**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**








**FORM
      10-Q**








**[
      x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
      THE**


**SECURITIES
      EXCHANGE ACT OF 1934**





**For
      the quarterly period ended: December 31, 2006**





**[   
      ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**





**For
      the transition period from to**





**Commission
      file number 0-18083**








**Williams
      Controls, Inc.**


(Exact
      name of registrant as specified in its charter)








**Delaware**
                (State
                  or other jurisdiction of
                incorporation
                  or organization)
              
              **84-1099587**
                (I.R.S.
                  Employer
                Identification
                  No.)**14100
                  SW 72nd Avenue,**
                **Portland,
                  Oregon**
                (Address
                  of principal executive office)
              
              **97224**
                (zip
                  code)


**(503)
      684-8600**


(Registrant's
      telephone number, including area code)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.


Yes
      [ X
      ] No
      [     ]





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
      Accelerated Filer [     ]    Accelerated
      Filer [     ]    Non-Accelerated
      Filer [ X ]





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act)


Yes
      [     ] No [ X ]





The
      number of shares outstanding of the registrant's common stock


as
      of
      January 31, 2007: 7,450,244








**Williams
      Controls, Inc.**


**December
      31, 2006**





**Table
      of Contents**











Page
              Number**Part
                I. Financial Information**Item
                1. Financial
                Statements (unaudited)Condensed
                Consolidated Balance Sheets, December 31, 2006
                andSeptember
                30, 2006
            1Condensed
                Consolidated Statements of Operations, three
                month periodsended
                December 31, 2006 and 2005
            2Condensed
                Consolidated Statements of Cash Flows, three
                month periodsended
                December 31, 2006 and 2005
            3Notes
                to Unaudited Condensed Consolidated Financial
                Statements
            4Item
                2. Management’s
                Discussion and Analysis of Financial Conditionand
                Results of Operations
            13Item
                3. Quantitative
                and Qualitative Disclosures About Market
                Risk
            20Item
                4. Controls
                and Procedures
            21**Part
                II. Other Information**Item
                1. Legal
                Proceedings
            22Item
                1A.         Risk
                Factors
            22Item
                2.            Unregistered Sales of Equity Securities and Use
                of
                Proceeds
            22Item
                3.            Defaults Upon Senior Securities
            22Item
                4.            Submission of Matters to a Vote of Security
                Holders
            22Item
                5. Other
                Information
            22Item
                6. Exhibits
            22Signature
                Page
            24










**PART
      I - FINANCIAL INFORMATION**





**Item
      1. Financial Statements**


**Williams
      Controls, Inc.**


**Condensed
      Consolidated Balance Sheets**


**(Dollars
      in thousands, except share and per share information)**


**(Unaudited)**





**December
                31,**
              **2006**
            
            **September
                30,**
              **2006****ASSETS**Current
                Assets:Cash and cash equivalents
            
            $
            2,461
            
            $
            2,530Trade accounts receivable, less allowance of
              $43
                and $35 at
                December 31, 2006 and September 30
              2006,
                respectively
            
            
            8,629
            
            
            9,368Other
                accounts receivable
            
            
            614
            
            
            1,231Inventories
            
            
            10,759
            
            
            9,918Deferred
                income taxes
            
            
            657
            
            
            657Prepaid
                expenses and other current assets
            
            
            889
            
            
            333Total current assets
            
            
            24,009
            
            
            24,037Property,
                plant and equipment, net
            
            
            8,695
            
            
            8,457Deferred
                income taxes
            
            
            2,228
            
            
            2,228Other
                assets, net
            
            
            983
            
            
            1,027Total assets
            
            $
            35,915
            
            $
            35,749**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                Liabilities:Accounts payable
            
            $
            5,129
            
            $
            6,504Accrued expenses
            
            
            5,215
            
            
            5,528Current portion of employee benefit obligations
            
            
            1,297
            
            
            1,669Current portion of long-term debt
            
            
            3,578
            
            
            3,996Total current liabilities
            
            
            15,219
            
            
            17,697Long-term
                Liabilities:Long-term debt
            
            
            4,250
            
            
            4,544Employee benefit obligations
            
            
            5,122
            
            
            4,991Other
                long-term liabilities
            
            
            260
            
            
            255Commitments
                and contingenciesStockholders’
                Equity:Preferred Stock ($.01 par value, 50,000,000 authorized) Series
                C
              (0 issued and outstanding at December 31, 2006 and September
                30,
              2006)
            
            
            -
            
            
            -Common stock ($.01 par value, 12,500,000 authorized;
                7,450,244
              and 7,432,844 issued and outstanding at December 31, 2006 and
              September 30, 2006, respectively)
            
            
            74
            
            
            74Additional paid-in capital
            
            
            34,261
            
            
            34,014Accumulated deficit
            
            
            (17,871
            )
            
            (20,414
            )Treasury stock (21,700 shares at December 31, 2006 and
              September 30, 2006)
            
            
            (377
            )
            
            (377
            )Accumulated other comprehensive loss
            
            
            (5,023
            )
            
            (5,035
            )Total stockholders’ equity
            
            
            11,064
            
            
            8,262Total liabilities and stockholders’ equity
            
            $
            35,915
            
            $
            35,749





See
      accompanying notes to Unaudited Condensed Consolidated Financial
      Statements.


**1**


**Williams
      Controls, Inc.**


**Condensed
      Consolidated Statements of Operations**


**(Dollars
      in thousands, except share and per share information)**


**(Unaudited)**





**Three
                Month Period Ended**
              **December
                31,****2006**
            
            **2005**Net
                sales
            
            $
            18,442
            
            $
            16,132Cost
                of sales
            
            
            12,150
            
            
            10,788Gross
                profit
            
            
            6,292
            
            
            5,344Operating
                expenses:Research and development
            
            
            830
            
            
            848Selling
            
            
            520
            
            
            448Administration
            
            
            1,273
            
            
            1,303Realignment of operations
            
            
            176
            
            
            58Total operating expenses
            
            
            2,799
            
            
            2,657Operating
                income
            
            
            3,493
            
            
            2,687Other
                (income) expenses:Interest income
            
            
            (36
            )
            
            (27
            )Interest expense
            
            
            258
            
            
            318Other income, net
            
            
            (603
            )
            
            (8
            )Total other (income) expenses
            
            
            (381
            )
            
            283Income
                before income taxes
            
            
            3,874
            
            
            2,404Income
                tax expense
            
            
            1,331
            
            
            877Net
                income
            
            $
            2,543
            
            $
            1,527Net
                income per common share - basic
            
            $
            0.34
            
            $
            0.20Weighted
                average shares used in per share calculation - basic
            
            
            7,439,746
            
            
            7,457,107Net
                income per common share - diluted
            
            $
            0.33
            
            $
            0.20Weighted
                average shares used in per share calculation - diluted
            
            
            7,693,601
            
            
            7,595,673





See
      accompanying notes to Unaudited Condensed Consolidated Financial
      Statements.


**2**


**Williams
      Controls, Inc.**


**Condensed
      Consolidated Statements of Cash Flows**


**(Dollars
      in thousands)**


**(Unaudited)**




**Three
                Month Period Ended**
              **December
                31,****2006**
            
            **2005**Cash
                flows from operating activities:Net income
            
            $
            2,543
            
            $
            1,527Adjustments
                to reconcile net income to net cash provided by
              operating
                activities:Depreciation and amortization
            
            
            502
            
            
            296Deferred income taxes
            
            
            -
            
            
            760Stock based compensation
            
            
            114
            
            
            104Gain from disposal of fixed assets
            
            
            (1
            )
            
            -Changes
                in operating assets and liabilitiesReceivables, net
            
            
            1,356
            
            
            634Inventories
            
            
            (841
            )
            
            (993
            )Accounts payable and accrued expenses
            
            
            (1,599
            )
            
            (706
            )Other
            
            
            (788
            )
            
            (490
            )Net
                cash provided by operating activities
            
            
            1,286
            
            
            1,132Cash
                flows from investing activities:Purchases of property, plant and equipment
            
            
            (687
            )
            
            (493
            )Net
                cash used in investing activities
            
            
            (687
            )
            
            (493
            )Cash
                flows from financing activities:Net payments of debt
            
            
            (712
            )
            
            (864
            )Repurchase of common stock
            
            
            -
            
            
            (3,200
            )Net proceeds from exercise of stock options
            
            
            44
            
            
            11Net
                cash used in financing activities
            
            
            (668
            )
            
            (4,053
            )Net
                increase in cash and cash equivalents
            
            
            (69
            )
            
            (3,414
            )Cash
                and cash equivalents at beginning of period
            
            
            2,530
            
            
            5,052Cash
                and cash equivalents at end of period
            
            $
            2,461
            
            $
            1,638Supplemental
                disclosure of cash flow information:Interest paid
            
            $
            221
            
            $
            277Income taxes paid
            
            $
            -
            
            $
            2





See
      accompanying notes to Unaudited Condensed Consolidated Financial
      Statements.





**3**




**Williams
      Controls, Inc.**


**Notes
      to Unaudited Condensed Consolidated Financial Statements**


**Three
      Month periods ended December 31, 2006 and 2005**


**(Dollars
      in thousands, except share and per share amounts)**


**(Unaudited)**





**Note
      1. Organization**





Williams
      Controls, Inc., including its wholly-owned subsidiaries as follows, are
      hereinafter referred to as the “Company,” “Registrant,” “we,” “our,” or
“us”:





**Active
      Subsidiaries** ***-*** Williams
      Controls Industries, Inc. (“Williams”); Williams (Suzhou) Controls Co. Ltd.
      (“Williams Controls Asia”); and Williams Controls Europe GmbH (“Williams
      Controls Europe”).





