<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION

                           Washington, D. C.  20549

                                   FORM 10-K

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

                              September 30, 1997

                                      or

[_]  TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
     THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to _______________

                          Commission File No. 0-27738

                                THE JPM COMPANY
            (Exact name of registrant as specified in its charter)

     Pennsylvania                                          23-1702908
(State or other jurisdiction                            (I.R.S. Employer
of incorporation)                                       Identification
                                                        Number)
           Route 15 North
       Lewisburg, Pennsylvania                            17837
  (Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including area code: (717) 524-8200

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

         Securities registered pursuant to Section 12(g) of the Act:

                       Common Stock, $.000067 par value

Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X  NO 
                                       --    --

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

The Registrant's revenues for the most recent fiscal year were $112,787,000.

As of September 30, 1997, 6,970,245 shares of Common Stock of the Registrant
were outstanding, and the aggregate market value of the Common Stock of the
registrant as of that date (based on the average closing bid and asked prices of
the Common Stock at that date as reported by the National Association of
Securities Dealers Automated Quotation National Market System), excluding
outstanding shares beneficially owned by directors and executive officers, was
approximately $86,000,000.

Portions of the proxy dated December 20, 1997 for the Annual Meeting of
Shareholders to be held on January 27, 1998 (the "1998 Proxy Statement"), are
incorporated by reference into Part III of this Report, to the extent specific
pages are referred to herein.
<PAGE>
 
                                    PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

(a)  General Development of the Business.
     -----------------------------------

The JPM Company (the "Company") was organized September 30, 1968 as a
recapitalization of a company originally founded in 1949 by Jay P. Mathias,
father of the current Chairman of the Board of Directors and Chief Executive
Officer, John H. Mathias and the current President and Chief Operating Officer,
James P. Mathias.  The Company is an independent manufacturer of cable
assemblies and wire harnesses for original equipment manufacturers (OEMs) in the
computer, networking and telecommunications sectors of the global electronics
industry.

The Company is headquartered in Lewisburg, Pennsylvania and operates
manufacturing facilities in Lewisburg and Beaver Springs, Pennsylvania;
Winnsboro, South Carolina; San Jose, California; Bor, Czech Republic; and
Guadalajara, Mexico.

In June 1997, the Company merged with Denron, Inc. ("Denron"), a manufacturer of
cable assemblies and wire harnesses in San Jose, California, in a transaction
accounted for as a pooling of interests, by issuing 791,170 shares of Common
Stock in exchange for all of the outstanding stock of Denron.  This Form 10-K
reflects all historical and current information of the combined companies.

In August 1997, the Company, through its subsidiaries JPM Deutschland and JPM
the Czech Republic, acquired  substantially all of the assets of Corma
Elektrotechnische Productions GmbH, Leuchtenberg, Germany and Corma spol s. r.
o., Bor, the Czech Republic (collectively "Corma") for cash in the amount of
approximately $1,700,000.

(b)  Financial Information About Industry Segments.
     ---------------------------------------------

All revenue of the Company is generated from a single business segment:  the
manufacture of wire harnesses and cable assemblies.

(c)  Narrative Description of Business.
     ---------------------------------

The Company is a leading independent manufacturer of cable assemblies and wire
harnesses for OEMs in the computer, networking and telecommunications sectors of
the global electronics industry.  The Company manufactures a wide spectrum of
products which transfer power or transmit voice, data or video within the OEMs'
equipment or to external connections.  Principal applications of the Company's
products include computers and computer peripherals,  network routers and
switches, self service terminals (including automatic teller machines), PBX
switching equipment, cellular digital switching equipment, industrial controls
and medical electronic equipment.  Substantially all of the Company's business
is contract manufacture of cable assemblies and wire harnesses. By integrating
its design and engineering capabilities with its customers' product development
activities, the Company customizes its products to satisfy its customers'
particular needs in a price-competitive manner.

Consistent with its marketing strategy, a substantial portion of the Company's
products are sold to a limited number of customers.  The Company's strategy is
to focus on industry leaders in the computer, networking and telecommunications
markets with whom it can develop mutually beneficial relationships.  The Company
continuously seeks to expand the number of products it supplies to existing
customers, as well as to develop similar relationships with selected new OEM
customers within its targeted markets.  Because of the complexity of these
relationships, sales cycles can be long, sometimes taking up to 18 months or
more to develop.  The Company's operating results can fluctuate significantly
both annually and quarterly because of  customers' product life cycles and new
product introductions by new and existing customers.

                                    Page 1
<PAGE>
 
(d)  Manufacturing.
     -------------

The Company manufactures substantially all of its products on a build-to-order
basis based on the forecasts of its customers.  The Company operates
manufacturing facilities in Lewisburg and Beaver Springs, Pennsylvania;
Winnsboro, South Carolina; San Jose, California; Guadalajara, Mexico; and Bor,
Czech Republic and has manufacturing services arrangements with companies in
Taipei, Taiwan and in the People's Republic of China.  Each of the Company's
manufacturing facilities is capable of producing the full range of the Company's
products.  The Company maintains rapid prototype capabilities at each of its
plants for designing and developing customized products for its customers.

The vast majority of the Company's products are manufactured by cross-trained,
customer-focused teams working in cells or on continuous flow manufacturing
lines.  This team approach enhances quality, responsiveness and flexibility,
permitting the Company to meet customer requirements for shorter lead times and
greater scheduling flexibility.  The teams support customer just-in-time
inventory shipment requirements, including bin replenishment programs, and allow
direct shipments to installation sites with cables packed in order of use for
ease of installation.  Each team prioritizes its own workload, balancing issues
of set-up, economic lot sizing, operator skills availability, equipment
scheduling and material availability with customer delivery requirements.
Cross-training of employees is an integral feature of this team approach.  All
employees, including members of the production teams, receive quality skills
training focusing on the benefits of statistical process control techniques that
may be applied on critical processes in their respective work areas.
Manufacturing engineering teams also evaluate process capabilities through
statistical data analysis and capability studies.

The Company emphasizes extensive and detailed quality assurance systems
throughout its operations.  Each facility is Underwriters' Laboratory listed,
approved by the Canadian Standards Association and ISO 9000 certified by an
independent accreditation organization.  ISO 9000 is part of a standard
developed by the International Organization for Standardization, a worldwide
federation of national standards bodies which establishes a framework for
structuring and documenting operations.

The Company is subject to a variety of foreign, federal, state and local laws,
rules and regulations relating to, among other things, the health and safety of
its work force, emissions to the air, discharge to waters and the generation,
handling, storage and transportation of waste and other materials. The Company
believes that it is currently in compliance in all material respects with such
laws, rules and regulations.

(e)  Marketing.
     ---------

The Company's sales and marketing efforts are focused on identifying and
satisfying customer needs and supporting the customer relationship on an ongoing
basis.  The Company seeks to develop extensive working relationships with its
customers through customer focus teams comprised of sales, quality assurance,
engineering, purchasing, and manufacturing personnel and customer service
specialists working collectively to focus on customer satisfaction.  To
strengthen its market penetration and customer relationships in key geographic
regions, the Company establishes customer support teams, consisting of sales
personnel, design engineers and production planners.  The teams enable the
Company to assist customers in the design and redesign of cable assemblies and
wire harnesses and provide additional production planning and control services
at the customer's site, thereby reinforcing and enhancing the Company's
responsiveness to the customer's needs and providing a greater level of support.

The Company's sales cycle with respect to new customers normally is an extended
process pursuant to which the OEM qualifies the Company as a supplier.  This
progressive process typically involves exchanges of information through written
surveys, presentations, site visits, formal audits, sample quotations and first
piece builds.  At the same time, the Company conducts extensive research
regarding the OEM's organization and seeks to establish contacts at multiple
levels within that organization.  This cycle can take 18 months or more from the
initial contact to the first production order.  For existing customers, the
Company seeks to expand its sales through multi-level relationships with design
engineers and other decision-makers within the OEM's organization.

The Company's sales and marketing programs are managed by its Vice President of
Marketing and Sales and supported by a total of 26 customer service specialists
in the Company's six manufacturing facilities.  The Company also employs 11
sales executives based in Pennsylvania, New York, Florida, Texas, California and
Germany as well as a Marketing Manager in Pennsylvania.  In addition to the
sales executives, the Company has four Custom Design Support Engineers based in
South Carolina, Ohio, Texas and California, providing product development and
design engineering support locally to its customers.

                                    Page 2
<PAGE>
 
During the fiscal year ended September 30, 1997, sales of the Company's products
to Diebold, Nortel, IBM, and Hewlett-Packard represented 17%, 16%, 14% and 10%,
respectively, of the Company's total sales.  During the fiscal year ended
September 30, 1996, sales of the Company's products to Diebold and IBM
represented 18% and 15%, respectively, of the Company's total sales.  During the
fiscal year ended September 30, 1995, sales of the Company's products to Diebold
and IBM represented 22% and 14%, respectively, of the Company's total sales.

The Company typically enters into annual contracts with its major customers.
These contracts periodically mature and are renewed throughout the year in the
normal course of business.

During each of the last three fiscal years, the Company's net sales to the
computer market sector (including self-service terminals and network bridges and
routers) and to the telecommunications market sector represented approximately
86% and 8%, respectively, of the Company's net sales.

(f)  Competition.
     -----------

The Company operates in an international market characterized by intense
competition.  While the Company does not believe that any of its competitors
provides the breadth of product line with the quality and at the prices offered
by the Company, competition within particular portions of the Company's business
comes from a broad range of companies.  Several of the Company's competitors are
much larger and have greater financial, management and marketing resources than
the Company. In addition to other independent manufacturers of cable assemblies
and wire harnesses such as itself, the Company's competitors include
manufacturers who are primarily connector manufacturers and who compete
primarily on the basis of having certain proprietary connector technology,
contract manufacturers and independent manufacturers. Competition within the
industry is primarily based on the combination of quality, production capacity,
breadth of product line, engineering support capability, price, local support
capability, delivery, packaging, systems support and financial strength.

(g)  Backlog.
     -------

The Company estimates its backlog at September 30, 1997 and 1996 was
approximately $25,544,000 and $15,857,000, respectively.  The Company does not
include within backlog non-binding, extended purchase orders and contractual
arrangements in which final authorization and shipment dates have not yet been
specified.  Substantially all of the September 30, 1997 backlog is expected to
be shipped by December 31, 1997.  Because of customers' and the industry's
movement to just-in-time and pull systems, the Company's backlog at any
particular date is not necessarily representative of the Company's level of
business to be expected in the ensuing period.

(h)  Employees.
     ---------

As of September 30, 1997, the Company had approximately 2,800 full-time
employees, including approximately 2,200 production operators, 450 in
engineering and other manufacturing support functions, 75 in executive, finance
and administrative functions, 50 in sales and customer service functions, and 34
in materials management functions.  The Lewisburg, Guadalajara, Beaver Springs,
Winnsboro, San Jose, Bor and Leuchtenberg Facilities have approximately 538,
1,279, 257, 225, 366, 90 and eight full-time employees, respectively.  At the
Guadalajara Facility, approximately 200 full-time and 650 temporary production
employees are members of Confederacion de Trabajadores Mexicanos (the
Confederation of Mexican Workers) and are covered by a collective bargaining
agreement that is negotiated annually.  None of the Company's other employees
are union members or are covered by a collective bargaining agreement.  The
Company has never experienced a labor strike or other labor-related work
stoppage.  Periodically, during times of increased production, the Lewisburg,
Beaver Springs and Winnsboro Facilities employ temporary employees, who may
constitute 10-15% of the total employees at these facilities.  The Company
considers its relations with its employees to be good.

