ALPHA TECHNOLOGIES GROUP INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED OCTOBER 27, 2002

COMMISSION FILE NUMBER 0-14365
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ALPHA TECHNOLOGIES GROUP, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 76-0079338
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

11990 SAN VICENTE BLVD., SUITE 350 90049
LOS ANGELES, CA (Zip Code)
(Address of principal executive offices)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(310) 566-4005
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SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
NONE

SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
COMMON STOCK, $.03 PAR VALUE
(Title of each class)

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) had 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. [X]

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

Aggregate market value of the voting stock held by non-affiliates of the
registrant.

$5,099,547 at January 27, 2003

Number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.

Common Stock, 7,110,336 shares outstanding at January 27, 2003
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ALPHA TECHNOLOGIES GROUP, INC.

ANNUAL REPORT ON FORM 10K
FOR THE FISCAL YEAR ENDED OCTOBER 27, 2002

TABLE OF CONTENTS

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PART I

ITEM 1. BUSINESS

OUR COMPANY

Alpha Technologies Group, Inc. ("Alpha" or the "Company") is engaged in the
manufacture, fabrication and sale of thermal management and non-thermal
fabricated products and aluminum extrusions. The Company is one of the leading
manufacturers of thermal management products in the United States. Thermal
management products, principally heat sinks, are devices made out of fabricated
aluminum extrusions that have high surface area to volume ratios and are
engineered to dissipate unwanted heat generated by electronic components. As
systems become increasingly more powerful and packaging becomes smaller, the
need to dissipate heat becomes more important to the reliability and functioning
of electronic systems. The Company's thermal management products serve the
automotive, telecommunication, industrial controls, transportation, power
supply, factory automation, consumer electronics, aerospace, defense,
microprocessor, and computer industries.

The Company also extrudes aluminum for its use in the production of thermal
management and non-thermal fabricated products and sells aluminum extrusions to
various industries including the construction, sporting goods and other leisure
activity markets. Extruded aluminum is the primary raw material in the
production of thermal management and non-thermal fabricated products.

The Company was incorporated as Synercom Technology, Inc., in Texas in
1969, and was reincorporated in Delaware in 1983. In April 1995, it changed its
name to Alpha Technologies Group, Inc. The Company's business is conducted
through its wholly-owned subsidiaries Wakefield Thermal Solutions, Inc.
("Wakefield") which includes the Wakefield-Pelham, Wakefield-Fall River and
Wakefield-Temecula divisions, Specialty Extrusion Corp. ("Specialty") and
Lockhart Industries, Inc. ("Lockhart").

In July 2000, the Company sold its connector business and in November 2000,
it sold its subsystems operation. These dispositions were made so that the
Company could focus on its thermal management business. In January 2001, the
Company acquired National Northeast Corporation ("NNE"), which was engaged in
the thermal management and aluminum extrusion business in Pelham, New Hampshire.
(See Footnote 2: Acquisitions). The Company integrated NNE into its Wakefield
subsidiary.

PRODUCTS

The Company designs, extrudes, fabricates and sells thermal management and
non-thermal fabricated products and aluminum extrusion products for use in a
variety of industries including automotive, telecommunication, industrial
controls, transportation, power supply, factory automation, consumer
electronics, aerospace, defense, microprocessor and computer industries. The
Company extrudes aluminum for its use in the production of its products and
sells aluminum extrusions to a variety of industries including the construction,
sporting goods and other leisure activity markets.

The Company's principal products include:

Extruded Heat Sinks Heat sinks and heat sink assemblies designed
for high power industrial applications,
including transportation equipment; automotive,
stereo amplifiers and others; bonded fin heat
sinks used by makers of power supplies,
transportation equipment and other industrial
equipment.

Active Cooling Components These products use air or liquid to dissipate
heat. Air-to-air heat exchangers use fans to
exchange heat with cooler air and are used in
high-performance telecommunications, military
and aerospace systems. These products also
include sophisticated precision formed
fin/fluxless vacuum brazed chassises, heat
exchangers and cold plates used to cool and
protect computer, radar and laser

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systems for the aerospace, military and
commercial markets. Liquid cooling systems are
used in applications which require the removal
of significantly greater amounts of heat than
can be achieved by air cooling.

Penguin(TM) Coolers Heat sinks specifically designed to solve
thermal problems for the latest high-speed
microprocessors offered by major manufacturers.
These products are used in personal computers
and servers. Older versions of Penguin Coolers
are used in embedded microprocessor
applications. In addition, these products solve
thermal problems for ASICs, ball grid arrays
("BGA") and multichip modules.

Stamped and Low Power Heat
Sinks Heat sinks designed to dissipate heat generated
by power semiconductors, transistors,
rectifiers, diodes and other electronic
components used in electronic applications.
Typically, these are smaller components used on
printed circuit boards.

Precision Compression Mounting
Clamp Systems These products are complete mounting clamp and
heat sink assembly systems for proper
installation, compression and cooling of
high-power compression pack (SCR)
silicon-controlled rectifiers. These products
are used in industrial welding, transportation
and motor control systems.

Accessory Products The Company's accessories include
high-performance thermal compounds, adhesives,
interface materials and other accessories.

Aluminum Extrusions The Company extrudes aluminum for its use in
the production of thermal management products
and sells aluminum extrusions to a variety of
industries including the construction, sporting
goods and other leisure activity markets.

Non Thermal Fabricated
Products The Company's non thermal fabricated products
include a variety of items such as van racks,
steering wheel columns, recreational trailers,
louvers, dampers and fencing which are sold for
commercial, industrial, and residential use.

CUSTOMERS

The principal customers for the Company's products are leading original
equipment manufacturers ("OEM's") of electronic equipment, including: Harman,
Flextronics, Tyco, Echostar, Solectron, Rockwell Automation, Lockheed Martin,
General Electric, Delco, SCI, Celestica, Raytheon, Chrysler, and Motorola. The
Company has approximately 1,600 customers. Harman International Industries, Inc.
accounted for 11.6% and 10.1% of its revenues in fiscal year 2002 and 2001
respectively. No single customer accounted for 10% or more of the Company's
revenues in fiscal year 2000.

The Company's products must meet its OEM customer's exacting
specifications. Some of the Company's OEM customers require the Company to
qualify as an approved supplier. In order to so qualify, the Company must
satisfy stringent quality control standards and undergo extensive in-plant
inspections of its manufacturing processes, equipment and quality control
systems. In conformity with the above, the Company's Wakefield-Temecula division
is QS9000 registered (a quality specification required by numerous automotive
customers ) and the Company's Wakefield-Fall River and Wakefield-Pelham
divisions are ISO9002 registered (a quality standard required by numerous
customers from certain other industries).

SALES, MARKETING AND DISTRIBUTION

While the Company designs, manufactures and sells thermal management and
non-thermal fabricated products and aluminum extrusion products, it seeks to
become a strategic supplier to its customers and to

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differentiate itself from its competitors by leveraging its ability to extrude,
fabricate, and finish products under one umbrella. This vertical integration not
only gives the Company complete control over its processes, management believes
that it also gives the Company the shortest lead times and lowest cost structure
of all domestic suppliers.

The Company has applications engineers who are dedicated to providing
ongoing technical support to the Company's customers. These engineers provide
solutions to customers for their thermal management problems, answer customers'
questions regarding the use and application of the Company's products, provide
field support to customers and work with certain key customers to develop new
product solutions. The Company believes the technical services provided by its
engineers are an important factor in its product sales.

The Company sells its products through its in-house sales personnel and a
network of independent manufacturers' representatives and distributors. In North
America, the Company's products sales are supported by a customer sales support
staff of 12 individuals, six factory direct key account managers, seven
independent manufacturers' representatives and 15 distributors. In international
markets, the Company's thermal management products are sold by: six companies
functioning both as manufacturers' representatives and distributors, two
manufacturers' representatives and nine distributors.

In general, the Company's manufacturers' representatives and distributors
enter into agreements that allow for termination by either party upon 60 days
notice. Generally, distributors are permitted to return a small portion of
products purchased by them during the term of their agreement with the Company.
They are required to return all products other than obsolete, minimum buy and
custom products upon termination of the agreement. Historically, the amount of
returns has been insignificant to the Company's business. The Company's
distributors are generally not precluded from marketing competitive products.

RESEARCH AND PRODUCT DEVELOPMENT

The Company's product development strategy continues to focus on
engineering modifications of existing products to provide customers with higher
performance and lower cost products. The Company maintains technical
relationships with certain key customers in order to understand their future
thermal management requirements and focuses on developing new or modifying
existing products to meet such requirements. The Company strives to be included
on the recommended vendor list of its customers, however, such recommendation is
typically not exclusive.

During fiscal 2002, 2001 and 2000, the Company spent $496,000, $926,000,
and $831,000, respectively, on product research and development with respect to
its thermal management products. The Company believes that its technical
capabilities, in conjunction with its relationships with customers, will allow
it to continue to introduce solutions to new thermal management problems
responsively.

COMPETITION

The thermal management and non-thermal fabricated products and aluminum
extrusion products markets are highly competitive. There are many companies
which compete directly with the Company in these businesses and offer products
and services similar to those offered by the Company. In the thermal management
products market, the Company's principal competitor is Aavid Thermal
Technologies, Inc. In the non-thermal fabricated products and aluminum extrusion
markets, we compete with numerous small and large companies such as Alcoa Inc.
and RD Werner Company, Inc. We differentiate ourselves from our competitors by
leveraging our ability to extrude, fabricate, and finish products within one
company.

BACKLOG

The Company's backlog was approximately $7.5 million and $11.6 million on
October 27, 2002 and October 28, 2001, respectively. Backlog consists of
purchase orders typically scheduled for shipment from two to eight weeks
following the order date. The Company's backlog at any time is not indicative of
the amount of future revenue to be recognized in any one period.

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PROPRIETARY RIGHTS

The Company applies for patents with respect to its most significant
patentable developments. It owns 16 patents related to its thermal management
products, which expire from 2009 to 2019. Management believes that its
competitive position is not dependent on patents and that patent expirations
will not materially adversely affect the Company's competitive position.

RAW MATERIALS

The principal raw materials used in the Company's products are aluminum
billet and extrusions. The Company owns facilities and equipment which produce
the majority of the extruded aluminum it needs to manufacture its thermal
management and non-thermal fabricated products. Raw materials represent a
significant portion of the cost of the Company's products. Prices for raw
materials are based upon market prices at the time of purchase. Historically,
the price of aluminum has experienced substantial volatility. Because raw
materials for an order are usually purchased within a short time after an order
is accepted and products are generally shipped within 60 days following the
order date, the Company does not believe the price volatility for aluminum
billet represents a significant risk. All raw materials are readily available
from multiple suppliers at competitive prices.

ENVIRONMENTAL REGULATIONS

Several aspects of the Company's operations utilize hazardous materials,
the removal of which is subject to government regulation. The Company contracts
with licensed third party waste companies to remove such hazardous materials.
While the Company believes that it conducts its operations in substantial
compliance with applicable environmental laws and regulations and has all
environmental permits necessary to conduct its business, more stringent
environmental regulations may be enacted in the future, and there can be no
assurance that the Company will not incur significant costs in the future in
complying with such regulations. Local environmental agencies monitor the
Company's operations for ongoing compliance with environmental requirements, and
the Company is required to correct any violations revealed by such monitoring.
The Company is not aware of any violations or events that would require the
Company to incur material cost, nor has the cost of complying with environmental
laws represented a material cost to the Company.

EMPLOYEES

At October 27, 2002, the Company employed 359 people of which 324 were full
time. Management believes that employee relations are excellent.

FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES

Financial information about export sales is set forth in Note 16 in the
Notes to Consolidated Financial Statements.

ITEM 2. PROPERTIES

The Company has leased facilities at the following locations:

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The Company's sales, engineering and administrative functions are located
in Pelham, New Hampshire. In addition, the Company has office space in Los
Angeles, California and New York, New York for some of its corporate staff.
Management believes that its facilities are in good condition and suitable for
the purposes for which they are used.

