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

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).       Yes [    ]      No [ X ]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

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Note: The balance sheet at March 31, 2004 has been taken from the audited financial statements as of that date.

The accompanying notes are an integral part of the financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Loss)

FOR THE Six MONTHS ENDED

September 30, 2004 AND September 30, 2003

UNAUDITED

The accompanying notes are an integral part of the financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Loss)

FOR THE THREE MONTHS ENDED

September 30, 2004 AND September 30, 2003

UNAUDITED

The accompanying notes are an integral part of the financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE Six MONTHS ENDED

September 30, 2004 AND September 30, 2003

UNAUDITED

The accompanying notes are an integral part of the financial statements.

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Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's March 31, 2004 Annual Report to Shareholders. The results of operations for the interim periods presented are not necessarily indicative of the operating results for the full year.

Inventory net of reserves is summarized as follows:

The business investment has been reflected in the consolidated balance sheet and statements of cash flows as of, and for, the six months ended September 30, 2004. Beginning in the last month of the third quarter, the Company will recognize 100% of the consolidated earnings of CPAC Asia, as the Company consolidates its foreign subsidiaries on a three-month lag.

The Company accounts for its 40% ownership interest in TURA AG (TURA) of Düren, West Germany, under the equity method of accounting as prescribed by Accounting Principles Board Opinion No. 18. The Company records its equity in the income or losses of TURA on a three-month lag. The Company has recorded its equity investment on the consolidated balance sheets in "Investment in affiliate" and its share of the TURA earnings and losses as "Equity in loss of affiliate," on the consolidated statements of operations. In addition, the purchase price to acquire the cumulative 40% ownership exceeded the Company's proportionate share of TURA's net assets. A portion of this allocated excess purchase price is also amortized into equity earnings.

The Company met with the investee's primary lending institution in late May to discuss the financial condition of TURA, who had continued to experience significant cash flow difficulties. While TURA was granted an extension until October 31, 2004 on the maturity date of its working capital line of credit, the Company believes that the ability for TURA to meet its normal day-to-day operating expenses appears conditional on obtaining future capital infusions or significant sales volume increases.

While TURA has continued to generate operating losses through the first six months of the current fiscal year (See summarized operating results below), they have reduced expenses and have been able to operate, while exploring various options for improving current financial conditions, including negotiating favorable payment terms with certain key vendors and customers. Their primary lending institution has not canceled their working capital line of credit, despite expiration of its maturity date, and continues to be working with TURA to resolve cash flow needs.

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The Company had an option to increase its ownership stake to 51% by October 2004. While this option has now expired, the Company has continued discussions with TURA and its primary lending institution, regarding appropriate actions to protect its investment in TURA in fiscal 2005. The Company believes that the ability for TURA to continue to operate remains uncertain at this time. Recognition of the proportionate share of TURA losses in the second quarter has effectively written down the basis of the Company's investment to zero at September 30, 2004. The Company has no obligation to fund any losses experienced by TURA and will not record its 40% share of TURA's equity earnings until such time as TURA becomes profitable. In the fourth quarter of fiscal 2004, the Company had determined, due to recognition of significant equity losses, that TURA's financial decline was other than temporary and recorded an impairment loss of approximately $2,320,000 or $0.47 a diluted share for the year ended March 31, 2004. This reduced the estimated fair market value of the Company's investment at March 31, 2004 to $250,000. The impairment adjustment also reduced the previously allocated excess purchase price, leaving a value that the Company believed was largely attributable to the supply contracts between the Company and TURA.

For the six months ended September 30, 2004 and the second quarter ended September 30, 2003, the Company recorded its 40% proportionate share of TURA's losses, plus amortization of the excess purchase price allocated to the supply contract. For the first quarter of last fiscal year, the Company recorded its 19% proportionate share of TURA's losses, plus amortization of the allocated excess purchase price.