(i)  Proprietary Information.
     -----------------------

The Company relies on trade secrets and other unpatented proprietary information
in its operations.  While the Company believes that it has developed certain
proprietary production methods, there can be no assurance that others will not
develop similar or better methods.  The Company's senior management employees
have entered into confidentiality agreements and the Company seeks to enter into
such agreements with its customers and suppliers as it deems appropriate.  There
can be no assurance, however, that such agreements will effectively prevent
disclosure of the Company's confidential information.

                                    Page 3
<PAGE>
 
ITEM 2.  PROPERTIES

The Company operates ISO 9002 certified facilities located in Lewisburg and
Beaver Springs, Pennsylvania; Winnsboro, South Carolina; San Jose, California;
and Guadalajara, Mexico.  The Company's facilities in Leuchtenberg, Germany and
Bor, Czech Republic are ISO 9001 certified.  The Company's headquarters are
located at the Lewisburg facilities, which are comprised of a manufacturing and
warehouse building of approximately 115,000 square feet and an adjoining office
building of approximately 7,000 square feet.  The Lewisburg facility is subject
to first and second mortgage liens in the amount of approximately $1,333,000 and
$845,000, respectively, as of September 30, 1997. The Beaver Springs facility is
a 60,000 square foot manufacturing, warehouse and office facility which was
acquired through a lease purchase agreement and is located approximately 25
miles from the Lewisburg facilities. The Winnsboro facility includes
manufacturing, warehouse and office space in a single building of approximately
47,000 square feet. This facility is subject to a mortgage lien in the amount of
approximately $1,000,000 as of September 30, 1997. The San Jose facility is a
leased facility and contains manufacturing, warehouse and office space. The
lease of this 40,000 square foot facility will expire in October, 2002. The
Company also leases 7,200 square feet of office space in San Jose, California.
The lease on this space expires in September, 2000. The Company also leases
13,000 square feet of manufacturing space in Bor, Czech Republic. The lease on
this facility expires March, 2000. The Company leases 6,000 square feet of
warehouse and engineering space in Leuchtenberg, Germany. The lease on this
facility expires March, 2004. The Company leases a building of approximately
70,000 square feet in Guadalajara, Mexico which contains its manufacturing,
warehouse and office space. The building is covered by two separate leases. The
lease of approximately 12,500 square feet of this facility, consisting of
certain office, warehouse and parking space, will expire in May, 1998. The
leases for the remaining portions of the facility, consisting of approximately
48,800 square feet of manufacturing and office space and approximately 8,700
square feet of warehouse space, expire in April, 1998. Electronica Pantera
("Pantera") also owns approximately four acres of undeveloped land located
approximately eight miles from the current facility, as to which the Company has
no current plans. Although management of the Company believes that its
facilities are currently adequate to meet its requirements, the Company may
require additional manufacturing capacity depending upon its future rate of
growth.

ITEM 3.  LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings nor, to the
Company's knowledge, is any material legal proceeding threatened.

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

Not Applicable.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
 COMMON STOCK PRICE RANGE

The Company's Common Stock is listed on The NASDAQ Stock Market's National
Market ("NASDAQ") and trades under the symbol "JPMX".  The Company completed an
initial public offering on April 30, 1996.  The following table presents the
high and low closing prices for the Common Stock for the fiscal year ended
September 30, 1997 and since becoming a public company (April 30, 1996) for the
fiscal year ended September 30, 1996, as reported by NASDAQ.

<TABLE>
<CAPTION>
 
FISCAL YEAR ENDED 1996     HIGH   LOW
                           ----   ---
<S>                      <C>     <C>
First Quarter            $   --  $   --
Second Quarter               --      --    
Third Quarter              9.25    7.50    
Fourth Quarter             9.38    7.38    
                                           
FISCAL YEAR ENDED 1997                     
First Quarter             19.25    8.88    
Second Quarter            23.00   16.00    
Third Quarter             38.00   15.25    
Fourth Quarter            42.25   23.00     
</TABLE>

On November 5, 1997 there were approximately 155 holders of record of the
Company's Common Stock.

                                    Page 4
<PAGE>
 
DIVIDEND POLICY

The Company has never paid dividends on shares of its Common Stock.  The Company
intends to retain future earnings for use in its business and does not
anticipate paying cash dividends on its Common Stock in the foreseeable future.
The payment of dividends in the future, if any, will be determined by the Board
of Directors of the Company and will depend on the Company's financial
condition, results of operations, capital requirements and such other factors as
the Board of Directors deems relevant.  The bank which extended a mortgage on
the Company's Winnsboro Facility limits dividends to 25% of income before income
taxes.

ITEM 6. SELECTED FINANCIAL DATA

The following table summarizes selected consolidated financial data of the
Company for each fiscal year of the five year period ended September 30, 1997,
and should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements included elsewhere herein.

<TABLE>
<CAPTION>
 
                                                                    FISCAL YEAR ENDED SEPTEMBER 30,
                                                           -------------------------------------------------
                                                             1997       1996      1995      1994      1993
                                                           -------------------------------------------------
<S>                                                        <C>        <C>       <C>       <C>       <C> 
Operating Statement Data:
 
                                                   (IN THOUSANDS, EXCEPT PER SHARE AND PERCENTAGE AMOUNTS)
 
     Net sales...........................................  $112,787   $85,516   $54,042   $41,418   $34,268
     Gross profit........................................    23,537    14,706     8,491     6,991     4,995
     Income from operations..............................    12,853     6,900     2,979     1,244       774
     Net income..........................................     7,329     3,083       936       307       197
     Net income as a percentage of sales.................       6.5%      3.6%      1.7%      0.7%      0.6%
     Net income (loss) applicable to
      Common Stock.......................................     7,329     2,943       659        67       (43)
     Net income (loss) per common share..................     $0.97     $0.48     $0.14     $0.02    ($0.01)
     Weighted average common shares
      outstanding........................................     7,538     5,683     4,390     4,280     4,280
<CAPTION>  
                                                                                SEPTEMBER 30,
                                                           ------------------------------------------------
                                                             1997      1996      1995      1994      1993
                                                           ------------------------------------------------
<S>                                                        <C>        <C>       <C>       <C>       <C> 
Balance Sheet Data:
 
                                                   (IN THOUSANDS, EXCEPT PER SHARE AND PERCENTAGE AMOUNTS)
 
     Working capital.....................................  $ 12,612   $10,206   $   164   $   948   $   928
     Total assets........................................    54,130    39,862    25,427    16,645    13,699
     Short-term debt.....................................     9,699     2,169     6,937     3,888     3,168
     Long-term debt......................................     2,805     3,264     4,292     2,407     2,598
     Shareholders' equity................................    28,231    19,927     4,866     3,688     3,460
</TABLE>

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

RESULTS OF OPERATIONS

OVERVIEW

The Company is a leading independent manufacturer of cable assemblies and wire
harnesses for OEMs in the computer, networking and telecommunications sectors of
the global electronics industry.  The Company manufactures a wide spectrum of
products which transfer power or transmit voice, data or video within the OEMs'
equipment or to external connections.  Principal applications of the Company's
products include computers and computer peripherals, network routers and
switches, self-service terminals (including automatic teller machines), PBX
switching equipment,

                                    Page 5
<PAGE>
 
cellular digital switching equipment, industrial electrical controls and medical
electronic equipment.  Substantially all of the Company's business is contract
manufacture of cable assemblies and wire harnesses.  By integrating its design
and engineering capabilities with its customers' product development activities,
the Company customizes its products to satisfy its customers' particular needs
in a price-competitive manner.

Consistent with its marketing strategy, a substantial portion of the Company's
products are sold to a limited number of customers. The Company's strategy is to
focus on industry leaders in the computer, networking and telecommunications
markets with whom it can develop mutually beneficial relationships. The Company
continuously seeks to expand the number of products it supplies to existing
customers, as well as to develop similar relationships with selected new OEM
customers within its targeted markets. Because of the complexity of these
relationships, sales cycles can be extremely long, sometimes taking up to 18
months or more to develop. The Company's operating results can fluctuate
significantly both annually and quarterly because of customers' product life
cycles and new product introductions by new and existing customers.

In addition to its domestic facilities, the Company operates facilities in
Guadalajara, Mexico (the "Guadalajara Facility"), Bor, Czech Republic (the "Bor
Facility") and Leuchtenberg, Germany (the "Leuchtenberg Facility").  The
functional currency of the Guadalajara Facility is the United States dollar.
All sales and receivables, over 90% of raw material purchases, all cash
equivalents and all borrowings are denominated in United States dollars.
However, certain costs, including the majority of labor and factory overhead
costs, are denominated in Mexican pesos.  As a result, fluctuations in the peso
to United States dollar exchange rate directly affect the Company's results of
operations.  In addition, future regulatory changes in Mexico could also affect
the Company's operating results, including mandatory increases in the minimum
wage of 10% scheduled for December 1997 and an additional 10% scheduled for
April 1998.

The Company's gross margins are mainly impacted by new customer and new product
start-up costs, raw material acquisition costs, product mix and manufacturing
productivity.  New customer and product start-up costs which are typically
incurred prior to the recognition of associated revenue, include engineering
costs related to product and process development, manufacture and approval of
prototypes and training of production employees.

The following table presents, as a percentage of net sales, certain selected
consolidated financial data for each of the three fiscal years completed
September 30, 1997, 1996 and 1995:

<TABLE>
<CAPTION>
 
                                             FISCAL YEAR ENDED
                                          ----------------------
                                           1997    1996    1995
                                          ----------------------
<S>                                       <C>     <C>     <C> 
 
Net sales...............................  100.0%  100.0%  100.0%
Cost of sales...........................   79.1    82.8    84.3
                                           ----    ----    ----
Gross profit............................   20.9    17.2    15.7
Selling, general and administrative
 expenses...............................    8.7     9.1    10.2
Costs related to the merger.............     .8       -       -
                                            ---     ---    ----   
                                            9.5     9.1    10.2
                                            ---     ---    ----
Income from operations..................   11.4     8.1     5.5
Interest expense, net...................    0.6     1.0     1.5
Other income (expense)..................      -    (0.3)   (0.3)
                                            ---     ---     ---
Income before taxes and minority 
 interest...............................   10.8%    6.8%    3.7%
                                           ====     ===     ===
</TABLE>

COMPARISON OF FISCAL YEAR 1997 WITH FISCAL YEAR 1996

Net sales for fiscal 1997 increased by $27,271,000, or 31.9%, as compared to
fiscal 1996.  This increase was from sales to new OEM customers and increased
sales to certain existing customers.

