SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 30, 2002 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from _______________ to ________________ Commission File No. 0-2052 GODDARD INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Massachusetts 04-2268165 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 705 Plantation Street, Worcester, Massachusetts 01605 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (508)852-2435 Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 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 requirements for the past 90 days. Yes [X] No State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Title of Each Class of Number of Shares Outstanding Common Equity Outstanding at March 30, 2002 Common Stock, $.01 par value 2,560,684 Transitional Small Business Disclosure Format Yes [ ] No [ X ] GODDARD INDUSTRIES, INC. TABLE OF CONTENTS PAGE PART I - FINANCIAL INFORMATION Item 1 Financial Statements Consolidated Balance Sheet - March 30, 2002 and March 31, 2001 3 Consolidated Statement of Operations - Three and Six Months Ended March 30, 2002 and March 31, 2001 5 Consolidated Statement of Shareholders' Equity - Six Months Ended March 30, 2002 6 Consolidated Statement of Cash Flows - Six Months Ended March 30, 2002 and March 30, 2001 7 Notes to Consolidated Financial Statements 9 Item 2 Management Discussion and Analysis 16 PART II - OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K 20 -2- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS 	 March 30, 2002 September 29, 2001 ASSETS Unaudited Audited CURRENT ASSETS: Cash and cash equivalents $ 605,431 $ 815,704 Accounts receivable, net of allowances 715,785 1,198,049 Inventories 2,713,062 2,645,007 Refundable taxes on income 387,564 222,672 Prepaid expenses 90,716 166,085 Deferred income taxes 294,972 283,943 TOTAL CURRENT ASSETS 4,807,530 5,331,460 NET PROPERTY, PLANT AND EQUIPMENT 1,659,474 1,732,675 OTHER ASSETS: Deferred charges 108,706 83,084 Deferred income taxes - long term 222,302 245,864 Investment 250,000 250,000 Deferred financing charges 126,520 52,101 Goodwill 2,335,585 2,239,917 TOTAL OTHER ASSETS 3,043,113 2,870,966 TOTAL ASSETS $9,510,117 $9,935,101 LIABILITIES AND SHAREHOLDERS'EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 135,294 $2,040,771 Accounts payable 486,028 727,511 Accrued expenses 549,419 505,119 Taxes payable - 99,753 Deferred compensation 77,976 77,976 TOTAL CURRENT LIABILITIES 1,248,717 3,451,130 LONG-TERM DEBT 3,140,025 1,332,937 DEFERRED COMPENSATION 426,055 439,863 -3- SHAREHOLDERS' EQUITY: Capital Stock: Preferred stock - par value $.01 per share; 3,000,000 shares authorized, none issued or outstanding at March 31, 2002. - Common stock - par value $.01 per share; 12,000,000 shares authorized, 2,560,684 issued and outstanding at March 30, 2002; 3,000,000 shares authorized, 2,160,684 issued and outstanding at September 29, 2001. 25,607 21,607 Additional paid-in capital 700,487 498,487 Accumulated other comprehensive income 21,997 (67,971) Retained earnings 3,947,229 4,259,048 TOTAL SHAREHOLDERS'EQUITY 4,695,320 4,711,171 TOTAL LIABILITIES AND SHAREHOLDERS'EQUITY $9,510,117 $9,935,101 The accompanying notes are an integral part of the consolidated financial statements -4- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the Three For the Six For The Three For the Six Months Ended Months Ended Months Ended Months Ended March 30, 2002 	 March 31, 2001 NET SALES $1,430,608 $3,073,944 $1,995,920 $3,390,793 COST OF SALES 946,548 2,007,791 1,181,016 2,014,975 GROSS PROFIT 484,060 1,066,153 814,904 1,375,818 SELLING AND ADMINISTRATIVE EXPENSES 738,563 1,470,274 721,548 1,296,640 INCOME (LOSS) FROM OPERATIONS (254,503) (404,121) 93,356 79,178 OTHER INCOME (EXPENSE): Interest expense (70,917) (129,438) (80,598) (151,629) Other income, net 14,000 21,957 17,378 62,151 (Loss)on foreign exchange (3,194) (6,617) - (75,200) TOTAL OTHER INCOME (EXPENSE) (60,111) (114,098) (63,220) (164,678) INCOME (LOSS) BEFORE INCOME TAXES (314,614) (518,219) 30,136 (85,500) PROVISION FOR (BENEFIT FROM) INCOME TAXES (125,800) (206,400) 8,648 (32,500) NET INCOME (LOSS) $(188,814) $(311,819) $ 21,488 $(53,000) EARNINGS PER SHARE: Net Income(loss): Basic $(0.07) $(0.13) $0.01 $ (0.02) Diluted N/A N/A $0.01 N/A The accompanying notes are an integral part of the consolidated financial statements -5- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS'EQUITY SIX MONTHS ENDED MARCH 30,2002 Unaudited Accum Additional Compre- Other Com- Common