<PAGE>

                                  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, 1996

                                       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. [ ]

As of November 20, 1996,  17,674,787 shares of Common Stock were outstanding and
the aggregate  market value of the shares (based upon the average of the bid and
asked price of the shares on the over-the-counter  market) of Williams Controls,
Inc. held by nonaffiliates was approximately $29,018,422.

                       Documents Incorporated by Reference
Portions  of the  definitive  proxy  statement  for the 1997  Annual  Meeting of
Stockholders  to be filed not later than  January 28, 1997 are  incorporated  by
reference in Part III hereof.

<PAGE>
<TABLE>
<CAPTION>

                             Williams Controls, Inc.
                             Index to 1996 Form 10-K



<S>                                                                                                       <C>
Part I                                                                                                    Page

      Item 1.     Business                                                                                  2-5
      Item 2.     Properties                                                                                  6
      Item 3.     Legal Proceedings                                                                           6
      Item 4.     Submission of Matters to a Vote of Security Holders                                         6


Part II

      Item 5.     Market for Registrant's Common Equity and Related Stockholder Matters                       7
      Item 6.     Selected Financial Data                                                                     8
      Item 7.     Management's Discussion and Analysis of Financial Condition
                  and Results of Operations                                                                9-14
      Item 8.     Financial Statements and Supplementary Data                                             15-38
      Item 9.     Changes in and Disagreements with Accountants on
                     Accounting and Financial Disclosure                                                     39


Part III

      Item 10.    Directors and Executive Officers of the Registrant                                         39
      Item 11.    Executive Compensation                                                                     39
      Item 12.    Security Ownership of Certain Beneficial Owners and Management                             39
      Item 13.    Certain Relationships and Related Transactions                                             39


Part IV

      Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K                            39


Signatures                                                                                                   40
</TABLE>
<PAGE>

                             WILLIAMS CONTROLS, INC.

                                    Form 10-K

                                     Part I

Item 1. Description of Business

Williams Controls,  Inc., together with its wholly owned subsidiaries,  Williams
Controls Industries,  Inc.; Kenco/Williams,  Inc.; NESC Williams, Inc.; Williams
Technologies, Inc.; Williams World Trade, Inc.; Williams Automotive, Inc.; Aptek
Williams, Inc.; Agrotec Williams, Inc.; Techwood Williams, Inc.; Premier Plastic
Technologies,  Inc.;  GeoFocus,  Inc.  and its  80%  owned  subsidiaries  Hardee
Williams, Inc. and Waccamaw Wheel Williams,  Inc., is hereinafter referred to as
the "Company" or "Registrant."

General

The Company is a Delaware  corporation  formed in 1988.  The  Company's  primary
business  segment was founded by Norman C.  Williams in 1939 and acquired by the
Company in 1988.  The Company's  operating  subsidiaries  which are all Delaware
corporations except GeoFocus, Inc. which is Florida corporation, are as follows:

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

Kenco/Williams,  Inc.: Manufactures,  assembles,  packages and distributes truck
and auto accessories for the aftermarket parts industries.

NESC  Williams,  Inc.:  Manufactures  conversion  kits to allow  vehicles to use
compressed natural gas and gas metering and regulating products.

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,  Williams World
Trade manages foreign sourcing for all subsidiaries of the Company.

Williams  Automotive,  Inc.:  Markets the Company's  products to the  automotive
industry.

Aptek Williams, Inc.: Develops and produces microcircuits,  cable assemblies and
other  electronic  products  for a wide  array of  applications,  including  the
transportation industry.

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

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

Waccamaw Wheel Williams,  Inc.:  Manufactures solid rubber tail wheels and other
rubber products,  used on landscape maintenance  equipment,  from recycled truck
and bus tires.
                                       2
<PAGE>

Techwood Williams,  Inc.:  Manufactures and distributes commercial wood chippers
used in landscaping and farming.

Premier Plastic  Technologies,  Inc.:  Manufactures  plastic  components for the
automotive industry.

GeoFocus,  Inc.:  Develops mobile  computing,  mapping and tracking software for
private industry and governmental agencies.

As discussed in note 14 to the Notes to Consolidated  Financial Statements,  the
Company's operations are divided into four industry segments.

Heavy Vehicle  Components - The Company's heavy vehicle  component product lines
include  electronic  throttles,  exhaust  brakes  and  pneumatic  and  hydraulic
controls.  These products are used in applications which include heavy vehicles,
utility  and  off-highway  equipment,   transit  buses  and  underground  mining
machines. The majority of these products are sold directly to original equipment
manufacturers such as Freightliner,  Navistar, Volvo, Motor Coach Industries and
Blue  Bird  Corporation.  The  Company  also  sells  these  products  through  a
well-established network of independent  distributors.  The major competitors in
one or more product lines include Allied Signal, Schraeder-Bellows and RMH.

Automotive  Accessories - The automotive  accessories  product lines include bug
and stone deflectors,  running boards,  side steps and bed mats for light trucks
and sport-utility  vehicles.  These products are sold in the aftermarket to mass
merchants  and auto supply stores such as Kmart,  WalMart,  Pep Boys and Western
Auto. The major competitors include Lund, Deflecta Shield and Dee Zee.

Landscape  Maintenance  Equipment - The landscape  maintenance equipment product
lines include  rotary  cutters,  sprayers,  discs,  wood  chippers,  harrows and
trailers.  These  products are sold to  independent  equipment  dealers  located
primarily in the Southeastern  United States. The major competitors include Wood
Brothers and Alamo Group.

Electrical  Components - The  electrical  components  product line  includes the
design and production of  microcircuits,  cable  assemblies and other electronic
products.   These   products  are  used  in   telecommunication,   computer  and
transportation  industries.  The major customers include Allied Signal, AT&T and
Nokia. The major competitors include CTS, AMP and Nethode.

Acquisitions

The  Company  has  been  pursuing  an  acquisition  strategy  to  diversify  its
operations.  The  Company's  acquisition  philosophy is to identify and evaluate
distressed companies and then attempt to acquire the most promising companies at
or below book  value.  This  strategy is designed  to  diversify  the  Company's
operations  through the  acquisition  of  businesses  and assets  with  existing
product lines with industry name recognition and which complements the Company's
existing businesses.  Through this growth strategy,  the Company has the ability
to add  product  lines  without the  substantial  initial  capital  requirements
necessary to start new businesses, achieve name recognition for new products and
build a reputation for quality.

Upon  completion of an acquisition,  the Company  assembles a management team to
restructure  the  business  with the goal of achieving  operating  profitability
within  three to five years  after the  acquisition.  During the  rehabilitation
period,  the  Company  generally  must  make  additional  investments  in  these
companies to turn them around.  At least  annually,  the Company  evaluates  its
acquisitions  to  determine  whether  to  invest,  hold or  divest.  None of the
acquired  businesses have been sold as of the date of this report. The Company's
acquisition  strategy poses a risk for the Company and its  stockholders in that
the distressed  businesses  ultimately may never achieve and sustain
profitability.

During  1996 the Company  acquired  three  small  businesses.  In April 1996 the
Company completed two  acquisitions,  including the assets of the Burda Group of


                                       3
<PAGE>

Companies located in West Linn, Oregon,  through Techwood Williams,  Inc., which
manufactures and distributes  commercial wood chippers used in landscaping,  and
farming;  and, Neumann  Manufacturing  and Engineering,  Inc. located in Madison
Heights,   Michigan,   through  Premier  Plastic   Technologies,   Inc.,   which
manufactures  plastic components for the automotive  industry.  In July 1996 the
Company acquired the stock of GeoFocus,  Inc.  located in Gainesville,  Florida.
GeoFocus  provides  geographical  information  systems  consulting  services and
develops mobile  computing,  mapping and tracking  software for private industry
and government agencies.

These acquisitions were accounted for as purchases and the results of operations
of these  businesses  have been  included  in the results of  operations  of the
Company from the acquisition dates. The purchase prices for these businesses and
the results of  operations of these  businesses  prior to  acquisition  were not
material to the consolidated financial statements.