In addition, the Company has a lease on approximately 19,349 square feet of
unused office space in Beverly, Massachusetts which will expire in December 31,
2006. The Company has subleased this space and has accrued the difference
between its lease payments and expected sublease payments and other costs
related to this space.

ITEM 3. LEGAL PROCEEDINGS

There are no material pending legal proceedings against the Company and, to
the Company's knowledge, no such proceedings are threatened except:

In December 2002, the Company was served with a summons and complaint in an
action entitled Action et al V. Simon Wrecking Company, et al, brought in the
United States District Court for the Eastern District of Pennsylvania. The
plaintiffs seek contribution for cleanup costs incurred at the Malvern Superfund
site relating to actions taken by the predecessor of the Company's former Malco
Technologies subsidiary. The Company purchased the predecessor's assets pursuant
to a bankruptcy court order which expressly stated that the assets were being
transferred free and clear of all environmental claims. As a result, the Company
believes it has a meritorious defense to the action.

In June 2002, Carter Technologies, a former sales representative for the
Company's former Malco subsidiary commenced an action in the United States
District Court and the Eastern District of Michigan against the Company,
claiming that the Company owed it commissions on certain sales. The case has
been transferred to the Eastern District of Pennsylvania. The complaint seeks an
unspecified amount of money, which plaintiff alleges to be in excess of
$100,000. The Company does not believe that it is liable for such amount and
intends to vigorously defend the action.

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

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.

PART II

ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET FOR COMMON STOCK

The Company's common stock is traded on The Nasdaq Stock Market, National
Market System (NMS) under the symbol ATGI. Through the facilities of the
NASDAQ/NMS reporting system, actual sales prices of the Company's common stock
are available.

The following table sets forth the high and low sales prices of the
Company's common stock as reported on the NASDAQ National Market System for each
full quarterly period within the Company's two most recent fiscal years:

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth a description of our equity compensation
plans as of October 27, 2002:

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(1) All the warrants were approved by the Board of Directors but not approved by
the shareholders. Warrants to purchase an aggregate of 250,000 shares of the
Company's common stock were granted to the members of 33 Bridge Investors,
LLC as part a sale and leaseback transaction. Warrants to purchase an
aggregate of 110,000 shares of the Company's common stock were granted to
the Company's Lenders pursuant to the provisions of the First and Second
Amendments to the Credit Agreements.

HOLDERS OF RECORD

On December 31, 2002, there were approximately 157 holders of record and
approximately 1,500 beneficial owners of the Company's common stock.

DIVIDENDS

The Company has paid no cash dividends on its common stock during fiscal
years 2002 and 2001. The Board of Directors of the Company does not intend to
authorize the payment of cash dividends to the Company's common stock holders in
the foreseeable future.

SALES OF UNREGISTERED SECURITIES

On January 28, 2002 and March 12, 2002, the Company issued warrants to
purchase an aggregate of 36,666 shares at an exercise price of $2.89 per share
and an aggregate of 73,334 shares at an exercise price of $1.94 per share,
respectively, of common stock of the Company to its Lenders in connection with
amendments to its Credit Agreement dated December 26, 2000. Neither the warrants
nor the underlying common stock have been registered under the Securities Act of
1933 and transfer of the warrants and underlying shares are subject to
restrictions and limitations. The issuance of the warrants and underlying shares
was exempt from registration pursuant to Section 4(2) of the Securities Act as a
transaction not involving any public offering.

On October 1, 2002, the Company issued warrants to purchase an aggregate of
250,000 shares of common stock of the Company at an exercise price of $1.42 per
share to the members of 33 Bridge Investors LLC (including Marshall Butler, a
director and shareholder of the Company), in connection with the sale and
leaseback of the Company's Pelham, New Hampshire manufacturing facility. Neither
the warrants nor the underlying common stock have been registered under the
Securities Act of 1933 and transfer

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of the warrants and underlying shares are subject to restrictions and
limitations. The issuance of the warrants and underlying shares was exempt from
registration pursuant to Section 4(2) of the Securities Act as a transaction not
involving any public offering.

ITEM 6. SELECTED FINANCIAL DATA

In July 2000, the Company sold (the "Uni-Star Sale") its connector
business, Uni-Star Industries, Inc. ("Uni-Star") to Tyco Electronics Corporation
and Tyco Electronics UK Ltd. The sale resulted in a gain of $6,478,000, net of
income tax expense.

In November 2000, the Company sold its subsystems business (Malco
Technologies, Inc.) for $2,200,000 in cash and a three-year promissory note in
the amount of $300,000. The sale resulted in a gain of approximately
$277,000,000, net of taxes.

In January 2001, Alpha purchased all of the outstanding Common Stock of NNE
from Mestek, Inc. The purchase price was $49,900,000 in cash, subject to
adjustment based upon working capital as of the Closing. The operating results
of NNE have been included in the Company's consolidated results of operations
since its acquisition date.

The results of operations in the following Selected Financial Data have
been reclassified to present the results of businesses sold as discontinued
operations. As a result, income or loss from continuing operations does not
include any financial results associated with businesses sold. In the
consolidated financial statements for the Company which are included in this
document, these businesses are accounted for as discontinued operations.

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(1) See Consolidated Financial Statements and Notes to Consolidated Financial
Statements on pages F-1 through F-25.

(2) See "Discontinued Operations" in Notes to Consolidated Financial Statements.

(3) Includes goodwill impairment charge of $15.6 million for the fiscal year
ended October 27, 2002. (See Note 1 "Goodwill and Long-Lived Assets" in
Notes to Consolidated Financial Statements.)

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL
CONDITION

FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K may contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are based on current expectations, estimates and projections
about the Company's business based, in part, on assumptions made by management.
These statements are not guarantees of future performance and involve risks,
uncertainties and assumptions that are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed or forecasted
in such forward-looking statements due to numerous factors, including the
following: changes in demand for the Company's products, product mix, the timing
of customer orders and deliveries, the impact of competitive products and
pricing, excess or shortage of production capacity, compliance with covenants in
the Company's loan documents, ability to meet principal payments under those
loan documents and other risks discussed from time to time in the Company's
Securities and Exchange Commission filings and reports. In addition, such
statements could be affected by general industry and market conditions and
growth rates, and general domestic and international economic conditions. Such
forward looking statements speak only as of the date on which they are made, and
the Company does not undertake any obligation to update any forward-looking
statement to reflect events or circumstances which may take place after the date
of this report.

CRITICAL ACCOUNTING POLICIES

The preparation of the Company's consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make judgements estimates and assumptions in
certain circumstances that affect the amounts reported in the consolidated
financial statements and related footnotes. We regularly evaluate the accounting
policies and estimates we use to prepare our financial statements. Estimates are
used for, but not limited to, the accounting for allowance for doubtful accounts
and sales returns, inventory reserves, and contingencies. These estimates are
based on historical experience and various assumptions that we believe to be
reasonable under the particular applicable facts and circumstances. Actual
results could differ from those estimates.

We consider our critical accounting policies to be those that (1) involve
significant judgements and uncertainties, (2) require estimates that are more
difficult for management to determine and (3) have the potential to result in
materially different outcomes under varying assumptions and conditions. Our
critical accounting policies include the following: recognition of revenues,
provision for sales returns, provision for doubtful accounts, provision for
inventory reserves, impairment of long-lived assets, and accounting for income
taxes. These policies are more fully described in Note 1, "Significant
Accounting Policies" in the Notes to the Consolidated Financial Statements.

RESULTS OF OPERATIONS

The results of operations have been reclassified to reflect the results of
operations from Uni-Star and Malco Technologies, Inc. as discontinued
operations. See introductory paragraphs in "Selected Financial Data". Unless
otherwise mentioned, the following discussion reflects results from continuing
operations, which includes the thermal management and non-thermal fabricated
products and aluminum extrusion products including the operating results of NNE
since acquisition and Alpha corporate expenses.

FISCAL YEAR 2002 VERSUS FISCAL YEAR 2001 COMPARISON

Net (Loss)Income. The Company reported a net loss for fiscal 2002 of $11.5
million which includes the following non-recurring items: goodwill impairment
charge of $15.6 million, a loss on the sale of land and building of $2.1
million, and losses associated with debt extinguishments and modifications of
$561,000. The loss reflects a benefit for income taxes of $7.6 million. The loss
before such benefit was $19.1 million. Net Income for fiscal 2001 of $305,000
included the following non-recurring items: a $277,000 gain from the sale of the
Company's subsystems business, a $79,000 loss from discontinued operations, each
net of applicable taxes and losses associated with debt extinguishments and
modifications of $650,000.

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(Loss) Income From Continuing Operations. Loss from continuing operations
for fiscal year 2002 was $11.5 million compared to income of $107,000 for fiscal
year 2001. Loss from continuing operations for fiscal year 2002, excluding the
goodwill impairment charge of $15.6 million ($9.4 million, net of tax), the loss
on sale of land and building of $2.1 million ($1.3 million, net of tax) and loss
associated with debt extinguishments and modifications of $561,000 ($337,000,
net of tax) was a loss of $514,000. Income from continuing operations for fiscal
year 2001 excluding restructuring and other non-recurring charges of $822,000
($522,000, net of tax), goodwill amortization of $1,275,000 ($765,000, net of
tax) and losses associated with debt extinguishments and modifications of
$650,000 ($450,000, net of tax) was income of $1.8 million. The increased loss
in fiscal 2002 was principally caused by the decreased sales resulting from the
continued downturn in the economy.

Sales. The Company's sales for fiscal year 2002 decreased by 18.2% to
$55.6 million from $67.9 million for fiscal year 2001 (which includes NNE sales
from January 9, 2001, the date of acquisition). Although the Company does not
prepare separate financial statements for the business previously conducted as
NNE, management believes that sales declined in both the NNE business as well as
in its previously existing business. Management believes that this decrease was
due to reduced demand for the Company's products resulting from the weakness in
the economy, particularly in the telecom, networking, computer and industrial
controls markets.

Gross Profit. The Company's gross profit for fiscal year 2002 was 14.8%
compared to 20.6% for fiscal year 2001. The Company implemented many cost
cutting measures over the past year to improve operating results, including
employee layoffs, tight expense controls and improved factory efficiencies.
Despite these improvements, gross profit decreased as a result of revenues
decreasing by $12.3 million while fixed overhead costs such as depreciation,
lease expense and insurance remained relatively unchanged.

Research and Development. Research and development expenses for fiscal
year 2002 were $496,000 compared to $926,000 for the same period last year. The
decrease was primarily due to the reduction in headcount and travel related
expenses.

Selling, General and Administrative. Selling, general and administrative
expenses for fiscal 2002 were $6.1 million or 11.0% of sales as compared to $9.0
million or 13.3% of sales for fiscal year 2001. SG&A expenses in absolute
dollars decreased by $2.9 million primarily due to decreases in goodwill
amortization, commission expense and compensation costs. Decreases in goodwill
amortization was the result of the Company's adoption of SFAS No. 142. Decreases
in commission expense is due to decreased sales which resulted in a reduction in
the number of outside independent sales representatives utilized by the Company
as well as a reduction in the rate charged by these representatives. Decreases
in compensation costs is the direct result of headcount reductions.

Goodwill Impairment Charge. The Company recorded a $15.6 million goodwill
impairment charge in the third quarter of fiscal 2002. The Goodwill of the
Company is tested for impairment annually on June 1st and between annual tests
if an event occurs or circumstances change that could result in impairment.

Losses Associated with Debt Extinguishments and Modifications. The Company
recorded a $561,000 charge during fiscal 2002 resulting from amendments to
Credit Agreements with its Lenders which revised certain financial covenants and
waived certain events of non-compliance. The Company recorded a $650,000 charge
in fiscal 2001 resulting from the payoff of the credit facility entered into on
April 16, 1999.

