10-K 1 wwc10k-603.txt FORM 10-K FOR 6-30-03 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal year ended June 30, 2003 Commission File No.: 0-17757 W W CAPITAL CORPORATION -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Nevada 93-0967457 -------------------------------------- ----------------- (State or other jurisdiction of (IRS Employer incorporation of organization) Identification No.) 3500 JFK Parkway, Suite 202 Ft. Collins, Colorado 80525 -------------------------------------- ---------- (Address of principal (Zip Code) executive office) Registrant's telephone number, including area code: (970) 207-1100 --------------- Securities registered pursuant to Section 12(b) of the Act: Name of exchange or Title of each class which registered ------------------- ---------------- Common stock, $.01 par value None Securities registered pursuant to Section 12(g) of the Act: Common Stock $.01 par Value --------------------------- (Title of Class) 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 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). [ ] 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. [ ] The aggregate market value of the voting stock held by non-affiliates of the Company on October 14, 2003 (1,748,708 shares of common stock) was $17,487 (*) based on the average of the bid and asked prices ($0.010 per share) as quoted on the over the counter market. The number of shares outstanding of each of the Company's sales of common stock, as of October 14, 2003 was: Common Stock, 2,010,614 Shares $.01 par value *This value is not intended to make any representation as to the value or worth of the Company's shares of common stock. The number of shares held by non-affiliates of the Company has been calculated by subtracting shares held by controlling persons of the Company from the shares issued by the Company and outstanding. Documents Incorporated by Reference: ------------------------------------ The Registrant hereby incorporates herein by reference the following documents: Part III Item 10. Directors and Executive Officers of the Registrant. Item 11. Executive Compensation. Item 12. Security Ownership of Certain Beneficial Owners and Management. Item 13. Certain Relationships and Related Transactions. Item 14. Principal Accounting Fees and Services. The foregoing are incorporated by reference from the Registrant's definitive Proxy Statement relating to its annual meeting of stockholders, which will be filed in an amendment within 120 days of June 30, 2003. Item 15. Exhibits: 1. Incorporated by reference from the Company's Annual Report on Form 10-K for the year ended June 30, 1990. 2. Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 31, 1991. 3. Incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended June 30, 1991. 4. Incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended June 30, 1992. 5. Incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended June 30, 1993. 6. Incorporated by reference from the Registrant's definitive Proxy Statement filed in conjunction with the Registrants' Annual Meeting of Shareholders held January 5, 2001. 2 Forward-Looking Statements: --------------------------- In addition to historical information, this Annual Report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and are thus prospective. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, competitive pressures, changing economic conditions, factors discussed in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations", and other factors, some of which will be outside the control of management. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should refer to and carefully review the information described in future documents the Company files with the Securities and Exchange Commission. 3 1 W W CAPITAL CORPORATION FORM 10-K PART I Item 1. Business ------- -------- (a) General Development of Business ------------------------------- W W Capital Corporation ("Company") was originally incorporated as Freedom Acquisition Fund, Inc., a Colorado corporation, on September 23, 1987, to merge with or engage in a merger with, or acquisition of, one or a small number of private firms. On May 16, 1988, the Company completed a public offering of 15,000,000 Units at an offering price of $.03 per Unit, each Unit consisting of one share of common stock, one Class A Warrant to purchase one share of the Company's common stock and one Class B Warrant to purchase one additional share of the Company's common stock. The net proceeds of the offering to the Company were approximately $240,000. The exercise period of the Class A Warrants expired on September 1, 1989. 3,754,500 Class A Warrants, at a price of $0.035 per common share, were submitted to the Company's transfer agent for exercise, with proceeds of $131, 408 to the Company before the payment of offering expenses and commissions associated with the offering. The Class B Warrants expired unexercised in June, 1990. On August 16, 1988, the Company acquired 100% of the outstanding shares of W-W Manufacturing Co., Inc. ("W-W") one of the oldest and largest livestock equipment manufacturers in the United States, in exchange for 160,000,000 shares of the Company's common stock. W-W manufactures a full line of cattle and equine handling and confinement equipment for use by farmers, ranchers, rodeos, and universities throughout the United States. W-W's principals began doing business in Texas City, Texas in 1945 designing and building their first cattle squeeze chute. Due to production and sales growth, the principals moved the operation to Dodge City, Kansas, where they established their first manufacturing facility in 1948. Operations continued to expand and develop, and on October 18, 1961, W-W was incorporated in the State of Kansas. On December 9, 1989, the Company's shareholders approved a proposal to re-incorporate W W Capital in the State of Nevada and to concurrently therewith, reverse split on a 1 for 100 basis the authorized shares of common stock from 500,000,000 shares par value $0.0001 per share to 5,000,000 shares of common stock, par value $0.01 per share and the 40,000,000 shares of authorized preferred stock, par value $0.10 per share to 400,000 shares of preferred stock, par value $10.00 per share. The re-incorporation and reverse stock split was effective December 15, 1989. On November 16, 1990, the Company's shareholders approved a proposal to increase the number of authorized shares of common stock from 5,000,000 to 15,000,000 shares. On August 15, 1991, the Company entered into an exchange agreement ("Exchange Agreement") with Titan Industries, Inc., a Nebraska corporation ("Titan"), whereby the Company would issue to Titan common stock, in exchange for all the outstanding stock of Titan. The consummation of this Exchange Agreement was subject to approval by the stockholders of the Company. On December 13, 1991, the stockholders approved the acquisition. The actual closing and exchange of stock took place December 30, 1991. Under the terms of the agreement the stockholders of Titan received 1,600,000 shares of W W Capital Common Stock in exchange for all the outstanding common shares (7,500) of Titan Industries. The shares had an aggregate value of $3,600,000 at the date of closing. The purchase price was arrived at through an arms length negotiation. On October 26, 1992, the Company entered into an exchange agreement ("Eagle Exchange Agreement") with Eagle Enterprises, Inc., a Tennessee corporation ("Eagle"), whereby the Company would issue to Eagle common stock, in exchange for all the outstanding stock of Eagle. The consummation of the Eagle Exchange Agreement was subject to approval by the Board of Directors of the Company. At a special meeting of the Board of Directors held October 20, 1992, the Board unanimously approved the acquisition. The actual closing and exchange of stock took place on October 4 26, 1992. Under the terms of the Eagle Exchange Agreement, the sole stockholder of Eagle (Jerry Bellar) received 325,000 shares of W W Capital Corporation common stock in exchange for all the outstanding common shares (1,539) of Eagle Enterprises. The shares had an aggregate value of $893,750 at the day of closing. The purchase price was arrived through an arms length negotiation. Eagle Enterprises was formed in August 1985 to manufacture livestock handling equipment. The company is presently located in a 40,000 square foot facility on 11 1/2 acres in Livingston, Tennessee. The Company's primary products are livestock panels and gates. On October 15, 1993, the Company acquired various assets of Wholesale Pump and Supply, Inc. ("Wholesale") of Oklahoma City, Oklahoma by issuing 250,000 shares of common stock. The shares had an aggregate value of $145,000 at the day of closing. The purchase of assets was arrived through an arms length negotiation. Wholesale operated as a division of Titan Industries and distributed water well supplies and environmental monitoring equipment for testing ground water. During October 1998, the Board of Directors unanimously approved the merger of W-W Manufacturing and Eagle Enterprises into one legal entity. On March 21, 2000, W-W Manufacturing, a wholly owned subsidiary of the Company, acquired various assets and assumed various liabilities of the Adrian J. Paul Company, (renamed W-W Paul Scales) of Duncan, Oklahoma, out of bankruptcy. The transaction was accounted for as a purchase and, accordingly, the excess of the asset values acquired over the liabilities assumed were used first to reduce long term assets and the remainder was recorded as negative goodwill of $67,210. W-W Paul Scales operates as a division of W-W Manufacturing and is currently doing business in a 35,000 square foot facility. The Company's primary functions are the manufacture of livestock scales and hydraulic chutes. On January 5, 2001, the Shareholders of the Company voted to sell its water and environmental product segment, Titan Industries, Inc., to certain shareholders of the Company in exchange for 3,387,949 shares, or approximately 61.0%, of the common stock of the Company. The transaction had an effective date of December 31, 2000. In addition to giving up its interest in Titan, the Company also contributed the sum of $850,000 to the capital of Titan to equalize the value of the consideration being exchanged. The sale was accounted for as a treasury stock transaction and a loss on disposal of $14,900 was recorded as the result of professional fees attributable to the transaction. (b) Financial Information About Industry Segments --------------------------------------------- The continuing business of the Company is carried on within one segment by three operating units, each with its own organization. The management of each operating unit has responsibility for product development, manufacturing, marketing and for achieving a return on investment in accordance with the standards and budgets established by W W Capital. Overall supervision, coordination and financial control are maintained by the executive staff from the corporate headquarters located at 3500 JFK Parkway, Suite 202, Ft. Collins, Colorado. As of June 30, 2003, the Company and its segments had approximately 120 employees. The reader is referred to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations and notes to the Company's financial statements for certain financial information regarding this segment. (c) Narrative Description of Business --------------------------------- The registrant conducts its business through its business segment: livestock handling equipment group. A discussion of this segment follows. 5 LIVESTOCK HANDLING EQUIPMENT GROUP ---------------------------------- Principal Products, Markets and Distribution -------------------------------------------- The livestock handling group manufactures a broad line of cattle handling, equine (horse), and rodeo equipment and containment systems. Farmers, ranchers, rodeos, county fairs, veterinarians, and universities use this equipment. Presently, with its 58-year-old history, W-W Manufacturing the primary subsidiary of this segment, is well recognized in the industry as the leader in production of livestock equipment. With the acquisition of Eagle Enterprises, October 1992, the Company experienced growth in the eastern United States. Eagle has the manufacturing capacity to produce the majority of W-W Manufacturing line of products, thus improving its delivery time to dealer/distributors in the east, and southeastern United States. The Eagle plant was realigned to complement the W-W Manufacturing line of products. This is significant since the W-W line has a long-term (58 years) reputation as an industry leader and manufacturer of quality equipment. Eagle was hit hard by the sluggish economy in 2002, the need to update certain equipment and the need for installation of a new paint system. During November 2002 the decision was made to scale back operations until a new inline pre-galvanized product could be marketed. Eagle began marketing this new product during June 2003. The market for cattle handling equipment is segmented by herd size into economic classifications. Based upon an independent study done for the Company, it is believed that economic dissimilarities between large and small operators create important differences in buying behavior. Recognizing this, management of the Company has positioned the Company to meet the demands of the market place and to be able to service both the large and small operator through its sales and marketing targeted at expanding the dealer/distributor network throughout the entire United States. The Company will continue to generate sales by offering special assistance in design and installation of product. This service has proven to be a valuable asset in the sale of equipment to large fairs, expo centers, rodeos, and universities. Over the years, W-W Manufacturing products have become favored for durability and ease of use by ranch hands who must work large volumes of cattle. W-W Manufacturing's presence at rodeos underscores the Company's position in the marketplace as a producer of equipment for the "working cowboy." W-W Manufacturing has been responsible for many innovations in rodeo equipment and has developed a well-respected line for that market. Since 1979, all of the chutes and rodeo equipment for the Professional Rodeo Cowboys National Finals Rodeo (NFR) have been supplied by W-W Manufacturing. The NFR is the largest rodeo championship event in the world. In addition, W-W Manufacturing has provided all the equipment for the International Rodeo Association Finals since 1978 and for many other top rodeos across the country. In the past, the Company has produced both heavy duty and portable horse stalls. These products have been primarily used by commercial users and exposition centers. Based on the success of the commercial horse stalls, the Company has introduced stalls designed for the equine hobbyist and horse show enthusiast. Aesthetics, ease of use and durability are considered by management to be the main selling points of this kind of equipment. The new horse stalls have been marketed through the distributor network already established by the Company. With the acquisition of Adrian J. Paul Scales in March 2000 the Company entered the new market of livestock scales. These scales are used to weigh and track the development of various livestock. This market compliments the W-W line of equipment and can be sold by the existing W-W distributor/dealer network. Also the W-W line of products is being offered and sold by the distributors and dealers of the W-W Paul Scale Company. The Company is in the process of developing several new scales that will compliment and work interrelated with the W-W cattle line of chutes. Cost of distribution of products has and will continue to be a problem for the customers and the Company. To help lower this cost, the Company needs to continue to find ways to fill trucks with a variety of products. With the introduction of the feed equipment, and other horse related products, the Company believes these products will help reduce its distribution cost and provides its customer the opportunity to carry more items with less depth of inventory. 6 Management believes these developments are key to the success of the Company's future expansion, and intends to continue to increase its dealer/distributor network vigorously. Demonstrations, seminars and special designs will continue to be offered and special discounts given to principal distributors for volume purchases. Raw Materials and Facilities ---------------------------- The manufacture of livestock handling equipment requires various sizes of steel, tubing, and other related steel products. The products necessary for fabrication of equipment are purchased from numerous steel companies, and the Company has experienced no difficulties in obtaining adequate supplies. The divisions of this segment are located as follows: W-W Manufacturing, the largest by sales volume of the three divisions, is located at Route 1, Box 138, Hwy 54, Thomas, Oklahoma. Eagle Enterprises, is located at 175 Windle Community Road, Livingston, Tennessee. W-W Paul Scales is located at Hwy 81 South, Duncan, Oklahoma. Competition ----------- The Company encounters competition in varying degrees in both cattle handling and equine product lines. Competitors are primarily domestic producers of similar products. These companies compete in price, delivery schedules, quality, product performance, and other conditions of sales. During 2003 and 2002, management invested in new equipment, did extensive training, scheduled many live demonstrations, improved plant efficiencies, introduced new product improvements and new products, in order to maintain its competitive edge. Strategy for Growth ------------------- Growth is anticipated in two areas. First, the Company will continue to expand the distributor/dealer network throughout the country. Future growth will, however, be constrained by availability of capital resources and continuing improvement in market conditions. Diversification into related product areas now served by the Company could afford a second area for growth. Management believes W-W Manufacturing's 58 year old reputation for quality, as well as for introducing new innovations into existing products, has positioned the Company ideally as a marketer for new products of its own as well as other companies' products. Continued emphasis will be put on specials and special sales to universities, expo centers and fairgrounds. This highly visible use of equipment provides product endorsement for the standard line of products and help distributors/dealers to sell product to the end consumer. OTHER INFORMATION RELATIVE TO THE BUSINESS ------------------------------------------ Patents and Trademarks ---------------------- With the purchase of the Adrian J. Paul Company, the livestock handling equipment segment, has acquired various patents. The patents deemed useful to the Company are current and registered with the United States Patent Trademark Office. These patents deal with systems for weighing non-stationary objects, torque bar suspension scales with strap assemblies and an on board truck weighing system. Seasonality ----------- The Company experiences seasonality in sales. The livestock handling equipment product segment has increased sales in the fall through spring and lower sales in summer. Practice Relating to Working Capital ------------------------------------ The information relating to this Item is included under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." 7 Dependence Upon a Single Customer --------------------------------- Not Applicable Dollar Amount of Backlog Orders ------------------------------- Backlog in the livestock handling equipment group was $1,250,000 in 2003 as compared to $750,000 in 2002. This increase from 2002 is due to a slow recovery in economic conditions. This is expected to remain steady as we move into the fall season. Business Subject to Renegotiation at Election of Government ----------------------------------------------------------- Not Applicable Research and Development Expenditures ------------------------------------- Due to the nature of manufacturing operations of the Company and the types of products produced expenditures for research and development are not material to the overall operating cost. Compliance with Environmental Controls -------------------------------------- The Company has faced issues with the Environmental Protection Agency regarding a paint system located at the Eagle plant located in Livingston, Tennessee. The Company was issued a temporary paint operating permit through December 31, 2001. Over the past two years, management worked with the EPA offices to negotiate an extension to the permit. In January 2003, the Company surrendered the temporary paint permit and discontinued all wet paint finishing at the facility. When, and if, painting resumes at the Eagle plant, a new permit will need to be applied for and issued. To the best of its knowledge, the Company believes that it is presently in substantial compliance with all other existing environmental laws. Item 2. Properties ------- ---------- The Company's corporate headquarters is located at 3500 JFK Parkway, Suite 202, in Ft. Collins, Colorado, and is leased from an unrelated third party. W-W Manufacturing is located at Route 1, Box 138, Hwy 54, Thomas, Oklahoma. This facility is leased from the City of Thomas Economic Development Authority for various monthly installments through June 2022. The facility is comprised of approximately 80,000 square feet located on 10 acres of land. Eagle Enterprises is located at 175 Windle Community Road, Livingston, Tennessee. This facility is owned by the Company and has approximately 40,000 square feet located on 11.5 acres of land. W-W Paul Scales is located at Highway 81 South, Duncan, Oklahoma. This facility is owned by the Company and has approximately 35,000 square feet located on 13.2 acres of land. Item 3. Legal Proceedings ------- ----------------- The Company is attempting to recover, through legal action, an accounts receivable balance of approximately $268,500, plus accrued interest, from a single customer that is in default of credit terms. Management believes it is reasonably possible it will collect the balances due. Item 4. Submission of Matters to a Vote of Security Holders ------- --------------------------------------------------- No matters were submitted for a vote of security holders of the Company during the fourth quarter of the fiscal year ended June 30, 2003. 8 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder ------- Matter ------------------------------------------------------------- Market Information ------------------ High Bid Low Bid -------- ------- Quarter ended ------------- September 30, 2001 $0.010 $0.010 December 31, 2001 0.010 0.010 March 31, 2002 0.010 0.010 June 30, 2002 0.010 0.010 September 30, 2002 $0.010 $0.010 December 31, 2002 0.010 0.010 March 31, 2003 0.010 0.010 June 30, 2003 0.010 0.010 The Company's common stock is listed on the over-the-counter market and trades under the symbol "WWCL". Holders ------- As of October 14, 2003 the Company had approximately 507 record holders of its common stock, not including some individuals holding shares in street name. Dividends --------- The Company did not pay dividends during 2003 or 2002 and does not intend to pay cash dividends in the foreseeable future. The management of the Company intends, for the present, to retain all available funds for the development of its business. Additionally, certain of the Company's loan covenants prohibit the paying of dividends. 9