At September 30, 2003, the proportionate share of the Company's investment in the net assets of TURA, as well as the unamortized value of the allocated excess purchase price, was allocated as follows:

The difference between the original purchase price for the Company's equity interests in TURA and the net investment balance shown above at September 30, 2003 represents the Company's subsequent recognition of its proportionate share of TURA's net loss, amortization of the purchase price, and foreign currency translation adjustments.

Summarized, approximate, unaudited, financial information for TURA for the three and six months ended September 30, 2004 and 2003 is shown below:

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Related to this endeavor, the Company adopted SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" and accounted for the employee termination costs and other costs associated with the move under its guidelines. The total expenses incurred in this project were approximately $1,275,000. As of September 30, 2004 all termination benefit costs and other move-related costs, accrued at March 31, 2004, were fully paid.

The table below summarizes the total costs accrued and paid under the criteria described in SFAS No. 146:

The Company completed the sale of the St. Louis facility on September 27, 2004 and recorded a gain on the sale of approximately $63,000. The Company continues to lease a 35,000 square foot warehouse space at 8448 Mid-County Industrial Drive, St. Louis, Missouri, with approximately 2.5 years remaining (original lease was for ten years, with a five-year termination clause), requiring monthly rental payments of approximately $14,000. The Company has contracted with a real estate firm to explore the possibility of subleasing the property, and as such, has not accrued any lease impairment or termination costs at September 30, 2004.

The Company guarantees the following debt and other obligations for some of its subsidiaries under agreements with banks:

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The Company has warranty obligations in connection with sales of its Imaging equipment. The warranty period generally ranges from 6 to 12 months. The costs incurred to provide for these warranty obligations are estimated and recorded as an accrued liability at the time of sale. The Company estimates its warranty cost at the time of sale for a given product based on historical failure rates and related costs to repair. The change in the Company's accrued warranty obligations from March 31, 2004 to September 30, 2004 was as follows (in thousands):

The fair value of these options were estimated at grant date using the Black-Scholes option-pricing model. There have been no charges to income in any of the periods above in connection with these options other than incidental expenses related to options.

Basic earnings per share are based upon the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average common shares outstanding during the period plus the dilutive effect of shares issuable through stock options and warrants. The shares used in calculating basic and diluted earnings per share are reconciled as follows:

Unexercised stock options to purchase 779,436 and 834,636 shares of the Company's common stock as of September 30, 2004 and 2003, respectively, were not included in the computations of diluted earnings per share because the

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exercise prices of these options were greater than the average market price of the Company's common stock during the respective periods. These options, issued at various dates from 1995 to 2004, are still outstanding at the end of the period. For the three months ended September 30, 2003, unexercised stock options to purchase 1,175,038 shares of the Company's stock were not included in the computation of EPS, because they would be anti-dilutive, due to the net loss incurred by the Company during the three months ended September 30, 2003.

Other comprehensive income includes foreign currency translation adjustments.

The Company operates in two industry segments: the Fuller Brands Segment and the CPAC Imaging (Imaging) Segment. Information concerning the Company's business Segments' net sales and income before non-operating income (expense) and income taxes for the quarters and six months ended September 30, 2004 and 2003 are as follows:

Sales between Segments are not material.

Information concerning the identifiable assets of the Company's business Segments at September 30, 2004 and March 31, 2004 are as follows:

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period beginning after March 15, 2004 to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The adoption did not have an impact on the Company's reported results of operations and financial position.

In December 2003, the Financial Accounting Standards Board issued SFAS No. 132 (revised 2003), "Employers' Disclosures about Pensions and Other Postretirement Benefits--an amendment of FASB Statements No. 87, 88, and 106." This statement requires new annual disclosures about the types of plan assets, investment strategy, measurement date, plan obligations, and cash flows, as well as the net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. The statement is effective for financial statements with fiscal years ending after December 15, 2003, with disclosure of information about foreign plans effective for fiscal years ending after June 15, 2004. The Company does not provide a defined benefit pension plan, nor any defined benefit postretirement plan; the impact of this pronouncement is expected to be minimal. Disclosures concerning the Company's defined contribution plans in its foreign operating units will be made f or the fiscal year ending March 31, 2005.