Loss on Sale of Land and Building. The Company sold its Pelham, New
Hampshire manufacturing facility as part of a sale and leaseback transaction.
The sales price of the facility was $4,750,000. In connection with the sale and
leaseback transaction, the Company issued warrants to purchase an aggregate of
250,000 shares of common stock at an exercise price of $1.42 per share. The
warrants were valued at approximately $274,000 using the Black Sholes method.
The book value of the land, buildings and improvements was approximately $6.3
million. Selling costs were approximately $300,000, excluding the value of the
warrants. The loss on the sale of the property was $2.1 million ($1.3 million,
net of tax).

Interest and Other Income (net). Interest income was $30,000 for the
fiscal year 2002 compared to $201,000 for fiscal year 2001. The decrease in
income was due to lower interest income associated with lower
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cash balances on hand during the period. The Company recorded other
income(net)in fiscal 2001 of $72,000 which was due primarily to the gain on the
sale of certain equipment no longer being used in the business.

(Benefit) Provision for Income Taxes. Benefit for income taxes was $7.6
million in fiscal year 2002 compared to an income tax provision of $165,000 for
fiscal year 2001. The effective income tax rate for fiscal year 2002 was 39.9%
compared to 60.7% for fiscal year 2001.

Gain on Sale of Discontinued Operation. Gain on sale of discontinued
operations was the result of the Company's sale of Malco Technologies Group,
Inc. in fiscal year 2001.

FISCAL YEAR 2001 VERSUS FISCAL YEAR 2000 COMPARISON

Net Income. The Company reported net income for fiscal 2001 of $305,000
which includes $107,000 in income from continuing operations, a $277,000 gain
from the sale of the Company's subsystems business and a loss from discontinued
operations of $79,000.

Net income for fiscal 2000 was $15,392,000 which included $7,918,000 in
income from continuing operations, a $6,478,000 gain from the sale of the
Company's connector business and $996,000 in income from discontinued
operations. The decrease in net income from continuing operations is the result
of substantially reduced demand for the Company's products resulting from the
economic downturn in the markets served by the Company and an increase in
overhead expenses due to the acquisition of "NNE" without a corresponding
increase in sales.

Income from Continuing Operations. Income from continuing operations for
fiscal 2001 was $107,000, inclusive of a $165,000 income tax provision compared
to income from continuing operations for fiscal 2000 of $7,918,000 which
included a tax provision of $580,000. For the 2000 period, the Company utilized
the benefit of net operating loss carry forwards and therefore did not report
fully taxed results.

Sales. The Company's sales for fiscal 2001 increased 10.3% to $67,914,000
from $61,547,000 for fiscal 2000. The increase in sales in fiscal 2001 was due
to the inclusion of revenue from NNE, which was acquired on January 9, 2001.
Management believes that sales in fiscal 2001 have been negatively impacted
compared to the prior year by the weakness in the economy.

Gross Profit. The Company's gross profit for fiscal 2001 was 20.6%
compared to 29.9% for fiscal 2000. The Company's gross margin decreased
primarily due to an increase in fixed overhead expenses without a corresponding
increase in revenue, as described above. The NNE acquisition caused overhead
expenses to increase due to the addition of its manufacturing facility. In
addition, a change in the sales mix resulted in greater aluminum extrusion sales
which have lower profit margins.

Selling, General and Administrative Expense. Selling, general and
administrative expenses for fiscal 2001 were $9,031,000, or 13.3% of sales. This
compares to $8,722,000, or 14.2% of sales, for fiscal 2000. SG&A expenses
increased by $309,000 due primarily to the goodwill amortization associated with
the NNE business which was partially offset by a decrease in commission expense
and other compensation costs. SG&A expenses for fiscal 2001 included $1,389,000
in goodwill and non-compete amortization compared to $221,000 in the prior year.

Restructuring Costs. In response to the decline in demand for the
Company's products resulting from the economic downturn in the markets served by
the Company's products, the Company took significant actions to reduce future
operating expenses. As a result, restructuring costs totaling $822,000 were
incurred in fiscal 2001, consisting primarily of severance costs and lease costs
related to an unused facility.

Other Income(net). The Company recorded other income(net)in fiscal 2001 of
$72,000 which was due primarily to the gain on the sale of certain equipment no
longer being used in the business. The Company recorded other income(net)in
fiscal 2000 of $145,000 which was primarily the reversal of a $160,000 accrual
expensed in prior periods for the environmental litigation at the Company's
Lockhart facility. In April 2000, the parties reached a settlement under which
the suit was dismissed.

11

Losses Associated with Debt Extinguishments and Modifications. The Company
recorded a $650,000 charge during the first quarter of fiscal 2001 resulting
from the payoff of the credit facility entered into on April 16, 1999, which was
paid off early to allow the Company to enter into a new credit facility to
purchase NNE.

Interest Expense. Interest expense was $2,546,000 and $692,000 for 2001
and 2000, respectively. This increase was due to higher average outstanding
borrowings due to the acquisition of NNE.

Provision for Income Tax. Income from continuing operations for fiscal
2001 reflects a $165,000 income tax provision compared to $580,000 for fiscal
2000. In 2000, the Company's tax provision was not at statutory rates due to the
Company's utilization of its net operating loss carry forwards.

Income (loss) from Discontinued Operations. The Company recorded a $79,000
loss from discontinued operations during fiscal 2001 compared to $996,000 in
income during fiscal 2000. The decrease in income from discontinued operations
was due to the sale of the Company's connector business in the third quarter of
fiscal 2000 and the sale of its subsystems business early in the first quarter
of fiscal 2001.

Gain on Sale of Discontinued Operation. During 2001, the Company earned
$277,000, net of taxes, from the sale of the assets of its Malco Technologies
subsidiary. During 2000, the Company earned $6,478,000, net of $640,000 in
taxes, from the sale of its Uni-Star subsidiary.

INCOME TAXES

On October 27, 2002, the Company had net pre tax operating loss carry
forwards for both Federal and State of approximately $10,518,000, unused
investment and research and development tax credits of approximately $253,000
and $542,000 of alternative minimum tax credits available to offset future
Federal income taxes. The net Federal operating loss carry forward will expire
from 2017 to 2020, the investment tax credit and research and development tax
credit carry forwards will expire from 2003 to 2005, and the alternative minimum
tax credit has no expiration. The state net operating loss carry forwards will
expire from 2003 to 2006.

All carry forwards are subject to review and possible adjustment by the
Internal Revenue Service. In compliance with the Tax Reform Act of 1986,
investment tax credits carried forward were reduced by 35%. The Company's
ability to utilize the net operating loss carry forwards to offset alternative
minimum taxable income is limited to 90% for tax years after fiscal 1987. Due to
the Job Workers Creation Act, the 90% limitation has been suspended for net
operating loss carryforwards generated in 2001 and 2002.

LIQUIDITY AND CAPITAL RESOURCES

CREDIT FACILITIES

On January 9, 2001, the Company and its subsidiaries, as guarantors,
entered into a Credit Agreement (the "Credit Agreement") with several banks and
other financial institutions ("the Lenders"). The Credit Agreement consisted of
a revolving credit facility and a term loan. Borrowings under the Credit
Agreement are secured by a first lien on and the assignment of all of the
Company's assets. Under the Credit Agreement, the Company must meet certain
covenants. During the fiscal year ended October 28, 2001 and during the three
months ended January 27, 2002, the Company did not meet certain financial
covenants. As a result, all outstanding loan balances under the Credit Agreement
were classified as current liabilities at October 28, 2001.

On January 28, 2002, the Lenders amended the Credit Agreement to revise
certain financial covenants and waive certain events of non-compliance at
October 28, 2001 and January 27, 2002. Under this first amendment to the Credit
Agreement, interest on the revolving credit facility and the term note increased
by rates ranging from .5% to .75% depending on the amount of financial leverage.
In addition, availability under the revolving credit facility was reduced from
$15 million to $5 million, the expiration date for the revolving credit facility
was amended from January 9, 2006 to June 30, 2003, and modifications were made
to the remaining payment schedule on the term loan.

12

On March 12, 2002, the Company and its Lenders entered into a Second
Amendment to the Credit Agreement, which amended certain financial and other
covenants. It also required the Company to make a $5 million principal payment
on June 28, 2002 which the Company contemplated making from the sale or
refinancing of the Company's Pelham, New Hampshire facility. Interest is now
payable monthly on the revolver and the term loan. The net interest settlement
on the portion of the term loan covered by the swap agreement continues to be
payable quarterly. Fees related to the January 28, 2002 and March 12, 2002
amendments to the Credit Agreement, including the fair value of warrants to
purchase the Company's common stock, totaled approximately $633,000.

On June 28, 2002, the Company did not make the $5 million principal payment
as a result of its inability to complete a sale and leaseback transaction by
that date. On July 24, 2002, the Company and its Lenders entered into a Third
Amendment to the Credit Agreement, by which the $5.0 million payment due on June
28, 2002 was delayed until September 30, 2002; the Company was allowed to
satisfy the difference between the $5.0 million obligation and the proceeds from
the sale and leaseback transaction with additional borrowings from its revolving
credit facility; the date by which warrants granted pursuant to the Second
Amended Credit Agreement must be registered, was delayed to February 4, 2003;
loan covenants were adjusted to reflect the impact on earnings before interest,
taxes, depreciation and amortization (EBITDA) of the Company's most recent
financial projections as well as the sale and leaseback transaction. Fees
related to the third amendment to the Credit Agreement totaled approximately
$89,000.

On September 27, 2002, the Company and its Lenders under the Credit
Agreement entered into a Fourth Amendment to the Credit Agreement by which (i)
certain of the financial covenants were amended to reflect the Company's most
recent financial projections as well as the sale and leaseback transaction, (ii)
the expiration date for the revolving credit facility was extended to June 30,
2004 from June 30, 2003, (iii) modifications were made to the remaining payment
schedule on the term loan, (iv) the date by which common stock underlying the
warrants issued to the Lenders must be registered was delayed to March 31, 2004,
and (v) the Company agreed to the retention, if requested by the Lenders, of a
consultant for the purpose of reviewing its operations, projections, cash flows,
financial statements and books and records. The Company is currently in
compliance with all of the financial covenants under the Credit Agreement. Fees
of approximately $82,000 were paid related to the Fourth Amendment. In addition,
a deferred restructuring fee of approximately $126,500 equal to 1% of the
aggregate revolving loan commitment and the outstanding principal amount of the
term loan as of fiscal year end 2004 was deemed earned in full upon the
effectiveness of the Fourth Amendment but is not payable until October 31,2004.

Under the Amended Credit Agreement, the revolving credit facility accrues
interest on outstanding borrowings at LIBOR plus 3.5% (5.31% on October 27,
2002) and expires on June 30, 2004. There is also an unused line fee equal to
..75% per annum. The Company may borrow up to the lesser of $5 million or 60% of
eligible accounts receivable ($4.1 million at October 27, 2002), as defined by
the Amended Credit Agreement. As of October 27, 2002, $3.2 million has been
drawn and is outstanding on the revolving credit facility.

A portion of the outstanding term loan ($12.0 million on October 27, 2002)
is covered by an interest rate swap (the "hedged loan"). The hedged loan accrues
interest at a fixed rate of 8.47%. The balance of the term loan not covered by
the swap, $9.7 million on October 27, 2002, consists of two notes which accrue
interest at the relevant LIBOR rate plus 3.5% (5.58% on $750,000 and 5.26% on
$8.9 million on October 27, 2002).

