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 December 28, 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 December 28, 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 Sheets as of December 28, 2002 and September 28, 2002 3 Consolidated Statements of Operations - Three Months Ended December 28, 2002 and December 29, 2001 5 Consolidated Statement of Shareholders' Equity - Three Months Ended December 28, 2002 6 Consolidated Statements of Cash Flows - Three Months Ended December 28, 2002 and December 29, 2001 7 Notes to Consolidated Financial Statements 9 Item 2 Management Discussion and Analysis 15 PART II - OTHER INFORMATION Item 2 Changes in Securities 18 Item 4 Submission of Matters to a Vote of Security Holders 18 Item 6 Exhibits and Reports on Form 8-K 18 -2- PART I - FINANCIAL INFORMATION Item 1 Financial Statements GODDARD INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS December 28, 2002 September 28, 2002 ASSETS Unaudited Audited CURRENT ASSETS: Cash and cash equivalents $ 137,089 $ 301,417 Cash - restricted 250,000 200,000 Accounts receivable, net of allowances 1,045,957 995,003 Inventories 2,288,204 2,300,792 Refundable taxes on income 427,753 373,765 Prepaid expenses and taxes 74,919 97,171 Deferred income taxes 279,337 276,122 TOTAL CURRENT ASSETS 4,503,259 4,544,270 NET PROPERTY, PLANT AND EQUIPMENT 1,498,835 1,542,034 OTHER ASSETS: Deferred charges 12,291 12,291 Deferred income taxes - long term 149,592 164,454 Investment 250,000 250,000 Deferred financing charges 169,679 173,332 Intangible assets 112,908 115,108 Goodwill 2,388,074 2,331,512 TOTAL OTHER ASSETS 3,082,544 3,046,697 TOTAL ASSETS $9,084,638 $9,133,001 LIABILITIES AND SHAREHOLDERS'EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $1,492,088 $ 151,499 Accounts payable 494,724 567,736 Accrued expenses 459,998 465,641 Deferred compensation 68,988 68,988 TOTAL CURRENT LIABILITIES 2,515,798 1,253,864 LONG-TERM DEBT 1,779,001 3,039,338 DEFERRED COMPENSATION 352,787 345,571 -3- SHAREHOLDERS' EQUITY: Capital Stock: Preferred stock - par value $.01 per share; 3,000,000 shares authorized, none issued or outstanding. - - Common stock - par value $.01 per share; 12,000,000 shares authorized, 2,560,684 issued and outstanding at December 28, 2002 and September 28, 2002 25,607 25,607 Additional paid-in capital 700,487 700,487 Accumulated other comprehensive income 85,988 49,440 Retained earnings 3,624,970 3,718,694 TOTAL SHAREHOLDERS'EQUITY 4,437,052 4,494,228 TOTAL LIABILITIES AND SHAREHOLDERS'EQUITY $9,084,638 $9,133,001 The accompanying notes are an integral part of the consolidated financial statements -4- GODDARD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the Three For the Three Months Ended Months Ended December 28, 2002 December 29, 2001 NET SALES $1,624,805 $1,643,336 COST OF SALES 1,067,909 1,061,243 GROSS PROFIT 556,896 582,093 SELLING AND ADMINISTRATIVE EXPENSES 654,553 731,711 INCOME (LOSS) FROM OPERATIONS (97,657) (149,618) OTHER INCOME (EXPENSE): Interest expense (65,777) (58,521) Other income, net 7,075 7,957 Foreign exchange (864) (3,423) TOTAL OTHER INCOME (EXPENSE) (59,566) (53,987) INCOME (LOSS) BEFORE TAXES (157,223) (203,605) BENEFIT FROM INCOME TAXES (63,499) (80,600) NET LOSS ($93,724) $(123,005) EARNINGS PER SHARE: Net Income: Basic $(0.04) ($0.06) Diluted N/A 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 THREE MONTHS ENDED DECEMBER 28, 2002 Accum Additional Compre- Other Com- Common paid-in hensive Retained prehensive stock capital income earnings income Total Balance at September 28, 2002 2,560,684 shares $25,607 $700,487 $3,718,694 $49,440 $4,494,228 Net loss - - (93,724) (93,724) - (93,724) Other comprehensive income: Foreign currency translation, net of taxes of ($25,000) - - 36,548 - 36,548 36,548 Comprehensive loss $(57,176) Balance at December 28, 2002 2,560,684 shares $25,607 $700,487 $3,624,970 $85,988 $4,437,052 The accompanying notes are an integral part of the consolidated financial statements -6- GODDARD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended December 28, 2002 December 29, 2001 CASH FLOWS FROM OPERATING ACTIVITIES: Net operating loss $(93,724) $(123,005) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 80,989 119,014 Changes in assets and liabilities: Accounts receivable (34,230) 367,190 Inventories 37,943 (22,126) Refundable income taxes - 10,108 Prepaid expenses and other 23,127 113,244 Accounts payable (83,702) (248,848) Accrued expenses (13,978) 23,416 Income taxes receivable/payable - 2,045 Deferred income taxes (63,500) (82,645) Deferred compensation 6,451 (6,546) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (140,624) 151,847 CASH FLOWS FROM INVESTING ACTIVITIES: Deferred charges - (17,330) Property, plant and equipment additions (13,875) (29,054) NET CASH USED IN INVESTING ACTIVITIES (13,875) (46,384) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long term debt 817,679 - Repayments of long term debt (782,508) (122,311) Issuance of common stock - 206,000 NET CASH PROVIDED BY FINANCING ACTIVITIES 35,171 83,689 EFFECT OF EXCHANGE RATE CHANGES ON CASH 5,000 10,800 NET INCREASE (DECREASE) IN CASH (114,328) 199,952 CASH AND EQUIVALENTS - BEGINNING 501,417 $815,704 CASH AND EQUIVALENTS - ENDING $ 387,089 $1,015,656 -7- Supplemental Disclosures of Cash Flow Information CASH PAID DURING THE PERIOD: Interest $61,200 $49,600 Income taxes - - The accompanying notes are an integral part of the consolidated financial statements -8- GODDARD INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 28, 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 28, 2002 that is included in the Company's Form 10-KSB and 10-KSB/A. The Company believes the disclosures contained herein are adequate to make the information presented not misleading. Intangible Assets: The Company adopted Financial Accounting Standards Statements Nos. 141, "Business Combinations" (SFAS No. 141), and 142, "Goodwill and Other Intangible Assets" (SFAS No. 142), effective September 29,2002. 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 not be amortized, but rather be tested at least annually for impairment. Asset Impairment: The Company adopted Financial Accounting Standards Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", effective September 29, 2002. In accordance with SFAS No. 144, long-lived assets to be held and used by the Company are reviewed at least annually 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 flow exist. If -9- 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. Reclassifications: Certain amounts in the September 28, 2002 financial statements have been reclassified to conform with the December 28, 2002 presentation, with no affect on previously reported net income, earnings per share, or shareholders' equity. 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. and Mack Valves Pty Ltd ("Mack Valves") (collectively, the "Company"). Goddard Management Company, Inc., incorporated on July 29, 1999, was dissolved during the quarter ended June 29, 2002. All material intercompany transactions have been eliminated. The information shown in the consolidated financial statements reflects all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim period, and are subject to adjustment at year end. NOTE 3. INVENTORIES: Consolidated inventories are comprised of the following: December 28, September 28, 2002 2002 Finished goods $1,908,731 $1,925,843 Work in process 79,888 78,436 Raw materials 299,585 296,513 $2,288,204 $2,300,792 NOTE 4. GOODWILL AND INTANGIBLE ASSETS Prior to the Company's adoption of SFAS Nos. 141, 142 and 144, management conducted a preliminary review of the impact of adopting these new standards and, as a result of this review, expected that there would be no impairment -10- or other negative impact, and made no adjustment to the carrying value of goodwill and other intangibles. In conjunction with the Company's adoption of SFAS Nos. 141, 142 and 144 the Company completed transitional goodwill impairment testing for its reporting units. The testing requires the Company to compare the fair value of its reporting units to the carrying value of the net assets of the respective reporting units. The Company concluded that the fair value exceeded the carrying value, and that no transitional impairment should be recognized. In addition, it was determined that no reclassification of goodwill to amortizable intangible assets was warranted as a result of the adoption of SFAS 142. The following table displays the effect on prior period earnings, had SFAS 142 been adopted and in effect at that time: Three months ended December 28, December 29 2002 2001 Net loss ($ 93,724) ($123,005) Add back: goodwill amortization, net of tax - 14,117 Adjusted net loss ($ 93,724) ($108,888) Basic earnings per share: Net income ($0.04) ($0.06) Goodwill amortization - 0.01 Adjusted net