UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                    FORM 10-K
               [ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                                     OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended: September 30, 2000

                                       OR

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

                  For the transition period from ______to_____

                         Commission file number 0-18083


                             Williams Controls, Inc.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


             Delaware                                     84-1099587
  -------------------------------              ---------------------------------
  (State or other jurisdiction of              (I.R.S. Employer incorporation or
          organization)                                Identification No.)


        14100 SW 72nd Avenue
          Portland, Oregon                                   97224
---------------------------------------                   ----------
(Address of principal executive office)                   (zip code)


               Registrant's telephone number, including area code:
                                 (503) 684-8600

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

                                      None

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

                          Common Stock ($.01 par value)

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

                                (1) Yes X No____

                                (2) Yes X No____

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

As of December 31, 2000,  19,921,114 shares of Common Stock were outstanding and
the  aggregate  market value of the shares  (based upon the closing price of the
shares on the  NASDAQ  National  market)  of  Williams  Controls,  Inc.  held by
nonaffiliates was approximately $12,214,074.

                       Documents Incorporated by Reference

Portions  of the  definitive  proxy  statement  for the 2000  Annual  Meeting of
Stockholders  to be filed not later than February 28, 2001 are  incorporated  by
reference in Part III hereof.


<PAGE>



                             Williams Controls, Inc.
                             Index to 2000 Form 10-K



Part I                                                                     Page
                                                                           ----
  Item 1.   Description of Business                                         2-6
  Item 2.   Properties                                                       7
  Item 3.   Legal Proceedings                                                7
  Item 4.   Submission of Matters to a Vote of Security Holders              7


Part II
  Item 5.   Market for Registrant's Common Equity and Related Stockholder
                 Matters                                                     8
  Item 6.   Selected Financial Data                                          9
  Item 7.   Management's Discussion and Analysis of Financial Condition
                 and Results of Operations                                 10-17
  Item 8.   Financial Statements and Supplementary Data                    18-55
  Item 9.   Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure                          56


Part III
  Item 10.  Directors and Executive Officers of the Registrant              56
  Item 11.  Executive Compensation                                          56
  Item 12.  Security Ownership of Certain Beneficial Owners and
               Management                                                   56
  Item 13.  Certain Relationships and Related Transactions                  56


Part IV
  Item 14.  Exhibits, Financial Statement Schedules and Reports
               on Form 8-K                                                  56


Signatures                                                                  57


<PAGE>


                             WILLIAMS CONTROLS, INC.


                                    Form 10-K


                                     Part I


Cautionary Statement: This report contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include, without limitation, those statements relating to development
of new products, the financial condition of the Company, the ability to increase
distribution  of the Company's  products,  integration of businesses the Company
acquires, and disposition of any current business of the Company,  including its
Agriculture Equipment segment.  These forward-looking  statements are subject to
the business and economic  risks faced by the Company  including  the ability of
the Company to generate or obtain  sufficient  working  capital to continue  its
operations.  The Company's  actual  results could differ  materially  from those
anticipated  in these  forward-looking  statements  as a result  of the  factors
described above and other factors described elsewhere in this report.

Item 1. Description of Business (Dollars in thousands)

Williams  Controls,  Inc.,  including its  wholly-owned  subsidiaries,  Williams
Controls Industries, Inc. ("Williams");  Aptek Williams, Inc. ("Aptek"); Premier
Plastic   Technologies,   Inc.  ("PPT");   ProActive   Acquisition   Corporation
("ProActive");  GeoFocus,  Inc.  ("GeoFocus");  NESC  Williams,  Inc.  ("NESC");
Williams  Technologies,  Inc.  ("Technologies");   Williams  World  Trade,  Inc.
("WWT");  Kenco/Williams,  Inc.  ("Kenco");  Techwood  Williams,  Inc.  ("TWI");
Agrotec  Williams,  Inc.  ("Agrotec")  and its  80%  owned  subsidiaries  Hardee
Williams,  Inc.  ("Hardee") and Waccamaw Wheel  Williams,  Inc.  ("Waccamaw") is
hereinafter referred to "we" "our" or "us."



General
-------

We are a  Delaware  corporation  formed in 1988.  The  principal  company in our
Vehicle Components segment,  our primary business segment, was founded by Norman
C.  Williams  in 1939  and  acquired  by the  Company  in  1988.  Our  operating
subsidiaries  are  divided  into two  operating  segments  and one  discontinued
segment that was sold in May 2000.

Vehicle  Components - Our vehicle  component  product  lines  primarily  include
electronic  throttle  control  systems  ("ETCs"),  exhaust brakes and pneumatic,
hydraulic  controls and plastic injection molded products  including  automotive
taillight  systems.  These products are used in trucks,  utility and off-highway
equipment,  transit buses and underground  mining machines.  We estimate that we
have over a 65% market share of electronic  throttle control systems for Class 7
and 8 trucks.  The  majority  of these  products  are sold  directly to original
equipment manufacturers such as Freightliner,  Navistar,  Volvo, Isuzu and Motor
Coach Industries. We also sell these products through a well-established network
of independent distributors. The major competitors in one or more of our product
lines include Teleflex, VDO, Hella and Felsted.  Markets for electronic throttle
control  systems are  developing  in smaller  classes of trucks,  diesel-powered
pick-up  trucks  and  automobiles.   The  major  automotive   manufacturers  are
converting  gasoline-powered  automobiles  and pick-up  trucks to the electronic
throttle  control  system,   although  this  requires  engine  redesign  by  the
automotive  manufacturers which is presently ongoing. In addition, the passenger
vehicles  market began the  introduction of adjustable foot pedal systems during
1999. We purchased an adjustable  foot pedal designer and  manufacturer  in July
1999.

Electrical  Components and Global Positioning System - Our electrical components
product  line  includes  the  design  and  production  of  microcircuits,  cable
assemblies,  position  tilt sensors and other  electronic  products  used in the
telecommunication,  computer  and  transportation  industries.  Major  customers
include Allied Signal,  Raychem and Eaton Corp. Major  competitors  include CTS,
Cooper,  Wabash,  AMP and Nethode.  The global  positioning  system product line
includes commuter railroad train tracking and agricultural  cyber-farming  using
global  positioning  and geographic  information  systems.  Our major  customers
include Chicago Metra, Tri-Rail,  the Florida Department of Transportation,  Los
Angeles Metro and Via Tropical Fruit.

Agricultural  Equipment - Our agricultural  equipment product lines were sold in
May 2000. This segment's product lines included rotary cutters,  discs,  harrows
and sprayers.  These products were sold to independent equipment dealers located
primarily in the Southeastern  United States. Our major competitors had included
Allied Industries (Bushhog),  Wood Brothers,  Taylor Industries,  Inc. and Alamo
Group. This business was previously reported as a discontinued operation.



                                        2
<PAGE>

These are our operating  subsidiaries,  all of which are 100% owned, and a brief
description of each operating  subsidiary's  business (the subsidiaries that are
reported as discontinued  operations or are no longer  operating in 2000 are not
listed).

Vehicle Components

Williams  Controls  Industries,   Inc.:  Manufactures  vehicle  components  sold
primarily in the commercial vehicle industry.

ProActive Acquisition Corporation.: Conducts research and development activities
related to adjustable foot pedals and manufactures adjustable pedal systems.

Premier Plastic  Technologies,  Inc.:  Manufactures  plastic  components for the
automotive  industry.  A definitive agreement has been entered into for the sale
of  this  subsidiary.  See  Note  15 to  the  Notes  to  Consolidated  Financial
Statements.

NESC  Williams,  Inc.:  Installs  conversion  kits  to  allow  vehicles  to  use
compressed natural gas and provides natural gas well metering services.

Williams  Technologies,  Inc.:  Supports  all  subsidiaries  of our  company  by
providing   research  and   development   and  developing   strategic   business
relationships to promote "technology partnering."


Electronic Components and Global Positioning System

Aptek  Williams,  Inc.:  Develops and  produces  sensors,  microcircuits,  cable
assemblies  and other  electronic  products for the  telecommunications  and the
transportation  industry,  and conducts  research and development  activities to
develop  commercial  applications of sensor related products for the electronics
and automotive markets.


GeoFocus,  Inc.: Develops train tracking and cyber-farming  systems using global
positioning systems and geographical  information systems. We signed a letter of
intent  to  sell  GeoFocus  in  October  2000.  See  Note  12 to  the  Notes  to
Consolidated Financial Statements.


Acquisitions and Dispositions


From fiscal 1994 through  fiscal  1996,  we pursued an  acquisition  strategy to
integrate vertically through the acquisition of a sensor  manufacturing  company
and horizontally through the acquisition of companies in similar industries that
could  benefit from our sensor and control  experience.  During this period,  we
acquired  several  companies  with  products  that could benefit from sensor and
control applications.

In fiscal 1997, we changed our diversification acquisition strategy to focus our
corporate  and  financial  resources  on  opportunities  emerging in our Vehicle
Components segment.  We may not be able to capitalize on opportunities  emerging
in our vehicle  components  segment,  including  the  development  of commercial
applications of sensor related  products.  In addition,  if we are successful in
one or more  endeavors,  we cannot  be  certain  that  those  endeavors  will be
profitable.

In March 1998, we completed the sale of our subsidiary comprising the Automotive
Accessories  business unit. In June 1998, we restructured our investment in Ajay
Sports,  Inc.  such  agreement  provides  for a  repayment  of all  loans and an
increase in the dividend  rate on our  preferred  stock  investment  on June 30,
2001. In July 1999, we purchased the ProActive  pedals  division of Active Tools
Manufacturing,  Co.,  Inc.  ProActive  Pedals is a  designer  and  developer  of
adjustable  foot  pedal  system  and  modular  pedal  systems.  In May 2000,  we
completed the sale of our  Agricultural  Equipment  segment  operation.  In July
2000, we signed an agreement to sell Premier Plastic  Technologies,  Inc., which
has not been  completed.  In October  2000,  we signed an  agreement to sell Geo
Focus, Inc., which has not been completed.



                                        3
<PAGE>

Competition


In general, our products are sold in highly competitive markets to customers who
are  sophisticated  and demanding  concerning  price,  performance  and quality.
Products are sold in competition with other independent suppliers (some of which
have   substantial    financial   resources   and   significant    technological
capabilities),  and many of these  products  are,  or could be,  produced by the
manufacturers to which we sell these products.  Our competitive  position varies
among our product lines.


In the Vehicle Components  segment, we are the largest domestic producer of ETCs
sold in the truck ETC market. We have only one primary  competitor in the diesel
heavy truck market.  We also  manufacture  pneumatic and air control systems for
the heavy  truck  market,  which is  comprised  of  numerous  highly  fragmented
competitors.  We believe  the  principal  method of  competition  for ETC in the
trucking  industry is quality and  engineering  added value and  reputation.  In
addition,  attainment  of the ISO 9001  and QS 9000  quality  certifications  is
critical to  qualifying  as a supplier to the  automotive  industry  and certain
manufacturers in the truck industry. Four of our manufacturing facilities in our
Vehicle Components segment have attained these certifications.


During  fiscal  1999 and  2000,  we began  the  introduction  of our  electronic
throttle control systems product into the passenger vehicle market that consists
of cars, small trucks, mini vans and sport utility vehicles.  In August 2000, we
began production of electronic  throttle controls for the Ford Super Duty series
trucks. In addition,  we have been awarded  production  contracts for electronic
throttle  controls  for the General  Motors W (Midsize  sedans) Car and Cadillac
series,  beginning in model year 2003.  Our initial  introduction  of electronic
throttle controls for passenger vehicles have been well accepted.  A competitive
advantage  has  been  the  durability  and  reliability  of the low  temperature
co-fired  ceramic  (LTCC)  sensor we  developed  that will be  utilized in these
designs.  Continued  introduction  of electronic  throttle  controls in gasoline
engines requires modification or redesign of engine components that is dependent
upon the  timing  of  development  by the  automotive  manufacturers  and  their
original  equipment  manufacturers.  However,  based on initial  acceptance,  we
expect that by model year 2005,  approximately 60-70% of passenger vehicles will
have converted to electronic  throttle controls.  Our primary competitors in the
United  States are  Teleflex,  Hella and  Felsted.  Each of these  companies  is
substantially  larger and has greater financial  resources than us. Furthermore,
we have no  control  over  the  timing  of the  introduction  of the  electronic
throttle  control into the  automotive,  small truck and sport  utility  vehicle
markets.


We purchased  substantially all of the assets and assumed certain liabilities of
ProActive  Pedals in July 1999.  ProActive  owns  patent  rights and designs for
adjustable  foot pedal systems and currently  produces the adjustable foot pedal
for the Dodge Viper. We hold the senior patents for rotational  based adjustable
pedal  systems and are examining  opportunities  available to us to exploit this
position,  including strategic  partnering and joint venture  relationships.  We
currently  compete  against  Teleflex,  Magna,  CTI, Delphi and KSR, Inc. in the
adjustable  foot pedal market,  and we expect Dura Automotive and Hella to enter
the market  with  adjustable  foot pedal  designs.  Thus,  we will be  competing
against much larger  competitors in these markets with financial  resources much
greater than ours and with existing  long-term  supplier  relationships with the
automotive industry.



Marketing and Distribution

We sell our  products to customers in the truck,  automotive,  heavy  equipment,
telecommunication and other diversified industries worldwide;  approximately 96%
of our  sales  from  continuing  operations  are  to  customers  in the  Vehicle
Components  segment  and 60% of our sales from  continuing  operations  are from
sales of ETC products.

For the years ended  September 30, 2000, 1999 and 1998,  Freightliner  accounted
for 23%, 27% and 21%, Navistar  accounted for 12%, 15%, and 16%, Volvo accounted
for 6%, 8%, and 9%, Evart  Corporation  accounted  for 9%, 1% and 0% and General
Motors  accounted  for 6%, 5% and 3% of net sales  from  continuing  operations,
respectively.  Approximately  15%,  20% and  15% of net  sales  from  continuing
operations  in fiscal  2000,  1999,  and 1998  respectively,  were to  customers
outside of the United States,  primarily in Canada, Mexico and Sweden, and, to a
lesser extent,  in Europe,  South America and  Australia.  See notes 2 and 16 of
Notes to Consolidated Financial Statements.

The Company  performs  ongoing credit  evaluations  of its customers'  financial
condition and maintains  allowances for potential  credit losses.  Actual losses
and allowances have been within management's expectations.



                                        4

<PAGE>

Existing Future Sales Orders

Future sales orders for our products were approximately $17,488 at September 30,
2000, compared to approximately  $17,625 at September 30, 1999. These are orders
for which customers have requested delivery at specified future dates within one
year. We have not  experienced  significant  problems  delivering  products on a
timely basis.


Environment

Our  operations  result  in the  production  of small  quantities  of  materials
identified  by  the  Environmental   Protection  Agency  of  the  United  States
Government  as  "hazardous  waste  substances"  which  must  be  disposed  of in
accordance  with applicable  local,  state and federal  guidelines.  Substantial
liability  may  result to a company  for  failure,  on the part of itself or its
contractors,  to dispose of hazardous  wastes in accordance with the established
guidelines,  including potential liability for the clean up of sites affected by
improper  disposals.  We use our best  efforts  to  ensure  that  any  hazardous
substances are disposed of in an environmentally  sound manner and in accordance
with these guidelines.

We have  identified  certain  contaminants  in the soil of our Portland,  Oregon
manufacturing  facility,  which we believe  was  disposed  on the  property by a
previous property owner. We intend to seek  indemnification  from such party for
the costs of permanent  monitoring,  or cleanup if required. We have retained an
environmental  consulting  firm that has conducted tests to determine the extent
of any contamination. Based on the results of the tests and current regulations,
the  contamination  is not a  reportable  event.  We believe that we can enforce
available claims against the prior property owner for any costs of monitoring or
cleanup.   We  believe  we  are  currently  in  compliance  with   environmental
regulations.

Government Regulation

Our vehicle  component  products must comply with the National Traffic and Motor
Vehicle Safety Act of 1966, as amended, and regulations  promulgated  thereunder
which are  administered by the National  Highway  Traffic Safety  Administration
("NHTSA"). If, after an investigation, NHTSA finds that we are not in compliance
with any of it's standards or  regulations,  among other things,  it may require
that we recall our products, which are found not to be in compliance, and repair
or replace such products. We believe we are currently in compliance with NHTSA.

Product Research and Development

Our operating  facilities  engage in  engineering,  research and development and
quality  control   activities  to  improve  the  performance,   reliability  and
cost-effectiveness  of our product lines.  Our  engineering  staff works closely
with our  customers in the design and  development  of new products and adapting
products for new  applications.  During fiscal 2000,  1999 and 1998, the Company
spent  $6,713,  $3,424,  and  $2,778  respectively,   on  these  activities  for
continuing operations. We increased our research and development expenditures in
fiscal 2000 to design and validate ETC products compatible with gasoline powered
vehicles,  develop commercial applications for inertia, tilt and position sensor
products,  and for the  development of adjustable foot pedal and ETC systems for
automotive,  sport utility vehicles, light trucks and heavy trucks. Research and
development expenditures are expected to decrease in fiscal 2001 as we apply the
applications  developed  to  specific  solutions  for our  customers  and  begin
manufacture of these products.

Patents and Trademarks

Our product lines generally have strong name recognition in the markets in which
they serve.  We have a number of product  patents over a period of years,  which
expire at various times. We consider each patent to be of value and aggressively
protect our rights against infringement throughout the world. We own two patents
(expiring in 2009) which we believe improve the  marketability of the electronic
product line of the heavy Vehicle  Components  segment.  We do not consider that
the loss or expiration of either patent would  materially  adversely  affect us;
however, competition in the electronic product line could increase without these
patents.  We have entered into a royalty bearing patent license agreement with a
private inventor, under which we hold an exclusive,  worldwide license for three
patents covering adjustable foot pedals. The license agreement remains in effect
for the  life  of the  patents  and  requires  yearly  minimum  payments  to the
inventor.  We  believe  these  licensed  patents  play  a  significant  role  in
establishing our proprietary  position in the adjustable foot pedal market,  and
the termination of the license or the loss of any of the licensed  patents could
materially adversely affect our ability to market adjustable foot pedals. We own
numerous  trademarks,  enabling  us to  market  our  products  worldwide.  These
trademarks include "Williams" and "Aptek". We believe that in the aggregate, the
rights  under  our  patents  and  trademarks  are  generally  important  to  our
operations,  but do not  consider  that any patent or trademark or group of them
related to a specific  process or product is of material  importance in relation
to our total business except as described above.

                                        5
<PAGE>

Raw Materials; Reliance on Single Source Suppliers

We produce our products from raw materials,  including brass,  aluminum,  steel,
plastic,  rubber and zinc,  which  currently are widely  available at reasonable
terms.  We rely upon CTS  Corporation  and  Caterpillar,  Inc. as single  source
suppliers  for  critical  components  and/or  products  as these  suppliers  are
currently the only  manufacturers of sensors made specifically for the Company's
ETC  system.  We  manufacture  a foot  pedal  using a  contact  position  sensor
manufactured  by  Caterpillar,  Inc. used  exclusively on  Caterpillar  engines.
Caterpillar  supplies  this sensor and  requires  that its sensor be used on all
Caterpillar  engines;  therefore,  the Company does not consider the Caterpillar
sensor supply to be at risk. Although these suppliers have been able to meet our
needs on a timely basis,  and appear to be willing to continue  being  suppliers
there is no assurance  that a disruption  in a  supplier's  business,  such as a
strike,  would not  disrupt  the supply of a  component.  In  addition,  we have
developed a high  performance-high  durability,  cost effective  sensor which we
expect to further refine, with the expectation that volume production will begin
in fiscal 2001.  Production of these position  sensors  internally would tend to
reduce our reliance on certain single source suppliers.



Product Warranty

We warrant our products to the first  purchaser and  subsequent  owners  against
malfunctions  occurring  during the warranty  period  resulting  from defects in
material or  workmanship,  subject to  specified  limitations.  The  warranty on
vehicle  components is limited to a specified  time period,  mileage or hours of
use,  and varies by product  and  application.  We have  established  a warranty
reserve  based upon our  estimate  of the future  cost of  warranty  and related
service  costs.  We  regularly  monitor our  warranty  reserve  for  adequacy in
response to historical experience and other factors.



Employees

We employ  approximately  434  employees,  including  128 union  employees.  Our
non-union  employees  are  engaged  in  sales  and  marketing,   accounting  and
administration,   product  research  and  development,  production  and  quality
control. Our union employees are engaged in manufacturing  vehicle components in
the Portland,  Oregon facility and are represented by the  International  Union,
United Automobile Workers of America and Amalgamated Local 492 (the "Union"). We
have a collective  bargaining agreement with the Union that expires in September
2002,  which  provides  for  wages  and  benefits  (including  pension,   death,
disability, health care, unemployment, vacation and other benefits) and contains
provisions governing other terms of employment,  such as seniority,  grievances,
arbitration and Union recognition. Our management believes that our relationship
with our  employees  and the  Union are good.  We could  experience  a change in
non-union labor costs as a result of changes in local economies and general wage
increases.



                                        6

<PAGE>

Item 2. Properties

(Dollars in thousands)


The following table outlines the principal  manufacturing  and other  facilities
owned by us, subject to mortgages on all facilities except Williams and Agrotec.


