FLOUR CITY INTERNATIONAL INC, 10-K, 2000-01-31

FLOUR CITY INTERNATIONAL INC
10-K, 2000-01-31
CONSTRUCTION - SPECIAL TRADE CONTRACTORS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM 10-K

(MARK ONE)

<TABLE>
<C> <S>
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXHANGE ACT OF 1934
</TABLE>

FOR THE FISCAL YEAR ENDED OCTOBER 31, 1999

<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>

FOR THE TRANSITION PERIOD FROM ______________ TO ______________

COMMISSION FILE NUMBER 0-23789

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FLOUR CITY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
NEVADA 62-1709152
(State of Incorporation) (IRS Employer Identification No.)
</TABLE>

915 RIVERVIEW DRIVE, SUITE ONE, JOHNSON CITY, TN 37601
(Address of principal executive offices; zip code)

(423) 928-2724
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

COMMON STOCK, $0.0001 PAR VALUE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 the past 90 days. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant on January 19, 2000, based on the Nasdaq
closing price of $3.625 per share was $6,299,960.

There were 5,375,408 shares of Common Stock, $0.0001 par value, issued and
outstanding at December 31, 1999

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement to be filed for its 2000
Annual Meeting of Stockholders are incorporated by reference to Part III of this
report.

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TABLE OF CONTENTS

<S> <C>
PART I

Item 1. Business............................................ 1
Item 2. Properties.......................................... 6
Item 3. Legal Proceedings................................... 7
Item 4. Submission of Matters to a Vote of Security
Holders................................................... 8
Supplementary Item. Executive Officers of the Registrant.... 8

PART II

Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters....................................... 9
Item 6. Selected Financial Data............................. 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 13
Item 7a. Quantitative and Qualitative Disclosures about
Market Risk............................................... 19
Item 8. Financial Statements and Supplementary Data......... 20
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure....................... 42

PART III

Item 10. Directors and Executive Officers of the
Registrant................................................ 43
Item 11. Executive Compensation............................. 43
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 43
Item 13. Certain Relationships and Related Transactions..... 43

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K............................................... 43
Signatures.................................................. 45
</TABLE>

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PART I

ITEM 1. BUSINESS

GENERAL DEVELOPMENT OF BUSINESS

Flour City International, Inc. and its majority owned subsidiaries (the
"Company" or the "Registrant") are primarily engaged in the design, engineering,
manufacture, and installation of custom curtainwall systems for the construction
industry. The Company was incorporated under the laws of the State of Nevada in
1987. The Company is a successor to another company of the same name
incorporated under the laws of the State of Nevada on January 16, 1997, and
International Forest Industries Inc. ("IFI"), an inactive corporation founded in
1987. The Company merged with and into IFI on May 16, 1997. IFI was the
surviving corporation and it subsequently changed its name to Flour City
International, Inc. The Company's primary operating units are Flour City
Architectural Metals, Inc. ("FCAM") and Flour City Architectural Metals (Asia)
Ltd. ("FCAM Asia").

FCAM, a Delaware corporation, was formed in 1893 under the name Flour City
Ornamental Iron Company as a specialty metals fabricator for the architectural
industry. In January 1997 the Company purchased FCAM from Armco, Inc. ("Armco"),
an Ohio corporation.

Flour City Architectural Metals (Pacific) Ltd. ("FCAM Pacific"), formerly
Hockley International Limited, a British Virgin Islands corporation incorporated
on May 4, 1993, was acquired by the Company in January 1997 through a share
exchange. FCAM Pacific is a holding company for the Company's Pacific-Rim
operations which are managed by FCAM Asia, formerly known as Kasion Contracting
Ltd.

The merger between the Company and IFI and the share exchange between the
Company and FCAM Pacific have been accounted for as a recapitalization. The
recapitalization resulted in the combined company assuming as its own the
historical financial information, excluding capital (common stock and additional
paid in capital), of FCAM Pacific and the capital of IFI. The acquisition of
FCAM has been accounted for as a purchase. Financial information of the Company
for periods before January 1997 reflects the operations of FCAM Pacific only.

During 1998, the Company entered into a joint venture as a 45% minority
shareholder with IMSALUM, S. A. de C. V., a corporation formed under the laws of
Mexico, for the construction and operation of a manufacturing facility in
Monterrey, Mexico. In October 1999, the Company and IMSALUM, S.A. de C.V.
mutually agreed to terminate this joint venture which resulted in the Company
recognizing a loss from the termination of the joint venture of $0.08 million.
Also during 1998, the Company entered into a joint venture with The Arlo
Aluminum Corporation, a Philippines corporation, for the manufacturing and
installation of custom curtainwall units in the Philippines. The Company is a
55% majority shareholder in this joint venture and consolidates the financial
results of the joint venture in the Company's financial statements. The joint
venture is currently working on two projects in Manila.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

For financial information reporting purposes, the Company engages in one
industry segment: the design, engineering, manufacturing, and installation of
custom curtainwall systems for the construction industry. The Company's
operations in geographic areas outside the United States principally include
Hong Kong, the Peoples' Republic of China ("PRC"), the Philippines, Thailand and
the United Kingdom. See Note 21 "Segment Information" in the Company's
consolidated financial statements included in Part II, Item 8 of this report.

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NARRATIVE DESCRIPTION OF THE BUSINESS

The Company engages in the design, engineering, manufacturing, and
installation of custom curtainwall systems for the construction industry. The
Company offers a complete range of custom curtainwall services, including
in-house design, engineering, manufacturing, assembly, installation and project
management, which it provides to building owners, developers, and general
contractors as a specialty subcontractor. The Company, one of the world's
leading full-service providers of custom curtainwall in commercial and
monumental high-rise construction, has been involved in the design, fabrication
and installation of custom curtainwall systems in the United States since the
modern high-rise emerged over 50 years ago. The Company actively participates in
the architectural design stage of its projects, and it has excellent marketing
and working relationships with major international architectural firms, and
major international and domestic developers and project managers. Some of the
most prestigious buildings in the world are accented by custom curtainwall
systems designed, fabricated, and installed by the Company. Such buildings
include:

Citicorp Center, New York
JFK Airport Terminal One, New York
320 Park Avenue (Mutual of America), New York
First Interstate Bank Tower, Los Angeles
Rock and Roll Hall of Fame, Cleveland
Key Tower, Cleveland
Empire Towers, Bangkok, Thailand
Allied Bank Tower (Fountain Place), Dallas
United Airlines Terminal at O'Hare Airport, Chicago
International Terminal at O'Hare Airport, Chicago
G.T. International Tower, Manila, Philippines
IDS Building, Minneapolis
RCBC Tower, Manila, Philippines

INDUSTRY BACKGROUND

The term "curtainwall" is used to describe the non-load bearing external
walls of modern mid-rise and high-rise buildings, which consist of a combination
of glazing, cladding elements and supports to attach the custom curtainwalls to
the main building structure. The curtainwall market is composed of standard and
custom segments. Standard curtainwall typically consists of stock components
that can be manufactured with minimal design and engineering at relatively lower
cost and correspondingly lower margins. Alternatively, custom curtainwall often
includes unique and irregular designs manufactured according to project-specific
requirements, typically at higher margins due to the extensive design and
engineering work involved.

Custom curtainwall defines high-rise and monumental buildings from an
aesthetic and architectural perspective. Custom curtainwall systems also serve a
wide range of practical purposes, including protecting the building interior
from the elements and allowing for cost savings through the introduction of high
performance, energy saving materials. The custom curtainwall component of a
typical high rise building will represent between 5% and 15% of the overall cost
of the building. The types of structures that utilize custom curtainwall systems
include mid-rise and high-rise buildings, campus-style buildings, and public
buildings such as courthouses and airport terminals.

Custom unitized curtainwall panels are produced and assembled in a factory
setting with minimal on-site operation, as opposed to the hand-cladded method of
using bricks and cement to constitute the facade of a building. Once assembled,
the curtainwall units are shipped to the job site for erection by the Company's
field labor force or by installation subcontractors. Custom curtainwall
construction requires expertise in various external building materials,
including marble, granite and other stone,

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aluminum, steel and pre-cast concrete, sealed and operable window systems, and
systems for securely attaching outside panels to building superstructures.
Custom curtainwalls allow repair work to be carried out to the facade of the
building by the replacement of a damaged wall panel without affecting the entire
external facade of the building. The deterioration and failure of older
curtainwall systems have also created demand for the repair or installation of
new custom curtainwall systems to modernize or reclad existing buildings and
structures.

UNITED STATES CURTAINWALL MARKET

As a specialty part of the commercial real estate construction market, the
custom curtainwall segment of the construction industry is driven by several
factors. The need for and development of mid-rise, campus style and high-rise
buildings, which drives demand for custom curtainwall systems, is influenced by
the supply and demand of premium office space as well as industrialization,
urbanization, suburbanization and population growth. As with the overall
commercial real estate market, the domestic and international markets in which
the Company participates are cyclical in nature. The Company believes that
decreasing vacancy rates often lead to increased rents, which in turn
contributes to increased private sector spending on construction projects, a
portion of which will utilize custom curtainwall systems.

The United States has seen an increase in the use of custom curtainwall
systems in public sector buildings and buildings with heavy public use, such as
airport terminals and courthouses. The construction of public sector projects or
the need for new or upgraded public facilities is usually supported by taxation.
Public sector buildings tend to be designed for a longer life cycle, which in
turn requires a curtainwall system that can provide superior performance with
limited maintenance. Contracts for installation of custom curtainwall systems in
public sector buildings have presented an area of growth for the Company. There
has been a significant rise in the number of private office building projects
initiated in the last few years.

The Company, by way of its international presence, hopes to mitigate
cyclical swings in the commercial real estate market of any one country by its
projects in other countries.

INTERNATIONAL MARKETS

SOUTHEAST ASIA. In light of the economic volatility in Southeast Asia,
demand for taller, premium office buildings in the region in general remains
depressed. However, parts of the region are showing signs of recovery in
comparison to prior years. For example, the Company has been asked to bid on or
is aware of new projects in the Peoples Republic of China, Hong Kong, Taiwan,
Japan, the Philippines and Thailand. In addition, several projects in Hong Kong
that were delayed have been restarted. In 1999, the Company was awarded the
curtainwall contracts for two projects in Hong Kong and one in the Shanghai that
amounted to $40 million. The Company believes that, as economic conditions in
the region improve, the continued demand for premium office space will result in
increased demand for construction of buildings that utilize custom curtainwall.
The Company also believes that the PRC, Hong Kong, and the Philippines should
continue to be significant markets for the Company's products and services in
the coming years.

MIDDLE EAST. The Company has recently experienced an increase in bid
activity throughout the Middle East, particularly in the United Arab Emirates.
To the extent the demand for custom curtainwall intensifies, the Company's
activity in the region may also increase.

EUROPE. Historically, non-European curtainwall companies have faired poorly
in their efforts to penetrate the European market. However, the Company is
investigating opportunities in this area through its London, England sales
office that opened in January 1999.

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LATIN AMERICA. The increase in economic activity in Latin America, which
started in mid-1996, continues in Mexico, Argentina and Peru. The Company
intends to pursue projects in Latin America. The Company believes that the
stabilization of the Mexican peso should assist the Company in securing custom
curtainwall projects in the growing Latin American construction industry.

For the years ended October 31, 1999, 1998, and 1997, projects located
outside the United States accounted for 66% 47%, and 40%, respectively, of total
revenues. See "Factors That May Affect Future Results" in Management's
Discussion and Analysis of Financial Position and Results of Operations in Item
7 of this report, Note 21 "Segment Information" to the Company's consolidated
financial statements included in Part II, Item 8 of this report.

SALES AND MARKETING

The fostering of strategic relationships in the construction industry
constitutes a key element in marketing the Company's services and products. The
Company seeks to build on its relationships with architects in the early design
phase of projects. By having the designs that it assisted in creating included
in the project specifications, the Company's prospects of being invited to bid
on a project are maximized and the Company gains a competitive advantage through
familiarity with a project's design. The Company also uses its relationships
with significant developers, contractors and consultants to secure invitations
to bid on monumental custom curtainwall projects worldwide. The Company's
history as one of the oldest custom curtainwall companies in the industry,
combined with its reputation and capabilities as a full service provider of
custom curtainwall systems, enhances its opportunities to selectively bid on
global projects.

The Company's projects are, and in the foreseeable future, will continue to
be awarded by private or governmental entities in a competitive bidding process.
Due to the nature of the bidding and award process, the Company has experienced,
and in the future expects to experience, delays in project awards. These delays
and the fact that the Company is not awarded many of the contracts that it bids
on, have caused, and will continue to cause, variations in quarterly and annual
results. In addition, no assurance can be given that the timing of a project
award will be consistent with the Company's expectations. The Company's failure
to win bids or obtain new projects in a timely manner could have a material
adverse effect on the Company's financial position, results of operations, and
cash flows.

