<Page>

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

                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 2001

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from _______________ to ________________.


                         Commission file number: 0-4041

                              HATHAWAY CORPORATION
             (Exact name of registrant as specified in its charter)


          COLORADO                                       84-0518115
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)


       8228 PARK MEADOWS DRIVE
         LITTLETON, COLORADO                                80124
(Address of principal executive offices)                  (Zip Code)


       Registrant's telephone number, including area code: (303) 799-8200

        Securities registered pursuant to Section 12(b) of the Act: NONE

    Securities registered pursuant to Section 12(g) of the Act: Common Stock,
                                  no par value


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


INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [ ]

     As of September 6, 2001, the aggregate market value of voting stock held by
non-affiliates of the Registrant, computed by reference to the average bid and
asked prices of such stock approximated $11,232,000.

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


                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's definitive Proxy Statement dated September 21,
2001 are incorporated by reference in Part III of this Report.

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

<Page>

                                TABLE OF CONTENTS

<Table>
<Caption>
PART I.                                                                         PAGE
<S>                                                                             <C>
Item 1.   Business..............................................................   1

Item 2.   Properties............................................................   4

Item 3.   Legal Proceedings.....................................................   4

Item 4.   Submission of Matters to a Vote of Security Holders...................   4

PART II.

Item 5.   Market for Registrant's Common Equity and Related Stockholder
          Matters...............................................................   4

Item 6.   Selected Financial Data...............................................   5

Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations.................................................   5

Item 8.   Financial Statements and Supplementary Data...........................  10

          Report of Independent Public Accountants..............................  11

Item 9.   Disagreements on Accounting and Financial Disclosure..................  30

PART III.

Item 10.  Directors and Executive Officers of the Registrant....................  30

Item 11.  Executive Compensation................................................  30

Item 12.  Security Ownership of Certain Beneficial Owners and Management........  30

Item 13.  Certain Relationships and Related Transactions........................  30

PART IV.

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.......  30

          Consent of Independent Public Accountants.............................  33

          Signatures............................................................  34

          Financial Statement Schedule .........................................  35

          Officers and Directors / Investor Information.........................  37

</Table>

<Page>

PART I

ITEM 1. BUSINESS.

     Hathaway Corporation (the Company) was organized under the laws of Colorado
     in 1962. The Company is engaged in the business of designing, manufacturing
     and selling advanced systems and instrumentation to the worldwide power and
     process industries, as well as motion control products to a broad spectrum
     of customers throughout the world. The Company operates primarily in the
     United States and the United Kingdom and has joint venture investments in
     China.

     POWER AND PROCESS BUSINESS

     POWER INSTRUMENTATION

     Hathaway's power instrumentation products help ensure that electric
     utilities provide high quality service to consumers of electricity. With
     manufacturing facilities in Seattle and Belfast, Northern Ireland, and
     sales and engineering functions in Seattle, Belfast and Denver, the power
     products group produces a comprehensive and cost-effective range of
     products designed exclusively for the power industry worldwide. Hathaway's
     equipment assists the electric power system operators in operating and
     maintaining proper system performance. The products, which are used to
     monitor and control the power generation, transmission and distribution
     processes, include fault recording products, fault location products,
     condition monitoring (circuit breaker) products and remote terminal units
     for Supervisory Control and Data Acquisition (SCADA) systems.

     Through July 5, 2001, the Company had three joint venture investments in
     China - a 20% interest in Hathaway Si Fang Protection and Control Company,
     Ltd. (Si Fang), a 25% interest in Zibo Kehui Electric Company Ltd. (Kehui)
     and a 40% interest in Hathaway Power Monitoring Systems Company, Ltd.
     (HPMS). Si Fang designs, manufactures and sells a new generation of digital
     protective relays, control equipment and instrumentation products for
     substations in power transmission and distribution systems in China and is
     one of the largest Chinese supplier of digital relays in China. The Company
     sold its interest in Si Fang effective July 5, 2001. Kehui designs,
     manufactures and sells cable and overhead fault location products,
     Supervisory Control and Data Acquisition (SCADA) systems and other test
     instruments within the China market and the Company may sell these products
     outside of China. HPMS manufactures and sells, under a license from the
     Company, instrumentation products designed by the Company to electric power
     companies in China.

     SYSTEMS AUTOMATION

     Effective September 30, 1996, the Company acquired Tate Integrated Systems
     which has since operated under the name of Hathaway Industrial Automation
     (HIA), a wholly-owned subsidiary of the Company. HIA is located near
     Baltimore, Maryland and is a full service supplier of process automation
     systems for industrial applications. HIA has developed a state-of-the-art
     software system for SCADA and Distributed Control Systems (DCS). The HIA
     system has been used to fully automate such industrial applications as
     water and wastewater treatment plants, glass manufacturing plants, oil and
     gas terminals and tank farm facilities. The focus of the systems business
     has shifted from industrial automation applications to the power generation
     and transmission industry. The Company has been successful at integrating
     the HIA system with certain other Hathaway products and targeting the
     integrated product at substation automation applications used in the
     electric power industry. The automation system provides the user the
     ability to securely send and receive information to and from intelligent
     electronic devices in transmission and distribution substations to help
     monitor and control the delivery of electricity. In addition, the
     automation system is used by organizations responsible for operating the
     transmission grid and ensuring the reliable delivery of electricity. It is
     used to communicate with and control the output of power generators and to
     securely communicate metering information from such generators to ensure
     the proper billing for such electricity.

     PROCESS INSTRUMENTATION

     The process instrumentation products group manufactures and markets
     products for industrial applications including monitoring systems and
     calibration equipment. The monitoring systems, called visual annunciators
     and sequential event recorders, provide both visual and audible alarms and
     are used to control processes in various plants, including electrical
     generating plants, chemical, petroleum, food and beverage, pulp and paper,
     and textiles. Calibration equipment is used to test and adjust
     instrumentation for proper and accurate operation in measuring electricity,
     temperatures and pressure within the process industry.

                                       1
<Page>

     MOTION CONTROL BUSINESS

     The motion control group offers quality, cost-effective products that suit
     a wide range of applications in the telecommunications, semi-conductor
     processing, industrial, medical, military and aerospace industries, as well
     as in the manufacturing of analytical instruments and computer peripherals.
     End products using Hathaway technology include tuneable lasers, wavelength
     meters and spectrum analyzers for the fiber optic industry, robotic systems
     for the semiconductor industry, anti-lock braking transducers, satellite
     tracking systems, MRI scanners and high definition printers.

     The motion control group is organized into one division and two
     subsidiaries, respectively, of Hathaway Motion Control Corporation, a
     wholly-owned subsidiary of the Company: Motors and Instruments Division
     (MI - Tulsa), Emoteq Corporation (Emoteq - Tulsa) and Computer Optical
     Products, Inc. (COPI - Chatsworth, CA).

     The MI division manufactures precision direct-current fractional horsepower
     motors and certain motor components. Industrial equipment and military
     products are the major application for the motors. This division also
     supplies spare parts and replacement equipment for general-purpose
     instrumentation products.

     Emoteq-Tulsa designs, manufactures and markets direct current brushless
     motors, related components, and drive and control electronics. Markets
     served include semiconductor manufacturing, industrial automation, medical
     equipment, and military and aerospace. Effective July 1, 1998, Emoteq
     Corporation acquired all of the outstanding shares of Ashurst Logistic
     Electronics Limited of Bournemouth, England (Ashurst) for $317,000. Ashurst
     manufactures drive electronics and position controllers for a variety of
     motor technologies as well as a family of static frequency converters for
     military and aerospace applications and has extensive experience in power
     electronics design and software development required for the application of
     specialized drive electronics technology. The acquired company was renamed
     Emoteq UK Limited.

     Optical encoders are manufactured by COPI. They are used to measure
     rotational and linear movements of parts in diverse applications such as
     tuneable lasers, spectrum analyzers, machine tools, robots, printers and
     medical equipment. The primary markets for the optical encoders are in the
     telecommunications, computer peripheral manufacturing, industrial and
     medical sectors. COPI also designs, manufactures and markets fiber
     optic-based encoders with special characteristics, such as immunity to
     radio frequency interference and high temperature tolerance, suited for
     industrial, aerospace and military environments. Applications include
     airborne navigational systems, anti-lock braking transducers, missile
     flight surface controls and high temperature process control equipment.

     PRODUCT DISTRIBUTION AND PRINCIPAL MARKETS

     The Company maintains a direct sales force. In addition to its own
     marketing and sales force, the Company has developed a worldwide network of
     independent sales representatives and agents to market its various product
     lines.

     The Company faces competition in all of its markets, although the number of
     competitors varies depending upon the product. The Company believes there
     are only a small number of competitors in the power and process markets,
     but there are numerous competitors in the motion control market. No clear
     market share data is available for the Company's other product areas.
     Competition involves primarily product performance and price, although
     service and warranty are also important.

     FINANCIAL INFORMATION ABOUT OPERATING SEGMENTS

     The information required by this item is set forth in Note 10 of the Notes
     to Consolidated Financial Statements on page 27 herein.

     AVAILABILITY OF RAW MATERIALS

     All parts and materials used by the Company are in adequate supply. No
     significant parts or materials are acquired from a single source.

     PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND CONCESSIONS

     The Company holds several patents and trademarks regarding components used
     by the various subsidiaries; however, none of these patents and trademarks
     are considered to be of major significance.

                                       2
<Page>

     SEASONALITY OF THE BUSINESS

     The Company's business is not of a seasonal nature; however, revenues
     derived from the power market may be influenced by customers' fiscal year
     ends and holiday seasons.

     WORKING CAPITAL ITEMS

     The Company currently maintains inventory levels adequate for its
     short-term needs based upon present levels of production. The Company
     considers the component parts of its different product lines to be readily
     available and current suppliers to be reliable and capable of satisfying
     anticipated needs.

     SALES TO LARGE CUSTOMERS

     During fiscal 2001, 2000 and 1999, no single customer accounted for more
     than 10% of the Company's consolidated revenue from continuing operations.

     SALES BACKLOG

     The Company's backlog at June 30, 2001 consisted of sales orders totaling
     approximately $21,713,000. The Company expects to ship goods filling
     $19,140,000 of those purchase orders within fiscal 2002. This compares to a
     backlog of $23,827,000 at June 30, 2000, of which $20,912,000 was scheduled
     for shipment in fiscal 2001.

     GOVERNMENT SALES

     Approximately $462,000 of the Company's backlog as of June 30, 2001
     consisted of contracts with the United States Government. The Company's
     contracts with the government contain a provision generally found in
     government contracts which permits the government to terminate the contract
     at its option. When the termination is attributable to no fault of the
     Company, the government would, in general, have to pay the Company certain
     allowable costs up to the time of termination, but there is no compensation
     for loss of profits.

     ENGINEERING AND DEVELOPMENT ACTIVITIES

     The Company's expenditures on engineering and development were $4,806,000
     in fiscal 2001, $4,274,000 in fiscal 2000 and $4,466,000 in fiscal 1999. Of
     these expenditures, no material amounts were charged directly to customers.

     ENVIRONMENTAL ISSUES

     No significant pollution or other types of emission result from the
     Company's operations and it is not anticipated that the Company's proposed
     operations will be affected by Federal, State or local provisions
     concerning environmental controls. However, there can be no assurance that
     any future regulations will not affect the Company's operations.

     The Company, with other parties, has been named as a defendant in an
     environmental contamination lawsuit. The Company is investigating the
     nature of the claims but believes the claims are without merit.

     FOREIGN OPERATIONS

     The information required by this item is set forth in Note 10 of the Notes
     to Consolidated Financial Statements on page 28 herein.

     EMPLOYEES

     As of the end of fiscal 2001, the Company had approximately 352 full-time
     employees.

                                       3
<Page>

ITEM 2. PROPERTIES.

The Company leases its administrative offices and manufacturing facilities as
follows:

<Table>
                DESCRIPTION / USE                                       LOCATION                    APPROXIMATE SQUARE FOOTAGE
--------------------------------------------------------         -------------------------          --------------------------
<S>                                                              <C>                                <C>
Corporate headquarters and sales and engineering offices            Littleton, Colorado                         14,000
Engineering and development facility                                Evergreen, Colorado                          3,000
Office and manufacturing facility                                  Farmers Branch, Texas                         8,000
Office and manufacturing facility                                   Auburn, Washington                          33,000
Engineering, development and administrative office                 Hunt Valley, Maryland                        14,000
Office and manufacturing facility                                     Tulsa, Oklahoma                           20,000
Office and manufacturing facility                                 Chatsworth, California                        22,000
Office and manufacturing facility                                     Tulsa, Oklahoma                           10,000
Office facility                                                     Hoddesdon, England                           3,000
Office and manufacturing facility                                Belfast, Northern Ireland                      17,000
Office and manufacturing facility                                  Bournemouth, England                          2,000
</Table>

The Company's management believes the above-described facilities are adequate to
meet the Company's current and foreseeable needs. All facilities described above
are operating at or near full capacity.

ITEM 3. LEGAL PROCEEDINGS.

The Company, with other parties, has been named as a defendant in an
environmental contamination lawsuit. The Company is investigating the nature of
the claims but believes the claims are without merit.

The Company is also involved in certain actions that have arisen out of the
ordinary course of business. Management believes that resolution of the actions
will not have a significant adverse affect on the Company's consolidated
financial position or results of operations.