The Amended Credit Agreement contains financial and other covenants with
which the Company must comply. These covenants include limitations on the amount
of financial leverage the Company can incur, minimum fixed charge coverage,
limits on capital spending, required minimal amounts of net worth, and required
levels of EBITDA. The maximum financial leverage ratio, which is calculated by
dividing funded debt by EBITDA, must not exceed 4.45:1 for the fiscal year end
2002, 4.15:1 for the first quarter of fiscal 2003, 4.30:1 for the second quarter
of fiscal 2003, 4.60:1 for the third quarter of fiscal 2003, 4.15:1 for the
fiscal year end, 1.85:1 for the first quarter of fiscal 2004 through fiscal year
end 2004 , and 1.75:1 for first quarter of fiscal 2005 and thereafter. The fixed
charge coverage ratio, which is calculated by dividing fixed charges by EBITDA
minus Capital Expenditures, must not exceed 1.00:1 for the fiscal year end 2002
and first quarter of

13

fiscal 2003, 0.95:1 for second quarter of fiscal 2003, 0.90: 1 for third quarter
of fiscal 2003 and year end of fiscal 2003 and 0.80:1 for the first quarter of
fiscal 2004 through fiscal year end 2004 and 0.85:1 for the first quarter of
fiscal 2005 and thereafter. Capital spending is limited to $500,000, $700,000,
and $1.0 million for fiscal years 2002, 2003 and thereafter, respectively.
Minimum Net Worth must be no less than $33,050,000 plus 75% of future Net Income
plus 100% of the Net Proceeds of future Equity Offerings. This amount is reduced
by Permitted Stock Repurchases and charges related to the issuance of warranty
agreements in connection with the Loan Documents. The "Minimum Net Worth"
covenant excludes goodwill write off in accordance with the provisions of SFAS
No. 142 up to a maximum of $20 million. EBITDA must be no less than $5,612,000
on an annual basis at the end of fiscal 2002. There is no minimum annual EBITDA
requirement beyond fiscal year 2002. As of October 27, 2002, the Company is in
compliance with all of the financial covenants under the Amended Credit
Agreement.

As a consequence of the continued economic downturn in the markets served
by the Company's products, the Company was not in compliance with certain
financial covenants contained in the Amended Credit Agreement for the quarter
ended January 26, 2003. On February 6, 2003, the Credit Agreement was further
amended to revise the Maximum Leverage Ratio and Fixed Charge Coverage Ratio to
levels that management believes the Company will be able to achieve and which
waived the non-compliance at January 26, 2003. Maximum Leverage Ratios as of the
first, second, third and fourth quarters of fiscal 2003 were revised to 4.70:1,
4.95:1, 4.90:1 and 4.50:1 from 4.15:1, 4.30:1, 4.60:1 and 4.15:1. Fixed Charge
Coverage Ratios for the third and fourth quarter of fiscal 2002 were revised to
1:10:1 for the third quarter and 1.15:1 for the fourth quarter from 0.90:1.
Under the Amendment, the Fixed Charge Coverage Ratio for the remainder of fiscal
2003 is based on the current quarter only rather than on the trailing quarters
in fiscal 2003. In addition, EBITDA and Minimum Net Worth definitions were
revised to exclude the costs related to any annual impairment charges incurred
by the Borrower in connection with SFAS No. 142. Fees for the amendments and
waiver are estimated to be approximately $60,000.

CASH FLOW INFORMATION

On October 27, 2002, the Company had cash of approximately $751,000
compared to $2,701,000 on October 28, 2001. For fiscal year 2002, $2,473,000 was
provided by operating activities and $8,399,000 was used in financing activities
of which $8,750,000 was used to pay down long-term debt and $656,000 was used to
pay bank fees related to the amendments made to the Credit Agreements. For
fiscal year 2001, $9,535,000 was provided by operating activities and
$29,436,000 was provided by financing activities including $32,600,000 provided
by a new credit facility and $1,914,000 in net proceeds received from the
issuance of common stock, primarily from the Company's rights offering which was
completed on January 8, 2001. During fiscal 2002, $4,490,000 was provided from
investing activities as a result of the net proceeds received from the sale and
leaseback of its Pelham, New Hampshire facility. Capital purchases for fiscal
2002, which were restricted by the Second Amendment to the Credit Agreements to
not exceed $500,000, were $459,000. During fiscal 2001, $49,551,000 was used in
investing activities for the purchase of NNE and the Company received $2,200,000
in cash from the sale of its subsystems business. Capital equipment purchases
for fiscal 2001 of $1,288,000 were made to improve manufacturing capabilities
and to refurbish and upgrade existing machinery. The Company used $3,661,000 to
repay the credit facility entered into on April 16, 1999, including a $378,000
early termination fee, and used $1,327,000 to pay fees and expenses related to
the new credit facility.

Working capital on October 27, 2002 was $9.5 million as compared to a
negative balance of $19.0 million on October 28, 2001. Working capital on
October 28, 2001, excluding $25.9 million of long-term debt classified as a
current liability due to the Company's non-compliance with certain financial
covenants, totaled approximately $6.9 million. A change in the loan amortization
schedule as a result of amendments to the bank Credit Agreement which decreased
the current maturities of long term debt was the primary contributor to the
increase in working capital from $6.9 million to $9.5 million. Other factors
which included decreases in accounts payable and other current liabilities were
partially offset by decreases in cash, prepaid expenses, accounts receivable and
inventories. The Company believes that its available cash and future cash flow
from operations will be sufficient to fund operations over the next twelve
months. However, the Company's

14

revolving credit facility will expire on June 30, 2004. If current economic
conditions continue, it is likely that the Company will need to extend or
replace this revolving credit facility in order to have the funds necessary to
fund its operations in the longer term and to pay off the remaining outstanding
balance on this debt.

RESULTS OF OPERATIONS

The Company's results of operations have been affected by the economic
downturn. In response to the reduction in revenue, the Company has taken a
number of steps to improve operational efficiency and profitability, including
reductions in head count at several of our facilities. These steps, coupled with
the changes to our credit facilities discussed above, should provide sufficient
liquidity to fund operations for at least the next twelve months.

SALE LEASEBACK WITH RELATED PARTY

On October 1, 2002, the Company's wholly-owned subsidiary, Wakefield
Thermal Solutions, Inc. ("Wakefield") entered into a sale and leaseback
transaction for its 171,235 square foot Pelham, New Hampshire manufacturing
facility (the "Property"). Wakefield sold the Property to 33 Bridge Investors,
LLC ("33 Bridge"), a newly-formed entity in which Marshall D. Butler, a director
of the Company owns 50% of the equity interest, for a purchase price of
$4,750,000. In connection with the sale and leaseback transaction, the Company
issued warrants to purchase an aggregate of 250,000 shares of common stock, par
value $.03 per share, of the Company to the members of 33 Bridge, including
warrants to purchase 125,000 shares of Common Stock to Marshall D. Butler, at an
exercise price of $1.42 per share. The warrants were valued at approximately
$274,000 using the Black Sholes method. The book value of the land, buildings
and improvements was approximately $6.3 million. Selling costs were
approximately $300,000, excluding the value of the warrants.

Effective on October 1, 2002, 33 Bridge and Wakefield entered into a lease
whereby Wakefield leased the Property from 33 Bridge for 15 years at an initial
rent of $630,000 per year with annual increases between 2% and 2.5% per annum.
Wakefield is responsible for operating expenses including taxes, utilities,
insurance and maintenance. As a result of the transaction the Company expects
annual expenses initially to increase by $325,000 representing the difference
between rental expense and interest and depreciation expense. The obligations of
Wakefield under the lease are guaranteed by the Company.

The purchase price and other terms of the sale and leaseback transaction
were the result of arm's length negotiations between representatives of the
Company and representatives of 33 Bridge. The terms of the transaction were
approved by the members of the Audit Committee of the Company constituted as a
Special Committee of Independent Directors.

The Company applied the net proceeds of the sale and leaseback transaction
to its $5,000,000 principal payment made on October 1, 2002 pursuant to its
Credit Agreement, dated December 26, 2000, as amended (the "Credit Agreement").

15

LEASE COMMITMENTS

The Company has operating lease commitments for certain office equipment
and manufacturing, administrative and support facilities. Minimum lease payments
under noncancellable leases, including amounts related to the sale leaseback
discussed above, are as follows:

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Under the Amended Credit Agreement, the revolving credit facility accrues
interest on outstanding borrowings at LIBOR plus 3.5% (5.31% on October 27,
2002) and expires on June 30, 2004. There is also an unused line fee equal to
..75% per annum. The Company may borrow up to the lesser of $5 million or 60% of
eligible accounts receivable ($4.1 million at October 27, 2002), as defined by
the Amended Credit Agreement. As of October 27, 2002, $3.2 million has been
drawn and is outstanding on the revolving credit facility. At current borrowing
levels, a 1% increase in interest rates in our variable rate revolving credit
facility would increase annual interest expense by approximately $32,000. The
revolving credit facility will expire on June 30, 2004. If current economic
conditions continue, it is likely that the Company will need to extend or
replace this revolving credit agreement in order to have the funds necessary to
fund its operations in the longer term and to pay off the remaining outstanding
balance on this debt.

A portion of the outstanding term loan ($12.0 million on October 27, 2002)
is covered by an interest rate swap (the "hedged loan"). The hedged loan accrues
interest at a fixed rate of 8.47%. The balance of the term loan not covered by
the swap, $9.7 million on October 27, 2002, consists of two notes which accrue
interest at the relevant LIBOR rate plus 3.5% (5.58% on $750.000 and 5.26% on
$8.9 million on October 28, 2002). At current borrowing levels, a 1% increase in
interest rates in our variable rate term debt would increase annual interest
expense by approximately $97,000.

The Company, as required by the Amended Credit Agreement, utilizes an
interest rate swap (the "swap") to hedge against its interest rate risk. The
swap is designated as a cash flow hedge and is carried on the balance sheets at
fair value. The effective portion of unrealized gains or losses on the fair
value of the swap is charged to other comprehensive income until the hedged
transaction is complete and affects earnings. Ineffectiveness is charged to
earnings as incurred. The amount of ineffectiveness has not been material to
date. The effect of the swap is to convert the interest rate on the hedged loan
from a variable rate as described above to a fixed rate of 8.47%. The swap
matures on March 31, 2004.

The principal raw material used in thermal management and non-thermal
fabricated products is aluminum. Raw materials represent a significant portion
of the cost of Alpha's products. Prices for raw materials are based on market
prices at the time of purchase. Historically, the price of aluminum has
experienced substantial volatility. Although thermal management and non-thermal
fabricated products are generally shipped within 60 days following the order
date, increases in raw materials prices cannot always be reflected in product
sales prices. All raw materials are readily available from multiple suppliers at
competitive prices. Alpha does not believe its risk in respect to raw materials
price volatility is significant since the raw materials for an order are usually
purchased within a short period of time after the order is accepted.

16

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary data required pursuant to this Item
are presented on pages F-1 through F-25 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Effective May 9, 2002, the Company engaged Deloitte & Touche LLP ("Deloitte
& Touche") as the independent auditors. The decision to change the Company's
independent auditors was recommended by the Audit Committee and approved by the
Board of Directors of the Company. The Company dismissed its previous certifying
accountant, Grant Thornton LLP ("Grant Thornton") effective May 9, 2002.

Grant Thornton's report on the Company's financial statements for the
fiscal years ended October 28, 2001 and October 29, 2000 were unqualified. There
were no disagreements with Grant Thornton on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
during those fiscal years, and in the subsequent interim period through May 9,
2002, the date the relationship ended, which, if not resolved to Grant
Thornton's satisfaction, would have caused Grant Thornton to make reference to
the subject matter of the disagreement(s) in connection with its Report.

The Company requested Grant Thornton to furnish a letter addressed to the
Commission stating whether it agrees with the statements made by the Company,
and, if not, stating the respects in which it does not agree. A letter from
Grant Thornton was included as Exhibit 16.1 to Form 8-K/A, filed June 11, 2002,
stating its agreement with the statements made by the Company.

Prior to its engagement as the Company's independent auditors, Deloitte &
Touche had not been consulted by the Company either with respect to the
application of accounting principles to a specific transaction or the type of
audit opinion that might be rendered on the Company's financial statements.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The current members of the Board of Directors were most recently elected at
the 2002 Annual Meeting of Stockholders for a term of one year, and until their
successors are duly elected and qualified or until their earlier death,
resignation or removal. The members, their ages and certain other information
about each of them are set forth below.

The current executive officers of the Company are as follows:

Each officer of the Company holds office until his successor shall be duly
elected and qualified or until his earlier death, resignation or removal.

For information concerning Messrs. L. Butler and Streiter see above.

Mr. Chupik has been Vice President Administration of the Company since
August 1993; from May 1988, he was Vice President Human Resources of the
Company.

