxman Industries) and its wholly-owned subsidiaries
(collectively, the Company). All significant intercompany transactions and
balances are eliminated in consolidation. Certain reclassifications have been
made to the prior year statements in order to conform to the current year
presentation. Until September 29, 2000, the Company owned 44.2% of the common
stock of Barnett Inc. (Barnett Common Stock), a direct marketer and
distributor of plumbing, electrical and hardware products, and accounted for
Barnett Inc. (Barnett) under the equity method of accounting. See
Managements Discussion and Analysis Significant
Developments - Comprehensive
Financial Restructuring section and Note 2 in these Notes to Consolidated
Financial Statements in this Form 10-K for information regarding the sale of
the Companys interest in Barnett.

The Company is a supplier of specialty plumbing, floor and surface
protection and other hardware products to the repair and remodeling market in
the United States. The Company distributes its products to a wide variety of
large national and regional retailers, independent retail customers and
wholesalers. The Company conducts its business primarily through its
wholly-owned subsidiaries, Waxman Consumer Products Group Inc. (Consumer
Products), WAMI Sales, Inc. (WAMI Sales) and TWI, International, Inc. (TWI
International). Consumer Products, the Companys largest operation, is a
supplier of specialty plumbing, floor and surface protection and other hardware
products to a wide variety of large retailers. WAMI Sales distributes
galvanized, black, chrome and brass pipe nipples and fittings to industrial and
wholesale distributors. TWI International includes TWI International Taiwan
Inc. and its sales operation, TWI Industrial Inc. (collectively, TWI),
located primarily in Taiwan, and CWI International China, Ltd. (CWI), located
in China. TWI and CWI manufacture, package, source and assemble product
purchased by Consumer Products and non-affiliated businesses. Until March 31,
2001, the Company also supplied plumbing and hardware products to hardware
stores and smaller independent retailers through Medal of Pennsylvania, Inc.
(Medal), formerly known as WOC Inc. (WOC), when substantially all of the
assets, subject to certain liabilities, of this business were sold (see Note
5). Until the sale of Western American Manufacturing Inc. (WAMI) effective
March 31, 2000, TWI also included a manufacturing operation in Mexico that
threaded galvanized, black, brass, and chrome pipe and imported malleable
fittings. Consumer Products utilizes the Companys and non-affiliated foreign
sourcing suppliers.



| | B. |  | Accounting Estimates
| | -- |  | --------------------

The consolidated financial statements of the Company are prepared in
conformity with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires management
of the Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period presented.
Actual amounts could differ from these estimates and different amounts could be
reported using different assumptions and estimates.



| | C. |  | Cash and Cash Equivalents
| | -- |  | -------------------------

In accordance with the terms of the PNC Revolving Credit, Term Loan and
Security Agreement (PNC Bank Facility) and , prior thereto, the Congress
Financial Loan and Security Agreement (as discussed in Note 7), all restricted
cash balances have been excluded from cash and have been applied against
outstanding borrowings. Cash balances include certain unrestricted operating
accounts and accounts of foreign operations. The Company considers all highly
liquid temporary cash investments with original maturities of less than three
months to be cash equivalents. Cash investments are valued at cost plus accrued
interest, which approximates market value.



| | D. |  | Trade Receivables
| | -- |  | -----------------

Trade receivables are presented net of allowances for doubtful accounts of
$0.4 million and $0.6 million at June 30, 2003 and 2002, respectively. Net bad
debt expense totaled $0.1 million in fiscal 2003, $0.4 million in fiscal 2002
and $0.2 million in fiscal 2001.

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The Company sells specialty plumbing, floor and surface protection and
other hardware products throughout the United States to do-it-yourself
(D-I-Y) retailers, mass merchandisers, smaller independent retailers and
wholesalers. The Company performs ongoing credit evaluations of its customers
financial conditions. The Companys largest customers are retailers. As a
percentage of the Companys net sales, the largest customers accounted for the
following percentages in fiscal 2003, 2002 and 2001, respectively: Wal-Mart,
accounted for 18.4%, 16.3% and 12.8%, Lowes accounted for 18.4%, 15.7% and
9.6% and Barnett accounted for 15.7%, 18.6% and 23.2%. During the same periods,
the Companys ten largest customers accounted for approximately 69.2%, 75.3%
and 73.0% of net sales and approximately 66.6% and 53.3% of accounts receivable
at June 30, 2003 and 2002, respectively.



| | E. |  | Inventories
| | -- |  | -----------

At June 30, 2003 and 2002, inventories, consisting primarily of finished
goods, are carried at the lower of first-in, first-out (FIFO) cost or market.
The Company regularly evaluates its inventory carrying value, with appropriate
consideration given to any excess, slow-moving and/or nonsalable inventories.
In fiscal 2003, 2002 and 2001, the Company recorded charges of $0.2 million,
$0.1 million and $0.6 million, respectively, in connection with its evaluation
of its inventory carrying value.



| | F. |  | Property and Equipment
| | -- |  | ----------------------

Property and equipment are stated at cost. For financial reporting
purposes, buildings and equipment are depreciated on a straight-line basis over
the estimated useful lives of the related assets. Depreciable lives are 15 to
40 years for buildings and 3 to 15 years for equipment. Leasehold improvements
are amortized on a straight-line basis over the term of the lease or the useful
life of the asset, whichever is shorter. For income tax purposes, accelerated
methods of depreciation are used. Depreciation expense in each of the last
three fiscal years ended June 30, 2003, 2002 and 2001 totaled $1.5 million,
$1.3 million and $1.4 million, respectively. Repairs and maintenance are
expensed as incurred.



| | G. |  | Unamortized Debt Issuance Costs
| | -- |  | -------------------------------

Unamortized debt issuance costs relate to the Companys long-term and
short-term debt (See Note 7) and are amortized over the life of the related
debt. Amortization expense totaled $0.1 million in fiscal 2003, $0.3 million in
fiscal 2002 and $0.4 million in fiscal 2001, and is included in interest
expense in the accompanying consolidated statements of operations. The Company
incurred an extraordinary charge in fiscal 2001 related to the accelerated
amortization of unamortized debt issuance costs (See Note 6).



| | H. |  | Split Dollar Life Insurance Policies
| | -- |  | ------------------------------------

Split-dollar life insurance policies are maintained for the following
officers and directors: (1) Three policies for Melvin Waxman providing for
total death benefits of $8,535,000, (2) two policies for Armond Waxman
providing for total death benefits of $12,000,000, (3) one policy for Laurence
Waxman providing for death benefits of $1,274,000 and (4) one policy for John
Peters providing for death benefits of $1,250,000. In the event of the death
of any of the above-referenced insureds, the Company will be repaid for the
aggregate premiums paid by the Company for such policies from the insurance
proceeds paid to the split-dollar life insurance trusts which own such
policies. During fiscal 2003, the Company made payments of $140,871, but
suspended payments for the split dollar policies in March 2003, pending further
information regarding the impact the Sarbanes-Oxley Act of 2002 will have on
split dollar policies for executive officers.



| | I. |  | Procurement Charges
| | -- |  | -------------------

The Financial Accounting Standards Board (FASB) has reviewed the
industry practices regarding the accounting for up-front slotting fees
charged by retailers for the right to shelf space and issued EITF Issue No.
00-25 related to these types of charges. The FASB has concluded that charges of
this nature should be reported as a reduction in revenue beginning in annual or
interim periods after December 15, 2001, with financial statements for prior
periods being reclassified to comply with this requirement. The Company adopted
this standard in the quarter ended September 30, 2001.

Prior to the adoption of this standard, the Company reported and expensed
these costs in the period paid or incurred. The Company reported certain types
of business procurement costs as a separate category in its operating costs.
These business procurement costs included costs incurred in connection with a
customers agreement to purchase products from the Company for a specific
period, including the consideration paid to the new or existing customer (i)
for the right to supply such customer for a specified period and (ii) to assist
such customer in reorganizing its store aisles and displays in

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order to accommodate the Companys products. The Company classified a
third type of business procurement cost as a contra sale in prior years. This
type was associated with the purchase of a competitors merchandise that the
customer has on hand when it changes suppliers, less the salvage value received
by the Company. Beginning in fiscal 2002, the Company began recording all of
these business procurement costs as a reduction in sales.

J.     Foreign Currency Translation and Transactions

All balance sheet accounts of foreign subsidiaries are translated at the
exchange rate as of the end of the fiscal year. Income statement items are
translated at the average currency exchange rates during the fiscal year. The
resulting translation adjustment is recorded as a component of stockholders
equity and comprehensive loss. Foreign currency transaction gains or losses are
included in the consolidated statements of operations as incurred.



| | K. |  | Revenue Recognition
| | -- |  | -------------------

Revenue is recognized as risk and title to the product transfers to the
customer, which usually occurs at the time shipment is made. In December 1999,
the Securities and Exchange Commission (the SEC) issued Staff Accounting
Bulletin (SAB) 101, Revenue Recognition in Financial Statements, which
summarizes the SECs views in applying generally accepted accounting principles
to revenue recognition. The Company has determined that SAB 101s revenue
recognition guidelines are consistent with the Companys existing revenue
recognition policies; therefore, SAB 101 did not have a material impact on the
Companys consolidated financial statements.



| | L. |  | Shipping and Handling Fees
| | -- |  | --------------------------

In May 2000, the Emerging Issues Task Force (EITF) of the FASB reached a
consensus with respect to EITF Issue 00-10, Accounting for Shipping and
Handling Fees and Costs. EITF 00-10 recognizes the inconsistencies in practice
of the recording of shipping and handling costs incurred by most companies that
sell goods. The Company has historically recorded freight and any directly
related associated cost of transporting finished product to customers as a
component of its selling, general and administrative expenses. Included in
SG&A expenses are $2.6 million, $2.2 million and $2.9 million in shipping and
handling costs for fiscal 2003, 2002 and 2001, respectively.



| | M. |  | Earnings per Share
| | -- |  | ------------------

In February 1997, The FASB issued SFAS No. 128, Earnings per Share to be
effective for financial statements issued for periods ending after December 15,
1997. Under SFAS No. 128, primary earnings per share have been replaced by
basic earnings per share, which represents net income divided by the weighted
average number of common shares outstanding. Diluted earnings per share
utilizes the weighted average number of common stock and common stock
equivalents, which include stock options and warrants. In fiscal 2002, the
Company cancelled all outstanding stock options, and the warrants were
anti-dilutive due to the stock price being below the strike price of the
warrants. For fiscal 2001, the impact of the options and warrants is
anti-dilutive as the price of the Companys stock was below the exercise prices
of those instruments. In fiscal 2000, the Company was in a loss position and
the impact of the options and warrants was anti-dilutive, therefore the Company
has disclosed basic earnings per share as basic and diluted for these years.