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

No matter was submitted to a vote of the security holders of the Company in the
fourth quarter of fiscal year 2001.

PART II

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

Hathaway Corporation's common stock is traded on the Nasdaq Small Cap Market
System and trades under the symbol HATH. The number of holders of record of the
Company's common stock as of the close of business on September 6, 2001 was 543.
The Company did not pay or declare any dividends during fiscal years 2001 and
2000 as the Company's long-term financing agreement prohibits the Company from
doing so without prior approval.

The following table sets forth, for the periods indicated, the high and low
prices of the Company's common stock on the Nasdaq Small Cap Market System, as
reported by Nasdaq.

<Table>
<Caption>
                                          PRICE RANGE
                                      HIGH           LOW
                                    ---------      --------
<S>                                 <C>            <C>
          FISCAL 2000
             First Quarter          $    3.13      $   1.63
             Second Quarter              2.56          0.88
             Third Quarter              19.75          1.38
             Fourth Quarter              9.25          3.00

          FISCAL 2001
             First Quarter          $    9.88      $   5.06
             Second Quarter              7.38          2.25
             Third Quarter               6.94          2.94
             Fourth Quarter              4.84          3.10
</Table>


                                       4
<Page>

ITEM 6. SELECTED FINANCIAL DATA.

The following table summarizes data from the Company's annual financial
statements for the fiscal years 1997 through 2001 and notes thereto; the
Company's complete annual financial statements and notes thereto for the current
fiscal year appear in Item 8 beginning on page 10 herein. See Item 1 in the
Business section of this report on Page 2 and Note 2 to Consolidated Financial
Statements on page 20 for discussion of a business acquisition completed in
fiscal year 1999.

<Table>
<Caption>
                                                            FOR THE FISCAL YEARS ENDED JUNE 30,
                                            2001           2000           1999           1998           1997
                                          --------       --------       --------       --------       --------
                                                            IN THOUSANDS (EXCEPT PER SHARE DATA)

<S>                                       <C>            <C>            <C>            <C>            <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues                              $ 48,386       $ 45,133       $ 41,691       $ 41,317       $ 39,946
                                          ========       ========       ========       ========       ========
Income (loss) before income taxes         $  2,572       $  1,604       $ (1,317)      $ (2,161)      $ (2,192)
(Provision) benefit for income taxes          (576)          (129)          (208)           184            763
                                          --------       --------       --------       --------       --------
Net income (loss)                         $  1,996       $  1,475       $ (1,525)      $ (1,977)      $ (1,429)
                                          ========       ========       ========       ========       ========
Diluted net income (loss) per share       $   0.41       $   0.31       $  (0.36)      $  (0.46)      $  (0.34)
                                          ========       ========       ========       ========       ========
Cash dividends:
   Per share                              $     --       $     --       $     --       $     --       $     --
   Total amount paid                      $     --       $     --       $     --       $     --       $     --

BALANCE SHEET DATA:
Total assets at June 30                   $ 20,203       $ 19,937       $ 16,398       $ 17,820       $ 20,477
Total current and long-term debt
    at June 30                            $    553       $  1,546       $  1,308       $  1,245       $  1,769
</Table>

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

ALL STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL FACT
CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS INCLUDE,
WITHOUT LIMITATION, ANY STATEMENT THAT MAY PREDICT, FORECAST, INDICATE, OR IMPLY
FUTURE RESULTS, PERFORMANCE, OR ACHIEVEMENTS, AND MAY CONTAIN THE WORD
"BELIEVE," "ANTICIPATE," "EXPECT," "PROJECT," "INTEND," "WILL CONTINUE," "WILL
LIKELY RESULT," "SHOULD" OR WORDS OR PHRASES OF SIMILAR MEANING. FORWARD-LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT
MAY CAUSE THE ACTUAL RESULTS OF THE COMPANY TO DIFFER MATERIALLY FROM THE
FORWARD-LOOKING STATEMENTS. THESE RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHERS,
THE FOLLOWING: INTERNATIONAL, NATIONAL AND LOCAL GENERAL BUSINESS AND ECONOMIC
CONDITIONS IN THE COMPANY'S MOTION CONTROL, PROCESS AND POWER MARKETS,
INTRODUCTION OF NEW TECHNOLOGIES, PRODUCTS AND COMPETITORS, THE ABILITY TO
PROTECT THE COMPANY'S INTELLECTUAL PROPERTY, THE ABILITY OF THE COMPANY TO
SUSTAIN, MANAGE OR FORECAST ITS GROWTH AND PRODUCT ACCEPTANCE, THE ABILITY OF
THE COMPANY TO MEET THE TECHNICAL SPECIFICATIONS OF ITS CUSTOMERS, THE CONTINUED
AVAILABILITY OF PARTS AND COMPONENTS, INCREASED COMPETITION AND CHANGES IN
COMPETITOR RESPONSES TO THE COMPANY'S PRODUCTS AND SERVICES, CHANGES IN
GOVERNMENT REGULATIONS, AVAILABILITY OF FINANCING AND THE ABILITY TO ATTRACT AND
RETAIN QUALIFIED PERSONNEL. THE COMPANY'S ABILITY TO COMPETE IN ITS MARKETS
DEPENDS UPON ITS CAPACITY TO ANTICIPATE THE NEED FOR NEW PRODUCTS, AND TO
CONTINUE TO DESIGN AND MARKET THOSE PRODUCTS TO MEET CUSTOMERS' NEEDS IN A
COMPETITIVE WORLD.

THE COMPANY OPERATES IN A VERY COMPETITIVE ENVIRONMENT. NEW RISK FACTORS EMERGE
FROM TIME TO TIME AND IT IS NOT POSSIBLE FOR MANAGEMENT TO PREDICT ALL SUCH RISK
FACTORS, NOR CAN IT ASSESS THE IMPACT OF ALL SUCH RISK FACTORS ON ITS BUSINESS
OR THE EXTENT TO WHICH ANY FACTOR, OR COMBINATION OF FACTORS, MAY CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN ANY FORWARD-LOOKING
STATEMENTS. THE COMPANY'S EXPECTATIONS, BELIEFS AND PROJECTIONS ARE EXPRESSED IN
GOOD FAITH AND ARE BELIEVED TO HAVE A REASONABLE BASIS; HOWEVER, THE COMPANY
MAKES NO ASSURANCE THAT EXPECTATIONS, BELIEFS OR PROJECTIONS WILL BE ACHIEVED.

BECAUSE OF THE RISKS AND UNCERTAINTIES, INVESTORS SHOULD NOT PLACE UNDUE
RELIANCE ON FORWARD-LOOKING STATEMENTS AS A PREDICTION OF ACTUAL RESULTS. THE
COMPANY HAS NO OBLIGATION OR INTENT TO RELEASE PUBLICLY ANY REVISIONS TO ANY
FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS, OR OTHERWISE.

                                       5
<Page>

OPERATING RESULTS

FISCAL YEAR 2001 COMPARED TO FISCAL YEAR 2000

The Company achieved a 67% increase in net income before a restructuring charge
for its fiscal year ended June 30, 2001 compared to fiscal year ended June 30,
2000. Net income before the restructuring charge was $2,465,000 in fiscal year
2001, compared to net income of $1,475,000 in fiscal 2000. Net income for fiscal
2001 after the restructuring charge was $1,996,000, a 35% increase over last
year. As a result of changing business conditions in the process instrumentation
business, the Company restructured the process instrumentation portion of its
Power and Process segment. The restructuring, which was successfully completed
during fiscal 2001, consisted of retaining a portion of the business in Dallas,
moving manufacturing of two product lines to the Company's power instrumentation
manufacturing facility in Seattle and selling the remaining two product lines. A
pretax charge of $587,000 was recorded related to this restructuring. Revenues
increased 7% to $48,386,000 in fiscal 2001 from $45,133,000 in fiscal 2000,
representing increases in both the Motion Control and the Power and Process
segments.

Revenues from the Motion Control segment for the year ended June 30, 2001
increased 14% to $21,188,000 from $18,591,000 for the year ended June 30, 2000.
Pretax profit for Motion Control for fiscal 2001 was $3,584,000 compared to
$3,139,000 for fiscal 2000, a 14% increase. At June 30, 2001 backlog for Motion
Control orders was in excess of $13 million, 6% higher than at June 30, 2000.
Although the segment's backlog remains strong, there is some slowing in orders
and in delivery rates of the OEM programs due to the general economic slowdown.
The duration of the slowing in the industry sectors is uncertain but the Company
continues to develop applications for its products for new markets and broader
segments of already existing markets.

The Power and Process segment reported revenues for fiscal 2001 of $27,198,000
compared to revenues of $26,542,000 in fiscal 2000, a 2% increase. The segment
recorded a $952,000 pretax loss before the restructuring charge compared to a
pretax loss of $1,643,000 in fiscal 2000, a 42% improvement. Sales order backlog
for Power and Process orders was $8,669,000 at June 30, 2001 which is down 25%
from June 30, 2000 - primarily reflecting a decline in backlog of large process
systems projects partially offset by an increase in power instrumentation and
systems backlog reflecting the Company's shift of focus to automation and
communications products for the power industry and away from large process
system projects.

Sales to international customers increased 32% to $15,282,000, or 32% of sales,
in fiscal 2001, from $11,577,000 or 26% of sales, in fiscal 2000 due to an
increase in sales of motion control products in foreign markets.

Sales order backlog decreased 9% to $21,713,000 at June 30, 2001 from
$23,827,000 at June 30, 2000. Gross margin for fiscal 2001 increased to 39% from
38% in fiscal 2000 due to increased sales volume and changes in the mix of
products sold.

Selling expenses decreased 4% to $6,174,000 in fiscal 2001 from $6,433,000 in
fiscal 2000 resulting from savings from continued cost reduction efforts by the
Company. General and administrative expenses increased 7% to $5,551,000 in
fiscal 2001 from $5,194,000 in fiscal 2000 primarily due to increased employee
and insurance costs. Engineering and development expenses increased 12% to
$4,806,000 in fiscal 2001 from $4,274,000 in fiscal 2000, primarily due to
one-time costs incurred to develop a configuration tool kit for the Company's
remote terminal units (RTUs) used by the power industry.

Equity income from investments in joint ventures increased to $1,170,000 in
fiscal 2001 from $698,000 in fiscal 2000. This increase is due to the continued
success of the Si Fang joint venture which supplies digital relays in China.

On July 5, 2001, the Company sold its 20% equity interest in Si Fang for
$3,020,000 in cash. The Company will record a pretax gain on the sale of
approximately $650,000 which will be recorded in the first quarter of the fiscal
year ending June 30, 2002. During fiscal years 2001 and 2000, the Company
recognized equity income from Si Fang of $1,116,000 and $670,000 respectively.

In fiscal year 2001, the Company recognized a provision for income taxes of
$576,000 compared to $129,000 in fiscal year 2000. The effective tax rate as a
percentage of the income before income taxes was 22% in fiscal 2001 and 8% in
fiscal 2000. The difference in the effective tax rate between periods is
primarily due to changes in the valuation allowance recorded against the
deferred tax assets as well as adjustments related to the resolution of various
income tax related issues. The reduction in the valuation allowance decreased in
2001 compared to 2000

                                       6
<Page>

due to larger utilization of net operating loss carryforwards in 2000. The
impact of changes in the Company's recorded valuation allowance has different
impacts on the Company's effective tax rate due to differing amounts of pretax
income in each respective period.

FISCAL YEAR 2000 COMPARED TO FISCAL YEAR 1999

The Company recorded net income of $1,475,000 in fiscal year 2000, compared to a
net loss of $1,525,000 in fiscal 1999. Revenues increased 8% from $41,691,000,
in fiscal 1999 to $45,133,000 in fiscal 2000. The increase in revenues was due
to a 43% increase in revenues from the Company's motion control products,
partially offset by a 8% decrease in revenues from the Company's power and
process systems and instrumentation products.

The increase in Motion Control revenues in fiscal 2000 was primarily due to
expansion into new high growth applications such as test instrumentation for the
fiberoptic telecommunications industry as well as the expansion of existing
applications. At June 30, 2000, backlog for Motion Control orders was in excess
of $12 million, 69% higher than at June 30, 1999. This is a reflection of Motion
Control's continued expansion into new markets and broader segments of its
existing markets.

The decrease in Power and Process revenues was due to a decline in orders and
sales from the process instrumentation business partially as a result of the
Company's delay in releasing a new calibration product line which was completed
and shipments started in May 2000. In addition, the decline was partially due to
higher sales being achieved in fiscal year 1999 from customers purchasing
upgrade products to comply with Year 2000 requirements which reduced their funds
available for projects in our fiscal year 2000. At June 30, 2000, backlog for
Power and Process orders was $11,522,000 which was 5% higher than at the end of
the previous year. This reflects higher backlog for power instrumentation and
systems automation products partially offset by a decreased backlog for process
instrumentation products.

Sales to international customers decreased 9% from $12,902,000, or 31% of sales,
in fiscal 1999, to $11,779,000 or 26% of sales, in fiscal 2000 due to a decrease
in sales of fault recording and maintenance products in foreign markets.

Sales order backlog increased 30% from $18,260,000 at June 30, 1999 to
$23,827,000 at June 30, 2000. Gross margin for fiscal 2000 increased to 38% from
36% in fiscal 1999 due to increased sales volume and changes in the mix of
products sold.