No material litigation is pending to which the Company and/or its subsidiaries are a party, or which property of the Company and/or its subsidiaries is the subject.

Certain March 31, 2004 financial statement and related footnote amounts have been reclassified to conform to the September 30, 2004 presentation.

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Item 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The Company operates in two industry segments. The Fuller Brands Segment is involved in developing, manufacturing, distributing, and marketing branded industrial and consumer cleaning and personal care products in North America and internationally. The CPAC Imaging (Imaging) Segment includes the Company's color photographic, health care, and graphic arts imaging operations in the United States, Belgium, Italy, South Africa, and Thailand. Sales between Segments are not material.

The Company's financial results for the quarter and six months ended September 30, 2004 include income after tax of $0.01 per diluted share, resulting from the sale of its former imaging manufacturing site in St. Louis, Missouri.

The Company's financial results for the quarter and six months ended September 30, 2003 include an after tax charge of $0.05 and $0.07 per diluted share, respectively, for the Imaging Restructuring initiative (See Note 5 to the Consolidated Financial Statements).

The Company's net sales decreased 5.3% and 5.0% for the three and six months ended September 30, 2004, respectively, as compared to the same periods last year (decreased 6.3% and 6.4%, excluding the impact of foreign currency exchange).

For the Fuller Brands Segment, net sales for the three and six months ended September 30, 2004 were flat, as compared to the same periods in fiscal 2004, as a strong performance from Fuller Brush (Fuller) offset continued declines in Stanley Home Products (Stanley) and Cleaning Technologies Group's (CTG) net sales. Fuller's net sales increased 15.6% and 14.3% for the three and six months ended September 30, 2004, as compared to the same periods last year, primarily from increases in its QVC home shopping business, as well as sales resulting from its new retail initiatives.

Stanley's net sales declined 9.8% and 10.1% for the quarter and six months ended September 30, 2004, as compared to the same periods last year. Since April 2004, the Company has been in the process of implementing a new direct sales strategy that involves fundamental changes to key areas of the business such as its compensation plan, product focus, and recruiting methods to attract new independent representatives. Given the magnitude of change required, however, improvements are expected to be gradual.

CTG's net sales for the quarter and six months ended September 30, 2004 declined 12.9%, respectively, compared to the same quarter and six months last year. Distributor sales to school districts were down due to state and local economic conditions. The Kmart business is decreasing due to the continued closing of Kmart locations. In addition, CTG's national accounts business is facing increased competition. The Company is targeting additional classes of trade and finding success in several non-school related accounts, although not yet at a rate sufficient to balance the losses referred to above. In addition to this diversification program, a program will launch in Q3 to aggressively recruit new distribution partners in select areas of the country where growth opportunities exist, offering nonexclusive territory rights to drive incremental sales.

In the Imaging Segment, net sales decreased 12.5% and 10.4% for the three and six months ended September 30, 2004, respectively, as compared to the same periods in fiscal 2004 (decreased 15.0% and 13.9%, excluding the impact of foreign currency exchange). The Segment continues to be impacted by the shift from traditional imaging to digital products, particularly in the domestic marketplace. The Company's US medical imaging and photo imaging businesses experienced declines ranging from 13.4% to 19.4%, for the respective quarter and six months as compared to the same periods last year. The Imaging restructuring plan initiated in fiscal 2004 was intended to reduce costs and improve efficiencies for the US manufacturing operations. The total positive impact of the restructuring has been partially offset by the decline in sales, but nonetheless has reduced costs in critical areas.