Gross profit increased by $8,831,000, or 60.1%, in fiscal 1997 as compared to
fiscal 1996.  As a percentage of net sales, gross profit increased from 17.2% to
20.9%.  The increase in gross margin as a percentage of net sales was primarily
due to increased overhead absorption as a result of increased sales volume,
lower raw material acquisition costs due to larger volume purchase discounts and
a favorable product mix.

Selling, general and administrative expenses for fiscal 1997 increased
$2,878,000, or 36.9%, as compared to fiscal 1996, primarily as a result of
increased compensation expenses for additional personnel to support the
Company's growth, $873,000 in additional expenses related to the Company's
merger with Denron and additional administrative costs related to being a public
company.

                                    Page 6
<PAGE>
 
Interest expense for fiscal 1997 decreased by $201,000, or 23.1%, as compared to
fiscal 1996, primarily due to the utilization of funds generated by the
Company's April 30, 1996 initial public offering to pay down short-term debt.

The Company's effective income tax rate for fiscal 1997 was 39.8% as compared to
39.1% for fiscal 1996.

Net income for fiscal 1997 increased $4,246,000, or 137.7%, to $7,329,000 as
compared to fiscal 1996 net income of $3,083,000.  Earnings per share during
fiscal 1997 were $.97 compared to $.48 for fiscal 1996.  Net income and earnings
per share increased during the year mainly because of increased sales and gross
margins as discussed above.

COMPARISON OF FISCAL YEAR 1996 WITH FISCAL YEAR 1995

Net sales for fiscal 1996 increased by $31,474,000, or 58.2%, as compared to
fiscal 1995.  This increase came from three sources: the inclusion of net sales
of Pantera for the full fiscal year; sales to new OEM customers; and increased
sales to certain existing customers.  Pantera's net sales for the twelve months
were $12,675,000 higher than its five months' 1995 sales.  Sales to new
customers including those at Pantera totaled $10,790,000.

Gross profit increased by $6,215,000, or 73.2%, in fiscal 1996 as compared to
fiscal 1995.  As a percentage of net sales, gross profit increased from 15.7% to
17.2%.   The increased gross margin was primarily due to decreased raw material
costs related to the Company's ability to obtain larger volume discounts on raw
material purchases and increased overhead absorption as a result of increased
sales volume, offset in part by slightly lower unit selling prices in 1996
compared to 1995, resulting from volume-based price decreases to certain
customers.

Selling, general and administrative expenses for fiscal 1996 increased by
$2,294,000, or 41.6%, as compared to fiscal 1995, primarily as a result of the
inclusion of Pantera for a full fiscal year, increased amortization expense and
increased compensation expense.

Interest expense for fiscal 1996 increased by $44,000, or 5.3%, as compared to
fiscal 1995.  The increase was associated with slightly higher borrowing levels
and increased borrowing rates through the Company's initial public offering on
April 30, 1996.  After that date, the Company paid down its short-term
borrowings.

Other expense increased primarily due to foreign currency losses in 1996 as
compared to gains in 1995 offset by the absence of debt conversion expense
incurred in 1995.

The effective income tax rate for fiscal 1996 was 39.1% as compared to 43.3% in
fiscal 1995.  The decrease in the effective income tax rate was primarily due to
greater pre-tax income which decreased the impact on the tax rate of the non-
deductible amortization of intangible assets and to the absence of non-
deductible debt conversion expense incurred in 1995.

Net income for fiscal 1996 increased $2,147,000, or 229.4%, to $3,083,000 as
compared to fiscal 1995 net income of $936,000.  Net income increased during the
year mainly because of increased sales and gross margins as discussed above.

Fiscal 1996 and 1995 net income were reduced by $423,000 and $199,000,
respectively, for the minority interest in Pantera, which was acquired by the
Company in connection with its April 30, 1996 initial public offering.  In
addition to cumulative dividends declared in 1996 and 1995 of $140,000 and
$240,000, respectively, the Company declared a participating Preferred Stock
dividend in the amount of $36,000 in 1995.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities during 1997 was $1,201,000.  Net cash
provided from operating activities during  1996 was $138,000.  The cash used
during 1997 was primarily utilized to finance increases in inventory, as a
result of sales growth. The cash generated in 1996 was primarily from net
income, depreciation and increases in accounts payable and accrued expenses
which exceeded cash utilized to finance increases in accounts receivable and
inventory, as a result of sales growth.

Working capital was $12,612,000 at September 30, 1997, an increase of $2,406,000
from September 30, 1996. The increase in working capital was primarily the
result of inventory growth in response to current and anticipated sales levels
offset by increases in borrowings under Credit Facilities.

                                    Page 7
<PAGE>
 
During 1997, the Company expended $4,255,000 for capital expenditures.
Financing activities provided cash in the amount of $6,388,000 primarily to
finance increased working capital needs and the merger with and acquisition of
Denron and Corma, respectively.

CREDIT FACILITIES

In May 1997, the Company entered into a new bank revolving line of credit which
permits the Company to draw up to $20,000,000 collateralized by the Company's
inventories and accounts receivable. The interest rate on the new line is the
bank's prime lending rate minus .25% or, at the Company's election, a LIBOR-
based rate measured on a sliding scale tied to the Company's debt to net worth
ratio. The line of credit provides for advances up to the lesser of $20,000,000
or 90% of the Company's qualified accounts receivable plus 80% of raw materials
and finished goods inventory. The line of credit requires maintenance of certain
financial ratios and provides certain restrictions with regard to acquisitions,
mergers, dissolution and the incurrence of additional indebtedness; and
prohibits loans to other entities or persons. At September 30, 1997, the Company
was in compliance with all loan covenants. The line of credit may be terminated
on demand by the bank. At September 30, 1997, borrowings under this line of
credit facility amounted to $8,182,000 against an availability of $20,000,000 at
an interest rate of 8.25%.

The Company believes that its cash flow from operations, current short-term
investments and credit facilities will be sufficient to satisfy its working
capital requirements and capital expenditure needs over at least the next twelve
months.  The Company expects to spend approximately $5,000,000 on capital
expenditures during fiscal 1998.  However, depending on its rate of growth,
profitability and potential acquisition activity, the Company may require
additional equity or debt financing to meet its working capital requirements,
capital expenditure, additional manufacturing capacity or acquisition needs.
See "Subsequent Events" below.

SUBSEQUENT EVENTS

On October 16, 1997, the Company announced it had signed a letter of intent to
acquire 60% of AF DataLink Equipamentos de Telecomunicacao, Ltda. ("DataLink"),
a Sao Paulo, Brazil based manufacturer of wire harnesses and cable assemblies
for approximately $9,000,000. DataLink had sales of approximately $4,000,000
during its most recent fiscal year completed December 31, 1996 and has sales of
approximately $6,000,000 for the nine months ended September 30, 1997.

On October 9, 1997, the Company announced it had filed a registration statement
to sell 3,680,000 shares including 2,000,000 shares offered by the Company and
1,200,000 shares by selling shareholders.  In addition, the underwriters have an
option to purchase up to 480,000 additional shares to cover over-allotments.  On
November 18, 1997, the Company announced that due to present market turbulence,
it was delaying the proposed sale of the additional 2,000,000 shares.

INFLATION

The Company does not believe that inflation had a significant impact on its
results of operations during the last three fiscal years.

                                    Page 8
<PAGE>
 
RECENT ACCOUNTING PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share" ("SFAS 128"), which establishes new standards for
computing and presenting earnings per share ("EPS").  SFAS 128 replaces the
presentation of primary EPS with a presentation of basic EPS.  It also requires
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with a complex capital structure.  SFAS 128 is effective for
financial statements issued for periods ending after December 15, 1997 and
earlier adoption is not permitted.  EPS included in the accompanying financial
information is computed in accordance with APB Opinion No. 15, "Earnings Per
Share."  Had the provisions of SFAS 128 been effective for the periods
presented, the Company's basic EPS and diluted EPS on a pro forma basis would be
as follows:

<TABLE> 
<CAPTION> 

                               Year Ended September 30,
                        --------------------------------------
                        1997    1996    1995    1994     1993
                       -----   -----   -----   -----    -----
<S>                    <C>     <C>     <C>     <C>      <C>  
Basic EPS.......        $1.07   $0.51   $0.15   $0.02   ($0.01)
Diluted EPS.....        $0.97   $0.48   $0.15   $0.02   ($0.01)
</TABLE> 

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                    Page 9
<PAGE>
 
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of The JPM Company

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14 (a) (1) and (2) on pages 27 and 28 present fairly, in
all material respects, the financial position of The JPM Company and its
subsidiaries (the "Company") at September 30, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.

PRICE WATERHOUSE LLP

Philadelphia, PA
November 6, 1997

                                    Page 10
<PAGE>
 
<TABLE>
<CAPTION>
 
                                THE JPM COMPANY
                          CONSOLIDATED BALANCE SHEET
                     (in thousands except per share data)
                                                               SEPTEMBER 30,
                                                         -------------------------
                                                            1997           1996
                                                         ----------     ----------
<S>                                                     <C>            <C> 
ASSETS
Current assets:
  Cash and cash equivalents......................       $     543      $   1,411
  Accounts receivable (net of allowance of $222
   and $129).....................................          12,692         12,254
  Inventories, net...............................          19,328         11,342
  Other current assets...........................           2,045            908
                                                            -----           ----
    Total current assets.........................          34,608         25,915
Property, plant and equipment, net...............          13,552          8,536
Notes receivable -- related parties..............               -            206
Excess of cost over fair value of net assets
 acquired and other intangible assets, net.......           4,807          4,640
Other assets.....................................           1,163            565
                                                            -----           ----
                                                        $  54,130      $  39,862
                                                        =========      =========  
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Short-term borrowings..........................       $   8,182      $   1,532
  Current maturities of long-term debt...........           1,517            637
  Accounts payable...............................           6,841          7,614
  Accrued expenses...............................           3,924          3,749
  Income taxes payable...........................               -          1,090
  Deferred income taxes..........................           1,532          1,087
                                                            -----          -----
    Total current liabilities....................          21,996         15,709
Long-term debt...................................           2,805          3,264
Deferred compensation liability..................             621            509
Deferred income taxes............................             477            453
                                                           ------         ------
                                                           25,899         19,935
                                                           ------         ------
Commitments and contingencies
Shareholders' equity:
  Preferred Stock, no par value, 10,000 shares
   authorized, Class A, $31.43 stated value, no 
   shares issued and outstanding ................               -              -
  Common Stock, $.000067 par value, 40,000
   shares authorized, issued 6,970 shares in 
   1997 and 6,809 shares in 1996.................               -              -
  Additional paid-in capital.....................          17,187         16,212
  Retained earnings..............................          11,044          3,715
                                                           ------          -----
    Total shareholders' equity...................          28,231         19,927
                                                           ------         ------
                                                        $  54,130      $  39,862
                                                        =========      =========
</TABLE>

