a.  BUSINESS DEVELOPMENT
 
Quality Products, Inc. (the “Company”), a Delaware corporation, is a holding company, originally organized in 1988 under the name “Analytics Inc.”  We have three wholly-owned operating subsidiaries.  QPI Multipress, Inc. (“Multipress”), an Ohio corporation, is a manufacturer of hydraulic presses and accessories.  The trade name “MultiPress” has been in use for over 60 years.  On April 26, 2001 we acquired Columbus Jack Corporation (“CJC”), an Ohio corporation.  CJC is a manufacturer of hydraulic jacks and other ground support equipment for aircraft.  The trade name “Columbus Jack” has been in use for over 45 years.  Multipress and CJC exhibit similarities and experience synergies in the areas of purchasing, production, engineering and accounting.  However, the two companies differ in the areas of sales and marketing.  Multipress uses a network of manufacturers’ representatives to distribute its products, whereas the majority of sales at CJC are United States government customers that are sold to directly using internal salespeople.  On September 29, 2003 we established A-1 Specialty & Gov’t. Packaging, Inc., an Ohio corporation (“A1”) that provides packaging services for external customers as well as for Multipress and CJC.  On October 3, 2003 A1 acquired inventory and equipment for $22,000.  In November 2004 management decided to discontinue the operations of A1 due to unacceptable performance in 2004 and an unsatisfactory outlook for 2005.  The assets and employees of A1 will be transferred to the other subsidiaries for use in their operations.  Therefore, most of the overhead expenses generated by A1 will be absorbed by the remaining entities.  The discontinuance of A1 is not expected to have a material impact on the Company’s financial statements.
 
As discussed in our September 2004 Form 15 and 8K SEC filings, the Company has elected to become non-reporting.  Therefore, this 10-KSB report will be our last SEC filing.  However, the Company intends to issue quarterly press releases.
 
b.  BUSINESS OF QUALITY PRODUCTS, INC.
 
QPI MULTIPRESS, INC.
 
Multipress manufactures industrial hydraulic bench presses, floor presses, (together, referred to as  “Multipresses” herein) and accessories used with Multipresses.  The Company is one of the leading producers of industrial hydraulic “C” frame presses in the United States.  Multipresses are used in a variety of industries, including automotive, appliance, abrasive materials, electrical and food compaction industries.  Additionally, we supply repair parts and service for this equipment.  Historically, parts and service has averaged approximately 20% of Multipress’ total revenues and represented approximately 22% of Multipress’ fiscal 2004 revenues.
 
The current Multipress line, which consists of 27 different standard models, is adaptable to CIM (Computer Integrated Manufacturing), a combination of hydraulic presses with robotics.  Multipress has provided turnkey operations to a number of Fortune 500 companies.  Turnkey systems include a combination of any number of peripheral automation devices supplied by third party companies used in conjunction with a Multipress.
 
Approximately 75% of the machines Multipress ships are special or modified in some way to suit customer requirements.  In addition to standard C-Frame or Gap Frame presses, 4 Post or 4 Column designs either with or without a moving platen can be furnished up to 1000-ton capacity.  Many special designs and configurations have been furnished in the more than 60 years Multipresses have been produced.  These include ultra high speed, special frames, variations in daylight, throat, bed size, dual or triple units, and several units located around a large dial table.
 

 
Multipress requires several different raw material components for its presses.  Multipress is not dependent on any one supplier for any of its key parts and believes that its relationship with its suppliers is satisfactory.
 
Historically, the automotive, appliance, and electrical industries have provided approximately 75% of sales revenues.  Additionally, Multipresses have been integrated with automated robot systems developed by unrelated companies and used in assembly line systems.  Multipress competes in its market with several other companies, none of which is dominant.  Multipress competes primarily based on its ability to customize its presses, the excellent quality and longevity of its product, its excellent service, and pricing.
 
Multipress markets its presses through an in house force consisting of two sales agents and through exclusive outside machine tool distributors.  Historically, Multipress’ primary markets have been in the Midwestern United States, principally Ohio, Michigan, Indiana and Illinois.
 
Multipress does not market directly abroad; however, it has sold presses through sales representatives to customers outside of the United States.  In 2004, foreign sales were approximately $67,000.
 