Excluding the impacts of foreign currency exchange, the Company's European operations reported sales declines for the quarter and six month period. These were partially offset by significant sales increases in CPAC's South African subsidiary from its continued penetration into the medical x-ray chemical market. CPAC's Asian operation also posted sales gains in the second quarter (See Foreign Operations discussions for international operations' results).

The global Imaging segment is focused on improving its overall operating efficiencies, and building its position to become a competitive outsource private label imaging chemical supplier to major industry players as they invest resources in

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digital technology. In addition, CPAC Imaging is adding outsourced digital products to its portfolio to help distributors and customers bridge digital technologies.

Consolidated gross margins, exclusive of the Imaging restructuring charges in fiscal 2004, were 43.7% for the quarter ended September 30, 2004, as compared to 43.0% for the year ended March 31, 2004 and 43.8% for the quarter ended September 30, 2003, respectively.

Gross margins in the Fuller Brands Segment were 49.5% for the quarter ended September 30, 2004, as compared to 48.5% for the year ended March 31, 2004 and 48.6% for the quarter ended September 30, 2003, respectively. Increases in gross margins resulted from increased home shopping network and retail sales, which tend to have higher gross margins and higher selling and administrative costs to support it. The Company believes that increasing sales, as a result of its retail initiative, may aid in increasing production throughput and improving product margins in future periods.

Gross margins in the Imaging Segment, exclusive of the restructuring charges in fiscal 2004, were 34.6% for the quarter ended September 30, 2004 as compared to 35.6% for the year ended March 31, 2004 and 37.1% for the quarter ended September 30, 2003, respectively. The decrease in gross margins in fiscal 2005 versus fiscal 2004 reflect the continued pressures on pricing, due to the declining worldwide photographic and medical imaging markets, coupled with lower volumes of production. In addition, manufacturing efficiencies at the Imaging Segment's Norcross facility, as a result of the 2004 Imaging Restructuring Plan, have not been fully realized at this time.

Consolidated selling, administrative, and engineering costs for the quarter ended September 30, 2004, exclusive of the Imaging restructuring charges, were 40.1% of net sales, versus 41.1% and 41.2% for the year ended March 31, 2004 and the quarter ended September 30, 2003, respectively.

For the Fuller Brands Segment, selling, administrative, and engineering expenses for the quarter ended September 30, 2004 were 43.6% of net sales, as compared to 45.3% and 45.3% for the year ended March 31, 2004 and the quarter ended September 30, 2003, respectively. The decrease in the percentage in fiscal 2005, versus the previous year's second quarter, reflects higher non-recurring expenses in last year's three month period, including severance and management recruiting costs, and costs incurred to revise existing packaging prior to Fuller's entry into the retail marketplace.

In the Imaging Segment, selling, administrative, and engineering costs for the quarter ended September 30, 2004, exclusive of the Imaging restructuring charges, were 34.2% of net sales versus 35.2% and 34.9% for the year ended March 31, 2004 and the quarter ended September 30, 2003, respectively. The decrease, as a percentage of sales in fiscal 2005 versus fiscal 2004, reflects cost containment efforts in most domestic Imaging operations, as a result of reduced revenues, offset by the Segment's European operations where revenue declines have exceeded expense reductions. While the domestic Imaging Restructuring plan completed in 2004 has helped to eliminate duplicate costs in the domestic Imaging operations, fixed cost reductions in its European operations may be necessary, if sales declines continue.

Research and development expenses, as a percentage of sales, increased to 1.0% of net sales for the quarter ended September 30, 2004, as compared to 0.8% of net sales for the year ended March 31, 2004 and 0.7% for the same quarter last year. This was largely a result of temporary increases in employee expenses at the Imaging Segment's research and development facilities in Norcross, Georgia. The level of expense reflects the Company's emphasis of focusing on improving existing products or developing complementary products, based on customer needs.