MAJOR CUSTOMERS

The Company operates on several large construction contracts at a time.
While the loss of any substantial customer or contract could have a material
short-term impact on the Company's business, the Company believes that its
diverse operations would minimize the long-term impact of any such loss. During
1999 the Company received ten percent or more of its revenues from the following
customers

<TABLE>
<CAPTION>
PERCENT OF 1999
CUSTOMER REVENUES
-------- ---------------
<S> <C>
ECW Joint Venture............................. 25%
Philippine Securities Corporation............. 14%
Amec Kumagi Joint Venture..................... 14%
LMB (Lehrer McGovern Bovis)................... 12%
</TABLE>

COMPETITION

The United States and international markets for custom curtainwall
construction are cyclical and dependent on change in general economic
conditions. The curtainwall industry remains highly competitive with numerous
contractors typically bidding on each available project. A limited number of
custom curtainwall projects are in development or under construction at any
given time. The Company competes for desirable projects, financing,
subcontractors, and other resources. A significant number of

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the Company's projects are obtained through a bidding process, which is subject
to intense competition. There can be no assurance that the Company will be
successful in winning projects or that it will successfully complete future or
existing projects on a profitable basis.

The Company encounters competition in the United States and abroad from
Benson Industries, Inc., Cupples Products, Glassalum, and other curtainwall
contractors. The Company's primary competitors in Asia include Nippon Light
Metals Ltd., Builder's Federal Ltd., Permasteelisa Holdings Ltd., and Josef
Gartner & Co. Ltd. (Hong Kong). The Company regularly faces competitive bids
from one or more of these competitors when bidding for custom curtainwall
contracts, and some of these competitors have greater financial resources than
the Company. Although the level and nature of competition differs between
markets and among products, the Company believes that it competes on the basis
of cost, the quality of its design and workmanship, and its reputation. The
Company expects its markets to remain highly competitive.

GOVERNMENT CONTRACTS

No material portion of the Company's business is subject to renegotiation of
profits or termination of contracts or subcontracts at the election of any
governmental entity in the United States or abroad with which it has contracted.

SOURCES AND AVAILABILITY OF RAW MATERIALS

The Company purchases raw materials used in the production of curtainwall
units from a variety of sources on a global basis. The Company believes that
none of the materials, principally aluminum, glass and sealants, required for
its manufacturing operations are proprietary in nature and that an adequate
supply of raw materials is available from several sources.

ENVIRONMENTAL COMPLIANCE

Environmental aspects of the Company's business are regulated primarily by
federal and state laws and by the ordinances of the localities where the
Company's facilities are located. The processes currently in use by the Company
for the fabrication, assembly and erection of curtainwall units require no
material expenditures to maintain environmental compliance. For additional
information regarding environmental compliance see Item 3, "Legal Proceedings".

SEASONALITY

While the Company does not consider its business, taken as a whole, to be
seasonal, the Company's dependence on a relatively small number of large
contracts for most of the Company's work means that the timing of these
contracts can cause significant quarterly, and even annual, revenue swings.
Further, awards of contracts for new projects are generally very slow in the
period of November through January in each year. Additionally, adverse weather
conditions in northern climates often cause the field installation or erection
phase of projects to be somewhat slower in winter months than during other
periods of the year.

The Company has experienced, and in the future expects to experience,
significant delays in project awards. These delays have caused and will continue
to cause variations in quarterly results, some of which may be material.

WORKING CAPITAL PRACTICES

The Company engages in no unusual practices regarding inventories,
receivables or other working capital items. In fiscal year 1999, the Company
utilized proceeds from its 1998 public offering, bank borrowings and import
loans to fund its working capital requirements.

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BACKLOG

As of December 31, 1999 and 1998, the Company had over $125 million and $98
million in project backlog, respectively. Project backlog represents projected
remaining revenues on projects awarded, as evidenced by a letter of intent or
contract. In accordance with construction industry practices, letters of intent
are included in backlog. In addition, due to the long lead times inherent in
producing custom curtainwall units, the Company undertakes significant design
and development work at the request of project owners and developers prior to
the issuance of formal contracts. Letters of intent are, however, subject to
cancellation. The typical duration of a project from commencement to completion
ranges from 18 to 30 months depending upon the size and complexity of a specific
project. At December 31, 1999, the Company had outstanding bids on projects with
an aggregate contract value of over $160 million. There can be no assurance that
the Company will be successful in securing any contracts as a result of these
bids, that the projects will be awarded in a timely manner or that the Company
will recognize as revenue the amounts reflected as backlog.

EMPLOYEES

As of December 31, 1999, the Company employed approximately 870 people of
whom approximately 106 were in North America and 764 were in the Pacific Rim. Of
the 870 employees, approximately 204 were salaried or clerical and 666 were
involved in either the manufacturing or erection phase of active contracts.
Levels of employment vary considerably given the number and timing of active
projects particularly during the manufacturing and field erection phase. The
Company contracts with union labor for curtainwall erection services in the
United States. The Company considers its relations with its employees to be
good.

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES

Financial information about foreign and domestic operations and export sales
are set forth in Note 21 to the Company's consolidated financial statements
included in Part II. Item 8 of this report.

ITEM 2. PROPERTIES

The Company's facilities as of December 31, 1999, consist of:

<TABLE>
<CAPTION>
PRINCIPAL CHARACTER AREA
OF PROPERTY LOCATION (SQUARE FEET) HOW HELD
------------------- -------- ------------- --------
<S> <C> <C> <C>
Office........................... Johnson City, TN 20,000 Leased

Manufacturing.................... Kingsport, TN 95,000 Leased

Office........................... Jericho, NY 2,500 Leased

Office........................... Hong Kong, China 8,129 Leased

Manufacturing.................... Foshan, China 20,000 Leased

Office........................... Shanghai, China 1,609 Leased

Office........................... London, England 1,500 Leased

Office........................... Bangkok, Thailand 2,876 Leased

Office........................... Manila, Philippines 2,817 Leased

Manufacturing/Whse............... Manila, Philippines 110,925 Leased
</TABLE>

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With the expansion into the recently leased Kingsport, Tennessee plant, the
Company intends to consolidate its principal offices, design and engineering
activities currently in Johnson City, Tennessee into the Kingsport facility
within the next year to provide operating efficiencies and cost savings.

During fiscal year 1999, and in conjunction with a joint venture, the
Company leased a manufacturing facility in Foshan, China. To meet the increasing
manufacturing demands associated with two newly awarded contracts in Hong Kong
the Company anticipates leasing additional manufacturing facilities in Mainland
China in 2000.

Management believes that the Company's leased facilities together with other
facilities available to the Company are suitable and adequate for its current
operations and provide sufficient capacity for its future operations.

ITEM 3. LEGAL PROCEEDINGS

The Company currently and from time to time is involved in litigation in the
ordinary course of its business. The Company does not believe that it is
involved in any litigation, including the proceedings described below, that
will, individually or in the aggregate, have a material adverse effect on its
financial condition, results of operations or cash flow.

During the period FCAM was owned and operated by Armco, FCAM and its former
parent company E. G. Smith Construction Products, Inc. ("E. G. Smith") operated
facilities that allegedly generated hazardous substances. As of December 31,
1999, unresolved actions with respect to environmental litigation are:

- In 1996, a consent decree was filed with the United States District Court
for the Southern District of Ohio, Eastern Division, between the United
States Environmental Protection Agency ("EPA") and Armco and FCAM. The
consent decree was entered into under provisions of the Resource
Conservation and Recovery Act with respect to the E.G. Smith facility
located in Cambridge, Ohio. The consent decree requires specific
performance and contains provisions for penalties in excess of $0.1
million in certain circumstances.

- In January 1994, a complaint was filed by AT&T Global Information
Solutions Company and others against E. G. Smith and Armco in the United
States District Court for the Southern District of Ohio, Eastern Division.
The action was brought under the Comprehensive Environmental Response
Compensation and Liability Act, to recover an unspecified portion of the
total costs for the cleanup of a disposal site in Granville, Ohio. Total
costs under this matter are alleged to be in excess of $2 million.

Under the terms of the agreement pursuant to which the Company purchased
FCAM from Armco, Armco agreed to defend, indemnify and hold harmless the Company
in connection with certain lawsuits, including environmental claims associated
with any property owned or operated by, or which constituted a disposal area of,
Armco or FCAM prior to January 1, 1997 (the "Indemnification Agreement"). The
Company believes that to the extent the Company incurs any loss or liability in
connection with any such action, it will be fully compensated pursuant to the
terms of the Indemnification Agreement.

It is the Company's policy to accrue for environmental liabilities if
information available prior to the issuance of the Company's financial
statements indicates that it is probable that a liability has been incurred at
the date of the financial statements and that the loss can be reasonably
estimated.

It is also the Company's policy to disclose the possibility of an
environmental liability if a) both litigation has commenced or a claim or an
assessment has been asserted, or, based on available information, commencement
of litigation or assertion of a claim or an assessment is probable and b) based
upon available information, it is probable that the outcome of such litigation,
claim or

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assessment will be unfavorable to the Company. The Company assesses materiality
in a manner consistent with the requirements of Instruction 5 of Item 3 of
Regulations S-K. There have been no claims of a material nature arising since
FCAM was purchased by the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the stockholders of the Company
during the fourth quarter of the fiscal year ended October 31, 1999.

SUPPLEMENTARY ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT

(PURSUANT TO INSTRUCTION 3 TO ITEM 401(B) OF REGULATION S-K).

<TABLE>
<CAPTION>
EXECUTIVE OFFICERS POSITION
- ------------------ --------
<S> <C>
John W. Y. Tang, 47 Chairman of the Board of the Company since January 1997
Chief Executive Officer of the Company since August 1999
Managing Director of FCAM Pacific since 1992.
Managing Director of FCAM Asia since 1992
Director of FCAM since 1997.

Edward M. Boyle, III, 39 President of the Company since August 1999
Secretary of the Company since January 2000
Chief Operating Officer of FCAM Pacific since October 1998
Director of Sales and Marketing of Harmon CFEM Facades
(UK) Ltd from 1993 to 1998
Director of Sales and Marketing of Harmon CFEM Facades S.A from 1993 to 1998

Johnson K. Fong, 41 Executive Vice President of the Company since November 1999
Director of the Company since January 1997
Partner in the accounting firm of Anderson, Schwartz and
McGuire, LLP from 1988 to 1999

James F. Lawler, 50 Interim Chief Financial Officer of the Company
since March 1999.
Financial Consultant from 1992 to 1999
Controller of Inmac Corp. from 1987 to 1992
Vice President, Chief Financial Officer of GoodMark
Foods, Inc. from 1984 to 1987

Roger Ulbricht, 59 Executive Vice President of the Company since August 1999
President of FCAM since August 1999
Executive Vice President of FCAM from June 1998 to July 1999
Senior Vice President of Technical Services of FCAM
from 1977 to June 1998
</TABLE>

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company's common stock began trading on The NASDAQ Stock Market (NASDAQ)
on May 21, 1998. The Company's stock was traded on the OTC Bulletin Board during
the period March 1997 through May 1998. Prior to March 1997, there was no market
for the Company's common stock. The table presented in Item 6--Selected
Financial Data includes the range of high and low bid quotations per share for
the Company's Common Stock for the periods indicated as reported by NASDAQ and
the OTC Bulletin Board, where the stock trades under the symbol "FCIN." OTC
Bulletin Board market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions. Information is presented beginning with the date of merger between
the Company and IFI. Effective May 21, 1998, the number of shares of the
Company's common stock were reduced by a 1 for 7 reverse stock split. As of
December 31, 1999, there were 94 holders of record of the Company's common
stock.

The Company paid no dividends during the fiscal year ended October 31, 1999
and 1998. During the fiscal year ended October 31, 1997, the Company paid
dividends of $1,095 per share on 100 shares of stock outstanding at that time.
Future policy with respect to payment of dividends on the Common Stock will be
determined by the Board of Directors based upon conditions then existing,
including the Company's earnings and financial condition, capital requirements
and other relevant factors.

REGISTRATION OF SECURITIES AND USE OF PROCEEDS

Information as of October 31, 1999, required by Item 701(f) of Regulation
S-K is set forth below:

The Company's registration statement on Form S-1, Commission file number
333-43793, for 2,000,000 shares of the Company's common stock was filed with the
United States Securities and Exchange Commission (the "Commission") and was
declared effective on May 21, 1998. All of the shares offered to the public were
sold by the termination date of May 28, 1998. On July 3, 1998, the Company's
underwriters exercised their option with respect to the purchase of an
over-allotment of 143,000 shares of common stock. The aggregate price of the
2,143,000 shares was $17,144,000.