Entity             Facility Location                   Type and Size of Facility
--------           -----------------                   -------------------------

Williams Controls
Industries, Inc.   Portland, Oregon                    Manufacturing and offices
                                                           120,000 square feet

Aptek              Deerfield Beach, Florida            Manufacturing and offices
                                                           48,000 square feet

Hardee             Loris, South Carolina               Manufacturing and offices
                                                           101,000 square feet

Agrotec            Pendleton, North Carolina           Manufacturing and office
                                                           43,000 square feet

Our  manufacturing  facilities  are equipped  with the  machinery  and equipment
necessary to manufacture and assemble its products. Management believes that the
facilities  have been  maintained  adequately,  and that we could  increase  our
production  output  significantly  at  any  of our  facilities  with  additional
equipment and work force.


Facilities  that are  encumbered  by  mortgages  at  September  30,  2000 are as
follows:  Hardee,  $467,  and Aptek $2,248.  A bank holds a deed of trust on the
Williams facility.

Additionally,   the  Company  leases  approximately 54,100  square  feet  of
production  and  administrative  office  space  in  Sterling  Heights  Michigan,
pursuant to a ten year lease signed in January 1998.

The  Company  also  holds  various  leases to  maintain  the  operations  of its
subsidiaries.



Item 3. Legal Proceedings

Williams Controls, Inc. and its consolidated subsidiaries are parties to various
pending judicial and administrative  proceedings  arising in the ordinary course
of business. Our management and legal counsel have reviewed the probable outcome
of these proceedings, the costs and expenses reasonably expected to be incurred,
the  availability  and limits of our  insurance  coverage,  and our  established
reserves for uninsured liabilities. While the outcome of the pending proceedings
cannot be predicted with  certainty,  based on our review,  management  believes
that any  liabilities  that  may  result  are not  reasonably  likely  to have a
material effect on the Company's  liquidity,  financial  condition or results of
operations.



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


We did not  submit  any  matters to a vote of its  security  holders  during the
fourth quarter of the year ended September 30, 2000.



                                        7
<PAGE>

                                     Part II



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

Our  common  stock is traded  on the  over-the-counter  market  of the  National
Association of Securities Dealers Automated Quotation ("NASDAQ") National Market
System under the symbol "WMCO."

The range of high and low bid closing  quotations  for our common stock for each
fiscal quarter for the past two fiscal years is as follows:


                                                               2000
                                                        -----------------
              Quarter                                   High          Low
              -------                                   ----          ---

    October 1 - December 31                            $2.56         $1.97
    January 1 - March 31                                2.44          2.00
    April 1 - June 30                                   2.25          1.50
    July 1 - September 30                               1.90          1.25

                                                               1999
                                                        -----------------
              Quarter                                   High          Low
              -------                                   ----          ---
    October 1 - December 31                            $2.50         $2.00
    January 1 - March 31                                3.00          2.19
    April 1 - June 30                                   3.25          2.19
    July 1 - September 30                               3.13          2.47



There were 430 record  holders of our common stock as of November  30, 2000.  We
have never paid a dividend with respect to our common stock and have no plans to
pay a dividend in the foreseeable future.



                                        8

<PAGE>

Item 6. Selected Financial Data
(Dollars in thousands - except per share amounts)

<TABLE>
<CAPTION>
<S>                                                      <C>        <C>         <C>          <C>        <C>

Consolidated Statements of Operations Data:
Year ended September 30,                                   2000*       1999**      1998        1997       1996***
----------------------------------------------           --------    ---------   --------    --------   ---------
Net sales from continuing operations                     $ 67,725    $ 61,422    $ 57,646    $ 46,671   $ 40,253
Net earnings (loss) from continuing operations            (16,744)     (3,928)      4,611       2,515      2,975
Net earnings (loss)                                       (16,744)     (9,539)        312      (2,037)      (561)
Earnings (loss) from continuing operations per
     common share - basic                                   (0.88)      (0.24)       0.24        0.14       0.18
Earnings (loss) from continuing operations per
     common share - diluted                                 (0.88)      (0.24)       0.23        0.14       0.17
Net earnings (loss) per common share - basic                (0.88)      (0.54)       0.00       (0.12)     (0.03)
Net earnings (loss) per common share - diluted              (0.88)      (0.54)       0.00       (0.12)     (0.03)
Cash dividends per common share                                 -           -          -           -           -


Consolidated Balance Sheet Data
September 30,                                              2000*      1999**       1998        1997      1996***
----------------------------------------------           --------    ---------   --------    --------   ---------
Current assets                                           $ 20,561    $ 27,777    $ 31,716    $ 25,156   $ 30,926
Current liabilities                                        38,239      18,865      12,767       9,028     29,600
Working capital (deficit)                                 (17,678)      8,912      18,949      16,128      1,326
Total assets                                               49,149      64,504      68,565      48,313     53,049
Long-term liabilities                                       9,866      27,433      31,387      22,450      4,726
Minority interest in consolidated subsidiaries                  -           -           -           -        713
Shareholders' equity                                        1,044      18,206      24,411      16,835     18,010

</TABLE>

Note:  Except for the balance sheet amounts for 1996, the above amounts  reflect
the Automotive  Accessories and Agricultural  Equipment segments as discontinued
operations. See Note 14 to the Notes to Consolidated Financial Statements.

*    2000 data includes  recognition  of $5,044  expense for equity  interest in
     loss of affiliate.  The recognition of the loss was significantly increased
     due to the  implementation  of Emerging  Issues Task Force  Bulletin  99-10
     "Percentage Used to Determine the Amount of Equity Method Losses". The 2000
     data   also   includes  a  $6,896  deferred  tax expense  for  a  valuation
     allowance for previously recognized deferred income tax assets which may no
     longer be  realizable  based on  management's  current  assessment of their
     ultimate  realizability.  See also Notes 4 and 11 to Notes to  Consolidated
     Financial  Statements  for  information  on the equity  interest in loss of
     affiliate   and  the  valuation   allowance  for  deferred   income  taxes,
     respectively.

**   1999 data  includes  an  acquisition  made in July.  Net  sales,  loss from
     operations  (including expense of $1,750 for acquired  in-process  research
     and  development),  and total assets related to this  acquisition were $55,
     $(2,066) and $6,320, respectively. The 1999 loss from continuing operations
     includes a loss from impairment of assets of $5,278. See Notes 10 and 19 to
     the Notes to  Consolidated  Financial  Statements  for  information  on the
     impairment loss and the acquisition, respectively.

***  1996 data  includes  acquisitions  made in April and July 1996.  Net sales,
     loss from  operations and total assets related to these  acquisitions  were
     $2,782, $(46) and $2,869, respectively.




                                        9

<PAGE>

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations
(Dollars in thousands - except per share amounts)

See "Cautionary Statement" contained at the beginning of this report.

Financial Position and Capital Resources
Financial Condition, Liquidity and Capital Resources

As shown  in the  consolidated  financial  statements  during  the  years  ended
September  30, 2000,  1999 and 1998,  the Company  incurred  (losses)  income of
($16,744),  ($9,539) and $312, respectively.  In addition,  accounts payable has
increased  from $9,223 at September  30, 1999 to $11,363 at September  30, 2000;
working  capital has decreased from $8,912 at September 30, 1999 to a deficit of
($17,678) at September 30, 2000;  and  stockholders'  equity has decreased  from
$18,206  at  September  30,  1999 to $1,044 at  September  30,  2000.  Also,  as
described in Note 6 to Consolidated Financial Statements, the Company was not in
compliance with the covenants of its credit agreement at September 30, 2000. The
credit  agreement with the Company's  primary bank matures on July 11, 2001, the
Company  has  extended  the debt due with  another  bank and the  Company  is in
default  on  the  payment  of  certain  bank  debt  as  discussed  in  Note 6 to
Consolidated  Financial Statements;  as a result, the Company has classified its
debt owed to its primary  bank as a current  liability  at  September  30, 2000.
Subsequent to September  30, 2000,  the Company  reached the borrowing  capacity
under its credit  agreement and required an overadvance from its primary bank to
support  operations.  Due to the lack of  borrowing  capacity  under the  credit
facility,  the Company's working capital deficit, the Company's debts, including
accounts  payable,  and other  factors as  outlined  herein,  the  Company has a
significant  lack of liquidity.  Accordingly,  the Company's  continuation  as a
going concern is dependent  upon,  among other  things,  its ability to generate
sufficient  cash flow to meet its  obligations on a timely basis, to comply with
the terms of its credit agreement, to obtain additional financing or refinancing
as may be required, and ultimately to attain profitability.

The North American  truck market has seen a significant  decline in sales of new
trucks  as a  result  of  the  large  number  of  used  trucks  on  the  market,
significantly  increased  gasoline prices and interest  rates. As a result,  the
Company has experienced a significant decline in sales in the first three months
of fiscal 2001 as compared to fiscal 2000, and expects the trend to continue for
a period of time.  As a result of the  decline in sales,  the  Company has taken
certain actions  including  reducing the hourly workforce to a four-day workweek
and reducing the salaried workforce by approximately 15%.

After reviewing its working capital needs,  management of the Company  estimates
that additional working capital for fiscal 2001 of approximately  $7,000 will be
needed.  Management  is  reviewing  how it might  reduce  the  amount of working
capital needed and is pursuing  alternatives to raise capital,  both debt and/or
equity. In addition,  the Company is reviewing the sale of non-strategic  assets
and has engaged an investment banking firm to investigate alternatives available
to it, including selling all or part of the Company to a third party,  obtaining
bridge financing to enable the Company to continue  operating until such time as
a buyer can be  identified or  sufficient  equity  and/or debt  financing can be
raised to support the operations of the Company.

There is no assurance that the Company will be able to obtain  adequate  working
capital in the amounts  needed to sustain its operations or sell its business or
parts of it in a timely fashion.

The above  matters  raise a  substantial  doubt about the  Company's  ability to
continue  as a going  concern.  The  financial  statements  do not  include  any
adjustments  relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.

Cash decreased $2,293 at September 30, 2000 compared to September 30, 1999. Cash
flow  from  continuing  operations  decreased  from  $7,644  for the year  ended
September 30, 1999 to $2,979 for the year ended September 30, 2000. The decrease
was  primarily due to the increase in the net loss between  years.  The positive
cash flow from  continuing  operations  for 2000  differs from the net loss from
operations  primarily  because of (1) non cash operating  expenses of $3,189 for
deprecation and  amoritzation,  an increase of $1,133 over 1999, equity interest
in  loss of  affiliate  of  $5,044  (see  Note 4 of the  Notes  to  Consolidated
Financial  Statements),  an  increase  of  $4,556  over  1999 and  deferred  tax
provision  of  $6,896  (see  Note  11 of the  Notes  to  Consolidated  Financial
Statements),  an  increase  of $9,461  over 1999 and (2) an increase in accounts
payable and accrued expenses of $2,696 and a decrease in inventory of $1,819.



                                       10

<PAGE>

Cash flow used in investing  activities  decrease from $9,181 for the year ended
September 30, 1999 to $2,343 for the year ended  September 30, 2000. In 1999 the
Company used cash of $6,350 for the acquisition of ProActive Pedals (see Note 19
of  the  Notes  to  Consolidated  Financial  Statements).   Cash  used  for  the
acquisition of property,  plant and equipment was $2,343 and $2,948 for 2000 and
1999,  respectively.  Capital  expenditures  are expected to be $2,850 in fiscal
2001, primarily for existing customers and new automotive ETC business.

Cash flow from  financing  activities  was a use of  $2,718  for the year  ended
September 30, 2000,  reflecting a net payment on long-term debt of $4,098 offset
by an increase in cash of $1,965 representing the net proceeds from the issuance
of  convertible  subordinated  debt  (see  Note 6 of the  Notes to  Consolidated
Financial  Statements).  In 1999, the Company had net cash provided by financing
activities  of $4,557 due  primarily  from a net increase in  long-term  debt of
$1,605 and net proceeds from the issuance of common stock in a private placement
of $3,379. Cash flow from financing  activities in 1999 was used to purchase the
net assets of ProActive Pedals.

Market Risk - The Company may be exposed to future  interest rate changes on its
debt. The Company does not believe that a hypothetical  10 percent change in end
of period  interest  rates would have a material  effect on the  Company's  cash
flow.

In June 2000 the FASB issued  Statement of Financial  Accounting  Standards  No.
138, "Accounting for Certain Derivative  Instruments and Hedging Activities - an
amendment of FASB Statement No. 133" ("SFAS 138").  In June 1999 the FASB issued
Statement of Financial  Accounting  Standards No. 137, Accounting for Derivative
Instruments  and Hedging  Activities."  ("SFAS 137") SFAS 137 is an amendment to
SFAS 133,  "Accounting for Derivative  Instruments and hedging Activities." SFAS
133,  as  amended  by SFAS  137 and 138  establishes  accounting  and  reporting
standards  for all  derivative  instruments.  SFAS 133 and 138 are effective for
fiscal years  beginning  after June 15, 2000. The Company has made a preliminary
assessment of its potential derivative  instruments and based on that assessment
does not expect  that the  adoption  of SFAS 133 and 138 will have any  material
impact on the Company's financial position or results of operations.



                                       11

<PAGE>

Results of Operations
Year ended  September 30, 2000 compared to the year ended September 30, 1999


Net sales from continuing  operations  increased 10.3% to $67,725 in fiscal 2000
from  $61,422 in fiscal 1999 due to higher unit sales  volumes in the  Company's
Vehicle Components segment.

In fiscal 2000,  loss from  continuing  operations was $1,548,  compared to loss
from  continuing  operations  of $3,031 in fiscal 1999.  The decrease in losses,
totaling  $1,483,  was partially the result of a $1,105 decrease in gross margin
from the prior year caused by $7,610 in increased  cost of sales in the  Vehicle
Components   segment  affected   primarily  by  the  plastic  injection  molding
subsidiary, decreased absorption of overhead related to lower finished goods and
work in  process  inventory  levels,  as well as the  impact  from  product  mix
shifting  away  from  higher  margin  ETC  sales.  Additionally,   research  and
development  expenses  increased  $3,289,  selling  expenses  decreased $121 and
administrative expenses increased $1,272 in 2000. These increases were offset by
1999 expenses of $1,750 for research and  development  efforts in process at the
date of acquisition of ProActive and $5,278 loss from the impairment of assets
related to Kenco,  our former  Automotive  Accessories  segment,  which were not
incurred in fiscal 2000.

Net loss allocable to common shareholders  increased $7,197 to $17,332 in fiscal
2000  compared to net loss  allocable to common  shareholders  of $10,135 in the
prior fiscal year due to the factors described above, as well as the recognition
of $5,044 expense for equity  interest in loss of affiliate.  The recognition of
the loss was  significantly  increased  due to the  implementation  of  Emerging
Issues Task Force  Bulletin  99-10  "Percentage  Used to Determine the Amount of
Equity  Method  Losses".  The net loss  allocable  to common  shareholders  also
includes a $6,896  deferred tax provision  resulting from a valuation  allowance
for  previously  recognized  deferred  income tax assets  which may no longer be
realizable   based  on  management's   current   assessment  of  their  ultimate
realizability.  Net  interest  expense  increased  $968  due to  increased  bank
borrowings,  increased capital leases, the issuance of convertible  subordinated
debt in April 2000, and a decreased  allocation of interest to the  discontinued
Agricultural Equipment Segment.


Net Sales
---------

Net sales from continuing  operations  increased $6,303, or 10.3%, to $67,725 in
the year ended  September 30, 2000 from $61,422 in the year ended  September 30,
1999  primarily  due to higher  unit  sales  volumes in our  Vehicle  Components
segment.

Net sales from continuing operations in the Vehicle Components segment increased
$7,127,  or 12.3%,  to $65,263 in the year ended  September 30, 2000 over levels
achieved  in the year ended  September  30,  1999 due to $4,893  higher  plastic
injection  molding  sales and  automotive  pedal  sales.  Sales from  continuing
operations  in our  Electrical  Components  and GPS segment  decreased  $824, or
25.1%, due to lower unit sales of electrical components.




                                       12
<PAGE>

Gross margin
------------

Gross margin from continuing  operations  decreased  $1,105, or 6.5%, to $15,979
(23.6% of  sales)  compared  to  $17,084  (27.8%  of  sales)  in the year  ended
September  30, 1999.  Gross  margin  decreased  $482 or 2.8%,  in the year ended
September  30, 2000 in the Vehicle  Components  segment due  primarily to $1,133
reduction in margin loss in the plastic injection  molding  subsidiary driven by
higher  volume of  production  over which fixed costs were  allocated  offset by
$1,741  decrease  in margins in our  Portland  and Florida  subsidiaries  due to
decreased  absorption  of overhead  related to lower  finished  goods  inventory
levels,  as well as the impact from  product  mix  shifting  slightly  away from
higher  margin  ETC  sales.  The  Electrical  Components  and GPS  segment  also
recognized  an increase in gross  margin loss of $623 to $735  compared to prior
fiscal year's gross margin loss of $112.

Our plastic  injection  molding and tooling  subsidiary  ("PPT"),  the operating
results of which are  included in the  Vehicle  Components  segment,  reported a
$3,638 loss from operations for the year ended September 30, 2000, a decrease of
$807 compared to the prior year's loss from operations of $4,445.  Sales,  gross
margin  (loss) and  operating  loss for the year ended  September  30, 2000 were
$10,146,  ($1,950),  and ($3,638)  compared to $5,253,  ($3,083),  and ($4,445),
respectively,  in the prior fiscal year.  The increase in sales is the result of
new  business  that was awarded and began  production  in the second  quarter of
fiscal 2000. The Company has signed a definitive agreement for the merger of PPT
into 3DM International,  Inc. ("3DMI"). No loss is expected to be realized under
the terms of the definitive agreement.  Closing of the transaction is subject to
customary closing  conditions and 3DMI's payment of all advances relating to PPT
under the secured  lending  facility with the Bank and subject to 3DMI obtaining
sufficient financing. Financing has not been completed and there is no assurance
that the transaction will be completed. No other plan to dispose of PPT has been
adopted.  In  addition,  the  Company has entered  into an  operating  agreement
whereby an affiliate of the  potential  buyer is managing the  operations of PPT
during the interim period until the sale is consummated.

Gross margin loss at the Electrical  Components  and GPS segment  increased $623
from  $112 for the year  ended  September  30,  1999 to $735 for the year  ended
September  30,  2000,  primarily  as a result of fixed  overhead  combined  with
declining  sales at the electronic  components  operations,  offset by increased
margins of $171 at the GPS operations,  primarily due to the completion of a GPS
contract in the current fiscal year.


Operating expenses
------------------

In conjunction  with the  acquisition of the ProActive  Pedal Division of Active
Tool and  Manufacturing  Co.,  Inc. in July,  1999,  we  expensed  $1,750 of the
purchase price as acquired  in-process  research and development during the year
ended  September 30, 1999.  Also,  during the year ended  September 30, 1999, we
recognized a $5,278 loss from the  impairment  of assets  related to Kenco,  the
Company's  former  Automotive  Accessories  segment.  The loss  consisted  of an
impairment  of  non-voting  preferred  stock and notes and  accounts  receivable
totaling  $4,655 and  impairment  of property  totaling $623 (see Note 10 to the
Notes to Consolidated Financial Statements). These items did not recur in fiscal
2000.

Operating  expenses  before the  charge for  acquired  in-process  research  and
development and the loss from impairment of assets increased  $4,440,  or 33.9%,
to $17,527 for the year ended  September  30,  2000  compared to $13,087 for the
year ended September 30, 1999,  primarily as a result of increased  research and
development  expenses of $3,289,  a decrease in selling expenses of $121, and an
increase in administration expenses of $1,272. Research and development expenses
increased to support new product  development  for the  automotive and truck ETC
and  adjustable  foot pedal  products,  and for  development  of  sensor-related
products and for existing  customers.  Research  and  development  expenses as a
percentage of sales were 9.9% for the year ended  September 30, 2000 compared to
5.6% for the year ended  September  30,  1999.  However,  they are  expected  to
decrease  in the fiscal year ending  September  30, 2001 as the focus  shifts to
production of automotive pedals and sensor-related products.  Operating expenses
before the charge for acquired in-process research and development and loss from
the impairment of assets increased $4,899, or 47.8%, in the year ended September
30, 2000 in the Vehicle  Components segment and decreased $459, or 16.2%, in the
Electrical Components and GPS segment compared to the prior year period.

Selling  expenses  were  reduced  $121 for the year  ended  September  30,  2000
compared to 1999.  Selling  expenses as a percent of sales  decreased to 2.8% in
the year ended September 30, 2000 compared to 3.3% in the prior year.


                                       13

<PAGE>

Administration  expenses increased $1,272 to $8,938 for the year ended September
30, 2000 from $7,666 for the comparable  period in the prior year, due primarily
to  increased  costs of $339 to  support  the  increased  volume of sales at the
plastics  injection molding  subsidiary,  increased  amortization of intangibles
totaling  $540 as a result of an  acquisition  completed in fiscal year 1999, as
well as start-up  costs of $474 related to the  implementation  of operations at
the automotive  pedal plant,  offset by decreased  costs of $285 at our Portland
subsidiary due to reduction in bad debt expense.

Acquired In-Process Research and Development
--------------------------------------------

In connection  with its  acquisition  of the assets of ProActive  Pedals in July
1999,  the  Company  recorded  a  pretax  charge  of  $1,750  for  research  and
development  efforts in process at the date of the  acquisition.  See Note 19 of
Notes to Consolidated Financial Statements.