Selling expenses decreased 6% from $6,852,000 in fiscal 1999 to $6,433,000 in
fiscal 2000 resulting from savings due to the continued overall cost reduction
efforts of the Company. General and administrative expenses increased 5% from
$4,958,000 in fiscal 1999 to $5,194,000 in fiscal 2000 primarily due to bonuses
paid to the management of profitable operations. Engineering and development
expenses decreased 4% from $4,466,000 in 1999 to $4,274,000 in 2000.

Amortization of intangibles and other assets decreased from $481,000 in 1999 to
$83,000 in 2000. The decrease was primarily due to the $125,000 of amortization
and $249,000 write-off in fiscal 1999 of the goodwill from the 1991 acquisition
of Hathaway Systems Limited (HSL). This goodwill was fully written off in fiscal
1999.

Equity income from investments in joint ventures increased to $698,000 in fiscal
2000 from $329,000 in fiscal 1999 due to the success of the joint ventures.

In fiscal year 2000, the Company recognized a provision for income taxes of
$129,000 compared to $208,000 in fiscal year 1999. The effective tax rate as a
percentage of the income or loss before income taxes was a provision of 8% in
fiscal 2000 and 16% in fiscal 1999. The difference is primarily due to the
changes in the valuation allowance recorded against deferred tax assets. In
fiscal 2000, the valuation allowance was decreased due to the utilization of net
operating loss carryforwards, whereas in fiscal year 1999, the valuation
allowance was increased due to the increase in net operating losses being
carried forward. The reduction in the effective tax rate is also due to a
decrease in nondeductible expenses and goodwill amortization.

                                       7
<Page>

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity position as measured by cash and cash equivalents
(excluding restricted cash) decreased $1,017,000 during the year to a balance of
$1,911,000 at June 30, 2001. Operating activities generated $720,000, $817,000
and $40,000 in fiscals 2001, 2000 and 1999, respectively.

Cash of $715,000, $970,000 and $987,000 was used by investing activities in
fiscal 2001, 2000 and 1999, respectively. The 1999 cash used for investing
activities includes $281,000 net cash paid for the interest acquired in Ashurst.

Financing activities used $768,000 in fiscal 2001 and generated $809,000 and
$63,000 in fiscal years 2000 and 1999, respectively. During fiscal 2001,
$1,124,000 in cash was used to pay down the line-of-credit. In fiscal 2000, cash
was generated due to proceeds from the exercise of employee stock options, as
well as increased net borrowings on the line-of-credit.

At June 30, 2001, the Company had $553,000 of bank debt, compared with
$1,546,000 at June 30, 2000, a decrease of $993,000. The debt at June 30, 2001
represents borrowings on the Company's current long-term financing agreement
(Agreement) with Silicon Valley Bank (Silicon). The Agreement matures on May 7,
2002 and, accordingly, the $553,000 balance has been classified as a current
liability as of June 30, 2001. The Agreement is subject to automatic and
continuous annual renewal for successive additional terms of one year each
unless either party notifies the other of its intention to terminate the
Agreement at least sixty days before the next maturity date. Borrowings on the
loan are restricted to the lesser of $3,000,000 or 85% of the Company's eligible
receivables (Maximum Credit Limit). As of June 30, 2001, 85% of the Company's
eligible receivables exceeded the maximum loan amount, therefore, the Company
could borrow an additional $2,447,000 up to the Maximum Credit Limit of
$3,000,000. Subsequent to June 30, 2001, the amount outstanding under the
line-of-credit was repaid allowing the Company access to the full $3,000,000
Maximum Credit Limit as of July 31, 2001.

The line-of-credit bears interest at Silicon's prime borrowing rate (prime rate,
6.75% at June 30, 2001) plus 1.5%. The interest rate is adjustable on a
quarterly basis to prime rate plus 2% if the Company incurs a net loss greater
than $750,000 in each previous twelve-month rolling period. In addition to
interest, the loan bears a monthly unused line fee at 0.0625% of the Maximum
Credit Limit less the average daily balance of the outstanding loan during a
month. The unused line fee is also adjustable on a quarterly basis to 0.125% if
the Company incurs a net loss greater than $750,000 in each previous
twelve-month rolling period.

The line-of-credit is secured by all assets of the Company. The Agreement
prohibits the Company from paying dividends without prior approval and requires
that the Company maintain compliance with certain covenants related to tangible
net worth. At June 30, 2001, the Company was in compliance with such covenants.

As in the three-year period ended June 30, 2001, the Company's fiscal 2002
working capital, capital expenditure and debt service requirements are expected
to be funded from cash provided by operations, the existing cash balance of
$1,911,000 and the $2,447,000 available under the long-term financing agreement
at June 30, 2001. The Company believes that such amounts are sufficient to fund
operations and working capital needs for at least the next twelve months. As
explained above, the Company's Agreement with Silicon matures on May 7, 2002 but
will continue for successive additional terms of one year each unless either
party gives notice of termination at least sixty days before the maturity date.
The Company has not received notice of termination and does not anticipate
receiving or giving such notice.

PRICE LEVELS AND THE IMPACT OF INFLATION

Prices of the Company's products have not increased significantly as a result of
inflation during the past several years, primarily due to competition. The
effect of inflation on the Company's costs of production has been minimized
through production efficiencies and lower costs of materials. The Company
anticipates that these factors will continue to minimize the effects of any
foreseeable inflation and other price pressures from the industries in which it
operates. As the Company's manufacturing activities mainly utilize semi-skilled
labor, which is relatively plentiful in the areas surrounding the Company's
production facilities, the Company does not anticipate substantial
inflation-related increases in the wages of the majority of its employees.

                                       8
<Page>

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of loss that may impact the financial position,
results of operations or cash flows of the Company due to adverse changes in
financial and commodity market prices and rates. The Company is exposed to
market risk in the areas of changes in United States interest rates and changes
in foreign currency exchange rates as measured against the United States dollar.
These exposures are directly related to its normal operating and funding
activities. Historically, and as of June 30, 2001, the Company has not used
derivative instruments or engaged in hedging activities.

INTEREST RATE RISK

The interest payable on the Company's line-of-credit is variable based on the
prime rate, and, therefore, affected by changes in market interest rates. The
line-of-credit matures in May 2002 and is subject to automatic and continuous
annual renewal for successive annual terms of one year each unless either party
notifies the other of its intention to terminate the Agreement at least sixty
days before the next maturity date. The Company manages interest rate risk by
investing excess funds in cash equivalents bearing variable interest rates that
are tied to various market indices. Additionally, the Company monitors interest
rates frequently and has sufficient cash balances to pay off the line-of-credit
should interest rates increase significantly. As a result, the Company does not
believe that reasonably possible near-term changes in interest rates will result
in a material effect on future earnings, fair values or cash flows of the
Company.

FOREIGN CURRENCY RISK

The Company has wholly-owned subsidiaries located in Northern Ireland and
England. Sales from these operations are typically denominated in British
Pounds, thereby creating exposures to changes in exchange rates. The changes in
the British/U.S. exchange rate may positively or negatively affect the Company's
sales, gross margins, net income and retained earnings. The Company does not
believe that reasonably possible near-term changes in exchange rates will result
in a material effect on future earnings, fair values or cash flows of the
Company, and therefore, has chosen not to enter into foreign currency hedging
instruments. There can be no assurance that such an approach will be successful,
especially in the event of a significant and sudden decline in the value of the
British Pound.

RECENTLY ISSUED ACCOUNTING STANDARDS

Statement of Financial Accounting Standards (SFAS) No. 133, "Derivative
Instruments and Hedging Activities," establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. SFAS No. 133 requires
that an entity recognize all derivatives as either assets or liabilities and
measure those instruments at fair value. It also specifies the accounting for
changes in the fair value of a derivative instrument depending on the intended
use of the instrument and whether (and how) it is designated as a hedge. SFAS
No. 133 was effective for all fiscal years beginning after June 15, 1999. During
1999, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of SFAS No. 133," which
delayed the effective date of SFAS No. 133 until all fiscal years beginning
after June 15, 2000. Through June 30, 2001, the Company had not entered into any
transactions involving derivative financial instruments included in the scope of
SFAS No. 133, as amended, and, therefore, the adoption of SFAS No. 133 has had
no financial statement impact.

In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition," to provide guidance on
the recognition, presentation and disclosure of revenue in financial statements.
The accounting and disclosures described in SAB No. 101 must be applied no later
than the fourth fiscal quarter of the Company's fiscal year ending June 30,
2001, retroactive to July 1, 2000. The adoption of SAB No. 101 has had no
material impact on the Company's financial statements. However, implementation
guidelines for this bulletin, as well as potential new pronouncements regarding
revenue recognition, could result in unanticipated changes to the Company's
current revenue recognition policies. These changes could affect the timing of
the Company's future revenue recognition and results of operations.

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, "Business Combinations." SFAS No. 141 requires that all business
combinations be accounted for using the purchase method of accounting. The use
of the pooling-of-interest method of accounting for business combinations is
prohibited. The provisions of SFAS No. 141 apply to all business combinations
initiated after June 30, 2001. The Company will account for any future business
combinations in accordance with SFAS No. 141.

                                       9
<Page>

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 changes the accounting for goodwill and intangible assets
and requires that goodwill no longer be amortized but be tested for impairment
at least annually at the reporting unit level in accordance with SFAS No. 142.
Goodwill must also be reviewed for impairment when certain events indicate that
the goodwill may be impaired. Recognized intangible assets should, generally, be
amortized over their useful life and reviewed for impairment in accordance with
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." Because the Company is a noncalendar
year-end company, the FASB has allowed adoption of SFAS No. 142 either in fiscal
year 2002 or fiscal year 2003, except for provisions related to the
nonamortization and amortization of goodwill and intangible assets acquired
after June 30, 2001, which will be subject immediately to the provisions of SFAS
No. 142. The Company will adopt SFAS No. 142 on July 1, 2002. The Company has
not yet quantified the effects of adopting SFAS No. 142 on its financial
position or results of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                                       10
<Page>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Hathaway Corporation:

We have audited the accompanying consolidated balance sheets of HATHAWAY
CORPORATION (a Colorado corporation) AND SUBSIDIARIES as of June 30, 2001 and
2000, and the related consolidated statements of operations, cash flows and
stockholders' investment for each of the three fiscal years in the period ended
June 30, 2001. These financial statements and the schedule referred to below are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 financial position of Hathaway Corporation and
subsidiaries as of June 30, 2001 and 2000, and the results of their operations
and their cash flows for each of the three fiscal years in the period ended June
30, 2001 in conformity with accounting principles generally accepted in the
United States.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule II is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.


                                        /s/ ARTHUR ANDERSEN LLP

Denver, Colorado,
  July 27, 2001.


                                       11
<Page>

                              HATHAWAY CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<Table>
<Caption>
                                                                    JUNE 30, 2001     JUNE 30, 2000
                                                                    -------------     -------------
<S>                                                                 <C>               <C>
ASSETS
Current Assets:
   Cash and cash equivalents                                           $  1,911          $  2,928
   Restricted cash                                                          346               270
   Trade receivables, net of allowance for doubtful accounts
      of $496 and $530 at June 30, 2001 and 2000, respectively            7,708             7,976
   Inventories, net                                                       4,931             4,550
   Deferred income taxes                                                    229               601
   Income tax refunds receivable, prepaid expenses and other                486               361
                                                                       --------          --------
Total Current Assets                                                     15,611            16,686
Property and equipment, net                                               1,781             1,707
Investment in joint ventures, net (Notes 3 and 11)                        2,459             1,482
Other                                                                       352                62
                                                                       --------          --------
Total Assets                                                           $ 20,203          $ 19,937
                                                                       ========          ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
   Line-of-credit (Note 4)                                             $    553          $  1,546
   Accounts payable                                                       1,583             1,879
   Accrued liabilities and other                                          3,345             3,854
   Income taxes payable                                                     380               538
   Product warranty reserve                                                 514               813
                                                                       --------          --------
Total Current Liabilities                                                 6,375             8,630

Commitments and Contingencies

Stockholders' Investment:
   Preferred stock, par value $1.00 per share, authorized
      5,000 shares; no shares outstanding                                    --                --
   Common stock, at aggregate stated value, authorized
      50,000 shares; 5,719 and 5,582 shares issued at
      June 30, 2001 and 2000, respectively                                  100               100
   Additional paid-in capital                                            11,230            10,594
   Loans receivable for stock (Note 7)                                     (160)             (235)
   Retained earnings                                                      6,787             4,791
   Cumulative translation adjustments                                      (152)               34
   Treasury stock, at cost; 1,122 shares                                 (3,977)           (3,977)
                                                                       --------          --------
Total Stockholders' Investment                                           13,828            11,307
                                                                       --------          --------
Total Liabilities and Stockholders' Investment                         $ 20,203          $ 19,937
                                                                       ========          ========
</Table>

   The accompanying notes to consolidated financial statements are an integral
                   part of these consolidated balance sheets.