Competition

In general,  the Company's  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  the  Company  sells  these  products.   The  Company's
competitive position varies among its product lines.

Marketing and Distribution

For the years ended  September 30, 1996, 1995 and 1994,  Freightliner  accounted
for 10%, 12% and 14%, respectively, of net sales and in 1995, Navistar and Volvo
accounted for 10% of net sales. During the years ended September 30, 1996, 1995,
and 1994,  approximately  12%, 13% and 16% of the Company's total net sales were
to customers outside of the United States, primarily in Canada, and, to a lesser
extent,  in  Europe  and  Australia.  See note 15 to the  Notes to  Consolidated
Financial Statements.

Existing Future Sales Orders

Future sales orders for the Company's products were approximately  $8,900,000 at
September 30, 1996,  compared to  $9,200,000  at September  30, 1995.  These are
orders for which  customers have requested  delivery at specified  future dates.
The Company has not experienced any significant  problems delivering products on
a timely basis.

Environment

The  Company's  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 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 sites  affected  by  improper
disposals.  The  Company  uses its best  efforts  to ensure  that its  hazardous
substances are disposed of in an environmentally sound manner.

Government Regulation

The  Company's  heavy 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 investigation,  NHTSA finds that the
Company is not in  compliance  with any  standard  or  regulation,  among  other
things, it may require the Company to recall its products which are found not to
be in compliance and repair or replace such products.


                                      4
<PAGE>


Product Research and Development

The  Company's  operating   facilities  engage  in  engineering,   research  and
development  and  quality  control   activities  to  improve  the   performance,
reliability and cost-effectiveness of the Company's product lines. The Company's
engineering  staff works closely with customers in the design and development of
new products and adapting products for new  applications.  During 1996, 1995 and
1994, the Company spent $2,229,000,  $1,445,000 and $1,145,000 respectively,  on
these activities.

Patents and Trademarks

The  Company's  product  lines  generally  have strong name  recognition  in the
markets which they serve.  The Company has a number of product patents  obtained
over a period of years and which expire at various times. The Company  considers
each  patent  to be of  value  and  aggressively  protects  its  rights  against
infringement  throughout  the world.  The Company owns two patents  (expiring in
2009) which the Company  believes  improved the  marketability of the electronic
product  line of the heavy  vehicle  components  segment.  The Company  does not
consider that the loss or expiration of either patent would materially adversely
affect the Company;  however,  competition in the electronic  product line could
increase without these patents.  The Company owns numerous  trademarks which are
registered  in many  countries  enabling  the  Company  to market  its  products
worldwide.  These trademarks include "Williams," "Kenco," "Hardee" and "Bugman."
The Company  believes  that in the  aggregate,  the rights under its patents and
trademarks are generally important to its operations, but does 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 the Company's  total  business
except as described above.

Raw Materials

The Company produces its products from raw materials, including brass, aluminum,
steel,  plastic,  rubber  and zinc,  which  currently  are widely  available  on
reasonable terms. The Company relies upon, and expects to continue to rely upon,
CTS Corporation,  Conner Formed Metal Products,  Inc. and  Caterpillar,  Inc. as
single source suppliers for critical components and/or products.  Although these
suppliers  have been able to meet the Company's  future needs on a timely basis,
and appear to be willing to continue being suppliers to the Company, there is no
assurance that a disruption in a supplier's  business,  such as a strike,  would
not disrupt the supply of a component.

Product Warranty

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

Employees

The  Company  employs   approximately  120  union  employees  and  380  nonunion
employees.  The  nonunion  employees  of the  Company  are  engaged in sales and
marketing,  accounting and  administration,  product  research and  development,
production and quality control. The union employees are engaged in manufacturing
heavy 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").  The Company and the Union have a collective bargaining
agreement that expires in September 1997,  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.  Management of
the Company believes that its  relationship  with its employees and the Union is
good.

                                       5
<PAGE>

Item 2. Properties

The following table outlines the principal  manufacturing  and other  facilities
owned by the Company,  subject to mortgages on each facility. See notes 7 to the
Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>

                                                                           Type and Size
        Entity                  Facility Location                          of Facility

        <S>                                                                <C>
        Williams                Portland, Oregon                           Manufacturing and offices
                                                                           160,000 square feet

        Kenco                   Middlebury, Indiana                        Manufacturing and offices
                                                                           139,000 square feet

        Hardee                  Loris, South Carolina                      Manufacturing and offices
                                                                           100,000 square feet

        Aptek                   Deerfield Beach, Florida                   Manufacturing and offices
                                                                           50,000 square feet

        Agrotec                 Pendleton, North Carolina                  Manufacturing and office
                                                                           50,000 square feet
</TABLE>

The  Company's  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 the
Company  could  increase  its  production  output  significantly  at  any of its
facilities with minimal expansion of its present equipment and work force.

Item 3. Legal Proceedings

The Company and its  consolidated  subsidiaries  are parties to various  pending
judicial  and  administrative  proceedings  arising  in the  ordinary  course of
business.  The Company's management and legal counsel have reviewed the probable
outcome of these proceedings,  the costs and expenses  reasonably expected to be
incurred,  the availability and limits of the Company's insurance coverage,  and
the Company's established reserves for uninsured liabilities.  While the outcome
of the pending  proceedings  cannot be predicted  with  certainty,  based on its
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

The Company did not submit any matters to a vote of its security  holders during
the fourth quarter of the year ended September 30, 1996.

                                        6
<PAGE>

                                     Part II


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

The  Company's  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 the Company's common stock
for each fiscal quarter for the past two fiscal years is as follows:

                                                                            1996
<TABLE>
<CAPTION>

                                                                High                       Low
        <S>                                                   <C>                       <C>
        Quarter
        October 1 - December 31                               $ 3.41                    $ 2.28
        January 1 - March 31                                    3.03                      2.38
        April 1 - June 30                                       2.72                      1.72
        July 1 - September 30                                   2.72                      1.44
</TABLE>
<TABLE>
<CAPTION>


                                                                                1995

                                                                High                       Low
        <S>                                                   <C>                       <C>
        Quarter
        October 1 - December 31                               $ 3.50                    $ 2.69
        January 1 - March 31                                    3.72                      3.41
        April 1 - June 30                                       3.72                      3.09
        July 1 - September 30                                   3.69                      3.22
</TABLE>

The number of record  holders of the  Company's  common stock as of December 20,
1996 was  approximately  587. The Company has never paid a dividend with respect
to its  common  stock  and has no plans  to pay a  dividend  in the  foreseeable
future.

                                       7
<PAGE>


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


Statement of Operations Data
<TABLE>

Year ended September 30                         1996*          1995**          1994***              1993              1992
-----------------------                     ---------        --------        ---------         ---------         ---------

<S>                                          <C>              <C>              <C>               <C>               <C>
Net sales                                    $67,542          $60,614          $41,761           $25,897           $20,072
Earnings from operations                       1,241            9,491            6,615             3,750             2,028
Earnings (loss) before extraordinary item
  and cumulative effect of accounting change   (561)            4,512            3,641             1,956             1,012
Net earnings (loss)                            (561)            4,512            3,641             1,956             1,267
Earnings (loss) per common share:
  Primary:
     Earnings (loss) before extraordinary
       item and cumulative effect of
       accounting change                       (.03)              .26              .22               .14               .07
     Net earnings (loss)                       (.03)              .26              .22               .14               .09
  Fully diluted:
     Earnings (loss) before extraordinary
       item and cumulative effect of
       accounting change                       (.03)              .26              .22               .13               .07
     Net earnings (loss)                       (.03)              .26              .22               .13               .09
Cash dividends per common share                   -                 -                -                 -                 -
</TABLE>

Balance Sheet Data
<TABLE>
<CAPTION>

September 30                                   1996*           1995**          1994***              1993              1992
------------                               ---------         --------         --------          --------          --------

<S>                                          <C>              <C>              <C>              <C>                <C>
Current assets                               $31,655          $25,788          $20,874          $ 10,623           $ 6,869
Current liabilities                           29,600            7,881           10,012             7,527             5,547
Working capital                                2,055           17,907           10,862             3,096             1,322
Total assets                                  53,778           47,182           32,159            20,006            13,142
Long-term liabilities                          5,455           20,244            9,699             5,690             3,863
Redeemable convertible preferred stock,
  including unpaid dividends                       -                -                -               413               492
Minority interest in consolidated subsidiaries   713              764                -                 -                 -
Stockholders' equity                          18,010           18,293           12,448             6,376             3,240
</TABLE>

*1996 data includes a  restructuring  charge of $2,250 related to the Automotive
accessories  segment.  See  note  13 to the  Notes  to  Consolidated  Financial
Statements  for  information  relating to the  restructuring  charge.  1996 data
includes small acquisitions from Apri1 1996. Net sales, earnings from operations
and total assets related to these acquisitions were not material. See note 18 to
the Notes to Consolidated  Financial Statements for information  regarding these
acquisitions.