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COMMON STOCK - EXPENSES OF ISSUANCE AND USE OF PROCEEDS
(in thousands)

<TABLE>
<S> <C>
At October 31, 1999:
Aggregate offering price of amount sold..................... $17,144
Expenses of issuance:
Underwriters discount..................................... 1,286
SEC registration fee...................................... 9
NASD filing fee........................................... 3
NASDAQ National Market listing fee........................ 67
Blue sky fees and expenses including legal fees........... 15
Printing costs............................................ 248
Registrar and Transfer Agent fees......................... 5
Legal fees and expenses................................... 548
Underwriters nonaccountable expense allowance............. 257
Accounting fees and expenses.............................. 130
Miscellaneous............................................. 31
Total expenses of issuance.............................. 2,599
-------
Net proceeds................................................ 14,545
-------
Use of proceeds:
Proceeds used for purchase and installation of leasehold
improvements, machinery and equipment................... 1,516
Proceeds used for investment in joint ventures............ 334
Proceeds used as collateral for lines of credit........... 3,500
Proceeds used for working capital......................... 1,540
-------
Temporary investments in United States
Government securities and cash deposits................... $ 7,655
=======
</TABLE>

ITEM 6 -- SELECTED FINANCIAL DATA

(in thousands except per share data)

The following table shows summary consolidated financial information for the
Company's continuing operations for the fiscal years ended October 31, 1999
through 1995. Certain information is restated to give retroactive effect to the
1997 mergers and recapitalizations between the Company and IFI and FCAM Pacific.
The Company's historical financial information includes the Company in its
current form since January 1997 and FCAM Pacific only for prior periods. As a
result the financial information for the year ended October 31, 1997, includes
FCAM for 10 months of the year. See Part I, Item 1 of this report.

10
<PAGE>

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(in thousands except per share data)
Revenues....................................... $44,970 $32,280 $31,875 $ 6,684 $ 4,806
Gross margin................................... 8,552 11,049 13,845 3,019 2,034
Selling, general and administrative expense.... 10,781 6,783 6,117 1,353 1,006
Operating profit (loss)........................ (1,893) 4,589 7,986 1,666 1,028
Other income and (expense)..................... 345 305 (967) (97) 65
Income (loss) before taxes and minority
interest..................................... (1,548) 4,894 7,019 1,569 1,093
Net income (loss).............................. (2,229) 3,973 5,273 1,411 938
Net income (loss) per share:
Basic........................................ $ (0.37) $ 0.82 $ 1.33 $ 0.36 $ 0.24
Diluted...................................... $ (0.37) $ 0.78 $ 1.21 $ 0.32 $ 0.22
Weighted average shares outstanding:
Basic........................................ 6,010 4,847 3,960 3,960 3,960
Diluted...................................... 6,010 5,065 4,359 4,359 4,359
Cash dividends per restated share.............. $ - $ - $ 0.03 $ 0.03 $ 0.33
</TABLE>

<TABLE>
<CAPTION>
OCTOBER 31
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cash........................................... $ 9,557 $19,297 $ 342 $ 1,401 $ 2,450
Working capital................................ 19,862 24,927 8,513 1,104 50
Total assets................................... 35,909 42,251 21,083 7,571 4,350
Long-term debt................................. - - - - -
Stockholders' equity........................... 22,056 26,152 7,674 1,661 370
</TABLE>

11
<PAGE>
ITEM 6 -- SELECTED FINANCIAL DATA -- CONTINUED

(in thousands except per share data)

<TABLE>
<CAPTION>
QUARTERLY RESULTS
-----------------------------------------------
QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4
<S> <C> <C> <C> <C>
1999
Revenues.......................................... $ 7,342 $12,306 $10,969 $14,353
Gross margin 951 2,512 2,402 2,687
Operating profit (loss)........................... (1,093) 99 (1,823) 924
Net income (loss)................................. (884) (259) (1,804) 718
Net income (loss) per share -- diluted............ $ (0.14) $ (0.04) $ (0.29) $ 0.12
Price range of common stock:
High............................................ $ 5.25 $ 5.31 $ 3.50 $ 2.75
Low............................................. $ 3.13 $ 2.38 $ 1.81 $ 1.31
1998
Revenues.......................................... $ 6,461 $ 6,930 $10,004 $ 8,885
Gross margin...................................... 3,120 2,361 2,879 2,689
Operating profit.................................. 1,815 879 1,041 854
Net income........................................ 809 1,333 927 904
Net income per share -- diluted................... $ 0.19 $ 0.31 $ 0.16 $ 0.14
Price range of common stock:
High............................................ $ 6.56 $ 10.00 $ 8.13 $ 6.88
Low............................................. $ 2.63 $ 4.38 $ 6.38 $ 2.94
1997
Revenues.......................................... $ 3,717 $ 8,956 $12,198 $ 7,004
Gross margin...................................... 1,411 3,903 5,432 3,099
Operating profit.................................. 482 2,356 3,729 1,419
Net income........................................ 351 1,910 2,433 579
Net income per share -- diluted................... $ 0.08 $ 0.44 $ 0.62 $ 0.13
Price range of common stock:
High............................................ Not listed $ 14.00 $ 8.75 $ 8.75
Low............................................. Not listed $ 7.00 $ 6.13 $ 3.50
</TABLE>

12
<PAGE>
ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Global economic uncertainty impacted the Company's operations in 1998 but
saw signs of recovery in 1999. Growth in revenues from the Company's Pacific-Rim
operations slowed in 1998 but increased by 96% in 1999 in comparison to 1998;
revenue from the Company's North American operations actually decreased in large
part due to project delays. Backlog has grown substantially, increasing from
approximately $45 million at the end of fiscal 1997 to over $98 million at the
end of fiscal 1998 and over $108 million at the end of fiscal 1999.

From a financial perspective, the major event for the Company during fiscal
1998 was the completion of its initial public offering in May 1998. The offering
resulted in net proceeds to the Company of approximately $14 million, and these
proceeds have enabled the Company to pursue several capital projects, including
the expansion of manufacturing capacities in Tennessee, the Philippines and the
PRC and to fund working capital requirements. The proceeds of the initial public
offering have also strengthened the Company's balance sheet, which has helped
the Company to secure needed additional bonding capacity for projects.

On February 24, 1998 the Board of Directors declared a 1 for 7 reverse stock
split effective May 21, 1998. All per share and weighted average share
information has been restated to reflect the effect of such stock split.

THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES SUCH AS THE DEPENDENCE OF THE COMPANY ON A SMALL NUMBER OF LARGE
CONTRACTS, THE SENSITIVITY OF THE COMPANY'S BUSINESS TO GLOBAL ECONOMIC
CONDITIONS, REFERENCES TO 1999, YEAR 2000 COMPLIANCE, FUTURE TAX RATES, THE
COLLECTABILITY OF RECEIVABLES AND THE ADEQUACY OF CASH FLOWS. THESE
FORWARD-LOOKING STATEMENTS AND OTHER STATEMENTS MADE ELSEWHERE IN THIS REPORT
ARE MADE IN RELIANCE ON THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
THE SECTION BELOW ENTITLED "FACTORS THAT MAY AFFECT FUTURE RESULTS" SETS FORTH
AND INCORPORATES BY REFERENCE CERTAIN FACTORS THAT COULD CAUSE ACTUAL FINANCIAL
RESULTS OF THE COMPANY TO DIFFER MATERIALLY FROM THESE STATEMENTS.

RESULTS OF OPERATIONS

YEAR ENDED OCTOBER 31, 1999 COMPARED TO YEAR ENDED OCTOBER 31, 1998

REVENUES. Revenues in fiscal year 1999 increased by 39% or $12.7 million
over the previous years revenue reaching $45 million compared to $32.3 million
in 1998. The Pacific Rim revenues totaled $29.6 million, an increase, year on
year, of $14.5 million or 96% while the revenues in North America totaling $15.4
in the fiscal year 1999, declined $1.8 million or 11%. Two projects in the
Philippines accounted for the majority of the Pacific Rim revenue growth while
the North America revenues were negatively impacted by project delays. See
"Factors That May Affect Future Results" below. The delays in projects that
adversely impacted the North American revenues in 1999 should result in an
improved revenue performance for the North American operations in fiscal 2000.

GROSS PROFIT: Gross profits totaling $8.5 million decreased by $2.5 million
or 22.6% in 1999 compared to those in 1998 of $11 million. The gross margins in
1999 were 19% as a percentage of revenues while in 1998 the gross profit margin
percentage was 34% of revenues. The decline in gross margin was primarily
attributable to the project mix that comprised the revenue source in comparison
to that of the prior year as a result of increasingly competitive bidding
activity on new projects. In addition, a reduction in the estimated contract
revenues and therefore gross margins of $1.0 million

13
<PAGE>
dollars was recorded this year when previously agreed to change orders were
subsequently rejected by the owner of a project in Thailand that was nearing
completion.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling general and
administrative expenses in 1999 of $10.8 million were 24% of revenues in
comparison to 21% of revenues in 1998, during which time selling general and
administrative expenses totaled $6.8 million. Selling, general and
administrative expenses were 20% and 23% of revenues respectively for the
Pacific Rim and North America. Selling, general and administrative expenses
increased by $4 million, $3.7 million in the Pacific Rim and $0.7 in North
America, over the previous year or 62% in total. Approximately $2.0 million of
the $4 million increase in selling general and administrative expenses
represents a reserve that was established as the result of uncertainties that
developed in the third quarter in regards to the collectability of primarily
$1.6 million of retention receivables and "cost in excess of billings" and $0.4
million in taxes and other costs on the Empire Towers project located in
Thailand. In the third quarter, events the Company believes were outside its
control occurred on the Empire Towers project after which the owner of the
building refused to honor claims previously agreed to and asserted claims
against the Company which the Company believes are unsubstantiated. Management
has met subsequently on several occasions with the building owner and the
previous owner's specified supplier of the glass material of the project, to
resolve the matters being alleged. The Company believes that allegations made by
the building owner are the responsibility of a materials supplier and therefore
is continuing to seek a favorable outcome to the dispute.

The remaining increase in selling general and administrative expenses of $2
million representing a 31% increase over the previous year was due to the
building of the Company's infrastructure, primarily in the Pacific Rim, in
support of the Pacific Rim's revenue growth which was 96% in fiscal 1999.

INCOME TAXES: Income tax expense decreased from $0.9 million in the fiscal
year 1998 to a tax benefit of $0.1 million in fiscal year 1999. The pretax loss
in North America resulted in a tax reduction of $1.5 million while the
profitability of projects in the Pacific Rim segment, mainly on two Philippine
projects, resulted in a $0.5 million increase in tax expense

MINORITY INTEREST IN EARNINGS OF CONSOLIDATED SUBSIDIARIES. The minority
interest in earnings of consolidated subsidiaries for the fiscal year 1999 was
$0.8 million compared to $0.1 million the previous year. The increase is
primarily the result of the profits recognized on two new projects in the
Philippines, which accounted for 61% of the revenues in the Pacific Rim in 1999
in comparison to10% of revenues in the previous fiscal year. These projects are
part of a joint venture in which the minority partner's interest is 45% of
pretax earnings.

BACKLOG. Backlog at October 31, 1999 was $108.9 million compared to $98.8
million at October 31, 1998. Of the backlog at October 31, 1999, $51.5 million
is for projects located in North America and $57.4 million is for projects in
Pacific-Rim countries.

YEAR ENDED OCTOBER 31, 1998 COMPARED TO YEAR ENDED OCTOBER 31, 1997

REVENUES. Revenues increased 1.3% to $32.3 million in 1998 compared to
$31.9 million in 1997. Revenues from North American projects decreased by $1.9
million to $17.2 million in 1998 from $19.1 million in 1997. The $1.9 million
decrease was due primarily to the 1997 acquisition of FCAM. Revenues from
Pacific projects increased to $15.2 million in 1998 from $12.8 million in 1997.
See "Factors That May Affect Future Results" below.

GROSS PROFIT. Gross profit decreased 20.2% to $11.0 million in 1998 from
$13.8 million in 1997. Gross profit as a percent of revenues decreased to 34.2%
in 1998 from 43.4% in 1997. This decrease was due primarily to the decrease in
relative importance of one high-margin project that provided 36% of total
revenues in 1998 compared to 84% in 1997. That project is scheduled for
completion in 1999.

14
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 10.9% to $6.8 million in 1998 compared to $6.1
million in 1997. The increase primarily relates to additional costs incurred in
anticipation of higher levels of business in 1999. Management expects selling,
general and administrative expenses to increase in 1999 as the Company increases
its infrastructure in anticipation of higher levels of business.

OTHER OPERATING AND INCOME ITEMS. Other items of income before income taxes
increased by $1.3 million to $0.3 million in 1998 compared to a loss of $1.0
million in 1997. Foreign currency transaction losses decreased by $0.9 million
to a loss of $0.4 million in 1998 compared to a loss of $1.3 million in 1997.
All foreign currency transaction losses relate to operations in Thailand.
Operations in Hong Kong have not generated foreign currency transaction losses
as the Hong Kong dollar is pegged to the United States dollar. Interest income
net of interest expense increased by $0.5 million to $0.6 million in 1998
compared to $0.1 million in 1997 primarily due to interest derived from the
investment of funds from the Company's initial public offering of its common
stock. Other items of income, primarily equity income from joint ventures,
decreased by $0.2 million to $0.1 million in 1998 compared to $0.3 million in
1997.