                                       12
<Page>

                              HATHAWAY CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<Table>
<Caption>
                                                                 FOR THE FISCAL YEARS ENDED JUNE 30,
                                                               2001              2000              1999
                                                             --------          --------          --------
<S>                                                          <C>               <C>               <C>
Revenues                                                     $ 48,386          $ 45,133          $ 41,691
Cost of products sold                                          29,734            28,175            26,475
                                                             --------          --------          --------
Gross margin                                                   18,652            16,958            15,216

Operating costs and expenses:
   Selling                                                      6,174             6,433             6,852
   General and administrative                                   5,551             5,194             4,958
   Engineering and development                                  4,806             4,274             4,466
   Restructuring charge (Note 9)                                  587                --                --
   Amortization and other                                          57                83               481
                                                             --------          --------          --------
Total operating costs and expenses                             17,175            15,984            16,757
                                                             --------          --------          --------
Operating income (loss)                                         1,477               974            (1,541)

Other income (expense), net:
   Equity income from investments in joint
        ventures (Notes 3 and 11)                               1,170               698               329
   Interest and dividend income                                    90                69               111
   Interest expense                                               (82)             (154)             (146)
   Other (expense) income, net                                    (83)               17               (70)
                                                             --------          --------          --------
Total other income, net                                         1,095               630               224
                                                             --------          --------          --------
Income (loss) before income taxes                               2,572             1,604            (1,317)
Provision for income taxes (Note 5)                              (576)             (129)             (208)
                                                             --------          --------          --------
Net income (loss)                                            $  1,996          $  1,475          $ (1,525)
                                                             ========          ========          ========
Basic net income (loss) per share (Note 1)                   $   0.44          $   0.34          $  (0.36)
                                                             ========          ========          ========
Diluted net income (loss) per share (Note 1)                 $   0.41          $   0.31          $  (0.36)
                                                             ========          ========          ========
Basic weighted average shares outstanding (Note 1)              4,493             4,341             4,283
                                                             ========          ========          ========
Diluted weighted average shares outstanding (Note 1)            4,834             4,785             4,283
                                                             ========          ========          ========

</Table>

   The accompanying notes to consolidated financial statements are an integral
                   part of these consolidated statements.


                                       13
<Page>

                              HATHAWAY CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<Table>
<Caption>
                                                                     FOR THE FISCAL YEARS ENDED JUNE 30,
                                                                   2001             2000             1999
                                                                  -------          -------          -------
<S>                                                               <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                 $ 1,996          $ 1,475          $(1,525)
Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities:
   Depreciation and amortization                                      831              890            1,220
   Provision for doubtful accounts                                    150              150               14
   Equity income, net of dividends, from investments
      in joint ventures (Notes 3 and 11)                             (977)            (559)            (208)
   Deferred income tax provision                                      372               31              147
   Other                                                              255             (144)            (195)
   Changes in assets and liabilities, net of effect
      in 1999 of purchase of Ashurst (Note 2):
      (Increase) decrease in -
        Restricted cash                                               (95)             377             (166)
        Trade receivables                                              12           (1,661)              87
        Inventories, net                                             (530)          (1,234)             333
        Income tax refunds receivable, prepaid
           expenses and other                                        (130)             182              183
      Increase (decrease) in -
        Accounts payable                                             (340)             309             (499)
        Accrued liabilities and other                                (384)             899              408
        Income taxes payable                                         (147)             (22)              27
        Product service reserve                                      (293)             124              214
                                                                  -------          -------          -------
Net cash provided by (used in) operating activities                   720              817               40

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                (908)            (827)            (792)
   Purchase of Ashurst, net of cash acquired (Note 2)                  --               --             (281)
   Activities related to joint venture investments,
      net (Notes 3 and 11)                                             --             (282)             (35)
                                                                  -------          -------          -------
Net cash used in investing activities                                (908)          (1,109)          (1,108)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Repayments on line-of-credit                                    (1,117)             (65)            (150)
   Borrowings on line-of-credit                                       124              303              213
   Repayment on loan to employee stock ownership plan                  75               --               --
   Sale of stock to employees through stock purchase plan              94               --               --
   Proceeds from exercise of employee stock options                    55              575               --
   Purchase of treasury stock                                          --               (4)              --
                                                                  -------          -------          -------
Net cash (used in) provided by financing activities                  (769)             809               63

Effect of foreign exchange rate changes on cash                       (60)              (5)             (22)
                                                                  -------          -------          -------
Net (decrease) increase in cash and cash equivalents               (1,017)             512           (1,027)
Cash and cash equivalents at beginning of year                      2,928            2,416            3,443
                                                                  -------          -------          -------
Cash and cash equivalents at end of year                          $ 1,911          $ 2,928          $ 2,416
                                                                  =======          =======          =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Net cash paid during the year for:
   Interest                                                       $    94          $   152          $   123
   Income taxes                                                       179               53             (153)
Noncash investing and financing activities:
   Assets of Ashurst purchased, net of liabilities
      assumed and cash acquired (Note 2)                          $    --          $    --          $   281

</Table>

   The accompanying notes to consolidated financial statements are an integral
                   part of these consolidated statements.

                                       14
<Page>

                              HATHAWAY CORPORATION
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
                                 (IN THOUSANDS)

<Table>
<Caption>

                                                                    LOANS
                                      COMMON STOCK   ADDITIONAL  RECEIVABLE            CUMULATIVE                   TREASURY STOCK
                                     --------------   PAID-IN    FOR STOCK   RETAINED  TRANSLATION  COMPREHENSIVE  ----------------
                                     SHARES  AMOUNT   CAPITAL     (NOTE 7)   EARNINGS  ADJUSTMENTS  INCOME (LOSS)  SHARES   AMOUNT
                                     ------  ------  ----------  ----------  --------  -----------  -------------  ------  --------
<S>                                  <C>     <C>     <C>         <C>         <C>       <C>          <C>            <C>     <C>
Balances, June 30, 1998               5,405  $  100   $  9,954    $  (235)   $  4,841    $   389                    1,122  $(3,973)
  Foreign currency translation                                                              (235)      $  (235)
  adjustment
  Net loss                                                                     (1,525)                  (1,525)
                                                                                                       -------
  Comprehensive loss                                                                                   $(1,760)
                                     ------  ------   --------    -------    --------    -------       =======     ------  -------
Balances, June 30, 1999               5,405     100      9,954       (235)      3,316        154                    1,122   (3,973)
  Purchase of treasury stock                                                                                                    (4)
  Exercise of stock options             177                575
  Tax benefit from disqualifying
    stock dispositions                                      65
  Foreign currency translation
    adjustment                                                                              (120)      $  (120)
  Net income                                                                    1,475                    1,475
                                                                                                       -------
  Comprehensive loss                                                                                   $ 1,355
                                     ------  ------   --------    -------    --------    -------       =======     ------  -------
Balances, June 30, 2000               5,582     100     10,594       (235)      4,791         34                    1,122   (3,977)
  Exercise of stock options              29                 55
  Tax benefit from disqualifying
    stock dispositions                                     178
  Shares issued to repurchase
    subsidiary stock (Note 6)            76                309
  Employee stock purchase plan           32                 94
  Employee stock ownership plan                                        75
  Foreign currency translation
    adjustment                                                                              (186)      $  (186)
  Net income                                                                    1,996                    1,996
                                                                                                       -------
  Comprehensive income                                                                                 $ 1,810
                                     ------  ------   --------    -------    --------    -------       =======     ------  -------
Balances, June 30, 2001               5,719  $  100   $ 11,230    $  (160)   $  6,787    $  (152)                   1,122  $(3,977)
                                     ======  ======   ========    =======    ========    =======                   ======  =======
</Table>

   The accompanying notes to consolidated financial statements are an integral
                   part of these consolidated statements.


                                       15
<Page>

                              HATHAWAY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BUSINESS

     Hathaway Corporation (the Company) is engaged in the business of designing,
     manufacturing and selling advanced systems and instrumentation to the
     worldwide power and process industries, as well as motion control products
     to a broad spectrum of customers throughout the world. The Company operates
     primarily in the United States and Europe and has joint venture investments
     in China (Notes 3 and 11).

     PRINCIPLES OF CONSOLIDATION

     The accompanying consolidated financial statements include the accounts of
     the Company and its wholly-owned subsidiaries. All significant intercompany
     accounts and transactions are eliminated in consolidation.

     Investments in joint ventures, in which the ownership is at least 20% but
     less than 50%, are accounted for using the equity method (Note 3).

     CASH AND CASH EQUIVALENTS

     Cash and cash equivalents include instruments which are readily convertible
     into cash (original maturities of three months or less) and which are not
     subject to significant risk of changes in interest rates. Cash flows in
     foreign currencies are translated using an average rate.

     RESTRICTED CASH

     Restricted cash consists of certificates of deposit that serve as
     collateral for letters of credit issued on behalf of the
     Company.

     INVENTORIES

     Inventories, valued at the lower of cost (first-in, first-out basis) or
     market, are as follows (in thousands):

<Table>
<Caption>
                                                  JUNE 30, 2001  JUNE 30, 2000
                                                  -------------  -------------
<S>                                               <C>            <C>
     Parts and raw materials, net                    $3,251         $2,827
     Finished goods and work-in-process, net          1,680          1,723
                                                     ------         ------
                                                     $4,931         $4,550
                                                     ======         ======

</Table>

     Reserves established for anticipated losses on excess or obsolete
     inventories were approximately $1,844,000 and $1,900,000 at June 30, 2001
     and 2000, respectively.

     PROPERTY AND EQUIPMENT

     Property and equipment is classified as follows (in thousands):

<Table>
<Caption>
                                                       USEFUL LIVES     JUNE 30, 2001     JUNE 30, 2000
                                                       ------------     -------------     -------------
<S>                                                    <C>              <C>               <C>
     Machinery, equipment, tools and dies                2-8 years        $   5,987         $   8,233
     Furniture, fixtures and other                      3-10 years            2,839             1,350
                                                                          ---------         ---------
                                                                              8,826             9,583
     Less accumulated depreciation and amortization                          (7,045)           (7,876)
                                                                          ---------         ---------
                                                                          $   1,781         $   1,707
                                                                          =========         =========
</Table>

     Depreciation and amortization expense is provided using the straight-line
     method over the estimated useful lives of the assets. Maintenance and
     repair costs are charged to operations as incurred. Major additions and
     improvements are capitalized. The cost and related accumulated depreciation
     of retired or sold property are removed from the accounts and any resulting
     gain or loss is reflected in earnings.

     Depreciation expense was approximately $774,000, $807,000 and $788,000 in
     fiscal years 2001, 2000 and 1999, respectively.

                                       16
<Page>

                              HATHAWAY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1.   BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     IMPAIRMENT OF LONG-LIVED ASSETS AND INTANGIBLES

     The Company reviews its long-lived assets for impairment whenever events or
     changes in circumstances indicate that the carrying amount of an asset may
     not be recoverable. For assets that are held and used in operations, the
     asset would be considered to be impaired if the undiscounted future cash
     flows related to the asset did not exceed its net book value. The amount of
     the impairment is assessed using the assets' fair market value, which is
     estimated using discounted cash flows.

     As a result of its acquisition of Hathaway Systems Limited (HSL) in 1991,
     the Company had previously recorded goodwill of $1,197,000. At June 30,
     1999 and in accordance with Statement of Financial Accounting Standards
     (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for
     Long-Lived Assets to be Disposed of," the Company determined that the
     unamortized cost in excess of net assets acquired from its acquisition of
     HSL was impaired; and, therefore, wrote off the remaining unamortized
     balance of $249,000. The Company's determination was based on projections
     of undiscounted cash flows of HSL, which were reflective of then current
     marketplace conditions, low orders and continuing losses. Such undiscounted
     cash flow estimates were not sufficient to indicate realization of the
     related unamortized cost in excess of net assets acquired. Utilizing such
     projections and discounting the estimated cash flows, the Company
     determined that the entire unamortized amount was impaired. Fiscal year
     1999 amortization of $125,000 and impairment write-off of $249,000,
     totaling $374,000, is included in amortization of intangibles and other in
     the fiscal year 1999 consolidated statement of operations.

     ACCRUED LIABILITIES

     Accrued liabilities consist of the following (in thousands):

<Table>
<Caption>
                                             JUNE 30, 2001     JUNE 30, 2000
                                             -------------     -------------
<S>                                          <C>               <C>
     Compensation and fringe benefits            $1,617            $1,863
     Deferred revenue                               621               800
     Commissions                                    552               596
     Other accrued expenses                         555               595
                                                 ------            ------
                                                 $3,345            $3,854
                                                 ======            ======
</Table>

     FOREIGN CURRENCY TRANSLATION

     In accordance with SFAS No. 52, "Foreign Currency Translation," the assets
     and liabilities of the Company's foreign subsidiaries are translated into
     U.S. dollars using current exchange rates. Revenues and expenses are
     translated at average rates prevailing during the period. The resulting
     translation adjustments are recorded in the cumulative translation
     adjustments component of stockholders' investment in the accompanying
     consolidated balance sheets. Transaction gains and losses that arise from
     exchange rate fluctuations on transactions denominated in a currency other
     than the functional currency are included in the results of operations as
     incurred.

