SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 29, 2003 [ ] TRANSITION REPORT UNDER 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)852-2436 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 29, 2003 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 March 29, 2003 and September 28, 2002 (Unaudited) 3 Consolidated Statements of Operations - Three and Six Months Ended March 29, 2003 and March 30, 2002 (Unaudited)	 5 Consolidated Statement of Shareholders' Equity - Six Months Ended March 29, 2003 (Unaudited)	 7 Consolidated Statements of Cash Flows - Six Months Ended March 29, 2003 and March 30, 2002 (Unaudited) 8 Notes to Consolidated Financial Statements 10 Item 2 Management Discussion and Analysis 19 Item 3 Controls and Procedures 23 PART II - OTHER INFORMATION Item 3 Defaults Upon Senior Securities 24 Item 6 Exhibits and Reports on Form 8-K 24 -2- PART I - FINANCIAL INFORMATION Item 1 Financial Statements GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS 	 March 29, 2003 September 28, 2002 ASSETS Unaudited Audited CURRENT ASSETS: Cash and cash equivalents $1,159,130 $ 251,417 Cash - restricted - 250,000 Accounts receivable, net of allowances 626,115 532,167 Inventories 868,673 826,940 Refundable taxes on income 445,967 373,765 Prepaid expenses and taxes 87,596 93,964 Deferred income taxes 114,897 276,122 TOTAL CURRENT ASSETS 3,302,378 2,604,375 NET PROPERTY, PLANT AND EQUIPMENT 605,476 870,705 OTHER ASSETS: Deferred charges - 12,291 Deferred income taxes - long term 166,801 164,454 Real estate held for sale 265,029 - Investment 250,000 250,000 Deferred Financing Charges 33,543 32,437 Goodwill 2,521,063 2,331,512 Net assets of discontinued operations 407,998 738,388 TOTAL OTHER ASSETS 3,644,434 3,529,082 TOTAL ASSETS $7,552,288 $7,004,162 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $1,543,134 $ 136,499 Accounts payable 427,806 351,432 Accrued expenses 409,646 277,875 Deferred compensation 68,988 68,988 TOTAL CURRENT LIABILITIES 2,449,574 834,794 LONG-TERM DEBT - 1,329,569 DEFERRED COMPENSATION 352,483 345,571 The accompanying notes are an integral part of the consolidated financial statements -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 March 29, 2003 and September 28, 2002 25,607 25,607 Additional paid-in capital 700,487 700,487 Accumulated other comprehensive income 176,808 49,440 Retained earnings 3,847,329 3,718,694 TOTAL SHAREHOLDERS' EQUITY 4,750,231 4,494,228 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $7,552,288 $7,004,162 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 29, 2003 March 30, 2002 NET SALES $825,612 $1,695,532 $604,675 $1,442,463 COST OF SALES 494,427 1,026,097 343,459 843,714 GROSS PROFIT 331,185 669,435 261,216 598,749 SELLING AND ADMINISTRATIVE EXPENSES 528,479 914,754 459,035 901,150 LOSS FROM OPERATIONS (197,294) (245,319) (197,819) (302,401) OTHER INCOME (EXPENSE): Interest expense (56,861) (119,034) (70,942) (129,463) Other income (loss), net (22,863) 11,442 14,010 21,968 Gain(loss)on foreign exchange (820) (1,685) 4,603 1,180 TOTAL OTHER INCOME (EXPENSE) (80,544) (109,277) (52,329) (106,315) LOSS FROM CONTINUING OPERATIONS BEFORE TAXES (277,838) (354,596) (250,148) (408,716) BENEFIT FROM INCOME TAXES (110,501) (141,502) (100,009) (162,780) LOSS FROM CONTINUING OPERATIONS, NET OF TAXES (167,337) (213,094) (150,139) (245,936) LOSS FROM DISCONTINUED OPERATIONS NET OF INCOME TAX BENEFIT (306,721) (354,688) (38,675) (65,883) GAIN ON DISPOSITION OF DISCONTINUED OPERATIONS NET OF INCOME TAX EXPENSE OF $336,822 696,417 696,417 - - NET INCOME (LOSS) $222,359 $128,635 $(188,814) $(311,819) The accompanying notes are an integral part of the consolidated financial statements -5- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Continued) (Unaudited) For the Three For the Six For The Three For the Six Months Ended Months Ended Months Ended Months Ended March 29, 2003 	 March 30, 2002 EARNINGS (LOSS) PER SHARE: Basic: Continuing operations $(0.06) $(0.08) $(0.06) $(0.10) Discontinued operations (0.12) (0.14) (0.01) (0.03) Gain on disposition of Discontinued operations 0.27 0.27 - - Net income (loss) $0.09 $0.05 $(0.07) $(0.13) Weighted average shares 2,560,684 2,560,684 2,560,684 2,362,882 The accompanying notes are an integral