INCOME TAXES. The Company's effective income tax rate decreased to 18% in
1998 from 25% in 1997 due to the lower relative proportion of income before
taxes attributable to United States operations in 1998 versus 1997. The
effective tax rate of operations in the United States is 38%. Generally, United
States taxes may be incurred on international sales between the Company's
foreign subsidiaries. However, the Company's operations in Hong Kong, Malaysia,
and Thailand operate under rules of the Internal Revenue Code, local tax laws,
and international tax treaties that results in little or no United States or
foreign income taxes. The Company's new joint venture in the Philippines may
incur income taxes in the 30% to 35% range. The Company's effective income tax
rates are expected to increase in the future as income from operations in Hong
Kong, Malaysia, and Thailand account for a smaller portion of consolidated
income before taxes.

BACKLOG. Backlog at October 31, 1998 was $98.8 million compared to $45.0
million at October 31, 1997. Of the backlog at October 31, 1998, $50.4 million
is for projects located in North America and $48.4 million for projects in
Pacific-Rim countries. The increase in backlog is attributable to the increase
in the Company's bonding capacity as a result of the Company's initial public
offering of its common stock.

LIQUIDITY AND CAPITAL RESOURCES

The Company manages its liquidity through the allocation of working capital
between North American and Pacific-Rim operations as needed and through the use
of import loans and bank loans that are secured with restricted cash. The
Company attempts to structure payment arrangements with its customers to match
costs incurred under projects. To the extent the Company is not able to match
payments with costs, it relies on its cash reserves and its credit facilities to
meet its working capital needs.

In May of 1998 the Company sold 2.1 million shares of its common stock
though an initial public offering resulting in net cash proceeds to the Company
of approximately $14.5 million.

Management expects that the Company will have sufficient liquidity to meet
ordinary short-term and business needs for the foreseeable future. Sources of
liquidity generally available to the Company include cash from operations, cash
and cash equivalents, availability under existing credit facilities, and
borrowings from other sources.

OPERATING ACTIVITIES. The Company's operating activities used $8.5 million
in cash in 1999 compared to providing $6.6 million in 1998. The primary factor
causing the decrease in cash flow in

15
<PAGE>
1999 was due to a net loss of $2.2 million and an increase in the materials
acquired and the fabrication and assembly of finished units for active projects
in the Pacific Rim that had not as yet been invoiced.

INVESTING ACTIVITIES. The Company's capital expenditures totaled $1.3
million in 1999 compared to $1.2 million in 1998. In 1999, the Company invested
approximately $1.0 in the Pacific Rim area (primarily in the Philippines) for
plant improvements and equipment in order to accommodate the growth in revenues
that resulted from two projects that commenced production activities in early
fiscal 1999. The Company also commenced expansion of its fabrication and
assembly capacity in Tennessee by leasing a facility and starting leasehold
improvements to that plant in anticipation of increasing revenues in fiscal year
2000 from projects awarded in 1999 and the re-commencement of projects that
incurred start up delays in 1999.

The investment in property, plant and equipment in1998 of $1.2 million is
primarily attributable to the commencement of activities in the Philippines and
additional engineering offices in Thailand and the Philippines

In 1998, the Company contributed $0.6 million in capital to joint ventures
in the Philippines, Mexico and the PRC compared to $0.1 million in 1997. The
Company loaned $0.8 million to the developer of a joint venture in the PRC
during 1998. The Company has reached a tentative agreement with the borrower for
the repayment of the entire amount during fiscal year 2000. The Company
terminated the joint venture in Mexico to the mutual satisfaction of both
parties in late 1999.

FINANCING ACTIVITIES. In 1999, cash generated by financing activities
amounted to $0.5 million dollars. Net bank borrowings provided $2.0 million and
the purchase of 892,000 treasury shares used $1.4 million. Cash generated by
financing activities in 1998 increased to $15.0 million from $0.4 million in
1997. The increase was due primarily to the issuance of common stock for $14.5
million.

On May 28, 1998, the Company completed the registration and issuance of
2,000,000 shares of the Company's $0.0001 par value common stock resulting in
net proceeds after deducting estimated issuance costs of approximately $13.6
million. On July 9, 1998, the Company's underwriters exercised their
over-allotment option with respect to 143,000 shares resulting in net proceeds
of approximately $1.0 million. The proceeds of the offering are intended to be
used to establish or acquire an interest in a fabrication facility in the PRC,
capital expenditures at its Tennessee fabrication facility, working capital and
general corporate purposes. In addition, increased stockholders' equity
resulting from the offering will allow the Company to secure more and larger
bonding facilities. Pending the complete application of the net proceeds the
Company has invested the net proceeds in short-term, interest-bearing,
investment grade securities.

The Company maintains lines of credit with commercial banks in the United
States and in Hong Kong totaling $4.5 million. The lines of credit are used to
provide letters of credit in connection with the importation of goods, overdraft
facilities and short-term financing. The lines of credit are collateralized by
$2 million in the form of certificates of deposit and, in the case of the Hong
Kong line, by the personal guarantee of the Chairman of the Company. The
personal guarantee of the Chairman of the Company was vacated in December 1998.
The lines of credit are fully collateralized and carry no restrictive covenants
such as minimum balances or ratios. As of October 31, 1999 and 1998, the Company
had approximately $3.3 million and $1.3 million respectively in borrowings under
its lines of credit.

16
<PAGE>
YEAR 2000 COMPLIANCE

The Company undertook a project to address the issue of computer programs
and embedded computer chips being unable to distinguish between the year 1900
and the year 2000 (Y2K). The project was divided into three phases:

- Phase I involved identifying areas where Y2K problems exist or may exist.
This phase included both IT and non-IT systems and the surveying of
suppliers and customers.

- Phase II involved repairing or replacing items that were not Y2K compliant
including computer hardware and software. This phase also involved
identifying alternative sources of supply for major vendors that are not
Y2K compliant.

- Phase III involved testing significant systems and processes to assure
their Y2K compliance.

All phases of the project were completed prior to December 31, 1999

The Company's costs incurred in connection with achieving Y2K compliance
were not material. However, the Company does not separately track the internal
costs incurred for the Y2K project since such costs are principally the related
payroll costs for information systems employees. Management estimates the total
external costs have totaled less than thirty thousand dollars.

The most reasonably likely worst case scenario of a major Y2K failure would
be the failure of several major suppliers to deliver required materials on time.
As discussed above, this would involve mainly suppliers in North America. In
such a case the Company could experience project delays of up to two weeks on
projects. Such delays could result in higher levels of overtime for production
and field installation workers as well as liquidating damages if projects are at
critical stages near completion. The costs in such a case could be $1.5 million.

The Company has contingency plans to minimize any Y2K problems. In-house
computer systems are believed to be Y2K compliant. Management believes that the
Company is adequately prepared for the year 2000 and that its Y2K project will
mitigate any material effect on the Company's financial position, results of
operations or cash flows. As of January 15, 2000 the Company has not become
aware of any negative impact from a Y2K problem.

RECENTLY ISSUED ACCOUNTING STANDARDS

A discussion of recently issued accounting standards is presented in Note 23
to the Company's consolidated financial statements in Item 8 of this report.

FACTORS THAT MAY AFFECT FUTURE RESULTS

GENERAL. The Company's projects are awarded by private or governmental
entities in a competitive bidding process. Due to the nature of the bidding and
award process, the Company has experienced, and in the future expects to
experience, significant delays in project awards. No assurance can be given that
the timing of a project award will be consistent with the Company's
expectations. In addition, numerous factors, many of which are out of the
Company's ability to control, have caused and will continue to cause substantial
variations in its results of operations in any quarterly or annual reporting
period. Some of these factors are:

- Downturns in one or more segments of the construction industry;

- Changes in economic conditions;

- The failure of project owners to obtain adequate construction financing;

17
<PAGE>
- The failure of project general contractors to schedule other trades in a
manner most efficient for Flour City;

- The Company's failure to obtain or delays in awards of major projects;

- The cancellation or delay of major projects, including cancellations or
delays caused by job-site labor problems and jurisdictional disputes; or

- The Company's failure to timely replace projects that have been completed
or are nearing completion.

- Dependence on large projects, the delay or abandonment of which could
adversely affect the Company.

Any of these factors could cause the Company's results of operations to
fluctuate significantly from period to period, including on a quarterly basis.

FOREIGN EXCHANGE RISKS. The Company generally attempts to mitigate foreign
exchange risk by entering into contracts providing for payment in United States
dollars instead of the local currency wherever possible. Nonetheless, local
currency must be used to pay for local labor, raw materials or other local
country costs of operations. The Company currently has contracts denominated in
the Hong Kong dollar, Thai baht and Philippine peso. Future contracts may be
denominated in the currency of other countries. The Company maintains cash,
short-term debt (based on floating interest rates), accounts receivable, and
accounts payable in several currencies. The functional currencies in which those
accounts are maintained match the functional currencies of construction
contracts in process. Accounts are also maintained in United States dollars in
all countries in which the Company operates. The following table shows the
October 31, 1999 United States dollar translated balances of selected non-US
dollar denominated current accounts by the currency in which they are
maintained:

<TABLE>
<CAPTION>
HONG
KONG THAI PHILIPPINE
($ IN MILLIONS) DOLLARS BAHT PESOS
- --------------- -------- -------- ----------
<S> <C> <C> <C>
Cash and restricted cash........................... $ 0.8 $ -- $ 0.1
Short-term debt.................................... 1.0 -- --
Accounts and claim receivable...................... -- -- --
Accounts payable and accrued expenses.............. $ 2.7 $ 0.1 $ 1.4
===== ====== ======
US dollar exchange rate at October 31, 1998 7.755 38.390 39.870
</TABLE>

Materials and services to perform project contracts are procured globally.
Aluminum extrusion is typically the largest material cost and is generally
denominated in United States dollars. Glass purchases are generally denominated
in United States dollars unless sourced locally in a foreign locale. The
expenses associated with erection services are generally denominated in local
currency. To the extent that foreign currencies weaken against the United States
dollar, the Company will experience translation losses due to the revaluation of
accounts payable, accounts receivable and other asset and liability accounts.

The Company generally attempts to contract to secure compensation for
devaluation of local currencies relative to the United States dollar. In these
instances, although the Company may incur translation losses, the Company seeks
to offset such losses by increases in the amount of local currency payable to
the Company under contract so as to approximate the original United States
dollar equivalent value of the contract. There can be no assurance that the
Company will be successful in negotiating contracts with terms that maintain a
United States dollar equivalency. As of October 31, 1999, the Company's backlog
of non-US dollar based contracts totaled approximately $43.7 million. Of that
amount contract provisions to ensure United States dollar equivalency did not
protect approximately $29.5 million. Exchange rate fluctuations in local
currency denominated contracts that do

18
<PAGE>
not have a United States dollar equivalency, and in exchange rates in general,
could have a material adverse effect on the Company's financial position,
results of operations, and cash flows.

EMPIRE TOWERS PROJECT. The Company has substantially completed a project
located in Bangkok, Thailand (the "Empire Towers Contract") which is denominated
in Thai baht. At October 31, 1998, the total amounts due to the Company under
the Empire Towers Contract are the baht equivalent of $2.7 million including
$1.7 million in construction receivables and $1.0 million in claims receivable
for currency exchange losses. During 1998, the current owner of the Empire
Towers Contract acknowledged liability for the baht equivalent of approximately
$4.0 million in exchange losses. $3.0 million of that acknowledged liability had
been collected as of October 31, 1998. The remaining $1.0 million had been
deferred to the final completion of the contract which was scheduled for 1999.
In 1999, the Company revised its estimate of anticipated total contract revenues
when the owner of the project refused to honor claims previously agreed to which
resulted in a reduction of revenues of $1.0 million. In addition, events
occurring in the third quarter of fiscal 1999, which involved quality issues of
materials specified by the original owner, caused the Company to establish a
$2.0 million reserve to cover all uncollected assets associated with this
project. The current owner of the project made allegation the Company believes
to be unsubstantiated. The Company is currently in discussions with the project
owner and the materials supplier in order to seek a favorable resolution.

POLITICAL UNCERTAINTIES. The Company operates in several countries
including countries in Asia and in Mexico. Economic development in countries in
which the Company operates may be limited by the imposition of measures intended
to control economic conditions and the inadequate development of an
infrastructure to support manufacturing and large-scale construction projects.
Changes in governmental policies as well as general economic conditions
including interest rates or rates of inflation could have a material adverse
affect on the Company's financial position, results of operations, and cash
flows.

ITEM 7A-- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of October 31, 1999, the Company had no holdings of commodity-based
instruments, long-term debt instruments, forward contracts, futures contracts,
firmly committed foreign sales contracts, interest rate swaps, currency swaps,
or other items in the nature of derivative financial instruments. The Company
does maintain cash, short-term debt (based on floating interest rates), accounts
receivable, and accounts payable in several currencies. For a discussion of
foreign exchange risks, see "Factors That May Affect Future Results" in
Management's Discussion and Analysis of Financial Conditions and Results of
Operations, in Item 7 of this report.

19
<PAGE>
ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Reports............................... 21,22

Consolidated Balance Sheets................................. 23

Consolidated Statements of Operations....................... 24

Consolidated Statements of Cash Flow........................ 25

Consolidated Statements of Stockholders' Equity............. 26

Notes To The Financial Statements........................... 27
</TABLE>

20
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Directors of

Flour City International, Inc.