income ($0.04) ($0.05) At December 28, 2002 intangible assets are comprised of the following: Gross carrying Accumulated Amount Amortization Amortized intangible assets: Patent pending $ 26,938 $ 200 CE Mark 88,170 2,000 Total $115,108 $ 2,200 Unamortized intangible asset: Goodwill $2,388,074 Amortization expense for the three months ended December 28, 2002 totaled $2,200. Approximate future amortization expense for the remaining life of the intangible assets is $10,100 for each of the fiscal years 2003, 2004, 2005, 2006 and 2007, and $62,408 thereafter. There has been no change in the carrying value of unamortizable intangible assets during the three months ended December 28, 2002 -11- NOTE 5. LONG-TERM DEBT: At December 28, 2002, The Company's 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 at the bank's prime rate plus l.5% thereafter. $ 674,328 $ 15,000 Revolving line of credit, Commerce Bank and Trust Company, bearing interest at the bank's prime rate plus l.5%, due in March 2004. 1,104,673 - Note payable, National Australia Bank, due in quarterly installments of approximately A$71,000 ($40,000) including interest at 9.30% through November 2005 (Denominated in AUD). - 434,354 Revolving line of credit, National Australia Bank, current rate of 6.36% 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). - 1,008,720 Capital lease obligations for machinery. (Denominated in AUD). - 34,014 $1,779,001 $1,492,088 All of the above bank debt is secured by substantially all of the assets of the Company. At December 28, 2002 the Company was not in compliance with certain financial covenants of its loans with National Australia Bank, and accordingly, the Company has classified the National Australia Bank debt as current. See Note 10, Subsequent Events, for further discussion of long-term debt. -12- NOTE 6. 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: December 28, September 28, 2002 2002 Deferred tax asset Deferred compensation $ 156,200 $ 156,200 Capital loss carry forward 167,700 167,700 Inventory valuation 156,200 141,100 Accrued salaries 95,500 95,500 Bad debts 31,800 31,800 Foreign tax credit carry forward 93,000 93,000 Net operating loss carry forward 113,000 109,000 Other 13,229 3,976 Total gross deferred tax assets 826,629 798,276 Deferred tax liabilities: Depreciation (92,200) (92,200) Amortization (64,800) (64,800) Gain on foreign currency (58,000) (33,000) Total gross deferred tax liabilities (215,000) (190,000) Deferred tax asset before valuation allowance 611,629 608,276 Less valuation allowance (182,700) (167,700) $428,929 $440,576 Management has established valuation allowances against the deferred tax assets attributable to the capital loss and a portion of the net operating loss carry forwards. NOTE 7. ENVIRONMENTAL MATTERS: In 1998, the Company filed a Class "C" Response Action Outcome (RAO) Statement with the Massachusetts Department of Environmental Protection regarding its facility in Worcester, Massachusetts. The Company has been conducting periodic monitoring as required by the RAO. No further action is required at this time. -13- NOTE 8. EARNING PER SHARE: The following data show the amounts used in computing earnings per share (EPS) from operations. Three months ended December 28, 2002 Loss Common Shares EPS Basic EPS: Loss available to common shareholders ($ 93,724) 2,560,684 ($.04) Diluted EPS are not applicable for a period in which a loss is reported. Three months ended December 29, 2001 Loss Common Shares EPS Basic EPS: Loss available to common shareholders ($123,005) 2,165,080 ($.06) Diluted EPS are not applicable for a period in which a loss is reported. -14- NOTE 9. 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 three months ended December 28, 2002, in thousands of dollars, is as follows: Western Asia/ Corporate Hemisphere Pacific Total Total sales - $ 798 $ 870 $1,668 Intercompany sales 7 36 43 Sales to external Customers - 791 834 1,625 Operating profit (loss) (110) ( 9) 21 (98) Total interest 9 31 53 93 Intercompany interest 27 27 Interest expense 9 31 26 66 Total other income - 35 (1) 34 Intercompany interest - 27 - 27 Other income - 8 (1) 7 Foreign exchange - - 1 1 Depreciation and amortization - 52 29 81 Segment profit (loss) (119) (4) (34) (157) Expenditures for segment assets - 3 11 14 Segment assets 8,002 8,122 4,234 20,359 Eliminations in consolidation (6,699) (4,454) (121) (11,274) Total assets $1,303 $3,669 $4,113 $9,085 -15- Summarized segment financial information for the three months ended December 29, 2001, in thousands of dollars, is as follows: Western Asia/ Corporate Hemisphere Pacific Total Total sales - $ 830 $ 834 $1,664 Intercompany sales 2 19 21 Sales to external customers - 828 815 1,643 Operating profit (139) ( 4) ( 7) (150) Total interest 9 27 50 86 Intercompany interest 27 27 Interest expense 9 27 23 59 Total other income - 31 4 34 Intercompany interest - 27 - 27 Other income - 4 4 8 Foreign exchange - - (3) (3) Depreciation and amortization - 72 47 119 Segment profit (loss) (60) 18 (12) (53) Expenditures for segment assets - 20 9 29 Segment assets 7,880 8,401 4,119 20,400 Eliminations in Consolidation (6,688) (3,783) (150) (10,621) Total assets $1,192 $4,618 $3,969 $9,779 NOTE 10 SUBSEQUENT EVENTS On January 31, 2003, the Company sold substantially all of the operating assets of the business of Goddard Valve to Engineered Controls International, Inc. (ECII), for $4.1 million dollars less the reduction, if any, in the total value of Goddard Valve's inventory and accounts receivable at the date of sale as compared to the total value of inventory and accounts receivable at June 30, 2002. At the time of sale, $3.2 million was paid in cash, $700,000 was held back pending the final determination of inventory values, and $200,000 was held back pending the collection of accounts receivable. Reference is hereby made to the Company's Form 8-K filed on February 3, 2003. Approximately $1.9 million of the proceeds from the sale was used to retire all of the Company's outstanding debt to Commerce Bank and Trust Company. -16- Item 2 - MANAGEMENT DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS FOR THREE MONTHS ENDED DECEMBER 28, 2002 The discussion of results of operations set forth below includes the operations of Goddard Valve Corporation ("Goddard Valve"). The reader should bear in mind that the assets of Goddard Valve were sold on January 31, 2003 (see Footnote 10 to the financial statements, Subsequent Events). Net sales for the three months ended December 28, 2002 were $1,625,000 with a net loss of $94,000, or $.04 per share, compared with net sales of $1,643,000 with a net loss of $123,000, or $.06 per share, for the corresponding period last year. Had SFAS 142 been adopted for the three months ended December 29, 2001, the net loss would have been $109,000 or $.05 per share. New orders received in the first quarter were 4.3% higher than for the same period last year. New orders at Goddard Valve were 10% higher than for the same quarter last year, while new orders at Mack Valves were level with the same quarter last year. At December 28, 2002, the backlog of orders was 22% lower than at the end of last year's first quarter, with Goddard Valve's backlog down 57% and Mack Valves' up 29%. The consolidated operating loss improved by $52,000 from a loss of $150,000 to a loss of $98,000. Of the $52,000 improvement, $29,000 was a result of a reduction in Corporate expenses and $28,000 as a result of an improvement in operating profit at Mack Valves; these were partially offset by a $5,000 increase in operating loss at Goddard valve. The slightly greater operating loss of $5,000 at Goddard Valve was the net result of expenses which were $21,000 less than the previous year period and $26,000 of lower gross margins. Lower expenses followed actions taken in October 2001 which included reductions in management salaries of 10%, a freeze on all other salaries, a 15% workforce reduction, and selected reductions in other costs. The lower gross margins were primarily from underabsorption of overhead on lower net sales, which declined by 4% from the same period last year. The improvement of $29,000 in operating profit at Mack Valves resulted from a $8,000 improvement from operations and a $21,000 reduction in Goodwill amortization resulting from a change in accounting for Goodwill (see Note 4 to the Financial Statements). The $8,000 operating improvement resulted from increased net sales, which were 2 % higher than the same period last year, while cost of goods and expenses were essentially the same as the same period last year. The reduction in Corporate expenses of $28,000 was the result of actions taken in October of 2001, similar to those described above at Goddard Valve, and in May of 2002, which consisted of substituting stock options in lieu of salary for certain senior members of the