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

                                    Page 11
<PAGE>
 
                                THE JPM COMPANY
                     CONSOLIDATED STATEMENT OF OPERATIONS
                    (in thousands except per share amounts)
<TABLE> 
<CAPTION> 
                                                                                           YEAR ENDED SEPTEMBER 30,
                                                                                   --------------------------------------
                                                                                       1997           1996          1995
                                                                                   ----------    ----------    ----------
<S>                                                                                <C>           <C>           <C> 
Net sales .................................................................         $ 112,787     $  85,516     $  54,042
Cost of sales .............................................................            89,250        70,810        45,551
                                                                                    ---------     ---------     ---------
                                                                                       23,537        14,706         8,491
Selling, general and administrative expenses ..............................             9,811         7,806         5,512
Costs related to the merger ...............................................               873            --            --
                                                                                    ---------     ---------     ---------
                                                                                       12,853         6,900         2,979
Other income (expense):
  Interest expense ........................................................              (670)         (871)         (827)
  Other, net ..............................................................                (1)         (271)         (152)
                                                                                    ---------     ---------     ---------
                                                                                         (671)       (1,142)         (979)
                                                                                    ---------     ---------     ---------

Income before income taxes and minority interest ..........................            12,182         5,758         2,000
Provision for income taxes ................................................             4,853         2,252           865
                                                                                    ---------     ---------     ---------

Income before minority interest ...........................................             7,329         3,506         1,135
Minority interest .........................................................                --           423           199
                                                                                    ---------     ---------     ---------
Net income ................................................................             7,329         3,083           936
Cumulative dividends on Preferred Stock ...................................                --           140           277
                                                                                    ---------     ---------     ---------
Net income applicable to Common Stock .....................................         $   7,329     $   2,943     $     659
                                                                                    =========     =========     =========
Net income per common share ...............................................         $     .97     $     .48     $     .14
                                                                                    =========     =========     =========

Weighted average number of shares of Common Stock outstanding .............             7,538         5,683         4,390
                                                                                    =========     =========     =========
</TABLE> 
   The accompanying notes are an integral part of these financial statements.

                                     Page 12
<PAGE>
 
                                THE JPM COMPANY
                CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                            (dollars in thousands)
<TABLE> 
<CAPTION> 
                                        Preferred Stock           Common Stock            
                                     --------------------     ---------------------      Additional
                                     Number        Stated       Number        Par         paid-in   
                                     of shares      value      of shares     value        capital   
                                     ---------   ----------   -----------  -----------   ----------   
<S>                                   <C>          <C>         <C>            <C>         <C> 

Balance at September 30, 1994 ...      111,840      $ 3,515     7,865,170      $    --    $      50   

Subordinated debenture conversion           --           --       315,000           --          585   

Preferred stock dividends paid ..           --           --            --           --           --     

Net income ......................           --           --            --           --           --     
                                     ---------   ----------   -----------  -----------   ----------   

Balance at September 30, 1995 ...      111,840        3,515     8,180,170           --          635   

Preferred stock dividends paid ..           --           --            --           --           --     

Issuance of common stock ........           --           --     2,191,800           --       13,959   

Preferred stock redemption and
 exchange for common stock ......     (111,840)      (3,515)      232,635           --        1,578   

Debenture conversion to common
 stock ..........................           --           --       104,244           --          365   

Treasury stock retirement .......           --           --    (3,900,000)          --         (325)  

Net income ......................           --           --            --           --           --     

Denron net income April 1 to
  September 30, 1995 (See Note 1)           --           --            --           --           --     
                                      --------   ----------   -----------  -----------   ----------   
Balance at September 30, 1996 ...           --           --     6,808,849           --       16,212   

Issuance of common stock ........           --           --       161,396           --          975   

Net income ......................           --           --            --           --           --     
                                      --------   ----------   -----------  -----------   ----------   
Balance at September 30, 1997 ...           --     $     --     6,970,245  $        --   $   17,187   
                                      ========   ==========   ===========  ===========   ==========   

<CAPTION> 
                                                   Treasury Stock                
                                                   --------------                Total  
                                     Retained      Number                     shareholders'
                                     earnings     of shares        Cost         equity
                                    ----------    ----------    ----------    ----------
<S>                                 <C>           <C>           <C>           <C> 
Balance at September 30, 1994 ...      $   448     3,900,000         $(325)      $ 3,688

Subordinated debenture conversion           --            --            --           585

Preferred stock dividends paid ..         (343)           --            --          (343)

Net income ......................          936            --            --           936
                                    ----------    ----------    ----------    ----------
Balance at September 30, 1995 ...        1,041     3,900,000          (325)        4,866

Preferred stock dividends paid ..         (600)           --            --          (600)

Issuance of common stock ........           --            --            --        13,959

Preferred stock redemption and
 exchange for common stock ......           --            --            --        (1,937)

Debenture conversion to common
 Stock ..........................           --            --            --           365

Treasury stock retirement .......           --    (3,900,000)          325            --

Net income ......................        3,083            --            --         3,083

Denron net income April 1 to
  September 30, 1995 (See Note 1)          191            --            --           191
                                    ----------    ----------    ----------    ----------
Balance at September 30, 1996 ...        3,715            --            --        19,927

Issuance of common stock ........           --            --            --           975

Net income ......................        7,329            --            --         7,329
                                    ----------    ----------    ----------    ----------
Balance at September 30, 1997 ...      $11,044            --         $  --       $28,231
                                    ==========    ==========    ==========    ==========
</TABLE> 

                                    Page 13
<PAGE>
 
                                THE JPM COMPANY
                     CONSOLIDATED STATEMENT OF CASH FLOWS
                                (in thousands)

<TABLE> 
<CAPTION> 

                                                                                               YEAR ENDED SEPTEMBER 30,
                                                                                        -----------------------------------
                                                                                           1997        1996         1995
                                                                                         --------    --------     ---------
<S>                                                                                      <C>         <C>          <C> 
Cash flows from operating activities:
  Net income .......................................................................   $  7,329    $  3,083    $    936
  Adjustments to reconcile net income to net cash provided by (used in)
    operating activities:
    Depreciation and amortization ..................................................      1,640       1,343         883
    Debt conversion expense ........................................................         --          --         165
    Foreign currency translation (gain) loss .......................................        (12)        143        (129)
    Loss (gain) on sale of property, plant and equipment ...........................         66          (5)         --
    (Gain) on sale of non-operating property -- related parties ....................         --          --         (48)
    Deferred taxes .................................................................         61         230         124
    Minority interest ..............................................................         --         423         199
    Deferred compensation expense ..................................................        112         118          94
    Change in assets and liabilities, net of effects from businesses acquired:
      (Increase) decrease in accounts receivable ...................................       (438)     (5,639)       (127)
      (Increase) decrease in inventories ...........................................     (7,762)     (3,907)       (716)
      (Increase) decrease in other assets ..........................................     (1,086)        (80)        601
      Increase (decrease) in accounts payable ......................................       (773)      2,139          56
      Increase (decrease) in accrued expenses ......................................        175       1,844         (64)
      Increase (decrease) in income taxes payable ..................................       (513)        446         (80)
                                                                                       --------    --------    --------
        Net cash provided by (used in) operating activities ........................     (1,201)        138       1,894
Cash flows from investing activities:
  Payments for assets and businesses acquired, net of cash acquired of
    $88 in fiscal 1997 and $1,584 in fiscal 1995 ...................................     (1,897)     (3,400)     (2,204)
  Capital expenditures .............................................................     (4,255)     (2,731)     (1,271)
  Proceeds from sale of property, plant and equipment ..............................          7           5          39
  Proceeds from sale of non-operating property -- related parties ..................         --          --          50
  Collections of notes receivable -- related parties ...............................        206         408          75
  Deferred compensation plan contributions .........................................       (116)       (118)       (102)
  Loans to related parties .........................................................         --         (30)        (39)
                                                                                       --------    --------    --------
    Net cash provided by (used in) investing activities ............................     (6,055)     (5,866)     (3,452)
Cash flows from financing activities:
  Net borrowings (repayments) under credit facilities ..............................      6,650      (4,895)        652
  Proceeds from issuance of long-term debt .........................................         40         517       3,010
  Principal payments on long-term debt .............................................       (699)     (1,185)       (561)
  Common stock issuance ............................................................        397      13,959          --
  Preferred stock repurchase .......................................................         --      (1,937)         --
  Preferred stock dividends paid ...................................................         --        (600)       (343)
                                                                                       --------    --------    --------
    Net cash provided by (used in) financing activities ............................      6,388       5,859       2,758
                                                                                       --------    --------    --------
Increase (decrease) in cash and cash equivalents ...................................       (868)        131       1,200
Cash and cash equivalents at beginning of period ...................................      1,411       1,280          80
                                                                                       --------    --------    --------
Cash and cash equivalents at end of period .........................................   $    543    $  1,411    $  1,280
                                                                                       ========    ========    ========
</TABLE> 
Supplemental information relative to non-cash financing activity -- See Note 9.
Supplemental information relative to cash paid for interest -- See Note 8.
Supplemental information relative to cash paid for income taxes -- See Note 11.

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

                                     Page 14
<PAGE>
 
                                 THE JPM COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (dollars in thousands except per share data)

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The JPM Company (the "Company") is an independent manufacturer of cable
assemblies and wire harnesses for original equipment manufacturers in the
computer, networking and telecommunications sectors of the global electronics
industry.

     A substantial portion of the Company's products are sold to a limited
number of customers. Accordingly, a significant decrease in business from, or
the loss of, any major customer would have a material adverse effect on the
Company. The Company continuously seeks to expand the number of products it
supplies to existing customers, as well as to develop similar relationships with
new customers. Because of the complexity of these relationships, sales cycles
can be long, sometimes taking up to 18 months or more to develop. As the Company
becomes a qualified supplier for new products and as its customers' products
progress through their life cycles, the Company's operating results can
fluctuate significantly.

A summary of the Company's significant accounting policies follows:

    Basis of presentation

      On June 4, 1997 the Company completed a merger with Denron, Inc.
("Denron") by exchanging 791,170 shares of the Company's common stock for all of
the outstanding common stock of Denron. The merger has been accounted for as a
pooling of interests in accordance with Accounting Principles Board Opinion No.
16. Accordingly, all prior period consolidated financial statements presented
have been restated to include the combined results of operations, financial
position and cash flows of Denron as though it had always been a part of the
Company.

       Prior to the merger, Denron's fiscal year ended on March 31. In recording
the merger, Denron's March 31, 1995 financial statements have been combined with
the Company's September 30, 1995 financial statements. Denron's 1996 financial
information has been restated to a year ended September 30, 1996 to conform with
the Company's fiscal year end. As a result, Denron's results of operations for
the six months from April 1 through September 30, 1995 have been included as an
adjustment to JPM's opening retained earnings as of October 1, 1995 (the
beginning of fiscal 1996).

    Principles of consolidation

     The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions
have been eliminated.

    Cash and cash equivalents

     Cash and cash equivalents represent cash and highly liquid short-term
investments with original maturities of three months or less.

    Inventories

     Inventories are valued at the lower of cost or market as determined on the
first-in, first-out basis. Cost includes raw materials, direct labor and
manufacturing overhead. The Company generally provides reserves for inventory
considered to be in excess of 12 months of forecasted future demand.

    Property, plant and equipment

     Property, plant and equipment are recorded at cost and are depreciated on a
straight-line basis over the estimated useful lives of the respective assets.