We have audited the accompanying consolidated balance sheet of Flour City
International, Inc. (the "Company") as of October 31, 1999, and the consolidated
statements of operations, cash flows and stockholders' equity for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provide a reasonable basis for our opinion.

In our opinion, these financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Flour City
International, Inc. at October 31, 1999, and the consolidated results of their
operations and their consolidated cash flows for the year then ended in
conformity with generally accepted accounting principles.

GRANT THORNTON LLP

December 9, 1999

San Francisco, California

21
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Directors of

Flour City International, Inc.

We have audited the accompanying consolidated balance sheet of Flour City
International, Inc. (the "Company") as of October 31, 1998, and the consolidated
statements of income, cash flows and stockholders' equity for each of the two
years ended October 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Flour City International, Inc.
at October 31, 1998, and the results of its operations and its cash flows for
each of the two years ended October 31, 1998 in conformity with generally
accepted accounting principles.

DELOITTE & TOUCHE LLP

December 11, 1998

Nashville, Tennessee

22
<PAGE>
CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
OCTOBER 31,
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 9,557 $19,297
Restricted cash............................................. 4,134 3,887
Accounts receivable, net.................................... 6,345 8,124
Claims receivable........................................... -- 970
Notes receivable............................................ 2,169 1,395
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... 7,125 3,314
Tax refund receivable....................................... 227 --
Deferred income taxes....................................... 616 204
Other current assets........................................ 2,335 2,244
------- -------
Total current assets...................................... 32,508 39,435
Plant and equipment, net.................................... 2,547 1,454
Other assets................................................ 854 1,362
------- -------
Total assets.............................................. $35,909 $42,251
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt............................................. $ 3,291 $ 1,282
Accounts payable and accrued expenses....................... 6,843 4,119
Accounts payable to related parties......................... -- 79
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... 1,509 8,543
Other current liabilities................................... 1,003 485
------- -------
Total current liabilities................................. 12,646 14,508
Other liabilities........................................... 70 --
Negative goodwill, net...................................... 947 1,384
------- -------
Total liabilities and deferred credits.................... 13,663 15,892
------- -------
Commitments and contingencies
Minority interests in equity of consolidated subsidiaries... 190 207
Stockholders' equity:
Preferred stock, par value $0.0001; authorized 5,000
shares; no shares issued................................ -- --
Common stock, par value $0.0001; authorized 50,000 shares;
issued 6,268 shares; outstanding 5,376, and 6,268 shares
at October 31,1999 and 1998............................. -- --
Additional paid-in-capital................................ 14,788 14,788
Retained earnings......................................... 8,569 10,798
Less 892 shares of common stock in treasury, at cost...... (1,461) --
Accumulated other comprehensive income.................... 249 697
Other stockholders' equity................................ (89) (131)
------- -------
Total stockholders' equity................................ 22,056 26,152
------- -------
Total liabilities and stockholders' equity.............. $35,909 $42,251
======= =======
</TABLE>

THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE FINANCIAL
STATEMENTS.

23
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues.................................................... $44,970 $32,280 $31,875
Cost of revenues............................................ 36,418 21,231 18,030
------- ------- -------
Gross margin.............................................. 8,552 11,049 13,845
Selling, general and administrative expenses................ 10,781 6,783 6,117
Amortization, net........................................... (336) (323) (258)
------- ------- -------
Operating profit (loss)................................... (1,893) 4,589 7,986
Foreign currency transaction losses......................... (302) (380) (1,337)
Other income (expense), net................................. 647 685 370
------- ------- -------
Income (loss) before income taxes and minority
interests............................................... (1,548) 4,894 7,019
Income (taxes) benefit...................................... 122 (868) (1,752)
Minority interests in earnings of consolidated
subsidiaries.............................................. (803) (53) 6
------- ------- -------
Net income (loss)........................................... $(2,229) $ 3,973 $ 5,273
======= ======= =======
Net income (loss) per share:
Basic..................................................... $ (0.37) $ 0.82 $ 1.33
Diluted................................................... $ (0.37) $ 0.78 $ 1.21
======= ======= =======
Weighted average shares outstanding:
Basic..................................................... 6,010 4,847 3,960
Diluted................................................... 6,010 5,065 4,359
======= ======= =======
</TABLE>

THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE FINANCIAL
STATEMENTS.

24
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ (2,229) $ 3,973 $ 5,273
Adjustments:
Depreciation and amortization........................... (4) (180) (227)
Non-cash stock compensation............................. 42 55 57
Deferred income taxes................................... (412) 493 803
Loss on abandonment of property......................... 52 -- --
Income (loss) accruing to minority interests............ -- 53 (8)
Equity in (income) loss of joint ventures............... 81 4 8
Changes in assets and liabilities, net of effects of
acquisition of business:
Restricted deposits..................................... (247) (841) (688)
Accounts receivable..................................... 1,779 5,278 (2,034)
Claims receivable....................................... 970 (970) --
Notes receivable........................................ (774) -- --
Tax refund receivable................................... (227) -- --
Costs, estimated earnings and billings, net............. (10,845) 146 (6,857)
Other current assets.................................... (91) (1,799) 563
Other assets............................................ 246 206 (276)
Accounts payable and accrued expenses................... 2,724 573 1,909
Other current liabilities............................... 518 (330) 587
Accounts payable to related parties..................... (79) (69) 105
-------- -------- --------
Net cash provided by (used in) operating activities......... (8,496) 6,592 (785)
-------- -------- --------
Cash Flows - Investing activities:
Purchase of property, plant and equipment................. (1,327) (1,197) (372)
Investment in joint venture corporations.................. -- (601) (64)
Increase in other accounts and notes receivable........... -- (776) --
-------- -------- --------
Net cash used in investing activities....................... (1,327) (2,574) (436)
-------- -------- --------
Cash Flows - Financing activities:
Payments on bank borrowings............................... (8,257) (1,167) --
Proceeds from bank borrowings............................. 10,266 1,500 534
Changes in minority interest.............................. (17) 154 --
Cash dividends paid....................................... -- -- (109)
Issuance of common stock.................................. -- 14,545 --
Purchase of treasury shares............................... (1,461) -- --
-------- -------- --------
Net cash provided by financing activities................... 531 15,032 425
-------- -------- --------

Effect of exchange rate changes on cash..................... (448) (95) (263)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........ (9,740) 18,955 (1,059)
Cash and cash equivalents, beginning of year................ 19,297 342 1,401
-------- -------- --------
Cash and cash equivalents, end of year...................... $ 9,557 $ 19,297 $ 342
======== ======== ========
Supplemental cash flow information:
Interest paid in cash..................................... $ 97 $ 46 $ 52
Income taxes paid in cash................................. $ 200 $ 1,572 $ 477
======== ======== ========
</TABLE>

The Notes To The Financial Statements are an integral part of these financial
statements

25
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
SHARES ISSUED
--------------------- ACCUMULATED
ADDITIONAL TREASURY SHARES OTHER
PAID-IN ------------------- RETAINED COMPREHENSIVE COMPREHENSIVE
STOCK CAPITAL STOCK AMOUNT EARNINGS INCOME INCOME (LOSS)
-------- ---------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at November 1, 1996............... -- $ -- -- $ -- $ 1,661 $ --
Net income................................ 5,273 $ 5,273
Foreign currency translation.............. 792 792
-------
Comprehensive income...................... $ 6,065
=======
Dividend of $1,095 per share.............. (109)
Recapitalization in connection with FCI's
acquisition of FCAM Pacific............. 9,000 --
Employee stock grant...................... 1,000 344
Compensation expense......................
Issuance of shares and Recapitalization in
connection with the IFI merger.......... 20,517 188
------- ------- ---- ------- ------- ----- -------

Balance at October 31, 1997............... 30,517 532 -- -- 6,825 792
Net income................................ 3,973 3,973
Foreign currency translation.............. (95) (95)
-------
Comprehensive income...................... $ 3,878
=======
Reverse stock split....................... (26,157) --
Repurchase of shares...................... (235) (289)
Sale of shares............................ 2,143 14,545
Compensation expense......................
------- ------- ---- ------- ------- ----- -------

Balance at October 31, 1998............... 6,268 14,788 - - 10,798 697
Net loss.................................. (2,229) $(2,229)
Foreign currency translation.............. (448) (448)
-------
Comprehensive (loss)...................... $(3,025)
=======
Purchased treasury shares................. (892) (1,461)
Compensation expense......................
------- ------- ---- ------- ------- ----- -------
Balance at October 31, 1999............... 6,268 $14,788 (892) $(1,461) $ 8,569 $ 249
======= ======= ==== ======= ======= ===== =======

TOTAL
SHAREHOLDERS'
OTHER EQUITY
-------- -------------
<S> <C> <C>
Balance at November 1, 1996............... $ -- $ 1,661
Net income................................ 5,273
Foreign currency translation.............. 792

Comprehensive income......................

Dividend of $1,095 per share.............. (109)
Recapitalization in connection with FCI's
acquisition of FCAM Pacific.............
Employee stock grant...................... (344)
Compensation expense...................... 57 57
Issuance of shares and Recapitalization in
connection with the IFI merger.......... (188)
----- -------
Balance at October 31, 1997............... (475) 7,674
Net income................................ 3,973
Foreign currency translation.............. (95)

Comprehensive income......................

Reverse stock split.......................
Repurchase of shares...................... 289
Sale of shares............................ 14,545
Compensation expense...................... 55 55
----- -------
Balance at October 31, 1998............... (131) 26,152
Net loss.................................. (2,229)
Foreign currency translation.............. (448)

Comprehensive (loss)......................

Purchased treasury shares................. (1,461)
Compensation expense...................... 42 42
----- -------
Balance at October 31, 1999............... $ (89) $22,056
===== =======
</TABLE>

THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE FINANCIAL
STATEMENTS.

26
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. GENERAL

Flour City International, Inc. and its majority owned subsidiaries (the
"Company") are primarily engaged in the design, engineering, manufacture, and
installation of custom curtain-wall systems for the construction industry. The
Company is a successor to another company of the same name incorporated on
January 16, 1997, and International Forest Industries Inc., a dormant
corporation founded in 1987 (IFI). Flour City International, Inc. merged with
and into IFI on May 16, 1997. IFI was the surviving corporation and changed its
name to Flour City International, Inc. Flour City Architectural Metals, Inc.
(FCAM) was purchased from Armco, Inc. in January 1997. The Company acquired
Flour City Architectural Metals (Pacific) Ltd. (FCAM Pacific) in January 1997
through a share exchange. The merger between the Company and IFI and the share
exchange between the Company and FCAM Pacific have been accounted for as a
recapitalization. The acquisition of FCAM has been accounted for as a purchase.
Financial information of the Company for periods before January 1997 refers to
the operations of FCAM Pacific only. See Note 13 - Business Combinations.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Flour City
International, Inc. and its wholly owned and majority owned subsidiaries after
elimination of material intercompany accounts and transactions. Less than
majority owned affiliates over which the Company exercises significant influence
are accounted for as equity investments. Less than twenty percent owned
affiliates over which the company cannot exercise significant influence are
carried at cost.

The consolidated financial statements include accounts of foreign entities
prepared in accordance with statutory requirements of various countries. There
is no material difference between the method of accounting in foreign entities
and generally accepted accounting principles in the United States.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. On an
ongoing basis, management reviews its estimates, including those related to
construction and other contracts, litigation, and contingencies, based on
current available information. Changes in facts and circumstances may result in
revised estimates.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand, cash accounts, interest
bearing savings accounts, and repurchase agreements with original maturities of
three months or less.

RESTRICTED CASH

Restricted deposits consist of cash, certificates of deposit and interest
bearing securities maturing within twelve months from the date of purchase that
have been set aside to collateralize performance bonds, lines of credit and
standby letters of credit. The market value of such certificates of deposit and
securities approximates cost.

27
<PAGE>
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ACCOUNTS RECEIVABLE

Accounts receivable includes amounts billed on construction contracts after
allowance for doubtful accounts. In accordance with construction industry
practices accounts receivable includes certain amounts that are withheld and
retained by customers until completion and acceptance of the contracts.

PLANT AND EQUIPMENT

Plant and equipment are carried at cost. Additions, major renewals and
improvements are capitalized; maintenance and repairs that do not extend asset
lives are charged to operations as incurred. Gains and losses on the disposition
of property, plant and equipment are reflected in other income. Depreciation is
generally computed on the straight-line method based on useful lives of 3 to 15
years for furniture, fixtures and equipment. Leasehold improvements are
amortized over the terms of the respective leases.

INTANGIBLE ASSETS

Negative goodwill, a deferred credit, is amortized on the straight-line
method over 5 years.

ASSET IMPAIRMENT

The Company reviews its long-lived assets and certain intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Impairment losses are
charged to income when identified.

EMPLOYEE BENEFITS

The Company offers medical, dental, life insurance, and defined contribution
pension plan, in the form of 401-K plan, to its full-time United States based
salaried employees and hourly employees at its Tennessee manufacturing facility.
Hourly employees at United States job sites are covered by multi-employer union
plans to which the Company makes regular contributions. The Company does not
provide any other retirement or post-retirement benefits. All costs of employee
benefit plans are charged to operations as incurred.