As further described in Note 12, the Companys shareholders voted in favor
of a 1 for 10 reverse stock split, which became effective on February 20, 2001.
Accordingly, the share information presented below and on the face of the
income statement has been restated to reflect the reverse stock split.

The number of common shares used to calculate basic and diluted earnings
per share are as follows (in thousands):

|        |  |      |       |      |  |      |       |  |  |  |       | 
|------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|        |  | 2003 |       | 2002 |  | 2001
|        |  |      |       |      |  |     
|Basic   |  |      | 1,218 |      |  |      | 1,215 |  |  |  | 1,212 | 
|Diluted |  |      | 1,218 |      |  |      | 1,215 |  |  |  | 1,212 | 



| | N. |  | Stock-Based Compensation
| | -- |  | ------------------------

The Company utilizes the intrinsic value-based method of accounting
prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees
(APB 25) to measure compensation costs for its stock-based compensation plan
and had adopted the disclosure-only provisions of Statement of Financial
Standards No. 123  Accounting for Stock-Based Compensation (FAS 123). FAS
123 was amended in December 2002, with enhanced annual and interim disclosure
requirements that were issued in Financial Accounting Standard No. 148 
Accounting

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for Stock-Based Compensation  Transition and Disclosure (FAS 148).
Compensation costs for fixed price awards are measured by the excess, if any,
of the fair market price of the underlying stock over the amount the individual
is required to pay, which is established on the grant date. See Note 13 for a
further description of the assumptions used for preparing the pro forma
disclosures as prescribed by FAS 148.



| | O. |  | Joint Venture Investments
| | -- |  | -------------------------

The Company, through TWI, has invested in four joint venture operations in
Asia. TWI includes this investment in other assets on the balance sheet and is
accounting for these joint ventures using the cost method of accounting because
it does not exercise significant influence over the operating and financial
policy decisions of these entities. Accordingly, the Company has recognized the
distributions received from those entities as dividend income, which amounted
to $0.2 million, $0.1 million and $0.1 million in fiscal 2003, 2002 and 2001,
respectively. In fiscal 2003, dividend distributions, which had been netted
against SG&A expenses in prior periods, were reclassified to other income. The
investment in those entities at June 30, 2003 and 2002 was as follows:

|                                      |  |         |      |      |  |      |         |  |  |  |         | 
|------------------------------------- |  | ------- | ---- | ---- |  | ---- | ------- |  |  |  | ------- | 
|Company                               |  | % Owned |      | 2003 |  | 2002
|                                      |  |         |      |      |  |     
|Dynaflow Industries Corporation       |  |         | 38.5 | %    |  | $    | 73,000  |  |  |  | 75,000  | 
|Tsang Roug Industrial (Shenzhen) Ltd. |  |         | 28.0 | %    |  |      | 156,000 |  |  |  | 161,000 | 
|Quan Ri Chang (Shenzhen) Ltd.         |  |         | 28.1 | %    |  |      | 260,000 |  |  |  | 89,000  | 
|Everbrite Technology Inc.             |  |         | 7.5  | %    |  |      | 64,000  |  |  |  | 66,000  | 



|2. |  | Barnett
|-- |  | -------

In April 1996, the Company completed an initial public offering of the
Barnett Common Stock, reducing its interest in the former wholly-owned
subsidiary to 49.9% of the outstanding Barnett Common Stock and, together with
certain convertible non-voting preferred stock owned by the Company,
approximately a 54% economic interest. In April 1997, the Company completed a
secondary offering of 1.3 million shares of Barnett Common Stock, reducing its
voting and economic interests to 44.5% and, accordingly, began to account for
its interest in Barnett under the equity method of accounting. In July 2000,
the Company announced that it had reached an agreement to monetize the
remaining 7,186,530 shares of Barnett Common Stock for $13.15 per share as part
of the purchase of all of Barnetts outstanding shares in connection with the
Barnett Merger. In September 2000, the Barnett Merger was approved by Barnetts
shareholders and the Company sold its remaining shares of Barnett Common Stock.

The gross proceeds from the sale of the 7,186,530 shares of Barnett Common
Stock amounted to $94.5 million. The Companys equity investment in Barnett
amounted to $44.3 million immediately prior to the sale, including equity
earnings recognized by the Company in the quarter ended September 30, 2000 of
$1.4 million. The Company reported a net gain on the sale of Barnett of $47.5
million, after the write-off of $2.7 million in transaction related costs
associated with the Barnett Merger and other costs associated with the
comprehensive financial restructuring of the Company. In addition, the Company
recognized $7.8 million in deferred gain on the sale of U.S. Lock in the
quarter ended September 30, 2000, which was being recognized as Barnett
amortized the goodwill associated with its purchase of U.S. Lock.



|3. |  | Comprehensive Financial Restructuring Plan / Confirmation of Chapter 11 Filing
|-- |  | ------------------------------------------------------------------------------

Over a several year period concluding in fiscal 2001, the Company
endeavored to reduce its high level of debt through the monetization of
assets and to improve the efficiencies of its continuing businesses. As a
result, the Company undertook various initiatives to raise cash, improve its
cash flow and reduce its debt obligations and / or improve its financial
flexibility during that period. However, the Company believed that it would
have been unable to continue to make all of the interest and principal
payments under its debt obligations without the development of a
comprehensive financial restructuring plan, which would include the
monetization of the value of the shares of the Barnett Common Stock owned by
the Company. The key developments in the comprehensive financial
restructuring were as follows:



| |  |  | On December 13, 1999, the Company and an ad hoc committee (the
Committee), representing the holders of approximately 87.6% of the
$92.8 million outstanding principal amount of Waxman Industries 12
3⁄4% Senior Secured Deferred Coupon Notes due 2004 (the Deferred
Coupon Notes) and approximately 65% of the 11 1/8% Senior Notes due
2001 (the Senior Notes) of Waxman USA Inc., a direct wholly-owned
subsidiary of the Company, entered into an agreement (the Debt
Reduction Agreement) that provided, subject to certain conditions
(including Bankruptcy Court approval), for the process that would
lead to the full
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |   |  | satisfaction of the Deferred Coupon Notes and the Senior Notes as part
of a comprehensive financial restructuring of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | On July 10, 2000, the Company announced that it had reached
agreements with the Committee, among others, for the monetization of
its Barnett Common Stock and the financial restructuring of Waxman
Industries. These agreements included the Companys agreement to vote
its 7,186,530 shares of Barnett Common Stock owned by Waxman USA Inc.
in favor of the acquisition of Barnett by Wilmar Industries, Inc. for
$13.15 per share.                                                                                                                                           
|
| |  |  | On August 28, 2000, the Company and the Committee commenced the
solicitation for the approval of the Deferred Coupon Note holders for
the jointly sponsored, prepackaged plan of reorganization in advance
of its filing with the United States Bankruptcy Court (the Joint
Plan). Under the Joint Plan, the holders of the Deferred Coupon
Notes were the only impaired class of creditors; none of the
Companys operating subsidiaries or divisions were included in the
filing and they paid their trade creditors, employees and other
liabilities under normal conditions.
|
| |  |  | On September 1, 2000, the Company sold to Barnett 160,723
shares of Barnett Common Stock to fund the interest due on the
Companys Senior Notes.                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | On September 27, 2000, the Barnett shareholders approved the
Barnett Merger.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  |  | On September 28, 2000, the holders of approximately 97% of the
Deferred Coupon Notes voted in favor of accepting the Joint Plan,
with the remaining holders not voting.                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | On September 29, 2000, the Company received gross proceeds from
the sale of the remaining Barnett Common Stock, which together with
the shares sold to Barnett on September 1, 2000, amounted to $94.5
million. The Company utilized the proceeds from the sale of the
Barnett Common Stock in the following order:                                                                                                                                                                                                                                                               
|

| |  |  |  | paid or reserved for payment approximately $1.35
million for state and federal taxes associated with the sale
of the Barnett shares.                                                                                                
| |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  |  | reduced its borrowings under its working capital
credit facility by approximately $10 million.                                                                                                                                      
|
| |  |  |  | retired all of its approximately $35.9 million
principal amount of Senior Notes, plus accrued interest.                                                                                                                             
|
| |  |  |  | paid approximately $6.0 million in semi-annual
interest due on June 1, 2000 to its Deferred Coupon Note
holders.                                                                                                                    
|
| |  |  |  | funded a dedicated account with the remaining
gross proceeds of approximately $39.0 million, which was used
for the full satisfaction of the Deferred Coupon Notes,
including accrued interest, upon confirmation of the Joint
Plan.

| |  |  | On October 2, 2000, the Company, excluding Waxman USA Inc.
and all of its direct and indirect operating subsidiaries, filed a
petition for reorganization under Chapter 11 of the U.S. Bankruptcy
Code in the United States Court for the District of Delaware. The
petition sought confirmation by the court of the Joint Plan to
settle, at a discount, all amounts due on the Companys Deferred
Coupon Notes. Under the Joint Plan, the only impaired creditors
were the Deferred Coupon Note holders.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | On November 14, 2000, the Companys Joint Plan was approved
by the Court                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | On November 16, 2000, the Companys Joint Plan became
effective, and the Company paid its obligation to the Deferred
Coupon Note holders.                                                                                                                                                                                                                                                                                                                                                                 
|
| |  |  | On March 14, 2001, the Court closed the Chapter 11 case, and
the Company emerged from bankruptcy.                                                                                                                                                                                                                                                                                                                                                                                                         

Included in accrued liabilities at June 30, 2003 and 2002 are accrued
restructuring charges in the amount of $1.0 million.



|4. |  | Managements Review of Operations  Restructuring and Impairment Charges
|-- |  | ------------------------------------------------------------------------

Included in the results for the fiscal 2001 are $0.35 million in
additional costs and restructuring charges recorded by Consumer Products during
the quarter ended September 30, 2000 which were associated with certain of its
distribution and packaging warehouses closed in prior years.



|5. |  | Disposal of Businesses
|-- |  | ----------------------

In fiscal 2001, the Company sold substantially all of the assets and
certain liabilities of Medal of Pennsylvania, Inc. (Medal) to a newly formed
corporation, Medal USA, Inc. for approximately $0.8 million in cash and the
assumption of certain liabilities (the Medal Sale). The Medal Sale was
effective March 31, 2001, resulting in a net pretax loss of $1.1 million in the
quarter ended March 31, 2001.