part of the consolidated financial statements -6- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY SIX MONTHS ENDED MARCH 29,2003 (Unaudited) 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 income - - 128,635 128,635 - 128,635 Other comprehensive income: Foreign currency translation, net of taxes of ($85,000) - - 127,368 - 127,368 127,368 Comprehensive income $256,003 Balance at March 29, 2003 2,560,684 shares $25,607 $700,487 $3,847,329 $176,808 $4,750,231 The accompanying notes are an integral part of the consolidated financial statements -7- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Six Months Ended March 29, 2003 March 30, 2002 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 128,635 $ (311,819) Adjustments to reconcile net income to net cash provided by operating activities: Loss from discontinued operations 354,688 65,883 Gain on disposal of assets (696,417) - Depreciation and amortization 77,997 112,192 Deferred income taxes 223,730 (39,516) Changes in assets and liabilities: Accounts receivable (39,464) 248,019 Inventories 43,848 22,055 Refundable income taxes (70,567) (268,739) Prepaid expenses and other 13,953 59,742 Accounts payable (58,047) (186,225) Accrued expenses 14,036 44,363 Deferred compensation 4,435 (15,515) NET CASH USED IN OPERATING ACTIVITIES (3,173) (269,560) CASH FLOWS FROM INVESTING ACTIVITIES: Net proceeds from sale of business 3,200,000 - Deferred charges 12,291 (24,856) Property, plant and equipment additions (18,032) (52,872) Cash provided by (used in) discontinued operations (759,282) 216,818 NET CASH PROVIDED BY INVESTING ACTIVITIES 2,434,977 139,090 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long term debt 203,574 40,220 Repayments of long term debt (2,003,005) (249,860) Issuance of common stock - 206,000 Finance fees deferred - (92,721) NET CASH USED IN FINANCING ACTIVITIES (1,799,431) (96,361) EFFECT OF EXCHANGE RATE CHANGES ON CASH 25,340 16,558 NET INCREASE (DECREASE) IN CASH 657,713 (210,273) CASH AND EQUIVALENTS - BEGINNING 501,417 815,704 CASH AND EQUIVALENTS - ENDING $1,159,130 $ 605,431 The accompanying notes are an integral part of the consolidated financial statements -8- Supplemental Disclosures of Cash Flow Information CASH PAID DURING THE PERIOD: Interest $116,772 $129,438 Income taxes $ - $115,964 The accompanying notes are an integral part of the consolidated financial statements -9- GODDARD INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 29, 2003 (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 are included in the Company's Forms 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 -10- 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 fair value of the asset, measured using an estimate of discounted cash flow analysis. Stock Options: The Company adopted Financial Accounting Standards Statement No. 148, "Accounting for Stock-Based Compensation", effective September 29, 2002. (Note 8) Reclassifications: Certain amounts in the March 30, 2002 and September 29, 2002 financial statements have been reclassified to conform with the March 29, 2003 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. (the "Company"), its wholly-owned subsidiaries Mack Valves Corporation, formerly known as Goddard Valve Corporation ("Mack - USA"), Goddard Management Company, Inc. and Mack Valves Pty Ltd ("Mack Valves") (collectively, the "Company"). Goddard Management Company, Inc. 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. On January 31, 2003 the Company sold substantially all of the assets of Mack- USA to Engineered Controls International, Inc. ("ECII"),a Delaware corporation, for a total purchase price of approximately $3,900,000. Of the purchase price, $3,200,000 was paid in cash at the closing and an additional approximate $500,000 had been paid by April 1, 2003. Up to an additional $200,000 is payable upon collection of transferred accounts receivable. The assets sold included Mack-USA's machinery and equipment, office equipment, inventory, accounts receivable, intellectual property and proprietary information, including rights to the use of the names "Goddard Industries, Inc." and "Goddard Valve Corporation." The Company is restricted from competing with ECII in certain geographical areas for certain cryogenic valve types. On February 05, 2003, Goddard Valve Corporation was renamed Mack Valves Corporation. The Company must discontinue its use of the names "Goddard", "Goddard Industries, Inc." and "Goddard Valve Corporation". -11- The Mack-USA business that was sold designed, manufactured, and sold cryogenic valves that are used primarily by the industrial gas industries, including atmospheric gases, LNG, liquid hydrogen and specialty gases used in semiconductor manufacture. 