~~Year~~Item ~~ended~~6. ~~June~~Selected 30Financial Data ------- ----------------------- Year ended June 30 ----------------------------------------------------------------------------------------------~~----~~ SUMMARY OF OPERATIONS (A) ~~-------------------------~~2003 2002 2001 2000 1999 ~~1998 ---- ---- ---- ---- ----~~ Net Sales 11,530,445 12,652,044 13,092,869 12,210,587 9,108,446 ~~8,988,176~~ Gross Profit Margin 2,099,090 2,920,538 2,278,452 2,492,566 1,774,109 ~~1,711,749~~ Operating Earnings (Loss) (271,288) 243,481 (95,939) 456,463 164,026 ~~157,055~~ Interest Expense 380,241 338,248 296,265 171,124 164,755 ~~195,616~~ Operating Expense 2,370,378 2,677,057 2,374,391 2,036,103 1,610,083 ~~1,554,694~~ Earnings(Loss) From Continuing Operations (409,120) 54,464 (247,455) 271,600 46,925 ~~4,655~~ Net Earnings (Loss) (347,376) 54,464 (174,136) 338,777 104,808 ~~87,420~~ PER SHARE DATA -------------- Earnings(Loss) From Continuing Operations (.20) .03 (.0507) .05 .01 ~~.02~~ Dividends per Common Share .00 .00 .00 .00 .00 Weighted Average Shares Outstanding 2,~~008~~010,~~164~~614 32,~~725~~010,~~881~~614 53,~~420~~724,~~397~~256 5,420,397 5,~~520~~420,397 FINANCIAL CONDITION ------------------- Total Assets 5,845,418 6,435,564 6,322,810 6,651,737 5,781,655 ~~5,606,381~~ Fixed Assets (Net) 2,275,087 2,155,188 2,351,435 1,089,280 1,174,409 ~~1,268,605~~ Long-Term Debt 2,645,976 4,186,666 4,087,665 1,521,418 1,606,879 ~~1,117,818~~ Stockholders Equity (342,226) 5,150 (49,314) 2,953,995 2,615,218 ~~2,510,410~~ Working Capital (B) (246,935) 2,003,747 1,676,546 1,627,455 1,174,058 ~~481,657~~ Current Ratio (C) 0.93 2.00 1.80 1.80 1.75 ~~1.24~~ A. This summary has been restated to reflect proper accounting treatment for the discontinued operations regarding the sale of Titan Industries, Inc. during the year ended 2001. B. The year ended ~~1998~~2003 reflects a reclassification of debt from ~~short~~long-term to ~~long~~short-term due to ~~the~~violation ~~renewal~~ of ~~its~~ bank ~~lines~~covenants ~~for~~at ~~longer than one~~ year-end. C. Percent of current assets to current liabilities.

10 Item 7. Management's Discussion and Analysis of Financial Condition ------- and Results of Operations ----------------------------------------------------------- Statements contained in this Form 10-K that are not historical facts, including, but not limited to, any projections contained herein, are forward-looking statements and involve a number of risks and uncertainties. The actual results of the future events described in such forward-looking statements in this Form 10-K could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are adverse economic conditions, industry competition and other competitive factors, government regulation and possible future litigation. The following discussion and analysis of financial condition and results of operations should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto under Item 8. The Company has incurred operating losses two out of the past three years, has a working capital deficit of $246,935 and has an accumulated deficit of $342,226 as of June 30, 2003. The report of independent auditors on the Company's June 30, 2003 financial statements includes an explanatory paragraph indicating there is substantial doubt about the Company's ability to continue as a going concern. The Company believes that it has developed a viable plan to address these issues and that its plan will enable the Company to continue as a going concern for the next twelve months. This plan includes the realization of revenues from the commercialization of new products and the reduction of certain operating expenses. Although the Company believes that its plan will be realized, there is no assurance that these events will occur. The financial statements do not include any adjustments to reflect the uncertainties related to the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of the Company to continue as a going concern. Results of Operations: The following table presents, for the periods indicated, the dollar value and percentage relationship which certain items reflected in the Company's Statements of Operations. This percentage shows the percent as it relates to the total revenue.

2003 2002 2001 ~~2000~~ ----------------------- ----------------------- ----------------------- Total revenues $ 1211,~~652~~530,~~044~~445 100.0% $ 1312,~~092~~652,~~869~~044 100.0% $ 1213,~~210~~092,~~587~~869 100.0% Cost of revenues 9,431,355 81.8 9,731,506 76.9 10,814,417 82.6 ~~9,718,021 79.6~~ ------------ ----- ------------ ----- ------------ ----- Gross profit 2,099,090 18.2 2,920,538 23.1 2,278,452 17.4 ~~2,492,566 20.4~~ Selling, general, and administrative expense 2,370,378 20.6 2,677,057 21.2 2,374,391 18.1 ~~2,036,103 16.7~~ ------------ ----- ------------ ----- ------------ ----- Operating earnings (loss) (271,288) (2.4) 243,481 1.9 (95,939) (0.7) ~~456,463 3.7~~ Other income (expense) 54,909 0.6 174,631 1.3 103,206 0.8 36Interest expense (380,~~261~~241) 0(3.3) ~~Interest expense~~ (338,248) (2.6) (296,265) (2.3) ~~(171,124) (1.4)~~ ------------ ----- ------------ ----- ------------ ----- Earnings (loss) before income taxes (596,620) (5.1) 79,864 0.6 (288,998) (2.2) ~~321,600 2.6~~ Income taxes from continuing operations 187,500 1.6 (25,400) (0.2) 41,543 0.3 ~~(50,000) (0.4)~~ ------------ ----- ------------ ----- ------------ ----- Net earnings (loss) from continuing operations (409,120) (3.5) 54,464 0.4 (247,455) (1.9) ~~271,600 2.2~~ Net earnings of discontinued operations -- 0.0 -- 0.0 73,319 0.6 67Cumulative effect of a change in accounting principle 61,~~177~~744 0.65 -- 0.0 -- 0.0 ------------ ----- ------------ ----- ------------ ----- Net earnings (loss) $ (347,376) (3.0)% $ 54,464 0.4% $ (174,136) (1.3)% ~~$ 338,777 2.8%~~ ============ ===== ============ ===== ============ ===== Depreciation and amortization $ ~~258~~242,~~974~~582 2.01% $ ~~221~~258,~~491~~974 12.70% $ ~~188~~221,~~472~~491 1.57% ============ ===== ============ ===== ============ =====

