UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2001


[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

-OR-

[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~-OR-~~For the transition period from ______________ to ______________

[ ] 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 1-3552

SCOPE INDUSTRIES ~~(Exact name of Registrant as specified in its charter)~~

(Exact name of Registrant as specified in its charter)


California (State or other jurisdiction of incorporation or organization)		95-1240976 (I.R.S. Employer Identification No.)

233 Wilshire Boulevard, Suite 310
Santa Monica, California 90401-1206
(Address of principal executive office, zip code)

(Registrant’s telephone number, including area code) (310) 458-1574

(Former name, former address and former fiscal year, if changed since last report.)

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 90 days.

[X] Yes [ ] No

The number of shares of registrant’s common stock outstanding at ~~February~~November 61, 2002 was 1,~~029~~023,~~267~~167.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
		MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
	Item 3. Quantitative and Qualitative Disclosures About Market Risk:
	Item 4. Controls and Procedures:
PART II. OTHER INFORMATION
	Item 2. Increases and Decreases in Outstanding Securities and Indebtedness.
	Item 4. Submission of Matters to a Vote of Security Holders.
	Item 5. Other Information.
	Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
Exhibit 99.1
Exhibit 99.2

SCOPE INDUSTRIES AND SUBSIDIARIES

INDEX

				~~Page~~	Page
Part I		Financial Information:
Part I. Financial Information:
		Consolidated Balance Sheets - December 31, 2001 and June 30, 2001		3
	Item 1.		Financial Statements
		Consolidated Statements of Operations - Three Months Ended December 31, 2001 and 2000		4
			Consolidated Balance Sheets — September 30, 2002 and June 30, 2002		3
		Consolidated Statements of Operations - Six Months Ended December 31, 2001 and 2000		5
			Consolidated Statements of Operations — Three Months Ended September 30, 2002 and 2001		4
		Consolidated Statements of Cash Flows - Six Months Ended December 31, 2001 and 2000		6
			Consolidated Statements of Cash Flows — Three Months Ended September 30, 2002 and 2001		5
		~~Notes to Consolidated Financial Statements~~	Notes to Consolidated Financial Statements	7	6 – 9
		Management’s Discussion and Analysis of Results of Operations and Financial Condition		9
	Item 2.		Management’s Discussion and Analysis of Results of Operations and Financial Condition		10 – 11
Part II		Other Information:
	Item 3.		Qualitative and Qualitative Disclosures About Market Risk		12
Item 2.		Increases and Decreases in Outstanding Securities and Indebtedness		12
	Item 4.		Disclosure Controls and Procedures		12
Item 4.		Submission of Matters to a Vote of Security Holders		12
Part II. Other Information:
Item 5		Other Information		12
	Item 2.		Increases and Decreases in Outstanding Securities and Indebtedness		13
Item 6.		Exhibits and Reports on Form 8-K		12
	Item 4.		Submission of Matters to a Vote of Security Holders		13
		Signatures		13
	Item 5.		Other Information		13
	Item 6.		Exhibits and Reports on Form 8-K		13
Signatures					14

PART I. FINANCIAL INFORMATION ~~SCOPE INDUSTRIES AND SUBSIDIARIES~~ ~~CONSOLIDATED BALANCE SHEETS~~

			December 31,		June 30,
			2001		2001
			(Unaudited)
ASSETS
Current Assets:
	Cash and cash equivalents		$	3,884,847	$	563,234
	Treasury bills available for sale-at fair value			4,983,165		9,926,527
	Accounts and notes receivable, less allowance for doubtful accounts of $679,817 at December 31, 2001 and $691,283 at June 30, 2001			4,007,318		3,870,559
	Income taxes receivable			1,645,253		1,645,253
	Inventories			664,766		874,446
	Deferred income taxes			894,000		944,000
	Prepaid expenses and other current assets			2,004,488		2,387,804
		Total current assets		18,083,837		20,211,823
Notes Receivable				903,115		594,891
Property and Equipment:
	Machinery and equipment			47,993,451		42,581,045
	Land, buildings and improvements			18,608,126		17,034,166
				66,601,577		59,615,211
	Less accumulated depreciation and amortization			31,635,906		30,349,635
				34,965,671		29,265,576
Collection Routes and Contracts, less accumulated amortization of $6,293,687 at December 31, 2001 and $5,111,973 at June 30, 2001				3,238,621		4,700,326
Other Assets:
	Non-appropriated funds (Industrial Revenue Bonds)			230,110		1,962,598
	Deferred charges and other assets			626,495		680,969
	Deferred income taxes			—		231,000
	Investments available for sale-at fair value			17,907,230		4,871,810
	Other equity investments-at cost			8,325,403		8,474,155
				27,089,238		16,220,532
			$	84,280,482	$	70,993,148
LIABILITIES AND SHAREOWNERS’ EQUITY
Current Liabilities:
	Accounts payable		$	3,100,602	$	4,498,515
	Dividends payable			1,029,267		—
	Other accrued liabilities			1,915,192		1,852,487
	Accrued payroll and related employee benefits			2,001,265		1,572,553
		Total current liabilities		8,046,326		7,923,555
Industrial Revenue Bond				6,000,000		6,000,000
Deferred Income Taxes				4,697,000		—
				18,743,326		13,923,555
Shareowners’ Equity:
	Common stock, no par value, 5,000,000 shares authorized, shares issued and outstanding at December 31, 2001 - 1,029,267 and June 30, 2001 - 1,029,267			4,576,050		4,576,050
	Retained earnings			49,853,996		50,143,924
	Accumulated other comprehensive income			11,107,110		2,349,619
				65,537,156		57,069,593
			$	84,280,482	$	70,993,148

SCOPE INDUSTRIES AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


			September 30,		June 30,
			2002		2002

*ASSETS*
Current Assets:
	Cash and cash equivalents		$	4,664,802	$	7,023,393
	Treasury bills available for sale-at fair value			10,476,750		14,522,074
	Accounts and notes receivable, less allowance for doubtful accounts of $671,284 at September 30, 2002 and $646,285 at June 30, 2002			6,178,447		4,319,091
	Inventories			1,065,103		792,561
	Deferred income taxes			882,000		827,000
	Prepaid expenses and other current assets			1,339,457		1,415,388