paid-in hensive Retained prehensive stock capital income earnings income Total Balance at September 29, 2001 2,160,684 shares $21,607 $498,487 $4,259,048 $(67,971) $4,711,171 Net loss - - (311,819) (311,819) - (311,819) Other comprehensive income: Foreign currency translation, net of taxes of $60,000 - - 89,968 - 89,968 89,968 Comprehensive income (221,851) Proceeds from sale of common stock 400,000 shares 4,000 396,000 - - - 400,000 Payment of private placement costs - (194,000) - - - (194,000) Balance at March 30, 2002 2,560,684 shares $25,607 $700,487 - $3,947,229 $21,997 $4,695,320 The accompanying notes are an integral part of the consolidated financial statements -6- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Six Months Ended March 30, 2002 March 31, 2001 CASH FLOWS FROM OPERATING ACTIVITIES: Net operating loss $ (311,819) $ (53,000) Adjustments to reconcile net income to net cash provided by operating activities: Gain on disposal of assets - (3,848) Depreciation and amortization 241,463 309,677 Deferred income taxes (39,516) (47,669) Changes in assets and liabilities: Accounts receivable 519,019 (368,884) Inventories (2,715) (64,591) Refundable income taxes (268,739) 15,260 Prepaid expenses and other 77,517 (43,526) Accounts payable (261,747) 219,570 Accrued expenses 22,355 (68,113) Deferred compensation (15,515) (12,718) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (39,697) (117,842) CASH FLOWS FROM INVESTING ACTIVITIES: Deferred charges (24,856) 96,493 Property, plant and equipment additions (65,917) (45,825) Proceeds from sale of equipment - 15,962 Investment in net assets of subsidiary, net of cash - (4,262,831) NET CASH USED IN INVESTING ACTIVITIES (90,773) (4,196,201) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long term debt 40,220 3,694,800 Repayments of long term debt (249,860) (157,836) Financing Fees Deferred (92,721) (59,892) Issuance of common stock 206,000 10,273 NET CASH PROVIDED BY FINANCING ACTIVITIES (96,361) 3,487,345 EFFECT OF EXCHANGE RATE CHANGES ON CASH 16,558 19,347 NET INCREASE (DECREASE) IN CASH (210,273) (807,351) CASH AND EQUIVALENTS - BEGINNING 815,704 1,630,711 CASH AND EQUIVALENTS - ENDING $ 605,431 $ 823,360 -7- Supplemental Disclosures of Cash Flow Information CASH PAID DURING THE PERIOD: Interest $129,438 $151,629 Income taxes $115,964 - The accompanying notes are an integral part of the consolidated financial statements -8- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 30, 2002 (UNAUDITED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: General: The financial statements included in this report have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission for interim reporting and include all normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation. These financial statements have not been audited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations for interim reporting. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's annual report for the year ended September 29, 2001 that is included in the Company's Form 10-KSB. The Company believes the disclosures contained herein are adequate to make the information presented not misleading. Recent Accounting Pronouncements: In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 141 "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase method of accounting and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. SFAS No. 142 addresses the initial recognition and measurement of intangible assets acquired outside of a business combination and the accounting for goodwill and other intangible assets subsequent to acquisition. SFAS No. 142 provides that intangible assets with finite lives be amortized, and that goodwill and intangible assets with indefinite lives be tested at least annually for impairment, rather than being amortized. Upon adoption of SFAS Nos. 141 and 142 the Company will stop amortization of goodwill that resulted from business combinations completed prior to the adoption of SFAS No. 141. The Company currently has goodwill and other intangible assets on its balance sheet. The Company is required to adopt SFAS Nos. 141, and 142, on October 1, 2002. Management is in the process of evaluating the impact of adopting the above standards. In October 2001 the Financial Accounting Standards Board issued SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." This pronouncement supersedes SFAS No. 121. The Company is required to adopt SFAS No. 144 on October 1, 2002. Management is in the process