**1995 data includes  acquisitions  made in February,  April and August. In 1995
 net sales  related to these  acquisitions  from date of purchase  were  $9,646;
 earnings  from  operations  were $1,039.  Total  assets at  September  30, 1995
 related to these acquisitions were $16,072.

***1994 data includes small acquisitions from January 1994. Net sales,  earnings
 from  operations  and  total  assets  related  to these  acquisitions  were not
 material.
                                       8
<PAGE>

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

Financial Position and Capital Resources

The Company's  principal  sources of liquidity are  borrowings  under its credit
facilities  and funds  generated  from  operations.  In December  1996, the bank
advised the Company that it was in technical  default  under its $30,000  credit
facility primarily due to borrowings in excess of the loan availability provided
under the credit facility.  Decreased loan availability  resulted from decreased
earnings from  operations,  the major factor in  determining  loan  availability
under  the  credit  facility.  The  banks  advised  the  Company  that  they are
forbearing  from  exercising  their  rights  under  the loan  agreement  and are
continuing to provide financing under the credit facility with the understanding
that the Company  will  attempt to close a  refinancing  with new lenders by May
1997. Although the bank has not indicated that it currently intends to do so, as
a consequence of the default,  the bank could demand immediate  repayment of the
loan. The Consolidated  Financial  Statements  reflect the $21,000 in borrowings
outstanding  under the credit facility as a current  liability until the Company
can obtain alternative financing to replace the $30,000 credit facility.

In December 1996 the Company and Ajay Sports,  Inc. ("Ajay;")  (collectively the
"Borrowers") received a proposal with another bank to obtain an asset-based loan
facility  consisting of a revolving  line of credit up to $38,000 and term loans
up to $12,000.  The  proposed  revolving  line of credit  (including  letters of
credit)  may not exceed the lesser of $38,000 or an agreed  upon  percentage  of
eligible  accounts  receivable  and  inventories.  The revolving  line of credit
expires in three years and carries an interest rate at the  Company's  option of
the bank's prime rate or London Interbank  Offering Rate ("LIBOR") plus 1.75% to
3.00%  depending upon the financial  performance  of the Company.  The revolving
line of credit  requires  the  borrowers  to pay an initial fee of 1%, an annual
facility fee of 3/8 of 1%, an unused facility fee of 1/4 of 1% and is subject to
an early  termination fee of 1%. The term loans are due in three years and carry
an interest  rate,  at the Company's  option,  of the bank's prime rate or LIBOR
plus 2.00%,  and amortize over a period of five to fifteen  years.  The proposed
term loan  facility  is  subject to an annual  facility  fee of 3/8 of 1% of the
unused balance. The asset-based loan facility is subject to the bank's audit and
due diligence  which is expected to be completed in the Company's  second fiscal
quarter of 1997.

The proposed asset-based loan facility will replace the Company's $30,000 credit
facility,  which consists of a three-year  revolving loan, with an interest rate
at either the bank's prime rate or the Interbank  Offering Rate ("IBOR") plus 2%
to 3% depending  upon certain  financial  ratios.  At  September  30, 1996,  the
outstanding  balance under the Company's  existing  credit  facility was $21,000
and, due to the technical default,  the Company is not able to borrow additional
funds under the credit  facility.  Under the terms of the  proposed  asset-based
loan facility,  the Company would have  availability  of  approximately  $2,000.
Under the terms of the  asset-based  loan facility,  the Borrowers will have the
option to make advances  between the Company and Ajay provided the Borrowers are
in compliance  with the provisions of the loan facility.  At September 30, 1996,
the  Company  would  have to  advance  Ajay  approximately  $5,000  to repay its
previous loan facility which the Company has guaranteed. The Company has pledged
substantially  all of its  assets as  collateral  for the credit  facility.  The
Company is required to maintain  certain  financial  ratios,  and the  agreement
contains certain restrictions that limit acquisitions,  investments,  payment of
dividends and capital expenditures.

At  September  30, 1996 the Company  had working  capital of $2,055  compared to
$17,907 at September  30, 1995.  The current ratio on September 30, 1996 was 1.1
compared  with 3.3 at September 30, 1995.  The decreases in working  capital and
the current ratio are due primarily to the  reclassification  of $21,000 of debt
as a current  liability  which was recorded as a long-term  liability  under the
previous credit facility.  The Company is expected to obtain an asset-based loan
facility  in the  second  quarter  of 1997  which  will  improve  the  Company's
liquidity.  In the event that the Company does not obtain the  asset-based  loan
facility,  the Company  would be required to  renegotiate  the  existing  credit
facility or find  alternative  financing.  The Company believes that alternative
financing is available and has received other proposals for asset-based  lending
and convertible subordinated debt.



                                       9
<PAGE>

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


At September  30, 1996  accounts  receivable  increased  to $13,103  compared to
$10,521 at September  30,  1995.  Inventories  increased to $15,288  compared to
$12,987 at  September  30,  1995.  The  increase  in  accounts  receivables  and
inventories  is due in part to increased  sales and the  acquisitions  that were
made during the year.

Prior to July 1995,  the Company  had a loan  receivable  from Ajay.  In October
1994, the Company  exercised  options to acquire 4,117,647 shares of Ajay common
stock  through a reduction in the loan  receivable.  At  September  30, 1996 the
Company  owns  4,117,647   shares  of  Ajay  common  stock,   which   represents
approximately  18% of Ajay's  outstanding  common stock.  Ajay  manufactures and
distributes  golf  accessories  primarily  to  retailers  throughout  the United
States.  The investment in Ajay is recorded as an investment in affiliate in the
Consolidated  Balance  Sheets net of the Company's  equity  interest of $175 and
$282 in Ajay's losses for the twelve month periods ended  September 30, 1996 and
1995,  respectively.  The Company is required to account for the  investment  in
Ajay on the equity method due to common  ownership by the Chairman and President
of the Company who is also  Chairman  and  President of Ajay.  In addition,  the
Company has guaranteed  Ajay's $13,500 credit facility  ($10,407  outstanding at
September  30,  1996,  unaudited)  and is charging  Ajay a fee of 1/2% of 1% per
annum on the  outstanding  loan  amount for  providing  this  guaranty.  Ajay is
currently in technical  default under this credit facility,  and the Company and
Ajay have entered into  negotiations  with another bank to obtain a  replacement
loan facility.  At September 30, 1996, the Company also has manufacturing rights
in certain Ajay facilities through 2002 under a joint venture agreement, and the
Company has vested options to acquire  11,110,873 shares of Ajay common stock at
prices ranging from $.34 to .50 per share.

The Company  anticipates that cash generated from operations and borrowings will
be sufficient to satisfy  working capital and capital  expenditure  requirements
for the foreseeable  future, and provide the Company with financial  flexibility
to respond to business opportunities, including opportunities for growth through
internal development, strategic joint ventures or acquisitions.

The  Financial   Accounting  Standards  Board  recently  issued  SFAS  No.  121,
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
Be Disposed Of, which is effective for fiscal years beginning after December 15,
1995.  Adoption of SFAS No. 121 is not expected to have a material impact on the
Company's financial position or results of operations.