		Total current assets		24,606,559		28,899,507

Notes Receivable				728,084		753,217

Property and Equipment:
	Machinery and equipment			53,192,064		49,162,282
	Land, buildings and improvements			20,883,163		20,627,439

				74,075,227		69,789,721
	Less accumulated depreciation and amortization			35,285,674		33,705,132

				38,789,553		36,084,589

Collection Routes and Contracts, less accumulated amortization of $7,931,480 at September 30, 2002 and $7,433,705 at June 30, 2002				1,837,972		1,818,588

Other Assets:
	Long term treasury notes			1,982,503		3,968,148
	Deferred charges and other assets			699,005		460,348
	Deferred income taxes			1,021,650		926,000
	Investments available for sale-at fair value			7,134,796		1,053,652
	Other equity investments-at cost			6,714,946		6,771,420

				17,552,900		13,179,568

			$	83,515,068	$	80,735,469

*LIABILITIES AND SHAREOWNERS’ EQUITY*
Current Liabilities:
	Accounts payable		$	7,169,999	$	5,337,862
	Current portion of long-term debt			—		600,000
	Bank line of credit			1,000,000		—
	Other accrued liabilities			2,642,827		2,344,802
	Accrued payroll and related employee benefits			1,280,588		1,187,766
	Income taxes payable			460,000		772,000

		Total current liabilities		12,553,414		10,242,430
Long-term debt				5,400,000		5,400,000

				17,953,414		15,642,430

Shareowners’ Equity:
	Common stock, no par value, 5,000,000 shares authorized, shares issued and outstanding at September 30, 2002 — 1,023,167 and June 30, 2002 — 1,029,267			4,576,050		4,576,050
	Retained earnings			60,646,004		60,199,674
	Accumulated other comprehensive income			339,600		317,315

				65,561,654		65,093,039

			$	83,515,068	$	80,735,469

The accompanying notes are an integral part of these consolidated financial statements.

SCOPE INDUSTRIES AND SUBSIDIARIES ~~CONSOLIDATED STATEMENTS OF OPERATIONS~~ ~~(Unaudited)~~

		Three Months Ended
		December 31,
		2001			2000
Revenues:
	Sales	$	14,889,861		$	13,706,185
	Vocational school revenues		1,468,543			1,206,709
			16,358,404			14,912,894
Operating Costs and Expenses:
	Cost of sales		11,592,692			12,260,029
	Vocational school expenses		1,127,947			929,776
	Depreciation and amortization		1,733,810			1,774,291
	General and administrative		2,256,129			1,977,409
			16,710,578			16,941,505
			(352,174	)		(2,028,611	)
Other income and expense:
Investment and other income			122,165			476,630
Interest expense			(50,560	)		(88,524	)
			71,605			388,106
(Loss) before income taxes			(280,569	)		(1,640,505	)
(Benefit) for income taxes			(98,000	)		(515,000	)
Net (Loss)		$	(182,569	)	$	(1,125,505	)
Net (Loss) Per Share — Basic and Diluted		$	(0.18	)	$	(1.09	)
Average shares outstanding — Basic			1,029,267			1,031,392
Average shares outstanding — Diluted			1,029,267			1,031,392

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended
		September 30,

		2002			2001

Revenues:
	Sales	$	19,268,638		$	15,286,496
	Vocational school revenues		1,769,089			1,397,477

			21,037,727			16,683,973

Operating Costs and Expenses:
	Cost of sales		14,018,166			11,649,231
	Vocational school expenses		1,204,729			1,123,097
	Depreciation and amortization		2,192,992			1,691,567
	General and administrative		2,306,916			1,979,192

			19,722,803			16,443,087

			1,314,924			240,886

Other income and expense:
Investment and other income			63,303			1,282,222
Interest expense			(70,900	)		(55,201	)

			(7,597	)		1,227,021

Income before income taxes			1,307,327			1,467,907
Provision for income taxes			495,000			546,000

Net Income		$	812,327		$	921,907

Net Income Per Share — Basic and Diluted		$	0.79		$	0.90
Average shares outstanding — Basic and Diluted			1,026,692			1,029,267

The accompanying notes are an integral part of these consolidated financial statements.

SCOPE INDUSTRIES AND SUBSIDIARIES ~~CONSOLIDATED STATEMENTS OF OPERATIONS~~ ~~(Unaudited)~~

		Six Months Ended
		December 31,
		2001			2000
Revenues:
	Sales	$	30,176,357		$	26,719,204
	Vocational school revenues		2,866,020			2,411,279
			33,042,377			29,130,483
Operating Costs and Expenses:
	Cost of sales		23,241,923			23,667,616
	Vocational school expenses		2,251,044			1,938,838
	Depreciation and amortization		3,425,377			3,540,941
	General and administrative		4,235,321			3,929,350
			33,153,665			33,076,745
			(111,288	)		(3,946,262	)
Other income and expense:
Investment and other income			1,404,387			956,584
Interest expense			(105,761	)		(173,538	)
			1,298,626			783,046
Income (loss) before income taxes			1,187,338			(3,163,216	)
Provision (benefit) for income taxes			448,000			(999,000	)
Net Income (Loss)		$	739,338		$	(2,164,216	)
Net Income (Loss) Per Share — Basic and Diluted		$	0.72		$	(2.08	)
Average shares outstanding — Basic			1,029,267			1,038,881
Average shares outstanding — Diluted			1,029,267			1,038,881

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


			Three Months Ended
			September 30,

			2002			2001

*Cash Flows from Operating Activities:*
Net income				$ 812,327			$ 921,907
Adjustments to reconcile net income to net cash flows from operating activities:
		Depreciation and amortization		1,592,378			1,100,715
		Amortization of routes and contracts		600,616			590,852
		Gains on investments available for sale		—			(649,147	)
		Losses (gains) on sale of property and equipment		5,516			(546,993	)
		Deferred income taxes		(164,200	)		301,000
		Unrealized loss in equity investment		150,000			—
Changes in operating assets and liabilities:
		Accounts and notes receivable		(1,834,223	)		(1,751,928	)
		Inventories		(272,542	)		(50,324	)
		Prepaid expenses and other current assets		75,931			(140,107	)
		Accounts payable and accrued liabilities		2,222,984			(385,469	)
		Income taxes payable/receivable		(312,000	)		109,277
		Tax benefit applied to purchase of routes and contracts		140,000			140,000
		Other assets		86,842			(235,384	)