The value assigned to the in-process research and development efforts represents
those  efforts in process at the date of  acquisition  that had not  reached the
point  where  technological  feasibility  had been  established  and that had no
alternative  future uses.  Accounting rules require that these costs be expensed
as incurred.  The significant projects in process at the time of the acquisition
were for the  development  of  commercially  viable  designs  and  concepts  for
adjustable  pedal  systems.  The value was determined by estimating the costs to
further  develop the acquired  in-process  technology into  commercially  viable
products,  estimating  the  resulting  net cash  flows from such  products,  and
discounting  the net cash flows back to their present  value.  The discount rate
included  a factor  that took  into  account  the  uncertainty  surrounding  the
successful development of the acquired in-process technology. At the time of the
acquisition,  the in-process  technology  under  development  was expected to be
commercially  viable in 2001.  Expenditures  to  complete  these  projects  were
expected  to total  approximately  $3.5  million.  This  estimate  is subject to
change,  given the uncertainties of the development  process,  and no assurances
can be given that deviations from these estimates will not occur.  Additionally,
these projects will require expenditures for additional research and development
after they have reached a state of technological and commercial feasibility.  To
date, expenditures and results have not differed significantly from the forecast
assumptions.

Interest and Other Expenses
---------------------------

Interest  expense  increased $856 to $3,010 in the year ended September 30, 2000
from $2,154 in the year ended  September 30, 1999.  The reasons for the increase
were  increased debt owing to a Bank,  increased  capital leases and a decreased
allocation  of  interest to the  discontinued  Agricultural  Equipment  Segment.
Allocation  of  interest  to the  discontinued  Agricultural  Equipment  Segment
decreased  by $192 in  fiscal  2000  compared  to  fiscal  1999 as a  result  of
significantly decreased net assets at this segment. In addition, the issuance of
convertible   subordinated  debt  in  April  2000  increased   interest  expense
approximately   $72.   Allocated   interest  expense  included  in  discontinued
operations  for the year  ended  September  30,  2000 and 1999 was $85 and $277,
respectively.

Discontinued operations
-----------------------

The Company reported a net loss from discontinued  operations of $5,611 for year
ended  September  30,  1999.  The  Company  adopted a plan of  disposal  for the
Agriculture  Equipment segment in late 1998. As a result, a net loss on disposal
totaling  $1,403 was recorded for this segment.  However,  during the year ended
September  30, 1999,  an  additional  net loss on disposal  totaling  $5,611 was
recorded for the disposal of this segment.  The loss in fiscal 1999 was based on
events and information,  which resulted in management's  revised estimate of the
net realizable value of the Agricultural Equipment Segment. The revised estimate
was based on contract  negotiations and lower than anticipated bids for portions
or the entire segment.  During fiscal 2000, the Agricultural  Equipment  segment
was sold. No loss in excess of that previously provided was realized as a result
of the sale.

Income Taxes
------------

The income  tax  expense of $7,527  for the year  ended  September  30,  2000 is
primarily the result of a valuation allowance recorded for previously recognized
deferred  income  tax  assets as of  September  30,  2000 which may no longer be
realizable   based  on  management's   current   assessment  of  their  ultimate
realizability.

Net earnings (loss) allocable to common shareholders
----------------------------------------------------

Net earnings (loss)  allocable to common  shareholders was ($17,332) in the year
ended  September  30, 2000 compared to ($10,135) in the prior fiscal year due to
the factors described above.

                                       14

<PAGE>

Results of Operations
Year ended  September 30, 1999 compared to the year ended September 30, 1998


Overview
--------


Net sales from  continuing  operations  increased 6.6% to $61,422 in fiscal 1999
from  $57,646 in fiscal 1998 due to higher unit sales  volumes in the  Company's
vehicle components segment.

In fiscal 1999, loss from continuing operations was $3,031, compared to earnings
from  continuing  operations of $8,991 in fiscal 1998.  The  decrease,  totaling
$12,022,  was the result of reduced  gross  margin of $2,284,  primarily  due to
increased warranty expenses and increased  inventory reserves based on events in
the fourth quarter of fiscal 1999.  Also in fiscal 1999, we expensed  $1,750 for
research  and  development  efforts  in process  at the date of  acquisition  of
ProActive and  recognized a $5,278 loss from the impairment of assets related to
Kenco, our former Automotive Accessories segment.

Net loss allocable to common shareholders was $10,135 in fiscal 1999 compared to
net income allocable to common  shareholders of $42 in the prior fiscal year due
to  the  factors  described  above,  as  well  as an  increased  net  loss  from
discontinued  operations  based upon  events and  information  that  resulted in
management's  revised  estimates of the net realizable value of the Agricultural
Equipment
segment.


Net Sales
---------

Sales from continuing  operations  increased  $3,776, or 6.6%, to $61,422 in the
year ended  September 30, 1999 from $57,646 in the year ended September 30, 1998
primarily due to higher unit sales volumes in our Vehicle Components segment.

Sales from continuing  operations in the Vehicle  Components  segment  increased
$4,065,  or 7.5%,  to $58,136 in the year ended  September  30, 1999 over levels
achieved  in the year ended  September  30,  1998 due to higher ETC unit  sales.
Sales from  continuing  operations in our Electrical  Components and GPS segment
decreased $289, or 8.1%, due to lower unit sales of electrical components.


Gross Margin
------------

Gross margin from continuing  operations  decreased $2,284, or 11.8%, to $17,084
(27.8% of  sales)  compared  to  $19,368  (33.6%  of  sales)  in the year  ended
September  30, 1998.  Gross  margin  decreased  $977 or 5.4%,  in the year ended
September 30, 1999 in the Vehicle  Components segment due primarily to increased
losses at the company's  plastic  injection  molding and tooling  subsidiary and
increased warranty costs of $781.

Our plastic injection molding and tooling  subsidiary,  the operating results of
which are included in the Vehicle Components segment, reported an increased loss
from  operations  in the year ended  September 30, 1999 of $3,673 over the prior
year. Sales, gross margin (loss) and operating loss for the year ended September
30, 1999 were $5,253,  ($3,083), and ($4,445),  respectively compared to $4,949,
$205 and ($772) in the prior fiscal year. The operation  moved to a new facility
in the fourth quarter of fiscal 1998 that has a higher breakeven sales level and
plant capacity than the prior facility.  In addition,  the plastic injection and
molding  subsidiary  experienced  operating  problems resulting from inefficient
production from defective molds supplied by customers and operating  problems on
the manufacturing  floor. Also, in response to the issues previously  mentioned,
in the fourth quarter of fiscal 1999, the tooling operation was closed down.

Gross margin at the Electrical  Components  and GPS segment  decreased $852 from
$740 for the  year  ended  September  30,  1998 to  ($112)  for the  year  ended
September 30, 1999 primarily due to fixed expenses and other charges.

Operating expenses
------------------

In  conjunction  with  the  acquisition  of  the  ProAIn  conjunction  with  the
acquisition  of the ProActive  Pedal  Division of Active Tool and  Manufacturing
Co., Inc. in July,  1999, we expensed  $1,750 of the purchase  price as acquired
in-process  research and  development  during the year ended September 30, 1999.
Also, during the year ended September 30, 1999, we recognized a $5,278 loss from
the  impairment  of assets  related to Kenco,  the Company's  former  Automotive
Accessories segment. The loss consisted of an impairment of non-voting preferred
stock and notes and  accounts  receivable  totaling  $4,655  and  impairment  of
property  totaling  $623  (see Note 10 to the  Notes to  Consolidated  Financial
Statements).


                                       15

<PAGE>

Operating  expenses  before the  charge for  acquired  in-process  research  and
development and the loss from impairment of assets increased  $2,710,  or 26.1%,
to $13,087 for the year ended  September  30,  1999  compared to $10,377 for the
year ended  September 30, 1998  primarily as a result of increased  research and
development  expenses  of $646 and an  increase  in  administration  expenses of
$2,132.  Research and development expenses were increased to support new product
development  for  development of the automotive ETC product,  for development of
sensor-related  products and for existing  customers.  Operating expenses before
the  charge for  acquired  in-process  research  and  development  and loss from
impairment of assets as a percentage  of sales,  was 21.3% and 18.0% in the year
ended  September  30, 1999 and 1998.  Operating  expenses  before the charge for
acquired  in-process  research and  development  and loss from the impairment of
assets increased  $3,383,  or 47.1%, in the year ended September 30, 1999 in the
Vehicle  Components  segment and  decreased  $219,  or 8.0%,  in the  Electrical
Components and GPS segment compared to the prior year period.

Selling expenses were reduced $68 for the year ended September 30, 1999 compared
to 1998.  Selling and  expenses as a percent of sales  decreased  to 3.3% in the
year ended September 30, 1999 compared to 3.6% in the prior year .

In addition,  administration  expenses  increased  $2,132,  primarily to support
management  information service needs with the recent  implementation of new ERP
systems, as well an increased bad debt expense, totaling $225, primarily related
to closing the tooling operation at the plastic injection molding facility,  and
increased  payroll and related costs totaling $160 to support the  sophisticated
machinery and expanded  operations at our plastic  injection molding and tooling
subsidiary.


Acquired In-Process Research and Development
--------------------------------------------

In connection  with its  acquisition  of the assets of ProActive  Pedals in July
1999,  the  Company  recorded  a  pretax  charge  of  $1,750  for  research  and
development  efforts in process at the date of the  acquisition.  See Note 19 of
Notes to Consolidated Financial Statements.

The value assigned to the in-process research and development efforts represents
those  efforts in process at the date of  acquisition  that had not  reached the
point  where  technological  feasibility  had been  established  and that had no
alternative  future uses.  Accounting rules require that these costs be expensed
as incurred.  The significant projects in process at the time of the acquisition
were for the  development  of  commercially  viable  designs  and  concepts  for
adjustable  pedal  systems.  The value was determined by estimating the costs to
further  develop the acquired  in-process  technology into  commercially  viable
products,  estimating  the  resulting  net cash  flows from such  products,  and
discounting  the net cash flows back to their present  value.  The discount rate
included  a factor  that took  into  account  the  uncertainty  surrounding  the
successful development of the acquired in-process technology. At the time of the
acquisition,  the in-process  technology  under  development  was expected to be
commercially  viable in 2001.  Expenditures  to  complete  these  projects  were
expected  to total  approximately  $3.5  million.  This  estimate  is subject to
change,  given the uncertainties of the development  process,  and no assurances
can be given that deviations from these estimates will not occur.  Additionally,
these projects will require expenditures for additional research and development
after they have reached a state of technological and commercial feasibility.  To
date, expenditures and results have not differed significantly from the forecast
assumptions.

Interest and Other Expenses
---------------------------

Interest  expense  increased $349 to $2,154 in the year ended September 30, 1999
from $1,805 in the year ended  September 30, 1998.  Interest  expense  increased
primarily  as a result of  increased  capital  lease  obligations  that are at a
higher average interest rate than bank debt. Allocated interest expense included
in  discontinued  operations for the year ended  September 30, 1999 and 1998 was
$277 and $477, respectively.

Discontinued operations
-----------------------

The Company reported a net loss from discontinued  operations of $5,611 for year
ended  September  30,  1999  compared to a net loss of $4,299 for the year ended
September 30, 1998. The Company  adopted a plan of disposal for the  Agriculture
Equipment  segment in late 1998.  As a result,  a net loss on disposal  totaling
$1,403 was recorded for this segment.  However,  during the year ended September
30, 1999, an additional  net loss on disposal  totaling  $5,611 was recorded for
the  disposal  of this  segment.  The loss in fiscal 1999 is based on events and
information,  which  resulted  in  management's  revised  estimate  of  the  net
realizable value of the Agricultural  Equipment Segment. The revised estimate is
based on contract  negotiations  and lower than anticipated bids for portions or
all of the segment.


                                       16

<PAGE>

Net sales from the Agriculture  Equipment  segment declined $1,275,  or 15.0% to
$7,225 in the year ended September 30, 1999 compared to $8,500 in the year ended
September  30,  1998.  The  decline  in  sales  was  due  to  lower  unit  sales
attributable primarily to a weak farm economy.

Estimated  future  losses  from  discontinued   operations  for  the  Automotive
Accessories  segment  were accrued in fiscal 1997.  The  Automotive  Accessories
segment  was sold in March  1998,  and the loss was  $1,625  net of  income  tax
benefits of $1,001.  The  additional  loss in fiscal  1998 over that  accrued in
fiscal 1997 resulted from the loss on the actual  disposition  of the Automotive
Accessories segment which was sold in 1998.



Net earnings (loss) allocable to common shareholders
----------------------------------------------------

Net earnings (loss) allocable to common  shareholders were $(10,135) in the year
ended  September  30,  1999  compared  to $42 in the  prior  fiscal  year due to
decreased earnings from operations, including the charge for acquired in-process
research and  development  and the loss from  impairment  of assets as described
above.

The effective  income tax rate for  continuing  operations was (27.5)% and 33.9%
for the year ended September 30, 1999 and 1998.







                                       17

<PAGE>

Item 8.    Financial Statements and Supplementary Data



                             Williams Controls, Inc.
                   Index to Consolidated Financial Statements



                                                                         Page
                                                                         ----

     Consolidated Balance Sheets at September 30, 2000 and 1999           19

     Consolidated Statements of Shareholders' Equity for the
          years ended September 30, 2000, 1999 and 1998                   20

     Consolidated Statements of Operations for the
          years ended September 30, 2000, 1999 and 1998                   21

     Consolidated Statements of Comprehensive
          Income (Loss) for the years ended
          September 30, 2000, 1999 and 1998                               22

     Consolidated Statements of Cash Flows for the
          years ended September 30, 2000, 1999 and 1998                   23

     Notes to Consolidated Financial Statements                         24-54

     Report of Independent Public Accountants                             55



     See page 58 for Index to Schedules and page 60 for Index to Exhibits.






                                       18

<PAGE>
<TABLE>
<CAPTION>
<S>                                                                         <C>                  <C>


                             Williams Controls, Inc.
                           Consolidated Balance Sheets
                (Dollars in thousands, except share information)


                                                                             September 30,       September 30,
ASSETS                                                                            2000                1999
                                                                            -----------------   -----------------
Current Assets:
  Cash and cash equivalents                                                     $   $     30        $      2,323
  Trade and other accounts receivable, less allowance of
      $508 and $484 in 2000 and 1999, respectively                                    11,357              10,941
  Inventories, net                                                                     8,016               9,828
  Deferred income taxes and other                                                      1,158               4,325
  Net assets held for disposition                                                          -                 360
                                                                            -----------------   -----------------
   Total current assets                                                               20,561              27,777

Property plant and equipment, net                                                     21,486              20,775
Investment in and note and accounts receivable from                                    1,615               6,398
affiliate
Net assets held for disposition                                                            -                 500
Goodwill and intangible assets, net                                                    5,165               5,764
Deferred income taxes                                                                      -               3,025
Other assets                                                                             322                 265
                                                                            -----------------   -----------------
   Total assets                                                                 $     49,149        $     64,504
                                                                            =================   =================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable                                                              $     11,363        $      9,223
  Accrued expenses                                                                     4,574               3,449
  Non-refundable deposit                                                                 500                   -
  Current portion of long-term debt and capital leases                                21,802               5,193
  Estimated loss on disposal                                                               -               1,000
                                                                            -----------------   -----------------
   Total current liabilities                                                          38,239              18,865

Long-term debt and capital lease obligations                                           4,567              24,743
Other liabilities                                                                      3,259               2,690
Convertible subordinated debt, net                                                     2,040                   -

Commitments and contingencies (Note 23)

Shareholders' Equity:
  Preferred stock ($.01 par value, 50,000,000 authorized; 78,400 and
78,500
     issued and outstanding at September 30, 2000 and 1999, respectively)                  1                   1
  Common stock ($.01 par value, 50,000,000 authorized; 19,921,114 and
     19,898,728 issued and outstanding at September 30, 2000 and 1999,
     respectively)                                                                       199                 199
  Additional paid-in capital                                                          21,744              21,574
  Accumulated deficit                                                               (20,023)             (2,691)
  Treasury stock (130,200 shares at September 30, 2000 and 1999)                       (377)               (377)
  Note receivable                                                                      (500)               (500)
                                                                            -----------------   -----------------
   Total shareholders' equity                                                          1,044              18,206
                                                                            -----------------   -----------------
    Total liabilities and shareholders' equity                                  $     49,149       $      64,504
                                                                            =================   =================

</TABLE>

      The accompanying notes are an integral part of these balance sheets.


                                       19
<PAGE>
<TABLE>
<CAPTION>
<S>                <C>     <C>     <C>         <C>     <C>       <C>         <C>         <C>         <C>        <C>         <C>
                                                                            Williams Controls, Inc.
                                                                Consolidated Statements of Shareholders' Equity
                                                                            (Dollars in thousands)
                       Issued                                      Retained
                     Preferred          Issued        Additional   Earnings   Unearned                          Pension     Share-
                       Stock         Common Stock      Paid-in   (Accumulated   ESOP     Treasury     Note     Liability   holders'
                   Shares  Amount   Shares    Amount   Capital      Deficit)   Shares     Stock    Receivable  Adjustment   Equity
                   -----------------------------------------------------------------------------------------------------------------
Balance,
September 30, 1997     -    $  -   17,912,240  $ 179   $ 9,822     $ 7,402     $ (191)   $ (377)     $    -      $    -     $16,835

Net earnings           -       -            -      -         -         312          -         -           -           -         312
Issuance of
   preferred stock  80,000     1            -      -     7,336           -          -         -           -           -       7,337
Dividends on
   preferred stock       -     -            -      -         -        (270)         -         -           -           -        (270)
Common stock
   issued in
   satisfaction
   of note payable       -     -       42,329      1        99           -          -         -           -           -         100
Issuance of stock
   upon exercise
   of stock options      -     -      150,000      1        61           -          -         -           -           -          62
Common stock
   issued to
   affiliate for
   note receivable       -     -      206,719      2       498           -          -          -       (500)          -           -
Reduction of
   unallocated
   ESOP Shares           -     -            -      -         7           -        118          -           -          -         125
Change in pension
   liability
   adjustment            -     -            -      -         -           -          -          -           -       (184)       (184)
Income tax benefit
   of non-qualified
   stock option
   exercises             -     -            -      -        94           -          -          -           -          -          94
                   -----------------------------------------------------------------------------------------------------------------
Balance,
September 30, 1998  80,000     1   18,311,288    183    17,917       7,444        (73)      (377)       (500)      (184)     24,411

Net loss                 -     -            -      -         -      (9,539)         -          -           -          -      (9,539)
Dividends on
   preferred stock       -     -            -      -         -        (596)         -          -           -          -        (596)
Common stock
   issued private
   placement             -     -    1,331,149     13     4,539           -          -          -           -          -       4,552
Equity issuance
   costs                 -     -            -      -    (1,173)          -          -          -           -          -      (1,173)
Issuance of stock
   upon exercise of
   stock options         -     -      201,750      2       167           -          -          -           -          -         169
Common stock
   issued from
   conversion
   of preferred
   stock            (1,500)    -       54,541      1        (1)          -          -          -           -          -           -
Change in pension
   liability
   adjustment            -     -            -      -         -           -          -          -           -        184         184
Reduction of
   unallocated
   ESOP shares           -     -            -       -        7           -         73          -           -          -          80
Income tax
   benefit of
   non-qualified
   stock option
   exercise              -     -            -       -      118           -          -          -           -          -         118
                   -----------------------------------------------------------------------------------------------------------------
Balance,
September 30, 1999  78,500     1   19,898,728     199   21,754      (2,691)         -       (377)       (500)         -      18,206

Net loss                 -     -            -       -        -     (16,744)         -          -           -          -     (16,744)
Dividends on
   preferred stock       -     -            -       -        -        (588)         -          -           -          -        (588)
Equity issuance
   costs                 -     -            -       -      (33)          -          -          -           -          -         (33)
Warrants issued
   in connection
   with convertible
   subordinated debt     -     -            -       -      166           -          -          -           -          -         166
Issuance of stock
   upon exercise
   of stock options      -     -       18,750       -       37           -          -          -           -          -          37
Common stock issued
   from conversion
   of preferred
   stock              (100)    -        3,636       -        -           -          -          -           -          -           -
                   -----------------------------------------------------------------------------------------------------------------
Balance,
September 30, 2000  78,400   $ 1   19,921,114   $ 199  $21,744   $ (20,023)    $    -     $ (377)     $ (500)      $  -     $ 1,044
                   =================================================================================================================
</TABLE>
        The accompanying notes are an integral part of these statements.
                                       20
<PAGE>

                             Williams Controls, Inc.
                      Consolidated Statements of Operations
         (Dollars in thousands, except share and per share information)


<TABLE>
<CAPTION>
<S>                                                            <C>               <C>              <C>


                                                                        For the year ended September 30,
                                                                     2000             1999             1998
                                                               ----------------- ---------------- ----------------

Net sales                                                           $    67,725     $     61,422      $    57,646
Cost of sales                                                            51,746           44,338           38,278
                                                               ----------------- ---------------- ----------------
  Gross margin                                                           15,979           17,084           19,368

Operating expenses:
 Acquired-in process research and development                                 -            1,750                -
 Research and development                                                 6,713            3,424            2,778
 Selling                                                                  1,876            1,997            2,065
 Administration                                                           8,938            7,666            5,534
 Loss from impairment of assets                                               -            5,278                -
                                                               ----------------- ---------------- ----------------
  Total operating expenses                                               17,527           20,115           10,377

Earnings (loss) from continuing operations                               (1,548)          (3,031)           8,991

Other (income) expenses:
  Interest income                                                          (231)            (343)            (297)
  Interest expense                                                        3,010            2,154            1,805
  Other (income) expense                                                   (154)              85                -
  Equity interest in loss of affiliate                                    5,044              488              506
                                                               ----------------- ---------------- ----------------
   Total other expenses                                                   7,669            2,384            2,014
                                                               ----------------- ---------------- ----------------

Earnings (loss) from continuing operations before income taxes           (9,217)          (5,415)           6,977
Income tax (benefit) expense                                              7,527           (1,487)           2,366
                                                               ----------------- ---------------- ----------------
Net earnings (loss) from continuing operations                          (16,744)          (3,928)           4,611

Discontinued operations:
  Net loss from operations of the agricultural equipment segment              -                -           (1,271)
  Net loss on disposal of the agricultural equipment segment,
       including $638 and $496 for operating losses during
       phase-out period, respectively                                         -           (5,611)          (1,403)
  Net loss on disposal of automotive accessories segment,
      including $387 for operating losses during phase-out
      period                                                                  -                -           (1,625)
                                                               ----------------- ---------------- ----------------
 Net loss from discontinued operations                                        -           (5,611)          (4,299)
                                                               ----------------- ---------------- ----------------
Net earnings (loss)                                                     (16,744)          (9,539)             312

Dividends on preferred stock                                               (588)            (596)            (270)
                                                               ----------------- ---------------- ----------------

Net earnings (loss) allocable to common shareholders                $   (17,332)   $     (10,135)     $        42
                                                               ================= ================ ================

Earnings (loss) per common share from continuing operations -       $     (0.88)   $       (0.24)     $      0.24
                                                               ----------------- ---------------- ----------------
Loss per common share from discontinued operations - basic          $         -    $       (0.30)     $     (0.24)
                                                               ----------------- ---------------- ----------------

Net earnings (loss) per common share - basic                        $     (0.88)   $       (0.54)     $      0.00
                                                               ----------------- ---------------- ----------------
Weighted average shares used in per share calculation - basic        19,788,031       18,603,057       17,922,558
                                                               ================= ================ ================

Earnings (loss) per common share from continuing
     operations - diluted                                           $     (0.88)   $       (0.24)     $      0.23
                                                               ----------------- ---------------- ----------------
Loss per common share from discontinued operations - diluted        $         -    $       (0.30)     $     (0.23)
                                                               ----------------- ---------------- ----------------
Net earnings (loss) per common share - diluted                      $     (0.88)   $       (0.54)     $      0.00
                                                               ----------------- ---------------- ----------------
Weighted average shares used in per share calculation - diluted      19,788,031       18,603,057       19,808,460
                                                               ================= ================ ================

</TABLE>
        The accompanying notes are an integral part of these statements.