16



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##### Table of Contents



The Company consolidated Medals financial information in its results
through March 31, 2001. The impact of not consolidating Medals results would
have been to reduce consolidated net sales and improve the Companys net income
(loss) as follows (in thousands, except per share data):

|                                 |  |             |       |  
|-------------------------------- |  | ----------- | ----- | -
|                                 |  | Fiscal 2001
|                                 |  |            
|Net sales                        |  | $           | 3,407 |  
|Net loss                         |  | $           | (151  | )
|Basic and diluted loss per share |  | $           | (0.12 | )



|6. |  | Extraordinary Items
|-- |  | -------------------

In September 2000, the Company retired Waxman USAs Senior Notes,
utilizing a portion of the proceeds from the Barnett Merger. As a result, the
Company wrote off $57,000, net of taxes of $38,000, of deferred loan costs
associated with these notes.

In November 2000, the Company reported net extraordinary income of $52.2
million, which included a gain of $56.5 million from the retirement of the
Companys $92.8 million of Deferred Coupon Notes at a discount, the write-off
of $1.9 million of unamortized debt issuance costs associated with the Deferred
Coupon Notes and $2.4 million of expenses associated with the debt
restructuring. The Company did not provide a tax provision on the extraordinary
gain due to the tax treatment of debt defeasance income in a bankruptcy.



|7. |  | Debt
|-- |  | ----



| | A. |  | Long-Term Debt
| | -- |  | --------------

Total long-term debt consists of the following at June 30, 2003 and 2002
(in thousands of dollars):

|                                                                                                                    |  |      |        |      |  |   |        |  
|------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|                                                                                                                    |  | 2003 |        | 2002
|                                                                                                                    |  |      |        |     
|Bank Agreement                                                                                                      |  | $    | 7,529  |      |  | $ | 7,298  |  
|Term Loan maturing in 2005, bearing interest at prime plus 1%, secured by the Companys
corporate land and building |  |      | 935    |      |  |   | 1,100  |  
|Capital leases maturing in 2003 to 2008, bearing interest at 6.13% to 17.3%, secured by
leased equipment            |  |      | 156    |      |  |   | 85     |  
|Other debt, maturing in 2002, bearing interest at 5.7%, secured by TWIs land and building                          |  |      |       |      |  |   | 298    |  
|                                                                                                                    |  |      |        |      |  |   |        |  
|                                                                                                                    |  |      | 8,620  |      |  |   | 8,781  |  
|Less: current portion                                                                                               |  |      | (7,724 | )    |  |   | (7,831 | )
|                                                                                                                    |  |      |        |      |  |   |        |  
|Long-term debt, net of current portion                                                                              |  | $    | 896    |      |  | $ | 950    |  
|                                                                                                                    |  |      |        |      |  |   |        |  

The PNC Revolving Credit, Term Loan and Security Agreement (PNC Bank
Facility), which began in February 2002, is between Waxman Industries, Inc.,
Consumer Products, WAMI Sales and Waxman USA as borrowers (the Borrowers).
The PNC Bank Facility provides, among other things, for revolving credit
advances of up to $15.0 million. The Term Loan facility provided an initial
loan on the Companys corporate office building of $1,155,000, with payments
being amortized over 7 years, although the facility would be subject to a
balloon payment if the PNC Bank Facility terminates and is not extended. At
June 30, 2003, the balance due under the Term Loan facility was $935,000 and
the Company had $7.5 million in borrowings under the revolving credit line of
the facility and approximately $3.2 million available under such facility.

The PNC Bank Facility provides for revolving credit advances of (a) up to
85.0% of the amount of eligible accounts receivable and (b) up to the lesser of
(i) $7.5 million or (ii) 60% of the amount of eligible raw and finished goods
inventory. Revolving credit advances bear interest at a rate equal to the
higher of (a) the PNC Bank, NA base prime rate plus 0.5% or (b) Federal Funds
Rate plus 1.0%. The Term Loan advance bears interest at a rate equal to the
higher of (a) the PNC Bank, NA base prime rate plus 1.0% or (b) Federal Funds
Rate plus 1.5%. The PNC Bank Facility includes a letter of credit subfacility
of $1.0 million, with none outstanding at June 30, 2003. Borrowings under the
PNC Revolving Credit Loan are secured by the accounts receivable, inventories,
certain general intangibles, and

17



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##### Table of Contents



unencumbered fixed assets of Waxman Industries, Inc., Consumer Products, WAMI
Sales, and a pledge of 65% of the stock of various foreign subsidiaries. The
PNC Bank Facility requires the Borrowers to maintain cash collateral accounts
into which all available funds are deposited and applied to service the
facility on a daily basis. The PNC Bank Facility prevents dividends and
distributions by the Borrowers, including the repurchase of stock, except in
certain limited instances.

The financial covenants contain customary negative, affirmative and
financial covenants and conditions that require the Company to maintain a
certain fixed charge coverage ratio and tangible net worth and not exceed a
certain amount of capital expenditures in any given period. The ratios and
dollar amounts of such financial covenants vary during the term of the PNC Bank
Facility and are contained in the agreement governing the PNC Bank Facility,
which appears as Exhibit 10.1 to the Current Report on Form 8-K filed by the
Company on February 27, 2002 and is incorporated herein by reference as Exhibit
4.10 to this Form 10-K. The customary negative covenants contained in the PNC
Bank Facility include restrictions, subject to important enumerated exceptions,
on the Companys ability to effect a merger, consolidation, acquisition or sale
of its assets, create liens, enter into guarantees, acquire interests in other
entities, make loans to other entities, incur indebtedness, and engage in
transactions with affiliates. The Company was in compliance with all loan
covenants at June 30, 2003. In August 2003, PNC and the Company retroactively
amended the fixed charge covenant to utilize financial results for measuring
its fixed charge coverage ratio beginning April 1, 2003. The PNC Bank Facility
also contains a material adverse condition clause, which allows PNC Bank, NA to
terminate the agreement under certain circumstances. The PNC Bank Facility
replaced a Loan and Security Agreement with Congress Financial Corporation,
which was scheduled to expire on June 18, 2002.



| | B. |  | Senior Secured Deferred Coupon Notes
| | -- |  | ------------------------------------

In November 2000, the Companys Joint Plan became effective and the
Company paid its Deferred Coupon Note obligation to the Deferred Coupon Note
holders (see Note 3). The Deferred Coupon Notes were issued in May 1994, when
the Company exchanged $50 million principal amount of its 13 3/4% Senior
Subordinated Notes due June 1, 1999 (Senior Subordinated Notes) for Deferred
Coupon Notes having an initial accreted value of $50 million, along with
detachable warrants to purchase 295,000 post-split shares of the Companys
common stock. The Deferred Coupon Notes were fully accreted at June 1, 1999,
and began accruing cash interest at a rate of 12 3/4% which became payable on
December 1, 1999 and semi-annually thereafter.

The warrants are exercisable through June 1, 2004. As a result of the
Companys reverse stock split in February 2001, the original 2.95 million
warrants exercisable at $2.45 per share became 295,000 warrants exercisable at
$24.50 per share. A portion of the initial accreted value of the Deferred
Coupon Notes had been allocated to the warrants and as a result, paid-in
capital increased by $2.5 million. The related $2.5 million reduction in the
recorded initial accreted value of the Deferred Coupon Notes was being
amortized as interest expense over the life of the Deferred Coupon Notes, and
was accelerated with the settlement of the Deferred Coupon Notes in connection
with the effectuation of the Joint Plan (see Note 3).



| | C. |  | Senior Notes
| | -- |  | ------------

On September 29, 2001, the Company redeemed its remaining $35.9 million of
Senior Notes as part of its Debt Reduction Agreement and comprehensive
financial restructuring, paying the principal and interest in full.



| | D. |  | Capital Leases
| | -- |  | --------------

The Company has certain obligations under capital leases which are
included in the debt balances in the Long-Term Debt table provided in Note 7A.
The obligations under capital leases have fixed interest rates of 6.13% to
6.93% and are collateralized by property, plant and equipment. Property under
capitalized leases consists of the following:

|                               |  |      |     |      |  |   |     | 
|------------------------------ |  | ---- | --- | ---- |  | - | --- | 
|                               |  | 2003 |     | 2002
|                               |  |      |     |     
|Machinery and equipment        |  | $    | 176 |      |  | $ | 447 | 
|Less: Accumulated depreciation |  |      | 9   |      |  |   | 281 | 
|                               |  |      |     |      |  |   |     | 
|                               |  | $    | 167 |      |  | $ | 166 | 
|                               |  |      |     |      |  |   |     | 

18



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##### Table of Contents



The future minimum rentals for property under capital leases are as
follows:

|                                                |  |   |     | 
|----------------------------------------------- |  | - | --- | 
|2004                                            |  | $ | 39  | 
|2005                                            |  |   | 38  | 
|2006                                            |  |   | 38  | 
|2007                                            |  |   | 33  | 
|2008                                            |  |   | 33  | 
|                                                |  |   |     | 
|Total minimum lease obligation                  |  |   | 181 | 
|Less interest                                   |  |   | 25  | 
|                                                |  |   |     | 
|Present value of total minimum lease obligation |  | $ | 156 | 
|                                                |  |   |     | 



| | E. |  | Term Debt
| | -- |  | ---------

The PNC Bank Facility provides for a Term Loan facility on the Companys
corporate office building. The initial loan amount was $1,155,000. The Term
Loan facility provided an initial loan on the Companys corporate office
building of $1,155,000, with payments being amortized over 7 years, although
the facility would be subject to a balloon payment if the PNC Bank Facility is
terminated and not extended. The Term Loan bears an interest rate of prime plus
1.0%. Monthly principal payments of $13,750 plus interest are made. The Company
made $55,000 in principal payments in fiscal 2002, and principal payments of
$165,000 will be made in each fiscal year beginning with fiscal 2003 through
fiscal 2008, with $110,000 being made in fiscal 2009.



| | F. |  | Miscellaneous
| | -- |  | -------------

The Company made cash interest payments of $0.4 million, $0.6 million and
$9.3 million in fiscal 2003, 2002 and 2001, respectively. The Company reported
interest income of $0.1 million in fiscal 2003 and $0.3 million in fiscal 2001,
but did not have interest income in fiscal 2002.