11 On January 5, 2001, the Shareholders of the Company voted to sell it's water and environmental product segment, Titan Industries, Inc., to certain shareholders of the Company in exchange for 3,387,949 shares, or approximately 61.0% of the common stock of the Company. The transaction had an effective date of December 31, 2000. In addition to giving up its interest in Titan, the Company also contributed the sum of $850,000 to the capital of Titan to equalize the value of the consideration being exchanged. The sale was accounted for as a treasury stock transaction and the loss on disposal of $14,900 was the result of professional fees attributable to the transaction. As a result of the sale of Titan, the accompanying financial statements have been restated for the years presented to reflect proper accounting treatment for discontinued operations. The reader should be aware that the management discussion and analysis for all years presented have been restated to include only discussion of the livestock equipment segment. Sales in the water and environmental product segment, disposed of during 2001, were $4,699,336 for the six month period ended December 31, 2000. Gross margins as a percentage of sales during the six month period ended December 31, 2000 were 14.3%. Total selling expenses as a percentage of sales were 4.8% for the six month period ended December 31, 2000. General and administration expense as a percentage of sales was 6.5% for the six month period ended December 31, 2000. Total interest expense for the six month period ended December 31, 2000 was $80,659. Fiscal Year Ended June 30, 2003 Compared to Fiscal Year Ended June 30, 2002. The Company had a net loss of $347,376 for the year ended June 30, 2003 compared to net earnings of $54,464 for the year ended June 30, 2002. The loss per share for fiscal 2003 amounted to $0.17, a decrease of $0.20 per share from earnings of $0.03 per share in fiscal 2002. Sales decreased from $12,652,044 for the fiscal year ended June 30, 2002 to $11,530,445 for the fiscal year ended June 30, 2003. This decrease of $1,121,599, or 8.9%, was primarily due to a sluggish economy, the unsettled geo-political environment and the tapering back of production at the Livingston, Tennessee plant. Sales at the W-W Manufacturing location in Thomas, Oklahoma increased $241,499, or 3.0%, from $8,077,658 in fiscal 2002 to $8,319,157 for the fiscal year ended June 30, 2003. Certain sales normally serviced at the Livingston, Tennessee plant were moved to the Thomas location due to customer requests for a powder coat paint finish. This helped sales levels at the Thomas location to remain consistent with prior years. Sales at the Eagle Enterprises location in Livingston, Tennessee decreased $1,239,617, or 40.9%, from $3,033,256 in fiscal 2002 to $1,763,639 for the fiscal year ended June 30, 2003. The Livingston plant was hit hardest by the sluggish economy, the need to update certain equipment and the need for installation of a new paint system. After the powder coat paint system was implemented in Thomas, Oklahoma, many customers wanted to purchase only product with a powder coat finish. With the economic environment in decline, management decided that the cost to install a new paint system in the Livingston plant was to high and the risk too great for the Company to take. During November 2002 the decision to scale back operations at the Livingston plant was made. While certain revenues were transferred to the Thomas plant, many revenues were permanently lost. During June 2003 management made the decision to market a new inline pre-galvanized product from the Livingston plant. This product allows for manufacturing without problems related to paint. Management believes this new product will allow the Livingston plant to be in full operation by the second quarter of fiscal 2004. Sales at the W-W Paul location in Duncan, Oklahoma decreased $123,481, or 7.9%, from $1,571,130 for the fiscal year ended June 30, 2002 to $1,447,649 for the fiscal year ended June 30, 2003. Whereas the Duncan location's primary manufacturing responsibilities are livestock scales and hydraulic squeeze chutes, they also serve as a supply source to the Thomas location. While all interdivision sales are eliminated for financial statement purposes, the Duncan location had a substantial increase in such sales. This allowed overall sales for the Duncan location to remain stable. With the improved economic outlook and the completion of new and redeveloped scales, management believes that sales at the Duncan location should increase during fiscal 2004. 12 Gross margins decreased from 23.1% in fiscal 2002 to 18.2% in fiscal 2003. This decrease of 4.9% is the result of an increase in workers compensation insurance rates as well as steel tariffs imposed by Congress that resulted in higher steel costs. In addition, the Livingston, Tennessee plant was affected by various paint finish related problems that resulted in the replacement of products to various customers at no charge. The Company did recover some of the replacement costs by selling and reworking the bad product, however not all costs could be recovered. The gross margin decrease is also the result of lower sales volumes, which did not allow for the absorption of fixed manufacturing overhead and several large special projects that resulted in a loss. Because of the slow economy and the competitive nature of many products, the Company did not believe the increase in costs could be passed on to customers through price increases without a large reduction in sales. Management anticipates improvement to gross margins as the cost of steel dropped during the last portion of fiscal 2003 and is expected to remain lower through the first half of fiscal 2004. The Company has also performed an extensive evaluation of raw material costs and found various ways to lower certain costs that will improve margins during fiscal 2004. Selling expense as a percentage of sales increased from 9.1% in fiscal 2002 to 9.4% in fiscal 2003. The increase is due to lower sales volume. Total dollars expended for selling expenses decreased $65,255 for the fiscal year ended June 30, 2003 as compared to fiscal 2002. Management anticipates that selling expenses will remain steady throughout fiscal 2004. General and administrative expenses decreased as a percentage of sales from 12.1% in fiscal 2002 to 11.1% for the fiscal year ended June 30, 2003. This decrease is a result of a write down of an accounts receivable balance of one large account that was in default of credit terms during fiscal year 2002. Management is continuing collection efforts and believes it is reasonably possible it will collect the balance due. Overall dollars spent for general and administrative cost, not including bad debt write downs, increased $7,024 for the fiscal year ended June 30, 2003 as compared to fiscal 2002. Interest expense increased in fiscal 2003 to $380,241 as compared to $338,248 in 2002. The increase reflects heavy borrowings on the revolving lines of credit to support the slow down in sales due to the economic downturn and related slow down of customer payments and decrease in cash flow. As profits and cash flow increase, the Company plans to reduce debt, thereby reducing overall interest expense. Fiscal Year Ended June 30, 2002 Compared to Fiscal Year Ended June 30, 2001. The Company had net earnings of $54,464 for the year ended June 30, 2002 as compared to a net loss of $174,136 for the year ended June 30, 2001. This increase in net earnings of $228,600 reflects the Company's recovery from transition costs associated with the opening of the new Thomas, Oklahoma plant, expenses related to the sale of Titan Industries as well as a general slowdown in the economy felt throughout the United States during 2001and the first six months of fiscal 2002. Even though sales were down slightly, overall production efficiencies were felt with the opening of the new Thomas plant. Sales decreased from $13,092,869 for the fiscal year ended June 30, 2001 to $12,652,044 for the fiscal year ended June 30, 2002. This decrease of $440,825, or 3.4%, was primarily due to a sluggish economic environment experienced during the first six months of the year, the effects of the September 11, 2001 tragedy as well as very dry weather conditions felt throughout the Western and Southern regions of the United States. Sales at the W-W Manufacturing location in Thomas, Oklahoma increased $454,166, from $7,623,492 in fiscal 2001 to $8,077,658 for the fiscal year ended June 30, 2002. Sales at the Livingston, Tennessee location decreased $445,722, from $3,448,948 in fiscal 2001 to $3,003,256 for the fiscal year ended June 30, 2002. The increase in sales at the Thomas location and related decrease in sales at the Livingston location are primarily due to transferring sales to Thomas because of the demand from our distributor/dealer network for a powder coat paint finish only offered at the Thomas location at this time. Sales at the W-W Paul location in Duncan, Oklahoma decreased $449,298 from $2,020,427 for the fiscal year ended June 30, 2001 to $1,571,130 for the fiscal year ended June 30, 2002. Because of the sluggish economy and hot/dry conditions in the South, in addition to the manufacturing of livestock scales and hydraulic chutes, the Duncan location was also used as a support to the Thomas plant by 13 manufacturing certain parts and equipment, then shipping to Thomas for painting. This allowed the Duncan plant to reduce production down time as well as to keep any potential layoffs to a minimum. Gross margins increased from 17.4% in fiscal 2001 to 23.1% in fiscal 2002. This increase of 5.7% is due to several factors with the primary factor being decreased labor and manufacturing costs associated with running two plants while moving the largest plant from Dodge City, Kansas to Thomas, Oklahoma during 2001. The entire moving process took approximately four months to complete. Another factor contributing to the increase in gross margins are the result of labor, shipping and manufacturing efficiencies realized at the new plant during the last six months of the fiscal year. Selling expense as a percentage of sales increased from 7.8% in fiscal 2001 to 9.1% in fiscal 2002. Total dollars expended for selling expense increased $129,435 for the year. This increase reveals the Company's aggressive pursuit of new markets and expanding its distributor/dealer base. Additionally, the increase is attributable to higher costs related to traveling expenses by salesmen and expanded exposure to new trade shows not attended by the Company in prior years. General and administrative expenses increased as a percentage of sales from 10.3% in fiscal 2001 to 12.1% for the fiscal year ended June 30, 2002. This increase is a result of a write down of the accounts receivable balance of one large account that is in default of credit terms. Management is continuing collection efforts and believes it is reasonably possible it will collect the balance due. Overall dollars spent for general and administrative cost, not including bad debt write downs, decreased $104,885 for the fiscal year ended June 30, 2002 as compared to fiscal 2001 which was primarily due to legal expenses related to the Titan spin off during fiscal 2001. Interest expense increased in fiscal 2002 to $338,248 as compared to $296,265 in 2001. This increase is due to higher borrowings on the Company's' revolving line of credit to support the Titan split-off, the manufacturing plant move and the slow down in sales due to current economic conditions felt throughout the country. Fiscal Year Ended June 30, 2001 Compared to Fiscal Year Ended June 30, 2000. The Company had a net loss of $174,136 for the year ended June 30, 2001 as compared to net earnings of $338,777 for the year ended June 30, 2000. The net loss is attributed to several factors with the most notable being the cost to move the largest production plant, formally in Dodge City, Kansas, to its new modern facility in Thomas, Oklahoma. Moving expenses incurred of approximately $112,000 included the loading, transporting and unloading of inventory and equipment, training of new employees, relocation expenses for certain employees, payroll expenses running dual plants during the four month moving process, set up costs for the new plant and the cost to clean up the old plant in Dodge City. Prior to moving, the Company incurred significant expense in training Oklahoma employees by having them spend time in Dodge City, Kansas working with those employees to learn the production process needed at the new plant in Oklahoma. The cost related to this training was approximately $42,000. Other expenses relating to the loss were costs associated to the sale of Titan Industries during the year of $14,900 and other unrelated legal expenses of approximately $78,000. Lower margins were also affected by costs at the new plant immediately following the move due to the production flow inefficiencies and the learning process of some of the new employees. Had the Company not incurred these expenses management believes the Company would have continued to be profitable for the fiscal year ending June 30, 2001. Sales improved to $13,092,869 for the fiscal year ended June 30, 2001 as compared to $12,210,587 for the same period of 2000. This increase of $882,282, or 7.2%, is due to WW Paul Scales recording twelve months of sales for the year compared to only four months for fiscal 2000. Sales at the W-W Manufacturing location in Thomas, Oklahoma, which includes sales at the Dodge City, Kansas location that was moved during a four month process of February through May of 2001 to Thomas, decreased from $8,384,438 in fiscal 2000 to $7,727,463 for the fiscal year ended June 30, 2001. This decrease of $656,975 was primarily due to production down time during the move and sluggish economic conditions experienced during the last quarter of the fiscal year. Sales at the Livingston, Tennessee location declined slightly from $3,604,068 in fiscal 2000 to $3,448,948 for the fiscal year ended June 30, 2001. The decrease of $155,120 was due to slow sales during 14 late spring into early summer. Despite the sluggish economy, the Company planned promotions and specials in an effort to maintain or improve sales levels through the fall and winter selling season. The Company introduced new additions to the product line along with product improvements throughout 2002. Also, management entered into a marketing agreement to sell related products not presently produced by the Company to enhance its equine product line. Gross margins decreased from 20.4% in fiscal 2000 to 17.4% in fiscal 2001. This decrease of 3.0% is due several factors with the primary factor being increased labor cost of running both plants while moving from Dodge City, Kansas to Thomas, Oklahoma. During the moving process, the Company continued operations at the old plant in Dodge City while gearing up operations at the new plant in Thomas, Oklahoma. The entire moving process took approximately four months to complete and excess labor was used to have both plants producing products while additional labor was needed for the moving process of loading and unloading material and equipment at both plants. Another factor contributing to the decrease in gross margins was the production inefficiencies at the new plant while employees were learning their jobs and production flows could be established. Selling expense as a percentage of sales remained relatively constant in fiscal 2001 at 7.8% as compared to 7.9% in the same period of fiscal 2000. The Company continued its aggressive marketing approach directed at developing new distributors/dealers in areas not previously covered. With the new plant and powder coat paint system, the Company has a competitive advantage with a superior product and feels it can attack new markets that it could not in previous years. General and administrative expenses increased as a percentage of sales from 8.8% in fiscal 2000 to 10.3% for the fiscal year ended June 30, 2001. This increase was due primarily to legal fees, higher management travel costs related to the move from Dodge City, Kansas to Thomas, Oklahoma, and other start up costs related to the new plant. Interest expense increased in fiscal 2001 to $296,265 as compared to $171,124 in 2000. This increase is due to higher borrowing on the Companies revolving line of credit to cover plant moving costs, accrued interest on the note payable used to finance the sale of its water and environmental segment, Titan Industries, and the addition of the capital lease on the new production facility in Thomas, Oklahoma. Inflation: Raw material costs during fiscal 2003 were significantly higher than fiscal 2002. Steel costs most affected this increase. The Company attempts to adjust selling prices to offset the effects of increased raw material costs. However, these adjustments have historically been difficult to implement and tend to lag behind cost increases. Minimizing the exposure to such cost increases is the Company's diversity of operations and the ongoing efforts to achieve greater manufacturing efficiencies. Liquidity and Capital Resources: The Company's principal sources of liquidity are from working capital, internally generated funds and borrowing under its various credit facilities. The Company believes that these sources are sufficient to fund the current requirements of working capital, capital expenditures and other financial commitments. The Company has in place a revolving debt facility that could provide up to $2,200,000. The Company's working capital decreased for the year ended June 30, 2003 to $(246,935) as compared to $2,003,747 for June 30, 2002. This reduction is due to the reclassification of long-term debt to current liabilities because the Company was in violation of certain bank covenants at year-end. The Company is currently negotiating new covenants with the bank for fiscal 2004. The Company generated funds from operations of $190,041 primarily caused by a decrease in net accounts receivable and inventory balances. The provision for loss on the write off of accounts receivables amounted to $57,880 in fiscal 2003 as compared to $306,328 for the year ended June 30, 2002. This decrease is due to the write down of a large account that was in default of credit terms at June 30, 3002. The Company continues to vigorously attempt collection of this receivable and believes it is reasonably possible that it will succeed. 15 The report of independent auditors on the Company's June 30, 2003 financial statements includes an explanatory paragraph indicating there is substantial doubt about the Company's ability to continue as a going concern. The Company believes that it has developed a viable plan to address these issues and that its plan will enable the Company to continue as a going concern for the next twelve months. The plan includes the realization of revenues from the commercialization of new products and the reduction of certain operating expenses. The financial statements do not include any adjustments to reflect the uncertainties related to the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of the Company to continue as a going concern. There is no assurance that the Company will be able to achieve additional financing or that such events will be on terms favorable to the Company. The Company used cash in investing activities for the purchase and replacement of property and equipment. Cash used in investing activities decreased to $18,548 for the year ended June 30, 2003 compared to $37,124 for the same period of 2002. Cash purchases for property and equipment remained consistent from $42,378 in 2002 to $41,148 in 2003. Net cash used in financing activities resulted in a net decrease in borrowing on its revolving credit line of $104,366 for the year ended June 30, 2003. This decrease was the result of increased efficiencies in the new production plant in Thomas, Oklahoma and related pay down of the credit line. As the Company moves into fiscal 2004 it anticipates that borrowing under its revolving line will remain steady as sales increase and overall cash flow improves. The Company amended its three-year loan arrangement with its principal lender, Wells Fargo Business Credit, during the year, increasing its term loan borrowings to help supply the present and future growth of the Company. Terms and conditions of the agreement were not altered significantly from the original term agreement. The Company also exercised an option to purchase the production facility in Duncan, Oklahoma, which it had been leasing. To finance the purchase, the Company borrowed $50,000 from the Duncan Area Economic Development Foundation and $160,584 from another of the Company's lending institutions, Bancfirst of Duncan, Oklahoma. All other banking and credit agreements were satisfactorily maintained throughout fiscal 2003. Even with the weakened economic climate the Company has been able to maintain sales at reasonable levels. Gross margins were weakened because of increased material costs, production problems and discount incentives used to maintain sales levels. The Company anticipates a recovery in profits during fiscal 2003 due to a decline in steel costs and an overall improvement in the economic outlook. Critical Accounting Policies: Management's discussion and analysis of the Company's financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. Revenue Recognition. The Company generally recognizes revenue when products are shipped, which is when title and risk of loss pass to the buyer and provides for estimated returns and allowances at the time of sale. The Company permits customers to return defective products and incorrect shipments for credit against other purchases. Terms offered by the Company are standard for the industry. 16 Allowance for Doubtful Receivables. The Company uses the allowance method of accounting for bad debts. The allowance is based upon estimates using analysis of the company's prior experience, customer credit history and current economic trends. Historically, the Company's estimates of bad debts related to its various receivables have been adequate to cover actual losses. Uncollectible accounts written off were $57,880, $306,328 and $28,212 for the fiscal years ended June 30, 2003, 2002 and 2001, respectively. The Company's estimates involve a significant amount of judgment, and actual results could differ adversely resulting in additional losses on receivables over and above the reserves provided. However, the Company believes its allowances for doubtful receivables are fairly stated as of June 30, 2003. Inventories. Inventories are stated at the lower of cost or market and consist of raw materials, work-in-process and finished goods. Management evaluates the need to record adjustments for impairments of inventory on a quarterly basis. The determination of whether or not inventory items are slow moving, obsolete or in excess of needs requires estimates about the future demand and ongoing success of our products. A decrease in product demand due to changing customer tastes, consumer buying patterns or loss of display space to competitors could significantly impact our evaluation of our excess and obsolete inventories. Accruals for Self-Insurance. Self-insurance accruals are made for certain claims associated with employee health care. These accruals include estimates that are based on historical losses. Differences in estimates and assumptions could result in an accrual requirement materially different from the calculated accrual. Impairment of Long - Lived Assets. In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," long-lived assets such as property, plant and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. Prior to June 30, 2002, the impairment of long-lived assets was accounted for in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of." Income Taxes. The Company accounts for income taxes under the asset and liability method in accordance with Statement of Financial Accounting Standard (SFAS) No. 109, "Accounting for Income Taxes". The Company recognizes deferred income taxes, net of valuation allowances, for the estimated future tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases and net operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. As of June 30, 2003 the Company had approximately $157,100 in net deferred tax assets. The Company evaluates on a regular basis the realizability of its deferred tax assets for each taxable jurisdiction. In making this assessment, management considers whether it is more likely than not that some portion or all of its deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers all available evidence, both positive and negative, in making this assessment. 17 Recent Accounting Pronouncements: In July 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", which requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of commitment to an exit or disposal plan. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS No. 146 is not expected to have a material effect on the Company's financial position, results of operations or cash flows. In November 2001, the FASB issued Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS 144). These rules supersede FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", providing a single accounting model for long-lived assets to be disposed of. Although retaining many of the fundamental recognition and measurement provisions of Statement 121, the new rules significantly change the criteria that would have to be met to classify an asset as held-for-sale. Statement 144 also supersedes the provisions of APB Opinion 30 with regard to reporting the effects of a disposal of a segment of a business. Adoption of SFAS 144 did not have a material impact on the Company's financial condition, results of operations or cash flows. In June 2001, the FASB issued SFAS No. 141, "Business Combination." SFAS No. 141 requires that unamortized negative goodwill arising from a business combination, for which the acquisition date was before July 1, 2001, shall be written off and recognized as a change in accounting principle. SFAS No. 141 was effective for the Company on July 1, 2002, at which time the Company had $61,744 of unamortized negative goodwill. The write off resulted in an increase in income and was reflected as a cumulative effect of a change in accounting principle. Item 7A. Quantitative and Qualitative Disclosures About Market Risk -------- ---------------------------------------------------------- The Company is exposed to market risk from changes in interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices such as interest rates. For fixed rate debt, interest rate changes affect the fair value of financial instruments but do not impact earnings or cash flows. Conversely for floating rate debt, interest rate changes generally do not affect the fair market value but do impact future earnings and cash flow, assuming other factors are held constant. At June 30, 2003, the Company had variable rate notes payable of approximately $2,637,000. Holding other variables constant, the pre-tax earnings and cash flow impact for the next year resulting from a one percentage point increase in interest rates would be approximately $26,000. 18 Item 8. Financial Statements and Supplementary Data. ------- -------------------------------------------- W W CAPITAL CORPORATION INDEX TO FINANCIAL STATEMENTS AND SCHEDULES PAGE ---- Financial Statements: Independent Auditors' Report . . . . . . . . F-1 Consolidated Balance Sheets as of June 30, 2003 and June 30, 2002. . . . . . . . . . . . . . F-2 Consolidated Statements of Operations for the years ended June 30, 2003, 2002 and 2001 . . . . . . . . F-4 Consolidated Statements of Stockholders' Equity (Deficit) for the years ended June 30, 2003, 2002 and 2001 . . . . . . F-6 Consolidated Statements of Cash Flows for the years ended June 30, 2003, 2002 and 2001 . . . . . . . . . . F-7 Notes to Consolidated Financial Statements . . . . . . F-9 Financial Statement Schedules: Independent Auditors' Report . . . . . . . . . . S-1 I - Condensed Financial Information of Registrant . . . . . S-2 II - Valuation and Qualifying Accounts . . . . . . . S-7 All other schedules are omitted because they are not applicable or not required, or because the required information is included in the consolidated financial statements or notes thereto. 19 Independent Auditor's Report ---------------------------- Board of Directors and Stockholders W W Capital Corporation Fort Collins, Colorado We have audited the accompanying consolidated balance sheets of W W Capital Corporation and subsidiaries as of June 30, 2003 and 2002, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the three years ended June 30, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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 W W Capital Corporation and subsidiaries as of June 30, 2003 and 2002, and the results of their operations and their cash flows for each of the three years ended June 30, 2003, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net working capital deficit and a net capital deficiency. The Company is also in violation of certain bank covenants at June 30, 2003. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. BROCK AND COMPANY, CPAs, P.C. Fort Collins, Colorado September 15, 2003 F-1 W W CAPITAL CORPORATION