                                    Page 15
<PAGE>
 
   Revenue recognition policy

     Sales are recorded upon shipment of product. Provision is made for returns
and allowances, and for estimated warranty costs, in the period of sale.

   Long-lived and intangible assets

     Assets and liabilities acquired in connection with business combinations
accounted for under the purchase method are recorded at their respective fair
values. Deferred taxes have been recorded to the extent of differences between
the fair value and the tax basis of the assets acquired and liabilities assumed.
The excess of the purchase price over the fair value of the net assets acquired
is amortized on a straight-line basis over 20 years. Intangible assets include
certain acquired customer contracts and the ISO 9002 certification of an
acquired plant; such assets are being amortized on a straight-line basis over
periods ranging from three to five years.

     The carrying value of long-lived assets and certain identifiable intangible
assets will be evaluated whenever changes in circumstances indicate the carrying
amount of such assets may not be recoverable. In performing such review for
recoverability, the Company will compare the expected future cash flows to the
carrying value of long-lived assets and identifiable intangibles. In addition,
on a quarterly basis, the carrying value of the excess of cost over fair value
of net assets acquired is subject to a separate evaluation.

   Foreign currency translation

     The Company has determined that the U.S. dollar is the functional currency
of its Mexican operations. Foreign currency inventories and property, plant and
equipment are remeasured into U.S. dollars at historical rates; all other
foreign currency assets and liabilities are remeasured at year-end exchange
rates. Income and expenses are remeasured at average rates prevailing during the
year, except for expenses related to inventories and property, plant and
equipment, which are remeasured at historical rates. Exchange gains and losses
resulting from remeasurement are included in earnings and amounted to a gain
(loss) of $12, ($143) and $129 for fiscal 1997, 1996 and 1995, respectively.

   Earnings per common share

    With respect to net income (loss) per common share computations for periods
prior to the Company's initial public offering, pursuant to Securities and
Exchange Commission Staff Accounting Bulletin No. 83, stock options and
convertible debentures issued at prices below the initial public offering price
per share in the twelve months preceding the initial filing were included in the
calculation of weighted average shares outstanding as if outstanding for all
periods presented. In addition, net income was reduced to the extent of all
possible "Participating Dividends" on Preferred Stock.

    Primary earnings (loss) per common share and share equivalents for periods
subsequent to the completion of the Company's initial public offering is
computed based on the weighted average number of shares outstanding plus the
common stock equivalents related to stock options, once the latter causes
dilution in earnings per share in excess of 3%.

    For each of the periods presented, fully diluted earnings (loss) per share
is not presented since the results do not cause a dilution in earnings per share
in excess of 3%.

   Stock based compensation

    In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" ("SFAS 123"). SFAS 123 defines a fair value based method of
accounting for employee stock options or other similar equity instruments.
Companies must either adopt the new method or disclose the pro forma income
statement effects in their financial statements. This statement is effective for
the Company's fiscal year ending September 30, 1997. The Company has elected to
disclose the pro forma income statement effects of SFAS 123; therefore, SFAS 123
does not affect the Company's financial position or results of operations.
   
   Recent accounting pronouncements

    In February 1997, the Financial Accounting Standards Board issued Statement 
No. 128, "Earnings Per Share" ("SFAS 128"), which establishes new standards for 
computing and presenting earnings per share ("EPS"). SFAS 128 replaces the 
presentation of primary EPS with a presentation of basic EPS. It also requires 
dual presentation of basic and diluted EPS on the face of the income statement 
for all entities with a complex capital structure. SFAS 128 is effective for 
financial statements issued for periods ending after December 15, 1997 and 
earlier adoption is not permitted. EPS included in the consolidated financial 
statements is computed in accordance with APB Opinion No. 15, "Earnings Per 
Share." Had the provisions of SFAS 128 been effective for the periods presented,
the Company's basic EPS and diluted EPS on a pro forma basis would be as 
follows:

                                          Year Ended September 30,
                                          ------------------------
                                           1997     1996     1995
                                           ----     ----     ----
Basic EPS...............................  $1.07    $0.51    $0.15
Diluted EPS.............................  $0.97    $0.48    $0.15

   Reclassifications

    Certain prior year balances have been reclassified for comparative
purposes.


                                     Page 16
<PAGE>
 
  Use of estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

2. ACQUISITIONS

     In May 1995, the Company purchased a 60% ownership in Electronica Pantera,
S.A. de C.V. ("Pantera"), a Mexican manufacturer and assembler of cable and wire
assemblies, for cash consideration of $3,600. The Company acquired the remaining
40% of Pantera for cash consideration of $3,400 in April 1996.

     In August 1997, the Company acquired the assets of Corma Elektrotechnische
Production GmbH, Leuchtenberg, Germany and Corma Spol s.r.o., or, the
Czech Republic (collectively "Corma"), manufacturers and assemblers of cable and
wire harnesses for cash consideration of $1,688.

     Information with respect to these acquisitions is presented below:

<TABLE> 

                                                     1997       1996       1995 
                                                     ----       ----       ---- 
<S>                                               <C>        <C>        <C> 
Cash paid (net of cash acquired) ..............   $ 1,688    $ 3,400    $ 2,016
Transaction and other costs ...................       209          -        188
                                                  -------    -------    -------
                                                    1,897      3,400      2,204
Liabilities assumed ...........................         -          -      4,543
Fair value of tangible assets acquired ........    (1,435)    (1,275)    (4,004)
                                                  -------    -------    -------
Excess of cost over fair value of net assets
  acquired and other intangible assets ........   $   462    $ 2,125    $ 2,743
                                                  =======    =======    =======
</TABLE> 

     Excess of cost over fair value of net assets acquired and other intangible
assets comprise the following:

<TABLE> 
<CAPTION> 
                                                                SEPTEMBER 30,
                                                                -------------
                                                               1997       1996
                                                             -------    -------
<S>                                                          <C>        <C> 
Excess of cost over fair value of net assets acquired ....   $ 5,230    $ 4,768
Other ....................................................       250        250
                                                             -------    -------
                                                               5,480      5,018
Accumulated amortization .................................      (673)      (378)
                                                             -------    -------
                                                             $ 4,807    $ 4,640
                                                             =======    =======
</TABLE> 

3. MAJOR CUSTOMERS AND SUPPLIERS

   Net sales to Diebold, Nortel, IBM and Hewlett-Packard amounted to 17%, 16%,
14% and 10% of total net sales, respectively, for fiscal 1997. Net sales to
Diebold and IBM amounted to 18% and 15% of total net sales for fiscal 1996,
respectively, and 22% and 14% of total net sales for fiscal 1995, respectively.
Aggregate net sales to major customers, each of which exceeded 10% of total net
sales were 57%, 33% and 36% of total net sales in 1997, 1996 and 1995,
respectively. At September 30, 1997 and 1996, aggregate accounts receivable from
these customers represented 54% and 36% of total accounts receivable,
respectively. To reduce its credit risk, the Company reviews its customers'
financial position before extending credit.

   The Company typically enters into annual contracts with its major customers.
These contracts periodically mature and are renewed throughout the year in the
normal course of business.

   Historically, the Company has purchased a significant portion of its wire,
cable and connectors from a limited number of suppliers. Although the Company
believes that its raw materials are generally available from several domestic
and international sources, customers often specify that the Company purchase
certain components from particular manufacturers. Accordingly, the loss of any
of the Company's key suppliers could have a material adverse impact on the
Company.



                                     Page 17
<PAGE>
 
4. INVENTORIES

<TABLE> 
<CAPTION> 
                                                          SEPTEMBER 30,
                                                          -------------
                                                         1997        1996
                                                      --------    ---------
<S>                                                  <C>         <C> 
Finished goods .............................         $  4,103    $  1,935
Work-in-process ............................            2,810       1,640
Raw materials and supplies .................           13,108       8,408
Valuation reserve ..........................             (693)       (641)
                                                     --------    --------
                                                     $ 19,328    $ 11,342
                                                     ========    ========
</TABLE> 

5. PROPERTY, PLANT AND EQUIPMENT, NET

<TABLE> 
<CAPTION>                                  
                                               SEPTEMBER 30,  
                                           -------------------         ESTIMATED
                                            1997          1996      USEFUL LIVES
                                           ------        ------     ------------
<S>                                      <C>           <C>          <C> 
Land ...............................     $    302      $    302
Buildings and improvements .........        6,230         4,426      10-25 years
Machinery and equipment ............       10,345         7,468       5-10 years
Furniture and fixtures .............        3,762         3,279       5-10 years
Vehicles ...........................          291           237       3- 5 years
Construction in progress ...........        1,005          --
                                         --------      --------
                                           21,935        15,712
Less: Accumulated depreciation .....        8,383       (7,176)
                                        ---------      --------
                                         $ 13,552      $  8,536
                                         ========      ========
</TABLE> 

     Capitalized computer equipment and software with a gross book value of $547
are included in furniture and fixtures at September 30, 1997 and 1996. Related
accumulated amortization was $274 and $198 at September 30, 1997 and 1996,
respectively. In addition, capitalized buildings and improvements with a gross
book value of $1,080 are included above at September 30, 1997. Related
accumulated amortization was $32 at September 30, 1997. The capital leases
include purchase options at the conclusion of the lease term. Future minimum
lease payments under these agreements are $62 for fiscal 1998, $25 for fiscal
1999, $27 for fiscal 2000, $30 for fiscal 2001 and $32 for fiscal 2002.

     Rental expense for vehicle, machinery and equipment operating leases
aggregated $151, $137 and $123 for fiscal 1997, 1996 and 1995, respectively.
Future minimum lease payments through the term of these agreements total $171
for fiscal 1998, $95 for fiscal 1999, $66 for fiscal 2000 and $46 for fiscal
2001.

     The Company leases its facilities in Mexico, California, Germany and the
Czech Republic in accordance with the terms of rental agreements, some of which
are renewable annually. The leases of the Mexico, California, Germany and Czech
Republic facilities are renewable in April 1998 and May 1998; October 2002 and
September 2000; March 2004; and March 2000, respectively. Rental expense under
these agreements totaled $511, $474 and $349 for fiscal 1997, 1996 and 1995,
respectively. Future minimum lease payments under these agreements are $854,
$854, $828, $773 and $603 for fiscal 1998, 1999, 2000, 2001 and 2002,
respectively.

6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

<TABLE> 
<CAPTION> 
                                                           SEPTEMBER 30,
                                                         -----------------
                                                          1997      1996
                                                         ------     ------
<S>                                                      <C>        <C> 
Salaries and benefits ........................           $3,005     $2,395
Other ........................................              919      1,354
                                                         ------     ------
Total accrued expenses .......................           $3,924     $3,749
                                                         ======     ======
</TABLE> 
     Included in accounts payable at September 30, 1997 and 1996 are book
overdrafts totaling $1,580 and $819, respectively.