Net cash flows from (used in) operating activities				3,103,629			(595,601	)

*Cash Flows from Investing Activities:*
Purchase of U.S. Treasury bills				(7,069,859	)		(2,049,801	)
Maturities of U.S. Treasury bills				13,100,828			7,000,000
Purchase of property and equipment				(1,890,608	)		(4,161,074	)
Purchase of waste recycling business				3,500,000			—
Purchase of routes and contracts				(760,000	)		—
Proceeds from disposition of property and equipment				2,250			645,781
Purchase of investments available for sale				(6,045,308	)		—
Purchase of other equity investments				(93,526	)		—
Proceeds from disposition of investments available for sale				—			1,036,846
Non-appropriated bond fund proceeds held by Trustee				—			1,734,630

Net cash flows (used in) from investing activities				(5,496,223	)		4,206,382

*Cash Flows from Financing Activities:*
Proceeds from long-term bank borrowing				5,400,000			—
Redemption of Industrial Revenue Bonds				(6,000,000	)		—
Proceeds from short-term bank line of credit				2,000,000			—
Repayment of short-term bank line of credit				(1,000,000	)		—
Repurchases of common stock				(365,997	)		—

Net cash flows from financing activities				34,003			—

Net (decrease) increase in cash and cash equivalents				(2,358,591	)		3,610,781
Cash and cash equivalents at beginning of period				7,023,393			563,234

Cash and cash equivalents at end of period			$	4,664,802		$	4,174,015

Supplemental Disclosures:
Cash paid during the quarter for:
	Interest		$	66,397		$	39,995
	Income taxes		$	804,340		$	21,996

The accompanying notes are an integral part of these consolidated financial statements.

SCOPE INDUSTRIES AND SUBSIDIARIES ~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~ ~~(Unaudited)~~

			Six Months Ended
			December 31,
			2001			2000
Cash Flows from Operating Activities:
Net income (loss)			$	739,338		$	(2,164,216	)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
		Depreciation and amortization		2,243,672			2,359,236
		Amortization of contracts and routes		1,181,705			1,181,705
		(Gains) on investments available for sale		(762,868	)		(49,287	)
		(Gains) losses on sale of property and equipment		(514,091	)		16,225
		Deferred income taxes		(913,266	)		(425,000	)
Changes in operating assets and liabilities:
		Accounts and notes receivable		(444,983	)		203,426
		Inventories		209,680			(16,202	)
		Prepaid expenses and other current assets		383,609			191,594
		Accounts payable and accrued liabilities		(906,496	)		(634,085	)
		Dividends Payable		1,029,267			1,029,567
		Income taxes receivable		—			(712,785	)
		Tax benefit applied to purchase of routes and contracts		280,000			280,000
		Other assets		202,936			8,857
Net cash flows from operating activities				2,728,503			1,269,035
Cash Flows from Investing Activities:
Purchase of U.S. Treasury bills				(5,056,638	)		(11,313,500	)
Maturities of U.S. Treasury bills				10,000,000			17,098,840
Purchase of property and equipment				(8,090,357	)		(3,779,091	)
Proceeds from disposition of property and equipment				660,681			20,000
Purchase of investments available for sale				—			(159,009	)
Proceeds from disposition of investments available for sale				1,346,936			56,485
Purchase of other equity investments				—			(1,000,000	)
Non-appropriated bond fund proceeds held by Trustee				1,732,488			548,286
Net cash flows from investing activities				593,110			1,472,011
Cash Flows from Financing Activities:
Repurchases of common stock				—			(1,435,595	)
Net increase in cash and cash equivalents				3,321,613			1,305,451
Cash and cash equivalents at beginning of period				563,234			4,045,582
Cash and cash equivalents at end of period			$	3,884,847		$	5,351,033
Supplemental Disclosures:
Cash paid during the six months for:
	Interest		$	72,148		$	133,897
	Income taxes		$	78,536		$	25,765

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~The accompanying notes are an integral part of these consolidated financial statements.~~(Unaudited) September 30, 2002

SCOPE INDUSTRIES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) December 31, 2001

Note 1. Basis of Financial Statement Preparation

The accompanying consolidated financial information of Scope Industries and its subsidiaries (“Scope” or the “Company”) should be read in conjunction with the Notes to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K to the Securities and Exchange Commission for the year ended June 30, ~~2001~~2002. The accompanying financial information includes all subsidiaries on a consolidated basis and all normal recurring adjustments that are considered necessary by the Company’s management for a fair presentation of the financial position, results of operations and cash flows for the periods presented. However, these results are not necessarily indicative of results for a full fiscal year. Certain prior year balances have been reclassified to conform to current period presentation.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

~~Note~~ In 2April 2002, the Financial Accounting Standards Board (“FASB”), issued Statement of Financial Accounting Standards (“SFAS”) No. 145, ~~Treasury~~“Rescission ~~Bills~~of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections”, that addresses reporting classification of certain early extinguishments of debt and amends Statement 13 to require sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. In June 2002, the FASB issued SFAS No. 146 “Accounting for Costs Associated with Exit or Disposal Activities”, that applies to costs associated with an exit activity that does not involve an entity newly acquired in a business combination or with a disposal activity covered by FASB Statement No. 144. The statements will be effective for this fiscal year and the adoption of SFAS No. 145 and 146 did not have a material impact on the Company’s consolidated financial statements.

~~Treasury~~Note ~~bills~~2. Purchase ~~consisted~~ of ~~the following:~~Assets

	December 31,		June 30,
	2001		2001
At adjusted cost which approximates fair value	$	4,983,165	$	9,926,527
At par value		5,000,000		10,000,000

On July 1, 2002, the Company, through its wholly owned subsidiary Scope Products, Inc., purchased the bakery waste recycling plant assets and routes and contracts of two processing facilities in California. The transaction was accounted for as a purchase of a business. The purchase price was allocated as follows:

Note 3. Inventories


Plant equipment	$	2,414,500
Routes and contracts		760,000
Other assets		325,500

Purchase price	$	3,500,000

The results of operation of the new plants since July 1, 2002 are included in the accompanying consolidated statements of operations. Had the Company purchased the plants on July 1, 2001, revenues for the quarter ended September 30, 2001, would have increased by approximately $1,800,000 and net income would have decreased by approximately $20,000.