Management believes the carrying value of its bank loan approximates its
fair value as it bears interest based upon the banks prime lending rates.



| | 8. |  | Income Taxes
| | -- |  | ------------

The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109, Accounting for Income Taxes. SFAS No. 109 utilizes the asset
and liability method, where deferred tax assets and liabilities are recognized
for the future tax consequences attributable to net operating loss
carryforwards and to differences between the financial statement carrying
amounts of assets and liabilities and their respective tax basis. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which these temporary differences are
expected to be recovered or settled.

The components of income (loss) from continuing operations before income
taxes and extraordinary gain are as follows (in thousands of dollars):

|         |  |                            |        |      |  |      |     |   |  |   |        | 
|-------- |  | -------------------------- | ------ | ---- |  | ---- | --- | - |  | - | ------ | 
|         |  | Fiscal Year Ended June 30,
|         |  |                           
|         |  | 2003                       |        | 2002 |  | 2001
|         |  |                            |        |      |  |     
|Domestic |  | $                          | (1,617 | )    |  | $    | (80 | ) |  | $ | 47,895 | 
|Foreign  |  |                            | 1,791  |      |  |      | 994 |   |  |   | 1,611  | 
|         |  |                            |        |      |  |      |     |   |  |   |        | 
|Total    |  | $                          | 174    |      |  | $    | 914 |   |  | $ | 49,506 | 
|         |  |                            |        |      |  |      |     |   |  |   |        | 

19



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##### Table of Contents



The components of the provision for income taxes are (in thousands of
dollars):

|                                 |                           |      |                            |      |   |      |      |      |   |   |     |       | 
|-------------------------------- | ------------------------- | ---- | -------------------------- | ---- | - | ---- | ---- | ---- | - | - | --- | ----- | 
|                                 |                           |      | Fiscal Year Ended June 30,
|                                 |                           |      |                           
|                                 |                           | 2003 |                            | 2002 |   | 2001
|                                 |                           |      |                            |      |   |     
|Currently (recoverable) payable:
|Federal                          |                           | $    | (166                       | )    |   | $    | (773 | )    |   | $ | 740 |      
|Foreign                          |                           |      | 451                        |      |   |      | 229  |      |   |   | 256 |      
|State                            |                           |      | (532                       | )    |   |      | (127 | )    |   |   | 317 |      
|                                 |                           |      |                            |      |   |      |      |      |   |   |     |      
|                                 | Total current             |      |                            | (247 | ) |      |      | (671 | ) |   |     | 1,313 | 
|Deferred: State                  |                           |      |                           |      |   |      |     |      |   |   | 367 |      
|                                 |                           |      |                            |      |   |      |      |      |   |   |     |      
|                                 | Total (benefit) provision |      | $                          | (247 | ) |      | $    | (671 | ) |   | $   | 1,680 | 
|                                 |                           |      |                            |      |   |      |      |      |   |   |     |      

The following table reconciles the U.S. statutory rate to the Companys
effective tax rate:

|                              |                    |  |        |        |      |  |       |       |    |  |       |     |  
|----------------------------- | ------------------ |  | ------ | ------ | ---- |  | ----- | ----- | -- |  | ----- | --- | -
|                              |                    |  | 2003   |        | 2002 |  | 2001 
|                              |                    |  |        |        |      |  |      
|U.S. statutory rate           |                    |  | 35.0   | %      |      |  | 35.0  | %     |    |  | 35.0  | %  
|Domestic losses not benefited |                    |  | 192.3  |        |      |  |      |       |    |  |      |    
|State taxes, net              |                    |  | (198.4 | )      |      |  | 1.8   |       |    |  | 0.8   |    
|Foreign tax items             |                    |  | (101.1 | )      |      |  | (13.0 | )     |    |  | (0.6  | )  
|Change in valuation allowance |                    |  |       |        |      |  |      |       |    |  | (32.0 | )  
|Change in tax law             |                    |  | (78.3  | )      |      |  | (84.6 | )     |    |  |      |    
|Other, net                    |                    |  | 8.8    |        |      |  | (12.6 | )     |    |  | 0.2   |    
|                              |                    |  |        |        |      |  |       |       |    |  |       |    
|                              | Effective tax rate |  |        | (141.7 | )%   |  |       | (73.4 | )% |  |       | 3.4 | %
|                              |                    |  |        |        |      |  |       |       |    |  |       |    

The deferred tax assets and liabilities as of June 30, 2003 and 2002 are
as follows (in thousands of dollars):

|                                 |  |                          |       |      |        |      |       |   |        |  
|-------------------------------- |  | ------------------------ | ----- | ---- | ------ | ---- | ----- | - | ------ | -
|                                 |  |                          |       | 2003 |        | 2002
|                                 |  |                          |       |      |        |     
|Net operating loss carryforwards |  | $                        | 6,458 |      |        | $    | 6,082 |  
|Accrued expenses                 |  |                          | 76    |      |        |      | 97    |  
|Inventories                      |  |                          | 337   |      |        |      | 409   |  
|Accounts receivable              |  |                          | 153   |      |        |      | 188   |  
|Procurement costs                |  |                          | 961   |      |        |      | 910   |  
|Alternative minimum tax credit   |  |                          | 591   |      |        |      | 718   |  
|Other                            |  |                          | 463   |      |        |      | 472   |  
|                                 |  |                          |       |      |        |      |       |  
|                                 |  | Deferred tax asset       |       |      | 9,039  |      |       |   | 8,876  |  
|                                 |  |                          |       |      |        |      |       |  
|Property                         |  |                          | (803  | )    |        |      | (941  | )
|                                 |  |                          |       |      |        |      |       |  
|                                 |  | Deferred tax liabilities |       |      | (803   | )    |       |   | (941   | )
|                                 |  |                          |       |      |        |      |       |  
|                                 |  | Net deferred tax asset   |       |      | 8,236  |      |       |   | 7,935  |  
|                                 |  | Valuation allowance      |       |      | (8,236 | )    |       |   | (7,935 | )
|                                 |  |                          |       |      |        |      |       |  
|                                 |  | $                        |      |      |        | $    |      |  
|                                 |  |                          |       |      |        |      |       |  

SFAS No. 109 requires the Company to assess the realizability of its
deferred tax assets based on whether it is more likely than not that the
Company will realize the benefit from these deferred tax assets in the future.
If the Company determines the more likely than not criteria is not met, SFAS
No. 109 requires the deferred tax assets be reduced by a valuation allowance.
In assessing the realizability of its net deferred tax asset, the Company
considered its historic performance and the uncertainty of it being able to
generate enough domestic taxable income to utilize these

20



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##### Table of Contents



assets. At June 30, 2003 and 2002, the Companys net deferred tax assets were
fully offset by a valuation allowance, and the Company continues to believe
that the Companys net deferred tax assets should continue to be offset by a
valuation allowance. The Company will continue to analyze the trends in the
operating results of its domestic operations to assess the realizability of its
deferred tax asset in fiscal 2004. At June 30, 2003, the Company had $18.5
million of available domestic net operating loss carryforwards for income tax
purposes, which will expire in 2010 through 2023.

In fiscal 2003, the Company recorded a net tax benefit of $0.2 million,
which represents the reversal of a $0.6 million tax reserve for a state tax
assessment that was favorably resolved during the year, $0.1 million for a
change in tax law related to the carryback of alternative net operating losses
to prior years, partially offset by a provision for various state and foreign
taxes. In fiscal 2002, the Company recorded a net tax benefit of $0.7 million,
which represents a tax benefit of $0.8 million for a change in tax law related
to the carryforward of an alternative minimum tax net operating loss to fiscal
2001, a benefit of $0.1 million for the reversal of tax reserves related to the
2001 financial restructuring and a provision for various state and foreign
taxes.

Undistributed earnings of the Companys foreign operations were
approximately $5.1 million as of June 30, 2003. These earnings are considered
to be indefinitely reinvested and accordingly, no U.S. federal or state taxes
have been provided.