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. Reference is hereby made to the Company's Form 8-K filed on February 3, 2003 and Form 8K/A filed on April 7, 2003 for additional information. As a result of the sale of Mack-USA assets, the operations of that segment have been reclassified to discontinued operations (Note 9.) In addition, the Company put the real estate that formerly housed Mack-USA on the market for sale and hopes to complete a sale within one year. Accordingly, as required by SFAS No. 144, the real estate has been classified as real estate held for sale at March 29, 2003. NOTE 3. INVENTORIES: Inventories are comprised of the following: March 29, September 28, 2003 2002 Finished goods $677,527 $680,442 Work in process 79,483 47,035 Raw materials 111,663 99,463 $868,673 $826,940 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 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 on September 29,2002, 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. -12- The following table displays the effect on prior period earnings, had SFAS 142 been adopted and in effect at that time: Six months ended March 29, March 30, 2003 2002 Net loss from continuing operations $(213,094) $(245,936) Add back: goodwill amortization, net of tax - 29,348 Adjusted net loss $ (213,094) $(216,588) Basic earnings (loss) per share: Net loss from continuing operations $(0.08) $(0.10) Goodwill amortization - 0.01 Adjusted net loss from continuing operations $(0.08) $(0.09) Three months ended March 29, March 30, 2003 2002 Net loss from continuing operations $(167,337) $(150,139) Add back: goodwill amortization, net of tax - 15,231 Adjusted net loss $(167,337) $(134,908) Basic earnings per share: Net loss from continuing operations $(0.06) $(0.06) Goodwill amortization - 0.01 Adjusted net loss from continuing operations $(0.06) $(0.05) At March 29, 2003 intangible assets are comprised of an unamortized intangible asset of Goodwill of $2,521,063. There was no amortization expense for the three or six months ended March 29, 2003. -13- NOTE 5. LONG-TERM DEBT: At March 29, 2003 the Company's long-term debt consisted of the following: LONG-TERM CURRENT Note payable, National Australia Bank, due in quarterly installments of approximately A$71,000 ($41,000) including interest at 9.30% through November 2005 (Denominated in AUD). - 428,993 Revolving line of credit, National Australia Bank, current rate of 6.50%, 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). - 1,080,540 Capital lease obligations for machinery. (Denominated in AUD). - 33,601 - $1,543,134 All of the above bank debt is secured by substantially all of the assets of Mack Valves Pty Ltd, with a letter of comfort provided by the Company. At March 29, 2003 Mack Valves was not in compliance with certain financial covenants related to these loans and accordingly, the Company has classified the National Australia Bank debt as current. -14- 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: March 29, September 28, 2003 2002 Deferred tax asset Deferred compensation $ 156,200 $ 156,200 Capital loss carry forward - 167,700 Inventory valuation 9,000 141,100 Accrued salaries 92,200 95,500 Bad debts 13,500 31,800 Foreign tax credit carry forward 93,000 93,000 Net operating loss carry forward 126,500 109,000 Other 5,598 3,976 Total gross deferred tax assets 495,998 798,276 Deferred tax liabilities: Depreciation (1,500) (92,200) Amortization (64,800) (64,800) Gain on foreign currency (118,000) (33,000) Total gross deferred tax liabilities (184,300) (190,000) Deferred tax asset before valuation allowance 311,698 608,276 Less valuation allowance (30,000) (167,700) $281,698 $440,576 Management had established a valuation allowance in connection with the deferred tax asset related to the capital loss carry forward as of September 28, 2002. The sale of Mack-USA assets allowed the Company to eliminate this valuation allowance. The valuation allowance at March 29, 2003 relates to a portion of the net operating loss carry forward. 