In connection with the asset purchase the Company also entered into a long-term lease for the two plant facilities with an option to purchase at a later date for $2,250,000.

SCOPE INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2002
(continued)

Note 3. Treasury Securities

Treasury securities consisted of the following:


		September 30,		June 30,
		2002		2002

Short-term:
At adjusted cost which approximates fair value		$	10,476,750	$	14,522,074
At par value			10,489,000		14,508,000
Long-term treasury notes:
At adjusted cost which approximates fair value		$	1,982,503	$	3,968,148
At par value			2,000,000		4,000,000
	Treasury notes mature in September 2003 and February 2004.

Note 4. Inventories

Inventories consisted of the following:

	December 31,		June 30,
	September 30,		June 30,
	2001		2001
	2002		2002
Finished products	$	~~315~~439,~~194~~312	$	~~368~~318,~~348~~657
Raw materials		~~195~~454,~~698~~949		~~356~~302,~~425~~734
Operating supplies		~~153~~170,~~874~~842		~~149~~171,~~673~~170
	$	~~664~~1,~~766~~065,103	$	~~874~~792,~~446~~561

Note 45. Investments

Investments consisted of the following:

			Gross Unrealized Gains
			Before Provision For
	Cost		Income Taxes		Fair Value
At December 31, 2001:
At September 30, 2002:
Equity securities — available for sale	$	1603,~~661,120~~153	$	16520,~~246,110~~222	$	171,~~907~~123,~~230~~375	(a)
Other equity securities		8,325,403				8,325,403	(a)
Short-term tax exempt mutual fund		6,000,000		11,421		6,011,421	(b)
At June 30, 2001:
Other equity securities		6,714,946				6,714,946	(c)
Equity securities — available for sale	$	2,245,187	$	2,626,623	$	4,871,810
Other equity securities		8,474,155				8,474,155	(a)

~~(a)~~ Investments Noconsisted ~~quoted~~of ~~market~~the ~~prices are available for these securities.~~following:


			Gross Unrealized Gains
			Before Provision For
	Cost		Income Taxes		Fair Value

At June 30, 2002:
Equity securities — available for sale	$	557,845	$	495,807	$	1,053,652	(a)
Other equity securities		6,771,420				6,771,420	(c)

(a)		Fair values for “Equity securities” available for sale are based upon quoted market prices, where available, at the reporting date.




(b)		Short-term tax-exempt mutual fund is pledged to the bank as collateral for the long-term bank debt of $5,400,000; interest earned from the fund is paid to the Company.




(c)		The Company holds shares and warrants in Chromagen, Inc., shares in Stamet, Inc., MetaProbe, Inc. and Myricom, Inc. that are classified as “Other equity securities”. The shares and warrants are not publicly traded and are carried at cost or adjusted cost, adjusted by the equity method of accounting for investments or management’s estimated value reflecting other than temporary losses. No quoted market prices are available for these securities.

SCOPE INDUSTRIES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ~~December~~September 3130, ~~2001~~2002 (continued)

Note 56. ~~Industrial Revenue Bond~~ Debt

In On ~~fiscal~~August 1, ~~2000~~2002, the Company ~~issued~~redeemed its $6,000,000 in tax exempt ~~Industrial~~ Industrial Revenue ~~Bonds~~Bond (“IRB”). ~~for~~In ~~the~~connection ~~new~~with ~~plant~~the inredemption ~~Georgia~~of ~~currently~~the ~~under~~IRB, ~~construction.~~the AtCompany ~~December 31,~~entered ~~2001~~into a $5,400,000 ~~the~~note ~~Bond~~with ~~Trustee~~its ~~held~~bank. ~~non~~The five-~~appropriated~~year note ~~funds~~is ofcollateralized by a $~~230~~6,~~110~~000,000 ~~that~~investment ~~are~~in ~~restricted~~a ~~for~~Short-term ~~construction~~tax-exempt municipal offund. ~~the~~The ~~new~~note ~~plant.~~bears ~~At December 31~~interest, ~~2001~~payable monthly, ~~the~~at LIBOR plus 1.125%. The Company ~~was~~entered ininto ~~compliance~~a ~~with~~one-year ~~all~~LIBOR ~~financial~~contract ~~covenants~~at 2.90%. The ~~under~~financing agreement requires that the ~~debt~~value ~~agreement~~of the mutual fund be at least 91% of the outstanding balance. The note is payable on July 31, 2007 and there are no prepayment penalties.

~~Note~~ On 6July 2, 2002, the Company borrowed $2,000,000 from its bank against the short-term line of credit agreement to help finance the $3,500,000 purchase of assets and routes and contracts of two bakery waste-recycling facilities located in California. ~~Comprehensive~~On ~~income~~September 30, ~~(loss)~~2002, the Company repaid $1,000,000 of the outstanding balance. Interest is paid monthly and the average interest rate on the loan for the quarter was 3.86%. The interest rate at September 30, 2002 was 4.50%. Subsequent to quarter-end the loan was paid in full.

	Six Months Ended
	December 31,
	2001			2000
Comprehensive income (loss) consisted of the following:
Net income (loss)	$	739,338		$	(2,164,216	)
Unrealized holding gains (losses) arising during the period, net of income taxes		9,245,727			(1,015,736	)
Reclassify gains realized and included in net income, net of income taxes		(488,236	)		(32,038	)
Other comprehensive income (loss)		8,757,491			(1,047,774	)
Comprehensive income (loss)	$	9,496,829		$	(3,211,990	)

Note 7. Comprehensive income

Note 7. Income Taxes


	Three Months Ended
	September 30,

	2002		2001

Comprehensive income consisted of the following:
Net income	$	812,327	$	921,907

Unrealized holding gains on securities available for sale arising during the period, net of income taxes		22,285		2,880,349
Reclassify gains realized from securities available for sale, and included in net income, net of income taxes		—		(435,750	)

Other comprehensive income		22,285		2,444,599

Comprehensive income	$	834,612	$	3,366,506

~~For~~Note the six month period ended December 31, 2001, the effective rate for income taxes is 38% of the income before taxes and for the comparable six month period last year the effective rate for income tax benefit is 32% of the loss before taxes8. Income ~~The determination of the income tax or benefit for income tax~~Taxes ~~considers certain permanent differences between taxable income or loss and~~ ~~income or loss as reported using accounting methods generally accepted in the~~ ~~United States of America. Those differences sometimes cause distortions in the relationships between income or loss before income taxes and the provision or benefit for income taxes.~~

~~Note~~ For 8the three month period ended September 30, 2002, the effective rate for income taxes is 38% of the income before taxes and for the comparable three-month period last year the effective rate for income taxes is 37% of the income before taxes. ~~Business~~The ~~Segment~~determination ~~Information~~of the income tax or benefit for income tax considers certain permanent differences between taxable income or loss and income or loss as reported using accounting methods generally accepted in the United States of America. Those differences sometimes cause distortions in the relationships between income or loss before income taxes and the provision or benefit for income taxes.