FOREIGN CURRENCY TRANSLATION

The Company has significant investments in foreign operations. The financial
statements of the Company's subsidiaries located outside the United States are
generally measured using the local currency as the functional currency. Assets
and liabilities of those subsidiaries are translated at the rates of exchange at
the balance sheet date. The resulting translation adjustment for the current
period is included as an adjustment to stockholders' equity. Income and expense
items are translated at average monthly rates of exchange. Gains and losses from
foreign currency transactions are included in income when incurred.

28
<PAGE>
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

REVENUE RECOGNITION

Construction contracts are accounted for under the percentage of completion
method, whereby revenues are recognized as work on a contract progresses based
on cost incurred to date as a percent of total estimated costs for the contract.
Costs are charged to operations as incurred and include material, labor,
subcontractor costs, and construction related overheads. Changes in estimates
are recognized in the period in which they are determinable using the cumulative
catch-up method of accounting. Claims for delays, incomplete specifications, or
similar items are presented to customers from time to time. Such claims involve
negotiations and sometimes litigation. Claims and contract change orders are
considered in the contract estimate at such time as realization is probable.
Anticipated losses on contracts are charged to operations as soon as they are
determinable. Revenues of replacement parts are recognized upon shipment.
Contracts with governmental units are based on commercial terms and are not
subject to renegotiations.

INCOME TAXES

Income taxes are accounted for using the asset and liability approach for
financial reporting. The Company recognizes deferred tax liabilities and assets
for the expected future tax consequences of temporary differences between the
financial statement carrying amount and the tax basis of assets and liabilities
and net operating loss and tax credit carry forwards. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be received. A substantial portion of the undistributed earnings of foreign
subsidiaries has been reinvested and is not expected to be remitted to the
parent company. Accordingly, no federal income taxes have been provided on such
earnings.

EARNINGS PER SHARE

Earnings per common share are computed based on the weighted average number
of common and common equivalent shares outstanding. Common equivalent shares
were not used in fiscal 1999 as they would have been anti-dilutive.

NOTE 3. RESTRICTED CASH

(in thousands)

Restricted cash includes $634 and $1,887 at October 31, 1999 and 1998,
respectively, of deposits guaranteeing the Company's performance on construction
contracts plus $3,500 and $2,000, respectively, of cash and certificates of
deposit that collateralize the Company's credit facilities. All such cash,
deposits and certificates of deposit mature within twelve months of purchase and
earn market rates of interest that accrue to the benefit of the Company.

29
<PAGE>
NOTE 4. ACCOUNTS RECEIVABLE

(in thousands)

<TABLE>
<CAPTION>
OCTOBER 31
-------------------
1999 1998
-------- --------
<S> <C> <C>
Contracts receivable:
Completed contracts..................................... $ 95 $ 625
Uncompleted contracts................................... 3,276 3,036
Retained................................................ 4,416 5,002
------- -------
Accounts receivable....................................... 7,787 8,663
Less: Allowance for doubtful accounts..................... (1,442) (539)
------- -------
Accounts receivable, net.................................. $ 6,345 $ 8,124
======= =======
</TABLE>

During the year ended October 31, 1999 and 1998 respectively, $124 and $945
of accounts receivable related to completed contracts were determined
uncollectable and written off against the allowance for doubtful accounts. Also
during 1999 and 1998, the allowance for doubtful accounts was increased by
$1,027 and $331 respectively by charging a provision to selling, general and
administrative expenses.

NOTE 5. CLAIMS RECEIVABLE

(in thousands)

Claims receivable at October 31, 1998, consists of a $970 claim against the
owner-developer of the Empire Towers project in Bangkok, Thailand for additional
monies owned the Company due to the 1997 devaluation of the Thai baht. At
October 31, 1998, total amounts due from this customer, including this claim,
are the Thai baht equivalent of approximately $2.7 million. At October 31, 1999
all assets associated with the Empire Towers project have been fully reserved.

NOTE 6. NOTES RECEIVABLE

(in thousands)

At October 31, 1999 and 1998, note receivable includes a $1,395 non interest
bearing unsecured note from Armco payable upon the Company either posting a
performance bond or completing and relieving Armco of performance obligations on
contracts assumed on the purchase of FCAM from Armco. The Company expects the
note to be paid in 2000 upon the Company's compliance with the terms and
conditions of the purchase agreement. Of the remaining balance, $774 represents
a loan to the developer of a joint venture in the PRC. The Company expects to
receive repayment in 2000 having reached a tentative agreement with the
borrower.

30
<PAGE>
NOTE 7. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

(in thousands)

<TABLE>
<CAPTION>
OCTOBER 31
-------------------
1999 1998
-------- --------
<S> <C> <C>
Job to date costs incurred on uncompleted contracts......... $ 69,588 $ 58,857
Job to date estimated earnings recorded on uncompleted
contracts................................................. 25,351 17,309
Less: Job to date billings on uncompleted contracts......... (89,323) (81,395)
-------- --------
$ 5,616 $ (5,229)
======== ========
Included in accompanying consolidated balance sheets under
the following captions:
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... $ 7,125 $ 3,314
Billings in excess of costs and estimated earnings on
uncompleted contracts..................................... (1,509) (8,543)
-------- --------
$ 5,616 $ (5,229)
======== ========
</TABLE>

NOTE 8. PLANT AND EQUIPMENT

(in thousands)

<TABLE>
<CAPTION>
OCTOBER 31
-------------------
1999 1998
-------- --------
<S> <C> <C>
Leasehold improvements.................................... $ 294 $ 95
Equipment and vehicles.................................... 1,785 873
Furniture and fixtures.................................... 684 499
Construction in progress.................................. 497 344
------- -------
Plant and equipment at cost............................... 3,260 1,811
Less: Accumulated depreciation and amortization........... (713) (357)
------- -------
Plant and equipment, net.................................. $ 2,547 $ 1,454
======= =======
</TABLE>

For the years ended October 31, 1999, 1998 and 1997, depreciation expense
totaled $282 and $198 and $88, respectively.

31
<PAGE>
NOTE 9. OTHER ASSETS

(in thousands)

<TABLE>
<CAPTION>
OCTOBER 31
-------------------
1999 1998
-------- --------
<S> <C> <C>
Long-term note receivable................................... $ -- $ 776
Investment in unconsolidated affiliates..................... 595 517
Receivable from joint ventures.............................. 249 --
Other....................................................... 10 69
---- ------
Other assets................................................ $854 $1,362
==== ======
</TABLE>

At October 31, 1998, long-term note receivable consists of an unsecured non
interest-bearing advance of $776 to the organizer of a joint venture
manufacturing facility in the PRC. The Company expects this note to be paid in
fiscal year 2000 and has therefore reported it in "Other current assets".

NOTE 10. SHORT-TERM DEBT

(in thousands)

<TABLE>
<CAPTION>
OCTOBER 31
-------------------
1999 1998
-------- --------
<S> <C> <C>
Credit facilities available................................. $4,474 $2,293
Drawn balance............................................... $3,291 $1,282
Composite interest rate..................................... 9.00% 9.00%
</TABLE>

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
OCTOBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Maximum outstanding.................................. $3,291 $1,598 $949
Average outstanding.................................. 2,209 977 181
Weighted average interest rate....................... 10.58% 7.9% 9.50%
</TABLE>

Short-term debt consists of the drawn balances of credit facilities
collateralized by restricted cash and certificates of deposit. The credit
facilities available to the Company consist of a $1.5 million revolving line of
credit in the United States that bears interest at LIBOR plus 175 basis points
and a $2,974 combination overdraft and import line of credit in Hong Kong that
bears interest at the HSBC-Hong Kong Bank prime rate plus 200 basis points. The
United States line of credit is collateralized by a $1.5 million certificate of
deposit. The Hong Kong line of credit is collateralized by a $2.0 million
certificate of deposit.

NOTE 11. ACCOUNTS PAYABLE

(in thousands)

At October 31, 1999 and 1998, accounts payable included $290 and $600,
respectively, of amounts due to subcontractors which have been retained pending
completion and customer acceptance of jobs.

32
<PAGE>
NOTE 12. RELATED PARTY TRANSACTIONS

(in thousands)

Accounts payable to related parties included $79 of outstanding loans
payable to directors and shareholders of the Company's Thailand subsidiary at
October 31, 1998. The loans are unsecured, carry no interest, and have no fixed
term of repayment.

The Chairman of the Company has indirect personal interests in two joint
ventures with whom the Company conducted business. Sales to joint venture
companies for the years ended October 31, 1999, 1998 and 1997 were $0, $0 and
$111. respectively. At October 31, 1999 and 1998 payables to joint venture
companies totaled $0 and $79, respectively.

NOTE 13. BUSINESS COMBINATIONS

(in thousands except per share amounts)

May 25, 1998, the Company formed a joint venture with The Arlo Aluminum
Corporation for the fabrication, assembly and installation of curtain wall
systems in the Philippines. The Company contributed $200 in cash for a
fifty-five percent ownership in the joint venture and consolidates the activity
of the joint venture in its financial statements.

On June 4, 1998, the Company formed a joint venture with a subsidiary of
Groupo IMSA, S.A. de C.V. for the construction and operation of a curtain-wall
manufacturing facility in Monterrey, Mexico. The Company contributed equipment
and cash of $284 for a forty-five percent ownership in the joint venture. In
October 1999, the Company mutually agreed to terminate the joint venture to the
satisfaction of both parties. In return of its investment, the Company received
equipment valued at approximately $105 and aluminum extrusion that will be
delivered in fiscal year 2000.

On May 16, 1997, the Company entered into a merger with International Forest
Industries (IFI), a dormant Nevada corporation, whereby IFI acquired all the
stock in Flour City International in exchange for 2,931,034 shares of IFI. Flour
City International was merged into IFI and dissolved. IFI immediately changed
its name to Flour City International, Inc. The prior owners of IFI received
eight percent of the stock of the combined company. The merger between FCI and
IFI has been accounted for as a recapitalization.

On January 17, 1997, the Company merged with FCAM Pacific in a share
exchange whereby the owners of Hockley International Limited, a British Virgin
Islands corporation (the former name of FCAM Pacific), exchanged all their
shares for 1,285,700 of the Company's shares. The prior owners of FCAM Pacific
retained eighty percent of the stock in the Company with ten percent held by the
management of FCAM. The share exchange with FCAM Pacific was treated as a
recapitalization.

On January 17, 1997, effective January 1, 1997, the Company acquired all the
capital stock of FCAM for a nominal amount in a purchase agreement with Armco,
Inc. The acquisition of FCAM from Armco has been accounted for as a purchase.
The net amount paid (one hundred dollars) was allocated to the fair value of the
assets, liabilities and contracts assumed, with the excess of fair value

33
<PAGE>
NOTE 13. BUSINESS COMBINATIONS (CONTINUED)

of net assets acquired used to first reduce plant and equipment to zero and then
credited to negative goodwill. The purchase price was allocated to assets and
liabilities as follows:

<S> <C>
Accounts receivable......................................... $ 7,972
Other assets................................................ 252
Deferred income taxes....................................... 1,500
Note receivable - Armco (note 6)............................ 1,395
Payables and other current liabilities...................... (1,447)
Billings in excess of cost and estimated earnings on
uncompleted contracts..................................... (7,487)
Negative goodwill........................................... (2,185)
=======
</TABLE>

The operating results of FCAM have been included in the Consolidated
Statement of Income from January 1, 1997, the effective date of acquisition. On
the basis of an unaudited pro forma consolidation of the results of operations
as if the acquisition had taken place at November 1, 1995, consolidated revenues
would have been $24,283 and $35,229 for the years ended October 31, 1996 and
1997, respectively. Consolidated pro forma net income (loss) and diluted net
income (loss) per share would have been $(1,441) and $5,471 or $(.33) per share
and $1.26 per share for the years ended October 31, 1996 and 1997, respectively.
Such pro forma amounts are not necessarily indicative of what the actual
consolidated results of operations might have been if the acquisition had been
effective at the beginning of fiscal 1996. In computing the pro forma amounts,
no adjustment has been made to retroactively reflect the amounts allocated to
the fair value of the contracts acquired form FCAM on January 1, 1997, as it is
not possible to recast what values would have been attributable to such
contracts at November 1, 1995 nor what effect such contracts might have had on
the purchase price of FCAM.

NOTE 14. COMMITMENTS AND CONTINGENCIES

(in thousands)

LEASES

The Company has commitments under operating leases for certain equipment and
facilities. Rental expense for 1999, 1998 and 1997 was $767, $588, and $402,
respectively. As of October 31, 1999, the minimum future lease payments,
including cancellation provisions, to which the Company was obligated, are:

<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31
----------
<S> <C>
2000........................................................ $ 910
2001........................................................ 360
2002........................................................ 315
2003........................................................ 276
2004........................................................ 276
Thereafter.................................................. 46
------
Total minimum lease payments................................ $2,183
======
</TABLE>

34
<PAGE>
NOTE 14. COMMITMENTS AND CONTINGENCIES (CONTINUED)

LITIGATION

The Company is party to various legal actions that are common and frequent
in the construction industry none of which represent material claims.