     REVENUE RECOGNITION

     Hathaway Industrial Automation (HIA), a wholly-owned subsidiary of the
     Company, undertakes contracts for the installation of integrated process
     control systems which are based upon its proprietary software. These
     contracts typically require substantial customization of this proprietary
     software. Accordingly, in accordance with Statement of Position (SOP) 97-2,
     "Software Revenue Recognition," the Company recognizes contract revenues by
     applying the percentage of completion achieved to the total contract sales
     price. The Company determines the percentage of completion for all
     contracts using the "cost-to-cost" method of measuring contract progress.
     Under this method, actual contract costs incurred to date are compared to
     total estimated contract costs to determine the estimated percentage of
     revenues to be recognized. To the extent these estimates prove to be
     inaccurate, the revenues and gross margins, if any, reported for the period
     during which work on the contract is ongoing may not accurately reflect the
     final results of the contract, which can only be determined upon contract
     completion. Provisions for estimated losses on uncompleted contracts, to
     the full extent of the estimated loss, are made during the period in which
     the Company first becomes aware that a loss on a contract is probable. The
     Company's other businesses generally recognize revenue when products are
     delivered, persuasive evidence of an arrangement exists, selling price is
     fixed, and collectibility is reasonably assured.

                                       17
<Page>

                              HATHAWAY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1.   BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     BASIC AND DILUTED INCOME PER SHARE

     Basic income (loss) per share is computed by dividing net income or loss by
     the weighted average number of shares of common stock outstanding. Diluted
     income or loss per share is determined by dividing the net income or loss
     by the sum of (1) the weighted average number of common shares outstanding
     and (2) if not anti-dilutive, the effect of stock options determined
     utilizing the treasury stock method. Outstanding options that were
     determined to have a dilutive effect totaled 341,962 and 444,316 for fiscal
     years 2001 and 2000, respectively. In fiscal year 1999, stock options to
     purchase 819,004 shares of common stock (without regard to the treasury
     stock method), were excluded from the calculation of diluted loss per share
     since the results would have been anti-dilutive.

     Basic income (loss) per share have been computed as follows (in thousands,
     except per share data):

<Table>
<Caption>
                                                            FOR THE FISCAL YEARS ENDED JUNE 30,
                                                           2001            2000            1999
                                                         -------         -------         -------
<S>                                                      <C>             <C>             <C>
     Numerator:
             Net income (loss)                           $ 1,996         $ 1,475         $(1,525)
     Denominator:
             Weighted average outstanding shares           4,493           4,341           4,283
                                                         -------         -------         -------
     Basic net income (loss) per share                   $  0.44         $  0.34         $ (0.36)
                                                         =======         =======         =======
</Table>

     Diluted income (loss) per share have been computed as follows (in
     thousands, except per share data):

<Table>
<Caption>
                                                           FOR THE FISCAL YEARS ENDED JUNE 30,
                                                          2001            2000            1999
                                                         -------         -------         -------
<S>                                                      <C>             <C>             <C>
     Numerator:
             Net income (loss)                           $ 1,996         $ 1,475         $(1,525)
     Denominator:
             Weighted average outstanding shares           4,834           4,785           4,283
                                                         -------         -------         -------
     Diluted net income (loss) per share                 $  0.41         $  0.31         $ (0.36)
                                                         =======         =======         =======
</Table>

     COMPREHENSIVE INCOME

     Comprehensive income is defined as the change in equity of a business
     enterprise during a period from transactions and other events and
     circumstances from non-owner sources. It includes all changes in equity
     during a period except those resulting from investments by and
     distributions to shareholders. Items of comprehensive income for all years
     presented are limited to cumulative translation adjustments from the
     translation of the financial statements of the Company's foreign
     subsidiaries.

     STOCK-BASED COMPENSATION

     The Company accounts for its employee stock option plans and other employee
     stock-based compensation arrangements in accordance with the provisions of
     Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
     Issued to Employees" and related interpretations. The Company adopted the
     disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based
     Compensation," which allows entities to continue to apply the provisions of
     APB Opinion No. 25 for transactions with employees and provide pro-forma
     disclosures for employee stock awards made in 1997 and future years as if
     the fair value-based method of accounting in SFAS No. 123 had been applied
     to these transactions. The Company accounts for equity instruments issued
     to non-employees in accordance with the provisions of SFAS No. 123 and
     related interpretations.

     FAIR VALUES OF FINANCIAL INSTRUMENTS

     The carrying amounts reported in the consolidated balance sheets for cash
     and cash equivalents, restricted cash, trade receivables, accounts payable
     and accrued liabilities approximate fair value because of the immediate or
     short-term maturities of these financial instruments. The carrying amount
     of the line-of-credit approximates fair value because the underlying
     instrument is a variable rate note that reprices frequently.

                                       18
<Page>

                              HATHAWAY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1.   BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     INCOME TAXES

     The current provision for income taxes represents actual or estimated
     amounts payable or refundable on tax return filings each year. Deferred tax
     assets and liabilities are recorded for the estimated future tax effects of
     temporary differences between the tax basis of assets and liabilities and
     amounts reported in the accompanying balance sheets, and for operating loss
     and tax credit carryforwards. A valuation allowance may be provided to the
     extent deemed more likely than not that deferred tax assets will not be
     realized. The change in deferred tax assets and liabilities for the period
     measures the deferred tax provision or benefit for the period. Effects of
     changes in enacted tax laws on deferred tax assets and liabilities are
     reflected as adjustments to the tax provision or benefit in the period of
     enactment. The ultimate realization of net deferred tax assets is dependent
     upon the generation of future taxable income, in the appropriate taxing
     jurisdictions, during the periods in which temporary differences become
     deductible. Management believes that it is more likely than not that the
     Company will realize the benefits of these deductible differences, net of
     valuation allowances as of June 30, 2001.

     CONCENTRATION OF CREDIT RISK

     During fiscal 2001, 2000 and 1999, no single customer accounted for more
     than 10% of the Company's consolidated revenue from continuing operations
     or its trade receivables balance. Trade receivables subject the Company to
     the potential for credit risk. To reduce this risk, the Company performs
     evaluations of its customers' financial condition, when necessary.

     USE OF ESTIMATES

     The preparation of financial statements in accordance with accounting
     principles generally accepted in the United States requires management to
     make certain estimates and assumptions. Such estimates and assumptions
     affect the reported amounts of assets and liabilities as well as disclosure
     of contingent assets and liabilities at the date of the consolidated
     financial statements and the reported amounts of revenues and expenses
     during the reporting period. Actual results could differ from those
     estimates.

     RECENTLY ISSUED ACCOUNTING STANDARDS

     SFAS No. 133, "Derivative Instruments and Hedging Activities," establishes
     accounting and reporting standards for derivative instruments, including
     certain derivative instruments embedded in other contracts, and for hedging
     activities. SFAS No. 133 requires that an entity recognize all derivatives
     as either assets or liabilities and measure those instruments at fair
     value. It also specifies the accounting for changes in the fair value of a
     derivative instrument depending on the intended use of the instrument and
     whether (and how) it is designated as a hedge. SFAS No. 133 was effective
     for all fiscal years beginning after June 15, 1999. During 1999, the
     Financial Accounting Standards Board (FASB) issued SFAS No. 137,
     "Accounting for Derivative Instruments and Hedging Activities - Deferral of
     the Effective Date of SFAS No. 133," which delayed the effective date of
     SFAS No. 133 until all fiscal years beginning after June 15, 2000. Through
     June 30, 2001, the Company had not entered into any transactions involving
     derivative financial instruments falling within the scope of SFAS No. 133,
     as amended, and, therefore, the adoption of SFAS No. 133 has had no
     financial statement impact.

     In December 1999, the Securities and Exchange Commission staff released
     Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition," to provide
     guidance on the recognition, presentation and disclosure of revenue in
     financial statements. The accounting and disclosures described in SAB No.
     101 must be applied no later than the fourth fiscal quarter of the
     Company's fiscal year ending June 30, 2001, retroactive to July 1, 2000.
     The adoption of SAB No. 101 has had no material impact on the Company's
     financial statements. However, implementation guidelines for this bulletin,
     as well as potential new pronouncements regarding revenue recognition,
     could result in unanticipated changes to the Company's current revenue
     recognition policies. These changes could affect the timing of the
     Company's future revenue recognition and results of operations.

     In June 2001, the FASB issued SFAS No. 141, "Business Combinations." SFAS
     No. 141 requires that all business combinations be accounted for using the
     purchase method of accounting. The use of the pooling-of-interest method of
     accounting for business combinations is prohibited. The provisions of SFAS
     No. 141 apply to all business combinations initiated after June 30, 2001.
     The Company will account for any future business combinations in accordance
     with SFAS No. 141.

                                       19
<Page>

                              HATHAWAY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1.   BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
     Assets." SFAS No. 142 changes the accounting for goodwill and intangible
     assets and requires that goodwill no longer be amortized but be tested for
     impairment at least annually at the reporting unit level in accordance with
     SFAS No. 142. Goodwill must also be reviewed for impairment when certain
     events indicate that the goodwill may be impaired. Recognized intangible
     assets should, generally, be amortized over their useful life and reviewed
     for impairment in accordance with SFAS No. 121. Because the Company is a
     noncalendar year-end company, the FASB has allowed adoption of SFAS No. 142
     either in fiscal year 2002 or fiscal year 2003, except for provisions
     related to the nonamortization and amortization of goodwill and intangible
     assets acquired after June 30, 2001, which will be subject immediately to
     the provisions of SFAS No. 142. The Company will adopt SFAS No. 142 on July
     1, 2002. The Company has not yet quantified the effects of adopting SFAS
     No. 142 on its financial position or results of operations.

     RECLASSIFICATIONS

     Certain prior year balances were reclassified to conform to the current
     year presentation. Those reclassifications had no impact on net income or
     stockholders' investment as previously reported.

2.   BUSINESS ACQUISITION

     Effective July 1, 1998, a wholly-owned subsidiary of the Company acquired
     all the outstanding shares of Ashurst Logistic Electronics Limited of
     Bournemouth, England (Ashurst) for $317,000 in cash. Ashurst manufactures
     drive electronics and position controllers for a variety of motor
     technologies as well as a family of static frequency converters for
     military and aerospace applications and has extensive experience in power
     electronics design and software development required for the application of
     specialized drive electronics technology. The acquired company was renamed
     Emoteq UK Limited.

     The acquisition was accounted for using the purchase method of accounting,
     and, accordingly, the purchase price was allocated to the assets purchased
     and the liabilities assumed based upon the estimated fair values at the
     date of acquisition. The final net purchase price allocation was as follows
     (in thousands):

<Table>
<S>                                                <C>
     Cash                                          $  36
     Trade receivables                               190
     Prepaid expenses                                  2
     Property and equipment, net                      25
     Cost in excess of net assets acquired           195
     Accounts payable                                (43)
     Accrued liabilities and other                   (88)
                                                   -----
     Net purchase price                            $ 317
                                                   =====
</Table>

     The results of operations of Ashurst have been included in the Company's
     fiscal 1999 consolidated statement of operations starting on July 1, 1998.

3.   INVESTMENTS IN JOINT VENTURES

     Through July 5, 2001, the Company had three joint venture investments in
     China - a 20% interest in Hathaway Si Fang Protection and Control Company,
     Ltd. (Si Fang), a 25% interest in Zibo Kehui Electric Company Ltd. (Kehui)
     and a 40% interest Hathaway Power Monitoring Systems Company, Ltd. (HPMS).
     Si Fang designs, manufactures and sells a new generation of digital
     protective relays, control equipment and instrumentation products for
     substations in power transmission and distribution systems in China and is
     now the largest Chinese supplier of digital relays in China. Kehui designs,
     manufactures and sells cable and overhead fault location products,
     Supervisory Control and Data Acquisition (SCADA) systems and other test
     instruments within the China market and the Company may sell these products
     outside of China. HPMS manufactures and sells, under a license from the
     Company, instrumentation products designed by the Company to electric power
     companies in China.

                                       20
<Page>

                              HATHAWAY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3.   INVESTMENTS IN JOINT VENTURES (CONTINUED)

     The Company accounts for its investments in the Chinese joint ventures
     using the equity method of accounting. At the time of the original
     investments in the Chinese joint ventures and until the beginning of fiscal
     1998, the Company determined that due to the start-up nature of the
     entities, their untested products and political uncertainty in China, the
     realization of the initial investments and subsequent earnings (which were
     not significant) was uncertain; and, therefore, the Company wrote down its
     investments in these joint ventures to their then-estimated fair value.

     The operations of these joint ventures have continued to mature, their
     products have gained significant acceptance, and they have achieved
     profitability. Because of sustained positive operating results, offset by
     the Company's concerns of political and business uncertainty in China, the
     Company recognized a portion of its share of equity in income from these
     joint ventures, totaling $1,170,000, $698,000 and $329,000 in fiscal years
     2001, 2000 and 1999, respectively. These amounts are included in equity
     income from investments in joint ventures in the accompanying consolidated
     statements of operations and reflect the Company's share of earnings, net
     of writedowns, from the joint ventures' operating results for the years
     ended December 31. The Company will continue to recognize its share of
     equity in income (loss) from these joint ventures to the extent it believes
     such amounts are realizable.

     At June 30, 2001, the Company's investments and ownership interests in
     these joint ventures are as follows (in thousands):

<Table>
<Caption>
                                                      Cumulative
                                     Investment,    Share of Income   Cumulative                        Balance at
                        Ownership      Net of         (Through        Dividends        Cumulative        June 30,
                        Interest       Sales        Dec. 31, 2000)     Received        Writedowns          2001
                        --------     -----------    ---------------   ----------       ----------       ----------
<S>                     <C>          <C>            <C>               <C>              <C>              <C>
     Si Fang              20%         $   642          $ 2,625          $  (453)         $  (484)         $ 2,330
     Kehui                25%             100              331              (28)            (298)             105
     HPMS                 40%             140              101               --             (217)              24
                                      -------          -------          -------          -------          -------
                                      $   882          $ 3,057          $  (481)         $  (999)         $ 2,459
                                      =======          =======          =======          =======          =======
</Table>

     The Company has no future commitments relating to its investments in these
     joint ventures.