Mr. Polakiewicz has been Chief Financial Officer of the Company since
September 2001; from January 1995, he was Vice President of Finance for
Wakefield Thermal Solutions, Inc., a subsidiary of the Company.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and holders of more than ten percent of a registered
class of the Company's equity securities, to file reports of ownership of such
securities with the Securities and Exchange Commission. Officers, directors and
greater than ten percent beneficial owners are required by applicable
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Other than Lawrence Butler and Marshall Butler, the Company is not aware
of a beneficial owner of more than ten percent of its Common Stock.

Based on a review of the copies of Forms 3, 4 and 5 furnished to the
Company, the Company believes that all Section 16(a) filing requirements
applicable to its officers, directors and ten percent holders were complied
within a timely manner during fiscal year 2002.

19

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the compensation paid or accrued for
services rendered in all capacities on behalf of the Company during the last
three fiscal years to the current executive officers who received compensation
in excess of $100,000 during the fiscal year ended October 27, 2002.

SUMMARY COMPENSATION TABLE

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

(1) Represents car allowance of $14,400 and 401(k) Employer Matching
Contribution of $2,264 for fiscal 2002; represents car allowance of $14,400
and 401(k) Employer Matching Contribution of $3,150 for fiscal 2001;
represents car allowance of $7,200 and 401(k) Employer Matching Contribution
of $3,150 for fiscal 2000.

(2) Represents car allowance of $7,200 and 401(k) Employer Matching Contribution
of $5,500 for fiscal 2002; represents car allowance of $8,200 and 401(k)
Employer Matching Contribution of $4,688 for fiscal 2001; represents car
allowance of $5,679 and 401(k) Employer Matching Contribution of $4,500 for
fiscal 2000.

(3) Represents accrued vacation payments.

(4) Represents 401(k) Employer Matching Contributions.

(5) Represents car allowance of $7,200, medical insurance waiver of $1,000 and
401(k) Employer Matching Contribution of $3,613 for fiscal 2002; represents
car allowance of $8,200, medical insurance waiver of $1,200 and 401(k)
Employer Matching Contribution of $3,820 for fiscal 2001; represents car
allowance of $5,523, medical insurance waiver of $1,000 and 401(k) Employer
Matching Contribution of $4,110 for fiscal 2000. Mr. Chupik became an
officer within the meaning of Section 16 of the Exchange Act effective as of
February 22, 2000.

(6) Mr. Polakiewicz became Chief Financial Officer of the Company in September
2001. Amounts reflected in the table above for 2001 represent his
compensation for the entire fiscal year.

20

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information regarding grants of stock
options to the Named Executive Officers during the last fiscal year. No SARs
were granted by the Company during the last fiscal year.

AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED OCTOBER 27, 2002 AND FISCAL
YEAR END OPTION VALUES

The following table sets forth information regarding each exercise of stock
options during the fiscal year ended October 27, 2002 by the Named Executive
Officers and the fiscal year-end value of unexercised options held by such
persons. No Named Executive Officers exercised any options during the fiscal
year ended October 27, 2002.

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

Note (1) Fair market value at October 27, 2002 was less than exercise price.

EMPLOYMENT AGREEMENTS

Effective November 1, 2000, the Company and Mr. L. Butler entered into a
three year employment agreement (the "Agreement"). Under the Agreement, Mr.
Butler is entitled to a base annual salary of $260,000 for the first year of the
term with annual reviews of such base salary by the Compensation Committee. In
addition, the Agreement provides for an annual bonus based on the Company's
earnings from continuing operations before provision for income taxes. Mr.
Butler took a voluntary salary reduction equal to 85% of his base salary for a
portion of fiscal year 2002.

Effective November 1, 2000, the Company entered into a three year
employment agreement, with Robert C. Streiter pursuant to which Mr. Streiter is
to serve as President and Chief Operating Officer of the Company. Under the
agreement, Mr. Streiter is entitled to a base annual salary of not less than
$260,000 for the first year of the term with annual reviews of such base salary
by the Compensation Committee. In addition, the Agreement provides for an annual
bonus based on the Company's earnings from continuing operations before
provision for income taxes. The agreement provides that in the event of a change
in control, Mr. Streiter may terminate the agreement. Mr. Streiter took a
voluntary salary reduction equal to 85% of his base salary for a portion of
fiscal year 2002.

COMPENSATION OF DIRECTORS

In 1998, the Company's Board of Directors and stockholders approved an
amendment to the Company's 1994 Stock Option Plan to provide for the annual
grant on the date of the Annual Meeting of Stockholders for

21

the 1998, 1999 and 2000 fiscal years of options to purchase 10,000 shares to
each director who is not an employee of the Company. During 2001, an amendment
to the Company's 1994 Stock Option Plan was approved by the Company's Board of
Directors and Stockholders to provide for the annual grant of options to
purchase 5,000 shares to each non-employee director elected at the Annual
Meeting of Stockholders held in 2001 and 2002. During 2002, an amendment to the
Company's 1994 Stock Option Plan was approved by the Company's Board of
Directors and Stockholders to provide for automatic grants of options to
purchase 5000 shares to each non-employee director elected at Annual Meetings of
Stockholders held in 2003 and 2004. Such Options, which are not Incentive Stock
Options, are exercisable at the fair market value of Common Stock of the Company
on the day of the Annual Meeting, vest one year from the date of the grant and
are exercisable until the date that is the earlier of five years from the date
of grant or 90 days after the Optionee ceases to be a director of the Company.

The Company issued to Richard E. Gormley, options under the Company's 1994
Stock option Plan to purchase 25,000 shares of Common Stock of the Company at an
exercise price of $5.82 per share, the fair market value of a Common Share of
the Company on the date Mr. Gormley was elected as director at the 2001 Annual
Meeting. The options are exercisable in three equal installments on each of the
first three annual anniversary dates of the grant of the options.

In addition, directors who are not employees of or consultants to the
Company will be paid $1,000 for each meeting of the Board of Directors
physically attended and $1,000 for each committee meeting physically attended.
Directors who are officers of or consultants to the Company will not receive any
additional compensation for serving on the Board of Directors or its committees.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board has a Compensation Committee, which currently consists of
Marshall D. Butler, Donald Grierson and Frederic A. Heim. For services to the
Company, Marshall Butler, formerly Chairman and Chief Executive Officer of the
Company, received compensation of $56,250 in fiscal year 2002.

On October 1, 2002, the Company's wholly-owned subsidiary, Wakefield
Thermal Solutions, Inc. ("Wakefield") entered into a sale and leaseback
transaction for its 171,235 square foot Pelham, New Hampshire manufacturing
facility (the "Property"). Wakefield sold the Property to 33 Bridge Investors,
LLC ("33 Bridge"), a newly-formed entity in which Marshall D. Butler, a director
of the Company owns 50% of the equity interest, for a purchase price of
$4,750,000. In connection with the sale and leaseback transaction, the Company
issued warrants to purchase an aggregate of 250,000 shares of common stock, par
value $.03 per share, to the members of 33 Bridge, including warrants to
purchase 125,000 shares of Common Stock to Marshall D. Butler, at an exercise
price of $1.42 per share. The warrants were valued at approximately $274,000
using the Black Sholes method. The book value of the land, buildings and
improvements was approximately $6.3 million. Selling costs were approximately
$300,000, excluding the value of the warrants. The loss on the sale of the
property was $2.1 million ($1.3 million, net of tax).

Effective on October 1, 2002, 33 Bridge and Wakefield entered into a lease
whereby Wakefield leased from 33 Bridge the Property for 15 years at an initial
rent of $630,000 per year with annual increases between 2% and 2.5% per annum.
Wakefield is responsible for operating expenses including taxes, utilities,
insurance and maintenance. As a result of the transaction the Company expects
annual expenses initially to increase by $325,000 representing the difference
between rental expense and interest and depreciation expense. The obligations of
Wakefield under the lease are guaranteed by the Company.

The purchase price and other terms of the sale and leaseback transaction
were the result of arm's length negotiations between representatives of the
Company and representatives of 33 Bridge. The terms of the transaction were
approved by the members of the Audit Committee of the Company constituted as a
Special Committee of Independent Directors. The Company applied the net proceeds
to its $5,000,000 principal payment made on October 1, 2002 pursuant to its
Credit Agreement, dated December 26, 2000, as amended (the "Credit Agreement").

22

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of December 31, 2002, the number and
percentage of outstanding shares of Common Stock of the Company owned
beneficially, within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act"), by (i) each stockholder known by the
Company to own more than 5% of the outstanding shares of Common Stock; (ii) each
director of the Company; (iii) each named executive officer; and (iv) all
directors and executive officers, as a group. Except as otherwise specified, the
named beneficial owner has sole voting and investment power.

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

(1) Unless otherwise indicated, the address of each beneficial owner is c/o
Alpha Technologies Group, Inc., 11990 San Vicente Boulevard, Suite 350, Los
Angeles CA 90049.

(2) Includes shares deemed to be beneficially owned by such persons or entities
pursuant to Rule 13d-3 promulgated under the Exchange Act because they have
the right to acquire such shares within 60 days upon the exercise of
options or similar rights or because such persons or entities have or share
investment or voting power.

(3) Does not include shares owned by Dot.Com of which Mr. M. Butler and Mr.
Heim are each limited partners. Messrs. M. Butler and Heim disclaim
beneficial ownership of such shares.

(4) Includes 76,667 shares which Mr. M. Butler has the right to acquire upon
the exercise of stock options within 60 days, 125,000 shares which Mr.
Butler has the right to acquire upon the exercise of warrants related to a
sales and leaseback transaction and 227,184 shares owned by a trust of
which Mr. M. Butler is a trustee.

(5) Includes 695,038 shares owned by Dot.Com, 231,560 shares owned by trusts of
which Mr. L. Butler is trustee, 450,002 shares which Mr. L. Butler has the
right to acquire upon the exercise of stock options within 60 days and
17,971 shares held for Mr. L. Butler's account in the Company's 401(k)
Plan.

(6) Includes 35,000 shares which Mr. Grierson has the right to acquire upon the
exercise of stock options within 60 days.

(7) Includes 60,000 shares that Mr. Heim has the right to acquire upon exercise
of stock options within 60 days.

(8) Shares owned by Dot.Com are also included in the number of shares reported
as beneficially owned by Mr. L. Butler, the president and sole shareholder
of the general partner of Dot.Com.

(9) Includes 291,668 shares that Mr. Streiter has the right to acquire upon
exercise of stock options within 60 days, 14,900 shares owned by Mr.
Streiter's spouse as to which Mr. Streiter disclaims beneficial ownership
and 3,313 shares held for Mr. Streiter's account in the Company's 401(k)
Plan.

23

(10) Includes 48,601 shares that Mr. Chupik has the right to acquire within 60
days and 13,834 shares held for Mr. Chupik's account in the Company's
401(k) Plan.

(11) Includes 37,944 shares that Mr. Polakiewicz has the right to acquire upon
exercise of stock options within 60 days and 3,438 shares held for Mr.
Polakiewicz's account in the Company's 401(k) Plan.

(12) Dimensional Fund Advisors Inc. ownership as of September 30, 2002.

(13) Includes 1,013,216 shares which individuals in the group have the right to
acquire upon the exercise of stock options which are exercisable within 60
days, 38,556 shares held for the accounts of the individuals in the group
in the Company's 401(k) Plan, 695,038 shares held by Dot.Com, 231,560
shares owned by trusts of which Mr. L. Butler is trustee, and 227,184
shares owned by a trust of which Mr. M. Butler is a trustee.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On October 1, 2002, the Company's wholly-owned subsidiary, Wakefield
Thermal Solutions, Inc. entered into a sale and leaseback transaction for its
171,235 square foot Pelham, New Hampshire manufacturing facility. Wakefield sold
the Property to 33 Bridge Investors, LLC ("33 Bridge"), a newly-formed entity in
which Marshall D. Butler, a director of the Company owns 50% of the equity
interest, for a purchase price of $4,750,000. In connection with the sale and
leaseback transaction, the Company issued warrants to purchase an aggregate of
250,000 shares of common stock, par value $.03 per share, of the Company to the
members of 33 Bridge, including warrants to purchase 125,000 shares of Common
Stock to Marshall D. Butler, at an exercise price of $1.42 per share. The
Company incurred rental expense of approximately $61,000 in October 2002 related
to this lease.