For 2005 the Fuller Brands Segment's focus will continue developing new products to enhance its entry into the retail marketplace and growing television shopping business, stimulate recruitment efforts in its direct selling business, as well as continuing to enhance CTG's commercial cleaning product offerings to compete in the highly-competitive janitorial sanitation business. In the Imaging Segment, continued effort will be placed on developing easy-to-use prepackaged, chemical formulations and innovative wrap-around-programs, involving chemistry, paper, and equipment for use in domestic and overseas imaging markets. These efforts are not expected to cause significant additional employee or other expenses long-term, as compared to prior periods.

Net interest expense (interest expense less interest income) decreased 32.5% and 28.6% for the quarter and six months ended September 30, 2004, as compared to the quarter and six months ended September 30, 2003. Lower debt levels at CPAC Europe and CPAC Asia contributed to lower interest expense, offsetting slightly lower interest income, due to reduced consolidated cash in fiscal 2005.

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The Company has recorded gross deferred tax assets of approximately $4,299,000 at September 30, 2004, as compared to approximately $4,470,000 at March 31, 2004, with no valuation reserve. Included in these amounts are approximately $368,000 representing tax-effected foreign net operating loss carryforwards from the Company's South African subsidiary. Realization of both the domestic and foreign net deferred tax assets is dependent upon profitable operations in the United States and the specific foreign jurisdictions during future years. The Company believes that although realization for both is not assured, it is more likely than not that such assets will be realized, following the criteria specified in SFAS No. 109, "Accounting for Income Taxes." Should the Company experience a significant, future, unanticipated impairment or restructuring charge, it is possible that it could be required to record a valuation allowance on a portion or all of the deferred tax assets.

On October 22, 2004, the "American Jobs Creation Act of 2004" (the "Act") was signed into law. Key provisions of the Act include a temporary incentive for U.S. multinational corporations to repatriate foreign earnings, a domestic manufacturing deduction, and international tax reforms designed to improve the global competitiveness of U.S. businesses. The Company is still evaluating the impact of the Act, and accordingly, has not yet determined its impact on the Company's consolidated effective tax rate and deferred tax assets and liabilities. In accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," the Company will reflect the effects of the Act, if any, in subsequent periods as part of its consolidated income tax provision.

The Company's net income increased $152,596 or 82%, as compared to the six months ended September 30, 2003. Increased earnings in the Fuller Brands Segment in fiscal 2005, coupled with restructuring expenses incurred in the Imaging Segment in fiscal 2004, contributed to the net increase.

The results of operations for the Company's foreign subsidiaries, including the impacts of currency exchange, are reported on a three-month lag. Inter-company sales between foreign operations have been eliminated in discussions of year-over-year fluctuations on a U.S. dollar basis, as well as disclosures concerning amounts and percentages, with foreign currency impacts excluded.

Combined net sales for the Company's operations in Thailand, South Africa, Belgium, and Italy for the three and six months ended in the second quarter of fiscal 2005, as compared to the same periods of the second quarter of fiscal 2004, decreased approximately $385,000 (9.8%) and $215,000 (3.1%) (or decreased approximately $616,000 (15.7%) and $860,000 (12.4%), excluding the impact of currency exchange), respectively. For the three and six months ended of the second quarter of fiscal 2005 CPAC Europe and Italia net sales combined decreased 24.3% and 15.6% (decreased 28.6% and 23.6%, after removing currency impact), respectively. CPAC Asia's sales increased 5.3% and 1.2% (increased 0.4% and decreased 5.4%, after removing currency impact), respectively, for the three and six months ended of the second quarter ended September 30, 2004. CPAC Africa displayed strong growth, as net sales increased approximately 61.9% and 89.0% (38.0% and 55.1%, after removing currency impact), respectiv ely, for the three and six months of the second quarter ended September 30, 2004.