                                     Page 18
<PAGE>
 
7. SHORT-TERM BORROWINGS

   At September 30, 1997, the Company had a bank revolving line of credit to
permit the Company to draw up to $20,000 collateralized by the Company's
inventories and accounts receivable. The interest rate on the line is the bank's
prime lending rate minus .25% or, at the Company's election, a LIBOR-based rate
measured on a sliding scale tied to the Company's debt to net worth ratio. The
line of credit provides for advances up to the lesser of $20,000 or 90% of the
Company's qualified accounts receivable plus 80% of raw materials and finished
goods inventory. The line of credit requires maintenance of certain financial
ratios and provides certain restrictions with regard to acquisitions, mergers,
dissolution and the incurrence of additional indebtedness; and prohibits loans
to other entities or persons. At September 30, 1997, the Company was in
compliance with all loan covenants. The line of credit may be terminated on
demand by the bank. Such borrowings are secured by the Company's inventories,
accounts receivables and contract rights as well as a second lien on machinery
and equipment in Lewisburg, Pennsylvania. As of September 30, 1997, borrowings
under this line of credit facility amounted to $8,182 against an availability of
$20,000 at an interest rate of 8.25% (average rate of 8.29% for fiscal 1997).

     At September 30, 1996, the Company had a $6,500 line of credit with a U.S.
bank, of which $257 was outstanding. Borrowings under the line of credit bore
interest at the bank's prime rate (8.25% at September 30, 1996 and average rate
of 9.00% for fiscal 1996) and were payable on demand. Such borrowings were
secured by the Company's inventories, accounts receivable and contract rights as
well as a second lien on machinery and equipment in Lewisburg, PA.

    The Company's San Jose, California facility previously had a bank revolving
line of credit which expired July 31, 1997 and permitted the Company to draw up
to $2,000 collateralized by the San Jose facility's inventories and accounts
receivable. The line of credit bore interest at the bank's prime lending rate
plus .75%. As of September 30, 1996, borrowings under this line of credit
facility amounted to $1,275 against an availability of $1,600 at an interest
rate of 9.75%.




                                     Page 19
<PAGE>
 
8. LONG-TERM DEBT

<TABLE> 
<CAPTION> 
                                                                                          SEPTEMBER 30,
                                                                                        -------------------
                                                                                          1997        1996
                                                                                        -------      ------
<S>                                                                                    <C>         <C> 
Term loan payable to bank; bank prime rate plus 1.5% (10.00% at September 30,
 1997 and average rate of 9.88% for 1997); payable in monthly installments of
 $24 plus accrued interest through May 2002; secured by machinery and equipment
 and a second lien on land, building and improvements in Lewisburg, PA with a
 net book value of $3,116 at September 30, 1997 ...................................... $ 1,333     $ 1,619
Mortgage payable to bank; bank prime rate plus 1% (9.50% at September 30,
 1997 and an average rate of 9.38% for fiscal 1997); payable in monthly
 installments of $19 through September 2010; secured by land, buildings and
 improvements in Lewisburg, PA with a net book value of $1,705 at 
 September 30, 1997 ..................................................................     845         996
Mortgage payable to bank; bank prime rate plus 1% (9.50% at September 30,
 1997 and an average rate of 9.38% for fiscal 1997); payable in monthly
 installments of $7 plus accrued interest through April 1998 plus a final
 principal and interest payment due April 1998; secured by land, buildings,
 improvements, furniture, fixtures and equipment in Winnsboro, SC with a net
 book value of $1,120 at September 30, 1997 ..........................................     998       1,078
Capital lease obligations, payable through 2011 ......................................   1,103         187
Other term loans payable .............................................................      43          21
                                                                                       -------     -------
                                                                                         4,322       3,901
Less: Current maturities .............................................................  (1,517)       (637)
                                                                                       -------     -------
                                                                                       $ 2,805     $ 3,264
                                                                                       =======     =======
</TABLE> 
Maturities of long-term debt, subsequent to September 30, 1997 are as follows:

<TABLE> 
<CAPTION> 

 YEAR ENDING
SEPTEMBER 30,
---------------------------------
<S>                               <C> 
1998 ............................ $   1,517
1999 ............................       495
2000 ............................       510
2001 ............................       532
2002 ............................       342
Thereafter ......................       926
                                     ------
                                  $   4,322
                                     ======
</TABLE> 

     The foregoing indebtedness is subject to certain covenants including the
maintenance of various financial ratios and limits on annual capital
expenditures. The Company was in compliance with all covenants at September 30,
1997.

     Interest paid in fiscal 1997, 1996 and 1995 on short-term borrowings,
long-term debt and subordinated debentures totaled $615, $995 and $1,000,
respectively.

9. SUBORDINATED DEBENTURES

     In July 1992, forty-two 12%, $10 face value convertible subordinated
debentures due January 1, 1999 (the "Series A debentures") were issued to
officers and directors of the Company. On August 1, 1995, the Company induced
conversion of the Series A debentures, by adjusting the conversion ratio from
4,883 shares to 7,500 shares of Common Stock per debenture. The change in
conversion privileges resulted in the issuance of an additional 109,911 shares
of common stock and the recognition of $165 in debt conversion expense which is
included in other expenses in the consolidated statement of operations for the
year ended September 30, 1995.




                                     Page 20
<PAGE>
 
     During 1995, $390 in 12% demand notes were issued to officers and directors
of the Company, and to one third-party investor. Under the terms of the notes,
the Company committed to exchange the notes for convertible securities with
terms that allowed for conversion into the Company's Common Stock.

     In November 1995, the Company issued seventy-three convertible subordinated
debentures (the "Series B debentures") in exchange for $365 demand notes payable
outstanding at September 30, 1995, and repaid the remaining $25 of notes. The
Series B debentures were subject to mandatory conversion upon the completion of
an initial public offering. Consequently, the debentures were redeemed for
104,244 shares of the Company's Common Stock at the time of the initial public
offering.

10. SHAREHOLDERS' EQUITY

     During 1997 the Company issued 161,396 shares of Common Stock pursuant to
exercises of options granted under its qualified stock option plans at an
average price of $2.51 per share and a total of $397. Such exercises also gave
rise to tax benefits of $578 included in equity.

     The Company completed an initial public offering of its common stock on
April 30, 1996. The initial offering consisted of a total of 2,100,000 shares.
Of those shares 1,876,800 were sold by the Company. The Underwriters exercised
their option to purchase an additional 315,000 over allotment shares of common
stock on May 30, 1996. Net proceeds to the Company from the offering were
approximately $14,000 after deducting the associated underwriting discount and
expenses of the offering. The net proceeds were used to acquire the remaining
40% of Pantera for $3,400, to reduce the Company's debt in an amount of
approximately $8,100 and to pay dividends on and redeem the Company's preferred
stock in an amount of approximately $2,500.

     Also in connection with the closing of the offering, 104,244 shares of
common stock were issued upon conversion of the Company's Series B debentures,
and 232,635 common shares were issued in exchange for the Class A preferred
shares not redeemed at the time of the offering.

     During January 1996, the Board of Directors authorized the retirement of
all of the Company's Treasury Stock.

     In August 1995, 315,000 shares of Common Stock were issued in conjunction
with an induced conversion of the Company's Series A debentures, as described in
Note 9.

         The Class A Preferred Stock previously outstanding, had no par value, a
stated value of $31.43 per share, was non-voting and carried a cumulative annual
dividend of $2.15 per share. In addition, the Board of Directors in any fiscal
year could declare additional dividends of 8.5% of the income before income
taxes in excess of $1,000 but less than $2,000 ("Participating Dividends").

    Concurrent with the Company's initial public offering on April 30, 1996, all
dividends on the Class A preferred stock in the amount of $600 were paid, 53,000
shares of Class A preferred stock were exchanged for 232,635 shares of the
Company's common stock at $32.92 per share and the remaining Class A preferred
stock was redeemed for cash at $32.92 per share or $1,937.

     During the years ended September 30, 1996 and 1995, Preferred Stock
dividends of $5.37 and $3.07 per share were paid, respectively, totaling $600
and $343 in each of the respective years. Dividends paid in fiscal 1996 included
a Participating Dividend declared for fiscal 1995 of $36 or $.32 per share. No
such Participating Dividends were declared for fiscal 1996.



                                     Page 21
<PAGE>
 
11. INCOME TAXES

     Provision for income taxes in the consolidated statement of operations:

<TABLE> 
<CAPTION> 

                                                    YEAR ENDED SEPTEMBER 30,
                                             -----------------------------------
                                               1997         1996         1995
                                             --------     --------     ---------
<S>                                         <C>           <C>           <C> 
Current expense (benefit)
 Federal .............................      $ 3,561       $ 1,087       $   425
 State ...............................          510           355           175
 Foreign .............................          721           580           141
                                            -------       -------       -------
                                              4,792         2,022           741
                                            -------       -------       -------
Deferred expense (benefit)
 Federal .............................         (436)         (283)         (106)
 State ...............................          (49)          (48)            2
 Foreign .............................          546           561           228
                                            -------       -------       -------
                                                 61           230           124
                                            -------       -------       -------
                                            $ 4,853       $ 2,252       $   865
                                            =======       =======       =======
</TABLE> 

     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at September
30, 1997 and September 30, 1996 are presented below:

<TABLE> 
<CAPTION> 
                                                               September 30,
                                                            -------------------
                                                              1997        1996  
                                                            -------     ------- 
<S>                                                         <C>         <C> 
Deferred tax assets:                                     
 Accounts receivable ....................................   $    85     $    66
 Inventory ..............................................       697         209
 Property, plant and equipment ..........................        22          14
 Accrued employee liabilities ...........................       731         704
 Deferred rent ..........................................        --          10
 Other ..................................................       118         155
                                                            -------     -------
                                                              1,653       1,158
                                                            -------     -------
Deferred tax liabilities:                                
 Inventory ..............................................    (1,675)     (1,150)
 Property, plant and equipment ..........................      (702)       (629)
 Intangible assets ......................................        --         (42)
                                                            -------     -------
                                                             (2,377)     (1,821)
                                                            -------     -------
 Net deferred tax liability .............................   $  (724)    $  (663)
                                                            =======     =======
</TABLE> 
  An analysis of the Company's effective income tax rate is as follows:

<TABLE> 
<CAPTION> 
                                                                Year Ended September 30,
                                                              1997        1996        1995
                                                           -------     -------     -------
<S>                                                        <C>         <C>         <C> 
Income taxes at U.S. federal income tax rate ............  $ 4,142     $ 1,958     $   669
State taxes, net of federal benefit .....................      320         210         118
Induced conversion of debentures ........................       --          --          56
Amortization of intangible assets .......................       81          60          19
Inflation ...............................................       48          33          49
Other, net ..............................................      262          (9)        (46)
                                                           -------     -------     -------
Provision for income taxes ..............................  $ 4,853     $ 2,252     $   865
                                                           =======     =======     =======
Effective income tax rate ...............................     39.8%       39.1%       43.3%
                                                           =======     =======     =======
</TABLE> 
     Cash paid for income taxes totaled $5,610, $1,552 and $740 in fiscal 1997,
1996 and 1995, respectively.

     Pre-tax earnings of Pantera since acquisition were $4,051, $3,171 and $709
in fiscal 1997, 1996 and 1995, respectively. Unremitted earnings of Pantera of
$4,715 were deemed to be permanently invested at September 30, 1997. No deferred
tax liability has been recorded related to future remittance of these earnings.
It is not practicable to estimate the income tax liability that might be
incurred upon remittance of such earnings to the United States.