     Summarized financial information for Si Fang as of December 31, 2000, 1999
     and 1998 (Si Fang is on a calendar fiscal year) is presented as follows (in
     thousands):

<Table>
<Caption>
                                                As of and             As of and             As of and
                                           For the Year Ended    For the Year Ended    For the Year Ended
                                            December 31, 2000     December 31, 1999     December 31, 1998
                                           ------------------    ------------------    ------------------
<S>                                        <C>                   <C>                   <C>
     Current assets                               $34,722               $25,539               $16,864
     Non-current assets                            14,869                 4,785                 1,745
     Current liabilities                           27,596                20,239                14,752
     Non-current liabilities                        6,024                    --                    --
     Revenues                                      48,363                32,959                16,502
     Gross margin                                  12,736                 6,834                 4,047
     Net income before income taxes                 6,291                 3,940                 1,706
     Net income                                     5,580                 3,352                 1,367
</Table>

     Summarized financial information for Kehui and for HPMS is not presented
     because it is not significant relative to the Company's consolidated
     financial statements.

     During fiscal 1999, the Company sold 2% of its ownership interest in Si
     Fang for $57,000 in cash and recognized a $49,000 gain on the sale, which
     is included in other income in the accompanying fiscal year 1999
     consolidated statement of operations. The Company reinvested the proceeds
     from the sale plus an additional $35,000 in cash to maintain its 23%
     ownership interest due to a capital call by the joint venture.

                                       21
<Page>

                              HATHAWAY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3.   INVESTMENTS IN JOINT VENTURES (CONTINUED)

     During fiscal 2000, the Company sold a portion of its investment in Si Fang
     to another partner in the joint venture, reducing its ownership from 23% to
     20%. The Company received $143,000 and recognized a $126,000 gain on the
     sale. The gain is included in other income in the accompanying consolidated
     statement of operations. The Company reinvested the proceeds from the sale
     plus an additional $282,000 in cash to maintain its 20% ownership interest
     due to a capital call by the joint venture.

     On July 5, 2001, the Company sold its equity interest in Si Fang (Note 11).

4.   DEBT

     On May 7, 1998, the Company entered into a long-term financing agreement
     (Agreement) with Silicon Valley Bank (Silicon). The Agreement matures on
     May 7, 2002 and, accordingly, the $553,000 balance of the line-of-credit
     has been classified as a current liability as of June 30, 2001. The
     Agreement is subject to automatic and continuous annual renewal for
     successive additional terms of one year each unless either party notifies
     the other of its intention to terminate the Agreement at least sixty days
     before the next maturity date. Borrowings on this line-of-credit are
     restricted to the lesser of $3,000,000 or 85% of the Company's eligible
     receivables (Maximum Credit Limit). As of June 30, 2001, 85% of the
     Company's eligible receivables exceeded the maximum loan amount; therefore
     the Company could borrow an additional $2,447,000 up to the $3,000,000
     Maximum Credit Limit.

     The line-of-credit bears interest at Silicon's prime borrowing rate (prime
     rate, 6.75% at June 30, 2001) plus 1.5%. The interest rate is adjustable on
     a quarterly basis to prime rate plus 2% if the Company incurs a net loss
     greater than $750,000 for each previous twelve-month rolling period. In
     addition to interest, the line bears a monthly unused line fee at 0.0625%
     of the Maximum Credit Limit less the average daily balance of the
     outstanding loan during a month. The unused line fee is also adjustable on
     a quarterly basis to 0.125% if the Company incurs a net loss greater than
     $750,000 for each previous twelve-month rolling period. The debt is secured
     by all assets of the Company. The Agreement requires that the Company
     maintain compliance with certain covenants related to tangible net worth
     and prohibits the Company from paying dividends without prior approval.

5.   INCOME TAXES

     The benefit (provision) for income taxes is based on income (loss) before
     income taxes as follows (in thousands):

<Table>
<Caption>
                                                 FOR THE FISCAL YEARS ENDED JUNE 30,
                                                 2001            2000            1999
                                               -------         -------          -------
<S>                                            <C>             <C>              <C>
     Domestic                                  $ 2,231         $ 1,918          $(1,065)
     Foreign                                       341            (314)            (252)
                                               -------         -------          -------
     Income (loss) before income taxes         $ 2,572         $ 1,604          $(1,317)
                                               =======         =======          =======

</Table>

     Components of the provision for income taxes are as follows (in thousands):

<Table>
<Caption>
                                           FOR THE FISCAL YEARS ENDED JUNE 30,
                                           2001          2000           1999
                                           -----         -----          -----
<S>                                        <C>           <C>            <C>
     Current provision (benefit):
        Domestic                           $ 204         $ 117          $  61
        Foreign                               --           (19)            --
                                           -----         -----          -----
     Total current provision                 204            98             61
     Deferred provision - domestic           372            31            147
                                           -----         -----          -----
     Provision for income taxes            $ 576         $ 129          $ 208
                                           =====         =====          =====
</Table>

                                       22
<Page>

                              HATHAWAY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


5.   INCOME TAXES (CONTINUED)

     The provision for income taxes differs from the amount determined by
     applying the federal statutory rate as follows (in thousands):

<Table>
<Caption>
                                                                FOR THE FISCAL YEARS ENDED JUNE 30,
                                                                2001           2000           1999
                                                                -----          -----          -----
<S>                                                             <C>            <C>            <C>
     Tax provision (benefit) computed at statutory rate         $ 874          $ 545          $(448)
     State tax, net of federal benefit                             87             99             36
     Nondeductible expenses and goodwill amortization             119             14            145
     Adjustments to prior year accruals*                         (312)            --             --
     Change in valuation allowance                               (186)          (561)           497
     Other                                                         (6)            32            (22)
                                                                -----          -----          -----
     Provision for income taxes                                 $ 576          $ 129          $ 208
                                                                =====          =====          =====
</Table>

     * Adjustments relate to the successful resolution of certain income tax
     related issues.

     The tax effects of significant temporary differences and credit and
     operating loss carryforwards that give rise to the net deferred tax assets
     are as follows (in thousands):

<Table>
<Caption>
                                                   JUNE 30, 2001    JUNE 30, 2000
                                                   -------------    -------------
<S>                                                <C>              <C>
     Allowances and other accrued liabilities         $   983          $ 1,008
     Investment in joint ventures                        (530)            (198)
     Tax credit carryforwards                             236              376
     Net operating loss carryforwards                      14               75
     Valuation allowance                                 (474)            (660)
                                                      -------          -------
     Net deferred tax asset                           $   229          $   601
                                                      =======          =======
</Table>

     The Company was entitled to a deduction for tax purposes related to the
     exercise of employee stock options during fiscal 2000 that resulted in a
     domestic operating loss carryforward for tax purposes. The carryforward
     balance at June 30, 2001 is $364,000 and will expire in 2019. A benefit for
     income taxes will not be recorded upon realization of the operating loss
     carryforward. The Company also has domestic tax credit carryforwards of
     $334,000 expiring in 2004 through 2008 and foreign advance corporation tax
     of $40,000 available which may be utilized to reduce future foreign taxes
     due.

     Realization of the Company's net deferred tax asset is dependent upon the
     Company generating sufficient taxable income in future years to obtain
     benefit from the reversal of net deductible temporary differences and from
     tax credit carryforwards. The Company has recorded a valuation allowance
     due to the uncertainty related to the realization of certain deferred tax
     assets existing at June 30, 2001. The amount of deferred tax assets
     considered realizable is subject to adjustment in future periods if
     estimates of future taxable income are changed. Management believes that it
     is more likely than not that the Company will realize the benefits of the
     net deferred tax asset, net of valuation allowances as of June 30, 2001.

6.   STOCK COMPENSATION

     HATHAWAY CORPORATION STOCK OPTION PLAN

     At June 30, 2001, 303,732 shares of common stock were available for grant
     under the Company's stock option plans. Under the terms of the plans,
     options may not be granted at less than 85% of fair market value. However,
     all options granted to date have been granted at fair market value as of
     the date of grant. Options generally become exercisable evenly over three
     years starting one year from the date of grant and expire seven years from
     the date of grant.

     In conjunction with the acquisition of HIA during fiscal 1997, the Company
     granted options for 125,000 shares of the Company's common stock to certain
     key management personnel of HIA with accelerated vesting schedules
     dependent on meeting certain performance criteria. At June 30, 2001,
     options to purchase 54,000 shares remain outstanding. The options vest
     during fiscal 2004.

                                       23
<Page>

                              HATHAWAY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6.   STOCK COMPENSATION (CONTINUED)

     Option activity in fiscal years 1999, 2000 and 2001 was as follows:

<Table>
<Caption>
                                                               WEIGHTED                       WEIGHTED
                                                               AVERAGE       NUMBER OF        AVERAGE
                                           NUMBER OF          EXERCISE        SHARES          EXERCISE
                                            SHARES            PRICE ($)     EXERCISABLE       PRICE ($)
                                           ---------          --------      -----------       ---------
<S>                                        <C>                <C>           <C>                <C>
     Outstanding at June 30, 1998            648,204             3.35         303,138            3.36
        Granted                              249,104             1.71
        Canceled or forfeited                (78,304)            3.18
                                           ---------
     Outstanding at June 30, 1999            819,004             2.87         371,866            3.36
        Granted                              164,000             1.81
        Canceled or forfeited               (144,400)            3.48
        Exercised                           (177,101)            3.25
                                           ---------
     Outstanding at June 30, 2000            661,503             2.37         410,800            2.49
        Granted                              452,700             5.43
        Canceled or forfeited                (32,936)            3.75
        Exercised                            (28,630)            1.93
                                           ---------
     Outstanding at June 30, 2001          1,052,637             3.66         460,857            2.36
                                           =========
</Table>

     Exercise prices for options outstanding and exercisable at June 30, 2001
     are as follows:

<Table>
<Caption>
                                                              RANGE OF EXERCISE PRICES                    TOTAL
                                                              ------------------------                    -----
                                                $1.13 - $2.13     $2.66 - $3.88      4.31 - $6.72     $1.13 - $6.72
                                                -------------     -------------     -------------     -------------
<S>                                             <C>               <C>               <C>               <C>
     Options Outstanding:
       Number of options                           346,467             251,670           454,500         1,052,637
       Weighted average exercise price              $ 1.73              $ 3.18            $ 5.39            $ 3.66
       Weighted average remaining
         contractual life                        4.5 years           2.9 years         6.2 years         4.8 years
     Options Exercisable:
       Number of options                           258,467             188,890            13,500           460,857
       Weighted average exercise price              $ 1.78              $ 3.01            $ 4.31            $ 2.36
</Table>

     Pro forma information regarding net income (loss) and income (loss) per
     share is required by SFAS No. 123 and has been determined as if the Company
     had accounted for its stock-based compensation plans using the fair value
     method prescribed by that statement. The fair value for these options was
     estimated at the date of grant using the Black-Scholes option pricing model
     with the following weighted average assumptions:

<Table>
<Caption>
                                     FOR THE FISCAL YEARS ENDED JUNE 30,
                                       2001         2000          1999
                                     -------       -------       -------
<S>                                  <C>           <C>           <C>
     Risk-free interest rate            5.9%          6.7%          6.3%
     Expected dividend yield            0.0%          0.0%          0.0%
     Expected life                   6 years       6 years       6 years
     Expected volatility               89.5%         81.9%         60.8%
</Table>

     Using the fair value method of SFAS No. 123, the net income (loss) and net
     income (loss) per share would have been adjusted to the pro forma amounts
     indicated below (in thousands, except per share data):

<Table>
<Caption>
                                                                FOR THE FISCAL YEARS ENDED JUNE 30,
                                                             2001              2000               1999
                                                           ---------         ---------         ---------
<S>                                                        <C>               <C>               <C>
     Actual net income (loss)                              $   1,996         $   1,475         $  (1,525)
     Pro forma net income (loss)                           $   1,364         $   1,444         $  (1,702)

     Actual basic net income (loss) per share              $    0.44         $    0.34         $   (0.36)
     Pro forma basic net income (loss) per share           $    0.30         $    0.33         $   (0.40)

     Actual diluted net income (loss) per share            $    0.41         $    0.31         $   (0.36)
     Pro forma diluted net income (loss) per share         $    0.28         $    0.30         $   (0.40)
</Table>

                                       24
<Page>

                              HATHAWAY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6.   STOCK COMPENSATION (CONTINUED)

     The weighted average fair value of options granted during fiscal years
     2001, 2000 and 1999 was $4.19, $0.79 and $1.07, respectively. The total
     fair value of options granted was $1,897,000, $130,000 and $266,000 in
     fiscal years 2001, 2000 and 1999, respectively. These amounts are being
     amortized ratably over the vesting periods of the options for purposes of
     this disclosure.