**Inactive
      Subsidiaries** ***-*** Aptek
      Williams, Inc. (“Aptek”); Premier Plastic Technologies, Inc. (“PPT”); ProActive
      Acquisition Corporation (“ProActive”); WMCO-Geo (“GeoFocus”); NESC Williams,
      Inc. (“NESC”); Williams Technologies, Inc. (“Technologies”); Williams World
      Trade, Inc. (“WWT”); Techwood Williams, Inc. (“TWI”); Agrotec Williams, Inc.
      (“Agrotec”) and our 80% owned subsidiaries Hardee Williams, Inc. (“Hardee”) and
      Waccamaw Wheel Williams, Inc. (“Waccamaw”).





**Note
      2. Basis of Presentation**





The
      accompanying unaudited interim condensed consolidated financial statements
      have
      been prepared by the Company and, in the opinion of management, reflect all
      material normal recurring adjustments necessary to present fairly the Company’s
      financial position as of December 31, 2006 and the results of operations and
      cash flows for the three month periods ended December 31, 2006 and 2005. The
      results of operations for the three month period ended December 31, 2006 are
      not
      necessarily indicative of the results to be expected for the entire fiscal
      year.





Certain
      information and footnote disclosures made in the last Annual Report on Form
      10-K
      have been condensed or omitted for the interim consolidated statements. Certain
      costs are estimated for the full year and allocated to interim periods based
      on
      activity associated with the interim period. Accordingly, such costs are subject
      to year-end adjustment. It is management’s opinion that, when the interim
      consolidated statements are read in conjunction with the September 30, 2006
      annual report on Form 10-K, the disclosures are adequate to make the information
      presented not misleading. The interim consolidated financial statements include
      the accounts of the Company and its subsidiaries. All significant intercompany
      balances and transactions have been eliminated in consolidation.





The
      preparation of consolidated financial statements in conformity with accounting
      principles generally accepted in the United States requires management to make
      estimates and assumptions, based upon all known facts and circumstances, that
      affect the reported amounts of assets and liabilities, disclosure of contingent
      assets and liabilities at the date of the consolidated financial statements
      and
      the reported amounts of revenues and expenses during the reported periods.
      Management makes these estimates using the best information available at the
      time the estimates are made; however, actual results could differ materially
      from these estimates. Estimates are used in accounting for, among other things,
      pension and post-retirement benefits, product warranty, excess and obsolete
      inventory, allowance for doubtful accounts, useful lives for depreciation and
      amortization, future cash flows associated with the evaluation of impairment
      of
      long-lived assets, deferred tax assets, stock options and commitments and
      contingencies.





Certain
      reclassifications of amounts reported in the prior period financial statements
      have been made to conform to classifications used in the current period
      financial statements.





At
      the
      March 2, 2006 Annual Meeting of stockholders, the stockholders of the Company
      approved a one-for-six reverse stock split for each share of common stock
      outstanding as of January 27, 2006. The Company’s share and per share amounts of
      common stock for fiscal year 2006 have been restated to reflect the effect
      of
      the one-for-six reverse stock split for all periods presented. The reverse
      split
      was effective March 16, 2006.




**4**


**Note
      3. Realignment of Operations**





During
      the second quarter of fiscal year 2006, the Company announced a plan for
      realignment of its Portland, Oregon manufacturing operations as part of ongoing
      efforts to focus on its core product competencies and improve its global
      competitiveness. The realignment plan consists of outsourcing all of the
      Company’s die casting and machining operations to high-quality suppliers,
      primarily in Asia, and relocating of the Company’s assembly operations for the
      majority of its pneumatic products to its manufacturing facility in Suzhou,
      China. In conjunction with the realignment, the Company expects to eliminate
      approximately 47 hourly and 2 salaried positions from its Portland, Oregon
      headquarters during fiscal 2007. As part of this realignment plan, the Company
      expects to incur a one-time termination benefit with those employees affected
      by
      the realignment. In accordance with Statement of Financial Accounting Standards
      (“SFAS”) No. 146, “Accounting for Costs Associated with Exit or Disposal
      Activities” and related guidance, a one-time benefit arrangement must meet
      certain criteria in order for a Company to recognize a liability for such
      one-time benefits. The realignment plan must establish the terms of the benefit
      arrangement, including the benefits that employees will receive upon
      termination, in sufficient detail to enable employees to determine the type
      and
      amount of benefits they will receive if they are involuntarily terminated.
      The
      Company did not establish the terms of the benefits to employees in sufficient
      detail until after it began its negotiations with the United Automobile Workers
      of America union bargaining committee during the first week of April 2006.
      As
      such, the Company did not begin to record any liability for expected termination
      benefits until the third quarter ended June 30, 2006. The Company's preliminary
      estimates of the total costs of the realignment, including supplier and parts
      qualification, refurbishment of tools, accelerated depreciation on certain
      assets, legal costs, and the one-time termination benefits to employees,
      are in the range of $1.5 million. The Company is not able at this time to
      provide estimates for each type of cost, or for the charge that will result
      in
      future cash expenditures, as the actual costs will be based on a variety of
      factors. The Company recorded realignment expenses of $176 and $58 for the
      three
      month periods ended December 31, 2006 and 2005, respectively, which were
      recorded in operating expenses in the accompanying condensed consolidated
      statements of operations. A liability of $105 related to employee termination
      benefits was recorded in accrued liabilities for the first quarter of fiscal
      year 2007. No employee termination benefits were recorded in the first quarter
      of fiscal year 2006.





**Note
      4. Accounting for Stock Based Compensation**





In
      the
      first quarter of fiscal year 2006, the Company adopted Statement of Financial
      Accounting Standards (“SFAS”) No. 123R, “Share Based Payment,” which revises
      SFAS No. 123, “Accounting for Stock-Based Compensation.” Prior to fiscal year
      2006, the Company accounted for its stock-based compensation plans using the
      intrinsic value-based method under Accounting Principles Board Opinion No.
      25
      (APB 25). No compensation expense was recorded for stock options granted to
      employees prior to October 1, 2005 under the intrinsic value
      method.





SFAS
      No.
      123R applies to new awards and to awards modified, repurchased, or cancelled
      after the required effective date, as well as to the unvested portion of awards
      outstanding as of the required effective date. The effective date for the
      Company was October 1, 2005. The Company uses the Black-Scholes option pricing
      model to value its stock option grants under SFAS No. 123R, applying the
“modified prospective method” for existing grants which requires the Company to
      value stock options prior to its adoption of SFAS No 123R under the fair value
      method and expense the unvested portion over the remaining vesting period.
      Stock-based compensation expense is recognized on a straight-line basis over
      the
      requisite service period, which equals the vesting period. Under SFAS No 123R,
      the Company is also required to estimate forfeitures in calculating the expense
      related to stock-based compensation. In addition, SFAS No. 123R requires the
      Company to reflect the benefits of tax deductions in excess of recognized
      compensation cost to be reported as a financing cash inflow upon
      adoption.





The
      Company currently has two qualified stock option plans. The Restated 1993 Stock
      Option Plan (the “1993 Plan”) reserves an aggregate of 750,000 shares of the
      Company’s common stock for the issuance of stock options, which may be granted
      to employees, officers and directors of and consultants to the Company. Under
      the terms of the 1993 Plan, the Company may grant “incentive stock options” or
“non-qualified options” with an exercise price of not less than the fair market
      value on the date of grant. Options granted under the 1993 Plan have a vesting
      schedule, which is typically five years, determined by the Compensation
      Committee of the Board of Directors and expire ten years after the date of
      grant. The non-employee Director Plan (the “1995 Plan”) reserves an aggregate of
      66,666 shares of the Company’s common stock for the issuance of stock options,
      which may be granted to non-employee directors of the Company. Under this plan
      the non-employee directors are each automatically granted 1,666 options at
      a
      price equal to the market value on the date of grant which is the date of the
      annual stockholders’ meeting each year, exercisable for 10 years after the date
      of the grant. These options are exercisable as to 25% of the shares thereby
      on
      the date of grant and as to an additional 25%, cumulatively on the first, second
      and third anniversaries of the date of grant.





**5**


As
      of
      December 31, 2006, there was $1,286 of total unrecognized compensation costs
      related to nonvested stock options. That cost is expected to be recognized
      over
      a weighted average period of 3.6 years. For the three month period ended
      December 31, 2006, the Company’s total stock-based compensation expense was $114
      ($104 net of tax). Stock-based compensation expense was recorded in cost of
      sales and operating expenses in the amounts of $16 and $98, respectively, in
      the
      accompanying condensed consolidated statement of operations. For the three
      month
      period ended December 31, 2005, the Company’s total stock-based compensation
      expense was $104 ($92 net of tax). Stock-based compensation expense was recorded
      in cost of sales and operating expenses in the amounts of $11 and $93,
      respectively, in the accompanying condensed consolidated statement of
      operations.





The
      fair
      value of each option grant is estimated on the date of grant using the
      Black-Scholes option pricing model with the following weighted average
      assumptions used for grants issued during the three month periods ended December
      31, 2006 and 2005.




**Three
                Month Period Ended**
              **December
                31,****2006**
            
            **2005**Risk-free
                interest rate
            
            4.60%
            
            4.56%Expected
                dividend yield
            
            0%
            
            0%Expected
                term
            
            6.5
                years
            
            6.4
                yearsExpected
                volatility
            
            86%
            
            87%





The
      expected term of options granted represents the weighted average period the
      stock options are expected to remain outstanding and is calculated using the
      simplified method under SAB 107, which expresses the view of the SEC Staff
      regarding interaction between SFAS No. 123R and certain SEC rules and
      regulations and provides the Staff’s views regarding the valuation of
      share-based payment arrangements for public companies. Expected volatilities
      are
      based on the historical volatility of the Company’s common stock.





The
      following table summarizes stock options outstanding as of December 31, 2006
      as
      well as activity during the three month period then ended.




