<PAGE>   1



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

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

      For the Fiscal Year Ended: September 30, 2000

                                       OR

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

      For the transition period from                 to
                                     ---------------    ---------------

                          Commission File Number 1-4817

                      WHITE ELECTRONIC DESIGNS CORPORATION

             (Exact name of registrant as specified in its charter)
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                            INDIANA                                                     35-0905052
(State or other jurisdiction of incorporation or organization)              (I.R.S. Employer Identification No.)

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               3601 E. UNIVERSITY DRIVE
                  PHOENIX, ARIZONA                                   85034
           (Address of principal executive offices)                (Zip Code)

    Registrant's telephone number, including area code:           602/437-1520

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

           Securities registered pursuant to Section 12(g) of the Act
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      TITLE OF EACH CLASS              NAME OF EACH EXCHANGE ON WHICH REGISTERED
-----------------------------          -----------------------------------------
<S>                                    <C>
 Common Stock, without par value                NASDAQ National Market
  (stated value $.10 per share)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes  x   No
    ---     ---

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

As of December 15, 2000, the aggregate market value of the Registrant's Common
Stock held by non-affiliates (based upon the closing price of the shares on the
NASDAQ National Market on December 15, 2000) was approximately $162,000,000.

On December 15, 2000, 18,673,373 shares of the Registrant's Common Stock were
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement prepared in connection with the 2001
Annual Meeting of Shareholders are incorporated by reference into PART III,
Items 10, 11, 12 and 13 of this Annual Report.
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                                TABLE OF CONTENTS
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                                     PART I
ITEM 1     BUSINESS

           Forward Looking Statements and Associated Risks..................       1
           General..........................................................       1
           Microelectronic Segment..........................................       2
           Display Segment..................................................       3
           Principal Customers..............................................       4
           Research, Engineering and Development............................       4
           Regulatory Matters...............................................       4
           Employees........................................................       5
           Financial Information by Geographic Segment......................       5
           Risk Factors.....................................................       6

ITEM 2     PROPERTIES.......................................................       8

ITEM 3     LEGAL PROCEEDINGS................................................       8

ITEM 4     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .............       8

           EXECUTIVE OFFICERS OF THE COMPANY................................       9

                                     PART II

ITEM 5     MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
               RELATED SHAREHOLDER MATTERS..................................       9

ITEM 6     SELECTED FINANCIAL DATA .........................................      10

ITEM 7     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS..........................      11

ITEM 7A    QUANTITATIVE AND QUALITATIVE DISCLOSURES
           ABOUT MARKET RISK................................................      16

ITEM 8     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................      16

ITEM 9     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
               ACCOUNTING AND FINANCIAL DISCLOSURE..........................      17

                                    PART III

ITEM 10    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT  .............      17

ITEM 11    EXECUTIVE COMPENSATION...........................................      17

ITEM 12    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT......................................................      17

ITEM 13    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS  .................      17

                                     PART IV

ITEM 14    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
           ON FORM 8-K......................................................   18-19

           SIGNATURES.......................................................      20
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                                     PART I

ITEM 1        BUSINESS

FORWARD LOOKING STATEMENTS AND ASSOCIATED RISKS

Certain matters discussed in this document contain forward-looking statements.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for such forward-looking statements. The words "believe," "expect," anticipate"
and similar statements of expectation and statements regarding expected
shipments of backlog, availability of supplies, increases in revenues and
profits, and expected inventory and expenditure levels identify forward-looking
statements that speak only as of the date the statement is made. These
forward-looking statements are based on Management's expectations and are
subject to a number of risks and uncertainties, some of which cannot be
predicted or quantified and are beyond the Company's control. Certain risks and
uncertainties that may cause actual results, performance, or achievements to be
materially different from those expressed, or implied, by the forward-looking
statements include those set forth in the section titled "Risk Factors," below.
In light of these risks and uncertainties, there can be no assurance that the
forward-looking statements contained in this document will prove to be accurate.
Forward-looking statements speak only as of the date the statement was made. The
Company does not undertake, and specifically disclaims, any obligation to update
any forward-looking statements.

GENERAL

White Electronic Designs Corporation is an Indiana corporation organized in
1951. On October 26, 1998, Bowmar Instrument Corporation ("Bowmar") merged with
Electronic Designs, Inc. ("EDI"). In connection with the merger, Bowmar changed
its name to White Electronic Designs Corporation (the "Company.") While Bowmar
was the legal acquirer, the merger was accounted for as a reverse acquisition
purchase whereby EDI was deemed to have acquired Bowmar for financial reporting
purposes. Consistent with the reverse acquisition purchase accounting treatment,
the historical financial statements presented for periods prior to the merger
date are the financial statements of EDI, not the previously reported
consolidated financial statements of Bowmar. The operations of both companies
combined as White Electronic Designs Corporation have been included in the
financial statements from the date of the merger.

The average market value of the Bowmar common stock and preferred stock for a
reasonable period of time before and after the announcement of the merger
determined the purchase price for accounting purposes. The average market value
of Bowmar stock used to record the purchase was $1.26 per share for common stock
with 6,674,992 shares outstanding and $26.94 per share for preferred stock with
119,906 shares outstanding at the merger date. The aggregate value of the stock
and stock options outstanding used to record the purchase were $11,633,000 and
$440,000 respectively. In addition, direct expenses of the purchase of $650,000
consisting of legal, accounting and other fees were included in the purchase
price recorded.

The Company allocated costs in excess of net assets acquired of $4,075,000, to
inventory, fixed assets, and intangible assets, which are being amortized over
various periods ranging from 3 months to 15 years on a straight-line basis.

The Company has two business segments. Each of the two business segments require
different design and manufacturing resources and serve customers in different
markets. The microelectronic segment manufactures high-density semiconductor
memory and microprocessor products for use in telecommunications, data
communications and military aerospace markets. The display segment manufactures
liquid crystal displays and electromechanical components for customers mainly in
the aviation industry. The Company's executive offices are located at 3601 E.
University Drive, Phoenix, Arizona 85034, (602) 437-1520.

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<PAGE>   4
MICROELECTRONIC BUSINESS SEGMENT

Financial information for the microelectronic segment is disclosed in Note 18 of
Notes to the Consolidated Financial Statements.

Commercial products use SRAM, DRAM and Flash memory components with existing
packaging technologies to create space saving solutions in industry standard
configurations (SIMMS, DIMMS, BGA), multiple bare die on laminate (MCM-L), and
boards packaged using standards established by the personal computer memory card
international association (PCMCIA cards). Commercial memory module products
range in density from 2 megabit to one gigabit, with data widths from 8 to 144
bits, and access speeds as fast as 8 nanoseconds in various package options.
Commercial products are sold mainly to original equipment manufacturers in the
network and telecommunications industries.

Military products use SRAM, EEPROM, SDRAM and Flash memory components in ceramic
packages and laminate to produce high-density multichip packages and monolithic
products for use in adverse environmental conditions. Multichip packaging is a
technique that places several semiconductor chips into a compact package. A
monolithic product does the same using only one semiconductor chip. Military
products range in density from one megabit to 288 megabits, with data widths of
8 to 72, and speeds as fast as 15 nanoseconds in various package options.
Military products are sold primarily to both foreign and domestic government
contractors in the aerospace industry. Product sales are spread over many
different programs such as aircraft, missiles and communications equipment.

The products designed, manufactured, and sold by the Company in its
microelectronic segment are sold to original equipment manufacturers in the
United States, Europe and Asia through the Company's sales personnel and
independent sales representatives and distributors. In a time of strong demand
for memory and microprocessor products, as at present, sources of supply of IC
(integrated circuit) die and other components may be constrained and subject to
shortages. Because of long lead times quoted from vendors, the Company may buy
larger than normal amounts of inventory, when it is available, to adequately
meet the requirements of future production. Therefore, it is not uncommon to see
an increase in inventory during periods of die allocation. A manufacturer's
ability to compete is heavily dependent on its ability to maintain access to
steady sources of supply. To address these needs, the Company has maintained
strong relationships with leading semiconductor fabricators in the United States
and the Far East. The Company has no specific long-term contractual arrangement
with its vendors. The Company's microelectronic segment business is not
seasonal. The Company does not provide extended payment terms to its customers.
Products in the microelectronic segment are sold under a standard one-year
warranty and may be returned for repair or replacement during the warranty
period.

The backlog and proforma backlog for microelectronic products was approximately
$38,445,000 and $20,630,000, at the end of fiscal years 2000 and 1999,
respectively. Approximately 90% of the segment's fiscal 1999 backlog was shipped
during fiscal 2000. Approximately 90% of the fiscal 2000 year-end backlog is
expected to be shipped during fiscal 2001. The backlog after fiscal 2001 is a
result of customer requirements and demand for the products, not capacity
restraints.

The Company's principal competitors in the commercial module market, Smart
Module Technology, a subsidiary of Solectron Corp., Simple Technology, Inc.
(STEC) and Interworks, a subsidiary of Sanmina Corp. are larger than the Company
and have substantially greater financial, technical, marketing, distribution and
other resources. Smart Modular, Inc. manufactures a broad range of memory
modules in high volume. In addition, the Company competes with a number of
smaller companies, and larger semiconductor companies, who are now in the market
or may in the future, enter the market. The Company competes in this market on
the basis of many factors, including access to advanced semiconductor products
at competitive prices, successful and timely product introduction, design
capability, lead times, quality, product specification, pricing and customer
service.

The two main military market competitors are the microelectronics division of
Aeroflex Corp. and Austin Semiconductor. Both competitors are part of business
organizations that are larger than the Company and

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have greater financial and other resources. There are few competitors for the
military memory market business of the Company. Companies compete for this
business on the basis of many factors, including cost and quality systems (which
allow for compliance with U.S. and foreign military standards), longer term
access to advanced semiconductor products in die and wafer form, successful and
timely product introduction, inclusion of products on standard military
drawings, design capabilities, lead times, product specification, pricing and
customer service.

DISPLAY SEGMENT REVIEW

Financial information for the display segment is disclosed in Note 18 of Notes
to the Consolidated Financial Statements.

The Company designs and manufactures AMLCDs (ranging in size from 4.0" to 18.1")
diagonal panels in display head, monitor and computer system formats. These
displays offer significant advantages over other commercially available
displays. Significant features include sunlight readability and ruggedized
construction for operating temperatures from -35 to +85 degrees Celsius. The
Company is growing its display product segment by offering a broad range of
products based on different sized AMLCD panels, as well as developing advanced
display driver electronics. As with any new products, there is no assurance that
the display products developed (or to be developed) will be commercially
acceptable or profitable. Display products are sold mainly to customers in the
aviation and aerospace industries.

The Company's electromechanical components and instrument packages consist of
rotating devices, including gearheads, mechanical counters, dial drives,
mechanical packages and related devices. Specific applications for these
products include controls for automatically tuning airborne radio transmitters
and receivers, controls for fuel flow in jet engines and selected automatic
flight control servomechanisms. These products are sold principally to aircraft
instrument manufacturers as information displays in aerospace and ground
equipment.

The Company also produces digital displays, which permit a more accurate readout
of information than is feasible with analog meters. These include display
devices, which respond electromagnetically to electronic input signals, thus
eliminating mechanical transmission delays. These products are sold primarily to
aircraft instrument manufacturers.

The Company designs and manufactures, to customer specification, a variety of
keyboard assemblies for commercial and military applications. The Company has
the capability of meeting demanding requirements such as backlighting to meet
night vision goggle (NVG) compatibility, adverse environments, and the
integration of displays, including LCD's, and microprocessor technology.

Neither the needs of the Company for a continuing allotment of goods from its
suppliers nor the requirements of its customers for the products of the display
segment require the carrying of finished goods inventory. In its purchase of
components (some of which must be ordered months in advance), the Company has
not encountered, and does not anticipate encountering any significant
difficulty. To ensure an adequate supply of display glass, the Company has
maintained strong relationships with leading glass manufacturers in the Far
East. The Company does not provide extended payment terms to its customers.
Products are sold under a standard one-year warranty and may be returned for
repair or replacement during the warranty period.

The display segment backlog and proforma backlog was approximately $9,705,000
and $10,870,000 at the end of fiscal years 2000 and 1999, respectively.
Approximately 95% of this segment's 1999 backlog was shipped during fiscal 2000.
Approximately 95% of the fiscal 2000 year-end backlog is expected to be shipped
during fiscal 2001. The backlog after 2001 is a result of customer requirements
not capacity restraints. There are no seasonality factors affecting the display
business.

The principal basis of competition among display suppliers are display
performance (e.g., brightness, color capabilities, contrast and viewing angle),
size and weight, design flexibility, power usage, durability and ruggedness.
While the primary competition for the AMLCD is currently cathode ray tube
displays, the

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Company's products compete with other flat panel displays including gas plasma
and electroluminescent displays. The Company believes that price, product
reliability and the ability to meet delivery schedules are key competitive
factors. The Company competes with numerous other companies in the display and
electromechanical segment, many of which have greater financial resources,
larger technical and marketing resources and in some instances more advanced
technology products than those of the Company.

PRINCIPAL CUSTOMERS

In fiscal 2000, our sales to Lucent Technologies accounted for 19% of the
Company's sales. No other customer accounted for more than 5% of total sales.
Sales are split between original equipment manufacturers in the network and
telecommunications industries, board assembly companies, and U.S. prime
contractors in the defense industry. Sales to prime contractors can be for
relatively large dollar amounts and sometimes call for deliveries over more than
one year. The award of new contracts or the expiration of old contracts could
have a significant short-term impact on sales and operating results. Sales of
commercial memory products are usually based on high volume purchase orders with
deliveries scheduled over several months. The award of new purchase orders is
based upon the Company's ability to supply the OEM or assembly company with
products that meet current technological and quality requirements. The Company
sells memory and display products to over 400 companies throughout the world.
Customers for the Company's microelectronic products include Arrow Electronics,
Cabletron Systems, Cisco Systems, Credence Systems, Honeywell, Intel/Dialogic,
Lockheed Martin, Lucent Technologies, Network Appliance, Northrop Grumman,
Raytheon and Qualcomm. Of these customers, Lucent accounted for 23% of
microelectronic segment sales, and Network Appliance accounted for 5.6% of
segment sales. No other customer accounted for more than 5% of microelectronic
segment sales. The Company's display customers include Ametek Aerospace, Avex
Aerospace, Avidyne, Avnet, Computing Devices, GTE Government Systems, Hamilton
Standard, Hamilton Sundstrand, Honeywell, Litton, Lockheed Martin, Rockwell,
Smiths Industries, Transas Aviation, Trimble Navigation, and the United States
Department of Defense. As a percent of display segment sales, the U.S.
Department of Defense accounted for 20%, Smiths Industries 8%, Litton 8%,
Lockheed Martin 7%, Computing Devices 7%, and Honeywell 6% of display segment
sales. Total Company foreign sales for fiscal 2000, 1999, and 1998 were
$14,367,000, $10,472,000 and $7,753,000 respectively.

RESEARCH, ENGINEERING AND DEVELOPMENT

Current research and product development activities are directed primarily
toward the improvement of existing standard products. Some projects, however,
are focused on the development of new products or processes. The Company devotes
minimal resources to pure research and development, but emphasizes the
application of its engineering expertise to the development and refinement of
proprietary products or technologies. Expenditures by the Company on research
and product development for fiscal years 2000, 1999 and 1998 amounted to
approximately $5,014,000, $3,651,000, and $2,559,000, respectively. Research and
product development efforts are principally conducted by the Company's
engineering staff.