     EMOTEQ CORPORATION STOCK OPTION PLAN

     Prior to fiscal year 2001, the Company had granted options for shares of
     common stock of Emoteq Corporation (Emoteq, a wholly-owned subsidiary) to
     officers and key employees of Emoteq. The options were granted with
     exercise prices equal to the fair value of the underlying common stock on
     the date of grant, and consisted of time vesting options and performance
     vesting options. During fiscal year 2001 all of the outstanding (and also
     fully vested) stock options were exercised and 223,636 shares of Emoteq
     common stock, representing 12% ownership of Emoteq, were issued. Proceeds
     to the Company from the exercises totaled $498,000. Under the terms of the
     Emoteq stock option plan and the related stockholders' agreements, the
     stockholders had a liquidity put option that they could exercise only after
     owning the stock for at least six months. If the holder of the shares
     elected this put option, the Company would be required to purchase the
     shares of Emoteq at their then current fair market value. After holding the
     shares for at least six months, all such holders of Emoteq common stock
     exercised their put options and consequently, the Company purchased the
     shares for $1,006,000, the fair value of the shares, for consideration
     consisting of Hathaway common stock, notes payable and cash. The Company
     recorded $352,000 of cost in excess of net assets acquired related to the
     purchase of these Emoteq shares. The Emoteq stock option plan and
     stockholders' agreements were terminated in August 2001.

     Option activity for the Emoteq plan during fiscal years 2001, 2000 and 1999
     was as follows:

<Table>
<Caption>
                                                                                  WEIGHTED AVERAGE
                                                 NUMBER OF SHARES                  EXERCISE PRICE
                                          -----------------------------       -------------------------
                                            TIME            PERFORMANCE         TIME        PERFORMANCE
                                           VESTED             VESTED           VESTED         VESTED
                                          --------          -----------       --------      -----------
<S>                                       <C>               <C>               <C>           <C>
     Outstanding at June 30, 1998           80,000           187,600          $   1.37      $   1.37
        Granted                             11,000            34,000          $   2.50      $   2.50
        Cancelled or forfeited                  --           (33,683)               --      $   1.56
                                          --------          --------          --------      --------
     Outstanding at June 30, 1999           91,000           187,917          $   1.51      $   1.54
        Granted                             83,118                --          $   3.43            --
        Cancelled or forfeited              (6,000)         (132,399)         $   1.37      $   1.55
                                          --------          --------          --------      --------
     Outstanding at June 30, 2000          168,118            55,518          $   2.46      $   1.51
        Exercised                         (168,118)          (55,518)         $   2.46      $   1.51
                                          --------          --------          --------      --------
     Outstanding at June 30, 2001               --                --                --            --
                                          ========          ========          ========      ========
</Table>

     Prior to the exercise of the Emoteq stock options, the Company accounted
     for the performance vested options under variable plan accounting. The
     Company recognized $21,000 in compensation expense for the fiscal year
     ended June 30, 2000 related to the 55,518 performance options.

7.   LOANS RECEIVABLE FOR STOCK

     The Company's loans receivable balance of $160,000 at June 30, 2001 is
     comprised of a loan for $27,000 from the Leveraged Employee Stock Ownership
     Plan and Trust (the Plan) and $133,000 from an Officer of the Company. The
     balance of $235,000 at June 30, 2000 is comprised of a loan of $102,000
     from the Plan and $133,000 from an officer of the Company. The loans relate
     to the purchase of Company common stock and are reflected in the
     accompanying consolidated balance sheet as an offset to stockholders'
     investment.

     The Plan allows eligible Company employees to participate in ownership of
     the Company. The $27,000 receivable represents the unpaid balance of the
     original $500,000 that the Company loaned to the Plan in fiscal year 1989
     so that the Plan could acquire from the Company 114,285 newly issued shares
     of the Company's common stock. The note bears interest at an annual rate of
     9.23% and

                                       25
<Page>

                              HATHAWAY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7.   LOANS RECEIVABLE FOR STOCK (CONTINUED)

     matures May 31, 2004. The terms of the Plan require the Company to make an
     annual contribution equal to the greater of i) the Board established
     percentage of pretax income before the contribution (5% in fiscal years
     2001, 2000, and 1999) or ii) the annual interest payable on the note.
     Company contributions to the Plan were $135,000 in 2001, $84,000 in 2000
     and $9,000 in 1999. The Company's contribution for 2001 was made on August
     16, 2001 and was used to pay off the entire principal and interest due on
     the loan and purchase 33,095 newly issued shares of common stock of the
     Company.

     The $133,000 receivable represents the principal balance of a loan made in
     fiscal year 1994 to the Chief Executive Officer of the Company in
     connection with his purchase of the Company's common stock, pursuant to the
     Officer and Director Loan Plan approved by stockholders on October 26,
     1989. The loan is full-recourse and bears interest at a current interest
     rate. The loan is due on demand but no later than October 31, 2001.

8.   COMMITMENTS AND CONTINGENCIES

     LEASES

     At June 30, 2001, the Company maintained leases for certain facilities and
     equipment. Minimum future rental commitments under all non-cancelable
     operating leases are as follows (in thousands):

<Table>
<Caption>
     FISCAL YEAR        AMOUNT
     -----------        ------
<S>                     <C>
     2002               $1,010
     2003                  632
     2004                  688
     2005                  650
     2006                  486
     Thereafter            248
                        ------
                        $3,714
                        ======
</Table>

     Rental expense was $1,027,000, $1,126,000 and $1,000,000 in fiscal years
     2001, 2000 and 1999, respectively.

     SEVERANCE BENEFIT AGREEMENTS

     The Company has entered into annually renewable severance benefit
     agreements with certain key employees which, among other things, provide
     inducement to the employees to continue to work for the Company during and
     after any period of threatened takeover. The agreements provide the
     employees with specified benefits upon the subsequent severance of
     employment in the event of change in control of the Company and are
     effective for 24 months thereafter. The maximum amount of salary that could
     be required to be paid under these contracts, if such events occur, totaled
     approximately $1,869,000 as of June 30, 2001. In addition to salary,
     severance benefits include the cost of life, disability, accident and
     health insurance for 24 months, a pro-rata calculation of bonus for the
     current year and a gross-up payment for all federal, state and excise taxes
     due on the severance payment.

     CONSULTING AGREEMENT

     Effective September 1, 1998, the Company entered into a consulting
     agreement (Consulting Agreement) with the Chairman of the Board of
     Directors who is a major shareholder. Under the Consulting Agreement, he
     will be compensated for providing consulting services to the Company
     primarily on matters involving the Company's motion control business, as
     well as other matters as requested by the Chief Executive Officer. During
     fiscal years 2001, 2000 and 1999, the Company paid $0, $66,000 and
     $137,750, respectively, to the Chairman of the Board under the Consulting
     Agreement.

     STOCK REPURCHASE PROGRAM

     Under an employee stock repurchase program approved by the Board of
     Directors, the Company may repurchase its common stock from its employees
     at the current market value. The Company's Agreement with Silicon limits
     employee stock repurchases to $125,000 per fiscal year. Under

                                       26
<Page>

                              HATHAWAY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

     Colorado law enacted in July 1994, repurchased shares of capital stock are
     considered authorized and unissued shares and have the same status as
     shares that have never been issued.

     LITIGATION

     The Company, with other parties, has been named as a defendant in an
     environmental contamination lawsuit. The Company is investigating the
     nature of the claims but believes the claims are without merit and,
     therefore, no reserve for this litigation is required at this time.

     The Company is also involved in certain actions that have arisen out of the
     ordinary course of business. Management believes that resolution of the
     actions will not have a significant adverse affect on the Company's
     consolidated financial position or results of operations.

9.   RESTRUCTURING CHARGE

     As a result of changing business conditions in the process instrumentation
     business, the Company restructured its process instrumentation operations
     in Dallas. The restructuring consisted of retaining a portion of the
     business in Dallas, moving the manufacturing of two products lines to its
     power instrumentation manufacturing facility in Seattle and selling the
     remaining two product lines. The costs associated with the restructuring
     were $587,000 for the fiscal year 2001, which includes $282,000 of employee
     termination expenses related to 15 employees, and closure and moving costs
     of $305,000. All restructuring costs have been incurred as of June 30,
     2001.

10.  SEGMENT INFORMATION

     SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
     Information" requires disclosure of operating segments, which as defined,
     are components of an enterprise about which separate financial information
     is available that is evaluated regularly by the chief operating decision
     maker in deciding how to allocate resources and in assessing performance.

     The Company operates in two different segments: Power and Process Business
     (Power and Process) and Motion Control Business (Motion Control).
     Management has chosen to organize the Company around these segments based
     on differences in markets, products and services.

     POWER AND PROCESS BUSINESS

     Hathaway's complete line of power instrumentation products helps ensure
     that electric utilities provide high quality service to consumers of
     electricity. The power products group produces a comprehensive and
     cost-effective range of products designed exclusively for the power
     industry worldwide. Hathaway's equipment assists the electric power system
     operators in operating and maintaining proper system performance. The
     products, which are used to monitor and control the power generation,
     transmission and distribution processes, include fault recording products,
     fault location products, condition monitoring (circuit breaker) products
     and remote terminal units for SCADA systems.

     Hathaway's state-of-the-art software system for SCADA has been used to
     fully automate such industrial applications as water and wastewater
     treatment plants, glass manufacturing plants, oil and gas terminals and
     tank farm facilities. In addition to expanding into its traditional process
     markets, the system is being marketed to the power utility industry. The
     Company has successfully sold the system with certain other Hathaway
     products and targets the combined product at substation automation and
     integration applications used in power generation, transmission and
     distribution facilities.

     The process instrumentation products group manufactures and markets
     products for the process and power industries including monitoring systems
     and calibration equipment. The monitoring systems, called visual
     annunciators and sequential event recorders, provide both visual and
     audible alarms and are used to control processes in various plants
     including, chemical, petroleum, food and beverage, pulp and paper, and
     textiles. Calibration equipment is used to test and adjust instrumentation
     for proper and accurate operation in measuring electricity, temperatures
     and pressure within the process industry.

                                       27
<Page>

                              HATHAWAY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10.  SEGMENT INFORMATION (CONTINUED)

     MOTION CONTROL BUSINESS

     Motion Control offers quality, cost-effective products that suit a wide
     range of applications in the industrial, medical, military and aerospace
     sectors, as well as in manufacturing of analytical instruments and computer
     peripherals. The end products using Hathaway technology include special
     industrial and technical products such as satellite tracking systems, MRI
     scanners, and high definition printers.

     The group designs, manufactures and markets direct current brush and
     brushless motors, related components, and drive and control electronics as
     well as precision direct-current fractional horsepower motors and certain
     motor components. Industrial equipment and military products are the major
     application for the motors.

     The group also manufactures optical encoders that are used to measure
     rotational and linear movements of parts as well as fiber optic-based
     encoders with special characteristics, such as immunity to radio frequency
     interference and high temperature tolerance.

     The following provides information on the Company's segments (in
     thousands):

<Table>
<Caption>
                                                                  FOR THE FISCAL YEARS ENDED JUNE 30,
                                                     2001                          2000                      1999
                                            -----------------------      -----------------------      -----------------------
                                             POWER                        POWER                        POWER
                                              AND           MOTION         AND           MOTION         AND           MOTION
                                            PROCESS        CONTROL       PROCESS        CONTROL       PROCESS        CONTROL
                                            --------       --------      --------       --------      --------       --------
<S>                                         <C>            <C>           <C>            <C>           <C>            <C>
     Revenue from external customers        $ 27,198       $ 21,188      $ 26,542       $ 18,591      $ 28,711       $ 12,980
     Equity income from investments in
        joint ventures                         1,170             --           698             --           329             --
     (Loss) income before income taxes        (1,539)         3,584        (1,643)         3,139        (1,932)           487
     Identifiable assets                      12,142          6,532        10,620          7,134         9,232          5,006
</Table>

     The following is a reconciliation of segment information to consolidated
     information (in thousands):

<Table>
<Caption>
                                                           FOR THE FISCAL YEARS ENDED AND
                                                                    AS OF JUNE 30,
                                                           2001          2000          1999
                                                         --------      --------      --------
<S>                                                      <C>           <C>           <C>
     Segments' income (loss) before income taxes         $  2,045      $  1,496      $ (1,445)
     Corporate activities                                     527           108           128
                                                         --------      --------      --------
     Consolidated income (loss) before income taxes      $  2,572      $  1,604      $ (1,317)
                                                         ========      ========      ========
     Segments' identifiable assets                       $ 18,674      $ 17,754      $ 14,238
     Corporate assets and eliminations                      1,529         2,183         2,160
                                                         --------      --------      --------
     Consolidated total assets                           $ 20,203      $ 19,937      $ 16,398
                                                         ========      ========      ========
</Table>

     The Company's wholly-owned foreign subsidiaries in the United Kingdom are
     included in the accompanying consolidated financial statements. Financial
     information for the foreign subsidiaries is summarized below (in
     thousands):

<Table>
<Caption>
                                               FOR THE FISCAL YEARS ENDED AND AS OF JUNE 30,
                                                      2001        2000        1999
                                                     ------      ------      ------
<S>                                                  <C>         <C>         <C>
     Revenues derived from foreign subsidiaries      $7,223      $5,632      $7,744
     Identifiable assets                              3,927       3,078       3,179
</Table>

                                       28
<Page>

                              HATHAWAY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10.  SEGMENT INFORMATION (CONTINUED)

     Sales to international customers was $15,282,000, $11,577,000 and
     $12,902,000 in fiscal years 2001, 2000 and 1999, respectively.