The Company made no federal income tax payments in fiscal 2003 and 2002,
but made payments of $0.8 for fiscal 2001. The Companys foreign operations
made payments of $0.4 million in fiscal 2003, as compared to $0.1 million in
both fiscal 2002 and fiscal 2001. The Company paid approximately $48,000,
$114,000 and $330,000 in state taxes for fiscal 2003, 2002 and 2001,
respectively. Refunds received totaled $891,000 in fiscal 2003, $28,000 in
fiscal 2002 and $6,000 in fiscal 2001.



|9. |  | Lease Commitments
|-- |  | -----------------

The Company leases certain warehouse and office facilities and equipment
under operating lease agreements, which expire at various dates through 2009.
The future minimum rental payments are as follows (in thousands of dollars):

|           |  |   |       | 
|---------- |  | - | ----- | 
|2004       |  | $ | 935   | 
|2005       |  |   | 878   | 
|2006       |  |   | 742   | 
|2007       |  |   | 677   | 
|2008       |  |   | 454   | 
|Thereafter |  |   | 152   | 
|           |  |   |       | 
|           |  | $ | 3,838 | 
|           |  |   |       | 

Total rent expense charged to operations was $1.0 million, $0.9 million
and $0.8 million in fiscal 2003, 2002 and 2001, respectively. Consumer
Products leases certain warehouse space from related parties. Related
parties rent expense totaled $0.2 million in fiscal 2003 and $0.3 million in
each of fiscal 2002 and fiscal 2001. Those related party relationships
consist of the following:



| |  |  | Aurora Investment Co., a partnership owned by Melvin Waxman,
Chairman of the Board and Co-Chief Executive Officer of the
Company, and Armond Waxman, President and Co-Chief Executive
Officer of the Company, together with certain other members of
their families, is the owner and lessor of the building used by
Consumer Products for its executive offices, administrative
functions and, until the move of the warehouse to Groveport, Ohio,
one of its distribution facilities. Rent expense and related
occupancy expenses under this lease was $167,157 in fiscal 2003 and
$326,712 in fiscal 2002 and 2001. In fiscal 2002 and 2001, 97,000
square feet of the warehouse portion of this facility was subleased
to Handl-it Inc. (see Note 10 for information regarding related
party ownership of Handl-it). On July 1, 2002, Consumer Products
renewed the lease for the 9,000 square feet of office space and
20,000 square feet of warehouse space that it uses, and began
subleasing an additional 17,000 square feet of space from Handl-it,
for which it paid $61,200 in fiscal 2003. Handl-it began leasing
the portion of the warehouse it used directly from Aurora
Investments Co.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | Handl-it Inc., a corporation owned by John S. Peters, a
director and consultant to the Company, together with another
member of his family, Melvin Waxman and Armond Waxman, sublet
warehouse space from Consumer Products through June 30, 2002. The
Company reported rental income from Handl-it Inc. of $191,079 and
$290,496 in fiscal 2002 and 2000, respectively, for subleasing the
warehouse in Bedford Hts., Ohio. In fiscal 2003, Consumer Products
paid $61,200 to Handl-it for subleasing a portion of the warehouse
space leased by Handl-it and used by Consumer Products. See Note 10
for additional information regarding this related party
transaction.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | From July 1, 1999 through April 2001, WAMI Sales utilized
Handl-it Inc. to provide all warehousing, labor and shipping
functions in Cleveland, Ohio for a fee equal to a percentage of
monthly sales plus other direct expenses from this operation. The
charge amounted to $67,000 in fiscal 2001 and $74,000 in fiscal
2000. The Company believes these terms are comparable to those that
would be available from unaffiliated third parties.                                                                                                                                                                                                                         



|10. |  | Related-Party Transactions
|--- |  | --------------------------

The Company purchases certain products, which it can not manufacture with
its existing operations, from WDI International, Inc., a company owned in part
by certain members of the Waxman family and other non-affiliated individuals.
In fiscal 2003, 2002 and 2001, purchases from WDI International amounted to
$1.1 million, $1.6 million and $1.7 million, respectively. The Company believes
that the prices it receives are on terms comparable to those that would be
available from unaffiliated third parties.

The Company leases certain facilities from Aurora Investment Co., a
partnership owned by members of the Waxman family (see Note 9 for additional
information regarding this arrangement). Aurora Investments Co. originally
developed the Bedford Heights, Ohio facility, with 9,000 square feet of office
space and 114,000 square feet of warehouse space, entirely for Consumer
Products. The lease of the entire facility expired on June 30, 2002, and
Consumer Products entered into a new 5 year lease with Aurora Investments for
9,000 square feet of office space and 20,000 square feet of warehouse. Rent
expense under this lease was $167,157 in fiscal 2003, as compared to $326,712
in each of fiscal 2002 and 2001, when Consumer Products leased the entire
facility. Consumer Products also subleases 17,000 square feet of space at this
Bedford Heights facility from Handl-it for $61,200 per year. In fiscal 2002 and
2001, when Consumer Products was leasing the entire facility, it sublet 97,000
square feet of the warehouse to Handl-it Inc. (see below for information
regarding affiliated ownership of Handl-it Inc.).

At June 30, 2003 and 2002, the Company had the following receivables from
related parties (in thousands):

|                          |       |      |     |      |  |   |     |     | 
|------------------------- | ----- | ---- | --- | ---- |  | - | --- | --- | 
|Related Party             |       | 2003 |     | 2002
|                          |       |      |     |     
|Melvin Waxman, Co-CEO     |       | $    | 50  |      |  | $ | 60  |    
|Armond Waxman, Co-CEO     |       |      | 125 |      |  |   | 135 |    
|Waxman Development        |       |      | 84  |      |  |   | 84  |    
|Aurora Investments Co.    |       |      | 85  |      |  |   | 97  |    
|Handl-it Inc.             |       |      | 78  |      |  |   | 134 |    
|All other related parties |       |      | 54  |      |  |   | 64  |    
|                          |       |      |     |      |  |   |     |    
|                          | Total |      | $   | 476  |  |   | $   | 574 | 
|                          |       |      |     |      |  |   |     |    

All of the related party and officer notes receivable are documented by a
promissory note and began to bear interest in July 2002 at the minimum rates
established by the Internal Revenue Service to avoid imputed interest
attribution. Principal payments of $10,000 were made by each officer beginning
in fiscal 2003, as well as quarterly interest payments. The receivable from
Waxman Development relates to a real estate development venture initially
formed to build facilities for Barnett, a former affiliate, and other
operations. The Barnett stock owned by the Company was disposed of in September
2000. Aurora Investments has been paying interest, while Waxman Development
began paying interest in fiscal 2003. Principal payments on the Aurora
Investments and Waxman Development notes begin in fiscal 2007 and are payable
over a ten year period.

Handl-it Inc., a corporation owned by John S. Peters, a director and
consultant to the Company, together with another member of his family, and
Melvin Waxman and Armond Waxman, sublet warehouse space in Bedford Hts., Ohio
from Consumer Products through June 30, 2002. In order to facilitate Consumer
Products move to a more efficient warehouse that was also logistically
beneficial in serving their customer base, Handl-it agreed to sublease 97,000
square feet of office space, which it would attempt to utilize for the
warehousing needs of its customers. Due to the prolonged economic downturn in
this area, Handl-it was unable to fully utilize the warehouse, and negotiated
an adjustment with Consumer Products to offset its revenue shortfall for this
warehouse. Accordingly, in fiscal 2002, Consumer Products

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reduced its rental charge to Handl-it by approximately $99,000, and received
concessions of $26,000 over the next 26 months from Aurora Investments. The
Company charged Handl-it Inc. $191,079 in fiscal 2002 (after the rent
adjustment) and $290,496 in fiscal 2001 for subleasing the warehouse space. At
June 30, 2003 and 2002, Handl-it owed Consumer Products $78,000 and $134,000 in
unpaid rent, respectively, which is evidenced by a promissory note, which bears
interest at a rate of 5.25% per annum. Effective July 1, 2002, Consumer
Products entered into a lease with Aurora Investments for the 9,000 square feet
of office space it utilizes and 20,000 square feet of warehouse space, and also
entered into an agreement to sublease 17,000 square feet of space from Handl-it
at a monthly charge of $5,100. Consumer Products offset the receivable from
Handl-it by the future monthly rental payments that would otherwise be paid to
Handl-it, and will continue to do so until the receivable has been fully
repaid. Consumer Products also utilizes Con-Pak Inc., a third party packaging
operation acquired by Handl-it in 1999, in certain instances where the
packaging can not be performed by the Companys operations in Asia. Con-Pak,
Inc. received $227,807, $377,599 and $234,368 for these services in fiscal
2003, 2002 and 2001, respectively. Consumer Products also paid Handl-it Inc.
approximately $27,000 for the cost of transportation of products in fiscal
2001. Handl-it is also compensated for the consulting services provided to the
Company by Mr. Peters, which amounted to approximately $43,000, $123,000 and
$81,000 in fiscal 2003, 2002 and 2001, respectively.

Melvin Waxman and Armond Waxman are directors and co-owners of Handl-it,
and each received director fees of $6,000 and $8,000 and consulting income of
$18,000 and $20,000 from Handl-it in the twelve months ended June 30, 2003 and
2002, respectively.



|11. |  | Retirement Plans
|--- |  | ----------------

The eligible employees of the Companys corporate office and certain
domestic subsidiaries of the Company participate in a trusteed, profit
sharing and 401(k) retirement plan. Contributions are discretionary and are
determined by the Companys Board of Directors. There were no profit sharing
contributions in fiscal 2003, 2002 or 2001. Beginning July 1, 2002 the
Company modified its 401(k) retirement plan to meet the Department of Labors
Safe Harbor Match provisions. Accordingly, the Company increased its match to
100% of the first 3% and 50% for the next 2% of deferral by employees, which
amounted to $173,000 in fiscal 2003. Under the new provisions, all
contributions are 100% vested. In fiscal 2002 and 2001 the Company
contributed a 50% match of up to the first 4% of salary deferral by
employees, which amounted to $0.1 million in each year. The Companys
domestic operations currently offer no other retirement, post-retirement or
post-employment benefits.

The Companys operation in Taiwan has a retirement plan covering all
regular employees, which provides for payment of benefits based on length of
service and basic pay at the time of retirement, making a monthly contribution
of 2% of salary and wages to the retirement fund. In fiscal 2003, this
operation adopted its method for employee benefit plan based on the Statement
of Financial Accounting Standards No. 87 (SFAS 87), and recognized net
periodic pension cost, related assets and liabilities based on actuarial
assumptions as required by SFAS 87. Contributions approximated $50,000 in
fiscal 2003 and $20,000 in fiscal 2002 and 2001. In fiscal 2002 and 2001, the
Company expensed the contributions made. An employees retirement committee
administrates the retirement fund and amounts contributed are deposited in the
name of this committee in the Central Trust of China.