**Shares**
            
            **Weighted
                Average Exercise Price**Outstanding
                at September 30, 2006
            
            586,255
            
            $
                5.85Granted
            
            24,068
            
            14.03Exercised
            
            (10,999)
            
            4.00Forfeited
            
            (1,266)
            
            8.22Outstanding
                at December 31, 2006
            
            598,058
            
            6.21Exercisable
                at December 31, 2006
            
            300,696
            
            $
                5.90





At
      December 31, 2006, the weighted average remaining contractual term of options
      outstanding and options exercisable was 6.9 years and 6.1 years,
      respectively.





The
      aggregate intrinsic value of options outstanding and options exercisable at
      December 31, 2006 was $4,967 and $2,594, respectively (the intrinsic value
      of a
      stock option is the amount by which the market value of the underlying stock
      exceeds the exercise price of the option). The aggregate intrinsic value of
      options outstanding and options exercisable at December 31, 2005 was $3,418
      and
      $1,316, respectively. The weighted average grant date fair value of stock
      options granted during the three month periods ended December 31, 2006 and
      2005
      was $10.45 and $7.56 per share, respectively. The intrinsic value of all stock
      options exercised during the three month period ended December 31, 2006 was
      $109. Cash received from the exercise of stock options for the three month
      period ended December 31, 2006 was $44. The intrinsic value of all stock options
      exercised during the three month period ended December 31, 2005 was
      $18.





**Note
      5. Comprehensive Income**





SFAS
      No.
      130, “Reporting Comprehensive Income," requires companies to report a measure of
      all changes in equity except those resulting from investments by owners and
      distributions to owners. Total comprehensive income for the three month periods
      ended December 31, 2006 and 2005 was $2,555 and $1,528, respectively, and
      consisted of net income and foreign currency translation adjustments. As of
      December 31, 2006, accumulated other comprehensive loss was $5,023 and consisted
      of accumulated benefit obligations in excess of the plan assets for both the
      Hourly Employees pension plan and the Salaried Employees pension plan and the
      effect of foreign currency translation adjustments.




**6**


**Note
      6. Earnings Per Share**





Basic
      earnings per share ("EPS") and diluted EPS are computed using the methods
      prescribed by SFAS No. 128, "Earnings Per Share". Basic EPS is based on the
      weighted-average number of common shares outstanding during the period. Diluted
      EPS is based on the weighted-average number of common shares outstanding and
      the
      dilutive impact of common equivalent shares outstanding.





Following
      is a reconciliation of basic EPS and diluted EPS:





**Three
                Month Period Ended**
              **December
                31, 2006**
            
            **Three
                Month Period Ended**
              **December
                31, 2005**Income
            
            Shares
            
            Per
                Share Amount
            
            Income
            
            Shares
            
            Per
                Share AmountBasic
                EPS -
            
            $
            2,543
            
            
            7,439,746
            
            $
            0.34
            
            $
            1,527
            
            
            7,457,107
            
            $
            0.20Effect
                of dilutive securities -Stock options
            
            
            
            
            
            253,855
            
            
            
            
            
            
            
            
            138,566Diluted
                EPS -
            
            $
            2,543
            
            
            7,693,601
            
            $
            0.33
            
            $
            1,527
            
            
            7,595,673
            
            $
            0.20





For
      the
      three month period ended December 31, 2006, the Company had options covering
      47,034 shares that were not considered in the dilutive EPS calculation since
      they would have been antidilutive. For the three month period ended December
      31,
      2005, the Company had options and warrants covering 55,508 shares not considered
      in the dilutive EPS calculation since they would have been
      antidilutive.





**Note
      7. Inventories**





Inventories
      consist of the following:




**December
                31,**
              **2006**
            
            **September
                30,**
              **2006**Raw
                materials
            
            $
            8,087
            
            $
            7,589Work
                in process
            
            
            173
            
            
            227Finished
                goods
            
            
            2,499
            
            
            2,102$
            10,759
            
            $
            9,918




**Note
      8. Patent License Agreements**





During
      fiscal 2003 the Company obtained a license agreement for use of an adjustable
      pedal design for its heavy truck and transit bus product lines. The agreement
      is
      for a period of three years and is renewed annually if certain sales thresholds
      are met. The Company is obligated to make royalty payments based on the number
      of units it sells. For the three month period ended December 31, 2006, the
      Company sold adjustable pedals and recorded an accrual for royalties related
      to
      these sales of $1. No adjustable pedal units were sold during the three month
      period ended December 31, 2005. Additionally, the initial license payments
      of
      $200 that were capitalized will be amortized based on the projection of units
      sold over the next five years. Based on these projections, the Company
      anticipates amortizing four dollars for every adjustable pedal sold. As of
      December 31, 2006, the Company has amortized approximately $1 related to the
      number of units sold. The Company has focused additional resources in the
      adjustable pedal market and expects sales of these products to continue to
      grow
      throughout fiscal 2007 and beyond.





Additionally,
      as part of the sale of the Company’s passenger car and light truck product lines
      to Teleflex Incorporated on September 30, 2003, the Company obtained the right
      to use certain of Teleflex’s adjustable pedal patents in exchange for Teleflex
      receiving licenses for certain of the Company’s patents.





**7**


In
      fiscal
      2005, the Company entered into an agreement to license non-contacting Hall
      effect sensor technology. The Company is using this license to internally
      produce non-contacting sensors for use in its electronic throttle controls.
      The
      initial licensing fee of $140 was paid and capitalized during fiscal 2005.
      The
      Company amortizes this license fee over a five year period beginning once units
      are produced and sold. For the three month period ended December 31, 2006,
      the
      Company amortized $7 of this initial licensing fee. In addition, the Company
      will make royalty payments based on the number of units sold, which includes
      minimum yearly royalties beginning in year three of this agreement. As of
      December 31, 2006, the Company recorded royalty payments of $7 related to units
      sold during fiscal 2007. The Company capitalized, as part of the license fee,
      $229 which is equal to the present value of the minimum royalty payment
      obligation. This agreement is for a period of ten years and is renewed annually
      based on written mutual agreement. This agreement may be terminated by the
      licensor after four years if certain sales thresholds are not met.





**Note
      9. Settlement of Accounts Payable**





Included
      in the accompanying condensed consolidated balance sheet is approximately $455
      of old accounts payable related to closed insolvent subsidiaries of the Company.
      In accordance with SFAS No. 140 “Accounting for Transfers and Servicing of
      Financial Assets and Extinguishments of Liabilities”, a debtor can only relieve
      itself of a liability if it has been extinguished. Accordingly, a liability
      is
      considered extinguished if (a) the debtor pays the creditor and is relieved
      of
      its obligation for the liability or (b) the debtor is legally released from
      being the primary obligor under the liability, either judicially or by the
      creditor. During the first quarter of fiscal 2007 and 2006, the Company was
      judicially released from and reversed $589 and $14, respectively, of old
      accounts resulting in a gain, which has been recorded in other (income) expense
      in the accompanying condensed consolidated statements of operations. The Company
      expects to reverse amounts in future periods based on the recognition of the
      liabilities being judicially released in accordance with SFAS No. 140 of $300
      remaining in fiscal 2007; $90 in fiscal 2010; and $65 in fiscal 2011 -
      2016.





**Note
      10. Debt**





In
      September 2004, the Company entered into a $25,000 senior secured lending
      facility with Merrill Lynch, consisting of an $8,000 revolving loan facility
      and
      a $17,000 term loan. The loans are secured by substantially all the assets
      of
      the Company. Borrowings under the revolving loan facility are subject to a
      borrowing base equal to 85% of eligible accounts receivables and 60% of eligible
      inventories. Interest rates under the new agreement are based on the election
      of
      the Company of either a LIBOR rate or Prime rate. Under the LIBOR rate option,
      the revolving loan facility will bear interest at the LIBOR rate plus 3.75%
      per
      annum and borrowings under the term loan facility will bear interest at the
      LIBOR rate plus 4.25%. Under the Prime rate option, the revolving loan facility
      will bear interest at the Prime rate plus 2.75% per annum and the term loan
      facility will bear interest at the Prime rate plus 3.25%. Fees under the loan
      agreement include an unused line fee of .50% per annum on the unused portion
      of
      the revolving credit facility.





The
      Company is required to repay the term loan in equal quarterly scheduled payments
      which are computed to repay the loan by the end of the term. The Company is
      entitled to prepay the term loan, in whole or in part, in minimum amounts
      without penalty. Mandatory prepayments of the loans under the term loan are
      required in amounts equal to 75% of the Company’s excess cash flow, as defined
      in the agreement, for each fiscal year and 100% of (i) the insurance or
      condemnation proceeds received in connection with a casualty event, condemnation
      or other loss, less any proceeds reinvested by the Company up to $500 per fiscal
      year; (ii) the net proceeds from issuance of equity or debt securities and
      (iii)
      the net cash proceeds of asset sales or other dispositions subject to customary
      exceptions. The revolving loan facility expires on September 29, 2009, at which
      time all outstanding amounts under the revolving loan facility are due and
      payable. The Company is subject to certain quarterly and annual financial
      covenants. At December 31, 2006, the Company was in compliance with all of
      its
      financial covenants. During the first quarter of fiscal 2006, the Company
      repurchased $3,200 of its common stock from one investor as discussed in Note
      13. The Company obtained a required consent from Merrill Lynch to purchase
      the
      common stock and to include the repurchase payment in the calculation of excess
      cash flow for the year ended September 30, 2005. During the second quarter
      of
      fiscal 2006, the Company paid $2,074 related to the excess cash flow requirement
      for fiscal 2005. Following payment of the excess cash flow requirement in the
      second quarter of fiscal 2006, the Company’s required quarterly scheduled
      principal payments were reduced from $850 to $712. During the second quarter
      of
      fiscal 2007, the Company is required to pay $1,149 related to the excess cash
      flow requirement of fiscal 2006, and the prepayment will reduce the Company’s
      future required quarterly scheduled payments from $712 to $607. This amount
      is
      included in the current portion of long-term debt at December 31, 2006.





