Equipment which Web Press Corporation manufactures consists of two basic products, the Marc-25 and the Atlas. The Atlas is made in six different models. The principal difference between the Marc-25 and the Atlas is that the Atlas is twenty percent faster. Each press is composed of standard modules to unwind, print, cutoff and fold the roll of paper into a finished product. Each is arranged to meet the particular printer's requirements for the number of pages, color, and size of their products. Following are descriptions of these modules:

PERFECTOR. Web's perfector is a rotary offset perfecting printing press unit, consisting of two printing couples running "back-to-back". Each perfector will print four broadsheet-size newspaper pages, in one color, on each revolution of the printing couples. Perfectors can be configured to print up to four colors. They can print up to 32 broadsheet-size pages. They are available both with and without an integrated roll-stand.

QUADRA-COLOR UNIT. Web's Quadra-Color unit consists of four printing stations mounted around a common impression cylinder. This unit prints four colors on two broadsheet-size pages at a time. It offers better control over color register and thus is capable of greater accuracy in color printing than conventional, unit-to-unit methods for color printing. It is used in conjunction with the Company's other products to provide close register, four-color capability in the printing system. The Quadra-color can also be installed into press-lines manufactured by Goss, Dauphin Graphic Machines, Heidelberg, and King.

QUAD-STACK(TM) MODULE. Web's Quad-Stack(TM) unit consists of eight printing stations positioned in two juxtaposed vertical stacks of four printing stations each. The horizontal layout of each printing station results in a compact 4+4 perfector that prints four colors on four broadsheet-size pages at the same time. Like the Quadra-Color, it offers excellent control over color register resulting in superior color printing. It is available both with and without an integrated roll-stand and is used in conjunction with the Atlas product line. The Quad-Stack(TM) can also be installed into press-lines manufactured by Goss, Dauphin Graphic Machines, Heidelberg, and King.

FOLDER. Web's folder is used in conjunction with perfecting units, Quadra-Color units, and Quad-Stack(TM) units to fold the printed paper into a finished product. The folder cuts the paper off in every plate cylinder revolution and folds it in standard broadsheet-size newspapers, tabloid-size papers, and shopping-flyer or magazine-size products. The Company also produces two folder styles which have the capability of making a second parallel

fold to produce "digest"-size signatures which are used in printing some books and pamphlets.

TWO-POSITION ROLL ROLL-STANDS. Web's roll-stand supports two 36-inch wide rolls of paper and is used in conjunction with the perfector, Quadra-Color, and Quad-Stack units. The base roll-stand holds two 42-inch diameter rolls of paper. A larger roll-stand that holds two 52-inch diameter rolls of paper is also available. The roll-stand controls the unwinding of the paper roll and feeds it to the printing units under controlled tension.

On October 23, 2003, the Company acquired the assets of Color Impact International, Inc. (CII) and all product technology covered in a licensing Agreement dated March 20, 1998 between the Company and CII. The Company will pay CII's owner $1,000,000 over a period of 10 years with one payment of $100,000 at the time of settlement and the balance of $900,000 payable in 108 monthly payments of $8,333 starting one year from the settlement date. The assets acquired consist of the drawings and license rights to the universal printing module (UPM) designed by CII and manufactured by the Company including the Quad-Stack(TM) perfector. These assets are described as intangible assets on the Company's balance sheet. The Company will have the right of first acceptance of any new printing product technology CII and/or its owner design in the future. The license fee for new printing product technology will be 5 percent. The Company and CII have not finalized certain details of the new product licensing agreement and, therefore, no payments were made as of December 31, 2003.

The value of the intangible asset on the Company's balance sheet was determined by discounting at 8 percent the $1,000,000 payable to CII. That value was $694,988 as of October 23, 2003. The Company is amortizing this amount at the rate of $579 per printing deck sold. The Company expects it to take between nine and 10 years to fully amortize this asset. Internal Revenue Service regulations require the Company to amortize this asset on a straight-line basis over 15 years in its federal tax return.

Web Press Corporation markets its products through Company employed representatives in the United States and Canada. Foreign sales are made through independent organizations in Latin America, Asia, Europe, and the Middle East.

The Company's presses are sold in a highly competitive world market. Competition is based on a combination of price, service, quality, and the versatility of the equipment. Web's presses are priced competitively with similar products. The Company believes that features incorporated in its presses, as well as the Company's policies of supporting its customers, will allow it to continue to be very competitive. Web Press Corporation is the

only manufacturer in the United States producing a Quadra-Color unit for its market.

The primary competitors of the Company are Goss Graphic Systems, Dauphin Graphic Machines, Inc., Tensor and Heidelberg Graphics. Certain of these companies have financial resources in excess of the Company's.

The most important materials employed in Web's product line are steel and aluminum (plate and bar stock), tubing, bearings, and rubber coverings. All are available through local suppliers. The Company believes that its sources of supply for these materials are adequate for its needs and that it is not substantially dependent upon any one supplier. Lead times of up to six months are required at some times for certain materials. The Company has some of its parts manufactured to its specifications by other machine shops in the United States, China, and India.

Web Press Corporation maintains an ongoing program of product development and improvement. This program consists primarily of technical improvements and supplementary developments which have produced features and capabilities that management believes will result in competitive marketing advantages for Web's product line. In 2003, $243 thousand was expended for research and development compared to $364 thousand in 2002.

Total employment was approximately 46 persons on both December 31, 2003, and December 31, 2002.

Substantially all of the Company's operations are run by electrical energy purchased from a local utility. The Company has not experienced energy shortages and does not anticipate any difficulties in the foreseeable future. Extended shortages of energy would have an adverse impact on the Company.

Compliance with federal, state and local environmental protection laws during 2003 had no material effect upon capital expenditures, earnings, or the competitive position of Web Press Corporation.

(D) Foreign Operations

The Company's foreign operations consist entirely of export sales and related services originating at its facilities within the United States. Export sales accounted for 31.4% of total sales in 2003 and 11.2% in 2002. Further financial information relating to foreign operations for the two years ended December 31, 2003, is set forth in Note 7 (Segment Information) of the Notes to Consolidated Financial Statements.