The
funded status of the plan and accrued pension cost reconciliation follows (in thousands):

|                                       |                                               |      |      |      |  |   |      |     |  | 
|-------------------------------------- | --------------------------------------------- | ---- | ---- | ---- |  | - | ---- | --- |  | 
|                                       |                                               | 2003 |      | 2002
|                                       |                                               |      |      |     
|Benefit obligations:                   |                                               |      |      |      |  |   |      |    
|                                       | - Non-vested accumulated benefit obligation   |      | $    | 436  |  |   | $    | 456 | 
|                                       | - Additional benefit based on future salaries |      |      | 49   |  |   |      | 200 | 
|                                       |                                               |      |      |      |  |   |      |    
|                                       | Projected benefit obligation                  |      |      | 485  |  |   |      | 656 | 
|Fair value of plan assets              |                                               |      | (215 | )    |  |   | (335 | )  
|                                       |                                               |      |      |      |  |   |      |    
|Funded status                          |                                               |      | (270 | )    |  |   | (321 | )  
|Unrecognized net transition obligation |                                               |      | 305  |      |  |   | 323  |    
|Unrecognized pension cost              |                                               |      | (90  | )    |  |   |     |    
|Additional pension liability           |                                               |      | (166 | )    |  |   | (123 | )  
|                                       |                                               |      |      |      |  |   |      |    
|Accrued pension cost                   |                                               | $    | (221 | )    |  | $ | (121 | )  
|Less: Intangible asset                 |                                               |      | 166  |      |  |   | 123  |    
|                                       |                                               |      |      |      |  |   |      |    
|Net pension asset (liability)          |                                               | $    | (55  | )    |  |   | 2    |    
|                                       |                                               |      |      |      |  |   |      |    
|Vested benefit                         |                                               | $    |     |      |  | $ |     |    

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|                                                       |                                                    |      |     |      |   |  |   |     |   | 
|------------------------------------------------------ | -------------------------------------------------- | ---- | --- | ---- | - |  | - | --- | - | 
|                                                       |                                                    |      |     |      |   |  |   |    
|                                                       |                                                    | 2003 |     | 2002
|                                                       |                                                    |      |     |     
|Actuarial assumptions:                                 |                                                    |      |     |      |   |  |   |    
|                                                       | - Discount rate used in determining present values |      |     | 3.5  | % |  |   | 4.0 | %
|                                                       | - Future salary increase rate                      |      |     | 2.0  | % |  |   | 2.5 | %
|                                                       | - Expected rate of return on pension assets        |      |     | 3.5  | % |  |   | 4.0 | %
|Net Periodic Pension Cost:                             |                                                    |      |     |      |   |  |   |    
|Service cost                                           |                                                    | $    | 73  |      |   |  |   |    
|Interest cost                                          |                                                    |      | 24  |      |   |  |   |    
|Expected return on plan assets                         |                                                    |      | (8  | )    |   |  |   |    
|Amortization of net unrecognized transition obligation |                                                    |      | 17  |      |   |  |   |    
|                                                       |                                                    |      |     |      |   |  |   |     |  
|Net periodic pension cost                              |                                                    | $    | 106 |      |   |  |   |    
|                                                       |                                                    |      |     |      |   |  |   |     |  
|Summary of changes in pension fund                     |                                                    |      |     |      |   |  |   |    
|                                                       | - Contribution                                     |      | $   | 49   |   |  | $ | 19  |  
|                                                       | - Payment of benefits                              |      | $   | 178  |   |  | $ | 0   |  



|12. |  | Capital Stock and Reverse Stock Split
|--- |  | -------------------------------------

Each share of the Companys common stock (the Common Stock) entitles its
holder to one vote, while each share of Class B common stock entitles its
holder to ten votes. Cash dividends on the Class B common stock may not exceed
those on the Common Stock. Due to restricted transferability, there is no
trading market for the Class B common stock. However, the Class B common stock
may be converted, at the stockholders option, into Common Stock on a
share-for-share basis at any time, without cost to the stockholder. No
preferred shares have been issued as of June 30, 2003.

The Companys Certificate Of Incorporation originally authorized the
issuance of 22,000,000 shares of Common Stock, 6,000,000 shares of Class B
Common Stock and 2,000,000 shares of Preferred Stock. The Company determined
that it was not likely to need more than 8,000,000 authorized shares of Common
Stock, 1,500,000 shares of Class B Common Stock and 200,000 shares of Preferred
Stock for issuance in the future, and the Companys Board of Directors approved
an amendment to the Certificate of Incorporation of the Corporation to reduce
the number of the Companys authorized shares in August 2001. The reduction in
authorized shares was approved by stockholders at the December 3, 2002 Annual
Meeting of Stockholders.

In February 2001, the stockholders of the Company approved a 1-for-10
reverse stock split, thereby reducing the outstanding number of shares of the
Company (the Reverse Stock Split). As a result of the Reverse Stock Split,
every ten shares of the Companys common stock and class B common stock were
converted into one share of common stock and class B common stock,
respectively. Each stockholders percentage share of total voting rights in the
Company was the same as it was prior to the Reverse Stock Split, except for the
de minimus effect of certain stockholders receiving an additional share of
Common Stock or Class B Common Stock in lieu of fractional shares. The number
of additional shares issued in lieu of fractional shares increased the number
of post-split shares by 154 for the Common Stock and 49 for the Class B Common
Stock. There was no change in the number of stockholders as a result of the
Stock Split. In addition, the number of shares purchasable upon exercise of the
warrants issued to the holders of the Companys former Deferred Coupon Notes
(the Warrants) were adjusted. The pre-split Warrants representing the rights
of the holders to purchase an aggregate of 2,950,000 Warrant Shares at $2.45
per share became, on a post-split basis, the right to purchase an aggregate of
295,000 Warrant Shares at $24.50 per share.

The Companys Common Stock is quoted on the Over-The-Counter Bulletin
Board (OTCBB). The Nasdaq, which originally planned to terminate the OTCBB
exchange, has instead ceased its effort to establish a new Bulletin Board
Exchange with improved order processing and automatic trading features.
Accordingly, the Company intends to maintain its listing on the OTCBB at this
time.



|13. |  | Stock Based Compensation Plans
|--- |  | ------------------------------

In December 2002, the FASB released FAS 148 to encourage more companies to
adopt the fair value method of accounting for stock based compensation plans
and amends the disclosure requirements of FAS 123 to require more prominent
disclosure in both annual and interim financial statements. Although FAS 148
does not require companies to

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adopt the fair value method, the new rules are effective beginning in the first
quarter of 2003 for those companies that follow the disclosure only
provisions of FAS 123.

The Company has adopted the disclosure only provisions of FAS 123, and has
elected to follow APB 25 and related interpretations in accounting for its
stock options. Compensation cost for stock based awards is measured by the
excess, if any, of the fair market value price at the grant date of the
underlying stock over the amount the individual is required to pay for
exercising the stock based award. Compensation cost for fixed based awards is
measured at the grant date, and the Company uses the Black-Scholes option
pricing model to determine the fair value estimates for disclosure purposes.
The Black-Scholes option pricing model requires the use of subjective
assumptions which can materially affect the value estimates. Therefore, the
model does not necessarily provide a reliable single measure of the fair value
of the Companys stock options.

At the December 2002 Annual Meeting of Stockholders, stockholders approved
a new stock incentive plan (the 2002 Stock Incentive Plan) that reserves
250,000 shares of Common Stock to replace various stock based awards that were
voluntarily terminated in January 2002. In July 2002, 176,655 stock options
were granted at an exercise price of $5.91, all of which were outstanding at
June 30, 2003. The stock options are fully vested, and none have been exercised
or cancelled. In performing the computation of the fair value of each option
grant, which is estimated on the date of grant using the Black-Scholes option
pricing model, the following assumptions were used for these grants: no
dividends; expected volatility of 87.7%; average risk-free interest rate of
6.0%; and expected life of 10 years.

No option based employee compensation has been recognized in reported net
income and all of the options granted had an exercise price equal to the market
price of the underlying common stock on the date of grant. As the options
granted were fully vested, for pro forma purposes, the estimated fair value of
the options was expensed in the fiscal 2003 first quarter, when the options
were granted. The Companys pro forma information follows (in thousands except
for earnings per share and per share data).

|                                                                                                                                                                 |  |             |       |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ----- | -
|Pro forma net income and earnings per share                                                                                                                      |  | Fiscal 2003
|                                                                                                                                                                 |  |            
|Net income (loss) as reported                                                                                                                                    |  | $           | 421   |  
|Deduct: Total stock-based compensation expense determined
under fair value based method for all awards granted since
January 1, 1995, net of related tax effects |  |             | (475  | )
|                                                                                                                                                                 |  |             |       |  
|Pro forma net (loss) income                                                                                                                                      |  | $           | (54   | )
|Basic and diluted income per share as reported                                                                                                                   |  | $           | 0.35  |  
|Pro forma basic and diluted (loss) income per share                                                                                                              |  | $           | (0.04 | )

Pro forma net income and earnings per share for fiscal 2002 and 2001 are
not presented as all stock based compensation plans previously adopted by the
Company were terminated in January 2002 and the current options outstanding
were not granted until fiscal 2003. At the time the options were voluntarily
terminated, the Company cancelled 130,155 options held by 33 persons at an
average price of $21.75. Also terminated were 5,000 options held by 3 directors
of the Company at an average price of $22.50 and stock appreciation rights for
3 executives for 50,000 shares, granted at a base price of $33.75.