                                       21

<PAGE>
                             Williams Controls, Inc.
             Consolidated Statements of Comprehensive Income (Loss)
                             (Dollars in thousands)


                                           For the year ended September 30,
                                        2000           1999             1998
                                     -----------    ------------    ------------

Net earnings (loss)                   $ (16,744)     $  (9,539)        $   312

Change in pension liability
     adjustment                               -            184            (184)
                                     -----------    ------------    ------------

Comprehensive income (loss)           $ (16,744)     $  (9,355)        $   128
                                     ===========    ============    ============















































        The accompanying notes are an integral part of these statements.



                                       22
<PAGE>

                                          Williams Controls, Inc.
                                   Consolidated Statements of Cash Flows
                                          (Dollars in thousands)

<TABLE>
<CAPTION>
<S>                                                                     <C>          <C>          <C>


                                                                          For the year ended September 30,
                                                                           2000        1999         1998
                                                                        -----------  ----------   ----------
Cash flows from operating activities:
 Net earnings (loss)                                                     $(16,744)   $  (9,539)     $   312
 Adjustments to reconcile net earnings (loss) to net cash provided by
       continuing operations:
   Loss from discontinued operations                                             -       5,611        4,299
   Depreciation and amortization                                             3,189       2,056        1,406
   Equity interest in loss of affiliate                                      5,044         488          506
   Deferred income taxes                                                     6,896      (2,565)         (96)
   Acquired in-process research and development                                  -       1,750            -
   Loss from impairment of assets                                                -       5,278            -
   Changes in working capital of continuing operations, net of
     acquisition:
        Receivables                                                           (458)       (141)      (3,739)
        Inventories                                                          1,819         974       (2,213)
        Accounts payable and accrued expenses                                2,696       3,277          722
           Other                                                               494         475          886
                                                                        -----------  ----------   ----------
 Net cash provided by operating activities of continuing operations          2,936       7,664        2,083

Cash flows from investing activities:
 Investment in and loans to affiliate                                            -        (500)      (2,292)
 Proceeds from sale of building                                                  -       1,192            -
 Investment in note receivable                                                   -        (575)      (3,200)
 Payment for acquisition of ProActive                                            -      (6,350)           -
 Payments for property, plant and equipment                                 (2,343)     (2,948)      (2,685)
 Other, net                                                                     43           -            -
                                                                        -----------  ----------   ----------
Net cash used in investing activities of continuing                         (2,300)     (9,181)       (8,177)

Cash flows from financing activities:
 Proceeds from long-term debt                                                1,800       5,592        4,201
 Repayments of long-term debt and capital lease obligations                 (5,898)     (3,987)      (2,079)
 Net proceeds from issuance of convertible subordinated debt                 1,965           -            -
 Net proceeds from issuance of common stock for private placement and
   upon exercise of stock options                                                3       3,548           62
 Preferred dividends                                                          (588)       (596)        (270)
 Issuance of preferred stock                                                     -           -        7,337
                                                                        -----------  ----------   ----------
Net cash provided by (used in) financing activities of continuing
  operations                                                                (2,718)      4,557        9,251

Cash flows from discontinued operations:
   Proceeds from sale of Automotive Accessories segment                          -           -        1,124
   Proceeds from sale of Agricultural Equipment segment                      1,460           -            -
   Net cash used in  operations                                             (1,671)     (1,998)      (3,700)
                                                                        -----------  ----------   ----------

Net cash used in discontinued operations                                      (211)     (1,998)      (2,576)
                                                                        -----------  ----------   ----------

Net increase (decrease) in cash and cash                                    (2,293)      1,042          581

Cash and cash equivalents at beginning of period                             2,323       1,281          700
                                                                        -----------  ----------   ----------

 Cash and cash equivalents at end of period                                $    30    $  2,323     $  1,281
                                                                        ===========  ==========   ==========

Supplemental disclosure of cash flow information:
 Interest paid                                                           $   2,677    $  1,993       $2,189
 Income taxes paid                                                       $     122    $    503       $   90
                                                                        ===========  ==========   ==========

</TABLE>

The non-cash activity related to the Company's  investing  activity is described
in notes 4 and 12 and 20, non-cash  activity related to the Company's  financing
activity is described in note 6 and non-cash  activity  related to the Company's
acquisition is described in note 19.

        The accompanying notes are an integral part of these statements.

                                       23

<PAGE>
Notes to Consolidated  Financial Statements
Years Ended September 30, 2000, 1999 and 1998
(Dollars in thousands, except share and per share amounts)


Note 1. Summary of Operations and Current Events

Williams  Controls,  Inc,  including  its  wholly-owned  subsidiaries,  Williams
Controls Industries, Inc. ("Williams");  Aptek Williams, Inc. ("Aptek"); Premier
Plastic   Technologies,   Inc.  ("PPT");   ProActive   Acquisition   Corporation
("ProActive");  GeoFocus,  Inc.  ("GeoFocus");  NESC  Williams,  Inc.  ("NESC");
Williams  Technologies,  Inc.  ("Technologies");   Williams  World  Trade,  Inc.
("WWT");  Kenco/Williams,  Inc.  ("Kenco");  Techwood  Williams,  Inc.  ("TWI");
Agrotec  Williams,  Inc.  ("Agrotec")  and its  80%  owned  subsidiaries  Hardee
Williams,  Inc.  ("Hardee") and Waccamaw Wheel  Williams,  Inc.  ("Waccamaw") is
herein  referred to as the  "Company"  or  "Registrant".  The  subsidiaries  are
detailed as follows:

Vehicle Components
------------------
Williams  Controls  Industries,   Inc.:  Manufactures  vehicle  components  sold
primarily in the commercial vehicle industry.


ProActive Acquisition Corporation:  Conducts research and development activities
related to adjustable foot pedals and manufactures  electronic throttle controls
and adjustable pedal systems for passenger vehicles.


Premier Plastic  Technologies,  Inc.:  Manufactures  plastic  components for the
automotive  industry.  In  July  2000,  an  agreement  to sell  Premier  Plastic
Technologies  was  signed.  See  Note  15 of  Notes  to  Consolidated  Financial
Statements.


NESC  Williams,  Inc.:  Installs  conversion  kits  to  allow  vehicles  to  use
compressed natural gas and provides natural gas well metering services.


Williams  Technologies,  Inc.:  Supports  all  subsidiaries  of the  Company  by
providing   research  and   development   and  developing   strategic   business
relationships to promote "technology partnering".


Williams  World Trade,  Inc.:  Located in Kuala  Lumpur,  Malaysia,  WWT managed
foreign  sourcing for  subsidiaries  of the Company,  affiliates and third party
customers. Significant portions of WWT's revenues were derived from Ajay Sports,
Inc., an affiliate. This subsidiary ceased operations in fiscal 2000.


Electrical Components and GPS
-----------------------------

Aptek  Williams,  Inc.:  Develops and  produces  sensors,  microcircuits,  cable
assemblies  and other  electronic  products for the  telecommunications  and the
transportation  industry,  and conducts  research and development  activities to
develop  commercial  applications of sensor related products for the electronics
and automotive markets.


GeoFocus,  Inc.: Develops train tracking and cyber-farming  systems using global
positioning  systems ("GPS") and geographical  information  systems  ("GIS").  A
letter of intent to sell Geo Focus, Inc. was signed in October 2000. See Note 12
of Notes to Consolidated Financial Statements.



Agricultural Equipment
----------------------

The operations of the subsidiaries comprising the Agricultural Equipment segment
were  sold  in May  2000  and  had  previously  been  reported  as  discontinued
operations.


Agrotec Williams,  Inc.:  Manufactured  spraying  equipment for the professional
lawn care, nursery and pest control industries.


                                       24

<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

Hardee Williams,  Inc.: Manufactured equipment used in farming, highway and park
maintenance.

Waccamaw Wheel Williams,  Inc.:  Manufactured solid rubber tail wheels and other
rubber  products used on  agricultural  equipment,  from recycled  truck and bus
tires.


Automotive Accessories
----------------------

Kenco/Williams,  Inc.: Manufactured,  assembled,  packaged and distributed truck
and auto accessories for the after market parts industries. Substantially all of
the assets of Kenco were sold in fiscal 1998.


Current Events
--------------

Going Concern Matters

The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of  liabilities in the normal course of business.  As shown in the  consolidated
financial  statements  during the years ended September 30, 2000, 1999 and 1998,
the  Company  incurred   (losses)  income  of  ($16,744),   ($9,539)  and  $312,
respectively.  In  addition,  accounts  payable  has  increased  from  $9,223 at
September  30,  1999 to $11,363 at  September  30,  2000;  working  capital  has
decreased  from  $8,912 at  September  30,  1999 to a deficit  of  ($17,678)  at
September  30, 2000;  and  stockholders'  equity has  decreased  from $18,206 at
September 30, 1999 to $1,044 at September 30, 2000. Also, as described in Note 6
to Consolidated Financial Statements, the Company was not in compliance with the
covenants of its credit  agreement at September 30, 2000.  The credit  agreement
with the  Company's  primary  bank  matures on July 11,  2001,  the  Company has
extended  the debt due with  another  bank and the  Company is in default on the
payment of certain bank debt as discussed  in Note 6 to  Consolidated  Financial
Statements; as a result, the Company has classified its debt owed to its primary
bank as a current  liability at September 30, 2000.  Subsequent to September 30,
2000, the Company reached the borrowing  capacity under its credit agreement and
required an overadvance from its primary bank to support operations.  Due to the
lack of borrowing  capacity  under the credit  facility,  the Company's  working
capital deficit,  the Company's debts,  including  accounts  payable,  and other
factors as outlined  herein,  the Company has a  significant  lack of liquidity.
Accordingly,  the Company's  continuation  as a going concern is dependent upon,
among other  things,  its ability to generate  sufficient  cash flow to meet its
obligations on a timely basis, to comply with the terms of its credit agreement,
to obtain additional financing or refinancing as may be required, and ultimately
to attain profitability.

After reviewing its working capital needs,  management of the Company  estimates
that additional working capital for fiscal 2001 of approximately  $7,000 will be
needed.  Management  is  reviewing  how it might  reduce  the  amount of working
capital needed and is pursuing  alternatives to raise capital,  both debt and/or
equity. In addition,  the Company is reviewing the sale of non-strategic  assets
and has engaged an investment banking firm to investigate alternatives available
to it, including selling all or part of the Company to a third party,  obtaining
bridge financing to enable the Company to continue  operating until such time as
a buyer can be  identified or  sufficient  equity  and/or debt  financing can be
raised to support the operations of the Company.

There is no assurance that the Company will be able to obtain  adequate  working
capital in the amounts  needed to sustain its operations or sell its business or
parts of it in a timely fashion.

The above  matters  raise a  substantial  doubt about the  Company's  ability to
continue  as a going  concern.  The  financial  statements  do not  include  any
adjustments  relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.


                                       25
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

Note 2. Significant Accounting Policies

Principles of Consolidation - The consolidated  financial statements include all
of the accounts of Williams Controls,  Inc. and its majority owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated.

Cash and Cash Equivalents - All short-term highly liquid  investments  purchased
with  maturity  at purchase of three  months or less are  considered  to be cash
equivalents.

Inventories  -  Inventories  are  valued at the lower of  standard  cost,  which
approximates actual cost, or market.

Property,  Plant and Equipment - Land, buildings,  equipment and improvements to
existing  facilities are recorded at cost.  Maintenance and repairs are expensed
as incurred.  Depreciation has been computed using the straight-line method over
the estimated useful lives of property and equipment as follows:  buildings 31.5
years, furniture,  machinery and equipment 3 to 12 years. Capitalized leases are
amortized  using the same method over the shorter of the estimated  useful lives
or the lease term.

Goodwill and Intangible  Assets - Goodwill,  which represents the excess of cost
over  net  assets  of  acquired   companies,   is  being   amortized  using  the
straight-line  method over  periods from 15 to 40 years.  At each balance  sheet
date,  management  assesses whether there has been an impairment in the carrying
value of cost in  excess of net  assets of  businesses  acquired,  primarily  by
comparing  current and projected sales,  operating income and annual cash flows,
on an undiscounted basis, with the related annual amortization  expenses as well
as considering the equity of such companies.  Other  intangible  assets includes
developed  technology which is being amortized on a straight line basis over the
estimated  useful life of the asset,  or seven years.  In  addition,  intangible
assets include the cost of a patent license agreement,  which is being amortized
on a straight line basis over the shorter of the legal or estimated  useful life
of the asset, which is eleven years.

Concentration of Risk - The Company invests a portion of its excess cash in debt
instruments  of  financial  institutions  with  strong  credit  ratings  and has
established  guidelines relative to diversification and maturities that maintain
safety and  liquidity.  The Company has not  experienced  any losses on its cash
equivalents.

The Company sells its products to customers in diversified industries worldwide;
however,  approximately  96% of its  sales  from  continuing  operations  are to
customers in the Vehicle Components segment.  Approximately 60% of the Company's
sales from continuing operations are electronic throttle controls ("ETC").

For the years ended  September 30, 2000, 1999 and 1998,  Freightliner  accounted
for 23%, 27% and 21%, Navistar accounted for 12%, 15% and 16%, Evart Corporation
accounted  for 9%, 1% and 0%,  Volvo  accounted  for 6%,  8% and 9% and  General
Motors  accounted  for 6%, 5% and 3% of net sales  from  continuing  operations,
respectively.  Approximately  15%,  20% and  15% of net  sales  from  continuing
operations  in fiscal  2000,  1999 and  1998,  respectively,  were to  customers
outside of the United  States,  primarily  in Canada,  Sweden and  Mexico,  to a
lesser extent, in Europe,  South America and Australia.  See Note 16 of Notes to
Consolidated Financial Statements.

Debt  Issuance  Costs - Costs  incurred in the  issuance of debt  financing  are
amortized  over the  term of the debt  agreement,  approximating  the  effective
interest method.

Revenue  Recognition - The Company recognizes revenue upon shipment,  when title
passes to the customer.


                                       26
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

Product Warranty - The Company provides a warranty covering defects arising from
products sold.  The warranty is limited to a specified  time period,  mileage or
hours of use, and varies by product and application.  The Company has provided a
reserve,  which in the opinion of  management is adequate to cover such warranty
costs.

Research and Development  Costs - Research and development costs are expensed as
incurred.

Income Taxes - Deferred tax assets and liabilities are recognized for the future
tax  consequences  attributable to differences  between the financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets  and  liabilities  of  a  change  in  tax  rates  is  recognized  in  the
consolidated  statement of  operations in the period that includes the enactment
date.

Post-retirement  Benefits - Statement of Financial Accounting Standards ("SFAS")
No.  106,  "Employers'  Accounting  for  Post  Retirement  Benefits  Other  than
Pensions"  requires the Company to accrue  retiree  insurance  benefits over the
period  in which  employees  become  eligible  for such  benefits.  The  Company
implemented  SFAS No. 106 by amortizing  the transition  obligation  over twenty
years.

Earnings (loss) Per Share - Basic earnings per share ("EPS") and diluted EPS are
computed  using the methods  prescribed  by Statement  of  Financial  Accounting
Standards  No. 128,  "Earnings  Per Share".  Basic EPS is  calculated  using the
weighted-average  number of common shares outstanding for the period and diluted
EPS is computed using the weighted-average  number of common shares and dilutive
common equivalent shares outstanding.








                                       27
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

Following  is a  reconciliation  of basic EPS and  diluted  EPS from  continuing
operations:
<TABLE>
<CAPTION>
<S>                        <C>          <C>           <C>               <C>          <C>           <C>


                                       Year Ended                                   Year Ended
                                   September 30, 2000                           September 30, 1999
                                                        Per                                          Per
                                                       Share                                        Share
                             Loss         Shares       Amount             Loss         Shares       Amount
                          ----------    -----------   --------          ---------    -----------    --------
Loss from continuing
    operations            $ (16,744)                                    $ (3,928)
Less - Preferred stock
    dividends                  (588)                                        (596)
                          ----------                                    ---------
Basic EPS-
  Earnings  (loss)
  allocable to
  common shareholders       (17,332)    19,788,031     $ (0.88)           (4,524)    18,603,057     $ (0.24)
                                                      ---------                                    ---------
Effect of dilutive
securities-
  Stock options
    and warrants                  -              -                             -              -
  Convertible
    preferred stock               -              -                             -              -
  Convertible
    subordinated
    debt                          -              -                             -              -
                          ----------    ----------                      ---------    ----------
Diluted EPS-
  Earnings  (loss)
  allocable to
  common shareholders     $ (17,332)    19,788,031     $ (0.88)         $ (4,524)    18,603,057     $ (0.24)
                          ==========    ==========     ========         =========    ==========     ========


                                       Year Ended
                                   September 30, 1998
                                                        Per
                                                       Share
                             Loss         Shares       Amount
                          ----------    -----------   --------
Earnings from continuing
  operations                $ 4,611
Less - Preferred stock
  dividends                    (270)
                          ----------
Basic EPS-
  Earnings allocable
  to common
  shareholders                4,341     17,922,558      $ 0.24
                                                      --------
Effect of dilutive
securities-
  Stock options
    and warrants                  -        564,766
  Convertible
    preferred stock             270      1,321,136
                          ----------    -----------
Diluted EPS-
  Earnings allocable
  to common
  shareholders              $ 4,611     19,808,460      $ 0.23
                          ==========    ==========     ========
</TABLE>


At  September  30,  2000,  1999 and 1998,  the Company had options and  warrants
covering 3,690,629,  3,548,797 and 582,236 shares, respectively of the Company's
common stock outstanding that were not considered in the respective  diluted EPS
calculations  since  they  would  have  been  antidilutive.  In 2000  and  1999,
conversion of the preferred shares,  and in 2000,  conversion of the convertible
subordinated  debt,  would  have  been  anti-dilutive  and,  therefore,  was not
considered in the computation of diluted earnings per share.



                                       28

<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

Reclassifications  - Certain  amounts  previously  reported in the 1999 and 1998
financial  statements  have  been  reclassified  to  conform  to 2000  financial
statement classifications.

Fair Value of  Financial  Instruments  - The  carrying  values of the  Company's
current assets and liabilities  approximate fair values primarily because of the
short maturity of these instruments.  The fair values of the Company's long-term
debt  approximated  its carrying  values because the debt is primarily  variable
rate debt. The fair value of preferred stock and  receivables  from an affiliate
is not practicable to estimate due to the related party nature of the underlying
transaction.  The carrying value of the convertible subordinated debt, excluding
the value of warrants recorded as debt discount,  approximates fair value due to
its recent issuance.