The  FASB  also  recently  issued  SFAS  No.  123,  Accounting  for  Stock-Based
Compensation.  SFAS No. 123 defines a fair-value-based  method of accounting for
stock-based  employee  compensation  plans and  transactions  in which an entity
issues its equity  instruments  to acquire goods or services from  nonemployees.
SFAS No. 123 allows  entities to measure  compensation  cost related to employee
stock plans by either using the fair-value-based method or continuing to use the
intrinsic-value  based method prescribed in Accounting  Principles Board Opinion
No. 25,  Accounting  for Stock Issued to Employees  (APB No. 25). The  effective
date of the  Statement  is for years  beginning  after  December  15,  1995.  No
material  financial  statement  impact  from the  adoption  of SFAS  No.  123 is
expected as the Company  plans to continue to apply APB No. 25 for its  employee
stock plans. The Company has not yet determined when it will adopt SFAS No. 123

                                       10
<PAGE>

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

Results of Operations

Year ended September 30, 1996
Compared to September 30, 1995

Sales

Sales for the year ended September 30, 1996 increased 11% to $67,542 compared to
$60,614 for the prior year. Sales of heavy vehicle components, auto accessories,
agricultural  equipment,  and electrical  components accounted for 54%, 24%, 16%
and 6% as a  percent  of total  sales  for the year  ended  September  30,  1996
compared to 58%,  26%, 11% and 5% for the prior year.  Heavy  vehicle sales were
$36,141 for the year ended  September 30, 1996 compared to $35,105 for the prior
year, an increase of 3%. Automotive  accessories sales were $16,263 for the year
ended  September 30, 1996 compared to $15,863 for the prior year, an increase of
3%.  Agricultural  equipment sales were $11,026 for the year ended September 30,
1996  compared  to $6,783  for the prior  year,  an  increase  of 63%.  Sales of
electrical components were $4,112 for the year ended September 30, 1996 compared
to $2,863 for the prior year,  an increase of 44%.  Agricultural  equipment  and
electrical  components  sales  were the  result  of  acquisitions  completed  in
February 1995 and April 1995.


Heavy vehicle  component sales were flat for the year as retail sales of class 8
trucks, the primary market for the Company's  electronic  throttle product line,
declined  over 20% compared to the prior year.  Historically,  the Class 8 truck
market has been  cyclical  with annual  production  ranging  from  approximately
100,000 to 200,000  units.  In 1995,  Class 8 truck  production was over 200,000
units which capped five years of increased annual production.  In calendar 1996,
Class 8 truck production declined to an estimated 160,000 units. The decrease in
the class 8 truck market has been offset by an increase in sales to the midrange
truck market which  continues  to  introduce  electronic  throttles to new truck
models as this technology  becomes more  acceptable to this market segment.  The
Company anticipates this trend to continue for approximately 12 to 18 months.


Automotive accessories sales were flat primarily due to the unusually bad winter
weather which  hampered  retail sales and a change in product mix as the Company
continues to redesign its product lines in an effort to achieve more  profitable
sales. In the first quarter,  the Company  introduced an automotive  accessories
product line targeted for the traditional aftermarket (dealers, distributors and
restylers)  segment  to reduce  its  reliance  on mass  merchant  retail  sales.
Agricultural  equipment  and  electrical  component  sales  are the  results  of
acquisitions and,  therefore,  comparison to the prior period is not meaningful.
The  agricultural  equipment  segment has increased  sales by integrating  small
product  line  acquisitions  into  its  primary  dealer  network.  Sales  in the
electrical  component  segment were lower than expected for the year due to loss
of two primary customers.

                                       11
<PAGE>

Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
(Dollars in thousands, except per share amounts)

Results of Operations
Year ended September 30, 1996 compared to September 30, 1995.

Earnings from Operations

Earnings  from  operations  for the year ended  September  30,  1996 were $1,241
compared  to  $9,491  for the prior  year,  a  decrease  of 87%.  Earnings  from
operations as a percentage  of sales for the year ended  September 30, 1996 were
2% compared to 16% for the prior year. The decrease in earnings from  operations
is due to a combination of lower gross margins and increased operating expenses.
In addition,  the Company  recorded a restructuring  charge of $2,250 related to
its automotive accessories operations. The restructuring plan was implemented in
conjunction with a new management team for the automotive  accessories  business
which  initiated a cost  reduction  program and a plan to redesign or  eliminate
certain product lines.

Gross margin as a percentage of sales for the year ended  September 30, 1996 was
21% compared to 28% for the prior year.  The  decrease in gross  margin  results
from a larger percentage of the Company's  operations being in business segments
with lower gross margins primarily as a result of acquisitions.  The Company has
experienced  decreased  margins in the  automotive  accessories  segment  due to
increased  competition.  Margins decreased in the agricultural equipment segment
due to  increased  cost  incurred to improve  product  quality and because of an
unprofitable  product  line which was  discontinued  in fiscal  1996.  Operating
expenses  for the year ended  September  30,  1996 were  $10,719 or 16% of sales
compared  to  $7,715 or 13 % of sales  for the same  period  in the prior  year,
excluding the one-time  restructuring  charge of $2,250. The increased operating
expenses are due primarily to costs  associated  with companies  acquired in the
agricultural  equipment and electrical  components  segments.  In addition,  the
automotive  accessories segment operating expenses have increased as a result of
developing product lines which use new channels of distribution.

Earnings from operations of the heavy vehicle  component  segment  decreased 22%
for the year ended  September 30, 1996 compared to the prior year.  The decrease
in earnings  from  operations in this segment is due to the shift in product mix
to products  used in midrange  truck  applications  which  typically  have lower
margins than heavy-duty truck applications.  In addition, due to the downturn in
the Class 8 truck  market  segment,  the  Company's  customers  are  faced  with
increased  price  pressure to compete in this cyclical  market.  Therefore,  the
Company is working with its customers to maintain or reduce selling prices while
absorbing the increased cost of raw materials.

The automotive  accessories segment had losses from operations of $4,353 for the
year ended September 30, 1996 compared to losses from operations of $286 for the
prior  year.  The  primary  reason for the  increased  loss is due to a one-time
restructuring  charge of $2,250 recognized during the third quarter. The Company
has implemented a plan to improve its automotive  accessories operations and has
strengthened  its  management  team  to  return  this  accessories   segment  to
profitability.  The restructuring plan includes a cost reduction program through
redesign of products to use alternative  sources of raw material and value-added
manufacturing.  In addition,  the Company is  identifying  new markets and sales
programs to increase sales.

                                       12
<PAGE>

Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
(Dollars in thousands, except per share amounts)


Results of Operations
Year ended September 30, 1996 compared to the year ended September 30, 1995.


The  electrical  components  segment had losses from  operations of $659 for the
year ended  September 30, 1996 compared to earnings from  operations of $182 for
the prior year. The loss from operations was due primarily to the loss of two of
its major customers in the telecommunication industry. The electrical components
segment  was  added  through  an  acquisition  completed  in April of 1995.  The
electrical  components segment continues to focus on product development efforts
to enhance future sales opportunities.

The  agricultural  equipment  segment had losses from operations of $578 for the
year ended  September 30, 1996 compared to earnings from  operations of $857 for
the prior year. The agricultural equipment segment resulted from acquisitions in
February 1995. The  agricultural  equipment  segment had increased  overhead and
production   inefficiencies   and  an   unprofitable   product  line  which  was
discontinued  in August 1996. It also had increased costs to improve its product
line to meet the quality of competition.  

Other Expenses

Interest  expense for the year ended  September 30, 1996 was $2,063  compared to
$2,409 for the year ended  September 30, 1995. The decrease in interest  expense
is due  primarily  to lower  interest  rates  and  reduced  average  borrowings.
Interest income,  affiliate  relates to a loan provided to Ajay which was repaid
in July of 1995.


Net Earnings (Loss)

The net loss for the year ended  September  30,  1996 was $561 or $.03 per share
compared to net  earnings of $4,512 or $.26 per share for the prior year.