	Six Months Ended
	December 31,
	2001			2000
Revenues:
Waste Material Recycling	$	29,896,177		$	26,471,860
Vocational School Group		2,866,020			2,411,279
Other		280,180			247,344
	$	33,042,377		$	29,130,483
Income (loss) before income taxes:
Waste Material Recycling operating income (loss)	$	3,499,307		$	(483,587	)
Vocational School Group operating income		503,776			358,603
Other operating income		120,950			108,072
General and administrative expenses		(4,235,321	)		(3,929,350	)
Other income and expense		1,298,626			783,046
	$	1,187,338		$	(3,163,216	)

SCOPE INDUSTRIES AND SUBSIDIARIES ~~MANAGEMENT’S~~NOTES ~~DISCUSSION~~TO ~~AND~~CONSOLIDATED ~~ANALYSIS~~FINANCIAL ~~OF RESULTS~~STATEMENTS OF(Unaudited) September 30, ~~OPERATIONS AND FINANCIAL CONDITION~~2002 (continued)

~~RESULTS~~Note OF9. Business ~~OPERATIONS~~Segment Information

Three Months Ended December 31, 2001 and 2000:


	Three Months Ended
	September 30,

	2002			2001

Revenues:
Waste Material Recycling	$	19,186,114		$	15,130,769
Vocational School Group		1,769,089			1,397,477
Other		82,524			155,727

	$	21,037,727		$	16,683,973

Pre-tax Income:
Waste Material Recycling	$	1,289,954		$	233,582
Vocational School Group		198,078			(27,164	)
Other		3,386			75,351
Corporate general and administrative expenses		(176,494	)		(40,883	)
Other income and (expense)		(7,597	)		1,227,021

	$	1,307,327		$	1,467,907

The ~~Company~~majority ~~incurred a net loss~~ of ~~$182,569,~~investment orand ~~$0.18~~interest ~~per~~income ~~share,~~is ~~for second~~related ~~the quarter ended December 31, 2001, compared~~ to ~~the~~corporate ~~previous~~level ~~year’s second~~investment ~~quarter net loss of $1,125,505, or $1~~activities.~~09 per share. Total company~~ ~~revenues for the quarter ended December 31, 2001 were $16,358,404 compared to~~ $14,912,894 for the comparable quarter last year. The 10% increase in revenues for the current first quarter over the prior year’s comparable quarter was attributable to both the Waste Material Recycling and Beauty School segments.

Waste Material Recycling segment sales for the current quarter increased $2,244,808 or 17% over the comparable quarter last year. The increase was due primarily to a 12% increase in the average selling prices on slightly higher sales volume of recycled dried bakery products. The increase is primarily attributed to the volatility in the commodities market due to reductions in the estimated volume of future corn crops compared to record corn crops produced during the past three years. The average price of corn for the current quarter was approximately $1.90 per bushel compared to $1.92 per bushel for the comparable quarter last year and $1.95 per bushel for the quarter ended September 30, 2001. The average price of corn for the month of January 2002 increased to $1.95 per bushel. The Waste Material Recycling segment generated increased operating profit in the current quarter against an operating loss in the comparable quarter last year due primarily to reduced raw material costs, improved production efficiencies from new capital equipment and slightly higher volume.

Vocational School Group revenues increased 16% from the comparable quarter last year due primarily to increased enrollment at the schools. The Vocational School Group had operating income for both the current quarter and the comparable quarter last year. A new school near Las Vegas, Nevada opened in January 2002.

General and administrative expenses for the Company increased (14%) for the quarter ended December 31, 2001, as compared to the prior year quarter. The increase is due primarily to the increases in employee health benefit costs, workers’ compensation insurance, auto, property, and liability insurance and professional services.

Investment and other income for the three months ended December 31, 2001, was $122,165 compared to $476,630 for the comparable quarter last year. Included in the current quarter in investment and other income were gains of $113,721 from the sale of investment securities. Interest income of approximately $94,000 from U.S. Treasury bills comprised most of the remainder of investment income in the current quarter compared to $405,600 for the comparable quarter last year. The reduction in interest income was primarily due to lower interest rates and a smaller investment portfolio. Offsetting the above investment and other income were losses on the disposition of equipment and losses recognized on an investment accounted for by the equity method of accounting.

Interest expense for the three months ended December 31, 2001, was $50,560 compared to $88,524 for the comparable quarter last year. The interest is primarily related to the Industrial Revenue Bond financing, (includes both interest and amortization of bond financing costs). Interest on the bonds is paid monthly and varies weekly based upon the tax-exempt interest rate in the bond market (2.45% at December 31, 2001).

SCOPE INDUSTRIES AND SUBSIDIARIES ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS~~ ~~OF OPERATIONS AND FINANCIAL CONDITION~~ ~~(continued)~~

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION

RESULTS OF OPERATIONS

~~Six~~ The ~~Months~~Company ~~Ended~~had ~~December~~net income of $812,327, or $0.79 per share, for the quarter ended September 3130, ~~2001~~2002, compared to the prior year’s first quarter net income of $921,907, or $0.90 per share. Total Company revenues for the first quarter ended September 30, 2002 were $21,037,727 compared to $16,683,973 for the comparable quarter last year. The 26% increase in revenues for the current first quarter over the prior year’s comparable quarter was attributable to both the Waste Material Recycling and ~~2000:~~Beauty School segments.