We believe that continued strategic investment in process technology and product
development is essential for us to remain competitive in the markets we serve.
We are committed to the appropriate levels of expenditures for research and
development.

REGULATORY MATTERS

Government Contracting Regulation

A significant portion of the Company's business in fiscal 2000 was derived from
subcontracts with prime contractors of the U.S. Government. As a U.S. Government
subcontractor, the Company is subject to Federal Government contracting
regulation. Under these regulations, the U.S. Government is entitled for three
years after final payment on certain negotiated contracts or contract
modifications to examine all of the Company's cost records with respect to such
contracts to determine whether the Company furnished complete, accurate and
current cost or pricing data to the government in connection with the
negotiation of the price of the contract or modification. The U.S. Government
also has the right after final payment to seek

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a downward adjustment to the price of a contract or modification if it
determines that the contractor failed to disclose complete, accurate and current
data. Historically the Company has not experienced significant downward
adjustments.

In addition, the Federal Acquisition Regulations govern the allowability of
costs incurred by the Company in the performance of U.S. Government contracts to
the extent that such costs are included in its proposals or are allocated to
U.S. Government contracts during performance of those contracts.

The Company's subcontracts provide that they may be terminated at the
convenience of the U.S. Government. Upon such termination, the contractor is
normally entitled to receive the purchase price for delivered items,
reimbursement for allowable costs incurred and allocable to the contract and an
allowance for profit on the allowable costs incurred or adjustment for loss if
completion of performance would have resulted in a loss. In addition, the
Company's subcontracts provide for termination for default if the Company fails
to perform or breaches a material obligation. In the event of a termination for
default, the customer may have the unilateral right at any time to require the
Company to return unliquidated progress payments pending final resolution of the
propriety of the termination for default. The Company may also have to pay the
excess, if any, of the cost of purchasing a substitute item from a third party.
If the customer has suffered other ascertainable damages as a result of a
sustained default, the customer could demand payment of such damages by the
Company.

In connection with the Company's U.S. Government business, the Company also is
subject to Government investigations of its policies, procedures and internal
controls for compliance with procurement regulations and applicable laws. The
Company may be subject to downward contract price adjustments, refund
obligations or civil and criminal penalties. In certain circumstances in which a
contractor has not complied with the terms of a contract or with regulations or
statutes, the contractor might be debarred or suspended from obtaining future
contracts for a specified period of time. Any such suspension or debarment of
the Company would have a material adverse effect on the Company's business.

It is the Company's policy to cooperate with the Government in any
investigations of which it has knowledge, but the outcome of any such Government
investigations cannot be predicted with certainty. The Company believes it has
complied in all material respects with applicable government requirements.

Environmental Protection

Compliance with federal, state and local laws or regulations, which govern the
discharge of materials into the environment, has not had a material adverse
effect upon the capital expenditures, earnings or competitive position of the
Company.

EMPLOYEES

As of the end of the fiscal year, the Company employed 274 persons. Of such
employees, 173 were employed in the microelectronic segment and 96 in the
display segment and 5 in corporate administration. A total of 53 of the
Company's employees in the display segment were employed pursuant to collective
bargaining agreements covering workers at the Company's Display Division in Fort
Wayne, Indiana. This agreement is effective through October 2001. The Company
believes its labor relations are satisfactory.

FINANCIAL INFORMATION BY GEOGRAPHIC SEGMENT

See Note 18 in Notes to the Consolidated Financial Statement for information
relating to foreign sales by geographic segment.

                                       5
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RISK FACTORS

OPERATING RESULTS

Capital Expenditures, Research and Development and Other Costs. The need for
continued significant expenditures for capital equipment purchases, research and
development and ongoing customer service and support, among other factors, will
make it difficult for the Company to reduce its operating expenses in a
particular period if the Company's net sales for a period are not met because a
substantial component of the operating expenses are fixed costs. Accordingly,
there can be no assurance that the Company will be able to be profitable or that
it will not sustain losses in future periods. Due to the foregoing factors, it
is likely that in some future quarter the Company's operating results will be
below the expectations of public market analysts and investors. In such an
event, the price of the Company Common Stock may be materially adversely
affected.

Microelectronic Business. In connection with the Company's microelectronics
memory business, a wide array of factors could cause the Company's results of
operations and gross margins to fluctuate in the future from period to period.
The primary factors that might affect the Company's results of operations in
this regard include the cyclic ability of the semiconductor market; any loss of
a principal customer or any short term loss of a customer due to product
inventory accumulation by the customer; any inability to procure required
components; any adverse changes in the mix of products sold by the Company; and
any downturn of the semiconductor market which could cause a decline in selling
unit prices, diminished inventory value, and less demand for commercial memory
products as customers restrict inventory levels.

Reduction in Inventory Values. Reduction in value of the Company's inventories
due to unexpected price declines, as has occurred in the past in connection with
a softening of the semiconductor industry, could adversely affect the Company's
results of operations. Such declines in inventory valuation have had an adverse
effect on the Company's financial condition and results of operations in the
past and could have an adverse effect on the Company's financial condition and
results of operations in future periods.

DEPENDENCE ON DEFENSE INDUSTRIES

Our current contracts with defense-related companies account for a material
portion of the Company's overall revenues. Military capital expenditure levels
have been declining for some years now and depend on factors that are outside
the control of the Company. In addition, the U.S. defense industry has been
moving toward the purchase of commercial "off-the-shelf" (COTS) products rather
than those manufactured as compliant to specified military standards. In fiscal
2000, military and display related sales accounted for approximately 46% of the
Company's overall sales. Changes in military spending and the shift in military
demand for microelectronics products have had an adverse effect on the sales and
profit of the Company. Continued reductions in military spending could adversely
affect the sales and profits of the Company.

DEPENDENCE ON INTERNATIONAL SALES AND PURCHASES

The Company anticipates that international sales will continue to account for a
significant portion of the Company's net sales. In fiscal 2000, foreign sales
accounted for approximately 16% of the Company's overall sales. In addition, the
majority of the components used by the Company in connection with products for
military applications are acquired from foreign manufacturers worldwide,
particularly countries located in Asia. As a result, a significant portion of
the Company's sales and purchases are subject to the risks of international
business, including fluctuations in foreign currencies, trade disputes, changes
in regulatory requirements, tariffs and other barriers, the possibility of
quotas, duties, taxes or other changes or restrictions upon the importation or
exportation of the products being implemented by the United States, timing and
availability of export licenses and the general economies of these countries in
which the Company transacts business. Foreign suppliers of semiconductor related
materials are regularly threatened with, or involved in, pending trade disputes
and sanctions which, if realized, could materially adversely effect the Company
by closing off critical sources of supply for the raw materials used to produce
our products.

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DOWNTURN OF THE TELECOMMUNICATIONS INDUSTRY

Over the past several years, the telecommunications industry has seen explosive
growth in sales mainly because of advances in computer technology, development
of enhanced signal carrying technologies, and the expansion of the Internet. We
currently sell a large majority of our commercial microelectronic products to
original equipment manufacturers in the telecommunications industry. The growth
of this industry has helped our commercial division grow significantly in the
last two years. However, there can be no assurances that the industry will
continue to grow at these high rates. The Internet is still in a formative and
developmental stage. There may be unpredictable changes in the future that may
cause reduced growth in Internet usage. It would be reasonable to assume that
the telecommunications industry could someday experience a downturn in business,
similar to many other industries that grew and matured. Given our current
dependence on this industry for a large portion of our sales and profits, a
downturn would have a material adverse effect on our business.

ABSENCE OF CONTRACTUALLY ASSURED SOURCES OF SUPPLY/GENERAL LIMITATIONS ON SUPPLY

The most significant raw materials that the Company purchases in its operations
are memory devices in wafer, die and component forms and AMLCD panels. In a time
of strong demand for memory integrated circuits and other products, sources of
supply of wafers, die and other components may be constrained and subject to
shortages, and the ability of the Company to compete is heavily dependent on its
ability to maintain access to steady sources of supply. AMLCD panels may also be
in short supply, at times. The Company does not have specific long-term
contractual arrangements with its vendors, although it believes it has good
relationships with its vendors. No assurance can be given that existing access
to the current sources of supply of the Company may not be impaired in the
future. Any such impairment could have a material adverse effect on the Company.

MAINTAINING QUALIFIED PERSONNEL

The Company's ability to compete in the market and successfully manufacture
quality products is dependent on our ability to attract and retain qualified
employees in the areas of product design, engineering, operations management,
manufacturing production, and sales. The demand for people with expertise in
these areas has been very high for the past several years, and competition for
qualified talent is intense. We currently have open requirements for people in
these areas, and have been unable to fill the positions for several months. This
personnel shortage could limit our ability to expand both of our business
segments. Also, the loss of key personnel in any one of these areas could have a
material adverse effect on the results of the business segment.

RISKS OF TECHNOLOGY CHANGE AND DEVELOPMENT OF NEW PRODUCTS

The Company's future results of operations will be dependent upon its ability to
improve and market its existing products and to develop, manufacture and market
new products. There can be no assurance that the Company will be able to
continue to improve and market its existing products or develop and market new
products, or that technological developments will not cause the Company's
products or technology to become obsolete or noncompetitive.

The Company's display products have been developed exclusively based on AMLCD
products procured from Sharp Electronics Corporation ("Sharp"). Competitors in
the flat panel display business are investing substantial resources in the
development and manufacture of flat panel displays using a number of alternative
technologies. In the event these efforts result in the development of products
that offer significant advantages over Sharp's and the Company's products, and
the Company is unable to improve its technology or develop or acquire
alternative technology that is more competitive, the Company's business and
results of operations will be adversely affected.


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VOLATILE MARKET PRICE FOR COMPANY STOCK

The market price for the Company's common stock is subject to fluctuations in
response to a number of factors, including variations in the Company's quarterly
operating results, perceptions about market conditions in the microelectronics
industry and the effect of general economic conditions, many of which are
unrelated to the Company's operating performance. In addition, the stock market
generally has experienced significant price and volume fluctuations. These
market fluctuations could have a material adverse effect on the market price or
liquidity of the Company's Common Stock.

ENVIRONMENTAL REGULATIONS

The Company is subject to a variety of federal, state and local governmental
regulations related to the storage, use, discharge and disposal of toxic,
volatile or otherwise hazardous chemicals used in its manufacturing process.
Increasing public attention has been focused on the environmental impact of
microelectronic manufacturing operations. While the use of toxic, volatile or
otherwise hazardous substances by the Company is small, there can be no
assurance that changes in environmental regulations will not impose the need for
additional capital equipment or other requirements. Any failure by the Company
to control the use of, or to adequately restrict the discharge of, hazardous
substances under present or future regulations could subject the Company to
substantial liability or could cause its manufacturing operations to be
suspended. Such liability or suspension of manufacturing operations could have a
material adverse effect on the Company's business, financial conditions and
results of operations.

ITEM 2        PROPERTIES

The Company leases a facility under an operating lease in Phoenix, Arizona
consisting of approximately 53,000 square feet. The facility is used as the
Company's corporate offices and for all manufacturing of the military components
of the microelectronic segment. The Company also leases a 33,000 square foot
facility located in Westborough, Massachusetts for manufacturing and development
of commercial microelectronic products and display products. The Company also
subleases its former sales office in London, England under a long-term lease
expiring in 2004. In addition, the Company owns a facility in Ft. Wayne, Indiana
consisting of a building with approximately 75,000 square feet of space used for
the manufacture of display and electromechanical products. The Company also owns
ten acres of vacant land adjacent to the building. All of the Company's property
has been pledged as security for the Company's line of credit and term loans
with Bank One. Management considers these properties to be well maintained and
adequate for their use. All properties have additional capacity, which could be
utilized in the event of increased production requirements.

ITEM 3        LEGAL PROCEEDINGS

On April 25, 1996 the U.S. Attorney's Office for the State of Arizona undertook
an investigation of certain aspects of White Microelectronics contracts with
prime contractors for the Federal government. The investigation focused on the
interpretation of certain government contract specified testing requirements on
incoming material. On March 13, 1998, the Company was notified by the U.S.
Attorney's Office for the State of Arizona that it had closed its criminal
investigation of White Microelectronics. On June 2, 2000 the Company reached a
settlement with the U.S. Attorney's office concerning the Federal government's
claim for civil damages based on their findings from the investigation. All
payments have been made, in full, to settle all claims regarding this
investigation.

ITEM 4        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.
                                       8
<PAGE>   11
EXECUTIVE OFFICERS OF THE COMPANY

The names, ages, positions and business experience of all of the executive
officers of the company are listed below. Officers are appointed annually by the
Board of Directors at the meeting of directors immediately following the Annual
Meeting of Shareholders and serve until the next annual election or until their
successors have been elected and qualified or as otherwise provided in the
Company's by-laws.

There are no family relationships between any of the directors and executive
officers of the Company nor any arrangement or understanding between any such
executive officer and any other person pursuant to which he was elected as an
executive officer.

<TABLE>
<S>                                 <C>
Hamid R. Shokrgozar, 40             President, Chief Executive Officer and
President,                          Chairman of the Board of the Company.
Chief Executive Officer and         Appointed President and CEO of Bowmar
Chairman of the Board               Instrument Corporation on January 3, 1998
                                    and Director of the Company in February
                                    1998. From 1993 to 1998, Mr. Shokrgozar
                                    served as President of White
                                    Microelectronics, the largest division of
                                    Bowmar Instrument. Served as Vice President
                                    Engineering and Technology from 1988 to
                                    1993. Mr. Shokrgozar was elected Chairman of
                                    the Board on August 31, 2000. Mr. Shokrgozar
                                    holds a U.S. Patent for the invention of
                                    "Stacked Silicon Die Carrier Assembly."


William J. Rodes, 46                Chief Accounting Officer for the Company
Chief Accounting Officer,           since October 2000. Mr. Rodes was appointed
Treasurer and Secretary             Treasurer and Secretary of the Company in
                                    August 1999. Mr. Rodes was Corporate
                                    Controller from May 1999 to September 2000.
                                    Mr. Rodes was Controller for White
                                    Microelectronic Division of Bowmar
                                    Instrument Corporation from 1993 to 1999.
                                    From 1990 to 1991 he served as Manager of
                                    Cost Accounting and Financial Analysis for
                                    California Micro Devices.
</TABLE>


                                     PART II

ITEM 5   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
         MATTERS

The Company's common stock is currently traded on the NASDAQ National Market
under the symbol WEDC. Prior to June 8, 2000, the Company's common stock was
traded on the American Stock Exchange. The following table sets forth the high
and low sales prices for the common stock by quarter over the last two fiscal
years.
<TABLE>
<CAPTION>
                                                FISCAL 2000
--------------------------------------------------------------------------------
<S>                              <C>           <C>         <C>        <C>
Common stock market price        Jan 1         Apr 1       Jul 1       Sep 30
High                             $5.50         $18.38      $14.75      $18.63
Low                              $2.44         $ 4.25      $ 7.00      $10.38

</TABLE>
<TABLE>
<CAPTION>
                                                FISCAL 1999
--------------------------------------------------------------------------------
<S>                              <C>           <C>         <C>        <C>
Common stock market price        Jan 2         Apr 3       Jul 3      Oct 2
High                             $1.42         $1.67       $1.67      $2.21
Low                              $1.13         $1.25       $1.20      $1.67
</TABLE>

As of December 15, 2000, there were approximately 6,669 holders of record of the
Common Stock. The Company has not paid cash dividends on its Common Stock and
does not expect to do so in the foreseeable future. The Company intends to
retain all earnings to provide funds for the operation and expansion of its
business. One of the Company's credit agreements precludes the payment of cash
dividends on the Company's common stock.