                                       13
<PAGE>

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


Year ended September 30, 1995
Compared to September 30, 1994

Sales - Sales for 1995 were $60,614 compared to $41,761 for 1994, an increase of
45%.  Heavy vehicle  component  sales,  which  accounted for 58% of total sales,
increased  22% to $35,105  compared  to $28,678  in the prior  year.  Automotive
accessory  sales,  which  accounted  for 26% of total  sales,  were $15,863 as a
result of acquisitions in August 1993 and January 1994.

Heavy vehicle component sales are comprised of sales of electronic throttles and
pneumatic/hydraulic controls product lines. The electronic throttle product line
accounted for 53% of heavy vehicle component sales.

Gross Margin - The gross margin as a percent of sales was 28% for 1995 and 1994.

Operating  Expenses - Operating  expenses  for 1995 were $7,715 or 13% of sales,
compared to $5,127 or 12% of sales.

Interest Income, Affiliate - Interest income, affiliate of $601 is from the Ajay
note receivable which offset a portion of interest expense.

Interest  Expense - Interest  expense for 1995 was $2,409 compared to $1,011 for
the prior  year.  The  increase  in interest  expense is due to  increased  debt
incurred to finance acquisitions, the Ajay loan and higher interest rates.

Net Earnings - Net earnings for 1995 were $4,512 compared to $3,641 for 1994, an
increase of 24%.

                                       14
<PAGE>

Item 8. Financial Statements and Supplementary Data

                             Williams Controls, Inc.
                   Index to Consolidated Financial Statements
<TABLE>
<CAPTION>

                                                                                                              Page
<S>                                                                                                           <C>
Consolidated Balance Sheets at September 30, 1996 and 1995                                                    16-17

Consolidated Statements of Stockholders' Equity for the
years ended September 30, 1996, 1995 and 1994                                                                    18

Consolidated Statements of Operations for the
years ended September 30, 1996, 1995 and 1994                                                                    19

Consolidated Statements of Cash Flows for the
years ended September 30, 1996, 1995 and 1994                                                                    20

Notes to Consolidated Financial Statements                                                                    21-36

Independent Auditors' Report                                                                                     38

See page 41 for Index to Schedules and page 44 for Index to Exhibits.
</TABLE>

                                       15
<PAGE>

Williams Controls Inc.
Consolidated Balance Sheets
September 30
(Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>

ASSETS                                                          1996        1995
                                                             -------     -------
<S>                                                          <C>         <C>
Current assets:
     Cash                                                    $ 1,379     $ 1,653
     Accounts receivable, net                                 13,103      10,521
     Inventories                                              15,288      12,987
     Other                                                     1,885         627
                                                             -------     -------
           Total current assets                               31,655      25,788
                                                             -------     -------

   Investment in affiliate                                       943       1,118

   Property, plant and equipment:
     Land and land improvements                                2,742       2,713
     Buildings                                                 9,407       9,221
     Machinery and equipment                                  10,872       9,169
     Office furniture and equipment                            1,934       1,426
                                                             -------     -------
                                                              24,955      22,529
     Less accumulated depreciation and amortization            5,154       3,731
                                                             -------     -------
                                                              19,801      18,798
                                                             -------     -------

    Other assets                                               1,379       1,478
                                                             -------     -------
                                                             $53,778     $47,182
                                                             =======     =======



        The accompanying notes are an integral part of these statements.

                                       16
<PAGE>
Williams Controls Inc.
Consolidated Balance Sheets
September 30
(Dollars in thousands, except per share amounts)
</TABLE>

<TABLE>
<CAPTION>

LIABILITIES AND STOCKHOLDERS' EQUITY                                       1996        1995
                                                                       --------    --------
<S>                                                                    <C>         <C>
   Current liabilities:
     Current portion of revolving line of credit                       $ 21,000    $    --
     Current portion of long-term debt                                      212         301
     Accounts payable and accrued expenses                                8,388       7,580
                                                                       --------    --------
           Total current liabilities                                     29,600       7,881
                                                                       --------    --------

   Long-term debt                                                         2,782      18,112
   Deferred tax liability                                                 1,219         886
   Other liabilities                                                      1,454       1,246

   Minority interest in consolidated subsidiaries                           713         764

   Commitments and contingencies                                           --          --

   Stockholders' equity:
     Preferred stock of $.01 par value, 50,000,000 shares authorized       --          --
     Common stock of $.01 par value, 50,000,000 shares
       authorized, 17,869,987 and 17,264,987 shares issued                  179         173
     Additional paid-in capital                                           9,671       9,023
     Retained earnings                                                    9,439      10,000
     Unearned ESOP shares                                                  (511)       (630)
     Treasury shares (195,200 shares at cost)                              (540)       --
     Pension liability adjustment                                          (228)       (273)
                                                                       --------    --------
                                                                         18,010      18,293
                                                                       --------    --------
                                                                       $ 53,778    $ 47,182
                                                                       ========    ========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       17
<PAGE>
Williams Controls, Inc.
Consolidated Statements of Stockholders' Equity
Years ended September 30, 1996, 1995 and 1994
(Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                 Number of
                             Shares Issued    Common Additional               Unearned     Pension
                                       and     Stock    Paid-in    Retained       ESOP   Liability   Treasury    Stockholders'
                                Subscribed    Amount    Capital    Earnings      Shares Adjustment     Shares          Equity
                            --------------   ------- ----------    --------   --------- ---------- ----------    ------------

<S>                             <C>          <C>        <C>         <C>        <C>        <C>          <C>           <C>
Balance, September 30, 1993     13,756,289   $   138    $ 4,391     $ 1,857    $     -    $   (10)     $    -        $  6,376



Dividend payable on 10%
  mandatory redeemable
  preferred stock                       -           -          -        (10)         -          -           -             (10)
Exercise of warrants            2,449,892          24      1,887          -          -          -           -           1,911
Preferred stock conversion        330,000           3        410          -          -          -           -             413
Common stock issued in connection
  with acquisitions               140,000           2        378          -          -          -           -             380
Cancellation of stock subscription      -           -          -          -          -          -           -               -
Change in pension liability
  adjustment                            -           -          -          -          -       (263)          -            (263)
Net earnings                            -           -          -      3,641          -          -           -           3,641
                               ----------     -------    -------    -------    -------    -------     -------         -------
Balance, September 30, 1994    16,676,181         167      7,066      5,488          -       (273)          -          12,448


Unearned ESOP shares                    -          -           -          -       (630)         -           -            (630)
Common stock issued in connection
   with acquisitions              588,806           6      1,957          -          -          -           -           1,963
Net earnings                            -           -          -      4,512          -          -           -           4,512
                               ----------     -------    -------    -------    -------    -------     -------         -------


Balance, September 30, 1995    17,264,987         173      9,023     10,000       (630)      (273)          -          18,293



Cost of treasury shares acquired
  (195,200 shares)                      -           -          -          -          -          -        (540)           (540)
Reduction of unallocated ESOP shares    -           -        129          -        119          -           -             248
Issuance of shares upon exercise
  of stock options and warrants   455,000           4        231          -          -          -           -             235
Common stock issued in connection
  with acquisitions               150,000           2        288          -          -          -           -             290
Change in pension liability
  adjustment                            -           -          -          -          -         45           -              45
Net loss                                -           -          -       (561)         -          -           -            (561)     
                               ----------     -------    -------    -------    -------    -------     -------        --------

Balance, September 30, 1996    17,869,987    $    179   $  9,671    $ 9,439    $  (511)   $  (228)     $ (540)       $ 18,010
                               ==========     =======    =======    =======    =======    =======     =======         =======

</TABLE>

        The accompanying notes are an integral part of these statements.