~~The~~ Waste ~~Company~~Material ~~had~~Recycling ~~net~~segment ~~income~~sales offor the current quarter increased $~~739~~4,~~338~~055,345 or $027% over the comparable quarter last year.72 ~~per~~The ~~share,~~increase ~~for~~was ~~six~~due primarily ~~months~~a increase of 12% in volume or approximately $1,900,000 resulting ~~ended~~from ~~December~~the purchase of the bakery waste recycling businesses on July 311, ~~2001~~2002, ~~compared~~ and to ~~the~~a ~~previous~~15% ~~year’s~~increase ~~six~~in ~~months~~the ~~net~~average ~~loss~~selling price of recycled dried bakery $2products. Sales volume for the segment for the current quarter,~~164~~ excluding the two new plants,~~216,~~ orwas $2slightly ahead of last year.08 ~~per~~The ~~share~~increase in the average selling price is attributed to the volatility in the commodity market due to early reductions in the estimated volume of future corn crops compared to record corn crops produced during the past three years. ~~Total~~Corn ~~company~~is ~~revenues~~an alternate substitute feed supplement that competes directly with our dried bakery product. The average price of corn for the ~~six~~current ~~months~~quarter was approximately ~~ended~~$2.43 ~~December 31~~per bushel, ~~2001~~or ~~were~~a ~~$33,042,377~~25% increase when compared to $~~29,130,483~~1.95 per bushel for the comparable ~~period~~quarter last year and $1.96 per bushel for the quarter ended June 30, 2002. The ~~13%~~Waste ~~increase~~Material inRecycling ~~revenues~~segment ~~for~~generated pre-tax income before Investment and other income in the current ~~six~~quarter due primarily to higher ~~months~~average ~~over~~selling ~~the~~prices, ~~prior~~reduced ~~year’s~~raw ~~comparable~~material ~~period~~costs ~~was~~and ~~attributable~~improved toproduction efficiencies ~~both~~from ~~the~~new capital equipment. The segment also generated pre-tax ~~Waste~~income ~~Material~~last ~~Recycling~~year ~~and~~with ~~Beauty~~lower ~~School~~average ~~segments~~selling prices and higher costs.

~~Waste~~ Vocational ~~Material~~School ~~Recycling~~Group ~~segment~~revenues ~~sales for the current six months~~ increased ~~$3,424,317 or 13~~27% ~~over~~from the comparable ~~six months~~ quarter last year. ~~The increase was~~ due primarily to ~~a 13% increase in~~ the ~~average~~new ~~selling~~school ~~prices~~that ~~on slightly~~opened ~~higher sales volume of recycled dried bakery products. The increase~~ in ~~price~~Nevada isat ~~primarily attributed to~~ the ~~volatility in the commodity market due~~ tobeginning ~~early~~of ~~reductions in~~ the ~~estimated~~calendar ~~volume~~year ofand ~~future~~an ~~corn~~overall ~~crops~~increase ~~compared~~in ~~to record~~enrollment ~~corn~~at ~~crops produced during~~ the ~~past three years~~ schools. The ~~average~~Vocational ~~price~~School ~~of corn~~Group ~~for~~had ~~the~~pre-tax ~~six~~income ~~months was approximately $1.93 per bushel compared to $1.73 per bushel~~ for the ~~comparable six months last year. The average price of corn~~current ~~for~~quarter ~~the~~compared ~~month of January 2002 increased~~ to ~~$1.95~~a ~~per~~pre-tax ~~bushel. The Waste Material Recycling segment generated operating profit in the current six months against an operating~~ loss infor the comparable ~~six~~quarter ~~months~~ last year ~~due primarily to higher average selling prices, reduced raw material costs and improved production efficiencies from new capital equipment~~.

~~Vocational~~ General ~~School~~and ~~Group~~administrative ~~revenues~~expenses for the Company increased 19(17%) ~~from~~ for the ~~comparable~~quarter ~~six months~~ended ~~last~~September 30, ~~year~~2002, ~~due~~as ~~primarily~~compared to ~~increased~~the ~~enrollment~~prior atyear ~~the schools~~quarter. ~~The~~ ~~Vocational~~The ~~School~~increase ~~Group~~is ~~had~~mainly ~~operating~~due ~~income~~to ~~for~~increases ~~both~~in ~~the~~employee ~~current~~health ~~six~~benefit ~~months~~costs, workers’ compensation insurance and ~~the~~auto ~~comparable~~liability ~~six~~insurance ~~months~~of ~~last~~approximately $180,000, ~~year.~~as Awell ~~new~~as ~~school~~additional ~~near~~costs ~~Las~~of ~~Vegas,~~approximately ~~Nevada~~$70,000 ~~opened~~associated inwith ~~January~~the bakery waste recycling plants acquired on July 1, 2002.

~~General~~ Investment and ~~administrative~~other ~~expenses~~income for the ~~Company~~quarter ~~increased~~ended 8%September 30, 2002, was $63,303 compared to $1,282,222 for the comparable quarter last year. The ~~six~~Company ~~months~~did ~~ended~~not ~~December 31,~~sell ~~2001,~~any asof its investment securities during the current quarter compared to the ~~prior~~same quarter last year, ~~six~~which ~~months.~~included gains of ~~The~~$649,147 ~~increase~~from isthe ~~due~~sale ~~primarily~~of toinvestment securities and a gain of $554,669 from the sale ~~increases~~of idle property no longer being utilized in ~~employee~~the ~~health~~Waste ~~benefit~~Material Recycling ~~costs,~~operations. ~~workers’~~Interest ~~compensation~~income ~~insurance,~~of ~~auto~~$151,437 ~~property~~from U.S. Treasury bills in the current quarter increased from $120,838 ~~and~~for ~~liability~~the ~~insurance~~comparable quarter last year primarily due to a larger investment portfolio. Offsetting the above investment and ~~professional~~other ~~services~~income were losses of $150,000 recognized on an investment accounted for by the equity method of accounting.