Stock-Based   Compensation  -  SFAS  No.  123,   "Accounting   for   Stock-Based
Compensation,"  ("SFAS 123") allows  companies to choose  whether to account for
stock-based  compensation on a fair value method, or to continue  accounting for
such  compensation  under the method  prescribed in Accounting  Principles Board
Opinion No. 25,  "Accounting  for Stock  Issued to  Employees"  ("APB 25").  The
Company has chosen to continue to account for stock-based compensation using APB
25 (see Note 13 of Notes to Consolidated Financial Statements).

Recent FASB Pronouncements - In June 2000 the FASB issued Statement of Financial
Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and
Hedging  Activities - an amendment of FASB  Statement No. 133" ("SFAS 138").  In
June 1999 the FASB issued Statement of Financial  Accounting  Standards No. 137,
Accounting for Derivative Instruments and Hedging Activities." ("SFAS 137") SFAS
137 is an amendment to SFAS 133,  "Accounting  for  Derivative  Instruments  and
hedging  Activities."  SFAS  133  and 138  establish  accounting  and  reporting
standards  for all  derivative  instruments.  SFAS 133 and 138 are effective for
fiscal years  beginning  after June 15, 2000. The Company has made a preliminary
assessment of its potential derivative instruments and, based on that assessment
does not expect the adoption of SFAS 133 and 138 will have any  material  impact
on the Company's financial position or results of operations.

Use of Estimates in the Preparation of Financial Statements - 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  reporting  periods.  Management  makes these
estimates  using the best  information  available at the time the  estimates are
made; however, actual results could differ materially from these estimates.



Note 3. Inventories

Inventories consist of the following at September 30:

                                 2000             1999
                                -------          -------
        Raw materials           $ 6,108          $ 6,867
        Work in process           1,088              697
        Finished goods              820            2,264
                                -------          -------
                                $ 8,016          $ 9,828
                                =======          =======

Finished goods include finished product ready for shipment.


                                       29

<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

Note 4. Investment in and Receivables from Affiliate

At September  30, 2000 the Company had notes and accounts  receivable  from Ajay
Sports,  Inc.  ("Ajay") with a carrying  value of $2,115,  including a $500 note
receivable,  reflected as a reduction  in the  Company's  shareholders'  equity,
relating to the  issuance of 206,719  shares of the  Company's  common  stock to
Ajay. Ajay  manufactures  and distributes  golf  accessories and outdoor leisure
furniture primarily to retailers in the United States and during 1999, purchased
ProGolf  Discount ("Pro Golf"),  a franchisor of golf equipment and  accessories
retail stores.  The Company has manufacturing  rights in certain Ajay facilities
through  2002 under a joint  venture  agreement.  On June 1, 2000 Ajay adopted a
strategic plan calling for the liquidation of its Delavan,  Wisconsin operations
(Ajay Leisure  Products,  Inc.,  Palm Springs Golf Inc., and Prestige Golf Inc.)
and the sale of its Baxter,  Tennessee  operation  (Leisure Life, Inc.).  During
June 2000,  Ajay  closed  its  Mexicali,  Mexico  facility  and in August  2000,
completed the closing of the Wisconsin facility.

The Company's note and accounts  receivable from affiliate at September 30, 2000
is comprised of a secured note  receivable  with a carrying amount of $1,020 and
accounts  receivable  of $595.  In addition,  the Company  could be obligated to
advance to Ajay up to an additional  $1,515 under the terms of an  intercreditor
agreement.  The  chairman of the Company has  provided a guarantee of certain of
the loans to Ajay. The accounts receivable due from Ajay are for unpaid interest
and fees  incurred  during  the years  ended  September  30,  2000 and 1999.  At
September 30, 1999 the Company had an investment in Ajay preferred  stock,  note
and  accounts  receivable  with  carrying  amounts of  $4,565,  $1,587 and $246,
respectively.

Prior to July 11,  1997,  the  Company  had  guaranteed  Ajay's  $13,500  credit
facility and charged Ajay a fee of 1/2 of 1% per annum on the  outstanding  loan
amount for providing  this  guaranty.  From July 11, 1997 through June 30, 1998,
the Company and Ajay had a joint and several loan  obligation to a bank. On June
30,  1998,  the  Company   restructured   its  investment  in  Ajay  (the  "Ajay
Restructuring").  The  objective of the Ajay  Restructuring  was to separate the
Company's and Ajay's  financing,  eliminate Ajay's dependency on the Company for
capital and provide Ajay with adequate  working  capital to grow its  operations
and  improve   shareholder   value,   which  would  benefit  the  Company.   The
restructuring  provides Ajay three years to improve  shareholder  value at which
time the notes receivable  become due and payable.  No dividends are accrued and
payable on the  preferred  stock  through July 31,  2001.  The  preferred  stock
dividend rate increases to an annual rate of 17% in 2001 and 24% in 2002,  rates
which the Company  believes would require Ajay to raise capital from new sources
to redeem the preferred stock.

As a  result  of  the  Ajay  Restructuring,  the  bank  provided  separate  loan
facilities  to the  Company  and  Ajay.  As  consideration  to the  bank for the
separate loan facilities, the Company provided Ajay $2,000 in additional capital
during 1998 which included the purchase of Ajay notes payable of $948 previously
provided by affiliated  parties of the Company,  and agreed to convert $5,000 of
advances  to  Ajay  into  a new  cumulative  convertible  preferred  stock.  The
preferred stock is convertible into 3,333,333 shares of Ajay common stock.

The  secured  promissory  notes  bear an  annual  interest  rate of 16%  payable
monthly,  subject to  increase  based  upon a  calculation  provided  for in the
agreement. In addition, Ajay has agreed to pay the Company annual administrative
fees of $90 and a management fee for sourcing products overseas in the amount of
$80 annually.

The  Company  owns  686,274  shares of common  stock in Ajay,  which  represents
approximately 16% of Ajay's  outstanding  common stock at September 30, 2000. In
addition,  the company has options to purchase  1,851,813 shares of common stock
at an exercise  price of $1.08.  The investment is recorded on the equity method
of  accounting  due to the  common  ownership  of Ajay  and the  Company  by the
chairman of the Company,  who is also the chairman of Ajay.  For the three years
ended  September 30, 2000,  1999, and 1998, the Company  reported  losses on its
investment in Ajay in the amount of $5,044, $488, and $506, respectively. During
the year ended  September  30,  2000,  the  Company  applied the  provisions  of
Emerging  Issues Task Force 99-10  "Percentage  Used to Determine  the Amount of
Equity Method Losses" ("EITF  99-10") in the  calculation of Equity  Interest in
Loss of Affiliate in the Consolidated  Financial Statements.  This pronouncement
provides for the  percentage of ownership to be  determined  by the  liquidation
order of the investment held to the total of each particular level of investment
held by the investor contained in the financial statements of the investee.  For
the years  ended  September  30, 1999 and 1998,  the Equity  Interest in Loss of
Affiliate was computed utilizing the percentage of common stock ownership held



                                       30

<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

by  Williams  in Ajay.  The  effect of EITF  99-10 in 2000 was to  substantially
increase the Company's  equity  interest in loss of affiliate  from amounts that
would have been recorded  using only the  percentage of common stock  ownership.
During  1999,  the  investment  in Ajay common  stock was reduced to zero in the
Consolidated  Balance  Sheet as a result of the  Company's  equity  interest  in
Ajay's losses since  acquisition.  During the year ended  September 30, 2000 and
1999, the Company's  investment in Ajay's  preferred stock was reduced by $4,565
and $435,  respectively,  as a result of continuing recognition of the Company's
equity interest in Ajay's losses.  In addition,  during the year ended September
30, 2000, the Company's investment in note receivable from Ajay was reduced from
$1,587 to $1,020, as a result of continuing  recognition of the Company's equity
interest in Ajay's losses.

Based upon the closing bid price,  the market  value of the  investment  in Ajay
common shares was approximately $182 at September 30, 2000.

Following is a summary of condensed unaudited  financial  information of Ajay as
of and for the twelve months ended September 30, 2000, 1999 and 1998.


                                2000             1999            1998
                             (unaudited)      (unaudited)     (unaudited)
                             -----------      -----------     -----------

Current assets                 $ 2,539          $ 9,193         $ 9,584
Other assets                    29,093           15,243           4,212
                             -----------      -----------     -----------
                               $31,632          $24,436         $13,796
                             ===========      ===========     ===========

Current liabilities            $ 2,276          $ 4,949         $ 2,030
Other liabilities               25,796           18,128           8,003
Common and preferred
   shareholders' equity          3,560            1,359           3,763
                             -----------      -----------     -----------
                               $31,632          $24,436         $13,796
                             ===========      ===========     ===========

Loss, including loss
   from discontinued
   operations, before
   income tax benefit          $(9,956)         $(2,713)        $(2,858)
                             ===========      ===========     ===========

At  September  30,  2000,  Ajay  had   approximately   4,120,000  common  shares
outstanding.  In addition to the  company's  options and  convertible  preferred
stock at  September  30,  2000,  Ajay had  outstanding  preferred  stock that is
convertible  to  approximately   1,686,000  shares  of  Ajay  common  stock  and
outstanding  options and warrants to purchase  approximately  834,000  shares of
Ajay common stock at prices  ranging from $1.08 to $6.00 per share  (unaudited).
An officer of Ajay provided  management services to the Company as an officer of
the Company. Ajay was reimbursed approximately $114 in total for his fiscal 1999
and 1998 time and services.  The Company  accepted the officer's  resignation in
December 1998.


                                       31
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)


Note 5. Goodwill and Intangible Assets

At September 30, goodwill and intangible assets consist of the following:

                                             2000             1999
                                         ------------     ------------
Goodwill                                 $    2,955        $   2,955
Developed technology                          1,820            1,820
Patent and patent license agreement           1,439            1,439
Less accumulated amortization                (1,049)            (450)
                                         ------------     ------------
                                         $    5,165        $   5,764
                                         ============     ============

Amortization  expense on intangible  assets was $599, $173 and $85 for the years
ended September 30, 2000, 1999 and 1998, respectively.



Note 6. Financing Arrangements

Debt - On June 30, 1998,  the Company  restructured  its credit  facility with a
bank (the "Bank") to consist of a revolving credit facility of up to $16,500,  a
$3,100 term loan (Term Loan I) and a $2,700 real estate loan. In December  1998,
the  Company  borrowed  $2,500  under  Term Loan II. In July 1999,  the  Company
borrowed  $2,500  under Term Loan III. In February  2000,  the Company  borrowed
$1,000 as an  overadvance  (Term  Loan IV) of its  credit  agreement.  Under the
revolver,  the Company can borrow up to $14,000 (as per  amendment to the credit
agreement) based upon a borrowing base  availability  calculated using specified
percentages of eligible  accounts  receivable and inventory.  The revolver bears
interest at the Bank's prime rate plus 2.00% (11.50% at September 30, 2000.) The
Real Estate and Term Loan I loans bear  interest  at the Bank's  prime rate plus
2.25% and Term Loan III and an overadvance bear interest at the banks prime rate
plus 3.25%.  The loans under the revolving  credit  facility  mature on July 11,
2001. The Real Estate loan is being  amortized over twenty years and Term Loan I
is being amortized over seven years with all remaining principal outstanding due
at July 11, 2001.  The advance under Term Loan II was repaid during 2000.   Term
Loan III is being amortized over eighteen months, with an original maturity date
of February  2000.  The overadvance is non-amortizing  with an original maturity
of July 15, 2000.  Subsequent  amendments  to the credit  agreement  provide for
payment by November 15,  2000,  of both Term Loan III and the  overadvance.  The
Company  did not repay Term Loan III or the  overadvance  as per the amended due
date,  and is in  default  under the terms of the  credit  agreement  under this
provision.  All loans are  secured  by  substantially  all of the  assets of the
Company.

The loan agreement  prohibits payment of dividends by the Company except for the
Series A Preferred  dividend,  and  requires  the  Company to  maintain  minimum
working  capital of $12,000  and minimum  tangible  net worth,  as  defined,  of
$11,500.  The loan also  prohibits  additional  indebtedness  and  common  stock
repurchases except for through the use of proceeds from stock options exercised,
and restricts  capital  expenditures  to an amount not to exceed $10,500 for the
two years ended September 30, 1999 and not to exceed $2,500 annually thereafter.
In addition,  the loan limits  incremental  operating lease  obligations to $600
annually.  Fees under the loan agreement  include an unused revolver fee of .25%
and a prepayment  penalty fee declining from 3% in 1998 to .5% in the year 2001.
The  prepayment  fee is waived if the loan is repaid with proceeds from the sale
of assets or is refinanced with an affiliate of the Bank. At September 30, 2000,
the Company was not in compliance with its debt covenants for debt with the Bank
and was in default on debt  payments to the Bank for Bank Term Loans III and IV.
No waivers have been  obtained and the default has not been cured.  Accordingly,
all of the  debt  with the  Bank of  $20,362  has  been  classified  as  current
liabilities  in the  accompanying  Consolidated  Balance  Sheet at September 30,
2000.

From July 11, 1997 through  June 30, 1998,  the Company and Ajay had a joint and
several  loan with the  Bank.  Under the  restructured  facility,  all joint and
several  liability,  cross  collateral  agreements and guarantees of the Company
with  respect  to  the  Ajay  portion  of  the  credit  facility  prior  to  the
restructuring  have  been  terminated.  In  consideration  to the  Bank  for the
restructured  facility,  the Company agreed to invest $2,000 in Ajay and convert
$5,000 of advances to Ajay into preferred stock.


                                       32
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)


Prior to July 11, 1997,  the Company had guaranteed the bank debt of Ajay with a
previous  lender  which debt was in default  under  Ajay's loan  agreement.  The
Company and Ajay refinanced their bank debt on July 11, 1997 with the Bank under
a $34,088 three-year  revolving joint and several liability credit and term loan
agreement.  As a result of a  shortfall  in  Ajay's  available  collateral,  the
previous  lender   provided  bridge   financing  of  $2,340  to  Ajay  under  an
inter-creditor agreement. The bridge loan is to be repaid from any proceeds from
the sale of Kenco,  the sale of other  assets,  from a specified  percentage  of
future Ajay and Company cash flow and from monthly  principal  payments by Ajay.
The balance of the bridge loan was $1,515 at September 30, 2000.


The Company's long-term debt consists of the following at September 30:

                                                2000                1999
                                              --------            --------
Bank  revolving  credit  facility             $ 12,547            $ 14,278
due July 11,  2001;  balance  bearing
interest at a variable rate of 11.50%
at September 30, 2000.

Bank Term  Loan I, due July 11,  2001,           3,595               3,426
balance  bearing  interest  at a
variable  interest  rate of 11.75% at
September  30,  2000,  payable in
monthly  installments  of $47 through
November then  increasing to $137
commencing on December 1, 2000,
with remaining  balance of $2,405
due at maturity.

Bank Term Loan II, balance paid on
July 1, 2000                                         -                 709

Bank Term Loan III, due November 15,               972               2,500
2000 with  variable  interest  rate
of  12.75% at September  30,  2000,
payable in monthly  installments of
$139 with remaining balance of $694
due at maturity.

Bank Term Loan IV,  due November 15,             1,000                   -
2000 with variable  interest rate of
12.75%   at   September  30,   2000,
with    principal     and    accrued
interest payable at maturity.

Bank Real Estate loan,  due July 11,             2,248               2,381
2001,  variable interest rate 11.75%
at September  30, 2000,   payable in
monthly  installments  of $11,  with
remaining  balance of  $2,138 due at
maturity.

Unsecured debt, due February 1, 2005,              700                 700
variable  interest  rate  (10.5%  at
September 30, 2000),  interest only,
balance due at maturity.

Real Estate loan,    due October 15, 2001,         467                 570
variable interest rate (11.5% at September
30, 2000), payable in monthly installments
of $8, with remaining balance of $367  due
at maturity.

Other                                                -                   5
                                             ------------       -------------
                                                21,529              24,569
Less current portion                            20,462               4,188
                                             ------------       -------------
                                              $  1,067            $ 20,381
                                             ============        ============



                                       33

<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

Maturities of long-term debt at September 30, 2000,  reflecting  debt in default
as current, are as follows:

                2001            $ 20,462
                2002                 367
                2003                   -
                2004                   -
                2005                 700
                Thereafter             -
                                --------
                                $ 21,529
                                ========

Capital Leases - The Company has acquired  certain assets,  primarily  machinery
and equipment,  through capital leases. The leases have terms ranging from three
to seven  years,  and are payable in monthly  and  quarterly  installments  with
interest (at rates ranging from 7.5% to 10.5%).

Future  minimum lease payments under capital leases are as follows for the years
ending September 30:

                                2001                    1,691
                                2002                    1,644
                                2003                      956
                                2004                      765
                                2005                      535
                          Thereafter                       34
                                                       ------
  Total future minimum lease payments                   5,625
  Less - amount representing interest                     785
                                                       ------
  Present value of future minimum lease payments        4,840
  Less - current portion                                1,340
                                                       ------
                                                       $3,500
                                                       ======

During 2000 and 1999, the Company incurred additional capital leases of $458 and
$1,819, respectively.  Capital lease obligations totaled $5,367 at September 30,
1999.  The  current  portion  of  capital  lease  obligation  totaled  $1,005 at
September  30, 1999.  Capital lease  obligations,  all of which were incurred in
fiscal 1998, totaled $4,146 at September 30, 1998.


Convertible  Subordinated  Debt  - In  April,  2000,  the  Company  issued  7.5%
convertible  subordinated debentures in an aggregate principal amount of $2,140,
due March 31, 2003  including $140 issued in lieu of the  underwriting  fee. Net
proceeds to the Company after expenses,  excluding the value of warrants issued,
were $1,965 and were used for general working capital  purposes.  The debentures
are unsecured obligations,  subordinate to all senior indebtedness (as defined).
The debentures are convertible  into shares of the Company's  common stock,  par
value $.01 per share, at a conversion price of $2.00 per share. In addition, the
Company  issued to each purchaser of debentures a three year warrant to purchase
common stock of the Company equal to 20% of the shares of common stock into



                                       34
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

which such  purchaser's  debenture is  convertible.  The  exercise  price of the
warrants is $2.375 per share. The Company issued the placement agent a five year
warrant to purchase  shares of the  Company's  common stock equal to 7.0% of the
total shares of common stock issuable upon the conversion of the debentures. The
exercise  price of the  placement  agent  warrants is $2.40 per share.  The fair
value of warrants  issued,  totaling  $166,  is included as "Warrants  issued in
connection with convertible subordinated debt" in the accompanying  Consolidated
Statements  of  Shareholders'   Equity  with  an  offset  of  $110  against  the
"Convertible Subordinated Debt" for the warrants issued to debenture holders and
an  increase  of $56 in other  assets for the  placement  agent  warrants in the
accompanying  Consolidated Balance Sheet. The discount of the debentures and the
debt issuance costs are being amortized using the effective interest method over
the lives of the debentures.

The conversion price for the convertible  subordinated debt shall be adjusted if
the Company sells or distributes  common stock,  options or warrants to purchase
common stock or  securities  convertible  into common stock at a price below the
conversion  price of the  convertible  subordinated  debt,  subject  to  certain
exceptions defined in the agreement. The formula for adjustment is as defined in
the agreement.

Upon a change in control,  each holder of convertible  subordinated debt, within
15 days of the change in control,  may elect to accelerate  the maturity date of
the convertible subordinated debt held by such holder to a date not less than 30
but not more than 45 days after the date of notice by the  Company of the change
in control.

In the  event of  default  by the  Company  on any debt  agreement  in excess of
$250,000, a holder owning 15% or more of the convertible  subordinated debt may,
at their  option,  declare the  principal  and accrued  interest due and payable
immediately. No holders own 15% or more of the convertible subordinated debt and
therefore  the default by the Company on certain of its debt  payments  with its
primary  Bank  has  had  no  impact  on the  maturity  date  of the  convertible
subordinated debt.


Note 7. Patent License Agreement

In conjunction  with the acquisition in 1999 of the ProActive Pedals division of
Active Tool &  Manufacturing  Co.,  Inc.,  (Note 19) the Company  entered into a
patent license agreement with a private inventor,  under which the Company holds
an exclusive,  worldwide  license for three  patents  covering  adjustable  foot
pedals. The license agreement remains in effect for the life of the patents. The
Company paid an initial  license fee of $600 and the agreement  requires  yearly
minimum payments of $95 to the inventor for a period of approximately ten years.
Accrued minimum royalties consist of the following at September 30:

                                                        2000           1999
                                                   -------------- -------------
           Minimum future royalties                     $   950      $  1,045

            Less imputed interest                          (389)         (406)
                                                   -------------- -------------
            Present value of payments                       561           639
            Less current portion included in
                 Accrued expenses                           (34)          (78)
                                                   -------------- -------------

            Long-term portion included in
                 Other Liabilities                      $   527       $   561
                                                   ============== =============

Note 8. Pension Plans

The Company maintains two pension plans; one plan covers salaried  employees and
the other plan  covers  the  Company's  hourly  employees.  Annual net  periodic
pension costs under the pension plans are determined on an actuarial  basis. The
Company's  policy is to fund these costs  accrued over 15 years and  obligations
arising  due to plan  amendments  over the  period  benefited.  The  assets  and
liabilities are adjusted annually based on actuarial results.