of evaluating the impact of adopting the above standard. In October 2001 the Financial Accounting Standards Board also issued SFAS No. 143 "Accounting for Asset Retirement Obligations." The Company does not hold any assets affected by this statement and it is not expected to have a material impact on the Company's financial statements. -9- Asset Impairment: In accordance with SFAS No. 121, "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to be Disposed Of", long-lived assets to be held and used by the Company are reviewed to determine whether any events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. For long-lived-assets to be held and used, the Company bases its evaluation on such impairment indicators as the nature of the assets, the future economic benefits of the assets, any historical or future profitability measurements, as well as other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable, the Company determines whether an impairment has occurred through the use of an undiscounted cash flow analysis of assets at the lowest level for which identifiable cash flows exist. If impairment has occurred, the Company recognizes a loss for the difference between the carrying amount and the estimated value of the asset. The fair value of the asset is measured using an estimate of discounted cash flow analysis. NOTE 2. BASIS OF PRESENTATION: The accompanying financial statements include the accounts of Goddard Industries, Inc. (Industries), its wholly-owned subsidiaries Goddard Valve Corporation (Goddard Valve), Goddard Management Company, Inc., incorporated on July 29, 1999, and Mack Valves Pty Ltd (Mack Valves), acquired on November 1, 2000 (collectively, the Company). The results of Mack Valves operations are reported for the period beginning with the date of its acquisition on November 1, 2000. All material intercompany transactions have been eliminated. NOTE 3. INVENTORIES: Consolidated inventories are comprised of: March 30,	 September 29, 2002 2001 Finished goods $2,187,953 $2,171,206 Work in process 137,480 109,169 Raw materials 387,629 364,632 $2,713,062 $2,645,007 -10- NOTE 4. LONG-TERM DEBT: On March 22, 2002, the Company entered into a Loan Agreement with Commerce Bank and Trust Company which includes a $1,550,000 revolving line of credit ("Revolver"); a $700,000 real estate mortgage loan ("Mortgage"); and a $1,000,000 acquisition guidance line of credit ("Acquisition Loan"). These facilities replaced all of the Company's previously existing facilities at Fleet National Bank. The Revolver is committed for two years at a time with an annual review, with a floating interest rate at the bank's prime rate plus 1.5%. The Mortgage is for a ten year term with a twenty year amortization schedule. Interest is fixed at 8% for the first five years, after which the rate reverts to the bank's prime rate plus 1.5%. The terms of the Acquisition Loan are to be negotiated at the time the loan is activated. All loans are secured by substantially all the properties of the Company and are subject to certain covenant requirements, the most restrictive of which relate to minimum tangible net worth and maximum leverage ratios. On March 22, 2002, in a non-cash transaction to the Company, the notes payable to Fleet National Bank, with balances aggregating $1,798,333, were repaid from the proceeds of the Commerce Bank and Trust Company financing. At March 30, 2002 long-term debt consisted of the following: LONG-TERM CURRENT Mortgage payable, Commerce Bank and Trust Company, due in 120 monthly installments of approximately $5,900 including interest at 8% for the first five years and then at the bank's prime rate plus 1.5% thereafter. $ 685,000 $15,000 Revolving line of credit, Commerce Bank and Trust Company, bearing interest at the bank's prime rate plus 1.5%, due in March 2004. 1,084,121 - Note payable, National Australia Bank, due in quarterly installments of approximately A$71,000 ($36,000) including interest at 8.85% through November 2005. (Denominated in AUD.) 381,113 110,599 Revolving line of credit, National Australia Bank, current rate of 5.9%, through October 2005. Commencing November 1, 2005 quarterly payments of principal plus interest in amounts sufficient to amortize the then outstanding balance by October 31, 2010. Interest may not exceed 9.55% for the life of the loan. (Denominated in AUD.) 959,940 - Capital lease obligations for machinery. (Denominated in AUD.) 29,851 9,695 $3,140,025 $ 135,294 All of the above bank debt is secured by