**8**


For
      this
      facility, the Company was required to pay Merrill Lynch a commitment fee of
      $500. In addition, the Company must pay Merrill Lynch an annual agency fee
      of
      $25 and reimburse Merrill Lynch for any costs and expenses incurred in
      connection with the completion of the new credit agreement. The commitment
      fee
      and expenses incurred by Merrill Lynch and paid for by the Company have been
      capitalized in the accompanying condensed consolidated balance sheet and are
      being amortized over the five-year life of the loan facility utilizing the
      effective interest method.





The
      Company had available under its revolving credit facility $8,000 at December
      31,
      2006 and September 30, 2006.





The
      Company’s long-term debt consists of the following:





**December
                31, 2006**
            
            **September
                30, 2006**Revolving
                credit facility due September 29, 2009, bearing interest at a variable
                rate.
            
            $
            -
            
            $
            -Term
                loan due September 29, 2009, balance bearing
              interest
                at a variable rate, (9.93% at December 31, 2006)
            
            
            7,828
            
            
            8,5407,828
            
            
            8,540Less
                current portion
            
            
            (3,578
            )
            
            (3,996
            )$
            4,250
            
            $
            4,544





**Note
      11. Product Warranties**





The
      Company establishes a product warranty liability based on a percentage of
      product sales. The liability is based on historical return rates of products
      and
      amounts for significant and specific warranty issues, and is included in accrued
      expenses in the accompanying condensed consolidated balance sheets. Warranty
      is
      limited to a specified time period, mileage or hours of use, and varies by
      product, application and customer. The Company has recorded a liability, which
      in the opinion of management is adequate to cover such warranty costs. Following
      is a reconciliation of the changes in the Company’s warranty liability for the
      three month periods ended December 31, 2006 and 2005:





**Three
                Month**
              **Period
                Ended**
              **December
                31,**
              **2006**
            
            
            
            **Three
                Month**
              **Period
                Ended**
              **December
                31,**
              **2005**Balance
                at September 30, 2006
            
            $
            1,720
            
            Balance
              at September 30, 2005
            
            $
            1,656Payments
            
            
            (107
            )
            Payments
            
            
            (179
            )Additional accruals
            
            
            221
            
            Additional
              accruals
            
            
            334Balance
                at December 31, 2006
            
            $
            1,834
            
            Balance
              at December 31, 2005
            
            $
            1,811





Included
      in the warranty liability at December 31, 2006 are warranty liabilities
      associated with our former passenger car and light truck product lines, which
      were sold on September 30, 2003. The Company recorded a $400 warranty liability
      during 2003 related to products sold from our passenger car and light truck
      product lines in fiscal 2003. The Company’s obligation for products sold by
      these product lines relates only to products sold prior to September 30,
      2003.





**Note
      12. Pension Plans and Post-Retirement Benefits**





The
      Company maintains two pension plans, an hourly employee plan and a salaried
      employee plan. The hourly plan covers certain of the Company’s union employees.
      The salaried plan covers certain salaried employees. During 2003, the Company
      modified the provisions of the salaried plan to limit the number of eligible
      employees to those in the plan at the time of modification and to limit the
      benefits under the plan to those earned to that date. Annual net periodic
      pension costs under the plans are determined on an actuarial basis. The
      Company’s policy is to fund these costs accrued over 15 years and obligations
      arising due to plan amendments over the period benefited. The assets and




**9**


liabilities
      are adjusted annually based on actuarial results. Disclosures regarding the
      components of net periodic benefit cost and contributions of pension plans
      are
      required for interim financial statements and are included below.





***Components
                of Net Periodic Benefit Cost:*****Salaried
                Employees Plan**
            
            **Hourly
                Employees Plan****Three
                Month Period Ended**
              **December
                31,**
            
            **Three
                Month Period Ended**
              **December
                31,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Service
                cost
            
            $
            -
            
            $
            -
            
            $
            29
            
            $
            36Interest
                cost
            
            
            73
            
            
            69
            
            
            112
            
            
            103Expected
                return on plan assets
            
            
            (68
            )
            
            (63
            )
            
            (100
            )
            
            (93
            )Amortization
                of prior service cost
            
            
            -
            
            
            -
            
            
            12
            
            
            13Amortization
                of loss
            
            
            23
            
            
            29
            
            
            62
            
            
            86Net
                periodic benefit cost
            
            $
            28
            
            $
            35
            
            $
            115
            
            $
            145





The
      Company expects total contributions to its pension plans in fiscal 2007 to
      be
      $1,669. As of December 31, 2006, the Company has made contributions of $372.





The
      Company also provides health care and life insurance benefits for certain of
      its
      retired employees. These benefits are subject to deductibles, co-payment
      provisions and other limitations. Disclosures regarding the components of net
      periodic benefit cost and contributions of the Company’s post-retirement plan
      are required for interim financial statements and are included below. The
      Company did not make any contributions to the post-retirement plan for the
      quarters ended December 31, 2006 and 2005.





***Components
                of Net Periodic Benefit Cost:*****Post-Retirement
                Plan****Three
                Month Periods Ended**
              **December
                31,****2006**
            
            **2005**Service
                cost
            
            $
            2
            
            $
            1Interest
                cost
            
            
            55
            
            
            50Amortization
            
            
            (6
            )
            
            (7
            )Net
                periodic benefit cost
            
            $
            51
            
            $
            44




**Note
      13. Related Parties**





During
      the first quarter of fiscal 2006, American Industrial Partners Capital Fund
      III,
      L.P. (“AIP”) sold all of its shares of stock in the Company to three purchasers:
      (i) the Company; (ii) Dolphin Offshore Partners L.P. (“Dolphin”), an affiliate
      of Dolphin Advisors, LLC (“Dolphin Advisors”); and (iii) an investment group
      arranged by Taglich Brothers, Inc. The Company repurchased 416,666 shares at
      $7.68 per share. Dolphin purchased 355,420 shares at $7.68 per share. The
      investment group arranged by Taglich Brothers, Inc. purchased 355,420 shares
      also at $7.68 per share. Peter E. Salas, a member of the Board of Directors
      of
      the Company, is a member of Dolphin Advisors. Douglas E. Hailey, also a member
      of the Board of Directors of the Company, is the Vice President of the
      Investment Banking Division of Taglich Brothers, Inc.




Effective
      with the 2004 recapitalization transaction, the Company entered into an Amended
      and Restated Management Services Agreement (the “Agreement”) with American
      Industrial Partners (“AIP Advisor”) and Dolphin Advisors. AIP Advisor is an
      affiliate of AIP, and Dolphin Advisors is an affiliate of Dolphin Offshore
      Partners, L.P. and Dolphin Direct Equity Partners, L.P. Under the restated
      management services agreement, the Company was required to pay annually $80
      to
      AIP Advisor and $120 to Dolphin Advisors. The Company’s obligation to pay the
      annual fee to AIP Advisor or Dolphin Advisors was to terminate automatically
      as
      of August 1, 2007. In conjunction with AIP’s sale of stock, the obligation under
      the agreement to pay the management fee to AIP Advisor terminated as of October
      1, 2005. Additionally, the Agreement with respect to Dolphin Advisors was
      amended to reduce the annual management fee to $60 and to extend the Agreement
      one year to August 1, 2008.





**10**


During
      the three month period ended December 31, 2006, the Company paid bonuses related
      to fiscal year 2006. As part of the employment agreement with Patrick W.
      Cavanagh, President and Chief Executive Officer, the Company has the option
      to
      pay Mr. Cavanagh a portion of his bonus in shares of common stock of the Company
      as approved by the board of directors. The Company paid $89 of Mr. Cavanagh’s
      bonus related to fiscal year 2006 in shares of common stock , consisting of
      6,401 shares at a price of $13.91 per share. During the three month period
      ended
      December 31, 2005, the Company paid $60 of Mr. Cavanagh’s bonus related to
      fiscal year 2005 in shares of common stock , consisting of 6,223 shares at
      a
      price of $9.66 per share.





**Note
      14. Segment Information**





The
      Company accounts for its segments in accordance with SFAS No. 131 “Disclosures
      about Segments of an Enterprise and Related Information”. During the three month
      periods ended December 31, 2006 and 2005, the Company operated in two geographic
      reportable segments as shown in the table below.





**Three
                Month Periods Ended**
              **December
                31,****2006**
            
            **2005**Revenue
                - External Customers:United
                States
            
            $
            18,302
            
            $
            16,132China
            
            
            140
            
            
            -$
            18,442
            
            $
            16,132Revenue
                - Intersegments:United
                States
            
            $
            483
            
            $
            527China
            
            
            2,432
            
            
            417Other
            
            
            115
            
            
            64Eliminations
            
            
            (3,030
            )
            
            (1,008
            )$
            -
            
            $
            -Income
                before income taxes:United
                States
            
            $
            3,805
            
            $
            2,620China
            
            
            194
            
            
            (122
            )Other
            
            
            (125
            )
            
            (94
            )$
            3,874
            
            $
            2,404





**Note
      15. Contingencies**





The
      Company and its subsidiaries are parties to various pending judicial and
      administrative proceedings arising in the ordinary course of business. The
      Company’s management and legal counsel have reviewed the probable outcome of
      these proceedings, the costs and expenses reasonably expected to be incurred,
      the availability and limits of the Company’s insurance coverage, and the
      Company’s established liabilities. While the outcome of the pending proceedings
      cannot be predicted with certainty, based on its review, the Company believes
      that any unrecorded liability that may result is not more than likely to have
      a
      material effect on the Company’s liquidity, financial condition or results of
      operations.