Consolidated Balance Sheets ====================================================================================~~===~~ June 30 2003 2002 ~~2001~~ ------------------------------------------------------------------------------------~~---~~ ASSETS Current Assets; Cash $ ~~137~~127,~~948~~479 $ ~~216~~137,~~473~~948 Accounts receivable, trade, net of allowance for doubtful accounts of $~~275~~290,000 in ~~2002~~2003 and $35275,000 in ~~2001~~2002 1,~~729~~382,~~161~~198 1,~~547~~729,~~584~~161 Accounts receivable, other 13,458 162,703 ~~67,975~~ Inventories 1,~~790~~511,~~304~~826 1,~~729~~790,~~322~~304 Prepaid expenses 41,556 35,632 ~~50,168~~ Current portion of notes receivable, related parties 1,261 603 ~~554~~Current portion of net investment in sales-type lease 18,055 -- Deferred income tax asset 178,000 149,500 ~~150,100~~ ---------- ---------- Total current assets 3,273,833 4,005,851 ~~3,762,176~~ ---------- ---------- Property and Equipment, net of accumulated depreciation of $2,~~135~~337,~~406~~391 in ~~2002~~2003 and $12,~~927~~135,~~259~~406 in ~~2001~~2002 2,~~155~~275,~~188~~087 2,~~351~~155,~~435~~188 ---------- ---------- Other Assets; Long-term notes receivable, related parties, net of current portion 19,812 20,470 21Net investment in sales-type lease,~~073~~ net of current portion 27,398 -- Loan acquisition costs, net of accumulated amortization of $37,~~075~~175 in ~~2002~~2003 and $433,~~574~~075 in ~~2001~~2002 33,825 37,925 ~~6,139~~ Equipment deposits 175,000 175,000 Other assets 40,463 41,130 ~~6,987~~ ---------- ---------- Total other assets 296,498 274,525 ~~209,199~~ ---------- ---------- Total assets $65,~~435~~845,~~564~~418 $6,~~322~~435,~~810~~564 ========== ==========

The accompanying Notes are an integral part of the consolidated financial statements F-2 W W CAPITAL CORPORATION

Consolidated Balance Sheets (continued) ========================================================================================~~========~~ June 30 2003 2002 ~~2001~~ ----------------------------------------------------------------------------------------~~--------~~ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities; Accounts payable $ 1,~~373~~260,~~803~~959 $ 1,~~423~~373,~~041~~803 Accrued payroll and related taxes 205,417 198,887 ~~177,474~~ Accrued property taxes 9,050 10,400 ~~15,950~~ Accrued interest payable 14,898 80,106 ~~62,361~~ Other current liabilities 14,444 24,908 ~~121,804~~ Current portion of notes payable ~~239~~1,943,000 ~~220~~239,000 Current portion of capital lease ~~obligation~~obligations 7573,000 6575,000 ----------- ----------- Total current liabilities 23,~~002~~520,~~104~~768 2,~~085~~002,~~630~~104 ----------- ----------- Long-Term Liabilities; Long-term notes payable, net of current portion 21,~~966~~498,~~693~~515 2,~~806~~966,~~268~~693 Long-term capital lease obligations, net of current portion 1,~~219~~147,~~973~~461 1,~~281~~219,~~397~~973 Deferred income tax liability ~~179~~20,900 ~~155~~179,~~100~~900 Negative goodwill, net of accumulated amortization of $5,466 in 2002 ~~and~~-- ~~$3,124 in 2001~~ 61,744 ~~43,729~~ ----------- ----------- Net long-term liabilities 42,~~428~~666,~~310~~876 4,~~286~~428,~~494~~310 ----------- ----------- Total liabilities 6,~~430~~187,~~414~~644 6,~~372~~430,~~124~~414 ----------- ----------- Commitments and Contingency -- -- Stockholders' Equity (Deficit); Preferred stock, $10.00 par value, 400,000 shares authorized -- -- Common stock, $0.01 par value, 15,000,000 shares authorized, 5,553,827 shares issued in ~~2002~~2003 and ~~2001~~2002 55,538 55,538 Capital in excess of par value 3,305,533 3,305,533 Accumulated deficit (~~476~~824,~~806~~182) (~~531~~476,~~270~~806) ----------- ----------- 2,~~884~~536,~~265~~889 2,~~829~~884,~~801~~265 Less 3,~~545~~543,~~663~~213 shares of treasury stock at June 30, ~~2002~~2003 and ~~2001~~2002, at cost (2,879,115) (2,879,115) ----------- ----------- Net stockholders' equity (deficit) ~~5,150~~ (49342,~~314~~226) 5,150 ----------- ----------- Total liabilities and stockholders' equity (deficit) $ 65,~~435~~845,~~564~~418 $ 6,~~322~~435,~~810~~564 =========== ===========

The accompanying Notes are an integral part of the consolidated financial statements F-3 W W CAPITAL CORPORATION

Consolidated Statements of Operations ===========================================================================================~~=====~~ Years ended June 30 2003 2002 2001 ~~2000~~ -------------------------------------------------------------------------------------------~~-----~~ Net Sales $ 11,530,445 $ 12,652,044 $ 13,092,869 ~~$ 12,210,587~~ Cost of Goods Sold 9,431,355 9,731,506 10,814,417 ~~9,718,021~~ ------------ ------------ ------------ Gross profit 2,099,090 2,920,538 2,278,452 ~~2,492,566~~ ------------ ------------ ------------ Operating Expenses; Selling expenses 1,087,220 1,152,475 1,023,040 ~~963,904~~ General and administrative expenses 1,283,158 1,524,582 1,351,351 ~~1,072,199~~ ------------ ------------ ------------ Total operating expenses 2,370,378 2,677,057 2,374,391 ~~2,036,103~~ ------------ ------------ ------------ Income (Loss) From Operations (271,288) 243,481 (95,939) ~~456,463~~ ------------ ------------ ------------ Other Income (Expense); Interest income 211 7,569 35,060 ~~19,903~~ Interest expense (380,241) (338,248) (296,265) Gain (~~171,124~~loss) ~~Gain~~ on property and equipment (3,439) 4,700 45,438 ~~1,144~~ Other income, net 58,137 162,362 22,708 ~~15,214~~ ------------ ------------ ------------ Net other income (expense) (325,332) (163,617) (193,059) ~~(134,863)~~ ------------ ------------ ------------ Earnings (Loss) Before Income Taxes (596,620) 79,864 (288,998) ~~321,600~~ Income Tax Benefit (Expense) From Continuing Operations 187,500 (25,400) 41,543 ~~(50,000)~~ ------------ ------------ ------------ Earnings (loss) from continuing operations (409,120) 54,464 (247,455) ~~271,600~~ ------------ ------------ ------------ Discontinued Operations; Earnings from operations of Titan Industries disposed of (net of income taxes of $59,000 at June 30, 2001 ~~and $12,000 at June 30, 2000~~) -- -- 88,219 ~~67,177~~ Loss on disposal of Titan Industries -- -- (14,900) -- ------------ ------------ ------------ Earnings offrom discontinued operations -- -- 73,319 67------------ ------------ ------------ Cumulative Effect of a Change In Accounting Principle 61,~~177~~744 -- -- ------------ ------------ ------------ Net ~~earnings~~Earnings (~~loss~~Loss) $ (347,376) $ 54,464 $ (174,136) ~~$ 338,777~~ ============ ============ ============

The accompanying Notes are an integral part of the consolidated financial statements F-4 W W CAPITAL CORPORATION

Consolidated Statements of Operations (continued) ============================================================================================~~=============~~ Years ended June 30 2003 2002 2001 ~~2000~~ --------------------------------------------------------------------------------------------~~-------------~~ Earnings Per Common Share Basic Earnings (loss) from continuing operations $ (0.0320) $ (0.~~05)~~03 $ (0.0507) Earnings from discontinued operations 0.00 0.0200 0.0102 Loss on disposal of Titan Industries 0.00 (0.~~02)~~00 0.00 Cumulative effect of a change in accounting principal 0.03 0.00 0.00 ------------- ------------- ------------- Net earnings (loss) $ (0.0317) $ (0.~~05)~~03 $ (0.0605) ============= ============= ============= Weighted average number of common shares outstanding 2,~~008~~010,~~164~~614 32,~~725~~010,~~881~~614 53,~~420~~724,~~397~~256 Diluted Earnings (loss) from continuing operations $ (0.0320) $ (0.~~05)~~03 $ (0.0507) Earnings from discontinued operations 0.00 0.0200 0.0102 Loss on disposal of Titan Industries 0.00 (0.~~02)~~00 0.00 Cumulative effect of a change in accounting principal 0.03 0.00 0.00 ------------- ------------- ------------- Net earnings (loss) $ (0.0317) $ (0.~~05)~~03 $ (0.0605) ============= ============= ============= Weighted average number of common shares outstanding 2,~~008~~010,~~164~~614 32,~~725~~010,~~881~~614 53,~~420~~724,~~397~~256

The accompanying Notes are an integral part of the consolidated financial statements F-5 W W CAPITAL CORPORATION

Consolidated Statements of Stockholders' Equity (Deficit) =================================================================================================================================== Years ended June 30, ~~2002~~2003, ~~2001~~2002 and ~~2000~~2001 ~~-----------------------------------------------------------------------------------------------------------------------------------~~ Common Stock Treasury Stock --------------------~~---~~ Capital --------------------~~------~~ Total Number of Par In Excess Accumulated Number of Stockholders' Shares Value of Par Value Deficit Shares Cost Equity ~~----------- --------- ----------- ----------- ----------- ----------- ----------- Balance, July 1, 1999 5,540,661 $ 55,406 $ 3,304,629 $~~ (~~695,911~~Deficit) ~~(120,264) $ (48,906) $ 2,615,218 Net earnings for year ended June 30, 2000~~ -- -- -- ~~338,777~~ -- -- ~~338,777~~ ----------- --------- ----------- ----------- ----------- ----------- ----------- Balance, ~~June~~July 301, 2000 5,540,661 $ 55,406 $ 3,304,629 $ (357,134) (120,264) $ (48,906) $ 2,953,995 Exercise of stock options 13,166 132 904 -- -- -- 1,036 Treasury stock redeemed in sale of Titan Industries, Inc. -- -- -- -- (3,~~390~~387,~~399~~949) (2,812,709) (2,812,709) Treasury stock redeemed in sale of inventory -- -- -- -- (35,000) (17,500) (17,500) Net loss for year ended June 30, 2001 -- -- -- (174,136) -- -- (174,136) ----------- --------- ----------- ----------- ----------- ----------- ----------- Balance, June 30, 2001 5,553,827 55,538 3,305,533 (531,270) (3,~~545~~543,~~663~~213) (2,879,115) (49,314) Net earnings for year ended June 30, 2002 -- -- -- 54,464 -- -- 54,464 --------- --------- ----------- ----------- ---------- ----------- ----------- Balance, June 30, 2002 5,553,827 55,538 3,305,533 (476,806) (3,543,213) (2,879,115) 5,150 Net loss for year ended June 30, 2003 -- -- -- (347,376) -- -- (347,376) --------- --------- ----------- ----------- ---------- ----------- ----------- Balance, June 30, ~~2002~~2003 5,553,827 $ 55,538 $ 3,305,533 $ (~~476~~824,~~806~~182) (3,~~545~~543,~~663~~213) $(2,879,115) $ 5(342,~~150~~226) =========== ========= =========== =========== =========== =========== ===========

The accompanying Notes are an integral part of the consolidated financial statements F-6 W W CAPITAL CORPORATION

Consolidated Statements of Cash Flows =====================================================================================================~~====~~ Years ended June 30 2003 2002 2001 ~~2000~~ -----------------------------------------------------------------------------------------------------~~----~~ Cash ~~Flows~~Flow From Operating Activities; Net earnings (loss) $ (347,376) $ 54,464 $ (174,136) ~~$ 338,777~~ Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities Earnings from discontinued operations -- -- (43,511) ~~(67,177)~~ Depreciation 238,482 249,760 203,059 ~~170,040~~ Amortization 4,100 9,214 18,432 ~~18,432~~ (Gain) loss on dispositions of property and equipment 3,439 (4,700) (45,438) ~~(1,144)~~ Provision for loss on accounts and notes receivable 57,880 306,328 28,212 ~~193,090~~ Amortization of negative goodwill -- (2,343) (2,343) Effects of change in accounting principle (~~781~~61,744) -- -- Write down of inventory to net realizable value 3,181 15,469 52,826 ~~97,418~~ Net changes in assets and liabilities Accounts receivable 289,083 (487,905) (201,153) ~~(402,489)~~ Inventories 275,297 (76,451) (16,340) ~~(148,083)~~ Other current and non-current assets 70,035 (85,192) (82,704) ~~5,133~~ Accounts payable, accrued expenses and other current liabilities (342,336) (67,368) 206,757 ~~(101,795)~~ ------------ ------------ ------------ Net cash provided (used) by operating activities 190,041 (88,724) (56,339) ~~101,421~~ ------------ ------------ ------------ Cash ~~Flows~~Flow From Investing Activities; Proceeds from sale of property and equipment 22,600 4,700 73,435 ~~93,519~~ Purchases of property and equipment (41,148) (42,378) (179,306) ~~(157,593)~~ Proceeds from stockholders' notes receivable ~~554 507 466 Cash acquired in acquisition of subsidiary~~ -- --554 ~~14,988~~507 ------------ ------------ ------------ Net cash used inby investing activities (18,548) (37,124) (105,364) ~~(48,620)~~ ------------ ------------ ------------ Cash ~~Flows~~Flow From Financing Activities; Borrowings on notes payable 11,955,581 12,168,450 11,966,434 ~~10,955,779~~ Payments on notes payable (12,063,031) (12,017,568) (11,700,110) ~~(10,846,664)~~ Payments on capital leases (74,512) (62,559) (37,982) ~~(18,270)~~ Payment of loan ~~acquisition~~acquistion costs -- (41,000) -- -- Proceeds from the exercise of stock options -- -- 1,036 -- Repurchase of common stock -- -- (165,100) -- ------------ ------------ ------------ Net cash provided (used) by financing activities; (181,962) 47,323 64,278 ~~90,845~~ ------------ ------------ ------------ Net ~~Increase (~~Decrease) in Cash (10,469) (78,525) (97,425) ~~143,646~~ ------------ ------------ ------------

The accompanying Notes are an integral part of the consolidated financial statements F-7 W W CAPITAL CORPORATION

Consolidated Statements of Cash Flows (continued) ===========================================================================================~~=====~~ Years ended June 30 2003 2002 2001 ~~2000~~ -------------------------------------------------------------------------------------------~~-----~~ Net ~~Increase (~~Decrease) in Cash $ (10,469) $ (78,525) $ (97,425) ~~$ 143,646~~ Cash, Beginning of year 137,948 216,473 313,898 ~~170,252~~ ----------- ----------- ----------- Cash, End of year $ 127,479 $ 137,948 $ 216,473 ~~$ 313,898~~ =========== =========== =========== Supplemental Information; Cash paid during the year for interest $ 414,141 $ 320,502 $ 248,084 ~~$ 167,096~~ Cash paid during the year for income taxes $ 7,425 $ 5,835 $ 50,677 ~~$ --~~ Installment loans and capital leases to acquire property and equipment $ 343,272 $ 11,135 $ 1,313,904 ~~$ 19,693~~ Installment loan to acquire residential rental property $ ~~28,542 $~~ -- $ --28,542 ~~Liabilities assumed to acquire subsidiary~~ $ -- ~~$ -- $ 383,990~~ Installment loans used for deposits on purchase of property and equipment $ -- $ -- $ 175,000 ~~$ --~~ Installment loans used for the repurchase of common stock $ -- $ -- $ 750,000 ~~$ --~~ Treasury stock acquired in sale of inventory $ -- $ ~~17,500~~-- $ --17,500