ENVIRONMENTAL

Prior to the Company's purchase of FCAM from Armco, FCAM operated facilities
that allegedly generated hazardous substances. FCAM has been named as a
potentially responsible party (PRP) in relation to several sites for actions
that allegedly occurred prior to the Company's purchase of FCAM. Pursuant to the
terms of the Armco sale, Armco agreed to defend, indemnify and hold harmless the
Company in connection with certain lawsuits, including environmental claims
associated with any property owned by FCAM at or before the date of sale. Any
and all cleanup responsibility and litigation with respect to such environmental
claims have been assumed by Armco pursuant to the sale agreement. The Company
believes that to the extent FCAM incurs any loss or liability in connection with
any such actions, it will be fully compensated by Armco. In the opinion of
management, any ultimate liability with respect to these actions will not have a
material impact on the financial position of the Company.

NOTE 15. STOCKHOLDERS' EQUITY

(in thousands except share and per share information)

All references to the number of shares of the Company's common stock in
these financial statements have been restated for the 7 for 1 reverse stock
split effective May 21, 1998.

On May 28, 1998, the Company completed the registration and issuance of
2,143,000 shares of the Company's $0.0001 par value common stock resulting in
net proceeds after deducting issuance costs of approximately $14,545. The
proceeds of the offering are intended be used to establish or acquire an
interest in a fabrication facility in the People's Republic of China, capital
expenditures at its Tennessee fabrication facility, working capital and general
corporate purposes.

During 1997 the Company issued 2,931,034 shares in the merger with and into
IFI and 1,285,700 shares in exchange for the stock of FCAM Pacific. See Note 13
- -Business Combinations.

Three employees of the Company, in connection with their employment
agreements effective November 1, 1997, were granted an aggregate of 399,714
shares of restricted common stock, including 142,860 shares issued at the time
of the IFI merger. Such shares vest annually over a five-year period following
the date of grant and have provisions for accelerated vesting if certain
earnings targets are met. The fair value of the stock issued at the date of
grant has been reflected as unearned compensation and is charged to operations
over five years. One employee terminated his employment with the Company during
1998 and one in 1999 and therefore in accordance with their employment
agreements, the Company repurchased 127,912 and 119,917 shares at par,
respectively; unearned compensation was reduced by $101.

In September 1999, the Company purchased 892,061 treasury shares at a cost
of $1,461,000. Of the total shares purchased, 692,200 shares were purchased from
non-affiliate shareholders and the remaining 199,861 shares represents both
vested and unvested shares of a former Company officer.

Other stockholders' equity is comprised of unearned compensation. The
balance of unearned compensation at October 31, 1999 and 1998 was $89 and $131,
respectively.

35
<PAGE>
NOTE 16. STOCK OPTIONS AND OTHER LONG-TERM INCENTIVE COMPENSATION AWARDS

(in thousands except share and per share information)

The 1997 Stock Incentive Plan provides for the granting of stock options and
other performance awards to employees and directors of the Company. No options
were issued by the Company prior to May 21, 1998. Effective May 21, 1998, the
Company's outside directors were granted restricted nonqualified options of
20,000 shares each. The options are priced at $7.56 per share, vest annually
over a four-year period beginning one year from the date of grant, and expire
ten years from the date of grant. No options were exercised, forfeited, or
expired during the year ended October 31, 1998.

In March 1999, the Company granted restricted nonqualified options of 20,000
shares to a newly elected outside director of the Company at an exercise price
of $3.25. Also in 1999, three outside directors were granted 5,000 shares each
at an exercise price of $2.25 and several key employees, including two executive
officers were granted options totaling 427,000 shares at an exercise price of
$2.25. These shares vest over four-years. No options are currently exercisable.

The following table contains information on stock option activity:

<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
OPTIONS PRICE PER OPTIONS PRICE PER
EXERCISABLE SHARE OUTSTANDING SHARE
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Balance at October 31, 1997.................. -- $ -- -- $ --
Granted (weighted average fair value of
$3.33) 60,000 $7.56
Exercised --
Expired/forfeited --
------ ----- ------- -----
Balance at October 31, 1998 -- $ -- 60,000 $7.56
------ ----- ------- -----
Granted (weighted average fair value of
$1.84) 462,202 $2.29
Exercised --
Expired/forfeited --
------ ----- ------- -----
Balance at October 31, 1999 15,000 $7.56 522,202 $2.90
------ ----- ------- -----
</TABLE>

Additional information regarding options outstanding as of October 31, 1999
is as follows:

36
<PAGE>

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------- ---------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE OPTIONS REMAINING NUMBER OF EXERCISE
PRICE SHARES CONTRACTRUAL SHARES PRICE
PER SHARE OUTSTANDING LIFE (YEARS) EXERCISABLE PER SHARE
- --------- ----------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
$2.25 442,202 9.8 -- $ --
$3.25 20,000 9.4 -- $ --
$7.56 60,000 8.5 15,000 $7.56
------- --- ------ -----
522,202 9.6 15,000 $7.56
======= === ====== =====
</TABLE>

The fair value is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions: risk-free
interest rate of 5.5% in 1999 and 5.0% in 1998, no dividends, expected
volatility of 71% in 1999 and 20% in 1998, and expected lives of 10.0 years in
1999 and 1998.

The Company accounts for its stock-based compensation plans under APB 25
- -Accounting for Stock Issued to Employees. For stock options granted, the option
price is not less than the market value of shares on the date of grant;
therefore, no compensation cost has been recognized for stock options granted.
Had compensation costs for these plans been determined under the provisions of
SFAS 123 - Accounting for Stock-Based Compensation, the Company's net income
(loss) and diluted earnings (loss) per share for the year ended October 31,
1999, would have been reduced to the following pro forma amounts:

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
-------------------------------------------------
1999 1998
----------------------- -----------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net income (loss)................. $(2,229) $(2,465) $3,973 $3,840
Diluted earnings (loss) per
share........................... $ (0.37) $ (0.41) $ 0.78 $ 0.75
======= ======= ====== ======
</TABLE>

NOTE 17. OTHER INCOME (EXPENSE), NET

(in thousands)

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Interest income......................................... $ 924 $666 $104
Interest expense........................................ (98) (59) (52)
Operating results of nonconsolidated affiliates......... -- (15) (8)
Other................................................... (179) 93 326
----- ---- ----
Other income (expense), net........................... $ 647 $685 $370
===== ==== ====
</TABLE>

NOTE 18. INCOME TAXES

(in thousands)

The Company operates in several countries some of which tax only
same-country source income and some of which have no income tax. FCAM Pacific
was not subject to United States taxation prior

37
<PAGE>
NOTE 18. INCOME TAXES (CONTINUED)

to the January 1997 share exchange. Income or (loss) before income taxes and
income tax (benefits) by segment regions are:

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
------------------------------
1999 1998 1997
(IN THOUSANDS) -------- -------- --------
<S> <C> <C> <C>
North America...................................... $(1,095) $1,980 $3,698
Pacific Rim........................................ (453) 2,914 3,321
------- ------ ------
Income (loss) before income taxes.................. $(1,548) $4,894 $7,019
======= ====== ======
</TABLE>

The provision (benefit) for income taxes is based on the statutory rates in
effect in each country where income is earned plus United States taxation on
certain foreign source income and deferred tax items. The (benefit) provision
for income taxes consist of:

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
------------------------------
1999 1998 1997
(IN THOUSANDS) -------- -------- --------
<S> <C> <C> <C>
North America............................................... $(399) $259 $ 697
Pacific Rim................................................. 689 116 252
----- ---- ------
Provision for income taxes - current........................ 290 375 949
Deferred -- North America................................... (412) 493 803
----- ---- ------
Provision (benefit) for income taxes........................ $(122) $868 $1,752
===== ==== ======
</TABLE>

Deferred income taxes are stated at enacted tax rates expected to be in
effect when taxes are actually paid or recovered. Aggregate deferred income tax
amounts are:

<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31
-------------------
1999 1998
-------- --------
<S> <C> <C>
Net operating loss carryforwards in Asia.................... $ 1,020 $ 85
Net operating loss carryforwards in the United States....... 512 --
Basis difference in contracts in process.................... -- 28
Allowance for doubtful accounts............................. 86 190
Other....................................................... 18 (14)
Valuation allowance in Asia................................. (1,020) (85)
------- ----
Net deferred tax assets................................... $ 616 $204
======= ====
</TABLE>

A valuation allowance has been established for deferred tax assets related
to net operating loss carry forwards in Asia.

38
<PAGE>
NOTE 18. INCOME TAXES (CONTINUED)

The following is a reconciliation between the United States federal
statutory rate and the effective income tax rate.

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Statutory United States federal income tax rate... (34.0%) 34.0% 34.0%
Increase (reduction) in rate
Resulting from:
Valuation allowance of net
operating loss carry forward in Asia............ 77.6%
Profits of foreign subsidiaries taxed at less
than the statutory rate....................... (23.4%) (16.4%) (9.4%)
United States state income taxes................ -- 1.2% 3.1%
Negative goodwill amortization.................. (28.2%) (3.0%) (1.8%)
Other........................................... 0.1% 1.9% (0.9%)
------ ------ ------
Effective income tax rate......................... (7.9%) 17.7% 25.0%
====== ====== ======
</TABLE>

The company has a federal net operating loss carry forward in the United
States of approximately $1.5 million expiring through 2014.

NOTE 19. EARNINGS PER SHARE

(in thousands except share information)

The acquisitions of FCAM Pacific by FCI and FCI by IFI described in Notes 1
and 13 have both been accounted for as recapitalizations. Accordingly, no value
has been attributed to the shares issued and they are treated as being
outstanding for all periods presented for purposes of computing earnings per
share.

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Shares after recapitalizations......................... 3,960 3,960 3,960
Weighted average effect of:
Employee grants vested............................... 88 54 --
Repurchased shares................................... (181) (107) --
Issuance of shares................................... 2,143 940 --
----- ----- -----
Weighted average basic shares...................... 6,010 4,847 3,960
Dilutive effect of nonvested employee stock grants..... -- 218 399
----- ----- -----
Weighted average diluted shares.................... 6,010 5,065 4,359
===== ===== =====
</TABLE>

39
<PAGE>
NOTE 20. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

The Company's operations are concerned with a small number of large dollar
amount construction contracts. Because of the nature of the construction
projects in which the Company participates, the Company often operates as a
subcontractor to a small number of large international general contractors.
Therefore the Company often is in situations where its operations are
concentrated with a few customers. Details of customers accounting for 10% or
more of total revenues and accounts receivable are presented below:

<TABLE>
<CAPTION>
OCTOBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Customer A............................................... 12% -- --
Customer B............................................... -- 18% 34%
Customer C............................................... 4% 34% 33%
Customer D............................................... 7% 15% --
Customer E............................................... 14% -- --
Customer F............................................... 25% -- --
Customer G............................................... 14% -- --

ACCOUNTS RECEIVABLE:
Customer A............................................... 24% -- --
Customer B............................................... -- 23% 31%
Customer C............................................... 3% 31% 6%
Customer D............................................... 6% 4% --
Customer E............................................... 16% -- --
Customer F............................................... 13% -- --
Customer G............................................... 4% -- --
</TABLE>

NOTE 21. SEGMENT INFORMATION

(in thousands)

The Company operates in one industry segment, the design, engineering,
manufacturing and installation of custom curtain-wall systems for the
construction industry. The Company's systems are sold through long-term
construction contracts to general contractors and owners of high-rise and

40
<PAGE>
NOTE 21. SEGMENT INFORMATION (CONTINUED)

special purpose buildings. The Company operates in several countries including
the United States, Hong Kong, Thailand, Malaysia, and the Philippines.
Geographic financial information is:

<TABLE>
<CAPTION>
NORTH PACIFIC REST OF
AMERICA RIM THE WORLD TOTAL
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Fiscal year 1999:
Net revenues - external customers....................... $15,337 $29,633 $44,970
Loss before income taxes and minority interest.......... (1,095) (292) (161) (1,548)
Interest income (expense)............................... 631 195 826
Identifiable assets..................................... 19,108 16,201 35,309
Depreciation and amortization expense................... (205) 201 (4)
Income tax expense (benefit)............................ (811) 689 (122)
Net income (loss)....................................... (284) (1,945) (2,229)

Fiscal year 1998:
Net revenues - external customers....................... $17,191 $15,089 $32,280
Income loss before income taxes and minority interest... 1,830 3,064 4,894
Interest income (expense)............................... 328 279 607
Identifiable assets..................................... 24,902 17,349 42,251
Depreciation and amortization expense................... (277) 97 (180)
Income tax expense (benefit)............................ 752 116 868
Net income (loss)....................................... 1,135 2,838 3,973

Fiscal year 1997:
Net revenues - external customers....................... $19,057 $12,818 $31,875
Income loss before income taxes and minority interest... 3,698 3,321 7,019
Interest income (expense)............................... 30 22 52
Identifiable assets..................................... 12,128 8,955 21,083
Depreciation and amortization expense................... (287) 60 (227)
Income tax expense (benefit)............................ 1,500 252 1,752
Net income (loss)....................................... 2,198 3,075 5,273
</TABLE>

NOTE 22. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash and cash equivalents, restricted deposits,
receivable from joint ventures, investments in joint ventures, advances from
shareholders and directors, and amounts due to joint ventures, are reasonable
estimates of their fair value due to the relatively short maturities of these
instruments. Short-term debt carries a variable interest rate tied to current
market rates thereby approximating fair value.