11.  SUBSEQUENT EVENT

     On July 5, 2001, the Company completed the sale of its 20% equity interest
     in Si Fang for $3,020,000 in cash. The sale became effective upon receipt
     of the net proceeds in U.S. dollars and the required approvals from the
     State Administration of Foreign Exchange in China. The Company sold its
     interest to Beijing Si Fang Tongchuang Protection and Control Co., Ltd.
     (Tongchuang), a Chinese company. Prior to the sale, Tongchuang held a 22%
     interest in Si Fang. The Company will record a pretax gain on the sale, net
     of selling costs, of approximately $650,000. The gain will be recorded in
     the first quarter of the fiscal year ending June 30, 2002 and will be
     included in other income in the Company's consolidated financial
     statements.

     Prior to the sale, the Company's net cash investment in Si Fang was
     $39,000. This consisted of the original acquisition of a 25% interest in Si
     Fang in 1994 for $175,000, subsequent capital contributions made and
     proceeds received in two partial sale transactions, netting to an
     additional $317,000 investment and dividends received of $453,000. Through
     the date of sale, the Company has recognized equity income of $2,291,000
     and gain on sales of $175,000. During fiscal years ended June 30, 2001,
     2000 and 1999, the Company recognized equity income of $1,116,000, $670,000
     and $314,000, respectively.

     The following presents the Company's unaudited pro forma financial
     information for the fiscal years ended June 30, 2001, 2000 and 1999. The
     pro forma statements of operations give effect to the sale of the Company's
     joint venture investment in Si Fang as if it had occurred at the beginning
     of each fiscal year.

     The pro forma financial information is for informational purposes only and
     does not purport to present what the Company's results would actually have
     been had these transactions actually occurred on the dates presented or to
     project the Company's results of operations or financial position for any
     future period. The gain on the sale of Si Fang is not reflected in the pro
     forma financial information as it is a non-recurring item.

<Table>
<Caption>
                                                FOR THE FISCAL YEARS ENDED JUNE 30,
                                                2001            2000           1999
                                              ---------      ---------      ---------
<S>                                           <C>            <C>            <C>
     Net income (loss)                        $   1,301      $   1,036      $  (1,729)

     Basic net income (loss) per share             0.29           0.24          (0.40)
     Diluted net income (loss) per share           0.27           0.22          (0.40)
</Table>

12.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

     Selected quarterly financial data for each of the four quarters in fiscal
     years 2001 and 2000 is as follows (in thousands, except per share data):

<Table>
<Caption>
                                                   FIRST             SECOND          THIRD            FOURTH
                      2001                        QUARTER           QUARTER         QUARTER           QUARTER
                                                 --------          --------         --------          --------
<S>                                              <C>               <C>              <C>               <C>
     Revenues                                    $ 11,333          $ 13,166         $ 11,313          $ 12,574
     Operating income (loss)                          (54)              754              (16)              793
     Net income (loss)                                  9               771              260               956
     Basic net income (loss) per share               0.00              0.17             0.06              0.21
     Diluted net income (loss) per share             0.00              0.16             0.05              0.20
</Table>

<Table>
<Caption>
                                                   FIRST             SECOND          THIRD            FOURTH
                      2000                        QUARTER           QUARTER         QUARTER           QUARTER
                                                 --------          --------         --------          --------
<S>                                              <C>               <C>              <C>               <C>
     Revenues                                    $  8,905          $ 11,151         $ 11,767          $ 13,310
     Operating income (loss)                         (762)              501              139             1,096
     Net income (loss)                               (721)              617              225             1,354
     Basic net income (loss) per share              (0.17)             0.14             0.05              0.30
     Diluted net income (loss) per share            (0.17)             0.14             0.05              0.28
</Table>

                                       29
<Page>

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

The Company has not changed its accounting or auditing firm during the past 24
months, nor has it had any material disagreements with its accountants or
auditors regarding any accounting or financial statement disclosure matters.

PART III

The information required by Part III is included in the Company's Proxy
Statement, and is incorporated herein by reference.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Information required by this item is set forth in the sections entitled
"Election of Directors" (page 2), "Executive Officer" (page 3) and "Section
16(a) Beneficial Ownership Reporting Compliance" (page 9) in the Company's Proxy
Statement and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this item is set forth in the section entitled
"Executive Compensation" (pages 5 through 9) in the Company's Proxy Statement
and is incorporated herein by reference.

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

The information required by this item is set forth in the section entitled
"Security Ownership of Certain Beneficial Owners and Management" (pages 4
through 5) in the Company's Proxy Statement and is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Effective September 1, 1998, the Company entered into a Consulting Agreement
with Eugene E. Prince, who resigned from the offices of President and Chief
Executive Officer on August 13, 1998 and retired from employment with the
Company effective August 31, 1998. Mr. Prince is the Chairman of the Board of
Directors and a major shareholder of the Company. Under the Consulting
Agreement, he will be compensated for providing consulting services to the
Company primarily on matters involving the Company's Motion Control business, as
well as other matters as requested by the Chief Executive Officer. During fiscal
year 2001, the Company made no payments to Mr. Prince under the Consulting
Agreement.

PART IV

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

a)   The following documents are filed as part of this Report:

     1.   FINANCIAL STATEMENTS

          a)   Consolidated Balance Sheets as of June 30, 2001 and June 30,
               2000.

          b)   Consolidated Statements of Operations for each of the fiscal
               years in the three-year period ended June 30, 2001.

          c)   Consolidated Statements of Cash Flows for each of the fiscal
               years in the three-year period ended June 30, 2001.

          d)   Consolidated Statements of Stockholders' Investment for each of
               the fiscal years in the three-year period ended June 30, 2001.

          e)   Notes to Consolidated Financial Statements.

          f)   Report of Independent Public Accountants.

     2.   FINANCIAL STATEMENT SCHEDULES

          II. Valuation and Qualifying Accounts.

     3.   EXHIBITS

<Table>
EXHIBIT NO.                     SUBJECT                                         PAGE
-----------                     -------                                         ----
<S>            <C>                                                              <C>
    3.1        Restated Articles of Incorporation.                                *

    3.2        Amendment to Articles of Incorporation dated September 24, 1993.   *
</Table>

                                       30
<Page>

<Table>
EXHIBIT NO.                     SUBJECT                                         PAGE
-----------                     -------                                         ----
<S>            <C>                                                              <C>
    3.3        By-laws of the Company adopted August 11, 1994.                    *

   10.1        Severance Agreement dated June 15, 1989 between Hathaway           *
               Corporation and Richard D. Smith. Incorporated by reference to
               Exhibit 10n(ii) to the Company's 1989 annual Report and Form 10-K
               for the fiscal year ended June 30, 1989.

   10.2        The 1989 Incentive and Non-Qualified Stock Option Plan dated       *
               January 4, 1989. Incorporated by reference to the Company's Form
               S-8 filed October 25, 1990.

   10.3        Joint Venture Agreement between Zibo Kehui Electric Company and    *
               Hathaway Instruments Limited, for the establishment of Zibo Kehui
               Electric Company Ltd., dated July 25, 1993. Incorporated by
               reference to Exhibit 10.15 to the Company's Form 10-K for the
               fiscal year ended June 30, 1994.

   10.4        Promissory Note from Richard D. Smith to Hathaway Corporation      *
               dated October 26, 1993. Incorporated by reference to Exhibit
               10.23 to the Company's Form 10-K for the fiscal year ended June
               30, 1994.

   10.5        Joint Venture Contract between Si Fang Protection and Control      *
               Company Limited and Hathaway Corporation for the establishment of
               Beijing Hathaway Si Fang Protection and Control Company, Ltd.,
               dated March 2, 1994. Incorporated by reference to Exhibit 10.26
               to the Company's Form 10-K for the fiscal year ended June 30,
               1994.

   10.6        Joint Venture Contract between Wuhan Electric Power Instrument     *
               Factory, Beijing Huadian Electric Power Automation Corporation
               and Hathaway Corporation for the establishment of Hathaway Power
               Monitoring Systems Company, Ltd., dated June 12, 1995.
               Incorporated by reference to Exhibit 10.29 to the Company's Form
               10-K for the fiscal year ended June 30, 1995.

   10.7        Technology License Contract between Wuhan Electric Power           *
               Instrument Factory and Beijing Huadian Electric Power Automation
               Corporation on behalf of Hathaway Power Monitoring Systems
               Company, Ltd. and Hathaway Corporation dated June 12, 1995.
               Incorporated by reference to Exhibit 10.30 to the Company's Form
               10-K for the fiscal year ended June 30, 1995.

   10.8        Supplementary Agreement between Wuhan Electric Power Instrument    *
               Factory, Beijing Huadian Electric Power Automation Corporation
               and Hathaway Corporation dated August 30, 1995. Incorporated by
               reference to Exhibit 10.31 to the Company's Form 10-K for the
               fiscal year ended June 30, 1995.

   10.9        Management Incentive Bonus Plan for the fiscal year ending June    *
               30, 1996. Incorporated by reference to Exhibit 10.28 to the
               Company's Form 10-K for the fiscal year ended June 30, 1995.**

   10.10       Purchase Agreement between Hathaway Corporation and Tate           *
               Engineering Services Corporation dated October 10, 1996, for the
               Company's purchase of all the issued and outstanding stock of
               Tate Integrated Systems, Inc. Incorporated by reference to the
               Company's Form 8-K dated October 25, 1996.

   10.11       Loan and Security Agreement dated May 7, 1998 between Hathaway     *
               Corporation and certain subsidiaries of Hathaway Corporation and
               Silicon Valley Bank. Incorporated by reference to Exhibit 10.16
               to the Company's Form 10-K for the fiscal year ended June 30,
               1998.

</Table>


                                       31
<Page>
<Table>
EXHIBIT NO.                     SUBJECT                                         PAGE
-----------                     -------                                         ----
<S>            <C>                                                              <C>
   10.12       Schedule to Loan and Security Agreement dated May 7, 1998 between  *
               Hathaway Corporation and certain subsidiaries of Hathaway
               Corporation and Silicon Valley Bank. Incorporated by reference to
               Exhibit 10.17 to the Company's Form 10-K for the fiscal year
               ended June 30, 1998.

   10.13       Amendment Number One dated August 1, 1998 to the 1989 Incentive    *
               and Non-Qualified Stock Option Plan. Incorporated by reference to
               Exhibit 10.18 to the Company's Form 10-K for the fiscal year
               ended June 30, 1998.

   10.14       The Amended 1991 Incentive and Nonstatutory Stock Option Plan      *
               dated August 1, 1998. Incorporated by reference to Exhibit 10.19
               to the Company's Form 10-K for the fiscal year ended June 30,
               1998.

   10.15       Employment Agreement between Hathaway Corporation and Richard D.   *
               Smith, effective August 13, 1998.

   10.16       Consulting Agreement between Hathaway Corporation and Eugene E.    *
               Prince dated September 1, 1998.

   10.17       The Year 2000 Stock Incentive Plan. Incorporated by reference to   *
               Exhibit A to the Company's Proxy Statement dated September 21,
               2000.

   10.18       The 2001 Employee Stock Purchase Plan. Incorporated by reference   *
               to Exhibit B to the Company's Proxy Statement dated September 21,
               2000.

   10.19       The Agreement for Assignment of Equity Interest in Hathaway Si     *
               Fang Protection and Control Co. Ltd. Incorporated by reference to
               Exhibit 99.1 to the Company's Form 8-K dated July 20, 2001.

   21          List of Subsidiaries                                              37

   22         Definitive Proxy Statement dated September 21, 2001 for the         *
              Registrant's 2001 Annual Meeting of Shareholders.

   23         Consent of ARTHUR ANDERSEN LLP.                                    33

</Table>

     *    These documents have been filed with the Securities and Exchange
          Commission and are incorporated herein by reference.

     **   The Management Incentive Bonus Plans for the fiscal years ending June
          30, 1997, 1998, 1999, and 2000 are omitted because they are
          substantially identical in all material respects to the Management
          Incentive Bonus Plan for the fiscal year ending June 30, 1996
          previously filed with the Commission, except for the fiscal years to
          which they apply.

(b)  Reports on Form 8-K.

     No reports on Form 8-K were filed during the fourth quarter of fiscal 2001.


                                       32
<Page>

SIGNATURES

Pursuant to the requirements of 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.

                                        HATHAWAY CORPORATION

                                        By  /s/ Richard D. Smith
                                            -----------------------
                                            Richard D. Smith
                                            President, Chief Executive Officer
                                            and Chief Financial Officer

                                        Date: September 21, 2001


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 in
the capacities and on the dates indicated.

       SIGNATURES                 TITLE                               DATE

/s/ Richard D. Smith     President, Chief Executive           September 21, 2001
----------------------   Officer, Chief Financial
Richard D. Smith         Officer and Director


/s/ Eugene E. Prince     Chairman of the Board of             September 21, 2001
----------------------   Directors
Eugene E. Prince


/s/ George J. Pilmanis   Director                             September 21, 2001
----------------------
George J. Pilmanis


/s/ Delwin D. Hock       Director                             September 21, 2001
----------------------
Delwin D. Hock


/s/ Graydon D. Hubbard   Director                             September 21, 2001
----------------------
Graydon D. Hubbard