The accompanying Notes are an integral part of the consolidated financial statements F-8 W W CAPITAL CORPORATION Notes to Consolidated Financial Statements June 30, 2003 ================================================================================ Note 1 - Summary of Significant Accounting Policies Nature of Operations. W W Capital Corporation and its wholly-owned subsidiary (the Company) principally engage in the manufacture, distribution and sale of a wide range of livestock confinement and handling equipment. Basis of Presentation. The accompanying consolidated financial statements include the accounts of W W Capital Corporation and its wholly-owned subsidiary, W-W Manufacturing Co., Inc. (W-W Manufacturing). In January 2001, the Company sold its water and environmental product segment, Titan Industries, Inc. The Company's consolidated financial statements have been restated to reflect the segment as a discontinued operation for all periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates. The preparation of the Company's consolidated 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 disclosures 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. Cash Equivalents. For purposes of the statement of cash flows, the Company considers all highly liquid debt investments purchased with an original maturity of three months or less to be cash equivalents. Accounts Receivable and Allowance for Doubtful Accounts. Accounts receivable consist primarily of receivables from the sale of livestock handling equipment. The Company uses the allowance method of accounting for bad debts. The allowance is based upon estimates using analysis of the Company's prior experience, customer credit history and current economic trends. It is reasonably possible the estimates may change in the near term. Inventories. Inventories are stated at the lower of cost or market. Cost includes materials, labor and production costs and is determined on a first-in, first-out (FIFO) method. Property and Equipment. Property and equipment are stated at cost. Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets, which are generally thirty to forty years for buildings and improvements, three to seven years for leasehold improvements and automobiles and trucks, and five to seven years for machinery and equipment and office equipment. Amortization of property and equipment under capital leases is included in depreciation expense. Loan Acquisition Costs. Loan acquisition costs were incurred to obtain certain of the Company's long-term debt. Such costs have been capitalized and are being amortized over the terms of the related debt. Long-Lived Assets. Long-lived assets to be held and used are recorded at cost. Management reviews long-lived assets and the related intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate, to the carrying amount including associated intangible assets of such operation. If the operation is determined to be unable to recover the carrying amount of its assets, then intangible assets are written down first, followed by the other long-lived assets of the operation, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets. F-9 W W CAPITAL CORPORATION Notes to Consolidated Financial Statements June 30, 2003 ================================================================================ Note 1 - Summary of Significant Accounting Policies (continued) Warranty. The Company provides a warranty to its customers and the related costs are recorded at the time of service. Future warranty costs are not considered significant to the financial statements as most warranty work, if any, is generally performed shortly after the sale. Negative Goodwill and Cumulative Effect of a Change in Accounting Principle. Negative goodwill was recorded in the acquisition of the Adrian J. Paul Company. It is the excess of the value of acquired assets over the total cash paid and liabilities assumed, after reducing long-term assets. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations." SFAS No. 141 requires that unamortized negative goodwill arising from a business combination, for which the acquisition date was before July 1, 2001, shall be written off and recognized as a change in accounting principle. SFAS No. 141 was effective for the Company on July 1, 2002, at which time the Company had $61,744 of unamortized negative goodwill. The write off resulted in an increase in income and was reflected as a cumulative effect of a change in accounting principle. Stock-Based Compensation. The Company applies the provisions of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." The Statement defined a fair value based method of accounting for stock options or similar equity instruments. SFAS No. 123 allows an entity to continue to measure compensation cost for employee stock option plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion (APB) No. 25, which was elected by the Company. SFAS No. 123 requires the Company to make certain proforma disclosures as if the fair value based method had been applied. The effects of the fair value based method for the periods presented were not material for proforma disclosure. Revenue Recognition. The Company recognizes revenue in the period the product is shipped and title is transferred to the customer. Shipping and handling charges are included in net sales and the related costs are included in cost of goods sold. Advertising. The Company expenses the cost of advertising the first time the advertising takes place. Advertising expense for the years ended June 30, 2003, 2002 and 2001 was $126,859, $145,639 and $137,045, respectively. Income Taxes. Deferred income taxes are recognized for temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred income taxes are classified as current or noncurrent, depending on the classification of the assets and liabilities to which they relate. Deferred income taxes arising from temporary differences that are not related to an asset or liability are classified as current or noncurrent depending on the periods in which the temporary differences are expected to reverse. The recognition of deferred tax assets is reduced if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. Per Share Data. Basic earnings per share were computed on the basis of weighted average number of shares outstanding. Diluted earnings per share includes outstanding stock options, unless the effect would be anti-dilutive. F-10 W W CAPITAL CORPORATION Notes to Consolidated Financial Statements June 30, 2003 ================================================================================ Note 2 - Going Concern As shown in the accompanying financial statements, the Company incurred a net loss of $347,376 during the year ended June 30, 2003, and as of that date, the Company has a net working capital deficit totaling $246,935 and total liabilities exceeded total assets by $342,226. The Company is also in violation of bank covenants pertaining to the maintenance of minimum net income and a minimum debt service ratio. The Company believes that it has developed a viable plan to address these issues and that the plan will enable the Company to continue as a going concern for the next twelve months. This plan includes the realization of revenues from the commercialization of new products and the reduction of certain operating expenses. Although the Company believes that the plan will be realized, there is no assurance that these events will occur. The financial statements do not include any adjustments to reflect the uncertainties related to the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of the Company to continue as a going concern. Note 3 - Related Party Transactions Receivables. Notes receivable from stockholders and all affiliated entities consisted of the following at June 30:

~~Note~~2003 ~~2 - Related Party Transactions Receivables. Notes receivable from stockholders and all affiliated entities consisted of the following at June 30:~~ 2002 ~~2001~~ ----~~------~~ ----~~------~~ Note receivable from a partnership owned by certain of the Company's stockholders bears interest at 9%. The note provides for annual installments of $2,500 through 2017 and for collateral consisting of shares of the Company's common stock owned by the partners. $ 21,073 $ 21,~~627~~073 Less current portion (~~603~~1,261) (~~554~~603) -------- -------- $20 19,~~470~~812 $21 20,~~073~~470 ======== ========

Interest receivable on related party notes totaled $10,613 at June 30, 2003 and 2002. Operating Lease. The Company leased its manufacturing facility in Dodge City, Kansas, from Murle F. Webster, a stockholder, on a month to month basis. The lease required monthly payments of $5,000 through April 2001 and monthly payments of $500 for May and June 2001. The Company closed the Dodge City, Kansas location during 2001. The provisions of the building lease required the Company to pay insurance, property taxes and maintenance costs. The Company has entered into the transactions with related parties as disclosed above during the three-year period ended June 30, 2003. The Company has not attempted to determine whether any or all of such transactions have been consummated on terms equivalent to those that would have prevailed in arm's length transactions. F-11 W W CAPITAL CORPORATION Notes to Consolidated Financial Statements June 30, 2003 ================================================================================ Note 4 - Inventories Inventories consisted of the following at June 30: 2003 2002 ---- ---- Raw materials $ 528,112 $ 528,110 Work-in-process 375,882 418,334 Finished goods 607,832 843,860 ----------- ----------- $ 1,511,826 $ 1,790,304 =========== =========== During the fourth quarter of 2003, 2002 and 2001, the Company evaluated its inventories for impairment. The inventory value was written down by $3,181, $15,469 and $52,826, respectively, to estimate net realizable value of impaired items. The write down is recorded in cost of goods sold. It is reasonably possible that estimates of net realizable value may change in the near term. Note 5 - Sales-Type Lease The Company's leasing operations consist principally of leasing livestock equipment under a sales-type lease expiring August 2005. The following is a summary of the components of the Company's net investment in the sales-type lease at June 30, 2003: Total minimum lease payments to be received $ 56,629 Unearned income (11,176) ------------ Net investment $ 45,453 ============ Future minimum lease payments to be received under the sales-type lease are as follows at June 30, 2003: Year ---- 2004 $ 24,432 2005 24,432 2006 7,765 ------------ $ 56,629 ============ Note 6 - Acquired Intangible Assets In September 2001, the Company incurred loan acquisition costs to obtain certain long-term debt. Such costs have been capitalized and are being amortized over the terms of the related debt or ten years. Loan acquisition costs are as follows at June 30: 2003 2002 ---- ---- Gross carrying amount $ 41,000 $ 41,000 Accumulated amortization (7,175) (3,075) --------- --------- Net loan acquisition costs $ 33,825 $ 37,925 ========= ========= Aggregate amortization expense totaled $4,100 and $3,075 for the years ended June 30, 2003 and 2002, respectively. F-12 W W CAPITAL CORPORATION Notes to Consolidated Financial Statements June 30, 2003 ================================================================================ Note 6 - Acquired Intangible Assets (continued) Estimated amortization expense is as follows for the years ended June 30: Year 2004 $ 4,100 2005 4,100 2006 4,100 2007 4,100 2008 4,100 Note 7 - Property and Equipment Property and equipment consisted of the following at June 30: 2003 2002 ---- ---- Land and improvements $ 122,622 $ 102,622 Building and improvements 2,034,615 1,844,031 Leasehold improvements 89,372 89,372 Machinery and equipment 1,547,564 1,512,123 Automobiles and trucks 484,486 417,770 Office equipment 333,819 324,676 ---------- ---------- 4,612,478 4,290,594 Less accumulated depreciation and amortization (2,337,391) (2,135,406) ---------- ---------- $2,275,087 $2,155,188 ========== ========== Note 8 - Discontinued Operation On January 5, 2001, the stockholders of the Company voted to sell its water and environmental product segment, Titan Industries, Inc., to certain stockholders of the Company in exchange for 3,387,949 shares, or approximately 61.0%, of the outstanding common stock of the Company. The transaction had an effective date of December 31, 2000. In addition to giving up its interest in Titan, the Company also contributed the sum of $850,000 to the capital of Titan to equalize the value of the consideration being exchanged. The sale was accounted for as a treasury stock transaction and the loss on disposal of $14,900 was the result of professional fees attributable to the transaction. The accompanying financial statements have been restated to conform to discontinued operations treatment for all historical periods presented. The result of the discontinued operation for the period from July 1, 2000 through December 31, 2000 is as follows: Net Sales $ 4,699,336 =========== Earnings before provision for income taxes $ 147,219 Provision for income taxes (59,000) Loss on disposal of Titan Industries (14,900) ----------- Earnings from discontinued operation $ 73,319 =========== During January 2001, the Company borrowed $750,000 under a loan agreement with an affiliated investment group. The loan proceeds were used to partially fund the capital contribution to Titan Industries, Inc. The loan is collateralized by 2,448,000 shares of the Company's treasury stock. F-13 W W CAPITAL CORPORATION Notes to Consolidated Financial Statements June 30, 2003 ================================================================================ Note 9 - Employee Benefit Plans 401(k) Plan. The Company has a 401(k) Saving Plan, whereby eligible employees, who have one half year of service and are age 21 or older, may contribute up to 20% of their salary up to a maximum as allowed by the Internal Revenue Code. The Company may make discretionary matching contributions on the first 4% of employee contributions vesting at 25% per year after three years of service. During the years ended June 30, 2003, 2002, and 2001, the Company made $33,175, $25,430 and $11,877 in discretionary contributions to the Plan. Stock Options. The Company has an Incentive Stock Option Plan. Under this Plan, the Board of Directors or its designated committee is authorized to grant officers and key employees options to purchase up to 950,000 shares of the Company's common stock. At June 30, 2003, options to purchase 823,500 shares of common stock are available to be granted by the Company under the plan. These options have a three-year vesting period. Additionally, the Company has a non-qualified stock option plan for the outside directors of the Company. Under this plan, the incentive stock option plan committee is authorized to grant outside directors options to purchase up to 400,000 shares of the Company's common stock. The Company granted options to purchase up to 153,334 shares at option prices ranging from $0.063 to $2.50 per share of which 80,168 are outstanding as of June 30, 2003. These options vest immediately and expire ten years after issuance.

~~Inventories~~Number ~~consisted~~ of ~~the~~Weighted ~~following~~Average atShares ~~June~~Exercise ~~30:~~Price ~~2002~~------ ~~2001~~ -------------- Outstanding, July 1, 2000 (all vested) 430,168 $ 0.8000 Granted 10,000 0.0625 Exercised (13,166) 0.0800 Cancelled (152,834) 0.6400 -------- ------ ~~Raw~~Outstanding, ~~materials~~June $30, ~~528~~2001 (all vested) 274,~~110~~168 $0.9000 ~~658~~Granted -- -- Exercised -- -- Cancelled (17,~~943~~500) ~~Work~~2.5000 -in-~~process~~----- ~~418~~------ Outstanding,~~334~~ ~~436~~June 30,~~237~~ ~~Finished~~2002 ~~goods~~(all ~~843,860~~vested) ~~634~~256,~~142~~668 0.7900 Granted -- -- Exercised -- -- Cancelled (50,000) 1.5000 --- ---- ------- $Outstanding, 1June 30,~~790~~ 2003 (all vested) 206,~~304~~668 $ ~~1,729,322~~0.6200 =========== ============

F-14 W W CAPITAL CORPORATION

~~Note~~Notes 4to -Consolidated ~~Property~~Financial ~~and~~Statements ~~Equipment~~June ~~Property~~30, ~~and~~2003 ~~equipment~~================================================================================================================== ~~consisted~~Note of9 ~~the~~- ~~following~~Employee atBenefit ~~June~~Plans ~~30:~~(continued) ~~2002~~Options ~~2001~~Outstanding Vested Options ----------------------------------------------- --------------------------- ~~Land~~Weighted ~~and~~Average ~~improvements~~Weighted $Weighted ~~102,622~~Remaining $Average ~~102,622~~Average ~~Building~~Exercise ~~and~~Number ~~improvements~~Contractual ~~1,844,031~~Exercise ~~1,844,031~~Number ~~Leasehold~~Exercise ~~improvements~~Prices ~~89,372~~Outstanding ~~76,510~~Life ~~Machinery~~(Years) ~~and~~Price ~~equipment~~Vested ~~1,512,123~~Price ~~1,493,411~~------ ~~Automobiles~~----------- ~~and trucks 417,770 448,402 Office equipment 324,676 313,718~~ ------------ ----- ------ ----- 40.8125 16,~~290~~001 0.0 $0.8125 16,~~594~~001 4$0.8125 0.7500 140,~~278,694~~667 ~~Less~~0.9 ~~accumulated~~0.7500 ~~depreciation~~140,667 ~~and~~0.7500 ~~amortization~~0.5625 (10,000 2.0 0.5625 10,~~135~~000 0.5625 0.0630 10,~~406)~~000 (13.0 0.0630 10,~~927~~000 0.0630 0.3000 10,~~259)~~000 5.0 0.3000 10,000 0.3000 0.0625 20,000 6.5 0.0625 20,000 0.0625 ------ --- ------ ------ ------ ~~$ 2~~206,~~155,188~~668 1.8 $0.6200 2206,~~351,435~~668 $0.6200 ======= === ======= ======= =======