substantially all assets of the Company. -11- NOTE 5. INCOME TAXES: The tax effects of the principal temporary differences giving rise to the net current and non-current deferred tax assets are as follows: March 30, September 29, 2002 2001 Deferred tax assets: Deferred compensation $ 198,000 $ 198,000 Capital loss carry forward 167,700 167,700 Inventory valuation 142,800 142,800 Foreign currency exchange - 46,000 Accrued salaries and long service leave 100,900 100,900 Bad debts 28,300 28,300 Foreign tax credit carry forward 108,500 93,000 Net operating loss carry forward 68,000 37,000 Other 3,274 2,307 Total gross deferred tax assets 817,474 816,007 Deferred tax liabilities: Depreciation (88,300) (88,300) Amortization (30,200) (30,200) Foreign currency exchange (14,000) - Total gross deferred tax liabilities (132,500) (118,500) Deferred tax asset before valuation allowance 684,974 697,507 Less valuation allowance (167,700) (167,700) $517,274 $529,807 Management has established a valuation allowance against the deferred tax asset attributable to the capital loss carry forward. NOTE 6. ENVIRONMENTAL MATTERS: In 1998, the Company filed a Class "C" Response Action Outcome (RAO) Statement with the Massachusetts Department of Environmental Protection regarding its facility in Worcester, Massachusetts. The Company has been conducting periodic monitoring as required by the RAO. No further action is required at this time. - 12 - NOTE 7. EARNINGS PER SHARE: The following data show the amounts used in computing earnings per share (EPS) from continuing operations and the effects on income and the weighted average number of shares of dilutive potential common stock. Six Months ended March 30,2002 (Loss) Common Shares EPS Basic EPS: Income available to common shareholders $(311,819) 2,362,882 $(0.13) Diluted EPS are not applicable for a period in which a loss is reported. Three Months ended March 30,2002 (Loss) Common Shares EPS Basic EPS: Income available to common shareholders $(188,814) 2,560,684 $(0.07) Diluted EPS are not applicable for a period in which a loss is reported. Six Months ended March 31,2001 (Loss) Common Shares EPS Basic EPS: Income available to common shareholders $(53,000) 2,151,273 $(0.02) Diluted EPS are not applicable for a period in which a loss is reported. Three Months ended March 30,2001 Income Common Shares EPS Basic EPS: Income available to common shareholders $ 21,488 2,157,309 $0.01 Dilutive effect of potential common stock: Stock options - 462 Diluted EPS: Income available to common shareholders after assuming exercise of dilutive securities $ 21,488 2,157,771 $0.01 - 13 - NOTE 8. SEGMENT INFORMATION: The Company conducts operations through business segments established along the following geographic lines: Western Hemisphere, which is represented by Goddard Valve, and Asia/Pacific, represented by Mack Valves. Certain expenses that are related to corporate activities, and unrelated to business segment activities, are separately stated. Summarized segment financial information for the six months ended March 30, 2002, in thousands of dollars, is as follows: Western Corporate Hemisphere Asia/Pacific Total Total sales - $1,633 $1,486 $3,119 Intercompany sales 1 44 45 Sales to external Customers - 1,632 1,442 3,074 Operating profit (282) (43) (79) (404) Total interest (expense) (17) - (112) (129) Total other income (loss) - 13 9 22 Foreign exchange - (8) 1 (7) Segment net (loss) (105) (22) (185) (312) Segment assets 8,021 8,321 4,070 20,412 Eliminations in consolidation (6,690) (4,129) (83) (10,902) Total assets $1,331 $4,192 3,987 $9,510 - 14 - Summarized segment financial information for the six months ended March 31, 2001, in thousands of dollars, is as follows: Western Corporate Hemisphere Asia/Pacific Total (five months) Sales to external Customers - $1,699 $1,691 $3,390 Operating profit(loss) $(78) (31) 188 79 Total interest (expense) (19) (1) (131) (151) Total other income (loss) 1 66 (5) 62 Foreign exchange (75) - - (75) Segment net income (60) 18 (12) (53) (loss) Segment assets 5,724 7,975 4,130 17,829 Eliminations in consolidation (5,253) (2,555) - (7,808) Total assets $ 471 $5,420 4,130 $10,021 NOTE 9 CAPITAL STOCK On October 31, 2001, the stockholders of the Company approved resolutions to amend the corporation's Restated Articles of Organization to increase the number of shares of the Company's common stock authorized to be issued from 3,000,000 to 12,000,000 shares and to authorize 3,000,000 shares of a new class of preferred