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. -15- NOTE 8. COMMON STOCK OPTIONS The Company applies APB Opinion 25 in accounting for employee stock options. Accordingly, no compensation cost has been recognized. Had compensation costs been determined in accordance with SFAS No. 123 in the three and six months ended March 29, 2003 and March 30, 2002, pro forma net income (loss) would have been as shown: For the Three For the Six For The Three For the Six Months Ended Months Ended Months Ended Months Ended March 29, 2003 	 March 30, 2002 Net income (loss) $222,359 $128,635 $(188,814) $(311,819) Cost of stock options Net of taxes (7,920) (47,041) (20,530) (110,117) Pro forma net income (loss) $214,439 $ 81,594 $(209,344) $(421,936) Pro forma net income (loss) per share $0.08 $0.03 $(0.08) $(0.18) -16- Note 9. DISCONTINUED OPERATIONS Mack-USA's discontinued operations are presented as follows: For the Three For the Six For The Three For the Six Months Ended Months Ended Months Ended Months Ended March 29, 2003 	 March 30, 2002 NET SALES $ 341,210 $1,132,360 $802,837 $1,631,481 COST OF SALES 238,537 811,041 579,993 1,164,077 GROSS PROFIT 102,673 321,319 222,844 467,404 SELLING AND ADMINISTRATIVE EXPENSES 603,084 874,213 279,528 569,124 LOSS FROM OPERATIONS (500,411) (552,894) (56,684) (101,720) OTHER INCOME (EXPENSE) (4,516) - (7,772) (7,772) LOSS BEFORE INCOME TAXES (504,927) (552,894) (64,456) (109,492) BENEFIT FROM INCOME TAXES (198,206) (198,206) (25,781) (43,609) NET LOSS $(306,721) $(354,688) $(38,675) $(65,883) -17- The net assets of Mack-USA's discontinued operations as of September 28, 2002 are summarized as follows: ASSETS CURRENT ASSETS: Accounts receivable, net of allowances $ 462,836 Inventories 1,473,852 Prepaid expenses and taxes 3,207 TOTAL CURRENT ASSETS 1,939,895 NET PROPERTY, PLANT AND EQUIPMENT 671,329 OTHER ASSETS: Deferred charges 115,108 Deferred financing charges 140,895 TOTAL OTHER ASSETS 256,003 TOTAL ASSETS $2,867,227 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 15,000 Accounts payable 216,304 Income taxes payable 187,766 TOTAL CURRENT LIABILITIES 419,070 LONG-TERM DEBT 1,709,769 TOTAL LIABILITIES 2,128,839 NET ASSETS 738,388 -18- Item 2 - MANAGEMENT DISCUSSION AND ANALYSIS SALE OF ASSETS OF GOODARD VALVE CORPORATION On January 31, 2003 the Company, sold substantially all of the assets of Mack-USA (then Goddard Valve Corporation) to Engineered Controls International, Inc. ("ECII"),a Delaware corporation, for a total purchase price of approximately $3,900,000. $3,200,000 of the purchase price was paid in cash at the closing and approximately $500,000 was paid on April 1, 2003. Up to an additional $200,000 is payable upon collection of transferred accounts receivable. The assets sold included Mack-USA's machinery & equip- ment, office equipment, inventory, accounts receivable, intellectual property and proprietary information, including rights to the use of the names "Goddard" and "Goddard Valve Corporation." The Company is restricted from competing with ECII in certain geographical areas for certain cryogenic valve types. As a result of the above sale, on February 05, 2003 Goddard Valve Corporation was renamed Mack Valves Corporation (Mack-USA), and the Company must discontinue its use of the name "Goddard Industries, Inc." and "Goddard Valve Corporation". The Mack-USA business that was sold designed, manufactured, and sold cryogenic valves that are used primarily by the industrial gas industries, including atmospheric gases, LNG, liquid hydrogen and specialty gases used in semiconductor manufacture. After the sale of the business, Mack Valves in Australia becomes the principal operating subsidiary of the Company. Mack - USA will support Mack Valves' business in the United States. Mack Valves manufactures a range of industrial valves for specialized areas of industry, including water, steam, fire service and other valves used extensively in clean water, fire prevention, mining and other industrial applications, as well as a range of cryogenic