The
      soil
      and groundwater at our Portland, Oregon facility contains certain contaminants,
      which were deposited from approximately 1968 through 1995. Some of this
      contamination has migrated offsite to a neighboring property. The Company has
      retained an environmental consulting firm to investigate the extent of the
      contamination and to determine what, if any, remediation will be required and
      the associated costs. During the third quarter of fiscal 2004, the Company
      entered into the Oregon Department of Environmental Quality’s voluntary clean-up
      program and during fiscal 2004 the Company established a liability of $950
      for
      this matter. As of December 31, 2006, this liability has been reduced to $560
      to
      reflect expenditures made to complete portions of the investigation and is
      recorded in accrued expenses in the accompanying condensed consolidated balance
      sheet. The Company has made contribution claims for investigation and
      remediation costs against both prior operators of the property and a former
      owner of the property under the Federal Superfund Act and the Oregon Cleanup
      Law. The Company believes it also has a contractual right to indemnification
      from one of the prior operators of the property for a portion of the
      investigation and remediation costs and has notified the prior operator of
      this
      indemnity claim. The Company is exploring the possibility of cooperative
      settlement with both prior operators and the prior owner of the property. The
      Company intends to pursue legal action against the prior owner and these prior
      operators if settlements cannot be reached in a reasonable time. During the
      second quarter of fiscal 2006, Dana Corporation (“Dana”), a prior owner and
      operator from whom the Company has a contractual right to indemnification,
      filed
      a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for
      the
      Southern District of New York.




**11**


The
      Company has filed a proof of Claim against Dana with the Court for the entire
      cost of the investigation and clean-up. At this time it is uncertain how this
      bankruptcy petition will impact the ultimate recovery from Dana, however, the
      Company has not previously reflected any potential recovery in its consolidated
      financial statements. The Company believes that even with a resolution of the
      claims against the prior operators and owner of the property, the Company will
      be liable for some portion of the ultimate costs.




On
      October 1, 2004, the Company was named as a co-defendant in a product liability
      case ( Cuesta
      v. Ford, et al, District Court for Bryant, Oklahoma )
      that
      seeks class action status. The complaint seeks an unspecified amount of damages
      on behalf of the class. The Company believes the claims to be without merit
      and
      intends to vigorously defend against this action. There can be no assurance,
      however, that the outcome of the lawsuit will be favorable to the Company or
      will not have a material adverse effect on the Company’s business, consolidated
      financial condition and results of operations. The Company cannot reasonably
      estimate the possible loss or range of loss at this time. In addition, the
      Company has incurred and will continue to incur substantial litigation expenses
      in defending this litigation.





On
      August
      1, 2005, Mr. Thomas Ziegler ,
      the
      Company’s former president and chief executive officer, filed a suit against the
      Company, American Industrial Partners, L.P.; American Industrial Partners Fund
      III, L.P., and American Industrial Partners Fund III Corporation in the Circuit
      Court of the 15th Judicial Circuit in and for Palm Beach County, Florida. This
      suit is similar to a suit filed by Mr. Ziegler on May 12, 2003 against the
      same
      defendants. The 2003 suit was dismissed without prejudice for failure to
      prosecute. In the suit, Mr. Ziegler alleges the Company breached an “oral
      agreement” with Mr. Ziegler to pay him additional compensation, including a
      bonus of "at least" $500 for certain tasks performed by Mr. Ziegler while he
      was
      the Company's president and chief executive officer and seeks additional
      compensation to which he claims he is entitled. The Company disputes the
      existence of any such agreement and any resulting liability to Mr. Ziegler
      and
      is vigorously defending this action.


**12**


**Williams
      Controls, Inc.**





**Item
      2. Management's Discussion and Analysis of Financial Condition and
      Results of Operations**


**(Dollars
      in thousands, except share and per share amounts)**





This
      section summarizes the significant factors affecting our consolidated results
      of
      operations, financial condition and liquidity position for the three month
      periods ended December 31, 2006 and 2005. This section should be read in
      conjunction with our condensed consolidated financial statements and related
      notes appearing elsewhere in this document. Statements in this report that
      relate to future results and events are based on our current expectations.
      Actual results in future periods may differ materially from those currently
      expected or desired because of a number of risks and uncertainties.





**Overview**





We
      design, manufacture and sell electronic throttle and pneumatic control systems
      for heavy trucks, transit busses and off-road equipment. Electronic throttle
      controls send a signal proportional to throttle position to adjust the speed
      of
      electronically controlled engines. The use of electronically controlled engines
      is influenced primarily by emissions regulations, because these engines
      generally produce lower emissions. The original applications of electronic
      engines and electronic throttle controls were in heavy trucks and transit busses
      in the United States and Europe in the late 1980’s. As a result of the
      continuing implementation of more stringent emissions standards worldwide,
      demand for electronically controlled engines and electronic throttle control
      systems is expanding. Both China and India have announced requirements for
      more
      stringent emissions standards for heavy trucks and transit busses. Additionally,
      worldwide emissions regulations have been enacted that increase the use of
      electronic throttle controls in off-road equipment. We also produce a line
      of
      pneumatic control products, which are sold to the same customer base as our
      electronic throttle controls. These pneumatic products are used for vehicle
      control system applications. We believe that the demand for our products will
      be
      driven by worldwide emissions legislation and the economic cycles for heavy
      trucks, transit busses and off-road equipment.





As
      we
      move forward in fiscal 2007 and beyond, we will continue to work closely with
      our existing and potential customers to design and develop new products and
      adapt existing products to new applications, and to improve the performance,
      reliability and cost-effectiveness of our products.





**Critical
      Accounting Policies and Estimates**





Management's
      discussion and analysis of our financial condition and results of operations
      are
      based on our condensed consolidated financial statements, which have been
      prepared in accordance with accounting principles generally accepted in the
      United States. The preparation of these condensed consolidated financial
      statements requires us to make estimates and judgments that affect the reported
      amounts of assets, liabilities, sales, cost of sales and expenses and related
      disclosure of contingent assets and liabilities. We evaluate our estimates
      on an
      on-going basis. We base our estimates on historical experience and on various
      other assumptions that are believed to be reasonable under the circumstances,
      the results of which form the basis for making judgments about the carrying
      value of assets and liabilities that are not readily apparent from other
      sources. Actual results may differ from these estimates under different
      assumptions or conditions. We believe the following critical accounting policies
      and the related judgments and estimates affect the preparation of our condensed
      consolidated financial statements.





***Revenue
      Recognition***





Revenue
      is recognized at the time of product shipment, which is when title and risk
      of
      loss transfers to customers, and when all of the following have occurred: a
      firm
      sales agreement is in place, pricing is fixed or determinable, and collection
      is
      reasonably assured. Revenues are reported net of estimated returns, rebates
      and
      customer discounts. Discounts and rebates are recorded during the period they
      are earned by the customer.





***Warranty***





We
      provide a warranty covering defects arising from products sold. The product
      warranty liability is based on historical return rates of products and amounts
      for significant and specific warranty issues. The warranty is limited to a
      specified time period, mileage or hours of use, and varies by product,
      application and customer. The Company has recorded a warranty liability, which
      in the opinion of management is adequate to cover such costs. While we believe
      our estimates are reasonable, they are subject to change and such change could
      be material.




**13**


***Legal***





We
      are
      involved in various claims, lawsuits and other proceedings from time to time.
      Such litigation involves uncertainty as to possible losses we may ultimately
      realize when one or more future events occur or fail to occur. In connection
      with such claims and lawsuits, we estimate the probability of losses based
      on
      advice of legal counsel, the outcomes of similar litigation, legislative
      development and other factors. Due to the numerous variables associated with
      these judgments and assumptions, both the precision and reliability of the
      resulting estimates of the related loss contingencies are subject to substantial
      uncertainties. We regularly monitor our estimated exposure to these
      contingencies and, as additional information becomes known, may change our
      estimates significantly. A significant change in our estimates, or a result
      that
      materially differs from our estimates, could have a significant impact on our
      financial position, results of operations and cash flows.





***Environmental***





We
      estimate the costs of investigation and remediation for certain soil and
      groundwater contaminants at our Portland, Oregon facility. The ultimate costs
      to
      the Company for the investigation, remediation and monitoring of this site
      cannot be predicted with certainty due to the often unknown magnitude of the
      pollution or the necessary cleanup, the varying costs of alternative cleanup
      methods, the amount of time necessary to accomplish such cleanups and the
      evolving nature of cleanup technologies and governmental regulations. The
      Company has recognized a liability for environmental remediation costs for
      this
      site in an amount that management believes is probable and reasonably estimable.
      When the estimate of a probable loss is within a range, the minimum amount
      in
      the range is accrued when no estimate within the range is better than another.
      In making these judgments and assumptions, the Company considers, among other
      things, the activity to-date at the site and information obtained through
      consultation with applicable regulatory authorities and third party consultants
      and contractors. The Company regularly monitors its exposure to environmental
      loss contingencies. As additional information becomes known, it is at least
      reasonably possible that a change in the estimated liability accrual will occur
      in the near future.




***Pensions
      and Post-Retirement Benefit Obligations***





Pension
      and post-retirement benefit obligations and net period benefit cost are
      calculated using actuarial models. The most important assumptions that affect
      these computations are the discount rate, expected long-term rate of return
      on
      plan assets, and healthcare cost trend rates. We evaluate these assumptions
      at
      least annually. Other assumptions involve demographic factors such as
      retirement, mortality and turnover. These assumptions are evaluated at least
      annually and are updated to reflect our experience. Actual results in any given
      year will often differ from actuarial assumptions because of economic and other
      factors.





Our
      discount rate assumption is intended to reflect the rate at which retirement
      benefits could be effectively settled based upon the assumed timing of the
      benefit payments. To determine our discount rate, we discount the expected
      benefit payments using the Citigroup Pension Discount Liability Index yield
      curve. The equivalent level interest rate that produces the same present value
      of benefits is then determined. Our assumed rate does not differ significantly
      from this benchmark rate. To determine the expected long-term rate of return
      on
      pension plan assets, we consider the current asset allocations and the
      historical and expected returns on various categories of plan assets obtained
      from our investment portfolio manager. Our post-retirement plan does not contain
      any plan assets.