                                       18
<PAGE>
Williams Controls, Inc.
Consolidated Statements of Operations
Years ended September 30
(Dollars in thousands, except per share amounts)       
<TABLE>
<CAPTION>

                                                             1996                 1995                  1994
                                                          -------              -------               -------

<S>                                                       <C>                   <C>                  <C>
Net sales                                                 $67,542               $60,614              $41,761
Cost of sales                                              53,332                43,408               30,019
                                                           ------                ------               ------
Gross margin                                               14,210                17,206               11,742
                                                           ------                ------              -------

Operating expenses:
  Research and development                                  2,229                 1,445                1,145
  Selling                                                   3,158                 2,888                1,933
  Administrative                                            5,332                 3,382                2,049
  Restructuring charge                                      2,250                    -                     -
                                                          -------                ------               ------
                                                           12,969                 7,715                5,127
                                                          -------                ------               ------

Earnings from operations                                    1,241                 9,491                6,615

Other (income) expenses:
   Equity interest in loss of affiliate                       175                   282                    -
   Interest income, affiliate                                   -                  (601)                (237)
   Interest expense                                         2,063                 2,409                1,011
                                                          -------                ------               ------

Earnings (loss) before income taxes                          (997)                7,401                5,841
Income taxes (benefit)                                       (380)                2,825                2,200
                                                          -------                ------               ------

Earnings (loss) before minority interest
   and preferred stock dividends                             (617)                4,576                3,641

Minority interest in net earnings (loss)
   of consolidated subsidiaries                               (56)                   64                    -
                                                          -------                ------               ------

Net earnings (loss)                                          (561)                4,512                3,641

Preferred stock dividends                                       -                     -                   10
                                                          -------                ------               ------

Net earnings (loss) applicable to common stockholders     $  (561)              $ 4,512              $ 3,631
                                                          =======                ======               ======

Earnings (loss) per common share                          $  (.03)              $   .26              $   .22
                                                          =======                ======               ======

</TABLE>


        The accompanying notes are an integral part of these statements.

                                       19
<PAGE>
Williams Controls, Inc.
Consolidated Statements of Cash Flows
Years ended September 30
(Dollars in thousands)    

<TABLE>
<CAPTION>
                                                                              1996        1995        1994
                                                                          --------    --------    --------
<S>                                                                       <C>         <C>         <C>
Cash flows from operations:
   Net earnings (loss)                                                    $   (561)   $  4,512    $  3,631
   Non-cash adjustments to net earnings (loss):
      Depreciation and amortization                                          2,156       1,638         972
      Restructuring charge                                                   2,250           -           -
      Equity interest in loss of affiliate                                     175         282           -
      Deferred income taxes                                                    333         116           9
      Minority interest in earnings (loss) of consolidated subsidiaries        (56)         64           -
   Changes in working capital items net of the effect of acquisitions:
      Receivables, net                                                      (1,970)       (931)     (2,552)
      Inventories                                                           (2,401)     (2,747)     (2,325)
      Accounts payable and accrued expenses                                 (1,610)     (1,068)      1,224
      Other                                                                 (1,058)        319        (138)
                                                                            ------      ------      ------
      Net cash provided by (used for) operations                            (2,742)      2,185         831
                                                                            ------      ------      ------

Cash flows from investing:
   Repayments from (borrowing) by affiliate                                      -       4,913      (6,313)
   Payments for acquisitions                                                (1,220)     (6,766)       (945)
   Payment for property, plant and equipment                                (1,595)     (1,683)       (369)
                                                                            ------      ------      ------

   Net cash used for investing                                              (2,815)     (3,536)     (7,627)
                                                                            ------      ------      ------

Cash flows from financing:
   Net borrowings (repayments) under lines of credit                             -      (3,187)      5,769
   Proceeds from debt                                                        6,000      15,000           -
   Payments of long-term debt                                                 (301)     (8,564)       (644)
   Payments of capital leases                                                 (111)       (123)       (104)
   Payments of debt issuance costs                                               -        (364)          -
   Payments of preferred stock dividends                                         -           -         (10)
   Proceeds from stock issuances                                               235           -       1,911
   Repurchase of common stock                                                 (540)          -           -
                                                                            ------      ------      ------

   Net cash provided by financing                                            5,283       2,762       6,922
                                                                            ------      ------      ------

Net increase (decrease) in cash                                               (274)      1,411         126

Cash at beginning of period                                                  1,653         242         116
                                                                            ------      ------      ------

Cash at end of period                                                     $  1,379    $  1,653    $    242
                                                                            ======      ======      ======

</TABLE>

Interest  paid in  1996,  1995 and 1994 was  approximately  $1,800,  $2,400  and
$1,000.  Income  taxes paid in 1996,  1995 and 1994 were  approximately  $1,200,
$2,600 and $1,685.  Non-cash  activity  included  entering  into  capital  lease
obligations  in 1994 of $122.  The non-cash  activity  related to the  Company's
investing  activity is described in note 6, and non-cash activity related to the
Company's acquisitions is described in note 18.

        The accompanying notes are an integral part of these statements.

                                       20
<PAGE>


Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(Dollars in thousands, except per share amounts)


Note 1.  Organization

The  Company  includes  its   wholly-owned   subsidiaries,   Williams   Controls
Industries,  Inc. ("Williams");  Kenco/Williams, Inc. ("Kenco");  NESC Williams,
Inc. ("NESC");  Williams Technologies,  Inc. ("WTI"); Williams World Trade, Inc.
("WWT");  Williams  Automotive,  Inc.;  Aptek Williams,  Inc.  ("AWI");  Agrotec
Williams,  Inc.  ("AGWI");   Techwood  Williams,  Inc.  (TWI);  Premier  Plastic
Technologies,  Inc. (PPT);  GeoFocus,  Inc. (GI) and its 80% owned  subsidiaries
Hardee Williams,  Inc. ("HWI") and Waccamaw Wheel Williams,  Inc. ("WWWI").  The
subsidiaries are detailed as follows:

                               Vehicle Components

Williams Controls Industries,  Inc.: Manufactures heavy vehicle components which
are sold in the heavy  vehicle  manufacturing  industry  to  original  equipment
manufacturers  and  independent  distributors  located  primarily  in the United
States and Canada.

NESC  Williams,  Inc.:  Manufactures  conversion  kits to allow  vehicles to use
compressed natural gas and gas metering and regulating products,  which are sold
primarily to lift truck manufacturers.

Premier Plastic  Technologies,  Inc.:  Manufactures  plastic  components for the
automotive industry which are sold to auto manufacturers.

                             Automotive Accessories

Kenco/Williams,  Inc.: Manufactures,  assembles,  packages and distributes truck
and auto accessories for the aftermarket parts industries.  Automotive accessory
products are sold  primarily  to mass  merchants  and auto supply  stores in the
United States.

                              Electrical Components

Aptek Williams, Inc.: Develops and produces microcircuits,  cable assemblies and
other  electronic  products  for a wide  array  of  applications  including  the
transportation  industry. These products are sold primarily to manufacturers and
distributors in the United States.

GeoFocus,  Inc.:  Develops mobile  computing,  mapping and tracking software for
private industry and governmental agencies.

                         Landscape Maintenance Equipment

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

Hardee  Williams,  Inc.:  Manufactures  and markets products used in highway and
park  maintenance,  landscaping and farming.  These products  include  sprayers,
rotary cutters, discs, harrows and trailers.

Waccamaw  Wheel  Williams,  Inc.:  Produces  solid  rubber tail wheels and other
rubber  products,  used  primarily  on  rotary  cutters  manufactured  by Hardee
Williams, from recycled truck and bus tires.

                                       21

<PAGE>

Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(Dollars in thousands, except per share amounts)

Techwood Williams,  Inc.:  Manufactures and distributes commercial wood chippers
used in landscaping and farming.  Landscape  maintenance  equipment products are
sold to independent  equipment  dealers  located  primarily in the  southeastern
United States.

                               Other Subsidiaries

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,  Williams World
Trade manages foreign sourcing for all subsidiaries of the Company.

Williams  Automotive,  Inc.:  Markets the Company's  products to the  automotive
industry.

Note 2.  Significant Accounting Policies

Principles of Consolidation - The Consolidated  Financial Statements include the
accounts of the  Company  and its  subsidiaries.  All  significant  intercompany
accounts and transactions have been eliminated.

Inventories - Inventories are valued at the lower of cost (first-in,  first-out)
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,  machinery  and equipment 3 to 12 years,  and office  furniture 10 years.
Capitalized  leases are amortized  using the same method over the shorter of the
estimated useful lives or the lease term.

Cost in Excess of Net  Assets of  Businesses  Acquired - The excess of cost over
net assets of acquired  companies  is being  amortized  using the  straight-line
method  over  periods  not  exceeding  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.