valves. The Company has put the building and property which formerly housed Mack-USA in Worcester, Massachusetts, on the market for sale and hopes to complete a sale within one year. RESULTS OF OPERATIONS - SIX MONTHS ENDED MARCH 29, 2003 COMPARED TO MARCH 30, 2002 As a result of the sale of substantially all of the assets of Mack-USA, the Company has three classes of income for reporting purposes: income from continuing operations; income from discontinued operations (the disposed Mack-USA assets), and the gain on the sale of the Mack-USA assets. Mack Valves becomes the principal operating subsidiary of the Company, and the results of operations reported herein consist of the operating results of Mack Valves and expenses associated with the corporate office in the United States. Net sales from continuing operations for the six months ended March 29, 2003 were $1,696,000, with a net loss from continuing operations of $213,000 or $.08 basic loss per share, compared with net sales of $1,442,000 and a net -19- loss from continuing operations of $246,000 or $.10 basic loss per share in the same period last year. During the six months ended March 29, 2003, the net loss from discontinued operations was $355,000 or $.14 basic loss per share, with a net gain on the sale of Mack-USA assets of $696,000 or $.27 per share, resulting in consolidated net income of $129,000 or $.05 per share. During the comparable period last year, the net loss from discontinued operations was $66,000 or $.03 basic loss per share, resulting in a consoli- dated net loss of $312,000 or $.13 basic loss per share. New orders received in the six months ended March 29, 2003 were 9% higher than for the same period last year when stated in US dollars. When stated in Australian dollars, there was a decline of 2% as a result of differing exchange rates in effect. At March 29, 2003 the backlog of orders was 6% lower than at the comparable date last year when stated in US dollars, and 16% lower when stated in Australian dollars. Operating losses from continuing operations improved by $57,000 from a loss of $302,000 in the first six months of last year to a loss of $245,000 in the first six months of this year. The improvement was made up of four component parts: an increase in gross margin of $70,000 all of which resulted from the difference in rates between the US dollar and the Australian dollar; a decrease in expenses of $84,000 all of which took place at Mack Valves; a difference (cost) of $65,000 when Australian expenses were translated into US dollars at differing exchange rates in effect; and deferred charges of $32,000 written off at March 29, 2003. The loss from discontinued operations of $355,000 in the six months ended March 29, 2003 consisted of a combination of losses from normal operations and certain costs associated with cessation of operations of Mack-USA at the Company's Worcester, Massachusetts facility prior to moving of assets to ECII's North Carolina plant. Stated in after tax dollars, $40,000 was attributed to normal operating losses; $233,000 to severance costs associated with the plant closure; and the remainder to deferred charges written off at the time of the sale. The loss from discontinued operations during the six months ended March 30, 2002 was made up of losses from normal operations of the business. The gain on sale of Mack-USA assets of $696,000 represents a pre-tax gain of approximately $1,033,000, which was made up of the sale price of $3,924,000 less the cost of the assets sold of $2,756,000 and closing costs of $135,000. THREE MONTHS ENDED MARCH 29, 2003 COMPARED TO MARCH 30, 2002 Net sales from continuing operations for the three months ended March 29, 2003 were $826,000, with a net loss from continuing operations of $167,000 or $.06 basic loss per share, compared with net sales of $605,000 and a net loss from continuing operations of $150,000 or $.06 basic loss per share in the same period last year. -20- During the three months ended March 29, 2003, the net loss from discontinued operations was $307,000 or $.12 basic loss per share, with a net gain on the sale of Mack-USA assets of $696,000 or $.27 per share, resulting in consolidated net income of $222,000 or $.09 income per share. During the comparable