management team; stock options in lieu of fees for directors of the company; reducing professional fees associated with being a public company; and reducing administrative functions within the company. -17- This year's other expenses increased by $6,000 when compared to the same period last year, the net result of an increase of interest charges of $7,000 partially offset by slightly lower losses on foreign exchange. LIQUIDITY AND CAPITAL RESOURCES Subsequent to the end of the quarter, the Company's liquidity and capital resources were significantly changed as a result of the sale of the operating assets of Goddard Valve, as discussed below. At December 28, 2002, cash and cash equivalents were $137,000, and working capital was $1,987,000. On that date, consolidated long-term debt equaled $3,271,000 of which $1,492,000 was short-term and $1,779,000 was long-term. Loans from Commerce Bank and Trust Company ("CBTC") accounted for $15,000 of short-term and $1,779,000 long-term debt. National Australia Bank ("NAB") accounted for $1,443,000 ( denominated in AUD), all of which is classified as current because Mack Valves had not met its debt service coverage covenant with NAB. NAB is aware of the matter and has elected to not take any action at this time with regard to its loan. The sale of Goddard Valve's assets was unrelated to the default debt service coverage covenant with NAB. On January 31, 2003, the Company sold substantially all of the operating assets of its Goddard Valve subsidiary to Engineered Controls International, Inc., a Delaware corporation. The purchase price was approximately $4.1 million, less an adjustment, if any, for a reduction in the value of inventory and accounts receivable at closing as compared to the value of inventory and accounts receivable at June 30, 2002. Of the total purchase price, approximately $3.2 million was paid in cash at the closing. Up to an additional $700,000 is payable after the determination of the value of inventory at the time of closing, and up to an additional $200,000 is payable upon collection of transferred accounts receivable. On January 31, 2003, approximately $1.9 million of the cash proceeds were used to retire all of the Company's outstanding debt to Commerce Bank and Trust Company. While the Company continues to have debt service obligations to NAB from the financing of its acquisition of Mack Valves, the Company's liquidity has been dramatically improved with the sale of the assets of Goddard Valve. Management believes that this new liquidity plus the facility with NAB will be sufficient to provide normal working capital and debt service requirements of the Company's current business in the near and long term. CRITICAL ACCOUNTING POLICIES Our significant accounting policies are more fully described in Note 1 to our annual financial statements included in Form 10-KSB and 10-KSB/A for the year ended September 28, 2002. 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 -18- 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 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. Intangible Assets and Goodwill: Goodwill, created in connection with the acquisition of Mack Valves on November 1, 2000, and other intangible assets, are stated at cost, less accumulated amortizaton. Until September 29, 2002, amortization of goodwill had been computed over an estimated useful life of thirty years. On September 29, 2002, the Company adopted Financial Accounting Standards Statement ("SFAS") No. 141 "Business Combinations," SFAS No. 142, "Goodwill and Other Intangible Assets," and SFAS No. 144, " Accounting for the Impairment or Disposal of Long-Lived Assets." As a result of the adoption of SFAS Nos. 141, 142 and 144, the Company no longer amortizes Goodwill and other intangible assets with indefinite lives, but instead, tests the value of these assets for impairment at least annually. Asset Impairment: The Company adopted Financial Accounting Standards Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", effective September 29, 2002. In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", 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 flow 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. -19- 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 without impairing its core business operations; 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, including from Mack Valves to Goddard Valve; the availability of