Combined pretax profits for the second quarter of fiscal 2005, prior to minority interests and equity in losses of TURA, were flat as compared to the previous year's quarter (decreased $25,000 (6.4%), excluding impact of currency exchange). For the six months ending September 30, 2004, combined pretax profits decreased $213,000, as compared to the comparable period last year (decreased $252,000 (35%), excluding the impact of currency exchange). CPAC Europe and Italia's pretax profits combined decreased approximately $89,000 and $310,000 (approximately $96,000 and $298,000, excluding impact of currency exchange), respectively. CPAC Africa's fiscal 2005 pretax income increased approximately $58,000 and $71,000 (approximately $47,000 and $52,000, after removing currency impact), respectively, while CPAC Asia's profits increased

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approximately $32,000 and $26,000 (increased approximately $21,000 and decreased $6,000, after removing currency impact), respectively, over fiscal 2004.

As disclosed in Note 4 to the Consolidated Financial Statements, the Company accounts for its 40% investment in TURA under the equity method of accounting. Equity in losses of affiliate for the quarter ended September 30, 2004 and 2003 includes 40% of the proportionate share of TURA's net losses, plus amortization of the excess purchase price related to the Company's investment. For the six months ended September 30, 2003 as compared to 2004, the Company recorded 19% of TURA's losses in the first three months, as compared to 40% for the full six months ended September 30, 2004, plus amortization of the excess purchase price, due to their ownership interest at the time.

As described previously, the Company met with the investee's primary lending institution in late May to discuss the financial condition of TURA, who had continued to experience significant cash flow difficulties. While TURA was granted an extension until October 31, 2004 on the maturity date of its working capital line of credit, the Company believes that the ability for TURA to meet its normal day-to-day operating expenses appears conditional on obtaining future capital infusions or significant sales volume increases.

While TURA has continued to generate operating losses through the first six months of the current fiscal year, they have reduced expenses and have been able to operate, while exploring various options for improving current financial conditions, including negotiating favorable payment terms with certain key vendors and customers. Their primary lending institution has not canceled their working capital line of credit, despite expiration of its maturity date, and continues to be working with TURA to resolve cash flow needs.

The Company had an option to increase its ownership stake to 51% by October 2004. While this option has now expired, the Company has continued discussions with TURA and its primary lending institution, regarding appropriate actions to protect its investment in TURA in fiscal 2005. The Company believes that the ability for TURA to continue to operate remains uncertain at this time. Recognition of the proportionate share of TURA losses in the second quarter has written down the basis of the Company's investment to zero at September 30, 2004. The Company has no obligation to fund any losses experienced by TURA and will not record its 40% share of TURA's equity earnings until such time as TURA becomes profitable.

The Company has exposure to currency fluctuations and occasionally has utilized hedging programs (primarily forward foreign currency exchange contracts) to help minimize the impact of these fluctuations on results of operations. At September 30, 2004, no forward foreign currency exchange contracts were outstanding. The Company does not hold or issue derivatives for trading purposes and is not a party to leveraged derivative transactions. On a consolidated basis, foreign currency exchange losses are included in income or expense as incurred and are not material to the results of operations.

During fiscal 2004, the Company completed the shift of its domestic manufacturing of photochemicals from its St. Louis, Missouri, facility to its CPAC Imaging manufacturing facility in Norcross, Georgia. The transfer of the manufacturing fixed assets, as well as the retrofitting of the Georgia facility to absorb this production, was completed during the fourth quarter of fiscal 2004.

Related to this endeavor, the Company adopted SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" and accounted for the employee termination costs and other costs associated with the move under its guidelines. The total expenses incurred in this project were approximately $1,275,000. As of September 30, 2004, all termination benefit costs and other move-related costs, accrued at March 31, 2004, were fully paid.