                                       9
<PAGE>   12
On January 5, 2000, the Company announced that it would redeem all outstanding
shares of its Senior Voting Convertible Preferred Stock effective 5:00 p.m.
(EST) February 7, 2000. During that period, holders of 117,523 shares of Senior
Voting Convertible Preferred Stock exercised their right to convert such shares
into 1,566,566 shares of the Company's Common Stock. The issuance was exempt
from registration under the Securities Act of 1933, as amended, pursuant to
Section 3(a)(9) of the Act. The shares of the preferred stock were converted to
common stock with no additional payment to the holders. An additional 723 shares
of preferred stock were redeemed at the redemption price of $25.00 per share. A
total of $18,075 was paid to redeem these shares. During the first quarter of
fiscal 2000, 1,660 shares of preferred stock were converted into 22,127 shares
of common stock with no additional payment to the holders.

ITEM 6   SELECTED FINANCIAL DATA (In thousands of dollars, except share and
         per share data)

<TABLE>
<CAPTION>
                                                                                    Fiscal Year
Operations:                                               2000          1999            1998          1997         1996
                                                                                      (Note 1)      (Note 1)     (Note 1)
--------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>           <C>             <C>            <C>          <C>
Net sales                                             $    87,595   $     58,038    $    32,772    $   42,104   $   57,478
--------------------------------------------------------------------------------------------------------------------------
Gross margin                                          $    31,171   $     15,528    $     7,043    $   15,494   $   16,834
--------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before
   income taxes (Note 2)                              $     6,561   $       (859)   $    (3,304)   $    5,297   $    5,251
--------------------------------------------------------------------------------------------------------------------------
Weighted average number of common:
  shares and equivalents-basic                         17,544,136     15,394,451      7,072,000     6,948,000    5,546,000
  shares and equivalents-fully diluted (Note 3)        19,539,501             --             --     7,579,000    7,603,000
--------------------------------------------------------------------------------------------------------------------------
Income (loss) per common share:
     Continuing operations - basic                    $      0.37   $      (0.06)   $     (0.47)   $     0.74   $     0.82
     Continuing operations - fully diluted (Note 3)   $      0.34                                  $     0.68   $     0.60
--------------------------------------------------------------------------------------------------------------------------
Net income per share - basic                          $      0.37   $      (0.08)   $     (0.47)   $     0.54   $     0.51
Net income per share - fully diluted (Note 2)         $      0.34   $         --    $        --    $     0.50   $     0.37
--------------------------------------------------------------------------------------------------------------------------
Financial Positions (at year end):
  Working capital                                     $    23,378   $     12,584    $     5,207    $   11,723   $    6,425
  Total assets                                        $    54,996   $     38,771    $    17,935    $   25,137   $   21,063
  Long-term debt                                      $     1,519   $      2,249    $        --    $    2,208   $    2,939
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

Note 1: As a result of the merger October 26, 1998 of White Electronic Designs
Corporation (formerly Bowmar Instrument Corporation) and Electronic Designs,
Inc. (EDI), which was accounted for as a purchase by EDI of Bowmar, the
financials for the 1996, 1997, and 1998 fiscal year ended include only the
results of EDI.

Note 2 - See footnote 16 of the Consolidated Financial Statement provided
         elsewhere herein for discussion of discontinued operations.

Note 3 - In 1999 and 1998, fully diluted net income per share is considered
         to be the same as basic net income per share since the effect of the
         potentially dilutive convertible preferred is antidilutive.

This table should be read in conjunction with the Consolidated Financial
Statements provided elsewhere herein.

                                       10
<PAGE>   13
ITEM 7        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS

Introduction

On October 26, 1998, Bowmar Instrument Corporation ("Bowmar") merged with
Electronic Designs, Inc. ("EDI"). In connection with the merger, Bowmar changed
its name to White Electronic Designs Corporation (the "Company"). While Bowmar
was the legal acquirer, the merger was accounted for as a reverse acquisition
purchase whereby EDI was deemed to have acquired Bowmar for financial reporting
purposes. Consistent with the reverse acquisition purchase accounting treatment,
the historical financial statements presented for periods prior to the merger
date are the financial statements of EDI, not the previously reported
consolidated financial statements of Bowmar. The operations of both companies
combined as White Electronic Designs have been included in the financial
statements from the date of the merger.

Results of Operations Fiscal 2000 vs Fiscal 1999

Revenues

Net Sales increased 51% to $87.6 million for the year ended September 30, 2000
from $58.0 million in the same period of 1999. This increase was primarily due
to a 63% increase in sales of microelectronic components to $74.3 million from
$45.5 million. Sales of commercial memory products increased 74% from the
previous year because of substantially higher shipment volume combined with
increased average selling prices based on new product sales. Sales of high
reliability products increased 48% from the previous year based on higher
shipment volumes of monolithic products and level average selling prices when
compared to the previous year. Display sales increased 6%, or $731,000, from the
previous year on slightly higher shipment volumes.

Sales of semiconductor products, such as the components used to make our memory
products, have historically been cyclical, and subject to wide fluctuations in
supply and demand. Currently, the industry is experiencing high demand for
certain memory components. While this demand has strengthened average selling
prices, it has also caused a shortage of certain components. We have already
seen lead-times for components, such as Flash and SRAM products, increase
substantially. We are currently working to assure a steady flow of supplies from
our vendors. The ability to increase our sales in the future will be dependent
on our ability to obtain adequate supplies of semiconductor products from the
manufacturers. There can be no assurances that we will be able to increase our
allocations from the semiconductor vendors. Any increase in revenues and profits
will also depend on the continued growth of various electronics industries that
use our products such as manufacturers of telecommunications equipment,
networking equipment, and military equipment.

Gross Margin

Gross margin as a percentage of net sales improved to 35.6% for the period ended
September 30, 2000, from 26.8% in the previous year. The microelectronic segment
saw margins improve to 34.6% from 25.6%. The improvement was primarily because
of higher shipment volumes in both the commercial and high reliability memory
products, which spread fixed manufacturing costs over more units, and a
favorable product mix which included new commercial products and memory modules
which have a higher average selling price. Gross margin for the display segment
improved to 41.2% from 30.9% in the previous year because of a higher ratio of
liquid crystal display sales and higher shipments of ruggedized liquid crystal
displays which had higher selling prices than the product mix last year.

While gross margins have improved substantially since last year, we could
experience competitive pressures in our markets from existing companies which
could: 1) limit our ability to hold current average selling prices, 2) restrict
our access to electronic and display components, or 3) make it harder for us to
hire and retain key people in the manufacturing, technical, and engineering
areas. Unfavorable events in any of these areas could impact our ability to
manufacture product and maintain current sales or gross margins levels.


                                       11
<PAGE>   14
Accordingly, there can be no assurance we will be able to sustain our recent
gross margins. We have taken various actions to maintain our gross margins,
including purchasing new capital equipment to improve our efficiencies in the
manufacturing areas to increase our throughput. We continue to work with
semiconductor and display glass manufacturers to improve the availability of raw
materials. We have also implemented programs to hire new employees and train,
and retain our current employees to meet our production requirements. However,
we currently have open requirements for engineering, marketing, and
manufacturing personnel who are needed to pursue growth opportunities in both
our business segments. We have been unable to fill these positions for several
months. This personnel shortage could limit our ability to expand both of our
business segments. Given the current demands of the labor market, there can be
no assurance that we will meet all of our personnel requirements for either of
our business segments.

Selling, General and Administrative Expenses

Selling expenses for the year ended September 30, 2000, increased $2.3 million
from the same period of the previous year. Increases in spending for
microelectronic sales represented $1.8 million of this increase. The largest
component of the increase in microelectronic expenses was a $1.3 million
increase in sales commission expenses based upon a 63% sales increase for the
segment from the previous year. The remaining increase was mainly due to
expenses for new sales personnel, advertising and marketing to support sales
into the telecommunications markets. Selling expenses for the display segment
were $510,000 higher than last year and were mainly used to target the aviation
markets.

General and administrative expenses increased $1.2 million for the year ended
September 30, 2000, when compared to the same period in the previous year. This
increase is mainly due to higher salary and benefit expenses relating to
employee incentive pay, legal expenses, costs associated with shareholder
services and the change in listing of our common stock from the American Stock
Exchange to the NASDAQ National Market.

For the year ended September 30, 2000, selling, general and administrative
expense decreased as a percentage of sales to 16.1% from 18.4% in the prior
year.

Research and Product Development Expenses

Research and development expenses for the year ended September 30, 2000
increased $1.4 million from the previous year and totaled 5.7% of net sales. The
main source of the increase came from the microelectronic segment, which
increased spending $1.5 million from the previous year. Major ongoing product
development efforts include SDRAM, microprocessor modules, ball grid array
products, development of new packaging designs for memory products, and
qualification of new semiconductor products. The display segment expenses were
$116,000 lower than last year mainly because of reductions in spending for
interface and mechanical products. Spending on liquid crystal display
development was approximately 10% of net sales in 2000.

We believe that continued strategic investment in process technology and product
development is essential for us to remain competitive in the markets we serve.
We are committed to the appropriate levels of expenditures for research and
development.

Merger Expense

The merger expense of $850,000 incurred during fiscal 1999, related to the
merger of Bowmar Instrument Corporation and Electronic Designs, Inc., which
occurred on October 26, 1998 and formed White Electronic Designs Corporation.
These expenses consisted mainly of severance costs and charges for professional
services to complete the merger. No additional merger related costs were
incurred during fiscal year 2000.


                                       12
<PAGE>   15
Discontinued Operations

In connection with the October 1997 sale by EDI of its Crystallume Diamond
Products Division, the Company had recorded a receivable in the amount of
$625,000. As previously disclosed, the buyer asserted an indemnity claim against
the Company and refused to pay the $625,000 balance due, including the initial
installment of $250,000, which was due on October 1, 1998. The Company and the
buyer have resolved this matter. In exchange for executing mutual releases the
Company has reduced the receivable to $325,000. The results of this settlement
are reflected in the fiscal 1999 Statement of Income under results from
discontinued operations.

Liquidity and Capital Resources

Cash on hand as of September 30, 2000 totaled $1,857,000. During fiscal year
2000, cash provided by operations was approximately $858,000. The sum of net
income, depreciation, and amortization totaled approximately $9.0 million for
the period. However, increases in accounts receivable, inventories, accounts
payable and other assets, based on higher levels of sales activity, used
approximately $11.0 million for working capital requirements. Cash balances
increased approximately $1.5 million during the period. This increase was funded
by borrowings under our line of credit, which increased $1.5 million from
year-end.

During fiscal 2000, we recorded an increase in prepaid taxes because of an
expected $2.8 million tax benefit from the exercise of stock options during the
fiscal year. Without this entry, cash used by operations totaled $1,935,000.

Other uses of cash during fiscal 2000 included capital expenditures of $2.3
million, reduction of long-term debt of $730,000, first quarter Convertible
Preferred Stock dividend payment of $89,000, and redemption of Convertible
Preferred Stock of $18,075.

During the second quarter, we completed the redemption of our Convertible
Preferred Stock. Over 99% of the shareholders elected to convert their
Convertible Preferred Shares into shares of common stock. The remaining
shareholders were paid a total of $18,075 based on redemption price of $25.00
per share. The redemption ended our requirement to pay quarterly dividends on
the Preferred Shares of $89,000, and no dividends were paid after the first
quarter.

Accounts receivable have increased $4.3 million from the year ended October 2,
1999. This increase is consistent with our higher quarterly sales when compared
to the fourth quarter of last year ($25.1 million versus $17.6 million in the
fourth quarter of 1999). The current accounts receivable balance of $14.7
million represents 58% of the current quarterly sales rate and is consistent
with the 59% ratio at October 2, 1999.

Inventory levels have increased $9.3 million from the year ended October 2,
1999. This increase is consistent with our higher quarterly sales when compared
to the fourth quarter of last year ($25.1 million versus $17.6 million in the
fourth quarter of 1999). The current inventory balances also take into account
projected production requirements. Also, because of potential semiconductor
component shortages in the future, we are sometimes required to purchase
inventory in advance of our needs to ensure a steady flow of material through
the factory. Inventory amounts, when compared to the current quarterly sales
rate, increased to 95% of quarterly sales at year-end 2000 compared to 83% of
quarterly sales at year end 1999. We believe we are holding appropriate
inventory levels, based upon lead times for our raw materials and projected
production requirements.

Accounts payable were $4.1 million higher at the end of fiscal year 2000 than at
the end of fiscal 1999. This is consistent with increased levels of production
and requirements for raw materials as stated above.

Capital expenditures for the year ended September 30, 2000 totaled approximately
$2.3 million. Approximately $1,273,000 has been spent to increase production
capacity for our commercial memory products and over $700,000 has been spent to
upgrade our hi-rel manufacturing equipment. Approximately $168,000 was spent to
upgrade equipment in our Display division. We expect capital expenditures for
fiscal

                                       13
<PAGE>   16
2001 to be at approximately the same level as fiscal 2000. Future capital
expenditures will be funded by cash from operations, line of credit borrowings,
or operating lease financing.

During the month of January 2000, we completed a new revolving credit agreement
with Bank One. This agreement increased our maximum borrowing limit to $12.0
million from the previous limit of $6.0 million. The actual borrowing limit at
any time is subject to available accounts receivable and inventory balances. As
of the end of the fiscal year, we were in compliance with all debt covenant
requirements in the loan agreement. We believe that cash generated by
operations, in addition to our borrowing capability, should be sufficient to
fund our cash needs for the next twelve months.

To improve our borrowing costs, during the month of June 2000, we negotiated a
change to our revolving credit agreement with Bank One. The change allows us to
borrow from our available line of credit at a rate of LIBOR (London Interbank
Offering Rate) + 2.25% instead of the current prime rate. There were no other
changes to the agreement.

Interest Expense

Interest expense increased $144,000 for the year ended September 30, 2000, when
compared to the same period in the previous year. The increase was caused by
additional borrowings against our line of credit to support higher inventory
levels necessary to meet sales requirements.

Amortization of Intangible Assets

Amortization expense increased $21,000 for the year ended September 30, 2000.
Twelve months of amortization has been taken in Fiscal 2000, while only eleven
months of amortization were included in the same period of Fiscal 1999 because
of the timing of the merger.

Seasonality and Inflation

The Company's business is not seasonal in nature. Management believes that the
Company's operations have not been materially affected by inflation.

Certain matters discussed in this document contain forward-looking statements.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for such forward-looking statements. The words "believe," "expect," anticipate"
and similar statements of expectation and statements regarding expected
shipments of backlog, availability of supplies, increases in revenues and
profits, and expected inventory and expenditure levels identify forward-looking
statements that speak only as of the date the statement is made. These
forward-looking statements are based on Management's expectations and are
subject to a number of risks and uncertainties, some of which cannot be
predicted or quantified and are beyond the Company's control. Certain risks and
uncertainties that may cause actual results, performance, or achievements to be
materially different from those expressed, or implied, by the forward-looking
statements include those set forth in the section titled "Risk Factors," below.
In light of these risks and uncertainties, there can be no assurance that the
forward-looking statements contained in this document will prove to be accurate.
Forward-looking statements speak only as of the date the statement was made. The
Company does not undertake, and specifically disclaims, any obligation to update
any forward-looking statements.

Recently Enacted Accounting Pronouncements

On December 3, 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements. SAB 101 establishes four criteria for revenue recognition, and
clarifies the SEC's interpretation of other revenue recognition situations. The
Company complies with the guidelines established for revenue recognition in SAB
101.