                                       35
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
<S>                                                  <C>                  <C>             <C>             <C>


                                                         Salaried Employees Plan             Hourly Employees Plan
September 30,                                               2000           1999               2000           1999
                                                     -------------------------------     ------------------------------
Change in benefit obligation:
Benefit obligation at beginning of year                    $      3,546    $  3,300          $     3,732    $    3,792
Service cost                                                        147         103                  159           133
Interest cost                                                       269         219                  283           251
Actuarial (gain)                                                   (560)         42                 (221)         (313)
Benefits paid                                                      (144)       (118)                (139)         (131)
                                                     -------------------------------     ------------------------------
Benefit obligation at end of year                          $      3,258   $   3,546          $     3,814    $    3,732
                                                     -------------------------------     ------------------------------


</TABLE>







                                       36


<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
<S>                                                     <C>              <C>               <C>             <C>


                                                         Salaried Employees Plan             Hourly Employees Plan
September 30,                                               2000           1999               2000           1999
                                                     -------------------------------     ------------------------------
Change in plan assets:
Fair value of plan assets at beginning of year             $      3,191    $  2,916          $     3,608    $    3,180
Actual return on plan assets                                        308         393                  244           559
Benefits paid                                                     (144)       (118)                (139)         (131)
                                                     -------------------------------     ------------------------------
Fair value of plan assets at end of year                   $      3,355    $  3,191          $     3,713    $    3,608
                                                     -------------------------------     ------------------------------
Funded status                                                        97       (355)                (101)         (124)
Unrecognized actuarial (gain) loss                                (381)         209                (272)         (123)
Unrecognized prior service cost                                   (102)       (114)                 250           292
                                                     -------------------------------     ------------------------------
Net amount recognized                                      $      (386)    $  (260)          $     (123)      $     45
                                                     -------------------------------     ------------------------------

Amounts recognized in the statement of Financial position consist of:
         Prepaid benefit cost                              $          -    $      -          $         -      $     45
         Accrued benefit liability                                (386)       (260)                (123)          (74)
         Intangible asset                                             -           -                    -            74
                                                     -------------------------------     ------------------------------
Net amount recognized                                      $      (386)    $  (260)          $     (123)      $     45
                                                     -------------------------------     ------------------------------

Weighted-average assumptions as of September
30,                                                        2000            1999               2000           1999
                                                     -------------------------------     ------------------------------
Discount rate                                                    7.75%        8.00%               7.75%          8.00%
Expected return on plan assets                                    9.00         9.00                9.00           9.00
Rate of compensation increase                                     4.00         4.00                   -              -


                                                         Salaried Employees Plan           Hourly Employees Plan
                                                        2000       1999       1998         2000      1999      1998
                                                     ---------------------------------    -----------------------------
Components of net periodic benefit cost for
the years ended September 30:

Service Cost                                           $    147      $  103     $ 105      $  159      $ 133  $    129
Interest Cost                                               269         219       213         283        251       266
Expected return on plan assets                            (278)       (257)     (273)       (315)      (280)     (307)
Amortization of prior service cost                         (12)        (12)      (12)          41         41        41
Amortization of (gain) loss                                   -           -         -           -          7         -
                                                     ---------------------------------    -----------------------------
Net periodic benefit cost                               $   126      $   53     $  33      $   168     $  152 $    129
                                                     ---------------------------------    -----------------------------

</TABLE>


The projected benefit obligation,  accumulated benefit obligation,  and the fair
value of plan  assets for the hourly  employees  plan with  accumulated  benefit
obligations   in  excess  of  plan  assets  were  $3,732,   $3,637  and  $3,608,
respectively as of September 30, 1999.



                                       37

<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)


Note 9. Property, Plant and Equipment

At September 30, 2000 and 1999,  property,  plant and  equipment  consist of the
following:

                                                 2000            1999
                                                -------         -------
        Land and land improvements              $ 2,545         $ 2,499
        Buildings                                 7,953           6,241
        Machinery and equipment                  16,791          15,966
        Office furniture and equipment            8,516           4,368
                                                -------         -------
                                                $35,805         $29,074
        Less accumulated depreciation           (14,319)        ( 8,299)
                                                -------         -------
                                                $21,486         $20,775
                                                =======         =======



Capital  leases for machinery  and equipment and office  furniture and equipment
included  above  were  $5,257  and  $6,490  at  September  30,  2000  and  1999,
respectively.  Accumulated depreciation on capital leases was $1,092 and $673 at
September 30, 2000 and 1999, respectively.



Note 10. Impairment of Assets

During the year ended  September  30, 1999 the Company  recognized a $5,278 loss
from the impairment of assets related to Kenco, the Company's former  Automotive
Accessories segment, consisting of the following items:

       Impairment of non-voting preferred stock and notes and
           accounts receivable                                     $4,655
       Impairment of property                                         623
                                                                   ------
       Total loss from impairment of assets                        $5,278
                                                                   ======

At the date the impairment loss was taken, the Company had non-voting  preferred
stock and notes and  accounts  receivable  related to Kenco of $797 and  $3,858.
Since the sale of the operating assets of Kenco to Kenco Products,  Inc. ("KPI")
in 1998, KPI has reported  operating  losses and experienced cash flow and other
financing difficulties.  In addition, KPI has not made any payments on its notes
and  accounts  payable to the  Company.  In 1999,  KPI filed for  bankruptcy  in
consideration of this and after evaluation of the business  prospects of KPI and
its need for additional capital, the Company determined it was not probable that
it would  recover  the value of the  preferred  stock  and  notes  and  accounts
receivable,  and an impairment  loss  totaling  $4,655 was recorded for the year
ended September 30, 1999.

In addition, the Company recorded an impairment loss related to certain property
retained from the Kenco sale. The majority of the  impairment  loss for property
related to the sale in July 1999 of a building  and land that were being  leased
by KPI from the Company. This property was sold, and after retiring $891 of debt
secured by the property,  resulted in cash  proceeds of $1,192.  The proceeds to
the Company,  after  deducting  approximately  $692 of expenses to assist in the
relocation  of KPI and to ready the  building  for sale were paid to a  previous
lender, on behalf of an affiliated company,  under the terms of an intercreditor
agreement.  The estimated loss on the sale of land and building,  which has been
recorded in loss from impairment of assets, is $528.




                                       38
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

Note 11. Income Tax Expense (Benefit)

The provision for income tax expense (benefit) is as follows for the years ended
September 30:

                                            2000           1999        1998
                                           ------        --------     -------
        Continuing operations:
           Current                         $  631         $1,078       $2,462
           Deferred                         6,896         (2,565)         (96)
                                           ------        --------     -------
                                            7,527         (1,487)       2,366

        Discontinued operations                 -         (3,189)      (2,932)
                                           ------        --------     -------
                                           $7,527        $(4,676)     $ (566)
                                           ======        ========     =======

The reconciliation  between the effective tax rate and the statutory federal tax
rate  on earnings  (loss) from continuing  operations  as a percent for 1999 and
1998 is as follows:

                                                      1999       1998
                                                    --------     ------
        Statutory federal income tax rate             (34.0)      34.0
        State taxes, net of federal income
                tax benefit                            (4.0)       4.0
        Credits for state income tax
                refunds                                   -       (8.4)
        Effect of change invaluation                    8.8        3.2
                allowance
        Other                                           1.7        1.1
                                                    --------     ------
                                                      (27.5)      33.9
                                                    ========     ======

The Company recorded an income tax expense of $7,527,  as opposed to an expected
benefit,  for the 2000 loss as a result of providing a 100% valuation  allowance
on the net deferred tax assets.

                                       39

<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets and deferred tax  liabilities  at September  30, 2000
and 1999 are as follows:

<TABLE>
<CAPTION>
<S>                                                                      <C>                  <C>

                                                                           2000                  1999
                                                                      ----------------------------------
Deferred tax assets:
Inventories, due to obsolescence reserve and additional
  costs inventoried for tax purposes pursuant to the
  Tax Reform Act of 1986                                                      $ 394               $ 253
Warranty reserves                                                               307                 550
Accrual for compensated absences                                                177                 130
Accrual for retiree medical benefits                                            856                 689
Accounts receivable reserves                                                    361                 225
Estimated loss from writedown of assets of automotive
  accessories segment                                                             -               1,824
Estimated loss on disposal of agriculture equipment segment                   2,522               3,105
Equity interest in loss on affiliate                                          2,642                 705
Tax gain on sale/leaseback                                                      628                 628
In-process research and development                                             627                 672
Accrued other reserves                                                          263                 249
Federal net operating loss carryforwards                                      2,280                   -
State net operating loss carryforwards                                        2,245               1,835
                                                                      ----------------------------------

Total deferred tax assets                                                    13,302              10,865
Less valuation allowance                                                    (11,356)             (2,310)
                                                                      ----------------------------------
Deferred tax assets, net of valuation allowance                               1,946               8,555
                                                                      ----------------------------------

Deferred tax liabilities:
   Plant and equipment, principally due to differences
    in depreciation and amortization                                          1,946               1,659
                                                                      ----------------------------------
Net deferred income tax assets                                                  $ -             $ 6,896
                                                                      ==================================

Current deferred income tax assets                                          $ 4,024             $ 3,871
Long-term deferred income tax assets                                          9,278               6,994
Long-term deferred income tax liabilities                                    (1,946)             (1,659)
Valuation allowance                                                         (11,356)             (2,310)
                                                                      ----------------------------------
                                                                                $ -             $ 6,896
                                                                      ==================================

</TABLE>

At  September  30,  2000,  the Company has  approximately  $6,700 of federal net
operating  loss  carryforwards  which are  available  to the  Company and expire
through 2019. At September 30, 2000,  the Company has  approximately  $38,000 of
state net operating  loss carry  forwards  which are available to the Company in
certain state tax jurisdictions and expire in 2006 through 2014. During the year
ended September 30, 2000, in accordance  with Statement of Financial  Accounting
Standards No. 109,  "Accounting  for Income  Taxes",  the Company  increased its
valuation  allowance  by $9,046 such that the net  deferred tax assets are fully
reserved, due to the uncertain realizability of the amounts.


                                       40
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

Note 12. Sale of GeoFocus, Inc.

On October 25, 2000, the Company  announced it had signed a letter of intent for
the sale of the GPS equipment subsidiary,  GeoFocus,  Inc. Proceeds are expected
to be $2,750 and the assumption of certain  liabilities,  with  incentives  that
could increase cash payment to $3,350 if certain operating objectives are met. A
gain is expected to be realized under the terms of the letter of intent.

Closing of the transaction is subject to customary closing  conditions,  and the
buyer's  ability to obtain  sufficient  financing.  The transaction has not been
completed and there is no assurance that the transaction  will be completed.  No
other  plan to dispose  of  GeoFocus  has been  adopted.  Accordingly,  GeoFocus
continues  to  be  consolidated  in  the  accompanying   consolidated  financial
statements.  Total assets of GeoFocus at September 30, 2000 were not material to
the  consolidated  financial  statements.  Net sales and loss from operations of
GeoFocus were $737 and $(561),  respectively,  for the year ended  September 30,
2000.



Note 13. Shareholders' Equity

Common  Stock -  In July  1999,  the Company  completed a private  placement  of
1,244,065  shares of common  stock of the Company and  received  net proceeds of
$3,379. In addition,  87,084 shares of the Company's common stock were issued in
lieu of the  underwriting  fee,  for a  total  of  1,331,149  shares  issued  in
conjunction with the offering.  For every share issued in the private placement,
the purchasing  shareholders  received warrants to purchase .35 common shares or
465,902 additional shares of common stock, at $3.125 per share. In addition, for
every share issued to the placement agent, the placement agent received warrants
to purchase .35 common shares,  or 87,084  additional shares of common stock, at
$3.30 per share.  The warrants issued may be exercised at any time over the next
five  years.  The fair  value of such  warrants  and the  shares  in lieu of the
underwriting  fee,  totaling  $1,118,  is  included in "Common  stock  issued in
private placement" with a corresponding charge to "Equity issuance costs" in the
accompanying Consolidated Statements of Shareholders' Equity.


Preferred Stock - In April  1998,  the Company  completed a private placement of
80,000 shares of Series A  convertible  redeemable  preferred  stock at $100 per
share,  or $8,000 in gross  proceeds and  received  net proceeds of $7,337.  The
preferred stock bears a dividend rate of 7.5%, which is payable  quarterly,  and
was  convertible  at the  option  of the  holder  into  2,909,091  shares of the
Company's common stock.  Dividends are cumulative and have preference over other
equity distributions.  The preferred stock conversion price shall be adjusted if
the Company sells or distributes  common stock,  options or warrants to purchase
common stock or  securities  convertible  into common stock at a price below the
preferred stock  conversion  price.  The formula for adjustment is as defined in
the agreement. As a result of the issuance of the convertible  subordinated debt
in  April  2000,  the  preferred   stock   conversion   price  was  adjusted  to
approximately   $2.70.  The  revised  conversion  price  does  not  represent  a
beneficial conversion feature to the holders of the preferred stock.

The preferred  stock is redeemable at the Company's  option  anytime after April
21, 2001. The preferred stock is not mandatorily  redeemable.  In addition,  the
Company can force  conversion of the  preferred  stock into common shares if the
Company's  common  stock  trades at or above  $4.125  for  twenty  out of thirty
consecutive  trading days.  Holders of the Series A preferred stock are entitled
to a number of votes  equal to those they would have  assuming  conversion  into
common stock, without taking into account fractional shares. The preferred stock
has priority over other classes of capital stock upon liquidation.

The preferred stock also has change of control provisions that allow the holders
to, upon the occurrence of certain  events,  maintain the value of the preferred
stock  or  convert  at the  lower  of the  conversion  price  at the  time  of a
transaction  or the price per share of common  stock  payable  in the  change of
control transaction.


                                       41

<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

Commencing with the quarterly period beginning July 1, 2001, the annual dividend
rate will  increase  each  quarter by 2.5% up to a maximum  dividend  of 24% per
annum.  The Company used the proceeds of the offering to provide  $3,200 of debt
financing  to the  purchaser of the  Portland,  Oregon  manufacturing  facility,
repayment of a bank term loan of $667 and an investment  of $1,500 in Ajay.  The
remaining balance was used for general working capital purposes.

Stock  Options and Warrants - The Company had issued stock  options and warrants
at exercise prices ranging from $.41 - $3.63 per share,  the market value at the
date of issuance. All remaining unexercised options and warrants under this plan
expired in fiscal 2000. The stock option activity  during the periods  indicated
is as follows:

                                                                Shares
                                              Subject to        Option
                                               Options          Prices
                                             ----------       ----------

        Outstanding at September 30, 1997     340,000         $0.41-3.63

        Exercised                            (150,000)              0.41
                                             ----------       ----------
        Outstanding at September 30, 1998     190,000          0.41-3.63

        Exercised                            (150,000)              0.41
        Cancelled                             (10,000)                 -
                                             ----------       ----------
        Outstanding at September 30, 1999      30,000               3.63

        Cancelled                             (30,000)              3.63
                                             ----------       ----------
        Outstanding at September 30, 2000           -         $        -
                                             ==========       ==========


The Company  currently has two qualified stock option plans. The Company adopted
the 1993 Stock  Option Plan ("the 1993 Plan")  which  reserves an  aggregate  of
1,500,000 shares of the Company's common stock for the issuance of stock options
which may be granted to employees,  officers and directors of and consultants to
the Company.  Under the terms of the 1993 Plan, the Company may grant "incentive
stock options" or "non-qualified options" at not less than the fair market value
on the date of grant.  Options granted under the 1993 Plan are exercisable as to
25 percent of the shares covered thereby commencing six months after the earlier
of the date of grant or the date of  employment,  and as to an  additional  25%,
cumulatively, on the first, second and third anniversaries of the date of grant,
and expire ten years after the date of grant.  In each of  January,  1998 and in
February,  1999,  the Company  reserved an  additional  1,500,000  shares of the
Company's common stock for the issuance of stock options under the 1993 Plan. At
September  30,  2000,  the Company had  1,984,393  shares  available  for future
grants.












                                          42

<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

Stock option  activity  during the periods  indicated  under the 1993 Plan is as
follows:


                                        Shares            Shares
                                     Available for      Subject to      Option
                                         Grant           Options        Prices
                                    --------------------------------------------

Outstanding at September 30, 1997       388,125        1,111,875  $  1.94 - 3.63

Additional shares reserved            1,500,000                -               -
Granted                              (1,183,887)       1,183,887     2.31 - 3.00
Canceled                                117,975         (117,975)    1.94 - 2.94
                                    --------------------------------------------
Outstanding at September 30, 1998       822,213        2,177,787     1.94 - 3.63

Additional shares reserved            1,500,000                -               -
Granted                                (744,000)         744,000     2.06 - 3.00
Exercised                                     -          (51,750)    1.94 - 2.50
Canceled                                137,862         (137,862)    1.94 - 3.63
                                    --------------------------------------------
Outstanding at September 30, 1999     1,716,075        2,732,175     1.94 - 3.00

Granted                                 (64,000)          64,000     1.50 - 2.50
Exercised                                     -          (18,750)           1.94
Canceled                                332,318         (332,318)    1.94 - 3.00
                                    --------------------------------------------
Outstanding at September 30, 2000     1,984,393        2,445,107   $ 1.50 - 3.00
                                    --------------------------------------------




During 1996 the  shareholders of the Company  approved a stock option plan which
reserves an aggregate of 200,000 shares of the Company's stock for  non-employee
Directors of the Company (the "1995 Plan"). The 1995 Plan provides for automatic
granting  of 10,000  options to each  non-employee  director of the Company at a
price  equal to the market  value on the date of grant  which is the date of the
annual shareholders' meeting each year,  exercisable for 10 years after the date
of the grant.  These options are  exercisable as to 25% of the shares thereby on
the date of grant and as to an additional 25%, cumulatively on the first, second
and  third  anniversaries  of the date of  grant.  In March  2000,  the  company
reserved an  additional  200,000  share of the  Companies  common  stock for the
issuance of stock  options under the 1995 plan. At September 30, 2000 there were
200,000 shares available for grant under the 1995 Plan.





                                       43
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)


Stock option  activity  during the periods  indicated  under the 1995 Plan is as
follows:


                                       Shares          Shares
                                   Available for     Subject to
                                      Grant           Options      Option Prices
                                   --------------   ----------     -------------

Outstanding at September 30, 1997     110,000        90,000        $ 2.66 - 3.66

Granted                               (30,000)       30,000                 2.44
                                   ---------------------------------------------
Outstanding at September 30, 1998      80,000       120,000          2.44 - 3.66

Granted                               (50,000)       50,000                 2.68
                                   ---------------------------------------------
Outstanding at September 30, 1999      30,000       170,000          2.44 - 3.66

Additional shares reserved            200,000
Granted                               (30,000)       30,000                2.125
                                   ---------------------------------------------
Outstanding at September 30, 2000     200,000       200,000       $ 2.125 - 3.66
                                   =============================================


Statement of Financial Accounting Standards No. 123

During 1995,  the  Financial  Accounting  Standards  Board issued SFAS 123 which
defines a fair value based method of accounting  for employee  stock options and
similar equity  instruments  and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans.  However, it also
allows an entity to continue to measure  compensation cost for those plans using
the method of accounting  prescribed by APB 25. Entities electing to continue to
use the  accounting  treatment in APB 25 must make pro forma  disclosures of net
earnings  (loss) and, if  presented,  earnings  per share,  as if the fair value
based method of accounting defined in SFAS 123 had been adopted.

The Company has elected to account for its stock-based  compensation plans under
APB 25; however,  the company has computed,  for pro forma disclosure  purposes,
the value of all options  granted  during the years ended  September  30,  2000,
1999 and 1998,  using the  Black-Scholes  option  pricing model as prescribed by
SFAS 123 using the following weighted average assumptions for grants:

                                               2000       1999      1998
                                             --------   --------   -------
        Risk-free interest rate                 6.40%     5.13%      6.00%
        Expected dividend yield                    0%        0%         0%
        Expected lives                       7 years    7 years    7 years
        Expected volatility                     53.6%     55.5%      57.1%


Using the Black-Scholes  methodology,  the total value of options granted during
the years ended September 30, 2000,  1999 and 1998, was $133,  $1,064 and $1,458
respectively,  which  would be  amortized  on a pro forma basis over the vesting
period of the options  (typically  three years).  The weighted average per share
fair value of options  granted during the years ended  September 30, 2000,  1999
and 1998, was $1.28, $1.36 and $1.60 respectively.  If the Company had accounted
for its  stock-based  compensation  plans  in  accordance  with  SFAS  123,  the
Company's  net  earnings   (loss)  and  net  earnings  (loss)  per  share  would
approximate the pro forma disclosures below:




                                       44
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
<S>                     <C>             <C>              <C>             <C>               <C>           <C>


                                Year Ended                      Year Ended                       Year Ended
                             September 30, 2000              September 30, 1999               September 30, 1998
                         -------------------------       -------------------------        -------------------------
                         As Reported     Pro Forma       As Reported     Pro Forma        As Reported     Pro Forma
                         -----------     ---------       -----------     ---------        -----------     ---------

Net earnings (loss)       $ (16,744)    $ (17,747)         $ (9,539)     $ (10,203)          $ 312         $ (176)

Basic net earnings
   (loss) per share           (0.88)        (0.93)            (0.54)         (0.60)           0.00          (0.02)

Diluted net earnings
   (loss) per share           (0.88)        (0.93)            (0.54)         (0.60)           0.00          (0.02)



</TABLE>

The effects of applying SFAS 123 in this pro forma disclosure are not indicative
of future  amounts.  SFAS 123 does not apply to awards  prior to the year  ended
September 30, 1996, and additional awards are anticipated in future years.