stock, as yet undesignated as to series. In December 2001, the Company initiated an offering of common stock, and warrants to purchase common stock, on a private placement basis in order to raise up to $3,000,000 of equity capital to fund its acquisition strategy and working capital needs. In the offering, each share of common stock and each warrant, which is exercisable for an additional share of common stock, comprise one unit (each a Unit). Units are being offered at $1.00 per Unit, with the warrants exercisable at $2.00 per share of common stock. On December 28, 2001, the Company consummated an initial closing of the private placement at which certain executive officers and directors of the Company purchased Units for an aggregate purchase price of $400,000. Expenses associated with the private placement, totaling $194,000, have been charged to additional paid-in capital during the period ending December 29, 2001. NOTE 10. SUBSEQUENT EVENT: On April 16, 2002, Mack Valves renewed its loan facility with National Australia Bank Limited. This renewal resulted in an increase in the annual interest rate from 8.55% per annum to 9.1% per annum and the addition of a financial covenant on interest coverage. -15- PART I - FINANCIAL INFORMATION Item 2 - MANAGEMENT DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Three months ended March 30, 2002 Net sales for the second quarter ended March 30, 2002 were $1,431,000 with a net loss of $189,000 or $.07 basic loss per share compared with net sales of $1,996,000 and net income of $21,000 or $.01 basic earnings per share for the same period last year. Lower net sales followed declines in new orders at both subsidiary operations. New orders received in the three months ended March 30, 2002 were 16% lower than for the same period last year. This decrease was the result of an 18% decrease in new orders at Goddard Valve and a 14% decrease in new orders at Mack Valves compared with the same period last year. Goddard Valve's decrease was the result of continuing lower levels of demand for cryogenic equipment in the industrial gas industry. With only a part of its business dependent upon the industrial gas industry, Mack Valves' new orders were less affected, but also suffered from continuation of the effects of the global economic slowdown, particularly in Australia and Southeast Asia. At March 30, 2002 the backlog of orders was 8% lower than at the end of last year's second quarter, with a decline of backlog at Goddard Valve of 21% offsetting an increase of backlog at Mack Valves of 12%. Pretax results declined by $345,000 in the second quarter of this year compared with last year. Fully $331,000 of this decrease was caused by a decline in gross margins, as a result of decreases normally expected from lower volumes as well as increases in cost of goods resulting from under- recovery of overheads. This was particularly true at Goddard Valve, where margins, other than unrecovered overhead, have stabilized and have now begun to improve due to development of alternate sources for basic castings and machining. The remainder of the difference stems from a series of offsetting increases and decreases, including the fact that this year's second quarter expenses contained a full complement of costs for Goddard Industries Europe, whereas last year's second quarter contained none of these costs since the office did not open until May of 2001. Six Months Ended March 30, 2002 Since Mack Valves was acquired on November 1, 2000, results for the six months ended March 31, 2001 contain only five months of Mack Valves' operations, whereas the six months ended March 30, 2002 contain six months of Mack Valves. - 16- Net sales for the six months ended March 30, 2002 were $3,074,000 with a net loss of $312,000 or $.13 basic loss per share compared with net sales of $3,391,000 with a net loss of $53,000 or $.02 basic loss per share for the same period last year. New orders received in the six months ended March 30, 2002 were 7% lower than for the same period last year, with new orders at Goddard Valve 9% lower than for the same period last year, and new orders at Mack Valves 6% lower than for the same period last year. Pretax results declined by $433,000 for the first six months of this year compared with the same period last year. Of this amount, $310,000 is the result of a decline in gross margins. As was the case with second quarter results, year to date results were similarly affected by lower volumes and the impact of under-recovered