PART IV

ITEM 14. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

The Company's chief executive and chief financial officer have reviewed and
evaluated the effectiveness of the Company's disclosure controls and procedures
(as defined in Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934
(the "Exchange Act")), as of a date within ninety days before the filing of this
annual report. Based on that evaluation, the chief executive and chief financial
officer has concluded that the Company's current disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in reports that it files or submits under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified
in the Securities and Exchange Commission rules and forms.

CHANGES IN INTERNAL CONTROLS.

There have not been any significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation. There were no significant
deficiencies or material weakness in the internal controls, and therefore no
corrective actions were taken.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this Annual Report on Form
10-K.

(1) Consolidated Financial Statements

(2) Financial Statement Schedules:

Schedule II -- Valuation and Qualifying Accounts, page S-1.

All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or
notes thereto.

24

(3) Exhibits:

The exhibits listed in the accompanying Index to Exhibits on are filed
or incorporated by reference as part of this Annual Report on Form 10-K.

(b) Reports on Form 8-K

The Company filed a Form 8-K, dated October 1, 2002 reporting under Item 5,
Other Events and Regulation FD Disclosure that the Company entered into a sale
and leaseback transaction for its Pelham, New Hampshire manufacturing facility
and that the Company and its Lenders under the Credit Agreement entered into a
Fourth Amendment to the Credit Agreement.

25

ALPHA TECHNOLOGIES GROUP, INC.

INDEX TO EXHIBITS

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

* Management Contract or Compensatory Plan

(1) Incorporated herein by reference to the Company's Form 8-K filed on January
23, 2001.

(2) Incorporated herein by reference to the Company's Form 8-K filed on August
14, 2000.

(3) Incorporated herein by reference to the Company's Form 8-K filed on
December 4, 2000.

(4) Incorporated herein by reference to the Registrant's Registration Statement
on Form S-1 (Reg. No. 33-2979), which became effective March 7, 1986.

(5) Incorporated herein by reference to the Registrant's Registration Statement
on Form S-8, filed September 28, 1987 (Reg. No. 33-17359).

(6) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended October 29, 2000 filed on January 31, 2001.

(7) Incorporated herein by reference to the Registrant's Registration Statement
on Form S-8, filed March 17, 1988 (Reg. No. 33-20706).

27

(8) Incorporated herein by reference to the Registrant's Registration Statement
on Form S-8, filed June 30, 1989 (Reg. No. 33-29636).

(9) Incorporated herein by reference to the Registrant's Registration Statement
on Form S-8, filed June 23, 1992 (Reg. No. 33-48663).

(10) Incorporated herein by reference to the Registrant's Registration Statement
on Form S-8, filed January 29, 1987 (Reg. No. 33-11627).

(11) Incorporated herein by reference to the Company's Form 10-Q for the
quarterly period ended April 26, 1998 filed on June 10, 1998.

(12) Incorporated herein by reference to the Company's Proxy Statement filed
February 23, 1998.

(13) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended October 27, 1996 filed on January 27, 1997.

(14) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended October 31, 1999 filed on January 31, 2000.

(15) Incorporated herein by reference to the Company's Form 10-Q for the
quarterly period ended April 30, 2000 filed on June 6, 2000.

(16) Incorporated herein by reference to the Registrant's Definitive Proxy
Statement for its 2002 Annual Meeting of Stockholders, dated April 10,
2002.

(17) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended October 28, 2001 filed on February 11, 2002.

(18) Incorporated herein by reference to the Company's Form 10-Q for the
quarterly period ended January 27, 2002 filed on March 13, 2002.

(19) Incorporated herein by reference to the Company's Form 10-Q for the
quarterly period ended July 28, 2002 filed on September 11, 2002.

(20) Incorporated herein by reference to the Company's Form 8-K filed on October
4, 2002.

(21) Incorporated herein by reference to the Company's Form 8-K/A filed on June
11, 2002.

28

SIGNATURES

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

ALPHA TECHNOLOGIES GROUP, INC.

By: /s/ LAWRENCE BUTLER
------------------------------------
(Lawrence Butler)
Chairman and Chief Executive Officer

Date: February 6, 2003

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 dates indicated.

29

CERTIFICATIONS

Pursuant to the requirements of the Section 302 of the Sarbanes-Oxley Act of
2002,

I, Lawrence Butler, certify that:

1. I have reviewed this annual report on Form 10-K of Alpha Technologies Group,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

/s/ LAWRENCE BUTLER
--------------------------------------
Lawrence Butler
Chief Executive Officer

Date: February 6, 2003

30

CERTIFICATIONS

Pursuant to the requirements of the Section 302 of the Sarbanes-Oxley Act of
2002,

I, James J. Polakiewicz, certify that:

1. I have reviewed this annual report on Form 10-K of Alpha Technologies Group,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

/s/ JAMES J. POLAKIEWICZ
--------------------------------------
James J. Polakiewicz
Chief Financial Officer

Date: February 6, 2003

31

ALPHA TECHNOLOGIES GROUP, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

F-1

INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors of Alpha Technologies Group, Inc.:

We have audited the accompanying consolidated balance sheet of Alpha
Technologies Group, Inc. (a Delaware corporation) and Subsidiaries as of October
27, 2002, and the related consolidated statement of operations, stockholders'
equity, and cash flows for the year then ended. Our audit also included the
information for the year ended October 27, 2002 contained within the financial
statement schedule listed in the Index at Item 14. These financial statements
and financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements and financial statement schedule based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 provides a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Alpha Technologies Group, Inc.
and Subsidiaries as of October 27, 2002, and the results of their operations and
their cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, the information for the year ended October 27, 2002 contained within
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

As discussed in Note 1, in 2002 the Company adopted the provisions of SFAS
No. 142, "Goodwill and Other Intangible Assets" and of SFAS No. 145, "Rescission
of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections."

/s/ Deloitte & Touche LLP

Boston, Massachusetts
January 7, 2003 (February 6, 2003 as to Note 7)

F-2

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of Alpha Technologies Group, Inc.

We have audited the accompanying consolidated balance sheet of Alpha
Technologies Group, Inc. (a Delaware corporation) and Subsidiaries as of October
28, 2001 and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the two years in the period ended October 28,
2001. 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 audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Alpha
Technologies Group, Inc. and Subsidiaries as of October 28, 2001 and the
consolidated results of their operations and their consolidated cash flows for
each of the two years in the period ended October 28, 2001, in conformity with
accounting principles generally accepted in the United States of America.

We have also audited Schedule II for each of the two years in the period
ended October 28, 2001. In our opinion, this schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be set forth therein.

/s/ GRANT THORNTON LLP

Houston, Texas
December 14, 2001

F-3

ALPHA TECHNOLOGIES GROUP, INC.

CONSOLIDATED BALANCE SHEETS

See notes to the consolidated financial statements.
F-4

ALPHA TECHNOLOGIES GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

See notes to the consolidated financial statements.
F-5

ALPHA TECHNOLOGIES GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE (LOSS) INCOME
FOR THE YEARS ENDED OCTOBER 27, 2002, OCTOBER 28, 2001 AND OCTOBER 29, 2000

See notes to the consolidated financial statements.
F-6

ALPHA TECHNOLOGIES GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

F-7

See notes to the consolidated financial statements
F-8

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

Alpha Technologies Group, Inc. ("Alpha" or the "Company") designs,
extrudes, fabricates and sells thermal management and non-thermal fabricated
products for use in a variety of industries including automotive,
telecommunication, industrial controls, transportation, power supply, factory
automation, consumer electronics, aerospace, defense, microprocessor and
computer industries. The Company extrudes aluminum for its use in the production
of thermal management and non-thermal fabricated products and sells aluminum
extrusions to a variety of industries including the construction, sporting goods
and other leisure activity markets.

RECENT RESULTS OF OPERATIONS

The Company has been impacted by the economic downturn and has suffered a
decline in revenues and profitability. In addition, this operational downturn
has resulted in noncompliance with the terms and conditions contained in the
Company's credit agreement. The Company has taken action to control expenses,
through cost containment and headcount reduction, and has negotiated amendments
to the terms and conditions of its credit agreement. As a result of these
actions, the Company believes that sufficient liquidity exists to support
operations for at least the forthcoming fiscal year.

ACCOUNTING PERIODS

The Company follows a 4-5-4 week quarterly accounting period cycle wherein
each quarter consists of two four week months and one five week month. The last
day of the fiscal year is always the last Sunday in October.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Alpha and its
wholly-owned subsidiaries. All material intercompany transactions and balances
have been eliminated. As more fully described in Note 3 -- Discontinued
Operations, the financial statements have been reclassified to present the
connector business, which was sold in July 2000, and the subsystems business,
which was sold on November 17, 2000, as discontinued operations. Additionally,
certain reclassifications were made to fiscal 2001 to conform to fiscal 2002
presentations.

USE OF ESTIMATES AND OTHER UNCERTAINTIES

The preparation of the Company's consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and 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. While we believe that our allowance for doubtful
accounts and sales returns is adequate and that the judgment applied is
appropriate, if there is a deterioration of a major customer's credit
worthiness, actual defaults are higher than our previous experience, or actual
future returns do not reflect historical trends, our estimates of the
recoverability of the amounts due us and our sales could be adversely affected.

REVENUE RECOGNITION AND ALLOWANCES FOR SALES RETURNS, DOUBTFUL ACCOUNTS AND
WARRANTIES

The Company recognizes revenues when (1) persuasive evidence of an
arrangement exists, (2) products and services have been delivered to the
ultimate customers, (3) the price is fixed or determinable, and (4)
collectibility is reasonably assured. The Company's shipping terms are generally
FOB shipping point.

F-9

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Allowances for doubtful accounts are provided for account receivables
considered uncollectible. Reserve for sales returns are provided in the period
in which the related sale is recognized. The allowance for doubtful accounts and
sales returns is based on our assessment of the collectibility of specific
customer accounts, the aging of our accounts receivable and trends in product
returns.

The Company does not generally provide a warranty on the goods that it
sells. However, customers do have the right to return merchandise deemed
defective when received. These returns generally occur at the point of delivery
when the goods are subject to customer inspections. Reserves for these potential
returns are provided when the related sale is recognized. Claims for defective
goods have not been significant in any period presented.

The following is a roll forward of the allowances provided for doubtful
accounts and sales returns (including returns related to defective goods):

RISK MANAGEMENT AND HEDGING ACTIVITY

The Company's current risk management strategies include the use of an
interest rate swap (see Note 7) to hedge against the impact on cash flows of
changes in interest rates. The interest rate swap is designated as a cash flow
hedge of specific variable rate debt and is carried on the balance sheets at
fair value. The Company evaluates its interest rate swap each quarter to
determine if it is effective. No other derivative instruments are held. The
effective portion of unrealized gains or losses on the fair value of the swap is
charged to other comprehensive income until the hedged transaction is complete
and affects earnings. Ineffectiveness is charged to earnings as incurred.
Amounts related to ineffectiveness have not been significant to date.

INVENTORIES AND INVENTORY RESERVES

Inventories are stated at the lower of cost or market and are priced using
the first-in, first-out method. Inventory purchases and commitments are based
upon future demand forecasts for our products and our current level of
inventory. Inventory reserves have been established for excess and obsolete
items. If there is a sudden and significant decrease in demand for our products
or there is a higher risk of inventory obsolescence because of rapidly changing
technology and requirements, we may be required to increase our inventory
reserve and as a result, our gross profit margin could be adversely affected.

F-10

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following is a roll forward of reserves provided for inventory:

PROPERTY AND EQUIPMENT

The cost of property and equipment is depreciated using the straight-line
method over the estimated useful lives of such assets, ranging from three to
fifteen years. Leasehold improvements are amortized on a straight-line basis
over the shorter of the lease term or the estimated useful lives of the leased
assets.