period last year, the net loss from discontinued operations was $39,000 or $.01 basic loss per share, resulting in a consolidated net loss of $189,000 or $.07 basic loss per share. Operating losses from continuing operations were level in the three months ended March 29, 2003 when compared to the comparable period last year. An improvement in gross margin between the second quarter of this year and the comparable period last year of $70,000 (of which $42,000 resulted from the difference in rates between the US dollar and the Australian dollar) was offset by a difference (cost) of $38,000 when Australian expenses were translated into US dollars at differing exchange rates in effect and deferred charges of $32,000 written off at March 29, 2003. LIQUIDITY AND CAPITAL RESOURCES As a result of the sale of the operating assets of Mack-USA, the Company's liquidity and capital resources have been significantly improved. At March 29, 2003, cash and cash equivalents were $1,159,000, and working capital was $852,000. On that date, consolidated debt equaled $1,543,000 (denominated in AUD), substantially all of which is held by National Australia Bank ("NAB") and 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 Company continues to have debt service obligations to NAB from the financing of its acquisition of Mack Valves. Management believes that the liquidity generated from the sale of Mack-USA assets 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 the Forms 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 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 -21- 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 at September 28, 2002. 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. 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," -22- "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 including, among other things: general economic and business conditions, both internationally and in the Company's markets; the Company's expectations and estimates concerning the Company's future financial performance; the ability of the Company to reduce expenses 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; the availability of key components for the Company's products; the availability of qualified personnel; the impact of possible future acquisitions; risks associated with foreign operations, including currency fluctuations; international, national, regional and local economic and political changes; and trends affecting the 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 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. -23- PART II - OTHER INFORMATION Item 3 - Defaults Upon Senior Securities At March 29, 2003, the Company was in default on its approximately $1.5 million revolving line of credit and note payable to National Australia Bank because it was out of compliance with the debt service coverage covenant 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 8 to the Financial Statements found in PART I hereof is hereby incorporated. (b) The Company filed a Form 8-K on February 3, 2003 and a Form 8-K/A on April 7, 2003 -24- 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 19, 2003 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 - 25 - 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 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 -26- 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 May 19, 2003 By /s/Salvatore J. Vinciguerra Salvatore J. Vinciguerra Principal Executive Officer (Signature and Title) -27- 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 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 -28- 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 May 19, 2003 By /s/Kenneth E. Heyman Kenneth E. Heyman Principal Financial Officer (Signature and Title) -29- 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 March 29, 2003 (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:	May 19, 2003 	_______________________________________ Salvatore J. Vinciguerra Chief Executive Office -30- 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-QSB for the period ended March 29,2003 (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:	May 19, 2003 	_______________________________________ Kenneth E. Heyman Chief Financial Officer -31-