On May 2, 2000 the Emerging Issues Task Force (EITF) issued EITF 00-10,
Accounting for Shipping and Handling Fees and Costs. EITF 00-10 focuses on
shipping and handling fees billed to customers and costs incurred by those
companies that sell goods. The Company believes that adoption of this standard
will have

                                       14
<PAGE>   17
no material effect on the Company's financial reporting and disclosure.

On April 3, 2000, the Financial Accounting Standards Board (FASB) issued FIN 44,
Accounting for certain transactions involving stock compensation - an
interpretation of APB 25. FIN 44 clarifies the application of Opinion 25 for
certain issues. The Company believes that adoption of this standard will have no
material effect on the Company's financial reporting and disclosure.

Year 2000

The Company surveyed its supporting computer systems and replaced, or upgraded
all non-compliant systems to meet year 2000 compliance at Fiscal Year end 1999.
We have continued to monitor all of our Year 2000 compliance issues through
September 2000. There were no additional costs incurred for Year 2000 compliance
in this period. We have not experienced any significant problems with suppliers,
customers, or shipments because of Year 2000 compliance issues through the month
of September 2000. We do not expect any business interruptions because of Year
2000 compliance issues in the future.

Results of Operations Fiscal 1999 vs 1998

Revenues

Fiscal 1999 and 1998 revenues were $58,038,000 and $32,772,000. The increase in
net sales between fiscal 1999 and 1998 is due to the inclusion in the financial
presentation for fiscal 1999 of the combined results of the former Bowmar and
EDI. If the net sales of Bowmar had been included in the fiscal 1998, combined
sales would have been $61,770,000. The primary reasons for the decrease in
combined sales include reductions in spending from year to year in the defense
industry, the lower average sales prices and the lower demand in the military
memory market brought on by the conversion to commercial-off-the-shelf ("COTS")
parts.

Gross Margins

As a percentage of sales, gross margin increased 1.3% during fiscal 1999 to
26.8% from 21.5% in fiscal 1998. If Bowmar's fiscal 1998 sales and cost of goods
sold were included, gross margin as a percentage of sales would have increased
in fiscal 1999 by 2% from fiscal 1998. This is mainly due to lower cost of sales
and improved production efficiencies which were primarily due to lower material
costs and headcount decreases. Cost of goods sold was negatively impacted by
merger expenses resulting from the write up of inventories because of the
allocation of the acquisition costs and severance payments to former employees.

Selling, General and Administrative Expenses

The inclusion of Bowmar's selling, general and administrative expenses in fiscal
1998 would have resulted in a decrease of $2,981,000 in fiscal 1999 compared to
fiscal 1998. The decrease results from lower sales cost and commissions due to
reorganization in the sales departments. In addition, the Company realized
savings in selling, general and administrative expenses due to merger related
efficiencies.

Research and Product Development Expenses

Product development expenses for fiscal 1999 increased by $1,092,000 from fiscal
1998. The inclusion of Bowmar's product development expenses in fiscal 1998
would have resulted in an increase of $464,000 in fiscal 1999 versus fiscal
1998. Product development expenses for fiscal 1998 increased $424,000 from
fiscal 1997. The yearly increases are due primarily to increases in salaries and
project costs associated with new product development.


                                       15
<PAGE>   18
Liquidity and Capital Resources

At October 2, 1999, working capital increased to $12,584,000 from $5,207,000 at
September 30, 1998, principally as a result of the increase in current assets
due to the merger. The Company's current ratio at fiscal year end 1999 improved
to approximately 1.8 to 1. The Company's total debt-to-equity ratio remained at
approximately 0.9 to 1.

In fiscal 1999 and 1998, the Company used $2,275,000 and generated $13,000
respectively of cash from operating activities. The major uses of cash in fiscal
1999 were $2,717,000 for the retirement of long term debt and $2,109,000 in
payments for capital expenditures. Depreciation and amortization expense was
$2,244,000 during fiscal 1999.

Capital expenditures in fiscal 1999 primarily consisted of $400,000 for
upgrading to a new computer system and related costs, $700,000 for test
equipment and $125,000 for facility upgrades. The remaining $884,000 in
expenditures was for manufacturing and general office equipment.

The Company's capital expenditure plans are principally to expand manufacturing
capacity and are expected to be financed largely through existing credit lines,
and to a lesser extent, through funds provided from operating leases.

With the inclusion of Bowmar's balance sheet account balances as of the date of
the merger, other major changes in balance sheet accounts during fiscal 1999
include: an increase in accounts receivable of $4,394,000 mainly due to shipment
timing differences from previous years; an increase in inventories of $2,433,000
in connection with the higher year-end backlog; accounts payables and accrued
expenses that partially offset the above working capital changes by increasing
$2,556,000 from fiscal 1998. The current portion of long-term debt increased
$2,104,000 relating to the Company's line of credit, which increased to
$4,730,000 from $2,332,000 at the end fiscal 1998. This increase was partially
offset by retirement of the current portion of long-term debt of $2,332,000
during fiscal 1999.

Interest Expense

Interest expense increased $351,000 from fiscal 1998 mainly because of increased
borrowings under the line of credit.

ITEM 7A       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of the fiscal year ended September 30, 2000 we had an outstanding balance of
$6.2 million borrowed against our revolving line of credit with Bank One. During
the fiscal year, the average outstanding balance on a daily basis was
approximately $4.0 million. The interest charged against these borrowings is a
combination of the Bank One "prime rate," which is similar to the prime rate
charged by major banking institutions in the United States, and the London
Interbank Offering Rate (LIBOR) plus 2.25%. During fiscal 2000 the "prime rate"
averaged 9.19%, and was at 9.5% as of September 30, 2000. Currently, LIBOR plus
2.25% is approximately 8.88%.

Based on average borrowings of $4.0 million per year, a hypothetical rate change
of 0.5% would increase our interest expense approximately $20,000 per year from
current expense levels. Using an average outstanding balance of $6.0 million, a
0.5% rate increase would increase our interest expense approximately $30,000 per
year from current expense levels. We believe that moderate interest rate
increases will not have a material adverse impact on our results of operations,
or financial position, in the foreseeable future.

ITEM 8        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 14 of this Annual Report for the Consolidated Financial Statements of
the Company and required supplementary data.


                                       16
<PAGE>   19
                                    PART III


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

None.

ITEM 10       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item for directors is set forth in the
Company's 2001 Proxy Statement relating to the Company's Annual Meeting of
Stockholders to be held on February 22, 2001, (the "2001 Proxy Statement"),
under the heading "Election of Directors" and the heading "Section 16(a)
Beneficial Ownership Reporting Compliance" and is incorporated herein by this
reference as if set forth in full. The information required by this Item for
Executive Officers of the Company is set forth in Part I of this Form 10-K,
under the heading "Executive Officers of the Company."


ITEM 11       EXECUTIVE COMPENSATION

The information required by this Item is set forth in the Company's 2001 Proxy
Statement under the heading "Executive Compensation" and is incorporated herein
by this reference as if set forth in full, however, the information set forth
under the headings "Report of the Compensation Committee" and "Stock Price
Performance Graph" contained in the 2001 Proxy Statement are not incorporated by
reference.


ITEM 12       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is set forth in the Company's 2001 Proxy
Statement under the heading "Principal Stockholders" and under the heading
"Security Ownership by Management" and is incorporated herein by this reference
as if set forth in full.


ITEM 13       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is set forth in the Company's 2001 Proxy
Statement under the heading "Certain Transactions" and under the heading
"Compensation Committee Interlocks and Insider Participation" and is
incorporated herein by this reference as if set forth in full.

                                       17
<PAGE>   20
                                     PART IV

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

(a)(1)        Financial Statements and Supplementary Data
<TABLE>
<CAPTION>

                                                                     Page
                                                                     ----
<S>                                                                  <C>
Consolidated Financial Statements

Report of Independent Accountants                                    21

Consolidated Balance Sheets as of September 30, 2000
 and October 2, 1999                                                 22

Consolidated Statements of Income for the Years Ended September
30, 2000, October 2, 1999 and September 30, 1998                     23

Consolidated Statements of Shareholders' Equity for the Years
Ended September 30, 2000, October 2, 1999 and September 30, 1998     24

Consolidated Statements of Cash Flows for the Years Ended
September 30, 2000, October 2, 1999, and September 30, 1998          25

Notes to Consolidated Financial Statements                           26

</TABLE>


(a)(2)   Financial Statement Schedules for the Years Ended September 30, 2000,
         October 2, 1999, and September 30, 1998


         Financial statement schedules have been omitted because either they are
         not required or are not applicable, or because the information has been
         included in the consolidated financial statements or notes thereto.



(a)(3)   Exhibits

<TABLE>
<S>      <C>
2.1      Agreement and Plan of Merger dated May 3, 1998 by and among Bowmar
         Instrument Corporation and Electronic Designs, Inc. and Bravo
         Acquisition Subsidiary, Inc. (incorporated herein by reference to
         Exhibit 2 to the current Report on Form 8-K filed on May 6, 1998.)

2.1A     Amendment to Agreement and Plan of Merger dated June 9, 1998
         (incorporated herein by reference to Exhibit 2.1A to the Registration
         Statement on Form S-4 filed on June 11, 1998, Registration No.
         333-56565).

2.1B     Amendment to Agreement and Plan of Merger dated August 24, 1998
         (incorporated herein by reference to Exhibit 2.1B to the Registration
         Statement on Form S-4, filed on September 2, 1998, Registration No.
         333-56565).

3.1      Amended and Restated Articles of Incorporation of White Electronic
         Designs Corporation (incorporated herein by reference to Exhibit 3.1 on
         Form 10-K filed December 24, 1998).

3.2      Amended and Restated Code of By-Laws of White Electronic Designs
         Corporation (incorporated herein by reference to Exhibit 3.2 to the
         June 9, 1998 Registration Statement on Form S-4 filed June 11. 1998).

4.1A     Amendment No. 1 to Rights Agreement, effective as of May 3, 1998
         (incorporated herein by reference to Exhibit 4.3 to the Registration
         Statement on Form S-4, filed on June 11, 1998, Registration No.
         333-56565).
</TABLE>

                                       18
<PAGE>   21
<TABLE>
<S>      <C>
10.1     Agreement to be Bound by Registration Rights Agreements, dated as of
         May 3, 1998, by and between Bowmar Instrument Corporation and
         Electronic Designs, Inc. (incorporated herein by reference to Exhibit
         10.1 to the Registration Statement on Form S-4, filed on Jun 11, 1998,
         Registration No. 333-56565).

10.2     Agreement to be Bound by Severance Agreements and Employment Agreement,
         dated as of May 3, 1998, by and between Bowmar Instrument Corporation
         and Electronic Designs, Inc. (incorporated herein by reference to
         Exhibit 10.2 to the Registration Statement on Form S-4, filed on June
         11, 1998, Registration No. 333-56565).

**10.10  Form of Incentive Stock Option Agreement covering incentive stock
         options granted under the Company's now terminated 1986 Plan, as
         amended October 23, 1987 (incorporated here in by reference to Exhibit
         10.2(c) to the Annual Report on Form 10-K for the fiscal year ended
         September 30, 1987).

**10.11  Form of Non-Incentive Stock Option Agreement covering non-incentive
         stock options granted under the Company's now terminated 1986 Plan, as
         amended October 23, 1987 (incorporated by reference to Exhibit 10.2(c)
         to the Company's Annual Report on Form 10-K for the fiscal year ended
         September 30, 1987).

**10.12  Bowmar Instrument Corporation Stock Option Plan for Non-Employee
         Directors as amended February 4, 1994 (incorporated herein by reference
         to Exhibit B to the Company's definitive Proxy Statement, prepared in
         connection with the 1994 Annual Meeting of Shareholders).

**10.14  1994 Flexible Stock Plan (incorporated herein by reference to Exhibit A
         to the Company's definitive Proxy Statement prepared in connection with
         the 1994 Annual Meeting of Shareholders).

10.27    Revolving Credit and Term Loan Agreement by and between Bank One, Texas
         and White Electronic Designs Corporation, an Indiana Corporation, dated
         January 7, 2000. (incorporated herein by reference to Exhibit 10.27 to
         the Company's 10-Q for the quarter ended January 1, 2000).

10.28    First Amendment to Loan and Security Agreement effective as of June 3,
         2000; Promissory Note effective June 3, 2000, Notice of Final Agreement
         effective June 3, 2000 (incorporated herein by reference to Exhibit
         10.28 to the Company's Quarterly Report on Form 10-Q for the quarter
         ended July 1, 2000).

21.1     Subsidiaries of White Electronic Designs Corporation (incorporated
         herein by reference to exhibit 21.1 to the Company's Annual Report on
         Form 10-K filed December 24, 1998).

*27.1    Financial Data Schedule.
</TABLE>

(b)      Reports on Form 8-K

         None.

(c)      See (a)(3) above.

(d)      Not applicable.

    *    Filed herewith.

   **    Management compensatory contract, plan or arrangement.


                                       19
<PAGE>   22
SIGNATURES

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

                                   WHITE ELECTRONIC DESIGNS CORPORATION




Date: December 27, 2000                  /s/William J. Rodes
     ---------------------               ---------------------------
                                         William J. Rodes
                                         Chief Accounting Officer,
                                         Secretary, Treasurer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the date indicated:


<TABLE>
<S>                                             <C>
/s/Norman T. Hall                               /s/Donald F. McGuinness
------------------------                        ---------------------------
Norman T. Hall                                  Donald F. McGuinness
Director                                        Director
Date: December 27, 2000                         Date: December 27, 2000
      ------------------                             ----------------------

/s/Thomas M. Reahard                            /s/Thomas J. Toy
------------------------                        ---------------------------
Thomas M. Reahard                               Thomas J. Toy
Director                                        Director
Date: December 27, 2000                         Date: December 27, 2000
      ------------------                             ----------------------



/s/Hamid R. Shokrgozar                          /s/William J. Rodes
------------------------                        ---------------------------
Hamid R. Shokrgozar                             William J. Rodes
President, Chief Executive Officer              Chief Accounting Officer,
and Chairman of the Board of Directors          Secretary, Treasurer
Date: December 27, 2000                         Date: December 27,2000
      ------------------                             ----------------------

/s/Edward A. White
------------------------
Edward A. White
Vice Chairman of the Board
and Director
Date: December 27, 2000
     -------------------
</TABLE>

                                       20
<PAGE>   23
                        REPORT OF INDEPENDENT ACCOUNTANTS


TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
WHITE ELECTRONIC DESIGNS CORPORATION


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholder's equity, and of cash flows
present fairly, in all material respects, the financial position of White
Electronic Designs Corporation and Subsidiary at September 30, 2000 and October
2, 1999, and the results of their operations and their cash flows for each of
the three years in the period ended September 30, 2000, in conformity with
accounting principles generally accepted in the United States of America. 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
auditing standards generally accepted in the United States of America, 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 our opinion.