***Stock-Based
      Compensation Expense***





As
      of
      October 1, 2005, we adopted SFAS No. 123R, which requires us to measure
      compensation cost for all outstanding unvested share-based awards, and awards
      we
      grant, modify, repurchase or cancel in the future, at fair value and recognize
      compensation over the requisite service period for awards expected to vest.
      The
      estimation of stock awards that will ultimately vest requires judgment, and
      to
      the extent actual results differ from our estimates, such amounts will be
      recorded as an adjustment on a prospective basis. We consider many factors
      when
      calculating fair value including estimated stock price volatility, expected
      term
      and expected forfeitures. Factors considered in estimating forfeitures include
      the types of awards, employee class, and historical experience. Actual results
      may differ substantially from these estimates. We recorded $114 and $104 of
      stock-based compensation expense for the three month periods ended
      December 31, 2006 and December 31, 2005 respectively. Stock-based
      compensation expense recorded for the three month period ended December 31,
      2006 included $16 in cost of sales, $9 in research and development, $13 in
      selling and the remaining $76 in administration expense. Stock-based
      compensation expense recorded for the three month period ended December 31,
      2005 included $11 in cost of sales, $6 in research and development, $12 in
      selling and the remaining $75 in administration expense.




**14**


***Income
      Taxes***





For
      each
      jurisdiction that we operate in, we are required to estimate our annual
      effective tax rate together with assessing temporary differences resulting
      from
      differing treatment of items for tax and accounting purposes. These differences
      result in deferred tax assets and liabilities, which are included in our
      condensed consolidated balance sheet. We must also assess the likelihood that
      our deferred tax assets will be recovered from future taxable income and unless
      we believe that recovery is more likely than not, a valuation allowance is
      established. Our income tax provision on the consolidated statement of
      operations would be impacted by changes in the valuation allowance. This process
      is complex and involves significant management judgment in determining our
      provision for income taxes, deferred tax assets and liabilities and any
      valuation allowances recorded against our net deferred tax assets.





**Forward-Looking
      Statements**





This
      report on Form 10-Q contains forward-looking statements within the meaning
      of
      the Private Securities Litigation Reform Act of 1995. Forward-looking statements
      include, without limitation, those statements relating to development of new
      products, the financial condition of the Company and the ability to increase
      distribution of our products. Forward-looking statements can be identified
      by
      the use of forward-looking terminology, such as “may, ” “will, ” “should, ”
“expect, ” “anticipate, ” “estimate, ” “continue, ” “plans, ” “intends, ” or
      other similar terminology. Although we believe that the expectations reflected
      in such forward-looking statements are reasonable, such forward-looking
      statements are subject to risks and uncertainties that could cause actual
      results to differ materially from those indicated by the forward-looking
      statements. These risks and uncertainties are beyond our control and, in many
      cases, we cannot predict the risks and uncertainties that could cause our actual
      results to differ materially from those indicated by the forward-looking
      statements.





The
      forward-looking statements are made as of the date hereof, and, except as
      otherwise required by law, we disclaim any intention or obligation to update
      or
      revise any forward-looking statements or to update the reasons why the actual
      results could differ materially from those projected in the forward-looking
      statements, whether as a result of new information, future events or otherwise.





Investors
      are cautioned to consider the risk factors identified below when considering
      forward-looking statements. If any of these items actually occur, our business,
      results of operations, financial condition or cash flows could be materially
      adversely affected.





**Results
      of Operations**


**Financial
      Summary**


**(Dollars
      in Thousands)**





**Three
                Month Periods Ended**
              **December
                31,****2006**
            
            **2005**
            
            **2005
                to**
              **2006**Net
                sales
            
            $
            18,442
            
            $
            16,132
            
            
            14.3%Cost
                of sales
            
            
            12,150
            
            
            10,788
            
            
            12.6%Gross
                profit
            
            
            6,292
            
            
            5,344
            
            
            17.7%Research
                and development
            
            
            830
            
            
            848
            
            
            (2.1)%Selling
            
            
            520
            
            
            448
            
            
            16.1%Administration
            
            
            1,273
            
            
            1,303
            
            
            (2.3)%Realignment
                of operations
            
            
            176
            
            
            58
            
            
            *NM*Operating
                income
            
            $
            3,493
            
            $
            2,687
            
            
            30.0%






**15**




As
                a percentage of net sales:Cost of sales
            
            
            65.9%
            
            
            66.9%Gross margin
            
            
            34.1%
            
            
            33.1%Research and development
            
            
            4.5%
            
            
            5.3%Selling
            
            
            2.8%
            
            
            2.8%Administration
            
            
            6.9%
            
            
            8.1%Realignment of operations
            
            
            1.0%
            
            
            0.4%Operating income
            
            
            18.9%
            
            
            16.7%





**Comparative
      - Three month periods ended December 31, 2006 and 2005**





*NM
      =
      Not Meaningful*


**Percent
                Change****For
                the Three Month Period Ended December 31:**
            
            **2006**
            
            **2005**
            
            **2006
                to 2005**Net
                sales
            
            $18,442
            
            $16,132
            
            14.3%





Net
      sales
      to our heavy truck, transit bus and off-road customers increased $2,310 in
      the
      first quarter of fiscal 2007 compared to the first quarter of fiscal 2006,
      primarily due to increased sales volumes of electronic throttle control systems,
      specifically in the North American, Asian and European markets, and to a lesser
      extent increases in sales of our pneumatic control systems. Net sales to our
      customers in Asia increased approximately 69% over the prior year quarter,
      whereas net sales in North America and Europe increased 10% and 26%,
      respectively. We expect that electronic throttle control sales will increase
      or
      decrease in the future in line with changes in heavy truck and transit bus
      production volumes in the various geographic markets in which we serve and
      when
      new product lines are established, however, competitive pricing may continue
      to
      reduce per unit pricing. A change in emissions regulations in the United States
      effective January 1, 2007 will most likely have a negative impact on truck
      sales
      in North America, and therefore the sales of our products to heavy truck
      manufacturers in the United States. The published estimates of the anticipated
      decline vary widely, and range from a decline of 25% to 50% of the total
      calendar year 2007 production volumes. It is further anticipated that the
      decline will most likely begin in the second calendar quarter of 2007 as truck
      engines produced prior to January 1, 2007 will be able to be put into trucks
      produced after January 1, 2007.




**Percent
                Change****For
                the Three Month Period Ended December 31:**
            
            **2006**
            
            **2005**
            
            **2006
                to 2005**Gross
                profit
            
            $6,292
            
            $5,344
            
            17.7%





Gross
      profit was $6,292, or 34.1% of net sales in the first quarter of fiscal 2007,
      an
      increase of $948 compared to the gross profit of $5,344, or 33.1% of net sales,
      in the comparable fiscal 2006 period.





The
      increase in gross profit in the first quarter of fiscal 2007 is volume driven
      as
      sales of our products were 14.3% higher than last year’s first quarter. Costs of
      material and labor increased in line with the higher sales volumes and overhead
      expenses decreased as a percentage of sales.





**Percent
                Change****For
                the Three Month Period Ended December 31:**
            
            **2006**
            
            **2005**
            
            **2006
                to 2005**Research
                and development
            
            $830
            
            $848
            
            (2.1)%





Research
      and development expenses decreased $18 for the first quarter of fiscal 2007
      compared to the comparable period in 2006. The Company’s research and
      development expenditures will fluctuate based on the products under development
      at any given point in time. Overall, we expect research and development expenses
      to increase slightly over fiscal 2006 levels due to additional new product
      design projects.




**16**




**Percent
                Change****For
                the Three Month Period Ended December 31:**
            
            **2006**
            
            **2005**
            
            **2006
                to 2005**Selling
            
            $520
            
            $448
            
            16.1%





Selling
      expenses increased $72 during the three month period ended December 31, 2006
      as
      compared with the three month period ended December 31, 2005 mainly due to
      expanded selling and marketing efforts in the European and Asian markets
      implemented during mid fiscal 2006. We expect that overall our selling expenses
      will increase in fiscal 2007 as we incur a full year of expenses for the higher
      activity associated with our expanded sales efforts worldwide.





**Percent
                Change****For
                the Three Month Period Ended December 31:**
            
            **2006**
            
            **2005**
            
            **2006
                to 2005**Administration
            
            $1,273
            
            $1,303
            
            (2.3)%





Administration
      expenses for the three month period ended December 31, 2006 decreased $30 when
      compared with the same period in fiscal 2006. The decrease in administration
      expenses is primarily a result of a decrease in legal fees associated with
      the
      class action lawsuit discussed in Note 15 to our unaudited condensed
      consolidated financials statements offset by increased expenses associated
      with
      our China manufacturing facility.





**Percent
                Change****For
                the Three Month Period Ended December 31:**
            
            **2006**
            
            **2005**
            
            **2006
                to 2005**Realignment
                of operations
            
            $
                176
            
            $
                58
            
            *NM*





The
      Company recorded expenses of $176 related to its realignment of operations
      as
      discussed in Note 3 of the unaudited condensed consolidated financial
      statements. The realignment of operations expense for the first quarter of
      fiscal 2007 increased $118 compared to the first quarter of fiscal 2006,
      primarily due to $105 in employee termination benefits being accrued during
      the
      first quarter of fiscal 2007.





**Percent
                Change****For
                the Three Month Period Ended December 31:**
            
            **2006**
            
            **2005**
            
            **2006
                to 2005**Interest
                income
            
            $
                (
                36)
            
            $
                (
                27)
            
            33.3%Interest
                expense
            
            $
                258
            
            $
                318
            
            (18.9)%





Interest
      expense decreased $60 in the first quarter of fiscal 2007 as compared to the
      first quarter of fiscal 2006 due to reductions in debt levels, partially offset
      by higher overall interest rates. We expect interest expense to continue to
      decrease in fiscal 2007 when compared with fiscal 2006 due to the continued
      reduction of debt levels resulting from scheduled debt payments.