Interest expense, which is included in Investment and other income, for the ~~six~~three months ended ~~December~~September 3130, ~~2001~~2002, was $170,~~404,387~~900 compared to $~~956~~55,~~584~~201 for the comparable ~~six~~quarter ~~months~~ last year. ~~Included~~ inThe ~~investment~~increase ~~and~~in ~~other~~interest ~~income~~expense ~~were~~is ~~gains of $762,868 from the sale of~~related ~~investment~~to ~~securities~~both ~~and~~short-term ~~a net gain of $575,359 from the sale of idle property~~ and ~~equipment~~long-term nobank ~~longer~~financing. ~~being~~The ~~utilized~~Company inincurred ~~the Waste Material Recycling~~new ~~operations.~~short-term ~~Interest~~LIBOR ~~income~~debt of $~~214~~2,~~912~~000,000 ~~from~~to ~~U.S.~~help ~~Treasury~~finance ~~bills comprised most of~~ the ~~remainder of investment income in the current six months compared to~~ $~~675~~3,~~826~~500,000 ~~for the comparable six months last year~~asset acquisition. The ~~reduction~~Company inalso ~~interest income~~redeemed ~~was~~its ~~primarily~~$6,000,000 ~~due~~IRB tofinancing ~~lower interest rates~~ and ~~a smaller interest bearing~~ ~~investment~~entered ~~portfolio.~~into ~~Offsetting~~a ~~the~~$5,400,000 ~~above~~secured ~~investment~~bank ~~and~~loan ~~other~~at ~~income~~LIBOR ~~were losses~~rates ~~on the disposition of equipment and losses recognized on an investment accounted~~ for byone ~~the equity method of accounting~~year.

Interest expense for the six months ended December 31, 2001, was $105,761 compared to $173,538 for the comparable six months last year. The interest is primarily related to the Industrial Revenue Bond financing, (includes both interest and amortization of bond financing costs). Interest on the bonds is paid monthly and varies weekly based upon the tax-exempt interest rate in the bond market (2.45% at December 31, 2001).

SCOPE INDUSTRIES AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(continued)

LIQUIDITY AND CAPITAL RESOURCES

We have used our cash principally to fund our purchases of capital equipment, ~~expenses~~investments and for working capital. We funded our cash requirements principally from operations and bank borrowings. During the current quarter we borrowed $7,400,000 from our bank; $2,000,000 on our short-term bank line of credit to help finance the ~~utilization~~purchase of ~~unappropriated~~assets ~~funds~~and routes and contracts from two bakery waste material recyclers in California and $5,400,000 on a five year note to help finance the ~~IRB~~redemption of the $6,000,000 Industrial Revenue Bond. On September 30, 2002, we paid down $1,000,000 on our short-term line of credit and ~~proceeds~~subsequent ~~from~~to quarter end the ~~sale~~Company paid off the remaining $1,000,000 on the short-term line of ~~investments~~credit. During the current quarter ~~six months~~ we expended $81,~~090~~890,~~357~~608 for capital projects primarily within the Waste Material Recycling segment. Our working capital ratio of 2.30 to 1 at ~~December 31~~September 30, ~~2001~~2002 decreased when compared to the June 30, ~~2001~~2002 ratio of 2.68 to 1. The change in components of working capital is mainly attributed to the reduction in Cash and cash equivalents and Treasury securities and increases in accounts payable and other current liabilities. The majority of the decrease in Cash and cash equivalents and Treasury ~~bills~~securities ~~used~~went from current to ~~help~~long-term ~~finance~~when ~~capital~~the ~~expenditures~~Company purchased $6,000,000 in a Short-term Tax-exempt Mutual Fund that is being used as collateral on the $5,400,000 bank loan. Capital expenditures for fiscal ~~2002 approximating~~2003 are currently estimated at $109,000,000 to $12,000,000 depending upon when some of the capital projects are ~~planned~~started. The majority of capital expenditures are primarily for the Waste Material ~~Recycling~~ Recycling segment for a new plant facility in Texas replacing two existing facilities and in New Jersey replacing a leased facility. The cost of each new facility is estimated at $6,000,000. The Company believes that the combination of cash on hand, Treasury ~~bills~~securities, investments available for sale and cash flow expected to be generated from operations will be sufficient to fund planned investments and working capital requirements through fiscal ~~2002~~2003. The Company is also reviewing its options to finance one or both of the new plant facilities through tax-exempt Industrial Revenue Bonds or long—term bank loans taking advantage of current low interest rates.

~~Subsequent to December 31, 2001, the Company entered into a Three Million~~TAXES ~~Dollars ($3,000,000) Revolving Line of Credit with its bank to provide the~~ Company additional future liquidity should the requirement arise. The Line of Credit is for one year with no fees and borrowings under the agreement bear interest at LIBOR plus 2.00% or the banks prime rate minus 0.25%, interest to be paid monthly. The agreement contains customary affirmative and negative covenants requiring the maintenance of specific consolidated leverage ratios and a minimum net worth. The Company has not drawn upon the line.

For the three month period ended September 30, 2002, the effective rate for income taxes is approximately 38% of pre-tax income compared to a effective income tax rate of 37% of pre-tax income for the comparable quarter last year. The determination of the provision or benefit for income taxes considers certain permanent differences between taxable income and income as reported using accounting methods generally accepted in the United States of America. Those differences sometimes cause distortions in the relationships between income before income taxes and the provision for income taxes.

NEW ACCOUNTING STANDARDS

~~Effective~~ In ~~July 1,~~April ~~2001~~2002, the ~~Company~~Financial ~~early~~Accounting ~~adopted~~Standards Board (“FASB”), issued Statement of Financial Accounting Standards (“SFAS”) No. ~~142~~145, “~~Goodwill~~Rescission of FASB Statements No. 4, 44, and ~~Other~~64, ~~Intangible~~Amendment ~~Assets”~~of ~~(“SFAS~~FASB Statement No. 13, and ~~142~~Technical Corrections”)., ~~The~~addresses ~~statement~~reporting ~~establishes~~classification ~~accounting~~of certain early extinguishments of debt and ~~reporting~~amends ~~standards~~Statement 13 to require sale-leaseback accounting for certain lease modifications that have economic effects that are ~~goodwill~~similar ~~and~~to ~~other~~sale-leaseback ~~intangible~~transactions. ~~assets~~In June 2002, FASB issued SFAS No. 146 “Accounting for Costs Associated with Exit or Disposal Activities”, that applies to costs associated with an exit activity that does not involve an entity newly acquired in a business combination or with a disposal activity covered by FASB Statement No. 144. The ~~early~~statements will be effective for this fiscal year and the adoption of SFAS No. ~~142~~145 and 146 did not have a material impact on the Company’s consolidated financial statements.

In 2001, the Financial Standards Accounting Board issued Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”) and becomes effective for the Company’s fiscal year starting July 2002. The statement retains the previous cash flow test for impairment and broadens the presentation of discontinued operations. The adoption of SFAS No. 144 is not expected have a material impact on the Company’s financial statements.