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The table below summarizes the total costs accrued and paid under the criteria described in SFAS No. 146:

The Company completed the sale of the St. Louis facility on September 27, 2004 and recorded a gain on the sale of approximately $63,000. The Company continues to lease a 35,000 square foot warehouse space at 8448 Mid-County Industrial Drive, St. Louis, Missouri, with approximately 2.5 years remaining (original lease was for ten years, with a five-year termination clause), requiring monthly rental payments of approximately $14,000. The Company has contracted with a real estate firm to explore the possibility of subleasing the property, and as such, has not accrued any lease impairment or termination costs at September 30, 2004.

The Company has historically financed its operations and acquisitions with internally generated cash flows, supplemented with outside borrowings. The following table summarizes CPAC, Inc.'s consolidated cash flow information (in thousands):

Consolidated net cash from investing activities of $375,761 was provided for the six months ended September 30, 2004, as compared to $2,215,731 used for the six months ended September 30, 2003. This change was primarily the result of the sale of the Trebla manufacturing facility in St. Louis that occurred in September 2004 providing cash, versus the investment in TURA and capital expenditures related to the expansion of the Norcross manufacturing facility to absorb the relocated color photochemical production from St. Louis that used cash during the six months ended September 30, 2003.

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The following table presents working capital information at September 30, 2004, March 31, 2004, and September 30, 2003:

The Company finalized an amendment to its line of credit agreement (Agreement) with Bank of America, N.A. (BOA) on September 27, 2004. The amendment extended the Agreement, with the line maturing on October 31, 2005. The Agreement includes a maximum borrowing capability of $5,000,000 with interest at the 30-day LIBOR rate plus 1.25% to 2.00% based on funded debt to EBITDA parameters. It also requires the Company to meet various quarterly and annual debt covenants, including minimum net worth, debt service coverage, funded debt to EBITDA, as well as limitations on capital expenditures, and amounts spent on acquisitions. At September 30, 2004, the Company was in compliance with its various loan covenants. The Company had previously extended its $6.2 million letter of credit facility, which collateralizes the Fuller Brands' Industrial Revenue Bonds to October 31, 2005, and as such, has continued to classify the Bonds as long-term at Septe mber 30, 2004.

In addition, the Company's Asian subsidiary, CPAC Asia Imaging Products Limited has a line of credit with an international bank of 20 million baht (approximately $489,000 based on the second quarter conversion rate in Thailand). Interest is payable at the bank's announced prime rate in Thailand, which was 7.75% at September 30, 2004. CPAC Asia Imaging Products Limited had no outstanding borrowings against the line of credit at the end of its second quarter.

The accompanying unaudited interim financial statements and footnotes presented have been prepared by the Company and contain information that is pertinent to management's discussion and analysis of financial condition and results of operations. The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results may differ from these estimates and assumptions.

The Company continues to follow the critical accounting policies and estimates as disclosed in the Company's March 31, 2004 Annual Report to Shareholders in preparing the interim financial statements for the three and six months ended September 30, 2004. Management's assumptions and judgements have not changed significantly from that previously disclosed.

This Form 10-Q contains forward-looking statements that are based on current expectations, estimates, and projections about the industries in which the Company operates, as well as management's beliefs and assumptions. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions ("Future Factors") that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

The Future Factors that may affect the operations, performance, and results of the Company's business include the following:

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Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the forward-looking statements. The Company does not intend to update forward-looking statements.

There has been no material change in the Company's assessment of its sensitivity to interest rate or foreign currency risks since its disclosure in Item 7(a) of the Company's Form 10-K for the year ended March 31, 2004.

The Company's chief executive officer and chief financial officer have informed the Board of Directors that, based upon their evaluations of the Company's disclosure controls and procedures as of the end of the period covered by its quarterly report (Form 10-Q), such disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports it submits under the Securities Exchange Act of 1934 is accumulated and communicated to management (including the chief executive officer and chief financial officer) as appropriate to allow timely decisions regarding required disclosure.

Management, with the participation of the Company's chief executive officer and chief financial officer, has concluded that there were no changes in the Company's internal control over financial reporting that occurred during the Company's second fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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