**Percent
                Change****For
                the Three Month Period Ended December 31:**
            
            **2006**
            
            **2005**
            
            **2006
                to 2005**Other
                income, net
            
            $
                (603)
            
            $
                (
                8)
            
            *NM*




Other
      income was $603 in the first quarter of fiscal 2007 compared to other income
      of
      $8 in first quarter of fiscal 2006. Included in other income for the three
      month
      period ended December 31, 2006 was a gain of $589 for the reversal of old
      accounts payable as discussed in Note 9 of the unaudited condensed consolidated
      financials statements.





**Percent
                Change****For
                the Three Month Period Ended December 31:**
            
            **2006**
            
            **2005**
            
            **2006
                to 2005**Income
                tax expense
            
            $
                1,331
            
            $
                877
            
            51.8%




**17**


Tax
      expense reflects an effective tax rate of 34.4% for the quarter ended December
      31, 2006 compared to an effective tax rate of 36.5% for the quarter ended
      December 31, 2005. In December 2006 the research credit for 2006 was reinstated
      by Congress and included in tax expense for the first quarter of fiscal 2007
      was
      a research credit of $42 related to fiscal 2006.





The
      Company was in a net operating loss carry-forward position during fiscal 2005.
      We utilized the remainder of our federal operating loss carry-forwards in the
      first quarter of fiscal 2006.





**Financial
      Condition, Liquidity and Capital Resources**





Cash
      generated by operating activities was $1,286 for the first quarter of fiscal
      2007, an increase of $154 from the cash generated by operating activities of
      $1,132 during the first quarter of fiscal 2006. Net income plus non cash charges
      for depreciation and stock based compensation contributed $3,159 in the first
      quarter of fiscal 2007 and $1,927 in the first quarter of fiscal 2006.
      Additionally in fiscal 2006, cash from operations included a $760 utilization
      of
      a deferred tax provision.





Changes
      in working capital items used cash of $1,872 in the first quarter of fiscal
      2007
      and $1,555 in the first fiscal quarter of 2006. Seasonal timing of collections
      on receivables generated cash of $1,356 in fiscal 2007 and $634 in 2006. Cash
      was used to increase inventory levels in the first quarter of both fiscal 2006
      and 2007 to facilitate switching of suppliers to lower cost suppliers, primarily
      in China, the re-alignment efforts and to support increasing operations in
      our
      Suzhou, China manufacturing facility. We expect that inventory levels should
      have reached their maximum levels at the end of the first quarter of fiscal
      2007
      and that as supplier switching and the re-alignment is completed, inventory
      will
      decline later in fiscal 2007. Accounts payable and accrued expenses decreased
      in
      the first quarter of fiscal 2007 and 2006 from seasonal payments of certain
      expenses. Additionally, during the first quarter of fiscal 2007, the Company
      was
      judicially released from and wrote off $589 of old accounts payable, which
      is
      reflected as a reduction of accounts payable. In addition, cash flows from
      operations for the three month period ended December 31, 2006 included payments
      to our pension plans of $372. For the three months ended December 31, 2005,
      we
      contributed $144 to our pension plans. We believe we will continue to generate
      positive cash from continuing operations due to our improved results of
      operations.





Cash
      used
      in investing activities was $687 for the three month period ended December
      31,
      2006 and was comprised solely of purchases of property, plant and equipment.
      For
      the three month period ended December 31, 2005, cash used in investing
      activities was $493 and was comprised solely of purchases of property, plant
      and
      equipment. We expect our cash use for investing activities to increase
      throughout the fiscal year as we continue to make purchases of capital
      equipment.





Cash
      used
      in financing activities was $668 for the quarter ended December 31, 2006,
      compared to cash used in financing activities of $4,053 for the quarter ended
      December 31, 2005. The use of cash for financing activities for the first
      quarter of fiscal 2007 primarily relates to scheduled debt payments on our
      Merrill Lynch term loan. The first quarter of fiscal 2006 use of cash for
      financing activities primarily relates to the repurchase of common stock from
      AIP of $3,200 and scheduled debt payments on our Merrill Lynch term loan.





**Contractual
      Obligations as of December 31, 2006**





At
      December 31, 2006, our contractual obligations consisted of bank debt, operating
      lease obligations, a service agreement and a license agreement. We do not have
      any material letters of credit, or debt guarantees outstanding at December
      31,
      2006. As of December 31, 2006, we entered into a purchase commitment to purchase
      inventory from one vendor during the fiscal year totaling $1,504. Maturities
      of
      these contractual obligations consist of the following:




**18**




**Payments
                due by period****Total**
            
            **Less
                than 1 year**
            
            **1
                - 3**
              **years**
            
            **3
                - 5**
              **years**
            
            **More
                than 5 years**Term
                loan
            
            $
            7,828
            
            $
            3,578
            
            $
            4,250
            
            $
            -
            
            $
            -Revolver
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Operating
                leases
            
            
            1,269
            
            
            355
            
            
            850
            
            
            64
            
            
            -MMT
                license - minimum royalties
            
            
            365
            
            
            19
            
            
            134
            
            
            150
            
            
            62Management
                Services Agreement
            
            
            120
            
            
            60
            
            
            60
            
            
            -
            
            
            -$
            9,582
            
            $
            4,012
            
            $
            5,294
            
            $
            214
            
            $
            62




Certain
      liabilities, including those related to our pension and post-retirement benefit
      plans, are reported in the accompanying condensed consolidated balance sheets
      but are not reflected in the table above due to the absence of stated
      maturities. The Company has net obligations at December 31, 2006 related to
      its
      pension plans and post-retirement medical plan of $3,216 and $3,203,
      respectively. The Company funded $372 to its pension plans during the first
      quarter of fiscal 2007 compared to $144 contributed for the first quarter of
      fiscal 2006. We expect to make payments to our pension plans of $1,297
      throughout the rest of fiscal 2007.





At
      December 31, 2006, we had $8,000 available under our revolving credit facility
      with Merrill Lynch plus cash and cash equivalents of $2,461. We believe these
      resources, when combined with cash provided by operations, will be sufficient
      to
      meet our working capital needs on a short-term and long-term basis.





Included
      in the accompanying condensed consolidated balance sheet is approximately $455
      of old accounts payable related to closed insolvent subsidiaries of the Company.
      In accordance with SFAS No. 140, “Accounting for Transfers and Servicing of
      Financial Assets and Extinguishments of Liabilities,” a debtor can only relieve
      itself of a liability if it has been extinguished. A liability is considered
      extinguished if (a) the debtor pays the creditor and is relieved of its
      obligation for the liability or (b) the debtor is legally released from being
      the primary obligor under the liability, either judicially or by the creditor.
      During the first quarter of fiscal 2007 and 2006, the Company was judicially
      released from and reversed $589 and $14, respectively, of old accounts payable
      resulting in a gain, which has been recorded in other (income) expense in the
      accompanying condensed consolidated statements of operations. The Company
      expects to reverse amounts in future periods based on the recognition of the
      liabilities being judicially released in accordance with SFAS No. 140 of $300
      remaining in fiscal 2007; $90 in fiscal 2010; and $65 in fiscal 2011 -
      2016.





**Recently
      Issued Accounting Pronouncements**





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
      No. 158, “Employers’ Accounting for Defined Benefit Pension and Other
      Postretirement Plans - an Amendment of FASB Statements No. 87, 88, 106 and
      132R.” This statement requires an employer to recognize the overfunded or
      underfunded status of a defined benefit postretirement plan as an asset or
      liability in its statement of financial position and to recognize changes in
      that funded status in the year in which the changes occur through comprehensive
      income. This statement also requires an employer to measure the funded status
      of
      a plan as of the date of its year-end statement of financial position, with
      limited exceptions. This statement also modifies the definition of current
      and
      non-current liabilities for purposes of presentation in the statement of
      financial position. An employer is required to initially recognize the funded
      status of a defined benefit postretirement plan and to provide the required
      disclosures as of the end of the fiscal year ending after December 15, 2006
      whereas the requirement to measure plan assets and benefit obligations as of
      the
      date of the employer’s fiscal year-end statement of financial position is
      effective for fiscal years ending after December 15, 2008. The Company is
      currently in the process of determining the effects of adopting this statement
      in its consolidated financial statements.





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
      No. 157, “Fair Value Measurements.” This statement defines fair value,
      establishes a framework for measuring fair value in generally accepted
      accounting principles, and expands disclosures about fair value measurements.
      SFAS No. 157 is effective for financial statements issued for fiscal years
      beginning after November 15, 2007, and interim periods within those fiscal
      years. The Company is currently in the process of determining the effects of
      adopting this statement in its consolidated financial statements.





**19**


In
      September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108,
“Quantifying Financial Misstatements,” which expresses the Staff’s views
      regarding the process of quantifying financial statement misstatements.
      Registrants are required to quantify the impact of correcting all misstatements,
      including both the carryover and reversing effects of prior year misstatements,
      on the current year financial statements. The financial statements would require
      adjustment when either approach results in quantifying a misstatement that
      is
      material, after considering all relevant quantitative and qualitative factors.
      SAB No. 108 is effective for financial statements covering the first fiscal
      year
      ending after November 15, 2006. The Company is currently in the process of
      determining the effects, if any, SAB No. 108 will have on the Company’s
      consolidated financial statements.