GOODWILL AND LONG-LIVED ASSETS

The Company performs impairment analyses of its long-lived assets whenever
events and circumstances indicate that they may be impaired. Prior to 2002, all
long-lived assets were assessed for impairment by comparison of the total amount
of undiscounted cash flows expected to be generated by such assets to their
carrying value. Long-lived assets, other than goodwill, continue to be evaluated
using this method and no adjustments have been required to date.

In 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 addresses the financial accounting and reporting for
goodwill and other acquired intangible assets. In particular, SFAS No. 142
mandates a fair value approach to assessing the potential impairment of goodwill
and other intangibles with indeterminable lives. No impairment was noted as of
the date of adoption. The Company engaged an independent valuation advisory firm
to conduct its initial annual impairment test as of the designated test date,
June 1, 2002, and as a result of that test concluded that approximately $15.6
million of the goodwill carried as of that date was impaired. The fair value of
the Company's single reporting unit was determined by using established
valuation techniques, specifically, the income, market and cost approaches.
Management believes that this impairment was caused by the downturn in the
economy which severely impacted the markets served by the Company's products.
This impairment has been reported as a separate component of operating expenses
in the Consolidated Statement of Operations for year ended October 27, 2002.
Goodwill, net of amortization, has been reduced from $28.6 million at October
28, 2001 to $13.0 million at October 27, 2002. The accumulated amortization for
goodwill was $2.3 million as of October 27, 2002 and October 28, 2001 and $1.0
million as of October 29, 2000. Amortization expense of approximately $1.3
million and $181,000 was recorded in fiscal years 2001 and 2000,respectively. No
amortization was recorded in fiscal year 2002 following adoption of SFAS No.
142.

F-11

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following reconciliation summarizes the impact that the adoption of
SFAS No. 142 had on the Company's net (loss) income and earnings per share.

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

Note (1) -- Net of applicable taxes

LOSS CONTINGENCIES

We are subject to the possibility of various loss contingencies arising in
the ordinary course of business. An estimated loss contingency is accrued when
it is probable that a liability has been incurred or an asset has been impaired
and the amount of loss can be reasonably estimated. We regularly evaluate
current information available to us to determine whether such accruals should be
adjusted.

COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) includes net income or loss, plus other
comprehensive income (loss). Other comprehensive loss in fiscal year 2002 and
2001 consists of fair value adjustments related to the interest rate swap
agreement. Other comprehensive income in fiscal year 2000 consists of foreign
currency translation adjustments.

STOCK-BASED COMPENSATION

The Company employs the intrinsic value based method of accounting for
stock options. The intrinsic method measures compensation cost for stock options
as the excess, if any, of the quoted market price of the Company's stock at the
measurement date over the exercise price. Compensation related to awards to non-
employees is measured using the fair value method.

F-12

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INCOME TAXES

The Company accounts for income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using current enacted
tax rates. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in the results of operations in the period that includes the
enactment date. Valuation allowances are provided to the extent that
recoverability of tax assets is not considered likely.

NEW ACCOUNTING PRONOUNCEMENTS

FASB has issued SFAS No. 144, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," which is effective November
1, 2002. SFAS No. 144 provides guidance on measuring and recording impairments
of assets, other than goodwill, and provides clarifications on measurement of
cash flow information and other variables to be used to measure impairment. The
Company believes that the adoption of SFAS No. 144 will not have a significant
impact on its financial statements.

In April 2002, FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 clarifies guidance related to the reporting of gains and losses
from extinguishment of debt and resolves inconsistencies related to the required
accounting treatment of certain lease modifications. The Company adopted SFAS
No. 145 during 2002, and has classified gains and losses resulting from the
extinguishment of debt as a separate component of income from continuing
operations. The 2001 statement of operations has been reclassified to reflect
the 2001 loss on debt extinguishment as a component of operations.

In June 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 nullifies previous guidance on
accounting for costs associated with exit or disposal activities and requires a
liability for these costs to be recognized and measured at its fair value in the
period in which the liability is incurred. SFAS No. 146 is effective for exit or
disposal activities initiated after December 31, 2002.

2. ACQUISITIONS

On January 9, 2001, the Company purchased all of the outstanding Common
Stock of National Northeast Corporation ("NNE") from Mestek, Inc.(the "Seller").
The purchase price was $49,900,000 in cash, subject to adjustment based upon
working capital as of the Closing. Pursuant to the SPA, the Seller and certain
of its affiliates agreed not to engage in the manufacture and sale of aluminum
extrusions and aluminum heat sinks for four and one half years. Alpha used
$14,800,000 of its cash on hand and $39,800,000 in borrowings under its credit
facility to pay the purchase price and $1,300,000 in transaction costs and costs
for the credit facility and to satisfy $3,400,000 in outstanding debt under its
old credit facilities, including a $378,000 early termination fee. The
acquisition has been accounted for as a purchase transaction, and accordingly,
the purchase price has been allocated to the assets acquired and liabilities
assumed for the acquisition based upon their estimated fair values. The Company
initially elected to amortize the portion of the purchase price allocated to
goodwill over 20 years. Amortization ceased upon adoption of SFAS No. 142. The
operating results of NNE have been included in the Company's consolidated
results of operations since its acquisition date.

The following unaudited proforma summary, based on historical operations,
is not necessarily indicative either of results of operations that would have
occurred had the purchase been made as of the beginning of the period presented,
or of future results of operations of the combined companies. The proforma
summary below does not include any savings that the Company expects to achieve
as a result of the combination. Total revenues included in the following
unaudited pro forma summary reflect the effect of accounting for the

F-13

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company's connector business and subsystems business as discontinued operations.
Net income included in the following unaudited pro forma summary does not
reflect the effect of income from discontinued operations or the gain on sale of
discontinued operations.

PROFORMA RESULTS

3. DISCONTINUED OPERATIONS

On July 28, 2000, the Company sold its connector business, Uni-Star
Industries, Inc. ("Uni-Star" or the "Business") to Tyco Electronics Corporation
and Tyco Electronics UK Ltd. (the "Buyer"). The sale included 100% of the
outstanding stock of Uni-Star Industries, Inc. and Microdot Connectors Europe,
Ltd. (a wholly owned UK subsidiary of Uni-Star) and the agreement by Alpha and
certain of their affiliates not to engage in the connector business for five
years. Alpha initially received $12,300,000, in cash, subject to reduction if
Uni-Star's net assets were less than $3,986,000 as of the closing date. A
subsequent payment of $325,000 was made to the seller in 2001. The sale resulted
in a gain of $6,478,000, net of income tax expense of $640,000.

On November 17, 2000, Malco Technologies Group, Inc., a wholly-owned
subsidiary of Alpha, sold substantially all of the assets and the subsystems
business (the "Business") located in Colmar, Pennsylvania, to a privately owned
company (the "Buyer"). The sale included Malco's accounts receivable, inventory,
machinery, equipment, tools, business machines, office furniture and fixtures
and certain intangibles including but not limited to customer lists, trade names
and engineering designs and the agreement by Alpha and certain of their
affiliates not to engage in any business, directly or indirectly, that competes
with Malco for three years. Alpha received $2,200,000 in cash plus a three-year,
12% note for $300,000 and Buyer assumed certain payables and liabilities of the
Business. The sale resulted in a gain of $277,000, net of income tax expense of
$70,000.

4. INVENTORIES

Inventories consisted of the following on:

F-14

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following on:

6. ACCRUED COMPENSATION AND RELATED BENEFITS

Accrued compensation and related benefits consisted of the following on:

7. DEBT AND REVOLVING CREDIT FACILITIES

Revolving Credit Facilities and Term Debt consisted of the following on:

On January 9, 2001, the Company and its subsidiaries, as guarantors,
entered into a Credit Agreement (the "Credit Agreement") with several banks and
other financial institutions ("the Lenders"). The Credit Agreement consists of a
revolving credit facility which expires in June 2004 and a term loan which
expires in January 2006. Borrowings under the Credit Agreement are secured by a
first lien on and the assignment of all

F-15

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of the Company's assets. Under the Credit Agreement, the Company must meet
certain covenants. During the fiscal year ended October 28, 2001 and during the
three months ended January 27, 2002, the Company did not meet certain financial
covenants. As a result, all outstanding loan balances under the Credit Agreement
were classified as current liabilities at October 28, 2001. The Company was in
compliance with the covenants and conditions of the Credit Agreement at October
27, 2002. The Company was not in compliance with certain financial covenants
contained in the Amended Credit Agreement for the quarter ended January 26,
2003. On February 6, 2003, the Credit Amendment was further amended to revise
the Maximum Leverage Ratio and Fixed Charge Coverage Ratio to levels that
management believes the Company will be able to achieve and which waived the
non-compliance at January 26, 2003. Fees for the Fifth Amendment and waiver are
estimated to be approximately $60,000.

During 2002, the Company experienced financial difficulty, and as a result,
the Credit Agreement was amended four times to revise financial covenants and to
waive events of non-compliance. As part of these amendments, the Company paid
the lenders involved fees of approximately $804,000, which includes the
estimated fair value of warrants to purchase common stock granted to the lenders
(see Note 11). Fees associated with obtaining debt financing are deferred and
amortized to interest expense over the term of the related debt. The amendments
entered into during 2002 significantly reduced the amount of the funds committed
during the Credit Agreement's term, and as a result, the Company wrote off a
proportionate amount of these deferred costs to reflect this reduction. This
charge aggregated $561,000. In 2001, the Company recorded a charge of $650,000,
representing the writeoff of costs associated with the payoff and cancellation
of an old credit facility.

Under the amended Credit Agreement, the revolving credit facility accrues
interest on outstanding borrowings at LIBOR plus 3.5% (5.31% on October 27,
2002) and expires on June 30, 2004. There is also an unused line fee equal to
..75% per annum. The Company may borrow up to the lesser of $5 million or 60% of
eligible accounts receivable ($4.1 million at October 27, 2002), as defined by
the Amended Credit Agreement. Prior to the amendments, the Company was allowed
to borrow up $15 million. As of October 27, 2002, $3.2 million has been drawn
and is outstanding on the revolving credit facility. A portion of the
outstanding term loan ($12.0 million on October 27, 2002) is covered by an
interest rate swap (the "hedged loan"). The hedged loan effectively accrues
interest at a fixed rate of 8.47%. The balance of the term loan not covered by
the swap, $9.65 million on October 27, 2002, consists of two notes which accrue
interest at the relevant LIBOR rate plus 3.5% (5.26% on $8.9 million and 5.58%
on $750,000 on October 27, 2002). Term loans require quarterly principal
payments through January 2006.

The Company, as required by the amended Credit Agreement, utilizes an
interest rate swap (the "swap") to hedge against the impact on cash flows of
changes in interest rates. The interest rate swap is designated as a cash flow
hedge of a specific portion of the term loans outstanding under the Credit
Facility and is carried on the balance sheets at fair value. The effective
portion of unrealized gains or losses on the fair value of the swap is charged
to other comprehensive income until the hedged transaction is complete and
affects earnings. Ineffectiveness is charged to earnings as incurred. Amounts
related to ineffectiveness have not been significant to date. The effect of the
swap is to convert the interest rate on the hedged portion of the term loans
from a variable rate to a fixed rate of 8.47%. The swap matures on March 31,
2004. The carrying value and fair value of the swap was $477,000 and $522,000 at
October 27, 2002 and October 28, 2001, respectively.

F-16

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum principal payments on the revolving credit facilities and
the term loans are as follows:

Cash paid for interest on all outstanding debt aggregated $2,281,000,
$2,338,000 and $588,000 for the years ended October 27, 2002, October 28, 2001
and October 29, 2000, respectively.

8. PREFERRED STOCK

On October 27, 2002 and October 28, 2001, the Company had authorized
180,000 shares of unissued, preferred stock with a par value of $100 per share.
The Board of Directors has the authority to issue such preferred stock and to
set the terms thereof, including the dividend rate, conversion rights,
redemption rights, voting rights and liquidation preferences. There are no
shares of preferred stock outstanding as of October 27, 2002.