PricewaterhouseCoopers LLP


Phoenix, Arizona
November 10, 2000


                                       21
<PAGE>   24
               WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                            (In thousands of dollars)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
                                                                  September 30,   October 2,
                                                                      2000           1999
============================================================================================
<S>                                                                 <C>             <C>
ASSETS
Current Assets
  Cash                                                              $  1,857        $    305
  Accounts receivable, less allowance for
     doubtful accounts of $417 and $304                               14,658          10,374
  Inventories, net                                                    23,884          14,583
  Prepaid expenses                                                     1,752             354
  Deferred income taxes                                                1,829           2,098
--------------------------------------------------------------------------------------------
              Total Current Assets                                    43,980          27,714
Property, Plant and Equipment, net                                     8,025           7,445
Deferred Income Taxes                                                  2,128           1,978
Goodwill and Intangibles                                                 690           1,444
Other Assets, net                                                        173             190
--------------------------------------------------------------------------------------------
              Total Assets                                          $ 54,996        $ 38,771
============================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
  Current portion of long-term debt                                 $  6,835        $  5,165
  Accounts payable                                                     8,832           4,697
  Accrued salaries and benefits                                        3,342           2,240
  Other accrued expenses                                               1,593           3,028
--------------------------------------------------------------------------------------------
              Total Current Liabilities                               20,602          15,130
Long Term Debt                                                         1,519           2,249
Other Long term Liabilities                                            1,252           1,190
--------------------------------------------------------------------------------------------
              Total Liabilities                                     $ 23,373        $ 18,569
--------------------------------------------------------------------------------------------
Commitments and Contingencies (see Note 12)
--------------------------------------------------------------------------------------------
Shareholders' Equity
   Preferred stock, $1.00 par value, authorized 500,000 shares,
     issued none, and 119,906                                             --             120
  Common stock, $0.10 stated value, authorized 60,000,000
    shares issued 18,534,201 and 15,919,524                            1,853           1,591
  Treasury stock, 44,442 and 44,442 shares, at stated value
     and cost                                                             (4)             (4)
  Additional paid-in capital                                          42,079          37,272
  Accumulated deficit                                                (12,305)        (18,777)
--------------------------------------------------------------------------------------------
                Total Shareholders' Equity                            31,623          20,202
--------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity                          $ 54,996        $ 38,771
============================================================================================
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
                                       22
<PAGE>   25
               WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARY
                        CONSOLIDATED STATEMENT OF INCOME
            (In thousands of dollars except data and per share data)
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------
                                                                                            FISCAL YEAR
                                                                               2000             1999             1998
------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>             <C>               <C>
Net sales                                                                  $    87,595     $     58,038      $    32,772
Cost of sales                                                                   56,424           42,510           25,729
------------------------------------------------------------------------------------------------------------------------
Gross margin                                                                    31,171           15,528            7,043
------------------------------------------------------------------------------------------------------------------------
Expenses:
   Selling, general and administrative                                          14,102           10,683            7,202
   Product development                                                           5,014            3,651            2,559
   Interest expense                                                                615              471              120
   Merger expense                                                                   --              850               --
   Amortization of intangible assets                                               753              732              466
------------------------------------------------------------------------------------------------------------------------
   Total expenses                                                               20,484           16,387           10,347
------------------------------------------------------------------------------------------------------------------------
Income/(loss) before income taxes
    and discontinued operations                                                 10,687             (859)          (3,304)
Provision (benefit) for income taxes                                             4,126             (301)              --
------------------------------------------------------------------------------------------------------------------------
Income/(loss) from continuing operations                                         6,561             (558)          (3,304)
------------------------------------------------------------------------------------------------------------------------
Discontinued operations (Note 16)
Loss from discontinued operations of Crystallume Diamond Products Division,
net of applicable income tax of $16,000                                             --             (277)              --
------------------------------------------------------------------------------------------------------------------------
Income/(loss) from discontinued operations                                          --             (277)              --
------------------------------------------------------------------------------------------------------------------------
NET INCOME/(LOSS)                                                                6,561     $       (835)     $    (3,304)
========================================================================================================================
Earnings (loss) per share - basic, continuing operations                   $      0.37     $      (0.06)     $     (0.47)
Earnings (loss) per share - basic, discontinued operations                          --            (0.02)              --
------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER COMMON SHARE - BASIC                                 $      0.37     $      (0.08)     $     (0.47)
------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share-diluted, continuing operations                   $      0.34
Earnings (loss) per share-diluted, discontinued operations                          --
------------------------------------------------------------------------------------------------------------------------
Net income per common share-diluted                                        $      0.34
------------------------------------------------------------------------------------------------------------------------
Weighted average number of common shares and equivalents:
    Basic                                                                   17,544,136       15,394,451        7,072,000
    Diluted                                                                 19,539,501
========================================================================================================================
</TABLE>

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

                                       23
<PAGE>   26
               WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                  (In thousands of dollars, except share data)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                                                              Additional                 Total Share-
                                            Preferred   Common     Treasury    Paid-in     Accumulated     holders'
                                               Stock     Stock      Stock      Capital       Deficit       Equity
=====================================================================================================================
<S>                                         <C>         <C>        <C>        <C>          <C>           <C>
BALANCE, SEPTEMBER 30, 1997                  $    --    $    72    $  (119)    $ 26,968     $(14,084)     $12,837
=====================================================================================================================
Purchase of common stock for
   treasury, at cost                                                  (310)                                 (310)
Common stock issued under
   employee stock option and stock
   purchase plans at $0.22 to $3.75
   per share                                                           243                      (194)         49
Stock purchase warrants issued in
   payment of services                                                               30                       30
Net loss                                                                                      (3,304)     (3,304)

=====================================================================================================================
BALANCE, SEPTEMBER 30, 1998                  $    --    $    72    $  (186)    $ 26,998     $(17,582)     $ 9,302
=====================================================================================================================
Common stock issued for exercise options
 and related tax benefits:
 76,159 shares                                                8                      14                        22
Payment of preferred dividends                                                                  (360)        (360)
Acquired through merger                          120      1,511        182       10,260                    12,073
Net loss                                                                                        (835)        (835)

=====================================================================================================================
BALANCE, OCTOBER 2, 1999                     $   120    $ 1,591    $    (4)    $ 37,272     $(18,777)     $20,202
=====================================================================================================================
Common stock issued for exercise
   of options: 1,020,799 shares                             103                   2,071                     2,174
Tax benefit related to exercise
   of stock options                                                               2,793                     2,793
Payment of preferred dividend                                                                    (89)         (89)
Conversion of preferred stock
   to common stock:
   1,588,693 shares                             (120)       159                     (57)                      (18)
Net income                                                                                     6,561        6,561

=====================================================================================================================
BALANCE, SEPTEMBER 30, 2000                  $    --    $ 1,853    $    (4)    $ 42,079     $(12,305)     $31,623
=====================================================================================================================
</TABLE>

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

                                       24
<PAGE>   27
               WHITE ELECTRONIC DESIGNS CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                            (In thousands of dollars)
<TABLE>
<CAPTION>

                                                                        YEAR ENDED
                                                        September 30,    October 2,     September 30,
                                                            2000            1999            1998
----------------------------------------------------------------------------------------------------
<S>                                                     <C>              <C>            <C>
 OPERATING ACTIVITIES:
 Net income                                                $ 6,561        $   (835)       $(3,304)
 Adjustments to reconcile net income to net cash
   provided by operating activities:
     Depreciation and amortization                           2,486           2,244          1,290
 Common stock and warrants issued in payment of
      interest and other expense                                --              --             30
     Deferred income tax (benefit) expense                     119            (117)
     Net changes in balance sheet accounts:
       Accounts receivable                                  (4,284)         (4,394)         3,809
       Inventories                                          (9,301)         (1,984)           712
       Prepaid expenses                                     (1,398)             26            326
       Tax benefit upon issuance of common stock
               for options                                   2,793              --             --
       Other assets                                             17             238           (715)
       Accounts payable                                      4,135             443         (2,220)
       Accrued expenses                                       (332)          1,253             85
       Other long-term liabilities                              62             851             --
----------------------------------------------------------------------------------------------------
 Net cash provided by (used in) operating activities       $   858        $ (2,275)       $    13
----------------------------------------------------------------------------------------------------

 INVESTING ACTIVITIES
 Acquisition of property,  plant & equipment                (2,313)         (2,109)          (773)
 Cash acquired in acquisition                                   --             224             --
 Proceeds from sales of discontinued operations                 --              --            500
----------------------------------------------------------------------------------------------------
 Net cash provided by (used in) investing activities       $(2,313)       $ (1,885)       $  (273)
----------------------------------------------------------------------------------------------------

 FINANCING ACTIVITIES:
 Borrowings under line of credit, net                        1,477           4,730             --
 Borrowings of long-term debt                                  193              34             --
 Issuance of long-term debt                                                                   150
 Retirement of long-term debt                                 (730)         (2,717)        (1,085)
 Issuance of common stock                                    2,174              22             49
 Repurchase of common stock                                     --              --           (310)
 Payment of preferred stock dividend                           (89)           (360)            --
 Redemption of preferred stock                                 (18)             --             --
----------------------------------------------------------------------------------------------------
 Net cash provided by (used in) financing activities       $ 3,007        $  1,709        $(1,196)
----------------------------------------------------------------------------------------------------
 Net change in cash                                          1,552          (2,451)        (1,456)
 Cash at beginning of year                                     305           2,756          4,212
----------------------------------------------------------------------------------------------------
 Cash at end of year                                       $ 1,857        $    305        $ 2,756

====================================================================================================
 SUPPLEMENTAL CASH FLOWS INFORMATION:
 Net cash paid for interest                                $   612        $    404        $   261
 Net cash recovered from income tax refunds                $    18        $    129        $   331
----------------------------------------------------------------------------------------------------
 NON-CASH INVESTING AND FINANCING ACTIVITIES
 Conversion of Preferred Stock                             $   102        $     --        $    --
----------------------------------------------------------------------------------------------------
 Details of acquisition
    Fair value of assets acquired                          $    --        $ 18,074        $    --
    Fair value of liabilities assumed                           --          (5,351)            --
====================================================================================================
 Net assets acquired                                       $    --        $ 12,723        $    --
 Acquisition costs                                              --            (650)            --
----------------------------------------------------------------------------------------------------
 Stock issued in connection with the merger                $    --        $ 12,073        $    --
====================================================================================================
</TABLE>

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

                                       25
<PAGE>   28
                      WHITE ELECTRONIC DESIGNS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       NATURE OF OPERATIONS

White Electronic Designs Corporation, formerly Bowmar Instrument Corporation and
its subsidiary (collectively "the Company"), designs and manufactures high
density, microelectronic memory products, advanced matrix liquid crystal
displays, interface products, and electromechanical components and packages. The
Company's customers include both domestic and international government
contractors and original equipment manufacturers. The majority of the sales and
operating income are generated by the microelectronic business segment.

2.       MERGER WITH ELECTRONIC DESIGNS, INC.

On October 26, 1998, Bowmar Instrument Corporation ("Bowmar") merged with
Electronic Designs, Inc. ("EDI"). In connection with the merger, Bowmar changed
its name to White Electronic Designs Corporation (the "Company"). While Bowmar
was the legal acquirer, the merger was accounted for as a reverse acquisition
purchase whereby EDI was deemed to have acquired Bowmar for financial reporting
purposes. Consistent with the reverse acquisition purchase accounting treatment,
the historical financial statements presented for periods prior to the merger
date are the financial statements of EDI, not the previously reported
consolidated financial statements of Bowmar. The operations of both companies
combined as White Electronic Designs Corporation have been included in the
financial statements from the date of the merger. Pursuant to the Merger each
outstanding share of common stock of EDI was converted into 1.275 shares of
common stock of Bowmar.

The following unaudited pro forma information shows the results of operations of
EDI and Bowmar for the fiscal year ended 1998 assuming the companies had
combined as of October 1, 1997.
<TABLE>
<CAPTION>

                                                                  1998
(Dollars in thousands except per share data)
--------------------------------------------------------------------------------
<S>                                                             <C>
 Revenue                                                        $  61,770
 Net income (loss), continuing operations                       $  (4,205)
 Basic income (loss) per share, continuing operations           $   (0.29)
--------------------------------------------------------------------------------
</TABLE>
This pro forma information does not purport to be indicative of the results that
actually would have been obtained if the companies had been combined during the
periods presented and is not intended to be a projection of future results.

3.       SIGNIFICANT ACCOUNTING POLICIES

         a. Principles of Consolidation

         The consolidated financial statements include the accounts of the
         Company. All significant inter-company accounts and transactions are
         eliminated. Certain amounts in prior fiscal years consolidated
         financial statements have been reclassified to conform to current
         presentation.

         b. Fiscal Year-End

         The Company's fiscal year-end is the Saturday nearest September 30.

         c. Fair Value of Financial Instruments

         The Company values financial instruments as required by SFAS No. 107,
         Disclosures about Fair Value of Financial Instruments ("SFAS No. 107").
         The carrying amounts of cash and cash equivalents and bank notes
         payable approximate fair value due to the short maturity of those
         instruments. The fair value of marketable securities and long-term
         investments is determined based on quoted market prices. The fair value
         of long-term obligations is estimated by discounting the future cash
         flows required under the terms of each respective debt agreement by
         current market rates for the same of similar issues of debt with
         similar remaining maturities.


                                       26
<PAGE>   29
                      WHITE ELECTRONIC DESIGNS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         d. Inventories

         Inventories are valued at the lower of cost or market with costs
         determined using the average and standard costs methods with standard
         costs approximating actual.

         e. Property, Plant and Equipment

         Property, plant and equipment, including property under capital lease
         agreements, are stated at cost. Depreciation is determined on a
         straight-line basis over the estimated useful lives ranging from 5 to
         20 years for buildings and improvements and 3 to 7 years for machinery
         and equipment. Leasehold improvements are amortized over the lives of
         the leases or estimated useful lives of the assets, whichever is less.
         When assets are sold or otherwise retired, the cost and accumulated
         depreciation are removed from the books and the resulting gain or loss
         is included in operating results.

         f. Intangible Assets

         Intangible assets represent the goodwill generated from the October 26,
         1998 merger with White Electronic Designs Corporation and the October
         10, 1995 acquisition of Electronic Designs, Inc. These assets are being
         amortized over periods ranging from four to five years. The intangible
         asset balances and related accumulated amortization as of fiscal year
         end 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
                                                          Fiscal 2000       Fiscal 1999
---------------------------------------------------------------------------------------
<S>                                                       <C>              <C>
Intangible Assets Gross October 26, 1998 Merger           $ 1,247,000      $ 1,247,000
Intangible Assets Gross October 10, 1995 Acquisition        2,330,000        2,330,000
Accumulated Amortization October 26, 1998 Merger             (557,000)        (266,000)
Accumulated Amortization October 10, 1995 Acquisition      (2,330,000)      (1,867,000)
---------------------------------------------------------------------------------------
Intangible Assets, Net                                    $   690,000      $ 1, 444,000
---------------------------------------------------------------------------------------
</TABLE>

         g. Government Contracts

         Sales under government contracts, which are usually based on firm fixed
         price contracts, are recorded when the units are shipped and accepted
         by the government.

         h. Sales Recognition and Accounts Receivable

         The majority of the Company's sales are recognized when the products
         are shipped to the customer. Some product shipments to distributors may
         be returned based on conditions set forth in their distributor
         agreement. Therefore, product sales on these shipments to distributors
         are not recognized until the distributor ships the products to the end
         user customer. The Company also maintains reserves for warranty return
         expense based on normal return rates. In addition, the Company has
         reserves for potential credit losses, and distributor price protection
         adjustments. Based on historical experience, the Company believes it
         has adequate reserves to account for potential losses or adjustments.
         Write-offs for uncollectible accounts totaled $112,188 in fiscal 2000,
         $36,000 in fiscal 1999, and $26,000 in fiscal 1998.

         i. Income Taxes

         The Company accounts for income taxes in accordance with Statement of
         Financial Accounting Standards No. 109, "Accounting for Income Taxes"
         ("SFAS 109"). SFAS 109 is an asset and liability approach that requires
         the recognition of deferred tax assets and liabilities for the expected
         future tax consequences of temporary differences between the financial
         statement carrying amounts and the tax bases of assets and liabilities.
         Deferred tax assets are recognized, net of any valuation allowance, for
         deductible temporary differences and net operating loss and tax credit
         carryforwards.