The following table summarizes  information  about stock options  outstanding at
September 30, 2000:

<TABLE>
<CAPTION>
<S>                  <C>                         <C>              <C>                <C>                    <C>

                               Options Outstanding                                           Options Exercisable
                      -----------------------------------------                       ----------------------------------
                                                  Weighted                            Number of shares
                            Number                 Average            Weighted         Exercisable at        Weighted
    Range of            Outstanding at            Remaining           Average           September 30,         Average
 Exercise Prices      September 30, 2000         Contractual       Exercise Price           2000             Exercise
                                                Life - Years                                                   Price
------------------    --------------------     ----------------    ---------------    ------------------    ------------
     $1.50 - 2.57               2,284,507                  7.4              $2.25             1,728,895           $2.23
       2.58 -3.66                 360,600                  6.3               2.91               298,100            2.95
------------------    --------------------     ----------------    ---------------    ------------------    ------------
    $ 1.50 - 3.66               2,645,107                  7.2              $2.34             2,026,995           $2.33

</TABLE>

At September 30, 1999 and 1998,  1,653,987 and 1,171,121 options,  respectively,
were  exercisable  at weighted  average  exercise  prices of $2.38 and $2.13 per
share, respectively.



                                       45
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)


Note 14. Discontinued Operations

Agriculture  Equipment  Segment - On May 3, 2000, the Company completed the sale
of the previously discontinued Agriculture Equipment Segment operation. Proceeds
at closing  were $1,760 in cash and a note plus the  assumption  by the buyer of
$200 of liabilities. In conjunction with the sale the Company has received notes
for $300 at 8% interest,  payable  April 30, 2003. No amounts have been recorded
for the notes due to the uncertainty of their collectibility.  No loss in excess
of  that  previously  provided  was  realized  as a  result  of the  sale of the
discontinued Agriculture Equipment Segment.

In December 1998, the Company  announced its intention to divest its Agriculture
Equipment segment.  The operations are reflected as discontinued  operations for
all periods prior to 2000  presented in the Company's  Statements of Operations.
During 1999,  the Company  recorded an estimated net loss on disposal of $5,611,
net of tax benefit of $3,189,  or $(0.30) per common share,  associated with the
divestiture of the Agriculture Equipment segment. The loss was based upon events
and  information  that  resulted  in  management's  revised  estimate of the net
realizable value of the Agriculture  Equipment segment. The revised estimate was
based upon contract negotiations and lower than anticipated bids for portions of
the segment which resulted in a write-down of certain assets and a provision for
associated  costs.  Liabilities  of  the  Agriculture  Equipment  segment  to be
retained by the Company as of September  30, 1999,  amounted to $462 included in
accounts  payable  and $217  included  in the  accrued  expenses  caption of the
accompanying  Consolidated  Balance  Sheet for current  payables  and  accruals.
Additionally,  $570 was included in the current  portion of  Long-term  Debt and
Capital Leases and $700 was included in the  Long-term  Debt and Capital  Leases
obligations caption for debt to be retained.

The summarized results for the Agriculture Equipment segment for the years ended
September 30 are as follows:


                                                          2000          1999
                                                          ----          ----

Net sales                                              $   3,915     $   7,225
                                                      =========================

Loss from operations before allocated interest
   expense and income tax benefits                     $       -     $       -
Allocated interest expense                                     -             -
                                                      -------------------------
Loss from operations before income tax benefit                 -             -
Income tax benefit                                             -             -
Loss allocable to minority interest                            -             -
                                                      -------------------------
Loss from operations                                           -             -

Loss on disposal before interest and income taxes              -        (8,700)
Allocated interest expense                                     -          (100)
                                                      -------------------------
Loss on disposal before income tax benefit                     -        (8,800)
Income tax benefit                                             -         3,189
Loss allocable to minority interest                            -             -
                                                      -------------------------
Loss on disposal                                               -        (5,611)
                                                      -------------------------
Total loss on discontinued operations                  $       -     $  (5,611)
                                                      =========================


                                       46
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)


The net  assets  of the  Agriculture  Equipment  segment  held  for  disposition
included in the  accompanying  Consolidated  Balance Sheet,  net of writedown to
estimated net realizable value, as of September 30, 1999, was as follows:


        Current assets:
                Accounts receivable and inventory, net       $ 360
                                                             ======

        Long term assets:
                Property, plant and equipment, net           $ 500
                                                             ======

The Company  elected to allocate  interest  expense to  discontinued  operations
based upon the net assets of the segment  being  disposed of at each  respective
year-end.  In  2000,  certain  assets  of the  Agricultural  Equipment  segment,
primarily  property and  equipment,  were  retained by the Company and are being
leased to a third party. These amounts,  totaling  approximately $371, have been
reclassified  from net  assets  held for  disposition  to  property,  plant  and
equipment in the accompanying Consolidated Balance Sheet at September 30, 2000.

Automotive  Accessories  Segment - On March 16, 1998,  the Company completed the
sale of a substantial  portion of the assets of Kenco,  to Kenco Products,  Inc.
("KPI").   The  principal  owner  of  KPI  is  Colfax Group,  Inc.,  a  Delaware
corporation.  One of the principal owners of Colfax Group,  Inc. had been acting
as general manager in charge of operating the business of Kenco.   Colfax Group,
Inc. is unrelated to the Company.

Consideration  to the Company  consisted  of $1,000 cash,  $430 of  receivables,
assumption of $1,000 of liabilities  and 2,000 shares of non-voting  convertible
preferred  stock of KPI. Under the agreement,  KPI agreed to purchase  $2,600 of
Kenco inventory during the six months following the sale.  Approximately $430 of
inventory  was unsold at September 30, 1998,  which was purchased  subsequent to
year-end.  The sale was recorded  based upon the estimated  fair market value of
the assets disposed of. The Company previously  reported Kenco as a discontinued
operation beginning with the measurement date of May 8, 1997. For the year ended
September 30, 1998, the Company reported an additional loss on the sale of Kenco
in the amount of $2,626 before income tax benefit resulting in an additional net
loss on disposal of discontinued operations of $1,625.

Colfax and one of the principal  owners of Colfax  Group,  Inc.  guaranteed  the
obligations of KPI to Kenco.  The Company had a security  interest in all of the
assets of KPI  subordinate  to the security  interest of KPI's bank.  During the
year ended September 30, 1999, KPI filed for bankruptcy.










                                       47
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)


The  summarized  results for Kenco for the year ended  September 30, 1998 are as
follows reflecting operating results through the measurement date:


    Net sales                                              $  4,964
                                                           =========

    Loss from operations before allocated interest
         expense and income tax benefit                           -
    Allocated interest expense                                    -
                                                           ---------
    Loss from operations before income tax benefit                -
    Income tax benefit                                            -
                                                           ---------
    Loss from operations                                          -


    Loss on disposal before interest and income taxes        (2,428)
    Allocated interest expense                                 (198)
                                                           ---------
    Loss on disposal before income tax benefit               (2,626)
    Income tax benefit                                        1,001
                                                           ---------
    Loss on disposal                                         (1,625)
                                                           ---------
      Total loss on discontinued operations                $ (1,625)
                                                           =========


Note 15. Sale of Premier Plastic Technologies, Inc

On July 11, 2000, the Company announced it had signed a definitive agreement for
the  merger  of  the  plastic  injection  molding  subsidiary,  Premier  Plastic
Technologies,  Inc. ("PPT"), into 3DM International,  Inc. (3DMI).  Proceeds are
expected to be 1.4 million shares of 3DMI stock,  representing  approximately 7%
of the  outstanding  3DMI shares.  The  transaction  is intended to qualify as a
tax-free  reorganization under IRC Section 368(a)(1)(A).  No loss is expected to
be realized under the terms of the definitive agreement.

Closing of the  transaction  is subject to  customary  closing  conditions,  and
3DMI's payment of all advances  relating to Premier Plastic  Technologies  under
the secured lending facility with the Bank, subject to 3DMI obtaining sufficient
financing.  Financing has not been  completed and there is no assurance that the
transaction will be completed. No other plan to dispose of PPT has been adopted.
Accordingly,  PPT continues to be consolidated in the accompanying  consolidated
financial  statements.  Total  assets of PPT at  September  30,  2000  consisted
primarily of accounts receivable and inventory of $3,812 and property, plant and
equipment, net of $5,161.

3DM  International  has also  advanced $500 as a  nonrefundable  deposit for the
benefit of Premier  Plastic  Technologies,  Inc., to be used for working capital
purposes. The amount is shown as Nonrefundable Deposit on the accompanying
consolidated balance sheet.


Note 16. Business Segment Information

In the fourth quarter of 1999, the Company adopted SFAS 131,  "Disclosures about
Segments of an Enterprise and Related  Information." SFAS 131 changes the method
of disclosing  segment  information  to the manner in which the Company's  chief
operating   decision  maker  organizes  the  components  for  making   operating
decisions,  assessing  performance  and  allocating  resources.  The Company has
organized the segments based on the type of products  sold,  which are described
in Note 1. As  required  by SFAS 131,  all prior  years'  segment  data has been
restated.

The Company  accounts for its segments  under the same  policies as described in
the principal  accounting policies footnote.  Intersegment  revenues and related
earnings are not material.  Management  evaluates segment performance  primarily
based on revenue and operating income; therefore, other items included in pretax
income,  consisting primarily of interest income or expense, are not reported in
segment results.  Operating income is net of all corporate  expenses,  which are
allocated based on measurable  services  provided to each segment or for general
corporate expenses, which are allocated on a revenue and capital basis.




                                       48
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

Identifiable  corporate assets consist  primarily of investment in an affiliated
company  and  other  assets   including   assets   retained  of  the  previously
discontinued Agricultural Equipment segment in 2000, and deferred taxes.
<TABLE>
<CAPTION>
<S>                                                                             <C>             <C>            <C>


                                                                                  2000           1999          1998
                                                                             --------------------------------------------
Net sales by classes of similar products from continuing operations
Vehicle Components                                                                 $ 65,263      $ 58,136       $ 54,071
Electrical Components and GPS                                                         2,462         3,286          3,575
                                                                             --------------------------------------------
                                                                                   $ 67,725      $ 61,422       $ 57,646
                                                                             ============================================
Earnings (loss) from continuing operations
Vehicle Components:
   Before loss from impairment of assets
     and acquired in-process research
     and developed expense                                                          $ 1,572       $ 6,632       $ 10,992
   Loss from impairment of assets                                                         -        (5,278)             -
     Acquired in-process research and
     development expense                                                                  -        (1,750)             -
                                                                             --------------------------------------------
Total Vehicle Components                                                              1,572          (396)        10,992
Electrical Components and GPS                                                        (3,120)       (2,635)        (2,001)
                                                                             --------------------------------------------
                                                                                   $ (1,548)     $ (3,031)       $ 8,991
                                                                             ============================================
Identifiable assets
Vehicle Components                                                                 $ 32,582      $ 41,358       $ 38,694
Electrical Components and GPS                                                        14,498         8,992          8,353
Corporate                                                                             2,069        13,294          8,344
                                                                             --------------------------------------------
Total assets - continuing operations                                                 49,149        63,644         55,391
Automotive accessories - discontinued operations                                          -             -          3,963
Agricultural equipment - discontinued operations                                          -           860          9,211
                                                                             --------------------------------------------
Total assets                                                                       $ 49,149      $ 64,504       $ 68,565
                                                                             ============================================

Capital expenditures
Vehicle Components                                                                  $ 1,094       $ 3,721        $ 6,446
Electrical Components and GPS                                                         1,707         1,046            386
                                                                             --------------------------------------------
Total capital expenditures - continuing operations                                    2,801         4,767          6,832
Agricultural equipment - discontinued operations                                          -            92            191
                                                                             --------------------------------------------
Total capital expenditures                                                          $ 2,801       $ 4,859        $ 7,023
                                                                             ============================================

Depreciation and amortization
Vehicle Components                                                                  $ 2,823       $ 1,652        $ 1,077
Electrical Components and GPS                                                           366           404            329
                                                                             --------------------------------------------
Total depreciation and amortization - continuing operations                           3,189         2,056          1,406
Automotive accessories - discontinued operations                                          -             -            179
Agricultural equipment - discontinued operations                                          -            92            309
                                                                             --------------------------------------------
Total depreciation and amortization                                                 $ 3,189       $ 2,148        $ 1,894
                                                                             ============================================
</TABLE>


                                       49
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)


For geographic information, revenues are allocated between the United States and
International,  depending on whether the shipments  are to customers  within the
United States or located  outside the United States.  Long-lived  assets outside
the United States were immaterial for all periods presented.


        Year ended September 30,           2000       1999        1998
                                          -------    -------     -------
        Canada                            $ 3,536    $ 5,493     $ 3,377
        Sweden                              1,895      1,868       2,073
        Mexico                              1,284      2,276          35
        Other                               3,231      2,947       3,201
                                          -------    -------     -------
                                            9,946     12,584       8,686
        Net sales-export                   57,779     48,838      48,960
                                          -------    -------     -------
                                          $67,725    $61,422     $57,646
                                          =======    =======     =======
        United States

Note 17. Other Benefit Plans

The Company  maintains an Employee  Stock  Ownership  Plan (ESOP) for  non-union
employees.  The ESOP may buy shares of the Company's  stock from time to time on
the open market or directly  from the Company.  The ESOP has been  authorized to
borrow up to $1,000 from the Company or  financial  institutions  to finance its
purchases.  At September 30, 2000 all shares had been  allocated  under the plan
and there were no amounts under the loan outstanding.

The Company  sponsors  salaried  employees and union  employees  matching 401(k)
plans,  in which  eligible  employees may elect to contribute a portion of their
compensation.


Note 18. Post Retirement Benefits other than Pensions

The Company provides health care and life insurance  benefits for certain of its
retired  employees  ("Post  Retirement  Plan").  These  benefits  are subject to
deductibles,  co-payment provisions and other limitations. The Company may amend
or change the Post Retirement Plan periodically.

Effective  October  1,  1993  the  Company  adopted  SFAS No.  106,  "Employers'
Accounting for Post Retirement  Benefits other than Pensions" ("SFAS 106"). SFAS
106  requires  companies to accrue the cost of post  retirement  health care and
life  insurance  benefits  within  employees'  active service period rather than
recognizing these costs on a cash basis as had been prior practice.

The  Company  elected  to  amortize  the  Accumulated  Post  Retirement  Benefit
obligation  at  October  1,  1993  over  twenty  years  as a  component  of post
retirement benefits expense.









                                       50
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

The following  table provides  information on the post retirement plan status at
September 30:


Accumulated Post Retirement Benefit Obligation             2000        1999
                                                       -------------------------

Retirees                                                 $ 1,185     $ 1,503
Fully eligible active participants                           778         662
Other active Plan participants                             1,194       1,312
                                                       -------------------------
                                                           3,157       3,477

Plan assets                                                    -           -
                                                       -------------------------
Accumulated post retirement benefit
    obligation in excess of Plan assets                    3,157       3,477

Unrecognized gain                                          1,068         500
Unrecognized prior service cost                             (504)       (576)
Unrecognized transition obligation                        (1,491)     (1,606)
                                                       -------------------------

Accrued post retirement benefit cost
    in the consolidated balance sheet                    $ 2,230     $ 1,795
                                                       =========================


Post retirement benefits expense included the following components for the years
ended September 30:
                                             2000        1999        1998
                                           -------------------------------------
Service cost                                  $ 89        $ 92        $ 74
Interest cost                                  264         239         218
Amortization of unrecognized
   net obligation at transition                178         190         165
                                           -------------------------------------
Post retirement benefits expense             $ 531       $ 521       $ 457
                                           =====================================



The assumed health care cost trend rate used in measuring the  accumulated  post
retirement  benefit obligation (APBO) ranged between 4.5%-10% in the first year,
declining to 4.5% - 5.0% after 8 years.  The discount  rate used in  determining
the APBO was 7.75%, 8.00% and 6.75% for the years ended September 30, 2000, 1999
and 1998, respectively.

If the  assumed  medical  costs  trends  were  increased  by 1%,  the APBO as of
September 30, 2000 would increase by $159, and the aggregate of the services and
interest cost components of the net annual post retirement benefit cost would be
increased by $25. If the assumed  medical costs trends were decreased by 1%, the
APBO as of September 30, 2000 would  decrease by $270,  and the aggregate of the
services and interest cost components of the net annual post retirement  benefit
cost would be decreased by $38.



                                       51
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)

Note 19. Acquisition

In July,  1999, the Company  purchased the ProActive  Pedals  division of Active
Tools  Manufacturing  Co., Inc.  ProActive Pedals is a designer and developer of
patented  adjustable foot pedal systems and modular pedal systems.  The purchase
price  included  $5,750 in cash,  plus the assumption of  approximately  $286 in
liabilities.  In addition,  the Company  entered into a patent  license with the
patent  holder  which  required an initial  payment of $600 and  minimum  annual
royalty payments of $95 per year for ten years.  Assets acquired include tooling
designs,  technology and patent rights on adjustable foot pedal systems, as well
as designs of modular foot pedal  systems.  The  acquisition  was  accounted for
using the  purchase  method of  accounting  and the  results  of  operations  of
ProActive Pedals have been included in the consolidated results of operations of
the Company from the acquisition date. The purchase price allocation resulted in
a $1,750 charge to operations for acquired  in-process research and development,
for the year ended  September 30, 1999.  The  technological  feasibility  of the
acquired  technology,  which  has  no  alternative  future  use,  had  not  been
established  prior to the purchase.  The significant  projects in process at the
acquisition  date were for the  development of  commercially  viable designs and
concepts for adjustable  pedal  systems.  The value was determined by estimating
the resulting net cash flows from such products,  and  discounting  the net cash
flows back to their present value. The discount rate included a factor that took
into account the  undertainty  surrounding  the  successful  development  of the
acquired in-process technology.  At the time of the acquisition,  the in-process
technology  under  development was expected to be  commercially  viable in 2001.
Expenditures  to complete  these  products were expected to total  approximately
$3.5 million.  These estimates are subject to change, given the uncertainties of
the  development  process,  and no assurances can be given that  deviations from
these  estimates  will not occur.  Additionally,  these  projects  will  require
expenditures for additional  research and development  after they have reached a
state of technological  and commercial  feasibility.  To date,  expenditures and
results  have not differed  significantly  from the  forecast  assumptions.  The
allocation  of the purchase  price also  resulted in $1,820  being  allocated to
developed  technology,  which is being  amortized over a seven year period.  The
excess of the  purchase  price over the fair value of the  assets  acquired  and
liabilities assumed of $2,162 was recorded as goodwill and is being amortized on
a straight line basis over a 15 year period.

The following unaudited proforma results of operations for the Company,  for the
years ended 1999 and 1998 includes the results of ProActive Pedals assuming such
acquisition  occurred as of October 1, 1997 and includes the acquired in-process
research and development charge in the period where incurred:

                                                 1999         1998
                                               ---------    ---------
        Net sales                              $ 63,059     $ 57,856
        Operating income (loss)                  (5,401)       6,360
        Loss from continuing operations         (11,137)      (1,495)
        Net loss per share - basic                (0.63)       (0.09)
        Net loss per share - diluted              (0.63)       (0.09)


The purchase was financed  through the private  placement of 1,331,149 shares of
the  Company's  common  stock with net  proceeds  of  approximately  $3,379.  In
addition,  the  Company  borrowed  $2,500  from its bank  under a new term  loan
facility ("Term Loan III").


Note 20. Sale Leaseback

In April 1997 the Company sold its Portland,  Oregon manufacturing facility in a
sale-leaseback   transaction  for  approximately  $4,600.  The  transaction  was
accounted  for  as  a  financing  and  the  capitalized   lease  obligations  of
approximately  $4,600  were  recorded as long term  liabilities.  In April 1998,
under the terms of the  agreement,  the Company  provided a mortgage note to the
purchaser in the amount of $3,200,  which was reported as a note  receivable  at
September  30,  1998.  In  December  1998,  the Company  exercised  an option to
repurchase  the building for $4,700,  consisting  of cash of $1,500 and the note
receivable of $3,200. Accordingly, the note receivable of $3,200 and the capital
lease  obligation  of $4,600  have been  eliminated  from the  balance  sheet at
September  30,  1999.  The costs  associated  with the building  repurchase  are
reported in other expenses during the year ended September 30, 1999.

The Company  borrowed  $2,500 from its bank under  amended term loans to finance
the  repurchase  transaction  and for working  capital  purposes.  Approximately
$1,222 of the  additional  financing  was  borrowed  under an  amendment  to the
Company's  existing  Term Loan I,  which  increased  the Term Loan I balance  to
$4,105.  Term Loan I is payable in equal  monthly  installments  of $60 with the
remaining  balance of $3,150  due at  maturity  on July 1,  2001.  Approximately
$1,278 of the  additional  financing was provided  under an amended Term Loan II
payable in 18 equal monthly  installments of $71, plus variable  interest.  Term
Loan II was paid off in July 2000.