                                     Page 22
<PAGE>
 
12. EMPLOYEE BENEFIT PLANS

     The Company maintains a tax-qualified defined contribution employee profit
sharing plan (the "Profit Sharing Plan"). All full-time U.S. employees, except
for employees of Denron, who are 21 years of age or older and who have completed
one year of service with the Company are eligible to participate. The Company
may make discretionary profit sharing contributions to the Profit Sharing Plan
for any plan year. A participant is entitled to receive a distribution of the
vested interest in his or her account upon retirement, death, permanent
disability or termination of employment. The Company's contribution vests to the
employee ratably over a seven-year period. The Company contributed $150, $100
and $85 for fiscal 1997, 1996 and 1995, respectively.

    The Profit Sharing Plan also contains provisions that are intended to
satisfy the tax qualification requirements of Section 401(k) of the Internal
Revenue Code (the "401(k) Plan"). All full-time U.S. employees, except for the
employees of Denron, who are 21 years of age or older and who have completed one
year of service with the Company are also eligible to participate in the 401(k)
Plan. Under the 401(k) Plan, an employee may elect to defer up to 15% of their
current compensation. Employee contributions to the 401(k) Plan are invested
according to the direction of the employee. The Company may make matching
contributions of fifteen cents for each dollar deferred by the employee up to 6%
of an employee's total compensation. A participant is entitled to receive a
distribution of the vested interest in his or her account upon retirement,
death, permanent disability or termination of employment. The Company's matching
contribution vests to the employee ratably over a seven-year period. Employee
contributions are fully vested and non-forfeitable at all times. The Company
contributed $30, $25 and $22 for fiscal 1997, 1996 and 1995, respectively.

     The Company maintains a deferred compensation plan for certain management
and highly compensated employees. Under the provisions of the plan, each
participant may defer up to 25% of annual compensation and the Company will
contribute 2.5% of each participant's annual salary on a quarterly basis.
Deferred compensation, under the plan, is invested by the Company, at the
discretion of the Board; however, each participant's account is allocated the
actual income, gains and losses that would have been earned if their deferred
compensation had been invested in accordance with their personal investment
selections.

     The Company has also entered into additional deferred compensation
agreements with two members of management. The terms of each of these agreements
provide that either employee may elect to defer any portion of their annual
gross salary. These agreements in no way obligate either participant to make
such an election in any fiscal year, and a failure to elect for any fiscal year
will not affect the right to do so in any subsequent fiscal year. These
agreements do not provide for Company contributions.

     At September 30, 1997 and 1996, the Company had assets related to deferred
compensation of $558 and $442, respectively, which balances are included in
other assets in the accompanying consolidated balance sheet. Compensation
expense for deferred compensation arrangements aggregated $112, $118 and $94 in
fiscal 1997, 1996 and 1995, respectively.

     In accordance with statutory requirements in Mexico, the Company is
required to make annual profit sharing distributions to the employees of
Pantera. These distributions are determined based on 10% of Pantera's taxable
income. A provision of $215 and $218 was recorded as of September 30, 1997 and
1996, respectively, for anticipated profit sharing distributions.

13. STOCK OPTION PLANS

     In April 1993, the Board of Directors approved adoption of the Stock Option
Plan of 1993 that authorized incentive stock options and nonqualified stock
options of 300,000 shares. Under the Plan, any salaried or supervisory employees
of the Company, as selected by the Board, are eligible to be granted options.
The options have ten-year terms with exercise prices equal to the fair market
value of the Company's Common Stock at the date of grant, as determined by the
Board. The options are exercisable from the date of grant. At September 30,
1995, all such options had been granted and were exercisable.

     The Company's 1995 Stock Option Plan (the "1995 Plan") was approved by the
Board of Directors on August 1, 1995 and by the shareholders of the Company on
November 21, 1995. Under the 1995 Plan, options may be granted to employees and
consultants for the purchase of up to an aggregate of 475,000 shares of Common
Stock. The 1995 Plan was amended at the January 28, 1997 Shareholders' Meeting
to provide for the authorization to issue an additional 525,000 shares under the
plan. The 1995 Plan provides for grants of both incentive stock options and
non-qualified stock options. The 1995 Plan is administered by the Board which
determines, at its discretion, the number of shares subject to each option
granted and the related purchase price and vesting period.


                                     Page 23
<PAGE>
 
    Under the 1995 Plan, no incentive stock option may be granted to an employee
who owns more than 10% of the total combined voting power of all classes of
outstanding stock. Each option expires on the date specified by the Compensation
Committee, but not more than 10 years from its date of grant. All incentive
options granted under the 1995 Plan will have an exercise price of not less than
100% of the closing price of the Common Stock on the grant date, 85% for
non-qualified options. Options shall be exercisable as specified by the
Compensation Committee. Generally, options are exercisable in cumulative annual
installments of 25% per year beginning one year after the date of grant.

     Pursuant to the 1995 Outside Directors Stock Option Plan ("Outside
Directors Plan") adopted by the Board of Directors on August 1, 1995, and the
shareholders of the Company on November 21, 1995, options shall be granted to
members of the Board of Directors who are not employees or 10% owners of the
Company (an "Outside Director"). An aggregate of 125,000 shares of Common Stock
are reserved for issuance under the Outside Directors Plan. All options granted
under the Outside Directors Plan are exercisable in full beginning sixty days
after date of grant of the option. The Outside Directors Plan requires that
options granted thereunder will expire not later than ten years after the date
of grant.

     The Company applies APB 25 and related Interpretations in accounting for
its Option Plans. Accordingly, no compensation cost has been recognized for
options granted under its Option Plans. Had compensation cost for the Company's
Option Plans been determined based on the fair value at the grant dates for
awards under the Option Plans consistent with the method of SFAS 123, the
Company's net income and earnings per share would have been reduced by the pro
forma amounts of: 1997 net income, $1,163 and earnings per share, $.15; 1996 net
income, $357 and earnings per share, $.06. This determination of fair value was
based on using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in both 1997 and 1996: dividend
yield of 0%, expected volatility of 106%, risk free interest rate of 5.25%, and
expected lives of 4 years.







                                     Page 24
<PAGE>
 
    A summary of the status of the Company's stock option plans as of September
30, 1997, 1996 and 1995, and changes during the years ending on those dates is
presented below:

<TABLE> 
<CAPTION> 
                                                                      Year ended September 30,
                                                    1997                         1996                        1995
                                         ----------------------     ---------------------------      -------------------------

                                                   Weighted-                       Weighted-                       Weighted-
                                                    Average                         Average                         Average
                                         Shares  Exercise Price     Shares       Exercise Price      Shares     Exercise Price
                                         ------  --------------     ------       --------------      ------     --------------
<S>                                      <C>     <C>                <C>          <C>                 <C>         <C> 
Options
-------
Outstanding at beginning of year         839,800         $4.71         300,000             $1.06        150,000          $0.68
Granted                                  267,500        $22.12         539,800             $6.85        160,000          $1.50
Exercised                               (161,396)        $2.51               -                 -              -              -
Cancelled                                (14,850)       $10.11               -                 -        (10,000)         $0.68
                                        --------                      --------                          --------

Outstanding at end                       931,054        $10.03         839,800             $4.71        300,000          $1.06
of year

Options exercisable                      348,635         $3.84         383,000             $1.69        300,000          $1.06
at end of year
</TABLE> 

     The following table summarizes information about stock options outstanding
at September 30, 1997:

<TABLE> 
<CAPTION> 

                                Outstanding and Exercisable by Price Range           Options Exercisable
                                ------------------------------------------           -------------------

                                                Weighted-Average
                                                   Remaining       Weighted-                       Weighted-
            Range of Exercise        Number       Contractual       Average         Number           Average
                  Prices           Outstanding       Life       Exercise Price    Exercisable    Exercise Price
           -------------------     -----------   -------------  --------------    -----------    --------------
            <S>                    <C>           <C>            <C>               <C>            <C> 
                $0.59-$0.68           95,500          6.25           $0.66            95,500          $0.66
                $1.50-$1.50           98,000          7.24           $1.50            98,000          $1.50
                $2.63-$4.00          130,050          8.15           $3.23            68,329          $3.77
                $7.65-$7.65           31,300          8.32           $7.65             1,300          $7.65
                $8.50-$8.50          317,204          8.93           $8.50            76,405          $8.50
               $8.88-$12.13            5,000          9.16          $11.48             4,000         $12.13
              $17.00-$17.00          152,650          9.54          $17.00               100         $17.00
              $18.75-$31.50           76,350          9.67          $30.09                 -              -
              $32.75-$32.75            5,000          9.83          $32.75             5,000         $32.75
              $33.00-$33.00           20,000          9.92          $33.00                 -              -

      ----------------------------------------------------- ------------------------------------------------
               $0.59-$33.00          931,054          8.60          $10.03           348,634          $3.85
</TABLE> 

                                    Page 25
<PAGE>

14. RELATED PARTY TRANSACTIONS

     Notes receivable from officers and directors of the Company totaled $206 at
September 30, 1996, earned interest at 8.25%-9.75% in 1996 and, except as noted
below, were payable on demand. Principal repayments on these notes totaled $206
and $408 in 1997 and 1996, respectively.

     In December 1994, three officers and directors of the Company purchased
land, with a book value of $201, from the Company for $250, of which
consideration included $50 of cash and two variable rate notes with an aggregate
face value of $200 maturing December 31, 2000. At September 30, 1996, principal
on these notes of $173, remained outstanding and was included in the balance of
related party notes receivable.

15. GEOGRAPHIC INFORMATION

    Certain geographic information follows:

<TABLE> 
<CAPTION> 
                                                         UNITED
                                                         STATES      MEXICO      EUROPE   CONSOLIDATED
                                                         ------      ------      ------   ------------
<S>                                                    <C>         <C>         <C>         <C> 
1997
----
Sales to unaffiliated customers ...................    $ 86,143    $ 26,369    $    275       $112,787
Operating profit (loss) ...........................       9,349       3,536         (32)        12,853
Identifiable assets ...............................      32,912      16,350       3,025         52,287


1996
----
Sales to unaffiliated customers ...................    $ 67,598    $ 17,918    $     --       $ 85,516
Operating profit ..................................       3,427       3,473          --          6,900
Identifiable assets ...............................      25,015      13,356          --         38,371


1995
----
Sales to unaffiliated customers ...................    $ 48,799    $  5,243    $     --       $ 54,042
Operating profit ..................................       2,239         740          --          2,979
Identifiable assets ...............................      16,080       8,151          --         24,231
</TABLE> 

     At September 30, 1997 and 1996 the difference between Identifiable Assets
above, and Total Assets reported on the consolidated balance sheet, is due to
general corporate assets, including deferred compensation assets and deferred
tax assets, of $1,843 and $1,491, respectively.