                                       27
<PAGE>   30
                      WHITE ELECTRONIC DESIGNS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         i. Newly Issued Accounting Standards

         On December 3, 1999, the Securities and Exchange Commission issued
         Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in
         Financial Statements. SAB 101 establishes four criteria for revenue
         recognition, and clarifies the SEC's interpretation of other revenue
         recognition situations. The Company does not believe that the adoption
         of SAB101 will have a significant impact on the consolidated financial
         statements.

         On May 2, 2000 the Emerging Issues Task Force (EITF) issued EITF 00-10,
         Accounting for Shipping and Handling Fees and Costs. EITF 00-10 focuses
         on shipping and handling fees billed to customers and costs incurred by
         those companies that sell goods. The Company believes that adoption of
         this standard will have no material effect on the Company's financial
         reporting and disclosure.

         On April 3, 2000, the Financial Accounting Standards Board (FASB)
         issued FIN 44, Accounting for certain transactions involving stock
         compensation - an interpretation of APB 25. FIN 44 clarifies the
         application of Opinion 25 for certain issues. The Company believes that
         adoption of this standard will have no material effect on the Company's
         financial reporting and disclosure.

         k. Accounting 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 revenues
         and expenses during the reported period. Actual results could differ
         from those estimates.

         l. Research and Development

         Expenditures for research and development are expensed as incurred.

4.       INVENTORIES

Inventories consist of the following:
<TABLE>
<CAPTION>

                                        September 30, 2000   October 2, 1999
-----------------------------------------------------------------------------
<S>                                     <C>                  <C>
Raw materials                               $12,163,000         $ 7,373,000
Work-in-process                               9,952,000           4,659,000
Finished goods                                1,769,000           2,551,000
-----------------------------------------------------------------------------
Total Inventories                           $23,884,000         $14,583,000
=============================================================================
</TABLE>

The inventories are net of reserve for excess and obsolete inventories of
$2,216,000 and $1,691,000 for fiscal 2000 and 1999 respectively.

5.       OTHER ASSETS

Other assets for fiscal 2000 were $173,000. Other assets for fiscal 2000 consist
of $22,500 in bank loan origination costs, $83,000 in security deposits and
$67,500 in other general deposits. Other assets for fiscal 1999 consist of
$57,000 in bank loan origination costs, $42,000 in security deposits and $91,000
in other general deposits.

                                       28
<PAGE>   31
                      WHITE ELECTRONIC DESIGNS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6.       PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
                                                   September 30, 2000    October 2, 1999
----------------------------------------------------------------------------------------
<S>                                                <C>                  <C>
Land                                                  $    246,000      $    246,000
Buildings and improvements                                 600,000           600,000
Machinery and equipment                                  7,117,000         5,704,000
Tooling                                                  1,487,000           987,000
Furniture and fixtures                                   1,698,000         1,618,000
Leasehold improvements                                   1,750,000         1,694,000
----------------------------------------------------------------------------------------
Total, at cost                                          12,898,000        10,849,000
Less accumulated depreciation and amortization          (4,873,000)       (3,404,000)
----------------------------------------------------------------------------------------
Net Property, Plant and Equipment                     $  8,025,000      $  7,445,000
========================================================================================
</TABLE>

At fiscal year-end 2000 and 1999, property, plant and equipment held under
capital leases amounted to $375,000 and $375,000 respectively. Related
accumulated amortization on this property and equipment amounted to $375,000 and
$304,000 at the end of fiscal 2000 and 1999, respectively. Amortization expense
for such equipment approximated $70,300, $94,000, and $94,000 for fiscal years
2000, 1999 and 1998, respectively.

7.       LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                            September 30, 2000   October 2, 1999
--------------------------------------------------------------------------------
<S>                                          <C>                  <C>
Term loan, Bank One                           $2,147,000           $2,601,000
Bank One revolving line of credit              6,207,000            4,730,000
Obligations under capital leases                       0               83,000
--------------------------------------------------------------------------------
   Sub-Total                                   8,354,000            7,414,000
Less current portion                           6,835,000            5,165,000
--------------------------------------------------------------------------------
Total long term debt                          $1,519,000           $2,249,000
================================================================================
</TABLE>

The availability of cash under the revolving line of credit is based on eligible
accounts receivable and inventories. There is a charge of 1/4 of 1% per month on
the unused portion of the line of credit.

The revolving line of credit agreement includes a covenant that precludes the
payment of cash dividends on common stock.

The aggregate maturities of the above debt excluding the revolving line of
credit are approximately $628,000 in 2001, $628,000 in 2002 and $891,000 in
2003.

The weighted average interest rate on long-term debt for fiscal 2000, 1999, and
1998 was approximately 9.05%, 8.05%, and 9.25% respectively.

8.       INCOME TAXES

The provision (benefits) for income taxes on continuing operations consists of
the following:

<TABLE>
<CAPTION>
                                                   Fiscal Year
                                       2000            1999           1998
--------------------------------------------------------------------------------
<S>                                <C>              <C>              <C>
Current                            $ 4,007,000      $ 129,000        $   --
Deferred                               119,000       (430,000)       $   --
--------------------------------------------------------------------------------
Income tax provision (benefit)     $ 4,126,000      $(301,000)       $   --
================================================================================
</TABLE>

                                       29
<PAGE>   32
                      WHITE ELECTRONIC DESIGNS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the provision for income taxes on continuing operations
between the U.S. statutory and effective rates follows:

<TABLE>
<CAPTION>
                                                          Fiscal Year
                                             2000            1999         1998
--------------------------------------------------------------------------------
<S>                                      <C>             <C>             <C>
Provision (benefits) at statutory rate   $ 3,634,000     $  (292,000)    $   --
State taxes, net of federal benefit          402,000         (30,000)    $   --
Other                                        (51,000)         (8,000)
Permanent difference                         141,000          29,000
--------------------------------------------------------------------------------
Effective Tax                            $ 4,126,000     $  (301,000)
--------------------------------------------------------------------------------
</TABLE>

The income tax effect of loss carry forwards, tax credit carryforwards and
temporary differences between financial and tax reporting give rise to the
deferred income assets and liabilities.

Deferred income taxes consisted of the following:

<TABLE>
<CAPTION>
                                                 September 30, 2000      October 2, 1999
----------------------------------------------------------------------------------------
<S>                                              <C>                     <C>
Current:
  Accounts receivable                               $        --            $        --
  Allowance for doubtful accounts                       164,000                119,000
  Inventories                                         1,480,000              1,374,000
  Plant, Property and Equipment                          74,000                 58,000
  Deferred Revenue                                       56,000                332,000
  Accrued expenses and other liabilities                366,000                816,000
  Tax credit carryforwards                                   --                     --
  Net operating loss carryforwards                      482,000                283,000
  Deferred tax asset valuation allowance               (793,000)              (884,000)
----------------------------------------------------------------------------------------
Subtotal                                            $ 1,829,000            $ 2,098,000
----------------------------------------------------------------------------------------
  Long Term:
    Property, Plant and Equipment                      (645,000)              (990,000)
    Intangible Assets                                  (272,000)              (568,000)
    Net operating loss carryforwards                  4,048,000              4,324,000
    Tax credits                                              --                147,000
    Other                                               (79,000)              (102,000)
    Deferred tax asset valuation allowance             (924,000)              (833,000)
----------------------------------------------------------------------------------------
  Subtotal                                          $ 2,128,000              1,978,000
----------------------------------------------------------------------------------------
  Total                                             $ 3,957,000            $ 4,076,000
----------------------------------------------------------------------------------------
</TABLE>

Based on the Company's taxable income in recent years and projecting future
taxable income over the period in which the deferred income tax assets are
deductible, the Company believes that it is more likely than not that it will
realize the benefit of the deferred tax assets.

As of September 30, 2000, the Company had federal net operating loss carry
forward for tax purposes of approximately $12,857,000, which expire at various
dates through 2018. In addition, the Company has state tax net operating loss
carryforwards of $2,995,000, which expire at various dates through 2003.

Ownership changes, as defined in Internal Revenue Code (IRC Section 382), have
limited the amount of net operating loss tax credit carryforwards that can be
utilized by the Company annually to offset future taxable income.

9.       BENEFIT PLAN

The benefit plan statement lists pension benefit information as of September 30,
2000, pursuant to the Company's defined benefit pension plan for union employees
at its Fort Wayne, Indiana facility pursuant to a

                                       30
<PAGE>   33
                      WHITE ELECTRONIC DESIGNS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

collective bargaining agreement. Benefits are based primarily on a benefits
multiplier and years of service. The Company funds the amount equal to the
minimum funding required plus additional amounts which may be approved by the
Company from time to time. The following statements list pension benefit
information as of September 30, 2000 and October 2, 1999.



<TABLE>
<CAPTION>
                                                                September 30,       October 2,
                                                                    2000               1999
-----------------------------------------------------------------------------------------------
<S>                                                             <C>                 <C>
Reconciliation of Projected Benefit Obligation
   Benefit obligation beginning of year                                  --                  --
   Benefit obligation assumed through merger                    $ 2,147,593         $ 2,258,116
   Service Cost                                                      45,063              49,217
   Interest cost                                                    156,661             146,900
   Participant contributions                                             --                  --
   Plan amendments                                                       --             133,176
   Curtailments                                                          --                  --
   Settlements                                                           --                  --
   Benefits paid                                                   (129,349)           (126,083)
   Actuarial (gain) loss                                             13,255            (313,733)
   Acquisitions (divestitures)                                            1                  --
-----------------------------------------------------------------------------------------------
Benefit obligation-end of year                                  $ 2,233,224         $ 2,147,593
-----------------------------------------------------------------------------------------------
Reconciliation of Fair Value of Plan Assets
   Plan assets at fair market value-beginning of year           $ 2,407,165         $ 2,353,962
   Actual return on plan assets                                     177,861             217,067
   Acquisitions (divestitures)                                           --                  --
   Employer contributions                                             4,974              15,289
   Participant contributions                                             --                  --
   Benefits paid                                                   (129,349)           (126,083)
   Settlements                                                           --                  --
   Expenses                                                         (47,723)            (53,070)
-----------------------------------------------------------------------------------------------
Plan assets at fair market value-end of year                    $ 2,412,928         $ 2,407,165
-----------------------------------------------------------------------------------------------
Funded Status                                                   $   179,705         $   259,572
   Unrecognized transition (assets) obligation                           --                  --
   Unrecognized prior service cost                                  161,037             185,922
   Unrecognized actuarial (gain) loss                              (330,013)           (341,032)
-----------------------------------------------------------------------------------------------
Net amount recognized                                           $    10,729         $   104,462
-----------------------------------------------------------------------------------------------
Weighted-Average Assumptions
   Discount rate                                                       7.50%               7.50%
   Expected return on plan assets                                      7.00%               7.00%
Amounts recognized in the statement of financial position
   Prepaid benefit cost                                              10,729         $   104,462
   Accrued benefit liability                                             --                  --
   Intangible assets                                                     --                  --
   Accumulated other comprehensive income                                --                  --
-----------------------------------------------------------------------------------------------
Net amount recognized                                           $    10,729         $   104,462
-----------------------------------------------------------------------------------------------
Components of Net Periodic Benefit Cost
   Service cost                                                 $    88,063         $    86,492
   Interest cost                                                    156,661             146,900
   Expected return on market-related plan assets                   (163,604)           (160,546)
   Amortization of transition (assets) obligation                        --                  --
   Amortization of prior cost                                        24,885              24,885
   Recognized actuarial (gain) loss                                  (7,298)                 --
-----------------------------------------------------------------------------------------------
Net periodic benefit cost                                       $    98,707         $    97,731
-----------------------------------------------------------------------------------------------
   Curtailment (gain) loss                                               --                  --
   Settlement (gain) loss                                                --                  --
-----------------------------------------------------------------------------------------------
Net periodic benefit cost after curtailments
            and settlements                                     $    98,707         $    97,731
===============================================================================================
</TABLE>

In addition, the Company has an Incentive Savings 401(k) Plan covering non-union
employees of the Company who have completed six months of service. During fiscal
2000, the Company matched employee


                                       31
<PAGE>   34
                      WHITE ELECTRONIC DESIGNS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

contributions equal to 50% of the first 6% of a participant's wage base. During
each of the fiscal years 2000, 1999, and 1998, the Company made contributions to
the plan of approximately $219,375, $133,475, and $119,000 respectively.


10.      STOCK OPTIONS, WARRANTS, AND STOCK PURCHASE PLANS

The Company has adopted the disclosure only provision of Statement of Financial
Accounting Standards No. 123, Accounting for Stock Based Compensation (SFAS
123). As allowed by SFAS 123, the Company has elected to continue to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) in accounting for its stock option plans. Accordingly, since
all options are issued with exercise prices greater than or equal to the market
price on the grant date, no compensation cost has been recognized for the stock
option plans.

In connection with the merger with Electronic Design, Inc., Bowmar assumed all
outstanding EDI options and EDI warrants exercisable for shares of EDI common
stock and each such EDI option and EDI warrant was by virtue of the merger and
without any action on the part of the holder thereof, exercisable for shares of
Bowmar stock having the same terms and condition as the EDI options and EDI
warrants (including such terms and conditions as may be incorporated by
reference into the agreements evidencing EDI options and EDI warrants pursuant
to the plans or arrangements pursuant to which such EDI options and EDI warrants
were granted) except that the number of shares issuable upon exercise has been
multiplied by the Exchange Ratio of 1.275 and rounded to the nearest whole
number of shares of Bowmar Stock and the exercise price per share of EDI Stock
under such option or warrants equals the exercise price per share of EDI Stock
under such EDI options or EDI warrant divided by the Exchange ratio of 1.275 and
rounded to the nearest cent.

Common Stock Warrants

During the year ended September 30, 1997, EDI, as part of a service agreement
with an outside firm, issued warrants to purchase 45,000 shares of common stock
at an exercise price of $3.875 per share, which vest upon achievement of
specified goals. These warrants expired in December 1999. The Company assigned a
value of $90,000 to these warrants, which was amortized to the income statement
over the service period.

At September 30, 2000, warrants to purchase 56,281 shares of common stock issued
prior to October 1, 1995, with an exercise price of $2.22, (using the exchange
ratio of 1.275) and expiration date of August, 2001 were outstanding.


Stock Options Plans

In February 1987, EDI adopted the 1987 Stock Option Plan (the "Plan"). The Plan,
as amended, allows for the issuance of up to 2,259,748 shares of the Company's
common stock. Options granted under the Plan must be granted at the fair market
value of such shares on the date of grant and must have an expiration date no
more that ten years from the date of grant. Generally, options vest over a
five-year period and expire five years from the date of grant. Additionally, in
October 1995, in connection with the acquisition of EDI-MA, fully vested options
to purchase 314,826 shares of the Company's common stock at $0.22 per share that
were valued at $598,000 were issued to employee in exchange for fully vested
options of EDI-MA. At the date of the merger with White Electronic Designs
Corporation, Bowmar assumed all then outstanding unexercised EDI options and
converted the number of shares issuable upon exercise and the exercise price per
share using the 1.275 exchange ratio. Both EDI plans were then terminated, and
there are no shares available for future grants. At September 30, 2000 there
were 738,184 shares from the 1987 Stock Option Plan under option, and 149,493
shares from the EDI-MA acquisition plan under option.