In
      June
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes” (“FIN 48”), an interpretation of SFAS No. 109, “Accounting for
      Income Taxes,” which clarifies the accounting uncertainty in income taxes
      recognized in the financial statements in accordance with SFAS No. 109. The
      interpretation prescribes a recognition threshold of more-likely-than-not and
      a
      measurement attribute on all tax positions taken or expected to be taken in
      a
      tax return in order to be recognized in the financial statements. FIN 48 is
      effective for fiscal years beginning after December 15, 2006. Accordingly,
      the
      Company will adopt FIN 48 on October 1, 2007, and the Company is currently
      assessing the impact FIN 48 will have on its financial statements.





**Item
      3. Quantitative and Qualitative Disclosures About Market Risk**





Market
      risk is the potential loss arising from adverse changes in market rates and
      prices, such as interest rates, foreign currency exchange rates and changes
      in
      the market value of investments. The Company’s primary market risk results from
      fluctuations in interest rates.





***Interest
      Rate Risk:***





§
            The
                Company has a five-year revolving and term loan agreement with its
                primary
                lender Merrill Lynch. Interest rates under the agreements are variable
                and
                are based on the election of the Company of either a LIBOR rate or
                Prime
                rate.





§
            As
                of December 31, 2006, the outstanding balance on the term loan was
                $7,828,
                and there was no balance on the revolving loan. The effective annual
                interest rate on the term loan was 9.93% as of December 31, 2006.
                The
                Company does not believe that a hypothetical 10% change in end of
                the
                period interest rates or changes in future interest rates on these
                variable rate obligations would have a material effect on its financial
                position, results of operations, or cash flows. The Company has not
                hedged
                its exposure to interest rate fluctuations.





***Foreign
      Currency Risk:***





§
            We
                sell our products to customers in the heavy truck, transit bus and
                off-road equipment industries. For the three month periods ended
                December
                31, 2006 and 2005, the Company had foreign sales of approximately
                39% and
                35% of net sales, respectively. All of these worldwide sales in the
                first
                quarter of fiscal 2006 and all but $140 of sales in the first quarter
                of
                2007 were denominated in U.S. dollars. During fiscal 2005, we established
                a manufacturing facility in Suzhou, China and we opened sales offices
                in
                Shanghai, China and Ismaning (which is near Munich), Germany. The
                Company
                does not believe that changes in future exchange rates would have
                a
                material effect on its financial position, results of operations,
                or cash
                flows as the majority of its foreign sales transactions are currently
                denominated in US dollars and the investments in China and Germany
                are
                relatively small at this time in relation to our United States operations.
                As a result, the Company has not entered into forward exchange or
                option
                contracts for transactions to hedge against foreign currency risk.
                The
                Company will continue to assess its foreign currency risk as its
                international operations and sales
                increase.





***Investment
      Risk:***





§
            The
                Company does not use derivative financial or commodity instruments.
                The
                Company’s financial instruments include cash and cash equivalents,
                accounts and notes receivable, accounts payable and long-term obligations.
                The Company’s cash and cash equivalents, accounts receivable and accounts
                payable balances are short-term in nature, and, thus, the Company
                believes
                they are not exposed to material investment risk.




**20**


**Item
      4. Controls and Procedures**





*Evaluation
      of Disclosure Controls and Procedures*





The
      Company’s Chief Executive Officer and Chief Financial Officer have evaluated the
      effectiveness of our disclosure controls and procedures as of the end of the
      period covered by this report pursuant to Rule 13a-15(b) under the Securities
      Exchange Act of 1934 (the “Exchange Act”)). Based on that evaluation, the
      Company’s Chief Executive Officer and Chief Financial Officer have concluded
      that, as of the end of the period covered by this report, our disclosure
      controls and procedures are effective in ensuring that information required
      to
      be disclosed in our Exchange Act reports is (1) recorded, processed, summarized
      and reported in a timely manner, and (2) accumulated and communicated to our
      management, including our Chief Executive Officer and Chief Financial Officer,
      as appropriate to allow timely decisions regarding required disclosure.





*Changes
      in Internal Controls*





There
      has
      been no change in the Company’s internal controls over financial reporting that
      occurred during our last fiscal quarter that has materially affected, or is
      reasonably likely to materially affect, our internal controls over financial
      reporting.


**21**


**PART
      II - OTHER INFORMATION**




**Item
      1. Legal Proceedings**





We
      are a
      party to various pending judicial and administrative proceedings arising in
      the
      ordinary course of business. Our management and legal counsel have reviewed
      the
      probable outcome of these proceedings, the costs and expenses reasonably
      expected to be incurred, the availability and limits of our insurance coverage,
      and our established liabilities. While the outcome of the pending proceedings
      cannot be predicted with certainty, based on our review, we believe that any
      unrecorded liability that may result is not likely to have a material effect
      on
      our liquidity, financial condition or results of operations.





**Item
      1A. Risk Factors**





There
      have been no significant changes in risk factors for the quarter ended December
      31, 2006. See the information set forth in the section entitled “Risk Factors”
in our Annual Report on Form 10-K for the fiscal year ended September 30,
      2006.





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds**





None





**Item
      3. Defaults Upon Senior Securities**





None





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





None





**Item
      5. Other Information**





None





**Item
      6. Exhibits**





2.01
            
            Asset
                Purchase Agreement, dated as of September 30, 2003, by and among
                the
                Registrant, Teleflex Incorporated and Teleflex Automotive Incorporated.*(Incorporated
                by reference to Exhibit 2.1 to the Registrant’s current report on form 8-k
                filed on December 9, 2003)*3.01(a)
            
            Certificate
                of Incorporation of the Registrant, as amended.*(Filed
                herewith)*3.01(b)
            
            Certificate
                of Amendment to Certificate of Incorporation of the Registrant, dated
                February 27, 1995.*(Filed
                herewith)*3.01(c)
            
            Certificate
                of Amendment to Certificate of Incorporation of the Registrant, dated
                October 28, 2004.*(Filed
                herewith)*3.01(d)
            
            Certificate
                of Amendment to Certificate of Incorporation of the Registrant, dated
                February 22, 2005.*(Filed
                herewith)*3.01(e)
            
            Certificate
                of Amendment to Certificate of Incorporation of the Registrant, dated
                March 2, 2006.*(Filed
                herewith)*3.02
            
            Restated
                By-Laws of the Registrant, as amended July 1, 2002.*(Incorporated
                by reference to Exhibit 3.6 to the Registrant’s quarterly report on
                Form 10-Q for the quarter ended June 30, 2002*)




**22**




4.01
            
            Specimen
                Unit Certificate (including Specimen Certificate for shares of Common
                Stock and Specimen Certificate for the Warrants).*(Incorporated
                by reference to Exhibits 1.1 and 1.2 to the Registrant’s Registration
                Statement on Form 8-A, Commission File No. 0-18083, filed with the
                Commission on November 1, 1989)*4.02
            
            Certificate
                to Provide for the Designation, Preferences, Rights, Qualifications,
                Limitations or Restrictions Thereof, of the Series A Preferred Stock,
                71/2%
                Redeemable Convertible Series*(Incorporated
                by reference to Exhibit 3.1 to the Registrant’s quarterly report on
                form 10-Q for the quarter ended March 31, 1998*)4.03
            
            Certificate
                to Provide for the Designation, Preferences, Rights, Qualifications,
                Limitations or Restrictions Thereof, of the Series A-1 Preferred
                Stock, Non-Redeemable Convertible Series.*(Incorporated
                by reference to Exhibit 3.3 to the Registrant’s quarterly report on
                Form 10-Q for the quarter ended June 30, 2002*)4.04
            
            Certificate
                to Provide for the Designation, Preferences, Rights, Qualifications,
                Limitations or Restrictions Thereof, of the Series B Preferred Stock,
                15% Redeemable Convertible Series*(Incorporated
                by reference to Exhibit (d)(v) to the Schedule TO-I/A filed on
                July 5, 2002*)4.05
            
            Certificate
                of Elimination for Mandatory Preferred Stock*(Incorporated
                by reference to Exhibit (d)(vi) to the Schedule TO-I/A filed on
                July 5, 2002*)4.06
            
            Certificate
                of Amendment to the Designation, Preferences, Rights, Qualifications,
                Limitations or Restrictions Thereof, of the Series A-1 Preferred
                Stock,
                Non-Redeemable Convertible Series*(Incorporated
                by reference to the Registrant’s report on Form 8-K, filed on September
                29, 2004)*4.07
            
            Certificate
                to Provide for the Designation, Preferences, Rights, Qualifications,
                Limitations or Restrictions Thereof, of the Series C Preferred Stock,
                15%
                Redeemable Non-Convertible Series*(Incorporated
                by reference to the Registrant’s report on Form 8-K, filed on September
                29, 2004)*4.08
            
            Certificate
                of Amendment to the Certificate to Provide for the Designation,
                Preferences, Rights, Qualifications, Limitations or Restrictions
                Thereof,
                of the Series B Preferred Stock, 15% Redeemable Convertible Series*(Incorporated
                by reference to the Registrant’s report on Form 8-K, filed on September
                29, 2004)*31.01
            
            Certification
                of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)*(Filed
                herewith)*31.02
            
            Certification
                of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)*(Filed
                herewith)*32.01
            
            Certification
                of Patrick W. Cavanagh pursuant to 18 U.S.C. Section 1350 as adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*(Filed
                herewith)*32.02
            
            Certification
                of Dennis E. Bunday pursuant to 18 U.S.C. Section 1350 as adopted
                pursuant
                to Section 906 of the Sarbanes-Oxley Act of 2002*(Filed
                herewith)*





**23**


**SIGNATURES**








Pursuant
      to the requirements 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.








**WILLIAMS
                  CONTROLS, INC.**Date:
                  February 9,
                  2007
              /s/
                  PATRICK W. CAVANAGH
                Patrick
                  W. Cavanagh
                *President
                  and Chief Executive Officer*Date:
                  February 9,
                  2007
              /s/
                  DENNIS E. BUNDAY
                Dennis
                  E. Bunday
                *Chief
                  Financial Officer*










**24**