                                       52

<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)


Note 21. Quarterly Data (unaudited)
<TABLE>
<CAPTION>
<S>                                                      <C>            <C>            <C>         <C>             <C>    <C>

                                                                           Restated
                                                           ---------------------------------------
                                                              First        Second        Third        Fourth
                         2000 (1)                          Quarter (2)   Quarter (2)   Quarter (2)  Quarter (3)      Annual
------------------------------------------                 ------------  ------------  -----------  ------------  -------------
Continuing operations:
 Net sales                                                    $ 15,877      $ 17,596     $ 18,022      $ 16,230       $ 67,725
 Cost of sales                                                  11,386        13,089       13,368        13,903         51,746
                                                           ------------  ------------  -----------  ------------  -------------
 Gross margin                                                 $  4,491      $  4,507     $  4,654      $  2,327       $ 15,979
                                                           ============  ============  ===========  ============  =============
 Operating expenses                                           $  3,989      $  4,303     $  4,892      $  4,343       $ 17,527
                                                           ============  ============  ===========  ============  =============
Net earnings (loss)                                           $ (1,312)     $   (988)    $ (1,173)     $(13,271)      $(16,744)
                                                           ============  ============  ===========  ============  =============
Earnings (loss) per common share - basic                      $  (0.07)     $  (0.06)    $  (0.07)     $  (0.68)      $  (0.88)
                                                           ============  ============  ===========  ============  =============
Earnings (loss) per common share - diluted                    $  (0.07)     $  (0.06)    $  (0.07)     $  (0.68)      $  (0.88)
                                                           ============  ============  ===========  ============  =============


                                                              First        Second        Third        Fourth
                         1999 (1)                            Quarter       Quarter     Quarter (4)  Quarter (5)      Annual
-------------------------------------------                ------------  ------------  -----------  ------------  -------------
Continuing operations:
 Net sales                                                    $ 14,399      $ 16,257     $ 15,749      $ 15,017       $ 61,422
Cost of sales                                                    9,005        10,611       10,606        14,116         44,338
                                                           ------------  ------------  -----------  ------------  -------------
 Gross margin                                                 $  5,394       $ 5,646     $  5,143      $    901       $ 17,084
                                                           ============  ============  ===========  ============  =============
 Operating expenses                                           $  3,070       $ 2,958     $  8,558      $  5,529       $ 20,115
                                                           ============  ============  ===========  ============  =============
Earnings (loss) from continuing operations                    $  1,031       $ 1,477     $ (2,378)     $ (4,058)      $ (3,928)
Loss from discontinued operations                                    -             -            -        (5,611)        (5,611)
                                                           ============  ============  ===========  ============  =============
Net earnings (loss)                                           $  1,031       $ 1,477     $ (2,378)     $ (9,669)      $ (9,539)
                                                           ============  ============  ===========  ============  =============
Earnings per common share from continuing
   operations - basic                                         $   0.05       $  0.07     $  (0.14)     $  (0.22)      $  (0.24)
(Loss) per common share from discontinued
   operations - basic                                                -             -            -         (0.29)         (0.30)
                                                           ------------  ------------  -----------  ------------  -------------
Earnings (loss) per common share - basic                      $   0.05       $  0.07     $  (0.14)     $  (0.51)      $  (0.54)
                                                           ============  ============  ===========  ============  =============
Earnings per common share from continuing
   operations - diluted                                       $   0.05       $  0.07     $  (0.14)     $  (0.22)      $  (0.24)
(Loss) per common share from discontinued
   operations - diluted                                              -             -            -         (0.29)         (0.30)
                                                           ------------  ------------  -----------  ------------  -------------
Earnings (loss) per common share - diluted                    $   0.05       $  0.07     $  (0.14)     $  (0.51)      $  (0.54)
                                                           ============  ============  ===========  ============  =============

</TABLE>

















                                       53
<PAGE>

Notes to Consolidated Financial Statements
Years Ended September 30, 2000, 1999, and 1998
(Dollars in thousands, except per share amounts)


(1)  Certain  reclassifications  have been made to the first three  quarters for
     the year ended  September  30, 2000 and to all  quarters for the year ended
     September  30, 1999 from  amounts  previously  reported to conform with the
     year end September 30, 2000 financial statement classification.
(2)  The first  three  quarters  of 2000 net loss have been  restated to include
     recognition of an additional  $1,146,  $717 and $594 of loss,  over amounts
     previously  reported,  for  equity  interest  in  loss  of  affiliate.  The
     recognition   of  the  loss  was   significantly   increased   due  to  the
     implementation  of Emerging  Issues Task Force Bulletin  99-10  "Percentage
     Used to Determine the Amount of Equity Method Losses".
(3)  The fourth  quarter of 2000 net loss includes a $6,896 expense for deferred
     tax provision  resulting  from a 100%  valuation  allowance for  previously
     recognized deferred income tax assets which may no longer be realizable due
     to management's  assessment of their ultimate  realizability,  $633 for the
     elimination of previously  provided  income tax benefits in the first three
     quarters  for the year ended  September  30, 2000 and changes in  estimated
     amounts for warranty reserves.
(4)  The third quarter of 1999  operating  expenses  includes a $5,278 loss from
     the  impairment  of  assets  related  to  Kenco,   our  former   Automotive
     Accessories segment,  consisting of $4,655 for the impairment of non-voting
     preferred  stock  and  notes  and  accounts  receivable  and  $623  for the
     impairment of property.
(5)  The fourth quarter of 1999 operating  expenses  includes $1,750 expense for
     acquired  in-process  research  and  development  and changes in  estimated
     amounts for warranty and inventory reserves based on fourth quarter events.
     The fourth quarter of 1999 loss from  discontinued  operations  includes an
     additional  loss for the  Agricultural  Equipment  Segment  which  reflects
     events and information  which resulted in management's  revised estimate of
     the net realizable value of this segment.


Note 22. Related Parties

In addition to related party  transactions  discussed  elsewhere in the notes to
the consolidated financial statements, during the years ended September 30, 2000
and 1999, $94 and $157,  respectively,  was paid to an affiliated  company,  for
website  development  and e-commerce  designs.  The chairman of the Company is a
controlling shareholder of the affiliated company.


Note 23. Contingencies

The Company and its subsidiaries are involved in various lawsuits  incidental to
their  businesses.  It is the opinion of management that the ultimate outcome of
these  actions  will not  have a  material  effect  on the  Company's  financial
position or results of operations.

The Company has identified certain contaminants in the soil and groundwater of a
manufacturing  facility  located  in  an  industrial  area,  which  the  Company
believes,  was disposed of on the  property by a previous  property  owner.  The
Company's  environmental  consulting  firm has conducted  tests to determine the
levels of  contaminants.  The  Company  has been  advised  by  counsel  that the
contamination is not a reportable condition under current statutes. In the event
that  remediation   were  required  in  the  future,   the  Company  would  seek
indemnification  from the  prior  property  owner  under  the terms of the asset
purchase  agreement.  The prior  property  owner has advised the Company that it
would dispute any liability for remediation  costs.  The Company believes it can
enforce  available  claims  against  the prior  property  owner for any costs of
investigation and remediation.




                                       54




<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To the Board of Directors of
Williams Controls, Inc.:

We have  audited  the  accompanying  consolidated  balance  sheets  of  Williams
Controls,  Inc.  and  subsidiaries  as of September  30, 2000 and 1999,  and the
related  consolidated  statements of  operations,  comprehensive  income (loss),
shareholders'  equity,  and cash flows for each of the three years in the period
ended September 30, 2000. These financial  statements are the  responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United  States..  Those  standards  require  that we plan and perform the
audit to obtain reasonable  assurance about whether the financial statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Williams Controls,
Inc.  and  subsidiaries  as of September  30, 2000 and 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.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern. As discussed in Note 1 to Consolidated
Financial Statements, the Company has suffered recurring losses from operations,
is out of compliance with it debt covenants, is in default on payment of certain
debt  and  has  significant  negative  working  capital.   These  matters  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans in regard to these matters are also described in Note 1. The
financial   statements   do  not  include  any   adjustments   relating  to  the
recoverability  and  classification  of asset carrying amounts or the amount and
classification  of liabilities that might result should the Company be unable to
continue as a going concern.

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



                                                      /s/  Arthur Andersen LLP
                                                      ------------------------
                                                           ARTHUR ANDERSEN LLP
Portland, Oregon,
January 12, 2001





                                       55


<PAGE>

Item 9.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure

None.


                                    Part III


Item 10.   Directors and Executive Officers of the Registrant

Incorporated by reference from the Company's 2000 Proxy Statement.

Item 11.   Executive Compensation

Incorporated by reference from the Company's 2000 Proxy Statement.

Item 12.   Security Ownership of Certain Beneficial Owners and Management

Incorporated by reference from the Company's 2000 Proxy Statement.

Item 13.   Certain Relationships and Related Transactions

Incorporated by reference from the Company's 2000 Proxy Statement.



                                     Part IV

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

1.   See Exhibit Index on page 59 of this Form 10-K.

2.   See Index to Financial Statements in Item 8 of this Form 10-K.

3.   See Index to Schedules on page 57 of this Form 10-K.

4.   Reports on Form 8-K.
















                                       56



<PAGE>


                                   Signatures

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


WILLIAMS CONTROLS, INC.

      Date:      January 12, 2001               By /s/ Thomas K. Ziegler
                                                   -----------------------------
                                                   Thomas K. Ziegler, President,
                                                   Chief Executive Officer and
                                                   Chief Operating Officer

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





      Date:      January 12, 2001               By /s/ Thomas K. Ziegler
                                                   -----------------------------
                                                   Thomas K. Ziegler, Principal
                                                   Executive Officer, President,
                                                   Chief Executive Officer and
                                                   Chief Operating Officer and
                                                   Director


      Date:      January 12, 2001               By /s/ Kim L. Childs
                                                   -----------------------------
                                                   Kim L. Childs
                                                   Principal Accounting Officer

      Date:      January 12, 2001               By /s/ Thomas W. Itin
                                                   -----------------------------
                                                   Thomas W. Itin, Chairman of
                                                   the Board and Director


      Date:      January 12, 2001               By /s/ H. Samuel Greenawalt
                                                   -----------------------------
                                                   H. Samuel Greenawalt,
                                                   Director


      Date:      January 12, 2001               By /s/ Timothy Itin
                                                   -----------------------------
                                                   Timothy Itin, Director


      Date:      January 12, 2001               By
                                                   -----------------------------
                                                   Charles G. McClure, Director










                                       57

<PAGE>



                             Williams Controls, Inc.

                               Index to Schedules





                                                                     Page





Schedule II          Valuation and Qualifying Accounts                58
























All other schedules are omitted because they are not required, not applicable or
the required information is given in the Consolidated Financial Statements.




                                       58

<PAGE>

                             Williams Controls, Inc.

                        Valuation and Qualifying Accounts

                                   Schedule II

                             (Dollars in thousands)


                                              Beginning              Ending
        Description                            balance              balance
        -----------                           ---------             -------

For Year Ended
September 30, 2000

Total reserves for doubtful accounts
and obsolete inventory                          $1,066              $  759


For Year Ended
September 30, 1999

Total reserves for doubtful accounts
  and obsolete inventory                          $569              $1,066


For Year Ended
September 30, 1998

Total reserves for doubtful accounts
  and obsolete inventory                          $855               $ 569










NOTE:    Valuation and qualifying accounts were not individually significant;
and, therefore,  additions and deductions information has not  been  provided
in this schedule.  Charges to the accounts are for the purposes for which the
reserves were created.















                                       59
<PAGE>

                                Williams Controls, Inc.
                                      Exhibit Index

Exhibit
Number         Description
-------        -----------

3.1  Certificate of Incorporation of the Registrant as amended. (Incorporated by
     reference to Exhibit 3.1 to the Registrants' annual report on form 10-K for
     the fiscal year ended September 30, 1995 (the "1995 form 10-K"))


3.2  By-Laws of the Registrant. (Incorporated by reference to Exhibit 3.2 to the
     Registrant's  Registration  Statement  on Form S-18,  Registration  No. 33-
     30601-S,  as filed with the  Commission  on August 18, 1989 (the "1989 Form
     S-18"))


4.1  Specimen Unit  Certificate  (including  Specimen  Certificate for shares of
     Common Stock and Specimen  Certificate for the Warrants).  (Incorporated by
     reference  to  Exhibits  1.1  and  1.2  to  the  Registrant's  Registration
     Statement  on Form  8-A,  Commission  File  No.  0-18083,  filed  with  the
     Commission on November 1, 1989)


4.2  Form of Placement Agent's Warrant  Agreement  (Incorporated by reference to
     Exhibit  4.2  to the  Registrant's  Registration  Statement  on  Form  S-3,
     Registration No. 333-59397 as filed with the Commission on July 20, 1998)


10.1(a)  Indemnification  Agreement  for Thomas W. Itin  ("Itin  Indemnification
     Agreement").  (Incorporated  by  reference to Exhibit 10.9 to the 1989 Form
     S-18)


10.1(b) Amendment  No. 1 to Itin  Indemnification  Agreement.  (Incorporated  by
     reference to Exhibit 10.1(b) to the Registrant's Annual Report on form 10-K
     for the Fiscal Year Ended September 30, 1993 (the "1993 Form-10K"))


10.1(c ) Form of Indemnification  Agreement for H. Samuel Greenawalt and Timothy
     Itin.  (Incorporated  by reference to Exhibit  10.1(c) to the  Registrant's
     1993 Form 10-K)

10.2(a)  Credit   Agreement  dated  July  11,  1997  among  Registrant  and  its
     subsidiaries and Ajay Sports,  Inc. ("Ajay") and its  subsidiaries,  all as
     borrowers,  and Wells  Fargo  Bank,  National  Association,  as lender (the
     "Credit  Agreement").  (Incorporated  by  reference  to Exhibit 10.1 to the
     Registrant's  Quarterly  Report on Form 10-Q for the period  ended June 30,
     1997 (the "June 1997 Form 10-Q"))

10.2(b)  Promissory Notes under the Credit Agreement:
             (a) Revolving Credit Loans Promissory Note
             (b) Term Loan I Promissory Note
             (c) Term Loan II Promissory Note
             (d) Real Estate Loan Promissory Note
             (All  incorporated  by  reference to Exhibit 10.2 to the
             Registrant's  June  1997  Form  10-Q)
             (e) Term Loan III Promissory Note (Incorporated by reference
                 to the Form 10-K for the year ended September 30, 1999)

                                       60
<PAGE>

Exhibit
Number         Description
-------        -----------

10.2(c) Mortgage and Security  Agreement between Aptek Williams,  Inc. and Wells
     Fargo Bank.  (Incorporated by reference to Exhibit 10.3 to the Registrant's
     June 1997 Form 10-Q)

10.2(d) Patent Assignment and Security Agreements for:
             (a) Williams Controls Industries, Inc.
             (b) Hardee Williams, Inc.
             (c) Aptek Williams, Inc.
             (All incorporated by reference to Exhibit 10.4 to the
             Registrant's June 1997 Form 10-Q)

10.2(e) Trademark Security Agreements for:
             (a) Agrotec Williams, Inc.
             (b) Hardee Williams, Inc.
             (All incorporated by reference to Exhibit 10.5 to the
             Registrant's June 1997 Form 10-Q)

10.2(f)  Continuing  Unconditional  Guaranty of Thomas W. Itin in favor of Wells
     Fargo Bank.  (Incorporated  by  reference  to Exhibit 10.6 to the June 1997
     Form 10-Q)

10.2(g) First Amendment to Credit Agreement dated June 30, 1998 (Incorporated by
     reference to Exhibit 10.1 to the  Registrant's  Current Report on Form 8-K,
     Date of report June 30, 1998)

10.2(h)  Replacement  Term Loan I Promissory  Note,  dated June 30, 1998 made by
     Registrant  payable  to Wells  Fargo Bank  (Incorporated  by  reference  to
     Exhibit 10.2 to the Registrant's June 30, 1998 Form 8-K)

10.3(a)  Intercreditor  Agreement  dated  July 11,  1997  among  Registrant  and
     subsidiaries,  Ajay Sports,  Inc. and subsidiaries,  United States National
     Bank of Oregon ("US Bank"),  Thomas W. Itin and Wells Fargo Bank,  National
     Association. (Incorporated by reference to Exhibit 10.7 to the Registrant's
     June 1997 Form 10-Q)

10.3(b) Consent, Reaffirmation and Release Agreement with US Bank. (Incorporated
     by reference to Exhibit 10.8 to the Registrant's June 1997 Form 10-Q)

10.3(c)  Promissory  Note of Ajay for  $2,340,000 to US Bank.  (Incorporated  by
     reference to Exhibit 10.9 to the Registrant's June 1997 Form 10-Q)

10.3(d) Mortgage,  Assignment of Rents, Security Agreement and Fixture Filing by
     Aptek  Williams,  Inc. in favor of US Bank.  (Incorporated  by reference to
     Exhibit 10.10 to the Registrant's June 1997 Form 10-Q)

10.3(e) Guaranty to US Bank.  (Incorporated by reference to Exhibit 10.11 to the
     Registrant's June 1997 Form 10-Q)

10.4(a) The  Company's  1995  Stock  Option  Plan  for  Non-Employee  Directors.
     (Incorporated  by reference to Exhibit 10.3 to the  Registrant's  Quarterly
     Report on Form 10-Q for the period  ended  March 31,  1995 (the "March 1995
     Form 10-Q"))

10.4(b) The Registrant's 1993 Stock Option Plan as amended to date

10.5 Williams/Ajay Loan and Joint Venture Implementation  Agreement dated May 6,
     1994, as amended by letter agreement dated April 3, 1995.  (Incorporated by
     reference to Exhibit 10.4 to the Registrant's March 1995 Form 10-Q)






                                       61
<PAGE>

Exhibit
Number         Description
-------        -----------
10.6(a) Guaranty dated as of October 2, 1995 by Thomas W. Itin to the Registrant
     (the "Itin  Guaranty").  (Incorporated  by reference to Exhibit 10.9 to the
     Registrant's 1995 Form 10-K)

10.6(b)  Amendment  One to the Itin  Guaranty.  (Incorporated  by  reference  to
     Exhibit  10.7(b)  to the  Registrant's  Annual  Report on Form 10-K for the
     period ended September 30, 1997 (the "1997 Form 10-K"))

10.7 Security Agreement between Ajay and its subsidiaries,  as debtors,  and the
     Registrant  and its  subsidiaries,  as secured  parties.  (Incorporated  by
     reference to Exhibit 10.8 to the 1997 Form 10-K)

10.8 Agreement,  dated  June 30,  1998,  by and  among the  Registrant  and Ajay
     Sports,  Inc. and its  subsidiaries  (Incorporated  by reference to Exhibit
     10.3 to the Registrant's June 30, 1998 Form 8-K)

10.9 Asset Purchase Agreement and related Exhibits between Kenco Williams,  Inc.
     and Kenco Products,  Inc. (Incorporated by reference to exhibit 10.1 to the
     Registrant's current report on Form 8-K, date of report March 16, 1998)

10.10(a) Asset  Purchase  Agreement,  dated July 28, 1999, by and between Active
     Tool &  Manufacturing  Co., Inc.,  and the  Registrant and its  subsidiary,
     ProActive Acquisition Corporation   (Incorporated  by reference to the Form
     10-K for the year ended September 30, 1999)

10.10(b) Patent License Agreement, dated July 28, 1999, by and between Edmond B.
     Cicotte  and the  Registrant  and  its  subsidiary,  ProActive  Acquisition
     Corporation  (Incorporated by reference to the Form 10-K for the year ended
     September 30, 1999)

21.1 List of Subsidiaries. See Item 1 in this report

23   Consent of Arthur Andersen LLP

27.1 Financial Data Schedule (Filed Herewith)




                                       62

<PAGE>
Exhibit 23



                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


As independent  public  accountants,  we hereby consent to the  incorporation by
reference of our report dated January 12, 2001, included in this Form 10-K, into
the  Company's  previously  filed  Registration  Statement  Nos.  333-59397  and
333-90565 on Form S-3 and No. 333-56591 on Form S-8.


                                                      /s/  Arthur Andersen LLP
                                                      ------------------------
                                                           ARTHUR ANDERSEN LLP
Portland, Oregon,
January 12, 2001









<PAGE>
Exhibit 27.1
Financial Data Schedule for FYE 9-30-00



ARTICLE                     5

CIK                         0000854860
NAME                        Williams Controls, Inc.
MULTIPLIER                                   1,000
CURRENCY                                     US DOLLARS

PERIOD-TYPE                   12-MOS
FISCAL-YEAR-END                              SEP-30-2000
PERIOD-START                                 OCT-01-1999
PERIOD-END                                   SEP-30-2000
EXCHANGE-RATE                                     1
CASH                                             30
SECURITIES                                        0
RECEIVABLES                                  11,865
ALLOWANCES                                      508
INVENTORY                                     8,016
CURRENT-ASSETS                               20,561
PP&E                                         35,805
DEPRECIATION                                 14,319
TOTAL-ASSETS                                 49,149
CURRENT-LIABILITIES                          38,239
BONDS                                             0
PREFERRED-MANDATORY                               0
PREFERRED                                         1
COMMON                                          199
OTHER-SE                                        844
TOTAL-LIABILITY-AND-EQUITY                   49,149
SALES                                        67,725
TOTAL-REVENUES                               67,725
CGS                                          51,746
TOTAL-COSTS                                  17,527
OTHER-EXPENSES                                    0
LOSS-PROVISION                                    0
INTEREST-EXPENSE                              3,010
INCOME-PRETAX                                (9,217)
INCOME-TAX                                    7,527
INCOME-CONTINUING                           (16,744)
DISCONTINUED                                      0
EXTRAORDINARY                                     0
CHANGES                                           0
NET-INCOME                                  (17,332)
EPS-BASIC                                     (0.88)
EPS-DILUTED                                   (0.88)