                                       32
<PAGE>   35
                      WHITE ELECTRONIC DESIGNS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Under Bowmar's shareholder approved 1994 Flexible Stock Plan, Common Stock is
available for the grant of options, appreciation rights, restricted stock
awards, performance shares and other stock-based awards. The vesting and terms
of the options granted under this plan are determined when awarded by the Board
of Directors. At September 30, 2000 there were 225,325 shares available for
future grants to directors, officers and employees at prices not less than the
fair value at the date of grant by the Board of Directors. At fiscal year-end
2000, 877,400 shares from the Company's 1994 plan are under option.

During fiscal 1995, the Board of Directors terminated Bowmar's shareholder
approved 1986 Stock Option Plan. At fiscal year-end 2000, 1,500 shares from
Bowmar's 1986 Plan remain under option.

The Company's approved Non-Qualified Stock Option Plan for Directors provides
for the issuance of options to purchase shares of Common Stock to directors at
an exercise price equal to the fair market value on the date of grant. At
September 30, 2000, there were 153,492 shares available for future grants to the
directors. The options are exercisable as early as six months after date of
grant and expire in ten years. A total of 285,000 options under this
Non-Qualified Plan have been issued to non-employee directors and 215,000
options remain unexercised at September 30, 2000.

During fiscal 1999, the Company's Board of Directors approved an independent
grant to Mr. McGuinness for a nonqualified stock option to purchase up to
102,000 shares of common stock at an exercise price of $1.125 per share, vesting
ratably over three years. At September 30, 2000, 102,000 shares from this
independent option right are still under option.

A summary of the Company's stock option activity and related information is as
follows:

<TABLE>
<CAPTION>
                                                                              Fiscal Year
                                                      2000                        1999                       1998
--------------------------------------------------------------------------------------------------------------------------
                                                           Weighted                    Weighted                   Weighted
                                               Shares       Average        Shares       Average       Shares       Average
                                               Under       Exercise        Under       Exercise       Under       Exercise
                                               Option       Price          Option       Price         Option       Price
--------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>             <C>         <C>             <C>         <C>            <C>
Beginning balance outstanding                2,692,234      $1.80        2,715,586      $2.31       1,740,978      $3.49
Granted                                        530,000       3.84        1,271,178       1.19         135,250       3.18
Canceled                                      (117,858)      1.74       (1,218,371)      2.37        (268,068)      3.39
Exercised                                   (1,020,799)      2.13          (76,159)      0.28          (2,566)      3.37
--------------------------------------------------------------------------------------------------------------------------
Ending balance outstanding                   2,083,577      $2.13        2,692,234      $1.80       1,605,594      $3.48
Merger conversion at 1.275                                                                          2,047,132       2.73
Beginning balance outstanding, Bowmar                                                                 668,454       2.04
--------------------------------------------------------------------------------------------------------------------------
Adjusted ending balance outstanding          2,083,577      $2.13        2,692,234      $1.80       2,715,586      $2.39
--------------------------------------------------------------------------------------------------------------------------
Shares available for future grant              378,817                     562,390                    757,000
Weighted average fair value of
   option grants                            $     3.12                 $      0.68                 $     2.13
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

The beginning balance of shares under option for fiscal 2000 was calculated by
converting EDI's balance of option shares outstanding by the $1.125 exchange
ratio and adding Bowmar's balance of option shares outstanding at fiscal year
end 1999.

                                       33
<PAGE>   36
                      WHITE ELECTRONIC DESIGNS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes additional information about the Company's stock
options outstanding as of September 30, 2000.

<TABLE>
<CAPTION>
                                        Options Outstanding                      Options Exercisable
------------------------------------------------------------------------------------------------------

                                           Weighted         Weighted                          Weighted
                               Shares       Average          Average                           Average
                                Under      Exercise         Remaining         Exercisable     Exercise
                               Option       Price        Contractual Life       Shares          Price
------------------------------------------------------------------------------------------------------
<S>                          <C>           <C>           <C>                  <C>             <C>
Range of exercise price:
  $ 0.170 - $ 1.000            149,493     $ 0.1700         4.1 years            149,493       $0.1700
  $ 1.001 - $ 2.000            984,484     $ 1.2850         5.4 years            612,579       $1.3164
  $ 2.001 - $ 3.000            860,100     $ 2.6953         7.1 years            428,081       $2.6401
  $ 3.001 - $ 8.000             54,000     $ 6,2326         9.3 years                  0       $0.0000
  $ 8.001 - $12.000             14,500     $10.3750         9.6 years                  0       $0.0000
  $12.001 - $16,000             21,000     $16.0000         9.9 years                  0       $0.0000
------------------------------------------------------------------------------------------------------
                             2,083,577     $ 2.1269         6.2 years          1,190,153       $1.6485
======================================================================================================
</TABLE>

On December 6, 1996, the Bowmar Board of Directors approved the repricing of
213,500 options that were granted to officers and employees in 1995 under the
Company's 1994 Flexible Stock Plan. The revised exercise price is $2.00 per
share (approximately 25% over the market price on the date of the repricing)
instead of the original exercise prices, which ranged from $3.125 to $3.375 per
share.

On December 3, 1998, the Board of Directors approved the repricing of options to
employees (excluding the Chief Executive Officer and the Chief Financial
officer) of the Company. The revised exercise price is $1.125 per share (the
market closing price on the date of repricing) instead of the original exercise
prices that ranged from $1.688 to $3.490 per share. In the above table these
options are shown as being canceled and new options granted.

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

<TABLE>
<CAPTION>

                                  2000     1999     1998
--------------------------------------------------------
<S>                               <C>      <C>      <C>
Expected options term (years)     6.0      4.4      5.0
Risk free interest rate           5.7%     5.5%     6.0%
Volatility                        176%      67%      78%
--------------------------------------------------------
</TABLE>

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the vesting period of the options. The pro forma
information for 2000, 1999 and 1998 follows: (In thousands except for per share
information):

<TABLE>
<CAPTION>

                                                     2000         1999           1998
--------------------------------------------------------------------------------------
<S>                                               <C>            <C>          <C>
Net income (loss), continuing operations          $ 6,561        $(558)       $(3,304)
Operation compensation expense                       (555)        (363)          (772)
--------------------------------------------------------------------------------------
Pro forma net income/(loss), continuing
operations                                        $ 6,006        $(921)       $(4,076)
--------------------------------------------------------------------------------------
Pro forma net income/(loss), income per share
    continuing operations, basic                  $  0.34        $(0.08)      $ (0.58)
--------------------------------------------------------------------------------------
</TABLE>

Because additional option grants are expected to be made in future years and
options vest over several years, the pro forma impact on fiscal years 2000,
1999, and 1998 is not necessarily representative of the pro forma impact on
reported results for future years.

                                       34
<PAGE>   37
                      WHITE ELECTRONIC DESIGNS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Purchase Plans

In November 1995, the EDI Board of Directors adopted the 1996 Employee Stock
Purchase Plan. This plan provided for the purchase by employees of up to 250,000
shares of common stock at 85% of the fair market value on the first or last day
of the offering period (as defined in the plan), whichever is lower. This plan
was terminated in October 1998 resulting from the merger of EDI and the Company.
There were no shares issued under this plan in fiscal 2000. There were no shares
issued under this plan in fiscal 1999. There were 17,744 shares issued at $1.66
under this plan in fiscal 1998.

11.      FINANCIAL INSTRUMENTS

The financial position of the Company at September 30, 2000, includes certain
financial instruments, which may have a fair value that is different from the
value currently reflected on the financial statements. The following methods and
assumptions were used to estimate the fair value of each class of financial
instruments for which it is practical to estimate that value.

Cash and Cash Equivalents: Cash is invested in overnight securities; therefore
the fair value is equal to the carrying amount. The carrying amount of long-term
debt is a reasonable estimate of fair value as stated rates of interest
approximate current market rates.

12.      COMMITMENTS AND CONTINGENCIES

The Company leases certain property and equipment under noncancelable lease
agreements some of which include renewal options of up to five years. Total rent
expense for 2000, 1999, and 1998 was $1,207,000, $1,337,000 and $609,000
respectively. Future minimum annual fixed rentals required under noncancelable
operating leases having an original term of more than one year are $1,240,000 in
2001, $1,256,000 in 2002, $755,000 in 2003, $458,000 in 2004 and $481,000
thereafter.

On April 25, 1996 the U.S. Attorney's Office for the State of Arizona undertook
an investigation of certain aspects of White Microelectronics contracts with
prime contractors for the Federal government. The investigation focused on the
interpretation of certain government contract specified testing requirements on
incoming material. On March 13, 1998, the Company was notified by the U.S.
Attorney's Office for the State of Arizona that it has closed its criminal
investigation of White Microelectronics. On June 2, 2000 the Company reached a
settlement with the U.S. Attorney's office concerning the Federal government's
claim for civil damages based on their findings from the investigation. The
settlement did not exceed the previous accrual made in the financial statements,
and all payments have been made in full to settle all claims regarding this
investigation. An accrual reversal of $250,000 was recorded in general and
administrative expense during the third quarter.

During the past two years, the Company was required to pay tariffs on certain
imported parts. The Company believed that the tariffs were not justified and
appealed the assessment. In May 2000, the Department of Commerce issued a
clarification to the Customs Department concerning these tariff assessments. The
ruling validated the Company's position and resulted in a refund of previously
paid tariffs of approximately $909,000.

13.      PREFERRED STOCK

On January 5, 2000, the Company announced that it would redeem all outstanding
shares of its Senior Voting Convertible Preferred Stock effective 5:00 p.m.
(EST) February 7, 2000. During that period, holders of 117,523 shares of Senior
Voting Convertible Preferred Stock exercised their right to convert such shares
into 1,566,566 shares of the Company's Common Stock. The issuance was exempt
from registration under


                                       35
<PAGE>   38
                      WHITE ELECTRONIC DESIGNS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the Securities Act of 1933, as amended, pursuant to Section 3(a)(9) of the Act.
The shares of the Preferred Stock were converted to common stock with no
additional payment to the holders. An additional 723 shares of Preferred Stock
were redeemed at the redemption price of $25.00 per share. A total of $18,075
was paid to redeem these shares.


14.      CONCENTRATIONS OF CREDIT RISK

The Company sells its products primarily to large original equipment
manufacturers, or electronic assembly houses in the United States. In fiscal
2000, one customer accounted for 19% of the Company's sales, that customer is
Lucent Technologies. No other customer accounted for more than 5% of the total
sales. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral from its customers.
At certain times throughout the year the Company may maintain certain bank
accounts in excess of the FDIC insured limits.

15.      SHAREHOLDERS RIGHTS PLAN

On December 6, 1996, the Board of Directors adopted a shareholder rights plan to
protect shareholders against unsolicited attempts to acquire control of the
Company, which do not offer what the Company believes to be an adequate price
for all shareholders. To implement the plan, the Board declared a dividend of
one common share purchase right (a "Right" or "Rights") for each outstanding
share of the Company's Common Stock and entered into a rights agreement with
American Stock Trust and Transfer, as Rights Agents (the "Rights Agreement"). If
and when the Rights become exercisable, each Right will entitle the registered
holder to purchase from the Company one share of Common Stock of the Company at
a purchase price of $20.00 (subject to adjustment pursuant to certain
anti-dilution provisions) (the "Purchase Price"). The terms of the rights are
set forth in the Rights Agreements.

Separate certificates representing the Rights will be distributed only upon an
event triggering a distribution. Pursuant to the Rights Agreement, if a person
or group (an "Acquiring Person") acquires 15% or more of the Company's
outstanding voting stock or announces a tender or exchange offer that would
result in the ownership by the Acquiring Person of 15% or more of the
outstanding voting stock, the Rights certificates will be distributed and each
holder of the rights (other than the Acquiring Person) may either exercise the
Rights to acquire Common Stock of the Company at the then Purchase Price or
convert the Rights into that number of shares of Common Stock equal to the
Purchase Price times the number of Rights held by the holder divided by 50% of
the then current market price of the Common Stock.

In the event that the Company is acquired in a merger or other transaction where
it is not the surviving corporation or where all or part of its Common Stock is
exchanged for securities, cash or property of another person, or in the event
that 50% or more of the Company's assets are sold, proper provision will be made
so that each holder of the right (other than the Acquiring Person) will have the
right to receive, upon exercise thereof, that number of shares of common stock
of the acquiring corporation which at the time of such transaction will have a
market value of two times the exercise price of the Right. Similarly, in the
event that a person acquires 15% or more of the outstanding Common Stock of the
Company, proper provision will be made so that each holder of a Right (other
than the Acquiring Person) will thereafter have the right to receive upon
exercise that number of shares of Common Stock of the Company having a market
value of two times the exercise price of the Right.

The Rights Agreement also contains an exchange option. At any time after a
person becomes an Acquiring Person, and prior to the acquisition by such
Acquiring Person of 50% or more of the outstanding Common Stock of the Company,
the Board of Directors may exchange the Rights (other than Rights owned by the
Acquiring Person, which Rights shall become void), in whole or in part, at an
exchange ratio of one share of Common Stock per Right.


                                       36
<PAGE>   39
                      WHITE ELECTRONIC DESIGNS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Finally, the Rights are subject to redemption. At any time prior to the tenth
calendar day following the date of a public announcement that a person or group
has become an Acquiring Person, the Board of Directors of the Company may redeem
the Rights in whole, but not part, at a price of $.01 per Right.

The terms of the Rights may be amended by the Board of Directors without the
consent of the holders of the Rights, except that from and after such time as
any person becomes an Acquiring Person, no such amendment may adversely affect
the interests of the holders of the Rights. Until a Right is exercised, the
holder thereof, as such, will have no rights as a shareholder of the Company,
including, without limitation, the right to vote or to receive dividends. The
Rights cannot be bought, sold or otherwise traded separately from the Common
Stock. Certificates for Common Stock issued after the date of the Rights
Agreement carry a notation that indicates the Rights are attached. The Rights
will expire on December 5, 2006 unless extended or unless the Rights are earlier
redeemed by the Company. The Rights Agreement was amended in connection with the
EDI merger to exempt from operation of the Rights Agreement the execution of the
Agreement and Plan of Merger with EDI and the transactions contemplated thereby.

16.      DISCONTINUED OPERATIONS


On May 13, 1997, the Company announced the decision to divest Crystallume. As a
consequence, the Company recorded a provision for loss on disposal of
Crystallume of $973,000, which included a provision for operating losses during
the phase out period (May 13, 1997 to the estimated date of disposal). Revenues
related to discontinued operations were $744,000 for fiscal 1997. The losses
from discontinued operations for fiscal 1997 were recorded net of current income
tax benefits of $649,000. The results of Crystallume have been retroactively
separated from the Company's ongoing operations in the consolidated statement of
operations and, at September 30, 1997, the assets of Crystallume, consisting
primarily of fixed assets, have been separately classified on the balance sheet
as a current asset.


On October 27, 1997, the Company sold the assets, effective as of October 1,
1997, of Crystallume pursuant to an Asset Purchase Agreement (the "Agreement").
The assets sold include all intellectual property, manufacturing equipment,
inventories and certain specific contracts related to Crystallume's diamond
films and coating business. The buyer assumed none of the liabilities, except
that it assumed the obligation to perform under the acquired contracts with
Crystallume's customers, facility lessor and equipment lessors. The purchase
price consisted of: $500,000 in cash at closing; $625,000 payable over three
years, plus simple interest at 9.5%; and an agreement for future payments based
on product and license revenues earned by the buyer using Crystallume
intellectual property over the next five and seven years, respectively.