NOTE 23. RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities which defines
derivatives, requires that all derivatives be carried at fair value and provides
for hedge accounting when certain conditions are met. SFAS No. 133, as amended
by SFAS No. 137, is effective for the Company in fiscal 2002. Although the
Company has not fully assessed the implication of SFAS No. 133 as amended, the
Company does not believe that the adoption of this statement will have a
material effect on financial conditions or results of operations.

41
<PAGE>
ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On April 26, 1999 the Company was informed by its independent auditors,
Deloitte & Touche LLP ("D&T"), of D&T's resignation, effective as of that date.
The reports of D&T on the financial statements of the Company for each of the
two fiscal years ended October 31, 1998 did not contain an adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles.

During each of the two fiscal years ended October 31, 1998, and the
subsequent interim period preceding D&T's resignation, there were no
disagreements with D&T on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of D&T, would have caused D&T
to make reference to the subject matter of the disagreements in connection with
their reports. During these periods, there were no "reportable events" as that
term is defined in Item 304(a)(1)(v) of Regulation S-K.

The Audit Committee of the Board of Directors did not recommend a change in
independent accountants and did not request that D&T resign the account.

The Company has authorized D&T to respond fully to the inquiries of the
Company's successor accountant and has requested that D&T provide the Company
with a letter addressed to the Securities and Exchange Commission stating
whether it agrees with the above statements. A copy of that letter, dated April
30,1999, is filed as exhibit 16.1 to the Form 8-K as filed by the Company on
April 30, 1999.

On August 20, 1999, the Company's Board of Directors authorized the
appointment of the international accounting firm of Grant Thornton LLP to serve
as the Company's independent auditors for the fiscal year ending October 31,
1999.

On August 20, 1999 the Board accepted the resignation of Michael J. Russo,
who served as President of Flour City international Inc. and Chief Executive
Officer of Flour City Architectural Metals, Inc. Edward Boyle III has been
appointed President of Flour City International, Inc. Roger Ulbricht has been
appointed Executive Vice President of Flour City International, Inc. and
President and Chief Executive Officer of Flour City Architectural Metals, Inc.
John Tang, Chairman of Flour City International, Inc. assumed the additional
position of Chief Executive Officer of Flour City International, Inc.

42
<PAGE>
PART III

ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by Item 10 is incorporated herein by reference to
the Company's definitive Proxy Statement to be filed with the Commission within
120 days of the Company's October 31, 1999 year end.

ITEM 11--EXECUTIVE COMPENSATION

The information required by Item 11 is incorporated herein by reference to
the Company's definitive Proxy Statement to be filed with the Commission within
120 days of the Company's October 31, 1999 year end.

ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by Item 12 is incorporated herein by reference to
the Company's definitive Proxy Statement to be filed with the Commission within
120 days of the Company's October 31, 1999 year end.

ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Item 13 is incorporated herein by reference to
the Company's definitive Proxy Statement to be filed with the Commission within
120 days of the Company's October 31, 1999 year end.

PART IV

ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Listing of Documents

(1) Financial Statements. The Company's Consolidated Financial Statements
included in Item 8 hereof, as required at October 31, 1999 and 1998, and
for the years ended October 31, 1999, 1998 and 1997, consist of the
following:

Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flow
Consolidated Statements of Stockholders' Equity
Notes To The Consolidated Financial Statements

(2) Financial Statement Schedules.

(i) Financial Statement Schedule of the Company appended hereto, as
required for the years ended October 31, 1999 and 1998 consist of the
following:

II. Valuation and Qualifying Accounts

43
<PAGE>
(3) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --- -----------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of Flour City
International, Inc. (1)
3.2 Articles of Merger of International Forest
Industries, Inc., and
Flour City International, Inc. (1)
3.3 By-laws of Flour City International, Inc. (1)
4.1 Underwriter's Warrant (1)
4.2 Form of Lock-Up Agreement (1)
10.2 Stock Purchase Agreement between Flour City
International, Inc., Armco, Inc., and Flour City
Architectural Metals, Inc., dated as of January 1, 1997 (1)
10.3 Agreement and Plan of Merger by and among Flour City
International, Inc. and International Forest
Industries, Inc., dated as of April 4, 1997 (1)
10.4 Flour City International, Inc. 1997 Stock Incentive Plan and
Form of Nonqualified Stock Option Agreement (1)
10.5 Form of Indemnification Agreement (1)
10.6 Employment Agreement between Flour City Architectural
Metals, Inc. and Michael J. Russo dated January 17, 1997 (1)
10.7 Employment Agreement by and between Flour City Architectural
Metals (Asia) Limited and John W. Y. Tang dated
December 15, 1997 (1)
10.8 Ground and Building Lease Agreement dated December 20, 1993,
Consent and Assumption of Lease dated May 27, 1997 (1)
10.9 Lease Agreement between Douglas Dynamics, LLC and Flour City
Architectural Metals, Inc. dated as of January 1, 1997 (1)
10.12 Agreement between Flour City Architectural Metals, Inc., and
Turner Construction Company dated December 4, 1996 (1)
10.13 Purchase Order #32895-1243 for U.C. Davis Medical Center in
Sacramento, California (1)
10.14 Trade Contract between Swiss Re Investors, Inc., and Flour
City Architectural Metals, Inc., dated May 19, 1997 (1)
10.15 Employment Agreement by and between Flour City Architectural
Metals, Inc. and Roger Ulbricht dated January 16, 1997 (1)
10.17 Curtainwall Contract between THK Real Estate Limited and
Kasion F.C. Limited dated June 15, 1995 (1)
10.18 Shareholder Agreement by and between IMSALUM S.A. de C.V.,
and Flour City Architectural Metals dated as of January 8,
1998 (1)
10.19 Employment Agreement by and between Flour City
International, Inc., and Beta Group, Inc., and Thomas P.
Scully dated as of April 27, 1998 (1)
10.20 Employment Agreement by and among Flour City
International, Inc., Flour City Architectural Metals, Inc.
and Robert O. Bruce dated as of August 28, 1998. (2)
21 Subsidiaries of the Registrant
27.1 Financial Data Schedule
</TABLE>

- ------------------------

(1) Incorporated herein by reference to the Exhibits filed with the Company's
Registration Statement on Form S-1 dated May 21, 1998, Commission
Registration Number 333-43793.

(2) Incorporated herein by reference to the Exhibits filed with the Company's
Current Report on Form 8-K dated September 8, 1998.

(b) Reports on Form 8-K:

The Company filed Form 8-K on April 30, 1999 pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934 addressing "Changes in
Registrant's Certifying Accounts"

44
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S> <C> <C>
FLOUR CITY INTERNATIONAL, INC.

By: /s/ JAMES F. LAWLER
-----------------------------------------
James F. Lawler
INTERIM CHIEF FINANCIAL OFFICER
</TABLE>

January 28, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ JOHN W. TANG
------------------------------------------- Chairman and Secretary January 28, 2000
John W. Y. Tang

/s/ EDWARD M. BOYLE III
------------------------------------------- President January 28, 2000
Edward M. Boyle III

/s/ JAMES F. LAWLER Interim Chief Financial
------------------------------------------- Officer (Principal January 28, 2000
James F. Lawler Accounting Officer)

/s/ JOHNSON K. FONG
------------------------------------------- Executive Vice President January 28, 2000
Johnson K. Fong and Director

/s/ EUGENE M. ARMSTRONG
------------------------------------------- Director January 28, 2000
Eugene M. Armstrong

/s/ PAUL D. LYNAM
------------------------------------------- Director January 28, 2000
Paul D. Lynam

/s/ MABEL CHAN
------------------------------------------- Director January 28, 2000
Mabel Chan
</TABLE>

45
<PAGE>
FLOUR CITY INTERNATIONAL, INC.

FINANCIAL STATEMENT SCHEDULES

PURSUANT TO ITEM 14(A)(2) OF FORM 10-K

<S> <C>
II. Valuation and Qualifying Accounts.................... 47

Independent Auditors' Report On Supplemental Schedules...... 48
</TABLE>

46
<PAGE>
FLOUR CITY INTERNATIONAL, INC.

II. VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997

(IN THOUSANDS)

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C - ADDITIONS COLUMN D COLUMN E
-------- ------------ --------------------------- ---------- ----------
BALANCE AT (1) CHARGED (2) CHARGED BALANCE AT
BEGINNING OF TO COSTS AND TO OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended October 31, 1999..................... $ 539 $1,027 $ - $(124)(a) $1,442
Year ended October 31, 1998..................... 1,153 331 - (945)(a) 539
Year ended October 31, 1997..................... 154 999 - - 1,153

DEFERRED TAX ASSET VALUATION ACCOUNT
Year ended October 31, 1999..................... $ 85 $ 616 $ - $ (85) 616
Year ended October 31, 1998..................... 53 32 - - 85
Year ended October 31, 1997..................... 59 - - (6)(b) 53
</TABLE>

- ------------------------------

Notes:

(a) During 1999 and 1998, $124 and $945, respectively, of accounts receivable
were determined uncollectable and were written off to the allowance for
doubtful accounts. See Note 4 to the Consolidated Financial Statements.

(b) The deferred tax asset valuation account is increased and decreased by
adjustments to the current year provision for income taxes. See Note 18 to
the Consolidated Financial Statements.

47
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL SCHEDULES

To the Shareholders and Board of Directors of

Flour City International, Inc.

Johnson City, TN

Our audit was conducted for the purpose of forming an opinion on the basic
consolidated financial statements as of and for the year ended October 31, 1999
taken as a whole. The supplemental schedule listed in the table of contents is
presented for the purpose of additional analysis and is not a required part of
the basic consolidated financial statements. The schedule is the responsibility
of the Company's management. Such schedule was subjected to the auditing
procedures applied in our audit of the basic consolidated financial statements
as of and for the year ended October 31, 1999 and, in our opinion, is fairly
stated in all material respects when considered in relation to the basic
consolidated financial statements taken as a whole.

GRANT THORNTON LLP

December 9, 1999

San Francisco, California

48
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL SCHEDULES

To the Shareholders and Board of Directors of

Flour City International, Inc.

Johnson City, TN

Our audits were conducted for the purpose of forming an opinion on the basic
consolidated financial statements taken as whole as of and for the years ended
October 31, 1998. The supplemental schedule listed in the table of contents is
presented for the purpose of additional analysis and is not a required part of
the basic consolidated financial statements. The schedule is the responsibility
of the Company's management. Such schedule has been subjected to the auditing
procedures applied in our audit of the basic consolidated financial statements
as of and for the years ended October 31, 1998 and, in our opinion, is fairly
stated in all material respects when considered in relation to the basic
consolidated financial statements taken as a whole.

DELOITTE & TOUCHE LLP

December 11, 1998

Nashville, Tennessee

<PAGE>
Exhibit 21

FLOUR CITY INTERNATIONAL, INC.

SIGNIFICANT SUBSIDIARIES

<TABLE>
<CAPTION>
NAME OF SUBSIDIARY PERCENT OWNERSHIP JURISDICTION OF INCORPORATION
------------------ ----------------- -----------------------------
<S> <C> <C>
Flour City Architectural Metals, Inc................. 100% Delaware

Flour City Arlo Corporation.......................... 55% Philippines

Flour City Architectural Metals (Pacific) Ltd........ 100% British Virgin Islands

Flour City Architectural Metals (L) Ltd.............. 100% Lubuan, Malaysia

Flour City Architectural Metals (Asia) Ltd........... 100% Hong Kong

Kasion F.C. Ltd...................................... 100% Thailand
</TABLE>

<PAGE>
<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<CASH> 13,691
<SECURITIES> 0
<RECEIVABLES> 9,956
<ALLOWANCES> 1,442
<INVENTORY> 0
<CURRENT-ASSETS> 32,508
<PP&E> 3,260
<DEPRECIATION> 713
<TOTAL-ASSETS> 35,909
<CURRENT-LIABILITIES> 12,646
<BONDS> 70
0
0
<COMMON> 0
<OTHER-SE> 22,056
<TOTAL-LIABILITY-AND-EQUITY> 35,909
<SALES> 0
<TOTAL-REVENUES> 44,790
<CGS> 0
<TOTAL-COSTS> 36,418
<OTHER-EXPENSES> 179
<LOSS-PROVISION> 1,027
<INTEREST-EXPENSE> 98
<INCOME-PRETAX> (1,548)
<INCOME-TAX> (122)
<INCOME-CONTINUING> (2,229)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,229)
<EPS-BASIC> (0.37)
<EPS-DILUTED> (0.37)

</TABLE>