Until its expiration on December 31, 2001, the Company also allowed
employees to defer a portion of their salary to participate in an Employee
Stock Purchase Plan (the ESPP). The ESPP allowed employees to make an
election to purchase shares at the lower of 85 percent of the closing market
price of the Companys stock on the first or last day of the calendar year. In
fiscal 2002, 6,129 shares were purchased by employees, while there were no
purchases in fiscal 2003 or fiscal 2001.



|14. |  | Contingencies
|--- |  | -------------

The Company is subject to various legal proceedings and claims that arise
in the ordinary course of business. In the opinion of management, the amount
of any ultimate liability with respect to these actions will not materially
affect the Companys consolidated financial statements or results of
operations.

The Company and two of its indirect subsidiaries were threatened with
litigation by two separate California public interest groups alleging unlawful
discharge of chemicals under Californias Safe Drinking Water & Toxic
Enforcement Act

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of 1986 (Proposition 65). Both public interest groups ultimately sued
the Company and two of its indirect subsidiaries in different lawsuits. The
Company successfully settled one action for an immaterial amount in late June
2003. The Company continues to evaluate the merits of the allegations in the
second action and is contesting and vigorously defending itself in that matter.
Any potential liability related to this litigation cannot be assessed at this
time, as the Company is in the early stages of the proceedings.



|15. |  | Segment Information
|--- |  | -------------------

The Companys businesses distribute specialty plumbing products, floor and
surface protection products, galvanized, black, brass and chrome pipe nipples,
imported malleable fittings and other products. Products are sold to primarily
to two customer categories, including (i) retail operations, which includes
national and regional retailers, D-I-Y home centers and smaller independent
retailers primarily located in the United States, and (ii) industrial
operations, including wholesale and industrial supply distributors which are
primarily located in the United States. There were no retail sales outside of
the United States, and sales to foreign countries accounted for less than 5
percent of total sales. Set forth below is certain financial data relating to
the Companys business segments (in thousands of dollars).

|                         |  |        |        |            |  |       |        |             |  |               |        |   |  |   |        |   |  |   |        |  
|------------------------ |  | ------ | ------ | ---------- |  | ----- | ------ | ----------- |  | ------------- | ------ | - |  | - | ------ | - |  | - | ------ | -
|                         |  |        |        |            |  |       |        |             |  | Corporate and |        |   |  |   |        |   |  |  
|                         |  | Retail |        | Industrial |  | Other |        | Elimination |  | Total        
|                         |  |        |        |            |  |       |        |             |  |              
|Reported net sales:      |  |        |        |            |  |       |        |             |  |               |        |   |  |   |        |   |  |   |        |  
|Fiscal 2003              |  | $      | 48,691 |            |  | $     | 26,255 |             |  |               |       |   |  | $ | (7,804 | ) |  | $ | 67,142 |  
|Fiscal 2002              |  |        | 52,643 |            |  |       | 25,638 |             |  |               |       |   |  |   | (7,856 | ) |  |   | 70,425 |  
|Fiscal 2001              |  |        | 54,759 |            |  |       | 24,177 |             |  |               |       |   |  |   | (7,566 | ) |  |   | 71,370 |  
|Operating income (loss): |  |        |        |            |  |       |        |             |  |               |        |   |  |   |        |   |  |   |        |  
|Fiscal 2003              |  | $      | 2,617  |            |  | $     | 608    |             |  | $             | (2,729 | ) |  |   |       |   |  | $ | 496    |  
|Fiscal 2002              |  |        | 4,039  |            |  |       | 494    |             |  |               | (2,990 | ) |  |   |       |   |  |   | 1,543  |  
|Fiscal 2001              |  |        | 1,459  |            |  |       | 514    |             |  |               | (2,720 | ) |  |   |       |   |  |   | (747   | )
|Identifiable assets:     |  |        |        |            |  |       |        |             |  |               |        |   |  |   |        |   |  |   |        |  
|June 30, 2003            |  | $      | 24,189 |            |  | $     | 9,886  |             |  | $             | 5,094  |   |  |   |       |   |  | $ | 39,169 |  
|June 30, 2002            |  |        | 24,474 |            |  |       | 9,892  |             |  |               | 5,930  |   |  |   |       |   |  |   | 40,296 |  

The Companys foreign operations manufacture, assemble, source and package
products that are distributed by the Companys wholly-owned operations,
retailers and industrial customers. Net sales for those foreign operations
amounted to $35.4 million, $35.3 million and $34.5 million for the fiscal years
ended June 30, 2003, 2002 and 2001, respectively. Of these amounts,
approximately $7.8 million, $7.9 million and $7.6 million were intercompany
sales for the fiscal years ended June 30, 2003, 2002 and 2001, respectively.
Identifiable assets for the foreign operations was $13.5 million and $13.5
million at June 30, 2003 and 2002, respectively.



|16. |  | Subsequent Event  Sale of Building
|--- |  | -----------------------------------

On August 8, 2003, the Company executed an agreement to sell accepted an
offer to sell the land and building in Taichung, Taiwan, used for the offices
and warehouse of TWI, for approximately $2.0 million. The transaction is
subject to bank financing and certain other conditions, and is expected to
close within 90 days. At June 30, 2003, the net book value of this asset was
approximately $1.0 million. TWI has agreed to lease approximately 33,000 square
feet of the 55,000 square feet space for four years, and has signed a lease
with the prospective purchaser which it believes reflects market rates, and
will become effective upon a sale of the facility. The Company will sublease
approximately 11,000 square foot of that space to one of its joint venture
operations.

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SUPPLEMENTARY FINANCIAL INFORMATION

Quarterly Results of Operations:

Presented below is a summary of the unaudited quarterly results of
operations for the fiscal years ended June 30, 2003 and 2002 (in thousands,
except per share amounts).

|                                                   |            |          |        |          |  |          |        |          |   |   |        |      |  |   |        |      | 
|-------------------------------------------------- | ---------- | -------- | ------ | -------- |  | -------- | ------ | -------- | - | - | ------ | ---- |  | - | ------ | ---- | 
|Fiscal 2003                                        |            | 1st Qtr. |        | 2nd Qtr. |  | 3rd Qtr. |        | 4th Qtr.
|                                                   |            |          |        |          |  |          |        |         
|Net sales                                          |            | $        | 18,208 |          |  | $        | 16,016 |          |   | $ | 15,217 |      |  | $ | 17,701 |     
|Gross profit                                       |            |          | 5,925  |          |  |          | 5,385  |          |   |   | 5,143  |      |  |   | 6,000  |     
|Operating income (loss)                            |            |          | 579    |          |  |          | 48     |          |   |   | (425   | )    |  |   | 293    |     
|Other income                                       |            |          | 3      |          |  |          |       |          |   |   | 178    |      |  |   | 29     |     
|Income before provision (benefit) for income taxes |            |          | 109    |          |  |          | 160    |          |   |   | (375   | )    |  |   | 280    |     
|Net income (loss)                                  |            | $        | 349    |          |  | $        | (254   | )        |   | $ | 101    |      |  | $ | 225    |     
|Basic loss per share:                              |            |          |        |          |  |          |        |          |   |   |        |      |  |   |        |     
|                                                   | Net income |          | $      | 0.29     |  |          | $      | (0.21    | ) |   | $      | 0.08 |  |   | $      | 0.19 | 
|Diluted loss per share:                            |            |          |        |          |  |          |        |          |   |   |        |      |  |   |        |     
|                                                   | Net income |          | $      | 0.29     |  |          | $      | (0.21    | ) |   | $      | 0.08 |  |   | $      | 0.19 | 

|                                                   |            |          |        |          |  |          |        |          |  |   |        |      |  |   |        |       |  
|-------------------------------------------------- | ---------- | -------- | ------ | -------- |  | -------- | ------ | -------- |  | - | ------ | ---- |  | - | ------ | ----- | -
|Fiscal 2002                                        |            | 1st Qtr. |        | 2nd Qtr. |  | 3rd Qtr. |        | 4th Qtr.
|                                                   |            |          |        |          |  |          |        |         
|Net sales                                          |            | $        | 18,733 |          |  | $        | 18,116 |          |  | $ | 15,552 |      |  | $ | 18,024 |      
|Gross profit                                       |            |          | 6,055  |          |  |          | 5,606  |          |  |   | 5,445  |      |  |   | 6,066  |      
|Operating income (loss)                            |            |          | 896    |          |  |          | 656    |          |  |   | 72     |      |  |   | (81    | )    
|Other income                                       |            |          |       |          |  |          |       |          |  |   | 94     |      |  |   |       |      
|Income before provision (benefit) for income taxes |            |          | 658    |          |  |          | 472    |          |  |   | 24     |      |  |   | (240   | )    
|Net income (loss)                                  |            | $        | 584    |          |  | $        | 384    |          |  | $ | 673    |      |  | $ | (56    | )    
|Basic loss per share:                              |            |          |        |          |  |          |        |          |  |   |        |      |  |   |        |      
|                                                   | Net income |          | $      | 0.48     |  |          | $      | 0.32     |  |   | $      | 0.55 |  |   | $      | (0.05 | )
|Diluted loss per share:                            |            |          |        |          |  |          |        |          |  |   |        |      |  |   |        |      
|                                                   | Net income |          | $      | 0.48     |  |          | $      | 0.32     |  |   | $      | 0.55 |  |   | $      | (0.05 | )

In fiscal 2003, the Companys third quarter tax provision was favorably
impacted by a ruling on a state tax matter for fiscal 1999, for which the
Company reported a $0.55 million tax benefit. In the fiscal 2003 fourth
quarter, the Company recorded a tax benefit for a favorable ruling on a state
matter for fiscal 2000 and 2001 and for a change in tax law. In fiscal 2003,
the Company reclassified dividend distributions it received from joint venture
operations in Asia for all periods presented. Dividend distributions were
previously netted in SG&A expenses. The effect of this reclassification did not
change pre-tax earnings or net income, but did reduce operating income.