~~For~~Note ~~the~~10 ~~period~~- ~~from~~Long-Term ~~July~~Debt 1,Long-term ~~For~~debt ~~the~~consists ~~2000~~of ~~through~~the ~~year~~following ~~ended~~at ~~December 31,~~ June 30,: ~~2000~~2003 ~~2000~~2002 ---- ---- Financial Institutions ------ ------------------ ~~Net~~Revolving ~~Sales~~note $payable 4bears interest at 3.0% above the Bank's base rate (total interest rate of 7.0% at June 30,~~699,336~~ $2003). 9The note is subject to various conditions described below and provides for the issuance of $2,~~053~~200,~~166~~000 ~~==========~~of ~~============~~revolving ~~Earnings~~credit ~~before~~debt. ~~provision~~The ~~for~~agreement ~~income~~matures ~~taxes~~in October 2004. $ ~~147~~1,~~219~~466,509 $ 791,~~177~~570,875 ~~Provision~~Term ~~for~~note ~~income~~payable ~~taxes~~bears ~~(59,000)~~interest at 4% over the Bank's base rate(12total interest rate of 8.0% at June 30,~~000~~ 2003). ~~Loss~~The onnote ~~disposal~~is due in monthly principal installments of ~~Titan~~$6,250 ~~Industries~~plus ~~(14~~interest through November 2004. The note is collateralized by equipment,~~900)~~ -inventory, intangibles and receivables. 175,000 --~~----------~~ Note payable bears interest at 6.0% and is due in monthly installments, including principal and interest, of $1,790 through July 2012. The note is collateralized by a building located in Duncan, Oklahoma. 149,437 --~~-----------~~ ~~Earnings~~Note ~~from~~payable ~~discontinued~~bears ~~operation~~interest at 9.0% and is due in monthly installments of $4,191, 73including principal and interest,~~319~~ through November 2005. The note is collateralized by real estate and machinery and equipment located in Livingston, Tennessee. 103,472 142,939 Note payable bears interest at 8.0% and is due in monthly installments of $2,505, 67including principal and interest,~~177~~ ~~============~~through ~~=============~~September 2004, at which time the remaining principal balance is due. The note is collateralized by machinery and equipment located in Duncan, Oklahoma. 84,643 106,899

F-15 W W CAPITAL CORPORATION Notes to Consolidated Financial Statements June 30, 2003 ================================================================================

~~Number~~Note of10 ~~Weighted~~- ~~Average~~Long-Term ~~Shares~~Debt ~~Exercise~~(continued) ~~Price~~2003 2002 ---- ----- Note payable bears interest at 6.0% and is due in annual installments of $23,000, including principal and interest, through August 2005. The note is collateralized by a lease purchase agreement. $ 48,114 $ -- Note payable is non-interest bearing and is due in monthly installments of $573 through May 2008. The note is collateralized by a vehicle. 33,781 --~~-----------~~ ~~Outstanding,~~Note ~~July~~payable bears interest at 8.9% and is due in monthly \ installments of $1,744 ~~1999~~, ~~(all~~including ~~vested)~~principal ~~400~~and interest,~~168~~ $0through February 2005.~~8600~~ ~~Granted~~The ~~30,000~~note 0is collateralized by a vehicle.~~0625~~ ~~Exercised~~32,286 --49,359 --Note ~~Cancelled~~payable --is non--interest ~~--------~~bearing and is due in monthly installments of $592 through June 2007. The note is collateralized by a vehicle. 28,412 --~~-----~~ ~~Outstanding~~Note payable bears interest at 2.9% and is due in monthly installments of $695, ~~June~~including 30principal and interest, ~~2000~~through ~~(all~~December ~~vested)~~2006. ~~430~~The note is collateralized by a vehicle. 27,~~168~~728 -- Note payable bears interest at 8.0% and is due in monthly installments of $312, including principal and interest, through August 2006, at which time the remaining principal balance is due.~~8000~~ ~~Granted~~The 10note is collateralized by rental property in Thomas,~~000~~ 0Oklahoma.~~0625~~ ~~Exercised~~25,674 ~~(13~~27,~~166)~~291 0Note payable bears interest at 3.~~0800~~9% ~~Cancelled~~and ~~(110~~is due in monthly installments of $441,~~334)~~ 0including principal and interest, through March 2007.~~7900~~ ~~--------~~The note is collateralized by a vehicle. 18,421 --~~-----~~ ~~Outstanding,~~Note ~~June~~payable 30bears interest at 7.75% and is due in monthly installments of $379, ~~2001~~including ~~(all~~principal ~~vested)~~and ~~316~~interest,~~668~~ 0through July 2007.~~8100~~ ~~Granted~~The --note --is ~~Exercised~~collateralized --by equipment. 15,886 -- ~~Cancelled~~Note ~~(17~~payable bears interest at 8.5% and is due in monthly installments of $522,~~500)~~ 2including principal and interest, through December 2004.~~5000~~ The note is collateralized by a vehicle. 8,796 13,990 Notes paid in full during 2003 -- 63,740 --------- --------- ~~Outstanding~~2, ~~June 30~~218,159 ~~2002 (all vested) 299~~1,~~168~~975,093 ~~$0.7200~~--------- ~~======== =======~~---------

F-16 W W CAPITAL CORPORATION Notes to Consolidated Financial Statements June 30, 2003 ================================================================================

Note 610 - ~~Employee~~Long-Term ~~Benefit~~Debt ~~Plans~~ (continued) ~~Options~~2003 ~~Outstanding~~2002 ~~Vested Options~~ ---- ----~~------------------------------------------~~ Other Entities --------------~~---------------~~ ~~Weighted~~Note ~~Average~~payable ~~Weighted~~bears ~~Weighted~~interest ~~Remaining~~at ~~Average~~3.0% ~~Average~~above ~~Exercise~~the ~~Number~~Wall ~~Contractual~~Street ~~Exercise~~prime ~~Number~~lending ~~Exercise~~rate ~~Prices~~(total ~~Outstanding~~interest ~~Life~~rate ~~(Years~~of 7.0% at June 30, 2003). ~~Price~~The ~~Vested~~note ~~Price~~is ~~----------~~payable ~~-----------~~in ~~------------~~monthly ~~------------~~installments, ~~--------~~including ~~------------~~principal and interest, of $114,374 through December 2010.~~5000~~ 50The note is collateralized by 2,448,000 0shares of the Company's treasury stock.7 $~~1.5000~~ 50995,~~000~~324 $ 1~~.5000~~,011,981 ~~0.8125~~Note ~~16,001~~payable 1bears interest at 2.0% ~~0.8125~~and ~~16,001~~is ~~0.8125~~due ~~0.7500~~in ~~143~~monthly installments,~~167~~ ~~1.9~~including ~~0.7500~~principal ~~143~~and interest,~~167~~ 0of $2,820 through March 2009.~~7500~~ 0The note is unsecured.~~5625~~ 20183,~~000~~678 3213,523 Note payable bears interest at 5.0% ~~0.5625~~and 20is due in monthly installments of $944,~~000~~ ~~0.5625~~including ~~0.3000~~principal 10and interest,~~000~~ ~~6.0~~through 0July 2007.~~3000~~ 10The note is collateralized by a building located in Duncan,~~000~~ 0Oklahoma.~~3000~~ ~~0.1300 10~~41,~~000~~739 -- Note payable bears interest at 5.025% ~~0.1300~~and 10is due in quarterly installments of $675,~~000~~ ~~0.1300~~including ~~0.0625~~principal 50and interest,~~000~~ 5through September 2004.9 0The note is unsecured.~~0625~~ 502,~~000~~615 ~~0.0625~~5,096 --------- --------- 1,223,356 1,230,600 --------- --------- 3,441,515 3,205,693 Less current portion (1,943,000) (239,000) --------- ~~299,168~~--------- ~~2.6~~ $~~0.7200 299~~1,~~168~~498,515 $~~0.7200~~2,966,693 ======= ==== ======= ===~~==== =======~~

A revolving note payable in the amount of $1,466,509 at June 30, 2003 is collateralized by equipment, intangibles, inventories and receivables. The debt is subject to borrowing base limitations of 80% of eligible accounts receivable and 50% of eligible inventory. The loan agreement contains certain covenants including the maintenance of minimum net income, minimum debt service ratio, limitations on the acquisition of property and equipment and the requirement to develop certain inventory control systems. The loan provides for charges of .25% on the unused revolving credit line and for payment penalties in the event the agreement is terminated prior to the maturity date. Receivable collections are used to pay down the note on a daily basis. After two business days, these funds are available for borrowing subject to the borrowing base limitations. Approximately $410,000 of the Company's consolidated net assets at June 30, 2003 are considered to be restricted net assets of consolidated subsidiaries. At June 30, 2003, the Company was in violation of the minimum net income and minimum debt service ratio covenants. As a result, the Company classified $1,566,509 of long-term debt as a current liability. The aggregate maturities of long-term debt are as follows at June 30, 2003: Year ---- 2004 $1,943,000 2005 343,283 2006 231,443 2007 233,839 2008 195,319 Thereafter 494,631 ---------- $3,441,515 ========== F-17 W W CAPITAL CORPORATION Notes to Consolidated Financial Statements June 30, 2003 ================================================================================ Note 11 - Lease Commitments Capital Leases. The Company leases its Thomas, Oklahoma plant under a capital lease arrangement that expires in June 2022. The leased building has a cost of $1,073,507 and accumulated amortization of $79,711 and $44,284 at June 30, 2003 and 2002, respectively. The Company also leases certain manufacturing equipment under eight capital leases which expire in August 2003 through February 2006. Assets under capital leases are recorded at fair value and are amortized over their estimated useful lives. The leased equipment has a cost of $165,333 and accumulated amortization of $115,220 and $86,681 at June 30, 2003 and 2002. Future minimum lease payments required under noncancelable capital leases are as follows at June 30, 2003.

~~Note~~Year 7Building -Equipment ~~Long-Term~~Total ~~Debt Long~~-~~term debt consists of the following at June 30: 2002 2001~~ --- -------- --- ------ ------ ~~Financial~~2004 ~~Institutions~~$ ~~Revolving~~157,600 ~~note~~$ ~~payable~~21,736 ~~bears~~$ ~~interest~~179,336 at2005 ~~3.0%~~157,600 ~~above~~11,154 ~~the~~168,754 ~~Bank's~~2006 ~~base rate (total interest rate of 7.75% at June 30~~157,600 ~~2002). The note is subject to various conditions described below and provides for the issuance of $~~2,~~200~~337 159,~~000~~937 of2007 ~~revolving~~157,600 ~~credit~~- ~~debt.~~157,600 ~~The~~2008 ~~agreement~~157,600 ~~matures~~- in157,600 ~~October~~Thereafter ~~2004. $~~1,~~570~~242,~~875~~026 $- 1,~~448~~242,~~452~~026 ~~Note~~----------- ~~payable~~---------- ~~bears~~----------- ~~interest~~Total atminimum ~~9.0%~~lease ~~and~~payments ~~is due in monthly installments of $4~~2,~~191~~030,026 ~~including principal and interest~~35,227 ~~through November 2005. The note is collateralized by real estate and machinery and equipment located in Livingston~~2, ~~Tennessee. 142~~065,~~939~~253 ~~179,165~~Less: ~~Note~~amount ~~payable~~representing ~~bears~~ interest at(842,770) ~~8.0% and is due in monthly installments of $~~(2,~~505,~~022) ~~including principal and interest~~(844,792) ~~through~~----------- ~~September~~---------- ~~2004,~~----------- atPresent ~~which~~value ~~time~~of ~~the~~net ~~remaining~~minimum ~~principal~~lease ~~balance~~payments is$ ~~due. The note is collateralized by machinery and equipment located in Duncan~~1, ~~Oklahoma. 106~~187,~~899~~256 -$ ~~Term note payable bears interest at 4% over the Bank's base rate (total interest rate of 8.75% at June 30~~33,205 ~~2002). The note is due in monthly principal installments of~~ $~~4,021~~ ~~plus interest through April 2003. The note is collateralized by equipment~~1, ~~inventory~~220,461 ~~intangibles~~=========== ~~and~~========== ~~receivables. 60,047 118,384~~===========

Operating Leases. In January 2002, the Company entered into a two year lease extension for office space. The lease extension provides for monthly rental payments of $2,733 through March 2003, escalating to $2,810 through March 2004, at which time the Company has an option to extend the lease for an additional two years. In April 2000, the Company entered into a two year lease for a production facility. The lease provided for monthly rental payments of $4,000 though March 2002, at which time the Company exercised an option to purchase the production facility for $208,000 plus closing costs. The sale was consummated on July 2, 2002. The Company has entered into various lease agreements for production and office equipment, office space and vehicles. The lease terms are generally two to five years. Future minimum rental payments under operating leases as of June 30, 2003 are as follows:

~~Note~~Warehouse ~~7 - Long-Term Debt (continued) 2002 2001 ----------- ---------- Notes payable bearing interest at rates ranging from 7.6% to 8.9%~~ and ~~are~~Vehicles ~~due in monthly installments, including principal~~ and ~~interest,~~Year ~~totaling~~Office ~~$2,219~~Space ~~through~~Equipment ~~February~~Total 2003, and $1,744 through February 2005. The notes are collateralized by vehicles $ 53,052 $ 74,021 Note payable bears interest at 8.0% and is due in monthly installments, including principal and interest, of $312 through August 2006, at which time the remaining principal balance is due. The note is collateralized by rental property in Thomas, Oklahoma 27,291 -- Note payable bears interest at 8.5% and is due in monthly installments, including principal and interest, of $522 through December 2004. The note is collateralized by a vehicle 13,990 18,733 Notes paid in full during 2002 -- ~~129,758~~ ----------- -~~----------~~ ~~1,975,093 1,968,513~~ ----------- -----~~------~~ ~~Other~~2004 ~~Entities Note payable bears interest at 3.0% above the Wall Street prime lending rate (total interest rate of 7.75% at June 30~~$33,094 2002). The note is payable with one payment consisting exclusively of twelve month's unpaid accrued interest on the second anniversary date, January 2003. The remaining balance is due in monthly principal installments of $1032,~~541~~651 commencing in February 2003 plus interest through December 2010. The note is collateralized by 2,448,000 shares of the Company's treasury stock 1,011,981 750,000 Note payable bears interest at 2.0% and is due in monthly installments, including principal and interest, of $265,~~820~~745 ~~through~~2005 ~~March 2009. The note is unsecured 213~~3,~~523~~250 ~~242~~8,~~777~~270 ~~Note payable bears interest at 5.25% and is due in quarterly installments~~11,520 ~~including~~2006 ~~principal and interest, of $675. The note is unsecured 5,096 7,452 Notes paid in full during 2002~~ -- ~~57,526 ----------- -----------~~ 1,~~230,600~~749 1,~~057,755~~749 ------- ---- --- -------- ~~3,205,693~~Total ~~3,026,268~~minimum ~~Less~~payments ~~current~~required ~~portion (239~~$36,~~000)~~344 ~~(220,000) ----------- -----------~~ $ 242,~~966,693~~670 $ 279,~~806,268~~014 ======= ==== === ========

Rental expense under operating leases for the years ended June 30, 2003, 2002 and 2001 amounted to $97,548, $130,993 and $196,253, respectively. F-18 W W CAPITAL CORPORATION Notes to Consolidated Financial Statements June 30, 2003 ================================================================================ Note 12 - Negative Goodwill and Change in Accounting Principle In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations." SFAS No. 141 requires that unamortized negative goodwill arising from a business combination, for which the acquisition date was before July 1, 2001, shall be written off and recognized as a change in accounting principle. SFAS No. 141 was effective for the Company on July 1, 2002. As of July 1, 2002, the Company had $61,744 of unamortized negative goodwill relating to the fiscal year 2000 purchase of the Adrian J. Paul Company by its subsidiary, WW Manufacturing Company. The write off resulted in an increase in income and was reflected as a cumulative effect of a change in accounting principle. A reconciliation of reported net income (loss) adjusted to reflect the adoption of SFAS No. 141 as if it had been effective July 1, 2000 is as follows:

~~Year~~2003 ~~Building~~2002 ~~Equipment~~2001 ~~Total~~ ---- ----~~-------~~ ----~~-----~~ ~~-----------~~Reported ~~2003~~net $income ~~150,100~~(loss) $ 37(347,~~416~~376) $ ~~187~~54,~~516~~464 ~~2004~~$ ~~157~~(174,~~600~~136) ~~21,736 179,336 2005 157,600 11,154 168,754 2006 157,600 2,337 159,937 2007 157,600~~ Subtract-back ~~157,600~~adjustment ~~Thereafter~~for ~~1,399,562~~accounting -change 1(61,~~399,562~~744) -~~----------~~ -~~--------~~ Add-~~----------~~back ~~Total~~goodwill ~~minimum~~amortization ~~lease~~- ~~payments~~ 2,~~180,062~~343 ~~72,643~~ 2,~~252,705~~343 ~~Less: amount representing interest (951,771) ( 5,961) (957,732)~~ ----------- --------- ----------- ~~Present~~Adjusted ~~value of~~ net ~~minimum~~income ~~lease~~(loss) ~~payments~~ $ 1(409,~~228,291~~120) $ 6656,~~682~~807 $ 1(171,~~294,973~~793) =========== ========= =========== Adjusted net income (loss) per share-basic $ (0.20) $ 0.03 $ (0.5) Adjusted net income (loss) per share-diluted $ (0.20) $ 0.03 $ (0.5)

Note 13 - Income Taxes The provision for income taxes is as follows at June 30:

~~Warehouse~~2003 ~~and~~2002 ~~Vehicles~~2001 ~~and Year Office Space Equipment Total~~ ---- ----~~----------~~ ----~~--------~~ ~~------------~~Current ~~2003~~Federal $ ~~40,831~~- $ 4668,~~009~~000 $ 8637,~~840~~757 ~~2004~~State ~~33,094~~- 327,~~373~~000 6519,~~467~~000 ~~2005~~Deferred 3(187,~~250~~500) 825,~~061~~400 11(9,~~311~~000) ~~2006~~Tax -benefit ~~1,749~~of ~~1,749~~net ~~2007~~operating -loss - -(75,000) (89,300) ---------- --------- ---------- ~~Total minimum payments required~~ $ 77(187,~~175~~500) $ 8825,~~192~~400 $ ~~165~~(41,~~367~~543) ========== ========= ==========

A reconciliation of income at the statutory rate to the Company's effective rate is as follows at June 30:

~~The~~2003 ~~provision for income taxes is as follows at June 30:~~ 2002 2001 ~~2000~~ ----~~-----~~ ----~~-----~~ ----~~-----~~ ~~Current~~ Federal $statutory ~~68,000~~rate $34.00% ~~37,757~~34.00% $34.00% ~~111,000~~Non ~~State~~deductible ~~7,000~~expenses ~~19,000~~1.02 ~~18,200~~12.63 ~~Deferred~~(2.53) ~~25,400~~Basis difference in assets and liabilities (~~9,000~~65.22) ~~17,000~~108.54 ~~Tax~~(25.42) ~~benefit~~Capital loss and reversal of non deductible write down of real estate - (21.41) - Change in deferred tax asset valuation allowance and net operating loss 2.29 (~~75,000~~101.96) - Discontinued operations - - (~~89,300~~20.42) Change in accounting principal (~~96,200~~3.52) - - ------- -----~~-----~~ -----~~-----~~ $(31.43)% ~~25,400~~31.80% $ (~~41,543~~14.37)% ~~$ 50,000~~ ======~~===~~ =====~~=====~~ ======~~====~~

F-19 W W CAPITAL CORPORATION Notes to Consolidated Financial Statements June 30, 2003 ================================================================================ Note 13 - Income Taxes (continued)

ADeferred ~~reconciliation~~tax assets and liabilities are comprised of ~~income~~the following at ~~the~~June ~~statutory~~30: ~~rate~~2003 to2002 ~~the~~2001 ~~Company's~~---- ~~effective~~---- ~~rate~~---- isDeferred asTax ~~follows~~Assets atAllowance ~~June~~for doubtful accounts $ 108,200 $ 102,600 $ 13,100 Accrued compensation 36,200 30:,200 ~~2002~~27,600 ~~2001~~Inventory ~~2000~~17,300 19,900 19,100 Capital loss carryforward - 18,800 - Net operating loss carryforward 158,900 15,000 89,300 Other 16,400 10,600 1,000 ------- ------- ------- Total deferred tax assets 337,000 197,100 150,100 ------- ------- ~~Federal~~------- ~~statutory~~Deferred ~~rate~~Tax ~~34.00%~~Liabilities: ~~34.00%~~Depreciation ~~34.00%~~of ~~Non~~property ~~deductible~~and ~~expenses~~equipment ~~12.63~~(179,900) (~~2.53~~179,900) ~~3.63~~(155,100) ~~Basis~~Insurance ~~difference~~proceeds inreceivable ~~assets~~- ~~and~~(47,600) - ------- ------- ------- Total deferred tax liabilities ~~108.54~~(179,900) (~~25.42~~227,500) ~~4.94~~(155,100) ~~Capital~~------- ~~loss~~------- ~~and~~------- ~~reversal~~Deferred oftaxes ~~non~~- ~~deductible~~net ~~write~~$ ~~down~~157,100 of$ ~~real~~(30,400) ~~estate~~$ (~~21.41~~5,000) -========== -========== ~~Change~~=========== inCurrent deferred tax asset ~~valuation~~$ ~~allowance~~178,000 ~~and~~$ ~~net~~149,500 ~~operating~~$ ~~loss~~150,100 ~~(101.96)~~ Long-term ~~(29.93)~~deferred ~~Discontinued~~tax ~~operations~~liability - ( 20~~.42~~,900) ~~3.73~~(179,900) ~~Other - -~~ (~~0.82~~155,100) --------- ------- -------- ~~31.80%~~$ 157,100 $ (~~14.37~~30,400)% ~~15.55%~~$ (5,000) ========== ========== ===========

As of June 30, 2003, the Company had the following net operating loss carryforwards: Expiration Net Operating Date Loss ---- --------- 2021 $ 40,000 2022 386,000 ------- $ 426,000 ======== Realization of the income tax benefits of future deductible amounts is dependent on the Company's ability to generate taxable income in amounts sufficient to absorb net operating loss carryovers prior to the expiration of the carryovers. Provisions of the Internal Revenue Code pertaining to changes in ownership interest and alternative minimum taxes may limit the amount of carryovers that may be absorbed in any specific year. It is reasonably possible that a change in the estimate of deferred income tax assets may occur in the near term. Note 14 - Significant Group Concentrations of Credit Risk The Company's continuing business activity is in one industry segment, livestock handling equipment. The Company's livestock handling equipment customers are principally resellers and are primarily located in the Midwest, Tennessee and Georgia. At June 30, 2003, the Company's accounts receivable, net of allowance for doubtful accounts, totaled $1,382,198. The Company generally does not require collateral for routine open accounts receivable. F-20 W W CAPITAL CORPORATION Notes to Consolidated Financial Statements June 30, 2003 ================================================================================ Note 15 - Fair Value of Financial Instruments The Company discloses fair value to the extent practicable for financial instruments which are recognized or unrecognized in the balance sheet. The fair value of the financial statements disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider tax consequences of realization. The carrying value of cash, trade receivables, notes receivable and accounts payable and variable rate debt instruments approximate fair value. The carrying value of long-term debt approximates fair value in 2003 and 2002 due to the scheduled maturities and restrictive provisions of the debt. Note 16 - Contingencies Environmental. The Company's past and present operations include activities that are subject to federal and state environmental regulations. In October 2000, the Company was notified by the Environmental Protection Agency that the flow coat paint system located in its Livingston, Tennessee plant was not in compliance with certain emission regulations. The Company was issued a temporary paint permit which expired on December 31, 2001. In January 2003, the Company surrendered its temporary paint permit and discontinued all wet paint finishing at the facility. Note 17 - Partially Self-Insured Health Insurance The Company is partially self-insured for losses and liabilities related to health insurance claims. Losses are accrued based upon the Company's estimates and experience. The plan includes a $30,000 stop-loss provision per month. The self-insurance liability of $72,551 at June 30, 2003 and $60,000 at June 30, 2002 is included in current liabilities in the consolidated balance sheets. F-21 Independent Auditors' Report The Board of Directors and Stockholders W W Capital Corporation Fort Collins, Colorado We have audited the accompanying consolidated balance sheets of W W Capital Corporation as of June 30, 2003 and 2002, and the related statements of operations, stockholders' equity (deficit) and cash flows for each of the three years ended June 30, 2003, and have issued our report thereon dated September 15, 2003. Our audit also included the financial statement schedules of W W Capital Corporation listed in Item 14. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. BROCK AND COMPANY, CPAs, P.C. Fort Collins, Colorado September 15, 2003 S-1 W W CAPITAL CORPORATION

~~Deferred~~Schedule ~~tax~~I ~~assets~~- ~~and~~Condensed ~~liabilities~~Financial ~~are~~Information ~~comprised~~ of ~~the~~Registrant ~~following~~Balance atSheets ================================================================================== June 30: 2003 2002 ~~2001 2000~~ --------- --------- ---------------------------------------------------------------- ~~Deferred~~ASSETS ~~Tax~~Current Assets; ~~Allowance~~Cash ~~for doubtful accounts~~ $ ~~102~~17,~~600~~378 $ 1324,~~100~~578 $Deferred ~~12,300~~income ~~Accrued~~tax ~~compensation~~asset 30178,~~200~~000 27149,~~600~~500 ~~21,600~~Other ~~Inventory~~current ~~19,900~~assets 1928,~~100~~023 1128,~~300~~023 ~~Capital~~---------- ~~loss~~---------- ~~carryforward~~Total 18current assets 223,~~800~~401 202,101 ---------- ---------- Equipment; Net ~~operating~~of ~~loss~~accumulated ~~carryforward~~depreciation ~~15,000~~of 89$128,~~300~~628 -in ~~Other~~2003 10and $125,~~600~~483 1in 2002 8,~~000~~637 465,~~800~~539 ---------- ----------- Other Assets; Investment in wholly owned subsidiaries 656,568 1,073,600 Loan acquisition costs, net of accumulated amortization of $7,175 in 2003 and $3,075 in 2002 33,825 37,925 Other assets 2,312 2,312 ---------- ---------- Total ~~deferred~~other ~~tax~~ assets ~~197~~692,~~100~~705 ~~150~~1,~~100 92~~113,~~000~~837 --------- -~~--------~~ ---------- Total assets $ 924,743 $1,321,477 ========== ==========

S-2 W W CAPITAL CORPORATION

~~Notes~~Schedule toI ~~Consolidated~~- Condensed Financial ~~Statements~~Information ~~June~~of ~~30,~~Registrant ~~2002~~Balance Sheets (continued) =========================================================================================~~============================~~ ~~Note~~June 1030 -2003 ~~Income Taxes (continued)~~ 2002 ~~2001 2000~~ --------- --------- ----------------------------------------------------------------------- ~~Deferred~~LIABILITIES ~~Tax~~AND ~~Liabilities:~~STOCKHOLDERS' ~~Depreciation~~EQUITY of(DEFICIT) ~~property~~Current ~~and~~Liabilities; ~~equipment~~Accounts payable, subsidiaries $ ~~(179~~242,~~900)~~112 $ ~~(155~~69,~~100)~~561 $Accrued ~~(106~~expenses 8,~~000)~~633 ~~Insurance~~54,885 ~~proceeds~~Current ~~receivable~~portion ~~(47~~of notes payable 104,~~600)~~000 -63,000 ----------- ----------- Total current liabilities; 354,745 187,446 ----------- ----------- ~~Total~~Long-Term ~~deferred~~Liabilities; ~~tax~~Long-term ~~liabilities~~notes ~~(227~~payable,~~500)~~ ~~(155~~net of current portion 891,~~100)~~324 ~~(106~~948,~~000)~~981 Deferred income tax liability 20,900 179,900 ----------- ----------- Net long-term liabilities 912,224 1,128,881 ----------- ~~Deferred~~----------- ~~taxes~~Total liabilities 1,266,969 1,316,327 ----------- ~~net~~----------- $Stockholders' Equity (~~30,400~~Deficit); Preferred stock, $10.00 (5par value, 400,000) shares authorized -- -- Common stock, $0.01 ~~(14~~par value, 15,000),000 ~~==========~~shares ~~==========~~authorized, ~~==========~~5,553,827 ~~Current~~shares ~~deferred~~issued ~~tax~~in ~~asset~~2003 $and ~~149~~2002 55,~~500~~538 ~~$ 150~~55,~~100~~538 $Capital 92in excess of par value 3,~~000~~305,533 ~~Long-term~~3,305,533 ~~deferred~~Accumulated ~~tax~~deficit ~~liability~~(824,182) (~~179~~476,~~900~~806) ----------- ----------- 2,536,889 2,884,265 Less 3,545,663 shares of treasury stock, at cost at June 30, 2003 and 2002 (~~155~~2,~~100~~879,115) (~~106~~2,~~000~~879,115) ----------- ----------- Net stockholders' equity (deficit) (342,226) 5,150 ----------- $----------- Total liabilities and stockholders' equity (~~30,400~~deficit) $ (5924,~~000)~~743 $ ~~(14~~1,~~000)~~321,477 ========== =~~==========~~ ===========

S-3 W W CAPITAL CORPORATION

Schedule I - Condensed Financial Information of Registrant ~~Balance~~Statements ~~Sheets~~of Operations =========================================================================================== Years ended June 30 2003 2002 2001 ------------------------------------------------------------------------------------------- ~~ASSETS~~Revenues; ~~Current~~Managment ~~Assets~~fee ~~Cash~~from subsidiaries $ 24420,~~578~~000 $ 98396,~~423~~000 ~~Deferred~~$ ~~income~~336,000 ~~tax~~Operating ~~asset~~Expenses; ~~149,500~~General ~~150,100~~and ~~Other~~administrative ~~current~~475,568 ~~assets 28~~444,~~023~~927 58397,~~923~~511 ---------- --------- --------- ~~Total~~Operating ~~current~~loss ~~assets~~(55,568) ~~202~~(48,~~101~~927) ~~307~~(61,~~446~~511) Other Income (Expense); Interest income -- -- 1,659 Interest expense (62,321) (89,995) (48,969) Other income 45 11,663 539 Equity in earnings (loss) of continuing subsidiaries before income taxes (417,032) 207,123 (192,393) --------- --------- --------- ~~Equipment~~Earnings ~~Net~~(Loss) ofFrom ~~accumulated~~Continuing ~~depreciation~~Operations ofBefore ~~$125,482~~Income inTaxes ~~2002~~(534,876) ~~and~~79,864 ~~$121~~(300,~~224~~675) inIncome ~~2001~~Tax 5Benefit (Expense) From Continuing Operations 187,~~539~~500 7(25,~~211~~400) 53,220 ---------- --------- --------- ~~Other~~Earnings ~~Assets~~(loss) ~~Investment~~from incontinuing ~~wholly~~operations ~~owned~~(347,376) ~~subsidiaries 1~~54,~~073,600~~464 ~~866~~(247,~~476~~455) ~~Loan~~--------- ~~acquisition~~--------- ~~costs,~~--------- Discontinued Operations; Earnings from operations of Titan Industries disposed of (net of ~~accumulated~~income ~~amortization~~taxes of $359,~~075~~000 inat ~~2002~~June 3730,~~925~~ 2001) -- ~~Other~~-- ~~assets 2~~88,~~312~~219 ~~2,312~~Loss on disposal of Titan Industries -- -- (14,900) --------- --------- --------- ~~Total~~Earnings ~~other~~of ~~assets~~discontinued ~~1,113,837~~operations ~~868,788~~-- -- 73,319 --------- --------- --------- ~~Total~~Net ~~assets~~earnings (loss) $1(347,~~321~~376) $ 54,~~477~~464 $1(174,~~183,445~~136) ========== ========= =========