One customer accounted for 7% of Multipress’ sales in fiscal 2004.
 
Multipress’ order backlog has no discernable pattern, as customer purchasing is not seasonal.  Multipress’ backlog at September 30, 2004 was approximately $750,000, compared to Multipress’ historical average backlog of $800,000 to $1,000,000.  The backlog usually ships within three to six months from the date ordered.
 
COLUMBUS JACK CORPORATION   CJC manufactures hydraulic jacks and other ground support equipment for maintenance functions of commercial and government aircraft.  The current product line consists of tripod jacks, axle jacks, towbars, tire bead breakers, tire dollies, tire fixtures, and aircraft weighing systems.  Additionally, we supply repair parts and service for this equipment.  Parts and service represented approximately 41% of Columbus Jack’s fiscal 2004 revenues, compared to 42% in 2003 and the historical average of 45%.
 
We require many different raw material components for our products, but we are not dependent on any one supplier for these products.  Our relationship with suppliers is satisfactory.
 
We compete in our market with approximately five other companies worldwide, none of which is dominant.  We compete primarily based on quality, longevity, service, and pricing.
 
Our products are primarily marketed through three in-house salespeople.  Although our main market is the United States, in 2004 foreign sales were approximately $555,000.
 
The U.S. government represented approximately 64% of CJC’s sales revenues in fiscal 2004, compared with the historical average of 50%.  The largest single commercial customer represented 5% of CJC’s sales.
 
CJC’s backlog has no discernable pattern, as customer purchasing is not seasonal.  At September 30, 2004 the backlog was approximately $2.0 million, compared to our historical average backlog of  $1.75 million to $2.0 million.  The backlog usually ships within three to six months from the date ordered.
 
A-1 SPECIALTY & GOV’T. PACKAGING, INC.
 
A1 provides custom packaging and crating services to commercial and government entities as well as to Multipress and CJC.  A1 provides these services to many industries including furniture, antiques, industrial machinery, computer equipment, and art.  A1 is qualified for all military specifications and prepares both domestic and export shipments.  A1 began operations on October 1, 2003.
 

 
EMPLOYEES
 
Quality Products employed a total of 57 employees, with 54 of those full-time, as of September 30, 2004, 13 of whom belonged to the International Association of Machinists and Aerospace Workers, AFL-CIO.  We believe our relationship with the union is satisfactory.  The union contract expires August 5, 2006.
 
GENERAL
 
The Company has a registered trademark on “Multipress”, and an unregistered trademark on “Columbus Jack”.
 
The Company does require government approval of its products or services that are sold to the U.S. government.
 
The Company is not aware of any existing or probable governmental regulations, which will have a material effect on the business.
 
The Company had no research and development expenses in fiscal years 2004 or 2003.
 
The Company incurred no material costs or effects due to compliance with environmental laws in 2004 or 2003 except the settlement of the “Granville Solvents vs. CJC” legal proceeding, in which the Company and CJC issued a 24 month, $52,500 principal, 4% annual interest, note payable in exchange for Granville’s release from any future claims.  See Part I, Item 3 for details.
 
The Company maintains the following websites for information on products and services:
 
A1 – www.a-1govpackaging.com
CJC – www.columbusjack.com
Multipress – www.multipress.com
 
c.  REPORTS TO SECURITY HOLDERS
 
The Company is not required to send reports to Security Holders.  The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file with the SEC, including the Company.  The Internet address of that site is www.sec.gov.  The Company’s 10KSB and other filings may be viewed and downloaded from that site.  In addition, the public may read and copy any material that the Company files with the SEC at the SEC’s public reference room, 450 5th Street, NW, Washington, DC, 20549.  The public may obtain information on the operation of the SEC’s public reference room by calling the SEC at 1-800-SEC-0330.
 
As discussed in our September 2004 Form 15 SEC filing, the costs to develop, test, and implement the internal control program required under the Sarbanes Oxley Act were projected to be as much as $300,000, an enormous expense for a small company.  Non-reporting companies are not subject to the requirements of Sarbanes Oxley.  Therefore, this 10-KSB report will be our last SEC filing.  However, the Company intends to issue quarterly press releases.