overhead. The increase of $174,000 in selling, general and administrative expense was the direct result of the fact that this year's results have six months of Mack Valves and European expenses, whereas last year's results contain only five months of Mack Valves and no expenses for the European office. In an effort to return the Company to profitability in as prompt a manner as possible, management is exploring plans to reduce operating expenses by an annual rate of up to $500,000. The reductions could take the form of substitution of stock options in lieu of salary for certain senior members of the management team; reduction of professional fees associated with being a public company; and reduction of other administrative functions within the company. No reductions are planned which would impair the Company's ability to obtain and deliver new business, or which would impair the Company's ability to produce the highest quality products and service that Goddard Industries is so well known for. LIQUIDITY AND CAPITAL RESOURCES On March 22, 2002, the Company entered into an agreement with Commerce Bank and Trust Company of Worcester, Massachusetts (Commerce Bank) which provides the Company with working capital, long term capital, and acquisition standby funds. This agreement replaces the agreement which had been in effect with Fleet National Bank since the acquisition of Mack Valves on November 1, 2000. The Mack Valves acquisition was financed through secured credit facilities amounting to approximately $3,668,000 furnished by Fleet National Bank and National Australia Bank Limited. Under the new agreement with Commerce Bank, the Company may borrow up to $1,550,000 on a revolving line of credit; has obtained a loan of $700,000 secured by a mortgage against its land and building in Worcester, Massachusetts; and obtained a $1,000,000 guidance line of credit for approved acquisitions. All loans are secured by substantially all of the assets of the Company, and are subject to certain covenants. On April 16, 2002, Mack Valves renewed its agreement with National Australia Bank Limited under substantially the same terms as its previous agreement, but with slightly higher interest rates and a financial covenant added. -17- At March 30, 2002, consolidated long-term debt equaled $3,275,000 of which $135,000 was short term and $3,140,000 was long-term. Commerce Bank accounts for $15,000 short-term and $1,769,000 long-term debt while National Bank of Australia Limited accounts for $111,000 short-term and $1,341,000 long-term debt. The balance of long-term debt represents capital lease obligations. At March 30, 2002 cash and cash equivalents were $605,000 and working capital was $3,559,000. In December 2001, the Company initiated an offering of common stock and warrants to purchase common stock on a private placement basis in order to raise additional equity capital. These funds will be aimed primarily at funding the Company's acquisition strategy and secondarily at supplementing working capital for operations. An initial closing of the sale of common stock and warrants to certain executive officers and directors of the Company was completed on December 28, 2001, with gross proceeds to the Company of $400,000. The securities offered in the private placement have not been and will not be registered under the Securities Act of 1933, as amended (Securities Act), and may not be offered or sold in the United States absent registration under the Securities Act or an applicable exemption from the registration requirements of the Securities Act. The private placement could be dilutive to existing stockholders of the Company on a book value basis. There is no guarantee that the Company will be successful in completing the private placement. Management believes that the new Commerce Bank facility described above and the renewed facility with National Bank of Australia Limited will be sufficient to provide normal working capital and debt service requirements of the Company's current business on both a short-term and on a long-term basis, as well as providing some degree of ability to fund expansion through acquisition. The Company has incurred debt, and therefore increased interest costs, as a result of its acquisition of Mack Valves, and these increased costs could have an effect on the Company's liquidity and capital resources. Management of the Company recognizes that it is necessary to return to profitability in the long term to assure continued funding of its