S-4 W W CAPITAL CORPORATION

Schedule I - Condensed Financial Information of Registrant ~~Balance~~Statement ~~Sheets~~of ~~(continued)~~Cash Flows ============================================================================================~~===~~ Years ended June 30 2003 2002 2001 --------------------------------------------------------------------------------------------~~---~~ ~~LIABILITIES~~Net ~~AND~~Cash ~~STOCKHOLDERS'~~Flows ~~EQUITY~~Provided (~~DEFICIT~~Used) ~~Current~~by ~~Liabilities~~Operating ~~Accounts~~Activities ~~payable~~ $ --15,700 $ 6(292,~~983~~239) ~~Accounts~~$ ~~payable~~209,976 ~~subsidiaries 69,561 168,664 Accrued expenses 54,885 152,012 Current portion of notes payable 63,000~~ -- -------~~----~~ ----------- ~~Total current liabilities 187,446 327,659~~ ----------- ~~-----------~~Cash ~~Long-Term~~Flows ~~Liabilities~~From ~~Long-term~~Investing ~~notes~~Activities; ~~payable,~~Purchase ~~net~~ of ~~current~~equipment ~~portion 948~~(6,~~981~~243) ~~750~~(2,~~000~~587) ~~Deferred income tax liability 179~~(1,~~900~~566) ~~155,100~~ --------- -- ------- --------- Net ~~long-term~~cash ~~liabilities~~used 1by investing activities (6,~~128~~243) (2,~~881~~587) ~~905~~(1,~~100~~566) ----------- ----------- ~~Total liabilities 1,316,327 1,232,759~~ ----------- ~~-----------~~Cash ~~Stockholders'~~Flows ~~Equity~~From ~~(Deficit)~~Financing ~~Preferred~~Activities; ~~stock,~~Borrowings ~~$10.00~~on ~~par~~notes ~~value~~payable 31,308 ~~400~~261,~~000~~981 ~~shares~~-- ~~authorized~~Payments on notes payable (47,965) -- -- ~~Common~~Payments ~~stock,~~of ~~$0.01~~loan ~~par~~acquisition ~~value,~~costs 15-- (41,000~~,000~~) ~~shares~~-- ~~authorized,~~Proceeds ~~5,553,827~~from ~~shares~~the ~~issued~~exercise inof ~~2002~~stock ~~and~~options ~~2001~~-- ~~55,538~~-- 551,~~538~~036 ~~Capital~~Repurchase ~~in excess~~ of ~~par~~common ~~value~~stock ~~3,305,533~~-- ~~3,305,533~~-- ~~Accumulated deficit~~ (~~476~~165,~~806~~100) ~~(531,270)~~ --------- -- ------- --------- ~~2,884,265~~Net ~~2,829,801~~cash ~~Less~~provided ~~3,545,663~~(used) ~~shares~~by offinancing ~~treasury~~activities ~~stock~~(16,657) ~~at cost at June 30~~220,981 ~~2002 and 2001~~ (2164,~~879,115~~064) ~~(2,879,115)~~ --------- -- ------- --------- Net ~~stockholders~~Increase ~~equity~~ (~~deficit~~Decrease) 5in Cash (7,~~150~~200) (4973,~~314~~845) 44,346 Cash, Beginning of Year 24,578 98,423 54,077 --------- -- ------- --------- ~~Total~~Cash, ~~liabilities~~End ~~and~~of ~~stockholders'~~Year ~~equity~~$ ~~(deficit)~~17,378 $ 124,~~321~~578 $ 98,~~477~~423 ========= ========= ========= Supplemental Disclosure of Cash Flow Information; Cash paid during the year for interest $ 94,129 $ 75,216 $ 1,~~183~~219 ========= ========= ========= Installment loans used for the repurchase of common stock $ -- $ -- $ 750,~~445~~000 ========= ========= ========= Treasury stock acquired in sale of property $ -- $ -- $ 17,500 ========= ========= =========

S-5 W W CAPITAL CORPORATION Schedule I - Condensed Financial Information of Registrant Notes June 30, 2003 ================================================================================ Note 1 - Related Party Transactions The following amounts related to wholly owned subsidiaries of the Company were eliminated in the consolidated financial statements of the Company but are reflected in this condensed financial statement of registrant at June 30:

~~Schedule~~2003 ~~I - Condensed Financial Information of Registrant Statements of Operations ============================================================================================== Years ended June 30~~ 2002 2001 ~~2000~~ ----~~------------------------------------------------------------------------------------------~~ ~~Revenues Management fee from subsidiaries $ 396,000 $ 336,000 $ 219,000 Operating Expenses General and administrative 444,927 397,511 263,365~~ ----~~-----~~ ----~~-----~~ ~~---------~~Amounts ~~Operating~~receivable ~~loss~~ (~~48,927~~payable): ~~(61,511) (44,365)~~ W-~~--------~~W ~~---------~~Manufacturing ~~---------~~Co. ~~Other~~Inc. ~~Income~~ $(~~Expense~~242,111) ~~Interest~~$ ~~income -- 1,659 63 Interest expense~~ (8969,~~995~~561) $(48168,~~969~~664) ~~(170)~~========= ~~Realized~~========= ~~loss~~========= onManagement ~~asset~~fee ~~sales and real estate held for sale - -- (1,856) Other~~ income 11,663 539 2,234 Equity in earnings (loss) of continuing subsidiaries before income taxes 207,123 (192,393) 315,694 --------- --------- --------- Earnings (Loss) From Continuing Operations Before Income Taxes 79,864 (300,675) 271,600 Income Tax Benefit (Expenses) From Continuing Operations (25,400) 53,220 -- --------- --------- --------- Earnings (loss) from continuing operations: ~~54,464 (247,455) 271,600~~ W-~~--------~~W ~~---------~~Manufacturing ~~---------~~Co. ~~Discontinued~~Inc. ~~Operations Earnings from operations of Titan Industries disposed of (net of income taxes of~~ $59 420,000 ~~at June 30, 2001 and~~ $12396,000 at$ ~~June 30~~336,000 ~~2000)~~========= --========= ~~88,219~~========= ~~67,177~~Equity ~~Loss on disposal of Titan Industries --~~ (~~14,900~~loss) --from ~~---------~~continuing ~~---------~~subsidiary ~~--------- Earnings of discontinued~~ operations: W--W ~~73,319~~Manufacturing ~~67,177~~Co. ~~---------~~Inc. ~~--------- --------- Net earnings~~ $(~~loss~~417,032) $ 54207,~~464~~123 $(~~174~~192,~~136~~393) ~~$ 338,777~~ ========= ========= =========

S-6 W W CAPITAL CORPORATION Schedule II - Valuation and Qualifying Accounts Years ended June 30, 2003 ================================================================================

~~Schedule~~Additions I - Condensed Financial Information of Registrant Statement of Cash Flows ==================================================================================================== Years ended June 30 2002 2001 2000 ----------------------~~------------------------------------------------------------------------------~~ ~~Net~~Balance ~~Cash~~at ~~Flows~~Charged ~~Provided~~to ~~(Used)~~Charged byBalance ~~Operating~~Beginning ~~Activities~~Costs ~~$(292,239)~~and $to ~~209,976~~Other $at ~~52,415~~End ~~---------~~of ~~---------~~Description ~~--------- Cash Flows From Investing Activities Purchase~~ of ~~equipment~~Period ~~(2,587)~~Expenses ~~(1,566)~~Accounts ~~(3,438)~~Deductions ~~---------~~Period --------- --~~-------~~ ~~Net cash used by investing activities (2,587) (1,566) (3,438)~~ --------- --------- --------- ~~Cash Flows From Financing Activities Borrowings on notes payable 261,981~~ -- -- ~~Payments of loan acquisition costs (41,000)~~ -- -- ~~Proceeds from the exercise of stock options~~ -- ~~1,036~~ -- ~~Repurchase of common stock~~ -- ~~(165,100)~~ -- ~~---------~~June ~~--------- --------- Net cash provided (used) by financing activities 220~~30,~~981~~ ~~(164,064)~~2003 --Allowance ~~---------~~for ~~---------~~doubtful ~~---------~~accounts: ~~Net~~Accounts ~~Increase~~receivable ~~(Decrease)~~$ ~~in Cash (73~~275,~~845)~~000 ~~44,346~~$ 4857,~~977~~880 ~~Cash,~~$ ~~Beginning of Year 98,423 54,077 5,100~~ --~~-------~~ ~~--------- --------- Cash, End of Year~~ $ 2442,~~578~~880 $ 98290,~~423~~000 $June 5430,~~077~~ ~~=========~~2002 ~~=========~~Allowance ~~=========~~for ~~Supplemental~~doubtful ~~Disclosure~~accounts: ofAccounts ~~Cash~~receivable ~~Flow Information Cash paid during the year for interest $ 75~~35,~~216~~000 ~~$ 1~~306,~~219~~328 ~~$ 170 ========= ========= ========= Installment loans used for the repurchase of common stock $~~ -- $66,328 ~~750~~275,000 $June --30, ~~=========~~2001 ~~=========~~Allowance ~~=========~~for ~~Treasury~~doubtful ~~stock~~accounts: ~~acquired~~Accounts inreceivable ~~sale~~38,000 of28,212 ~~property $~~ -- ~~$ 17~~31,~~500~~212 ~~$ -- ========= ========= =========~~35,000

Item 9. Changes in and Disagreements with Accountants on Accounting ------- and Financial Disclosures. ----------------------------------------------------------- Not Applicable Item 9A. Controls and Procedures. -------- ------------------------ The Company's management, including the President and Chief Executive Officer, conducted an evaluation of the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based such evaluation, the CEO has concluded that, as of June 30, 2003, the Company's disclosure controls and procedures are effective in ensuring that material information relating to the Company (including its consolidated subsidiaries), which is required to be included in the Company's periodic filings under the Exchange Act, has been made known to them in a timely manner. There have been no significant changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company's most recent fiscal quarter (the Company's fourth fiscal quarter in the case of this report) that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 20 PART III Part III, Items 10, 11, 12, 13 and 14, are incorporated herein by reference from the Registrant's definitive proxy statement relating to its Annual Meeting of Shareholders which will be filed in an amendment within 120 days of June 30, 2003. 21 PART IV Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K -------- ---------------------------------------------------------------- (a) (1) List of Financial Statements Filed as a Part of This Report ----------------------------------------------------------- Consolidated Balance Sheets as of June 30, 2003 and June 30, 2002. Consolidated Statements of Operations for the years ended June 30, 2003, 2002, and 2001. Consolidated Statements of Stockholders' Equity (Deficit) for the years ended June 30, 2003, 2002, and 2001. Consolidated Statements of Cash Flows for the years ended June 30, 2003, 2002, and 2001. (a) (2) List of Financial Statement Schedules Filed as a Part of This Report -------------------------------------------------------------------- Schedule I - Condensed Financial Information of Registrant Schedule II - Valuation and Qualifying Accounts (a) (3) Exhibits -------- Exhibit Number Document ------ -------- 3.1 Articles of Incorporation dated December 13, 1989 of W W Capital Corporation, a Nevada corporation (filed as Exhibit 3.2 to the Company's Form 10-K for the year ended June 30, 1990 and is hereby incorporated by reference). 3.2 Certificate and Amendment to Articles of Incorporation filed December 21, 1990 with the Nevada Secretary of State (filed as Exhibit 3.01 to the Company's Form 10-Q for the quarter ended December 31, 1990 and is hereby incorporated by reference). 3.3 Bylaws of W W Capital Corporation (filed as Exhibit 3.2 to the Company's Form 10-K for the year ended June 30, 1991 and is hereby incorporated by reference). 10.1 Employee Stock Benefit Plan (filed as Exhibit 10.15 of Form 10-K for the fiscal year ended June 30, 1992 and is hereby incorporated by reference). 10.2 1992 Non-Qualified Stock Option Plan (filed as Exhibit 10.13 of Form 10-K for the fiscal year June 30, 1993 and is hereby incorporated by reference). 10.3 Lease agreement dated January 26, 2000 with an effective date at time of occupancy, between W-W Manufacturing Co. Inc. (wholly owned subsidiary of the Company) and Thomas Economic Development Authority. 10.4 Stock Transfer and Exchange Agreement between the Registrant, Titan Industries, Inc. and others (filed as Appendix I to the Registrant's definitive Proxy Statement filed in conjunction with the Registrant's Annual Meeting of Shareholders held January 5, 2001). 10.5 Loan Agreement dated January 5, 2001 between the Registrant and West-OK Investment, LLC. 10.6 Promissory Note dated September 20, 2001 given by the Registrant to West-OK Investment, LLC. 22 21.0 Subsidiaries of the Registrant (attached hereto). 31.1 Certification of principal executive officer a required by Section 302 of the Sarbanes-Oxley Act of 2002 (attached hereto). 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (attached hereto). Item 15 (b) ----------- No reports on Form 8-K were filed during the fourth quarter of the fiscal year covered by this report. 23 SIGNATURES Pursuant to the requirements of Section 13 or 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. W W CAPITAL CORPORATION (Registrant) Dated: October 14, 2003 By: /s/ Steve D. Zamzow ------------------------------ Steve D. Zamzow, President, CEO and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Dated: October 14, 2003 By: /s/ Steve D. Zamzow ----------------------------------- Steve D. Zamzow, President, CEO and Director Dated: October 14, 2003 By: /s/ Harold Gleason ----------------------------------- Harold Gleason, Chairman Dated: October 14, 2003 By: /s/ L.M. "Mick" McCarty ------------------------------------ L.M. "Mick" McCarty, Secretary, Treasurer and Director Dated: October 14, 2003 By: /s/ Millard T. Webster ----------------------------------- Millard T. Webster, Director Dated: October 14, 2003 By: /s/ A. Randall Kourt ----------------------------------- A. Randall Kourt, Director 24 EXHIBIT 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AS REQUIRED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Steve D. Zamzow, President and Chief Executive Officer of W W Capital Corporation, certify that: 1. I have reviewed the annual report on Form 10-K filed by W W Capital Corporation; 2. Based on my knowledge, this annual 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 annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and I have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of this annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; 5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: October 14, 2003 By: /s/ Steve D. Zamzow ----------------------------- Steve D. Zamzow, President and CEO EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of W W Capital Corporation (the "Company") for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Steve D. Zamzow, President and Chief Executive Officer of the Company, certify, based on my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: October 14, 2003 By: /s/ Steve D. Zamzow ---------------------------------- Steve D. Zamzow, President and CEO

2002 2001 2000 --------- --------- --------- Amounts receivable (payable): W-W Manufacturing Co. Inc. $ (69,561) $(168,664) $332,657 Discontinued operation - - (288,881) --------- --------- --------- $ (69,561) $(168,664) $ 43,776 ========= ========= ========= Management fee income from continuing operations: W-W Manufacturing Co. Inc. $396,000 $ 336,000 $219,000 ======== ========= ======== Equity (loss) from continuing subsidiary operations: W-W Manufacturing Co. Inc. $207,123 $(192,393) $315,694 ======== ========= ========

Additions --------------------------------- Balance at Charged to Charged Balance Beginning Costs and to Other at End of Description of Period Expenses Accounts Deductions Period --------------------------------- ---------- ----------- -------- ---------- ------------ June 30, 2002 Allowance for doubtful accounts: Accounts receivable $ 35,000 $ 306,328 $ -- $ 66,328 $ 275,000 June 30, 2001 Allowance for doubtful accounts: Accounts receivable 38,000 28,212 -- 31,212 35,000 June 30, 2000 Allowance for doubtful accounts: Accounts receivable 20,000 193,090 -- 175,090 38,000

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