On October 1, 1998, the date that the first installment in the amount of
$250,000 was due, the Company received a letter from the buyer asserting certain
indemnity claims under the Agreement in the amount of the total purchase price
and claimed its right to set-off its indemnifiable damages against amounts due
to the Company. The Company and the buyer have resolved this matter. In exchange
for executing mutual releases, the Company has reduced the receivable to
$325,000. In fiscal 1999, $200,000 was received and $125,000 was received in
fiscal 2000. This settlement resulted in a loss of $342,000 net taxes in fiscal
1999.

17.      EARNINGS PER SHARE

The Company has adopted the provisions of the Statement of Financial Accounting
Standards No. 128, Earnings Per Share ("SFAS 128") effective January 3, 1998.
SFAS 128 requires the presentation of basic and diluted earnings per share.
Basic EPS is computed by dividing income available to common stockholders by the
weighted average number of common shares that were outstanding during the
period. Dilutive potential common shares consist of the incremental common
shares issuable upon exercise of stock options. All prior period earnings per
share amounts have been restated to comply with the SFAS 128.


                                       37
<PAGE>   40
                      WHITE ELECTRONIC DESIGNS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the disclosure requirements of SFAS 128, a reconciliation of
the numerator and denominator of basic and diluted EPS is provided as follows
(in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                              FISCAL 2000
---------------------------------------------------------------------------------------------------------
                                                               Income            Shares         Per share
                                                             (Numerator)      (Denominator)      Amount
---------------------------------------------------------------------------------------------------------
<S>                                                          <C>              <C>               <C>
Earnings from continuing operations, net of tax              $ 6,561,000
Less: preferred stock dividends                                  (89,000)
---------------------------------------------------------------------------------------------------------
BASIC EPS
Earnings applicable to continuing operations, net of tax     $ 6,472,000        17,544,136       $   0.37
---------------------------------------------------------------------------------------------------------
Earnings available to common stockholders                    $ 6,472,000                         $   0.37
EFFECTS OF DILUTIVE SECURITIES
Common stock equivalents                                                         1,995,365
---------------------------------------------------------------------------------------------------------
DILUTIVE EPS
Earnings available to common stockholders                    $ 6,561,000        19,539,501       $   0.34
---------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>

                                                                              FISCAL 1999
--------------------------------------------------------------------------------------------------------------
                                                                   Income          Shares           Per Share
                                                                (Numerator)     (Denominator)         Amount
--------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                  <C>               <C>
Earnings from continuing operations, net of Tax               $  (558,000)
Less: preferred stock dividends                                   360,000
--------------------------------------------------------------------------------------------------------------
BASIC EPS
Earnings applicable to continuing operations, net of tax      $  (918,000)        15,394,451        $  (0.06)
Loss applicable to discontinued operations, net of tax           (277,000)        15,394,451        $  (0.02)
--------------------------------------------------------------------------------------------------------------
Earnings available to common stock holders                    $(1,195,000)                          $  (0.08)
EFFECTS OF DILUTIVE SECURITIES
Common stock equivalents                                                             487,402
--------------------------------------------------------------------------------------------------------------
DILUTIVE EPS
Earnings available to common stock holders                    $(1,195,000)        15,881,853        $  (0.08)
--------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>

                                                                              FISCAL 1998
-------------------------------------------------------------------------------------------------------------
                                                                   Income           Shares          Per Share
                                                                (Numerator)      (Denominator)       Amount
-------------------------------------------------------------------------------------------------------------
<S>                                                            <C>               <C>                <C>
Earnings from continuing operations, net of tax                $(3,304,000)
Less: preferred stock dividends                                         --
-------------------------------------------------------------------------------------------------------------
BASIC EPS
Earnings applicable to continuing operations, net of tax       $(3,304,000)        7,072,000        $  (0.47)
Loss applicable to discontinued operations, net of tax                  --         7,072,000        $  (0.00)
-------------------------------------------------------------------------------------------------------------
Earnings available to common stock holders                     $(3,304,000)                         $  (0.47)
EFFECTS OF DILUTIVE SECURITIES
Common stock equivalents                                                                  --
-------------------------------------------------------------------------------------------------------------
DILUTIVE EPS
Earnings available to common stock holders                     $(3,304,000)        7,072,000        $  (0.47)
-------------------------------------------------------------------------------------------------------------
</TABLE>

The convertible preferred stock is not included in the calculation of dilutive
earnings per share for fiscal 1999, because its inclusion would be
anti-dilutive. The effect of common stock equivalents is not included in fiscal
1999 diluted loss per share calculation as their inclusion would be
anti-dilutive.


                                       38
<PAGE>   41
                      WHITE ELECTRONIC DESIGNS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18.      OPERATIONS BY BUSINESS SEGMENTS

The Company operates in two business segments. The microelectronic segment
packages semiconductor products mainly for memory storage. Its products are sold
to original equipment manufacturers in the telecommunications, computer
networking, aerospace defense, and military equipment industries. The display
segment designs and manufactures AMLCD's and other interface products. Display
products are sold mainly to customers in the aviation and aerospace industries.
The segments have common customers, mainly in the aerospace defense industry.
However, the products from each segment are usually purchased by different
purchasing groups within the parent company. There are no intersegment sales.
Transfers of inventory between segments are made at cost, and are treated simply
as transfers between locations.

The assets identified by segment are those assets used in the companies
operations and do not include general corporate assets such as cash, goodwill,
or deferred tax assets. Capital expenditures report asset purchases and do not
include equipment added through the use of operating leases.

A significant portion of the Company's business activity in each segment is from
contractor's who have contracts with the United States Department of Defense.

The Company has two reportable business segments, each of which requires
different design and manufacturing resources, and serve customers in different
markets. The Microelectronic segment manufactures mainly memory products for use
in telecommunications, data communications and military aerospace markets. The
Display segment manufactures liquid crystal displays and electromechanical
components for customers mainly in the aviation industry.

A significant portion of the Company's sales are to foreign customers. Export
sales as a percent of total sales in fiscal 2000, 1999, and 1998 were 16%, 18%,
and 24% respectively.

                    Foreign Sales by Major Geographic Segment
                            (in thousands of dollars)

<TABLE>
<CAPTION>
                                  Fiscal 2000     Fiscal 1999     Fiscal 1998
-----------------------------------------------------------------------------
<S>                               <C>             <C>             <C>
      Europe                          9,846           7,866          5,595
       Asia                           4,123           2,606          2,158
-----------------------------------------------------------------------------
      Total                          13,969          10,472          7,753
-----------------------------------------------------------------------------
</TABLE>

                                       39
<PAGE>   42
                      WHITE ELECTRONIC DESIGNS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OPERATIONS BY BUSINESS SEGMENTS

<TABLE>
<CAPTION>


                                                         FISCAL YEAR
                                          2000             1999            1998
--------------------------------------------------------------------------------
<S>                                       <C>           <C>           <C>
NET SALES
Microelectronic                           $ 74,289      $ 45,463      $ 28,149
Display                                     13,306        12,575         4,623
--------------------------------------------------------------------------------
Total Net Sales                           $ 87,595      $ 58,038      $ 32,772
--------------------------------------------------------------------------------
INCOME BEFORE TAX
Microelectronics                          $  9,199      $    (38)     $ (1,713)
Display                                      1,488            29        (1,591)
Merger costs                                                (850)
--------------------------------------------------------------------------------
Total income before tax                   $ 10,687      $   (859)     $ (3,304)
--------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
Microelectronics                          $ 39,392      $ 24,239      $  9,814
Display                                      7,508         8,517         2,084
General corporate                            8,096         6,015         6,037
--------------------------------------------------------------------------------
Total Assets                              $ 54,996      $ 38,771      $ 17,935
--------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Microelectronics                          $  2,140      $  1,731      $    535
Display                                        173           378           238
--------------------------------------------------------------------------------
Total capital expenditures                $  2,313      $  2,109      $    773
--------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION EXPENSE
Microelectronics                          $  2,082      $  1,834      $  1,131
Display                                        404           410           159
--------------------------------------------------------------------------------
Total                                     $  2,486      $  2,244      $  1,290
--------------------------------------------------------------------------------
</TABLE>

                                       40
<PAGE>   43
19. INTERIM FINANCIAL RESULTS (UNAUDITED)
         (In thousand of dollars, except per share data)


<TABLE>
<CAPTION>
=============================================================================================================================
                                                   FISCAL 2000                                    FISCAL 1999
                                    Jan 1    Apr 1    Jul 1    Sep 30    Year    Jan 2     Apr 3     Jul 3    Oct 2     Year
-----------------------------------------------------------------------------------------------------------------------------
<S>                                <C>      <C>      <C>      <C>      <C>      <C>       <C>       <C>      <C>      <C>
Net sales                          $18,149  $21,299  $23,035  $25,112  $87,595  $12,301   $12,960   $15,172  $17,604  $58,038
-----------------------------------------------------------------------------------------------------------------------------
Gross margin                       $ 6,128  $ 8,007  $ 7,952  $ 9,083  $31,171  $ 2,176   $ 2,982   $ 4,592  $ 5,777  $15,528
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing
   operations before income taxes  $ 1,662  $ 2,428  $ 3,035  $ 3,562  $10,687  $(1,860)  $(1,127)  $   827  $ 1,304  $  (859)
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing
   operations                      $ 1,014  $ 1,489  $ 1,865  $ 2,193  $ 6,561  $(1,116)  $  (676)  $   493  $   743  $  (558)
-----------------------------------------------------------------------------------------------------------------------------
Discontinued operations
Crystallume Diamond Products
      Division (loss) income on
      disposal net of applicable
      income  taxes (Note 19)      $    --  $    --  $    --  $    --  $    --  $    --   $  (342)  $    --  $    65  $  (277)
-----------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS)                  $ 1,014  $ 1,489  $ 1,865  $ 2,193  $ 6,561  $(1,116)  $(1,018)  $   493  $   808  $  (835)

-----------------------------------------------------------------------------------------------------------------------------
Net income per share - basic       $  0.06  $  0.08  $  0.10  $  0.12  $  0.37  $ (0.09)  $ (0.07)  $  0.03  $  0.05  $ (0.08)
Net income per share - diluted(a)  $  0.05  $  0.07  $  0.10  $  0.11  $  0.34  $    --   $    --   $    --  $    --  $    --

-----------------------------------------------------------------------------------------------------------------------------
Common stock market price:(b)
    High                           $  5.50  $ 18.38  $ 14.75  $ 18.63  $ 18.63  $  1.42   $  1.67   $  1.67  $  2.21  $  2.21
    Low                            $  2.44  $  4.25  $  7.00  $ 10.38  $  2.44  $  1.13   $  1.25   $  1.20  $  1.67  $  1.13
-----------------------------------------------------------------------------------------------------------------------------
Preferred market price:(b)
    High                           $ 71.00  $ 94.94  $    --  $    --  $ 94.94  $ 22.57   $ 29.00   $ 26.20  $ 31.80  $ 31.80
    Low                            $ 38.44  $ 59.00  $    --  $    --  $ 38.44  $ 20.29   $ 25.29   $ 25.25  $ 29.25  $ 20.29
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Earnings per share-assuming dilution is the same as earnings per share in
    fiscal 1999.
(b) Both common and preferred shares were traded on the American Stock Exchange.
    On June 8, 2000, the Company began trading on the NASDAQ National Market.
On February 7, 2000, the Preferred Stock was redeemed.


                                       41
<PAGE>   44
                                 Exhibit Index

<TABLE>
<S>      <C>
2.1      Agreement and Plan of Merger dated May 3, 1998 by and among Bowmar
         Instrument Corporation and Electronic Designs, Inc. and Bravo
         Acquisition Subsidiary, Inc. (incorporated herein by reference to
         Exhibit 2 to the current Report on Form 8-K filed on May 6, 1998.)

2.1A     Amendment to Agreement and Plan of Merger dated June 9, 1998
         (incorporated herein by reference to Exhibit 2.1A to the Registration
         Statement on Form S-4 filed on June 11, 1998, Registration No.
         333-56565).

2.1B     Amendment to Agreement and Plan of Merger dated August 24, 1998
         (incorporated herein by reference to Exhibit 2.1B to the Registration
         Statement on Form S-4, filed on September 2, 1998, Registration No.
         333-56565).

3.1      Amended and Restated Articles of Incorporation of White Electronic
         Designs Corporation (incorporated herein by reference to Exhibit 3.1 on
         Form 10-K filed December 24, 1998).

3.2      Amended and Restated Code of By-Laws of White Electronic Designs
         Corporation (incorporated herein by reference to Exhibit 3.2 to the
         June 9, 1998 Registration Statement on Form S-4 filed June 11, 1998).

4.1A     Amendment No. 1 to Rights Agreement, effective as of May 3, 1998
         (incorporated herein by reference to Exhibit 4.3 to the Registration
         Statement on Form S-4, filed on June 11, 1998, Registration No.
         333-56565).

10.1     Agreement to be Bound by Registration Rights Agreements, dated as of
         May 3, 1998, by and between Bowmar Instrument Corporation and
         Electronic Designs, Inc. (incorporated herein by reference to Exhibit
         10.1 to the Registration Statement on Form S-4, filed on Jun 11, 1998,
         Registration No. 333-56565).

10.2     Agreement to be Bound by Severance Agreements and Employment Agreement,
         dated as of May 3, 1998, by and between Bowmar Instrument Corporation
         and Electronic Designs, Inc. (incorporated herein by reference to
         Exhibit 10.2 to the Registration Statement on Form S-4, filed on June
         11, 1998, Registration No. 333-56565).

**10.10  Form of Incentive Stock Option Agreement covering incentive stock
         options granted under the Company's now terminated 1986 Plan, as
         amended October 23, 1987 (incorporated here in by reference to Exhibit
         10.2(c) to the Annual Report on Form 10-K for the fiscal year ended
         September 30, 1987).

**10.11  Form of Non-Incentive Stock Option Agreement covering non-incentive
         stock options granted under the Company's now terminated 1986 Plan, as
         amended October 23, 1987 (incorporated by reference to Exhibit 10.2(c)
         to the Company's Annual Report on Form 10-K for the fiscal year ended
         September 30, 1987).

**10.12  Bowmar Instrument Corporation Stock Option Plan for Non-Employee
         Directors as amended February 4, 1994 (incorporated herein by reference
         to Exhibit B to the Company's definitive Proxy Statement, prepared in
         connection with the 1994 Annual Meeting of Shareholders).

**10.14  1994 Flexible Stock Plan (incorporated herein by reference to Exhibit A
         to the Company's definitive Proxy Statement prepared in connection with
         the 1994 Annual Meeting of Shareholders).

10.27    Revolving Credit and Term Loan Agreement by and between Bank One, Texas
         and White Electronic Designs Corporation, an Indiana Corporation, dated
         January 7, 2000. (incorporated herein by reference to Exhibit 10.27 to
         the Company's 10-Q for the quarter ended January 1, 2000).

10.28    First Amendment to Loan and Security Agreement effective as of June 3,
         2000; Promissory Note effective June 3, 2000, Notice of Final Agreement
         effective June 3, 2000 (incorporated herein by reference to Exhibit
         10.28 to the Company's Quarterly Report on Form 10-Q for the quarter
         ended July 1, 2000).

21.1     Subsidiaries of White Electronic Designs Corporation (incorporated
         herein by reference to exhibit 21.1 to the Company's Annual Report on
         Form 10-K filed December 24, 1998).

*27.1    Financial Data Schedule.
</TABLE>


    *    Filed herewith.

   **    Management compensatory contract, plan or arrangement.