key components for the Company's products; the availability of qualified personnel; the impact of possible 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. Item 3 - Controls and Procedures Within the 90-day period prior to the date of this report, our Chief Executive Officer and Chief Financial Officer performed an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in SEC Rule 13a-14), which have been designed to ensure that material information related to the Company is made known to them and timely disclosed. Based upon that evaluation, they concluded that the disclosure controls and procedures were effective. Since the last evaluation of the Company's internal controls and procedures for financial reporting, the Company has made no significant changes in those internal controls and procedures or in other factors that could significantly affect the Company's internal controls and procedures for financial reporting. The Company's management, including the CEO and CFO, does not expect that our disclosure controls or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect -20- the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. PART II - OTHER INFORMATION Item 2 - Changes in Securities 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. In connection with the offering, Fechtor, Detwiler & Co., Inc. is providing the Company with financial advisory services for a fee. 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. The warrants which comprise part of each Unit have not yet been issued by the Company. Each warrant will be exercisable for one share of Common Stock at a price of $2.00 per share. In addition, each warrant will be separately tradeable and exercisable at any time after its issuance until December 29, 2006. The Units were sold in reliance upon the exemption provided by Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Regulation D promulgated thereunder. Item 3 - Defaults Upon Senior Securities At December 28, 2002, the Company was in default on its revolving Line of credit and note payable to National Australia Bank because it was out of compliance with certain of the financial covenants of the loans. However, NAB elected not to take any action at this time Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits (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. -21- 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 February 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 - 22 - CERTIFICATIONS I, Salvatore J. Vinciguerra, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Goddard Industries, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and - 23 - b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date February 14, 2003 By /s/Salvatore J. Vinciguerra Salvatore J. Vinciguerra Principal Executive Officer (Signature and Title) -24 - CERTIFICATIONS I, Kenneth E. Heyman, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Goddard Industries, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and -25 - b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date February 14, 2003 By /s/Kenneth E. Heyman Kenneth E. Heyman Principal Financial Officer (Signature and Title) -26- Exhibit 99.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) 	Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Goddard Industries, Inc., a Massachusetts corporation (the "Company"), does hereby certify, to the best of such officer's knowledge and belief, that: 	(1)	the Quarterly Report on Form 10-QSB for the period ended December 28, 2002 (the "Report") of the Company 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 materials respects, the financial condition and results of operations of the Company. Dated:	February 14, 2003 	_______________________________________ Salvatore J. Vinciguerra Chief Executive Office -27 - Exhibit 99.2 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) 	Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Goddard Industries, Inc., a Massachusetts corporation (the "Company"), does hereby certify, to the best of such officer's knowledge and belief, that: 	(1)	the Quarterly Report on FORM, 10-KSB for the period ended December 28, 2002 (the "Report") of the Company 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 materials respects, the financial condition and results of operations of the Company. Dated:	February 14, 2003 	_______________________________________ Kenneth E. Heyman Chief Financial Officer -28 -