Concentration  of Credit 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.  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.

Deferred  Debt  Issuance  Costs  - Costs  incurred  in the  issuance  of debt
financing are amortized over the term of the debt agreement.

                                       22
<PAGE>

Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(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 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  Statement
106 by amortizing the transition obligation over twenty years.

Earnings  per  Share -  Earnings  per  share  are  computed  on the basis of the
weighted average number of shares  outstanding plus the common stock equivalents
which would arise from the exercise of stock options and  warrants.  Primary and
fully  diluted  earnings  per share are the same for  1996,  1995 and 1994.  The
average number of shares  outstanding was 17,800,000,  17,600,000 and 16,800,000
for 1996, 1995 and 1994.

Reclassifications  - Certain  amounts  previously  reported in the 1994 and 1995
financial statements have been reclassified to conform to classifications in the
1996 financial statements.

Recent FASB  Pronouncements  - The Financial  Accounting  Standards Board (FASB)
recently issued SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of, which is effective for fiscal years
beginning  after December 15, 1995.  Adoption of SFAS No. 121 is not expected to
have a  material  impact on the  Company's  financial  position  or  results  of
operations.

The  FASB  also  recently   issued  SFAS  No.  123  Accounting  for  Stock-Based
Compensation.  SFAS No. 123 defines a fair-value-based  method of accounting for
stock-based  employee  compensation  plans and  transactions  in which an entity
issues its equity  instruments  to acquire goods or services from  nonemployees.
SFAS No. 123 allows  entities to measure  compensation  cost related to employee
stock plans by either using a  fair-value-based  method or continuing to use the
intrinsic-value-based  method prescribed in Accounting  Principles Board Opinion
No. 25,  "Accounting  for Stock Issued to Employees" (APB No. 25). The effective
date of the  Statement is for years  beginning  after  December  15,  1995.  The
Company plans to continue to apply APB No. 25. No material  financial  statement
impact from the  adoption of SFAS No. 123 is expected,  as the Company  plans to
continue to apply APB No. 25 for its employee  stock plans.  The Company has not
yet determined when it will adopt SFAS No. 123.

Fair  Value  of  Financial  Instruments  - In  1996,  the  Company  adopted  the
provisions  of  SFAS  No.  107,  Disclosures  About  Fair  Values  of  Financial
Instruments,  which requires the Company to disclosure  estimated fair values of
its  financial  instruments,  for which it is practical to estimate fair values.
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
based on  borrowing  rates  currently  available  to the  Company for loans with
similar terms.

                                       23
<PAGE>

Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(Dollars in thousands, except per share amounts)

Note 3.  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 from these
estimates.


Note 4.  Accounts Receivable
<TABLE>
<CAPTION>

                                                                       1996            1995
                                                                      ------          ------
<S>                                                                 <C>             <C>
Accounts receivable, trade, net of
   allowances of $1,250 and $325                                    $ 11,865        $  9,928
Other receivables                                                      1,238             593
                                                                     -------        --------
                                                                     $13,103         $10,521
                                                                      ======          ======
</TABLE>

At September 30, 1996 and 1995,  no one customer  accounted for more than 10% of
trade accounts receivable.


Note 5.  Inventories
<TABLE>
<CAPTION>

                                                                        1996            1995
                                                                      ------          ------
<S>                                                                   <C>             <C>
Raw material                                                          $7,243          $6,401
Work in process                                                        1,349           1,031
Finished goods                                                         6,696           5,555
                                                                      ------         -------
                                                                     $15,288         $12,987
                                                                      ======          ======
</TABLE>

Finished goods include component parts and finished product ready for shipment.

                                       24
<PAGE>

Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(Dollars in thousands, except per share amounts)

Note 6.  Investment in Affiliate

         Prior to July 1995, the Company had a loan receivable from Ajay Sports,
Inc. and subsidiaries  ("Ajay").  In October 1994, the Company exercised options
to acquire 4,117,647 shares of Ajay common stock through a reduction in the loan
receivable.  At September 30, 1996,  the Company owns  4,117,647  shares of Ajay
common stock,  which represents  approximately 18% of Ajay's  outstanding common
stock. Ajay manufactures and distributes golf accessories primarily to retailers
throughout  the  United  States.  The  investment  in  Ajay  is  recorded  as an
investment in affiliate in the Consolidated  Balance Sheets net of the Company's
equity  interest of $175 and $282 in Ajay's  losses for the twelve month periods
ended  September  30,  1996 and 1995,  respectively.  The Company is required to
account for the investment in Ajay on the equity method due to common  ownership
by the Chairman and  President of the Company who is also Chairman and President
of Ajay. In addition,  the Company has guaranteed Ajay's $13,500 credit facility
($10,407  outstanding  at September 30, 1996,  unaudited) and is charging Ajay a
fee of 1/2 of 1% per annum on the  outstanding  loan amount for  providing  this
guaranty. Ajay currently is in technical default under this credit facility, and
the Company and Ajay have entered into  negotiations with another bank to obtain
an asset-based  replacement  loan  facility.  At September 30, 1996, the Company
also has manufacturing  rights in certain Ajay facilities  through 2002, under a
joint  venture  agreement,  and  the  Company  has  vested  options  to  acquire
11,110,873  shares of Ajay common  stock at prices  ranging from $.34 to .50 per
share.


Following is a summary of condensed unaudited  financial  information of Ajay as
of and for the twelve months ended September 30, 1996 and 1995:
<TABLE>
<CAPTION>

                                                                        1996                  1995
                                                                      ------                ------
                                                                  (unaudited)            (unaudited)

<S>                                                                  <C>                   <C>
Current assets                                                       $13,951               $ 9,405
Other assets                                                           4,101                 1,577
                                                                     -------               -------
                                                                     $18,052               $10,982
                                                                      ======                ======

Current liabilities                                                  $14,207               $ 2,870
Other liabilities                                                         17                 3,600
Stockholders' equity                                                   3,828                 4,512
                                                                     -------                ------
                                                                     $18,052               $10,982
                                                                      ======                ======

Net sales                                                            $24,669               $15,645
                                                                      ======                ======
Gross margin                                                         $ 4,412               $ 2,083
                                                                      ======                ======
Net loss                                                             $  (985)              $(1,565)
                                                                      ======                ======
</TABLE>

If valued at the September 30, 1996 quoted closing price of publicly traded Ajay
shares,  the value of the Company's  investment  in Ajay would be  approximately
$1,500.  At  September  30, 1996 Ajay has  approximately  $4,212 of  outstanding
preferred stock that is convertible to  approximately  8,000,000  shares of Ajay
common stock and outstanding  options and warrants (in addition to the Company's
options)  to purchase  approximately  4,200,000  of Ajay common  stock at prices
ranging from $.34 to $1.00 per share (unaudited).

                                       25
<PAGE>

Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(Dollars in thousands, except per share amounts)

Note 7.  Debt

In December 1996, the bank advised the Company that it was in technical  default
under its $30,000 credit  facility  primarily due to borrowings in excess of the
loan   availability   provided  under  the  credit   facility.   Decreased  loan
availability resulted from decreased earnings from operations,  the major factor
in determining loan  availability  under the credit facility.  The banks advised
the Company that they are forbearing from exercising their rights under the loan
agreement and are continuing to provide financing under the credit facility with
the understanding  that the Company will attempt to close a refinancing with new
lenders  by May 1997.  Although  the bank has not  indicated  that it  currently
intends  to do so,  as a  consequence  of the  default,  the bank  could  demand
immediate repayment of the loan. The Consolidated  Financial  Statements reflect
the $21,000 in  borrowings  outstanding  under the credit  facility as a current
liability  until the Company  can obtain  alternative  financing  to replace the
$30,000 credit facility.