                                     Page 26
<PAGE>
 
16.         QUARTERLY FINANCIAL DATA (Unaudited)

<TABLE> 
<CAPTION> 

                                          First      Second    Third     Fourth
                                         Quarter    Quarter   Quarter   Quarter
<S>                      
Year ended September 30, 1997           <C>        <C>        <C>       <C> 
 Net sales .........................    $26,721    $30,160    $28,761    $27,145
 Gross profit ......................      5,037      6,016      6,543      5,941
 Net income ........................      1,768      1,952      1,744      1,865
 Earnings per share ................    $  0.24    $  0.26    $  0.23    $  0.25

Year ended September 30, 1996
 Net sales .........................    $19,213    $20,800    $21,869    $23,634
 Gross profit ......................      3,027      2,640      4,174      4,865
 Net income ........................        365        159      1,134      1,425
 Earnings per share ................    $  0.07    $  0.01    $  0.15    $  0.20

Year ended September 30, 1995
 Net sales .........................    $12,500    $12,144    $13,967    $15,432
 Gross profit ......................      2,024      1,965      2,061      2,441
 Net income ........................        320        369        217        229
 Earnings per share ................    $  0.06    $  0.07    $  0.01    $  0.00
</TABLE> 

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

          Not applicable.
                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The response to this item is contained in the Company's 1998 Proxy Statement
under the caption "Election of Directors" and is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION

The response to this item is contained in the Company's 1998 Proxy Statement
under the caption "Compensation of Directors and Executive Officers" and is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The response to this item is contained in the Company's 1998 Proxy Statement
under the caption "Beneficial Ownership of Capital Stock" and "Election of
Directors" and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The response to this item is contained in the Company's 1998 Proxy Statement
under the caption "Certain Transactions" and is incorporated herein by
reference.

                                     PART IV

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

(a) 1.   Financial Statements

         The following consolidated financial statements are included in item
         8:

                  -Consolidated Balance Sheet as of September 30, 1997 and 1996.

                  -Consolidated Statement of Operations for the years ended 
                  September 30, 1997, 1996 and 1995.

                                     Page 27
<PAGE>
 
                  -Consolidated Statement of Shareholders' Equity for the years
                  ended September 30, 1997, 1996 and 1995.

                  -Consolidated Statement of Cash Flows for the years ended 
                  September 30, 1997, 1996 and 1995.

(a) 2.   Financial Statement Schedules

         The following consolidated financial statements are included in item
         14(d):

                  -Schedule II-Valuation and Qualifying accounts and reserves.

                  -Schedules other than those listed above have been omitted
                  since the required information is not present or not present
                  in amounts sufficient to require submission of the schedule,
                  or because the information required is included in the
                  consolidated financial statements or the notes thereto.

(a) 3.   Listing of Exhibits

Exhibit No.    Description of Exhibit
-----------    ----------------------

3.1*      Amended and Restated Articles of Incorporation of the Company.

3.2*      Amended and Restated Bylaws of the Company.

4.1*      Specimen Certificate of Common Stock of the Company.

4.2**     Registration Rights Agreement.

10.1*     Employment Agreement, dated as of May 1, 1995, by and between Maria
                 Luisa Lozano and Electronica Pantera S.A. de C.V.

10.2*     Employment Agreement, dated as of May 1, 1995, by and between Robert
                 Verbosh and Electronica Pantera S.A. de C.V.

10.3*     Employment Agreement, dated as of December 9, 1994, by and between
                 John M. Spangler and The JPM Company.

10.4*     Employment Agreement, dated as of December 9, 1994, by and between
                 Robert R. Langton and The JPM Company.

10.5*     Employment Agreement, dated as of September 21, 1990, by and between
                 John H. Mathias and The JPM Company.

10.6*     Employment Agreement, dated as of September 21, 1990, by and between
                 James P. Mathias and The JPM Company.

10.7      Employment Agreement, dated as of March 12, 1996, by and between
                 William D. Baker and The JPM Company.

10.8*     The JPM Company 1995 Stock Option Plan.

10.9*     The JPM Company 1995 Outside Directors Stock Option Plan.

10.10*    The JPM Company 1993 Stock Option Plan.

10.11*    The JPM Company Deferred Compensation/Profit Sharing Plan.

10.12*    Form of Non-Qualified Deferred Compensation Agreement with Key
                 Employees.

10.13*    The JPM Company Deferred Compensation Plan for Messrs. John H. and
                 James P. Mathias.

10.14     Revolving Credit Business Loan Agreement, dated May 30, 1997, by and
                 between The JPM Company and CoreStates. 

                                    Page 28
<PAGE>
 
10.15     Commitment Letter, dated May 28, 1997, by and between The JPM Company
                 and CoreStates.

10.16     Amended and Restated Security Agreement, dated May 30, 1997, by and
                 between The JPM Company and CoreStates.

10.17     Guaranty, dated May 30, 1997, by and between The JPM Company and
                 CoreStates.

10.18     Cross-collateralization and Cross-default Agreement, dated May 30,
                 1997, by and between The JPM Company and CoreStates.

10.19*    Open-Ended Mortgage and Security Agreement dated May 12, 1995, from
                 The JPM Company to the Commonwealth Bank, a division of
                 Meridian.

10.20*    Business Loan Agreement dated May 12, 1995, by and between The JPM
                 Company and Commonwealth Bank, a division of Meridian.

10.21*    Promissory Note dated May 12, 1995, by and between The JPM Company and
                 Commonwealth Bank, a division of Meridian.

10.22*    Amended and Restated Loan Agreement dated May 10, 1995, by and between
                 The JPM Company, Inc. and NationsBank.

10.23*    Amended and Restated Promissory Note, dated May 10, 1995, made payable
                 to the order of NationsBank.

10.24*    Amended and Restated Security Agreement dated May 10, 1995, from The
                 JPM Company to NationsBank.

10.25*    Loan and Mortgage Modification Agreement, dated May 10, 1995, by and
                 between The JPM Company, Inc., The JPM Company of South
                 Carolina, Inc. and NationsBank.

10.26*    Lease Agreement, dated as of April 23, 1994, by and between
                 Electronica Pantera S.A. de C.V. and Natalia Sofia Presno
                 Rubin, Mario Raul Presno Rubin and Manuel Fernandez Fernandez.

10.27*    Lease Agreement, dated as of February 1, 1994, by and between
                 Electronica Pantera S.A. de C.V. and Natalia Sofia Presno
                 Rubin, Mario Raul Presno Rubin and Manuel Fernandez Fernandez.

10.28*    Lease Agreement, dated as of June 1, 1994, by and between Electronica
                 Pantera S.A. de C.V. and Natalia Sofia Presno Rubin, Mario Raul
                 Presno Rubin and Manuel Fernandez Fernandez.

10.29*    Lease Agreement, dated as of June 1, 1995, by and between Electronica
                 Pantera S.A. de C.V. and Eduardo E. Damy Gomez and Sergio R.
                 Damy Gomez in representation of their sons Eduardo and
                 Alejandro Damy Monraz and Neil Sergio and Rene Damy Novoa.

10.30*    Agreement with Diebold, Inc. dated July 1, 1993, for sale of
                 manufacture and service of electronic components.

21.1      Subsidiaries of Registrant:

                 The JPM Company of Delaware, Inc.
                 Route 15 North
                 Lewisburg, PA  17837

                 Denron, Inc.
                 2135 Ringwood Avenue
                 San Jose, CA  95131.

23.1      Consent of Price Waterhouse LLP.

27.1      Financial Data Schedule.

          * Incorporated by reference from Registrant's Registration Statement
on Form S-1 filed with the Securities and Exchange Commission on February 9,
1996, as amended.

                                     Page 29
<PAGE>
 
          ** Incorporated by reference from the Registrant's Proxy Statement for
a Special Meeting of Shareholders dated and filed with the Securities and
Exchange Commission on May 5, 1997.

(b)       Reports on Form 8-K:

                    The Registrant filed current reports on Form 8-K on March
                    12, 1997, June 4, 1997, August 20, 1997 and September 2,
                    1997.

                                     Page 30
<PAGE>
 
                                  EXHIBIT INDEX
                   Exhibit numbers are in accordance with the
                  Exhibit Table in Item 601 of Regulation S-K

Exhibit No.    Exhibit Description                    Sequential Page No.
-----------    -------------------                    -------------------

23             Consent of Price Waterhouse LLP                 -

27             Financial Data Schedule                         -

99.1           Master Demand Note
  
99.2           Line of Credit
 
99.3           Cross-Collateralization and Cross 
                 Default Agreement

99.4           Amended Security Agreement

99.5           Guaranty

99.6           Employment Agreement
    
                                    Page 31
<PAGE>
 
                                   SIGNATURES

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

                                                        THE JPM COMPANY
                                                         (Registrant)

BY: /s/ William D. Baker                       BY: /s/ John H. Mathias
    -----------------------------                  --------------------------
    William D. Baker                               John H. Mathias
    Vice President, Chief Financial Officer        Chairman of the Board and
    and Treasurer                                  Chief Executive Officer
    (Principal Financial and Accounting            (Principal Executive Officer)
    Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant in the
capacities and on the dates indicated.

<TABLE> 
<CAPTION> 

               Signature              Title                                        Date
               ---------              -----                                        ----
<S>                                   <C>                                       <C> 
/s/ John H. Mathias                   Chairman, Chief Executive Officer         November 24, 1997
-------------------------------       and Director (Principal Executive
John H. Mathias                       Officer)
                                               

/s/ James P. Mathias                  President and Director                    November 24, 1997
-------------------------------
James P. Mathias

/s/ William D. Baker                  Vice President, Chief Financial Officer   November 24, 1997
-------------------------------       and Treasurer (Principal Financial and 
William D. Baker                      Accounting Officer)                    
                                                          

/s/ Wayne A. Bromfield                Executive Vice President, General
-------------------------------       Counsel, Secretary and Director           November 24, 1997 
Wayne A. Bromfield                                                                                


/s/ Janet B. Mathias                  Director                                  November 24, 1997
-------------------------------
Janet B. Mathias


 /s/ Clifford M. Melberger            Director                                  November 24, 1997
-------------------------------
Clifford M. Melberger


/s/ Bruce M. Eckert                   Director                                  November 24, 1997
-------------------------------
Bruce M. Eckert
</TABLE> 
                                     Page 32
<PAGE>
 
                  SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
                   YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997
                             (dollars in thousands)

<TABLE> 
<CAPTION> 
                                                      Additions
                                                      ---------

                                                 Charged     Charged
                                   Balance at    to costs    to other                Balance at
                                   beginning       and       accounts    Deductions    end of
Description                        of period     expenses    describe     describe     period
-----------                        ---------     --------    --------     --------     ------
<S>                                <C>           <C>         <C>         <C>         <C> 

Year ended September 30, 1995:
Allowance for doubtful accounts ..      88             6         11(2)        --        105
Inventory reserve ................     190           350         --          192(1)     348
                                                                                       
                                                                                       
Year ended September 30, 1996:                                                         
Allowance for doubtful accounts ..     105            60         --            1        164
Inventory reserve ................     348           372         --           93(1)     627
                                                                                       
                                                                                       
Year ended September 30, 1997:                                                         
Allowance for doubtful accounts ..     164           232          8(4)       182(3)     222
Inventory Reserve ................     627            55         11(4)        --        693
</TABLE> 

(1) Due to disposal of excess and obsolete inventory 
(2) Due to recovery of accounts previously written off
(3) Due to write off of bad debt 
(4) Due to acquisition of Corma