operations. The Company plans to do so by increasing business levels, as well as by reducing its costs and expenses as mentioned above. CRITICAL ACCOUNTING POLICIES Our significant accounting policies are more fully described in Note 1 to our financial statements. However, certain of our accounting policies are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgment by our management; as a result, they are subject to an inherent degree of uncertainty. In applying these policies, our management makes estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. Those estimates and judgments are based upon our historical experience, the terms of existing contracts, our observance of trends in the industry, information that we obtain from our customers and outside sources, and various other assumptions that we believe -18- to be reasonable and appropriate 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 form these estimates under different assumptions or conditions. Our most significant accounting policies include: Deferred Tax Assets: Deferred tax assets arise from temporary differences between recognition of certain expenses for financial reporting and income tax purposes. Valuation allowances are established when realization of these tax assets becomes doubtful. Periodically management reviews the components of the deferred tax assets and records allowances based upon the nature of the items giving rise to them, economic conditions, and management's plans related to realization of the deferred tax assets. Goodwill: Goodwill, created in connection with the acquisition of Mack Valves on November 1, 2000, is stated at cost. Amortization is computed over an estimated useful life of thirty years. In connection with periodic reviews of this useful life, we consider changes in the economic environment, technological advances, and management's assessment of future revenue potential. FORWARD LOOKING INFORMATION Information in this report includes various forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including statements with words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect" and similar expressions, as they relate to the Company, the Company's business or the Company's management. Forward-looking statements are based largely on the Company's current expectations and projections about future events and financial trends affecting the financial condition of the business. These forward-looking statements are subject to a number of risks, uncertainties and assumptions about the Company, including, among other things, general economic and business conditions, both nationally, internationally and in the Company's markets; the Company's expectations and estimates concerning the Company's future financial performance, financing plans and the effect of competition; the ability of the Company to reduce expenses as planned; capital expenditures by competitors; market acceptance of new products; the development of new competitive technologies; the ability to satisfy demand for the Company's products; the ability to achieve low cost sourcing; the availability of key components for the Company's products; the availability of qualified personnel; the impact of future acquisitions; international, national, regional and local economic and political changes; and trends affecting the cryogenic valve industry, the Company's financial condition or the results of its operations. Given the uncertainties that attach to the Company's forward-looking statements, undue reliance should not be placed on them. The Company's actual results could differ materially from those anticipated in its forward-looking statements. -19- PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits (10) Material Contracts Loan Agreement, Security Agreement, and Mortgage and Security Agreement dated March 22, 2002 between the Company and Commerce Bank and Trust Company, Worcester, Massachusetts. (11) Statement Re: Computation of Per Share Earnings. The information set forth in Note 7 to the Financial Statements found in PART I hereof is hereby incorporated. (b) The Company did not file any reports on Form 8-K during the quarter covered by this report. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated as of May 14, 2002 GODDARD INDUSTRIES, INC. By:/s/Salvatore J. Vinciguerra ---------------------------- Salvatore J. Vinciguerra President, Chief Executive Officer By:/s/Kenneth E. Heyman ---------------------------- Kenneth E. Heyman Principal Financial and 				 Accounting Officer -20-