FORWARD LOOKING STATEMENTS

Certain statements contained in this Management’s Discussion and Analysis of Results of Operations and Financial Condition that are not related to historical results are forward looking statements. Actual results may differ materially from those stated or implied in the forward-looking statements. Further, certain forward-looking statements are based upon assumptions of future events, which may not prove to be accurate. Although the Company believes that the expectations reflected in such forward looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Potential risk and uncertainties include, but are not limited to, general business conditions, unusual volatility in equity and interest rate markets and in competing commodity markets, disruptions in the availability or pricing of raw materials, transportation difficulties, changing governmental educational aid policies, or disruption of operations due to unavailability of fuels or from acts of God.

~~PART~~SCOPE ~~II.~~INDUSTRIES ~~OTHER~~AND ~~INFORMATION~~SUBSIDIARIES ~~SCOPE~~QUANTITATIVE ~~INDUSTRIES~~AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND DISCLOSURE ~~SUBSIDIARIES~~CONTROLS AND PROCEDURES

Item 3. Quantitative and Qualitative Disclosures About Market Risk:


	The Company’s primary market risk results from the commodities market where corn is a substitute for its dried bakery products as an alternative feed supplement for animals. The Company also acquires its raw material sources from bakeries and other vendors typically under contract and priced to follow the corn commodities market. As a result, when corn prices are low the Company must lower its selling prices to compete with alternative feed supplements and the cost of raw material supplies typically will decrease following the lower corn prices. However, competition for raw material suppliers is often more competitive in major market areas where the cost of raw materials is increased in order to maintain materials for production. The average price of corn over the last 25 years is approximately $2.50 per bushel. During our past four fiscal years the average price of corn was $2.01, $1.90, $1.80 and $1.94, in 1999, 2000, 2001 and 2002, respectively, due to record corn crops. The average price of corn for the current quarter has increased to $2.43 per bushel based upon a lower projected corn crop by the Department of Agriculture due to drought conditions in the corn producing states during the planting season.

	The Company minimizes its risk by investing its cash primarily in short-term U.S. Treasury bill and some long-term Treasury notes. The Company invested $6,000,000 in a Short-term Tax-Exempt Mutual Fund that is pledged as collateral for a $5,400,000 bank loan. Due to its nature of short-term tax-exempt securities, the funds value historically does not fluctuate with the securities market retaining much from its original cost basis.

	The Company, with respect to interest rate risk exposure on its debt, has elected to reduce its market risk by entering into LIBOR interest rate contracts on both a short-term and long-term basis. Currently the Company has entered into a long-term (one year) LIBOR contract of 2.9%, plus 1.125% to cover the interest cost on its $5,400,000 bank loan.

Item 4. Controls and Procedures:

Based on their evaluation, as of a date within 90 days of the filing of this Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded the Company’s disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934) are effective. There have been no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regards to significant deficiencies and material weaknesses.

PART II. OTHER INFORMATION

SCOPE INDUSTRIES AND SUBSIDIARIES

Item 2. Increases and Decreases in Outstanding Securities and Indebtedness.

~~There~~ Increases ~~were~~and nodecreases ~~changes~~ in ~~the~~ outstanding ~~Common~~equity ~~Stock~~securities ofin the ~~Company~~three ~~during the six~~ months ~~ended~~ending ~~December~~September 3130, ~~2001.~~2002, were as follows:


	Common Stock
	No Par Value

Shares outstanding June 30, 2002		1,029,267
Shares purchased and retired during the three months		(6,100	)

Shares outstanding September 30, 2002		1,023,167

A corporate resolution requires the retirement of all reacquisitions of common stock. During the three months ended September 30, 2002, the Company purchased and retired 6,100 shares of common stock at a cost of $365,997.

Item 4. Submission of Matters to a Vote of Security Holders.

At the annual meeting of shareowners held on October 22, 2002, with 1,024,804 shares entitled to vote, 1,018,272 shares or 99% of those entitled to vote elected five directors to serve for the ensuing year and until their successors have been elected and qualified.


	Votes		Votes		Votes
Directors	For		Withheld		Abstained		Total

Babette Heimbuch		1,006,772		—		11,500		1,018,272
Robert Henigson		1,006,634		138		11,500		1,018,272
Meyer Luskin		1,004,634		2,138		11,500		1,018,272
William H. Mannon		1,006,634		138		11,500		1,018,272
Franklin Redlich		1,006,634		138		11,500		1,018,272

Item 5. Other Information.

On October 2322, ~~2001~~2002, the Company’s board of directors declared a regular dividend of $1.00 per share payable on January 43, ~~2002~~2003, to shareowners of record at November 2322, ~~2001~~2002.

Item 6. Exhibits and Reports on Form 8-K.

	(A)		Exhibits — None
	(B)		No Form 8-K was filed for the quarter ended December 31, 2001.


	(A) Exhibits:

	99.1 Certification of Chief Executive Officer

	99.2 Certification of Chief Financial Officer

12 (B) No Form 8-K was filed for the quarter ended September 30, 2002.

PART II. OTHER INFORMATION (continued)
SCOPE INDUSTRIES AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SCOPE INDUSTRIES (Registrant)
Dated: February 13, 2002	/s/	Eric M. Iwafuchi
		Eric M. Iwafuchi, Vice President, Chief Financial Officer and Secretary


		SCOPE INDUSTRIES (Registrant)

Dated: November 13, 2002		/s/ Eric M. Iwafuchi Eric M. Iwafuchi, Vice President Chief Financial Officer and Secretary

1314

Certification

I, Meyer Luskin, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Scope Industries;

2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

		a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

		b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

		c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:

		a)	all significant deficiencies in the design or operations of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditor any material weaknesses in internal controls; and

		b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: November 13, 2002		/s/ Meyer Luskin Meyer Luskin President & Chief Executive Officer

Certification

I, Eric M. Iwafuchi, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Scope Industries;

2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

		a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

		d)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

		e)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:

		a)	all significant deficiencies in the design or operations of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditor any material weaknesses in internal controls; and

		b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: November 13, 2002		/s/ Eric M. Iwafuchi Eric M. Iwafuchi Vice President, Chief Financial Officer & Secretary

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Filing Compare · SCOPE INDUSTRIES