In fiscal 2002, the Company adopted a FASB Emerging Issues Task Force
pronouncement and began to record all business procurement charges as an offset
to sales, with prior period results being restated. There was no impact on
operating income or net income since the Company previously reported business
procurement costs as a contra sale or an operating expense in prior years. Net
income for the fiscal 2002 third quarter was affected by a $0.8 million tax
benefit for a change in the tax law. Operating income for the fiscal 2002 third
quarter was affected by $246,000 in SG&A expenses associated with the write-off
of costs and early termination of the bank facility with Congress Financial
Corporation. In the fiscal 2002 fourth quarter, the Company reported foreign
exchange losses due to the weakening U.S. Dollar of approximately $228,000, as
compared to exchange gains of $317,000 in the same period last year.

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##### Table of Contents



PART IV 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a)
    
    
    (1
    )
    
    The following consolidated financial statements are included in Part II, Item 8:Report of Independent Public AccountantsBalance SheetsJune 30, 2003 and 2002Statements of OperationsFor the Years Ended June 30, 2003, 2002 and 2001Statements of Stockholders EquityFor the Years Ended June 30, 2003, 2002 and 2001Statements of Cash FlowsFor the Years Ended June 30, 2003, 2002 and 2001Notes to Financial Statements For the Years Ended June 30, 2003, 2002 and 2001Supplementary Financial Information(a)
    
    
    (2
    )
    
    All schedules have been omitted because the required information is not present or not present in amounts
sufficient to require submission of the schedule, or because the information required is included in the
consolidated financial statements including notes thereto.(a)
    
    
    (3
    )
    
    Exhibits3.1.1*
    
    
    
    
    
    Certificate of Incorporation of the Company dated October 27, 1989
(Exhibit 3(a) to the Companys Form S-8 filed December 4, 1989, File No.
0-5888, incorporated herein by reference).3.1.2*
    
    
    
    
    
    Certificate of Amendment to Certificate of Incorporation of the
Company dated November 30, 2000 (Exhibit 3.1.2 to Annual Report on Form
10-K for the year ended June 30, 2003, File No. 0-5888, incorporated
herein by reference).3.1.3*
    
    
    
    
    
    Certificate of Amendment to Certificate of Incorporation of the
Company dated February 6, 2001 (Exhibit 3.1.3 to Annual Report on Form
10-K for the year ended June 30, 2003, File No. 0-5888, incorporated
herein by reference).3.1.4*
    
    
    
    
    
    Certificate of Amendment to Certificate of Incorporation of the
Company dated December 3, 2002 (Exhibit 3.1.4 to Annual Report on Form
10-K for the year ended June 30, 2003, File No. 0-5888, incorporated
herein by reference).3.2*
    
    
    
    
    
    By-laws of the Company (Exhibit 3.2 to Annual Report on Form 10-K for
the year ended June 30, 1990, File No. 0-5888, incorporated herein by
reference).4.7*
    
    
    
    
    
    Warrant Agreement, dated as of May 20, 1994, by and between Waxman
Industries, Inc. and The Huntington National Bank, as Warrant Agent
(Exhibit 4.2 to Waxman Industries, Inc.s Form S-4 filed June 20, 1994,
incorporated herein by reference).4.8*
    
    
    
    
    
    Warrant Certificate (Exhibit 4.3 to Waxman Industries, Inc.s Form
S-4 filed June 20, 1994, incorporated herein by reference).4.9*
    
    
    
    
    
    Securities Purchase Agreement for Notes and Warrants dated as of
September 17, 1991, among the Company and each of the Purchasers
referred to therein (Exhibit 4.4 to Annual Report on Form 10-K for the
year ended June 30, 1991, File No. 0-5888, incorporated herein by
reference).4.10*
    
    
    
    
    
    Revolving Credit, Term Loan and Security Agreement, dated as of
February 13, 2002, by and among PNC Bank, National Association, as
Lender and as Agent, and Waxman Industries, Inc., Waxman Consumer
Products Group Inc., Waxman USA Inc. and WAMI Sales, Inc., as
 28




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##### Table of Contents



Borrowers (Exhibit 10.1 on Report 8-K filed February 27, 2002,
incorporated herein by reference).4.11*
    
    
    
    
    
    Second Amendment Agreement dated August 20, 2003 to the Revolving
Credit, Term Loan and Security Agreement by and among PNC Bank, National
Association, as Lender and as Agent, and Waxman Industries, Inc., Waxman
Consumer Products Group Inc., Waxman USA Inc. and WAMI Sales, Inc., as
Borrowers (Exhibit 4.11 to Annual Report on Form 10-K for the year ended
June 30, 2003, File No. 0-5888, incorporated herein by reference).10.1*
    
    
    
    
    
    Lease between the Company as Lessee and Aurora Investment Co. as
Lessor dated June 30, 1992 (Exhibit 10.1 to Annual Report on Form
10-K for the year ended June 30, 1992, File No. 0-5888, incorporated
herein by reference).10.2*
    
    
    
    
    
    Policy Statement (revised as of June 1, 1980) regarding the
Companys Profit Incentive Plan (Exhibit 10(c)-1 to Annual Report on
Form 10-K for the year ended June 30, 1984, File No. 0-5888,
incorporated herein by reference).10.6*
    
    
    
    
    
    Tax Sharing Agreement dated May 20, 1994 among Waxman Industries,
Waxman USA, Waxman Consumer Products Group Inc., WOC Inc. and Western
American Manufacturing, Inc. (Exhibit 10.6 to Waxman Industries, Inc.s
Form S-4 filed June 20, 1994, incorporated herein by reference).10.7*
    
    
    
    
    
    Waxman Industries, Inc. 2002 Stock Incentive Plan, adopted as of
December 6, 2001 (Exhibit 8 to Schedule to Tender Offer Statement filed
on December 7, 2001, incorporated herein by reference).10.8*
    
    
    
    
    
    Intercorporate Agreement dated May 20, 1994 among Waxman Industries,
Waxman USA, Waxman Consumer Products Group Inc., WOC Inc. and Western
American Manufacturing, Inc. (Exhibit 10.7 to Waxman Industries, Inc.s
Form S-4).10.10*
    
    
    
    
    
    Employment Agreement dated November 1, 1994 between Waxman Consumer
Products Group Inc. and Laurence Waxman (Exhibit 10.5 to Waxman
Industries, Inc.s Amendment No. 4 to Registration Statement on Form S-2
filed October 10, 1995, Registration No. 33-54211, incorporated herein
by reference).10.11*
    
    
    
    
    
    Intercorporate Agreement dated March 28, 1996 among Waxman Industries,
Inc., Waxman USA Inc., Waxman Consumer Products Group Inc., WOC Inc. and
TWI, International, Inc. (Exhibit 10.8 to Waxman Industries, Inc.s
Amendment No. 8 to Registration Statement on Form S-2 filed April 15,
1996, Registration No. 33-54211, incorporated herein by reference).10.26*
    
    
    
    
    
    Merger Agreement, dated as of July 10, 2000, by and among Wilmar
Industries, Inc. (Wilmar), BW Acquisition, Inc. (BW Acquisition)
and Barnett Inc. (Barnett) (Exhibit 10.1 to Current Report on Form
8-K filed July 17, 2000, File No. 0-5888, incorporated herein by
reference).10.27*
    
    
    
    
    
    Stockholder Agreement, dated as of July 10, 2000, by and among the
Company, Waxman USA, Wilmar and BW Acquisition (Exhibit 10.2 to
Current Report on Form 8-K filed July 17, 2000, File No. 0-5888,
incorporated herein by reference).10.28*
    
    
    
    
    
    Voting Trust Agreement, dated as of July 10, 2000, by and among
Waxman USA, Wilmar, BW Acquisition, Barnett and American Stock
Transfer & Trust Company. (Exhibit 10.3 to Current Report on Form
8-K filed July 17, 2000, File No. 0-5888, incorporated herein by
reference).10.29*
    
    
    
    
    
    Agreement, dated as of July 7, 2000, by and between Waxman USA and
Barnett (Exhibit 10.4 to Current Report on Form 8-K filed July 17,
2000, File No. 0-5888, incorporated herein by reference).14.1*
    
    
    
    
    
    Code of Business Conduct and Ethics (incorporated herein by
reference to the Registrants web site located at
http://www.waxmanind.com).
 29




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##### Table of Contents



21.1*
    
    
    
    
    
    Subsidiaries (Exhibit 21.1 to Waxman Industries, Inc.s Form S-4
filed June 20, 1994, incorporated herein by reference).23.1
    
    
    
    
    
    Consent of Meaden & Moore, Ltd.31.1
    
    
    
    
    
    Certification of Co-Chief Executive Officer Pursuant to Rule
13a-14(a) Promulgated Under the Securities Exchange Act of 1934.31.2
    
    
    
    
    
    Certification of Co-Chief Executive Officer Pursuant to Rule
13a-14(a) Promulgated Under the Securities Exchange Act of 1934.31.3
    
    
    
    
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)
Promulgated Under the Securities Exchange Act of 193432.1
    
    
    
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
  *
    
    Incorporated herein by reference as indicated.  (b)
    
    Reports on Form 8-K The Registrant filed a report on Form 8-K on May 5, 2003, incorporating by
reference the May 5, 2003 press release by the Company, announcing its fiscal
2003 third quarter and year to date earnings and condensed income statements
for the periods ended March 31, 2003 and 2002 and condensed balance sheets
for June 30, 2002 and March 31, 2003. 30




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized. WAXMAN INDUSTRIES, INC.May 14, 2004
    
    By:
    
    /s/ Mark WesterMark WesterSenior Vice President andChief Financial Officer
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##### Table of Contents



Exhibit Index 23.1
    
    Consent of Meaden & Moore, Ltd.31.1
    
    Certification of Co-Chief Executive Officer Pursuant to Rule 13a-14(a)
Promulgated Under the Securities Exchange Act of 1934.31.2
    
    Certification of Co-Chief Executive Officer Pursuant to Rule 13a-14(a)
Promulgated Under the Securities Exchange Act of 1934.31.3
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)
Promulgated Under the Securities Exchange Act of 193432.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 32