9. REPURCHASE OF COMMON STOCK

In October 1999, the Board of Directors of the Company approved a plan to
purchase up to $500,000 of the Company's common stock in the open market.
Pursuant to the stock repurchase plan, the Company purchased 25,137 shares of
common stock at an aggregate price of $90,000 during fiscal year 2001 and 35,800
shares of common stock at an aggregate price of $161,011 during fiscal year
1999.

10. STOCK OPTION PLANS

The Company has in effect nonqualified and incentive stock option plans
under which shares are available for exercise. As of October 27, 2002, the Board
of Directors has reserved 1,966,527 shares of common stock for issuance under
the plans. The prices at which substantially all stock options outstanding have
been granted have been equal to or in excess of the fair market value of the
Company's stock at the time of the grant. These options vest over periods up to
five years. On October 27, 2002, there were 202,151 shares available for future
grants.

F-17

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes activity and outstanding options under the
plans:

The Company's Board of Directors approved an amendment to the 1994 Stock
Option Plan on November 14, 2001 to increase the aggregate number of shares
subject to the Plan to 2,400,000 shares, subject to shareholder approval which
was subsequently obtained at the 2002 Annual Meeting of Stockholders. In April,
2001, the Company's Board of Directors and stockholders approved an amendment to
the Plan, which provided for options to purchase 5,000 shares to be
automatically granted to non-employee directors at the Annual Meetings to be
held in 2001 and 2002 and set the maximum number of shares as to which options
may be granted to any one individual under the Plan during any calendar year at
250,000. In April, 2002, the Company's Board of Directors and stockholders
approved an amendment to the Plan, which provided for

F-18

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

options to purchase 5,000 shares to be automatically granted to non-employee
directors at the Annual Meetings to be held in 2003 and 2004.

For fiscal 2002, 2001, and 2000, $12,000, $11,000, and $7,000,
respectively, was recognized as expense for options issued to non-employees
under the Company's stock option plans. Pro forma information regarding net
income and earnings per share has been determined as if the Company has
accounted for options issued to employees under the fair value method of that
statement. The fair value of these options was estimated at the date of grant
using the Black-Scholes option pricing model. The weighted average assumptions
for fiscal 2002 were: expected volatility 80.12%, risk free interest rate of
3.98%, expected option life of 4.0 years and no expected dividends. The weighted
average assumptions used for fiscal 2001 were: expected volatility 65.71%, risk
free interest rate of 5.10%, expected option life of 4.0 years and no expected
dividends. The weighted average assumptions used for fiscal 2000 were: expected
volatility 73.45%, risk free interest rate of 6.35%, expected option life of 4.0
years and no expected dividends. In addition, adjustments were made for
estimated cancellations.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

For pro forma disclosures, the estimated fair value of the options is
amortized to expense over the options' vesting period. If the fair value based
method of accounting for employee awards had been applied, the Company's net
income or loss and net income or loss per share would have been as follows:

The estimated weighted average fair value of options granted during fiscal
2002, 2001 and fiscal 2000 was $2.48, $4.10, and $4.53, respectively.

11. WARRANTS

On January 28, 2002, and March 12, 2002, warrants to purchase 36,666 and
73,334 shares of common stock were granted to the Company's Lenders pursuant to
the provisions of the First and Second Amendments to the Credit Agreements.
These warrants were fully vested and exercisable at the date of issuance at an
exercise price of $2.89 per share and $1.94 per share, respectively and will
expire in five years from the date of grant. None of these warrants have been
exercised as of October 27, 2002. The fair value of the warrants (determined
using the Black-Scholes pricing model) was $148,000 and is being amortized to
interest expense over the remaining life of the loan.

On October 1, 2002, warrants to purchase 250,000 shares of the Company's
common stock were issued to 33 Bridge Investors, LLC. in connection with the
sale and leaseback transaction as described in Note 18. The warrants were fully
vested and exercisable at the date of issuance at an exercise price of $1.42 per
share and will expire in ten years. None of these warrants have been exercised
as of October 27, 2002. The fair value of

F-19

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the warrants (determined using the Black-Scholes pricing model) was $274,000 and
was expensed as a component of the loss on the sale of land and building.

12. NET INCOME (LOSS) PER SHARE

Basic net income (loss) per common share is computed by dividing income
(loss) available to common shareholders by the weighted average number of shares
of common stock outstanding during each year. Diluted earnings per common share
are calculated to give effect to stock options and warrants outstanding during
the period. The treasury stock method is used to calculate dilutive shares and
reduces the gross number of dilutive shares by the number of shares purchasable
from the proceeds of the options assumed to be exercised. For fiscal year 2002,
potentially dilutive shares were not considered in the computation as their
effect would have been antidilutive. The amounts used in calculating basic and
dilutive earnings per share and the amounts that would have been used in fiscal
2000 through 2002 were:

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

(1) Antidilutive

For fiscal year ended October 27, 2002, 47,266 potential common shares were
excluded from the calculations above because the effect was antidilutive.

F-20

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. INCOME TAXES

The(benefit) provision for income taxes for continuing operations was as
follows:

Differences between the statutory Federal rate and the Company's effective
tax rate are summarized as follows:

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities and their changes during the
year end ended October 27, 2002 and October 28, 2001 were as follows:

F-21

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Cash paid for income taxes aggregated $136,000, $300,000 and $633,000 for
the years ended October 27, 2002, October 28, 2001 and October 27, 2000,
respectively.

Due to the Company's historical results of operations, a valuation
allowance has been provided for certain deferred tax assets that may not be
realized. The valuation allowance increased to $500,000 in fiscal 2002. In
fiscal 2001 and 2000, the valuation allowance decreased by $454,000, and
$4,338,000, respectively.

As of October 27, 2002, the Company had net pre tax operating loss carry
forwards for both Federal and State of approximately $10,518,000, unused
investment and research and development tax credits of approximately $253,000
and $542,000 of alternative minimum tax credits available to offset future
Federal income taxes. The net Federal operating loss carry forward will expire
from 2017 to 2020, the investment tax credit and research and development tax
credit carry forwards will expire from 2003 to 2005, and the alternative minimum
tax credit has no expiration. The state net operating loss carry forwards will
expire from 2003 to 2006.

14. COMMITMENTS AND CONTINGENCIES

The Company has operating lease commitments for certain office equipment
and manufacturing, administrative and support facilities. Minimum lease payments
under noncancellable leases, including amounts related to the sale leaseback
discussed in Note 18, are as follows:

Rent expense (exclusive of operating expenses and net of sublease rents)
for operating leases for continuing operations was approximately $1,337,000,
$1,416,000, and $1,157,000 in fiscal 2002, 2001, and 2000, respectively. Total
rent expense was approximately $1,422,000, $1,501,000, and $1,617,000 in fiscal
2002, 2001 and 2000, respectively.

The Company is engaged in various lawsuits, the outcome of which cannot
presently be determined. In the opinion of management, losses, if any, resulting
from these lawsuits will not have a material effect on the Company's
consolidated financial position or results of operations.

15. RETIREMENT PLANS

The Company sponsors a defined contribution plan which is available to all
domestic employees. This plan provides for employer contributions based on
employee participation. The total expense from continuing operations under the
plan was $292,000, $346,000 and $260,000 for the years ended October 27, 2002,
October 28, 2001 and October 29, 2000, respectively.

F-22

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. BUSINESS SEGMENT INFORMATION

The Company has one operating segment, which manufactures thermal
management and non-thermal fabricated products and aluminum extrusions. The
Company derives substantially all of its operating revenue from the sale and
support of one group of products and services with similar characteristics such
as the nature of the production processes, the type and class of customers, and
the methods of distribution. Substantially all of the Company's assets are
located within the United States. In addition, the Company's chief decision-
maker and management make decisions based on one product group.

Net sales to one customer totaled approximately 11.6% and 10.1% of
consolidated revenues for the fiscal years ended October 27, 2002 and October
28, 2001, respectively.

17. RESTRUCTURING COSTS

In response to the decline in demand for the Company's products resulting
from the economic downturn in the markets served by the Company's products, the
Company took significant actions to reduce operating expenses and incurred
restructuring costs totaling $822,000 in fiscal 2001. Such restructuring costs
consisted of severance costs ($257,000) and a non-cancelable lease commitment on
an unused administrative facility ($565,000). The following summarizes the
changes in the restructuring cost liability since the date the charge was taken
in 2001.

18. SALE AND LEASEBACK TRANSACTION WITH RELATED PARTIES

On October 1, 2002, the Company's wholly-owned subsidiary, Wakefield
Thermal Solutions, Inc. ("Wakefield") entered into a sale and leaseback
transaction for its 171,235 square foot Pelham, New Hampshire manufacturing
facility (the "Property"). Wakefield sold the Property to 33 Bridge Investors,
LLC ("33 Bridge"), a newly-formed entity in which Marshall D. Butler, a director
of the Company owns 50% of the equity interest, for a purchase price of
$4,750,000. In connection with the sale and leaseback transaction, the Company
issued warrants to purchase an aggregate of 250,000 shares of common stock, par
value $.03 per share, to the members of 33 Bridge, including warrants to
purchase 125,000 shares of Common Stock to Marshall D. Butler, at an exercise
price of $1.42 per share. The warrants were valued at approximately $274,000
using the Black Sholes method. The book value of the land, buildings and
improvements was

F-23

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

approximately $6.3 million. Selling costs were approximately $300,000, excluding
the value of the warrants. The loss on the sale of the property was $2.1 million
($1.3 million, net of tax).

Effective on October 1, 2002, 33 Bridge and Wakefield entered into a lease
whereby Wakefield leased from 33 Bridge the Property for 15 years at an initial
rent of $630,000 per year with annual increases between 2% and 2.5% per annum.
Wakefield is responsible for operating expenses including taxes, utilities,
insurance and maintenance. The obligations of Wakefield under the lease are
guaranteed by the Company. The Company incurred rental expense of approximately
$61,000 in October 2002 related to this lease.

The purchase price and other terms of the sale and leaseback transaction
were the result of arm's length negotiations between representatives of the
Company and representatives of 33 Bridge. The terms of the transaction were
approved by the members of the Audit Committee of the Company constituted as a
Special Committee of Independent Directors. The Company applied the net proceeds
to its $5,000,000 principal payment made on October 1, 2002 pursuant to its
Credit Agreement, dated December 26, 2000, as amended (the "Credit Agreement").

19. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's principal financial instruments consist of cash and cash
equivalents, variable rate debt outstanding under the Company's Credit
Agreement, and the interest rate swap utilized as a cash flow hedge. The
carrying amounts for these financial instruments approximate their estimated
fair values.

The fair market values of financial instruments were estimates based on
market conditions and perceived risks at October 27, 2002 and October 28, 2001,
and require varying degrees of management judgment. The factors used to estimate
these values may not be valid on any subsequent date. Accordingly, the fair
market values of the financial instruments presented may not be indicative of
their future values.

The following methods and assumptions were used to estimate the fair market
value of each class of financial instrument:

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash in banks and money market accounts
as well as highly liquid investments with initial maturities of three months or
less when purchased. The carrying amount approximated fair market value due to
the short-term maturity of the instruments.

VARIABLE-RATE REVOLVING CREDIT FACILITY AND TERM NOTES

The carrying amount of the credit facility approximates fair market value
because of the renewing feature of the facility. The fair market value of the
notes is estimated based on quoted market prices.

INTEREST RATE SWAP AGREEMENT

The Company, as required by the amended Credit Agreement utilizes the swap
to hedge against its interest rate risk. The fair market value represents the
amount Alpha would receive or pay to terminate the agreement taking into
consideration current interest rates.

F-24

ALPHA TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

20. SUMMARY OF QUARTERLY RESULTS OF OPERATIONS

F-25

SCHEDULE II
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

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

(1) Uncollectible accounts written off, net of recoveries.

(2) Obsolete inventory written off at cost, net of value recovered.

S-1