In December 1996 the Company and Ajay  ("Borrowers")  received a proposal with a
bank to obtain an  asset-based  loan facility  consisting of a revolving line of
credit up to $38,000 and term loans up to $12,000.  The proposed  revolving line
of credit (including  letters of credit) may not exceed the lessor of $38,000 or
an agreed upon percentage of eligible accounts  receivable and inventories.  The
revolving  line of credit expires in three years and carries an interest rate at
the Company's option of the bank's prime rate or London Interbank  Offering Rate
(LIBOR) plus 1.75% to 3.00%  depending  upon the  financial  performance  of the
Company.  The revolving  line of credit  requires the borrowers to pay a initial
fee of 1%, an annual facility fee of 3/8 of 1%, an unused facility fee of 1/4 of
1% and is subject to an early  termination  fee of 1%. The term loans are due in
three years and carries an interest rate at the  Company's  option of the bank's
prime  rate or LIBOR plus  2.00% and  amortize  over a period of five to fifteen
years.  The term loan facility is subject to an annual facility fee of 3/8 of 1%
of the proposed unused balance.  The asset-based loan facility is subject to the
bank's audit and due  diligence  which is expected to be completed in the second
quarter of 1997.

The proposed asset-based loan facility will replace the Company's $30,000 credit
facility,  which consists of a three-year  revolving loan, with an interest rate
at either the bank's prime rate or the Interbank Offering Rate (IBOR) plus 2% to
3%  depending  upon  certain  financial  ratios.  At  September  30,  1996,  the
outstanding  balance of the credit  facility was $21,000 with  interest at 7.9%,
which is IBOR plus 2.5%.  The weighted  average  interest rates on the Company's
revolving  lines of credit for the years ended September 30, 1996, 1995 and 1994
were  8.1%,  9.0% and 8.9%,  respectively.  Due to the  technical  default,  the
Company is not able to borrow additional funds under the credit facility.  Under
the terms of the proposed  asset-based  loan  facility,  the Company  would have
availability of  approximately  $2,000.  Under the terms of the asset-based loan
facility,  the  borrowers  have the  option  to make  advances  between  the two
companies  provided the borrowers are in compliance  with the  provisions of the
loan  facility.  At September  30, 1996,  the Company would have to advance Ajay
approximately  $5,000 to repay their previous loan  facility,  which the Company
has  guaranteed to the bank.  The Company has pledged  substantially  all of its
assets as  collateral  for the  credit  facility.  The  Company is  required  to
maintain  certain   financial  ratios,   and  the  agreement   contains  certain
restrictions  that limit  acquisitions,  investments,  payment of dividends  and
capital expenditures.

                                       26
<PAGE>

Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>

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

Bank:                                                                                   1996             1995
                                                                                        ----             ----
<S>                                                                                  <C>               <C>
Revolving line of credit,
variable interest rate (7.9% at September 30, 1995)
interest only payments                                                               $     -          $15,000

Mortgage  loan,  due in 2005 - variable  interest  rate (10.8% at September  30,
1996), payable in monthly
installments of $8 plus interest                                                         875              975

Other:

8.8% mortgage loan, due in 2003, payable in monthly
installments of $21 including interest                                                 1,321            1,454

Unsecured subordinated note payable, due in 2005,
interest only at prime (8.25% at September 30, 1996)                                     750              750

Other                                                                                     48              234
                                                                                      ------           ------
                                                                                       2,994           18,413
          Less current portion                                                           212              301
                                                                                      ------           ------
                                                                                     $ 2,782          $18,112
                                                                                      ======           ======

</TABLE>


Maturities of long-term debt are as follows:
<TABLE>

<S>                                                                                 <C>
     1997                                                                           $    212
     1998                                                                                258
     1999                                                                                273
     2000                                                                                289
     2001                                                                                306
Thereafter                                                                             1,656
                                                                                      ------
                                                                                      $2,994
                                                                                       =====
</TABLE>

                                       27
<PAGE>

Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(Dollars in thousands, except per share amounts)

Note 8.  Accounts Payable and Accrued Expenses
<TABLE>
<CAPTION>

                                                                                        1996             1995
                                                                                      ------           ------

<S>                                                                                   <C>              <C>
Accounts payable                                                                      $5,895           $4,357
Accrued wages and
     employee benefits                                                                 1,364            1,613
Other                                                                                  1,129            1,356
Income taxes payable                                                                       -              254
                                                                                      ------           ------
                                                                                      $8,388           $7,580
                                                                                      ======           ======
</TABLE>

Note 9.  Pension Plans

The Company maintains two pension plans; one plan covers the salaried  employees
and the other plan covers the 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.

Net pension cost is computed as follows:
<TABLE>
<CAPTION>
                                                                        1996            1995             1994
                                                                       -----           -----            -----

<S>                                                                   <C>             <C>             <C>
Service cost                                                          $  226          $  169          $   133
Interest cost                                                            450             388              327
Actual return on plan assets                                            (477)           (360)            (354)
Other components                                                          21              29               16
                                                                       -----           -----            -----
                                                                      $  220          $  226           $  122
                                                                       =====           =====            =====
</TABLE>

The expected  long-term rate of return on plan assets is 9.0%. The discount rate
and rate of  increase in future  compensation  levels  used in  determining  the
actuarial present value of accumulated  benefit obligations was 8.0% and 5.0% in
1996 and 1995, and 8.5% and 5.0% in 1994. Plan assets consist  substantially  of
equity and fixed income securities.

                                       28
<PAGE>

Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(Dollars in thousands, except per share amounts)

Statement of Financial  Accounting  Standards No. 87 requires recognition in the
balance sheet of a minimum pension liability for underfunded  plans. The minimum
liability  that must be  recognized  is equal to the  excess of the  accumulated
benefit  obligation  over plan assets.  The minimum  liability for the Company's
underfunded  plan of $544 has been  recorded  as a  long-term  liability  with a
partially  offsetting  intangible  asset of $316  recorded in other assets and a
reduction of stockholders' equity of $228.

The funded status as of September 30 is as follows:
<TABLE>
<CAPTION>

                                                                                Salaried               Hourly
                                                                               Employees            Employees
     1996                                                                           Plan                 Plan
                                                                               ---------            ---------
<S>                                                                             <C>                  <C>
Actuarial present value of vested benefits                                      $  2,173             $  2,558
  Actuarial present value of non-vested benefits                                      80                  457
                                                                                 -------              -------

  Accumulated benefits obligation                                                  2,253                3,015
                                                                                 =======              =======

  Actuarial present value of projected benefits obligation                        (2,667)              (3,053)
  Plan assets at fair market value                                                 2,634                2,669
                                                                                 -------              -------

  Funded status                                                                      (33)                (384)
                                                                                 =======              =======

  Unrecognized net losses                                                            (89)                (228)
  Prior service costs                                                                150                 (316)
  Prepaid (accrued) pension cost                                                     (94)                 160
                                                                                 -------              -------

  Funded status                                                                 $    (33)            $   (384)
                                                                                 =======              =======
</TABLE>
<TABLE>
<CAPTION>

                                                                                Salaried               Hourly
                                                                               Employees            Employees
     1995                                                                           Plan                 Plan
                                                                               ---------            ---------
<S>                                                                             <C>                  <C>
Actuarial present value of vested benefits                                      $  2,024             $  2,371
Actuarial present value of non-vested benefits                                        92                  411
                                                                                 -------              -------

Accumulated benefits obligation                                                    2,116                2,782
                                                                                 =======              =======

  Actuarial present value of projected benefits obligation                        (2,587)              (2,782)
  Plan assets at fair market value                                                 2,468                2,175
                                                                                 -------              -------

  Funded status                                                                     (119)                (607)
                                                                                 =======              =======

  Unrecognized net losses                                                            (64)                (272)
  Prior service costs                                                                (57)                (279)
  Prepaid (accrued) pension cost                                                       2                  (56)
                                                                                 -------              -------

 Funded status                                                                  $  (119)             $   (607)
                                                                                 =======              =======
</TABLE>

                                       29
<PAGE>

Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(Dollars in thousands, except per share amounts)

Note 10.  Income Taxes (benefit)

The provision for income taxes (benefit) is as follows:
<TABLE>
<CAPTION>

                                                                              1996         1995          1994
                                                                           -------      -------        ------
      <S>                                                                    <C>         <C>           <C>
Current:
      Federal                                                                $ 280       $2,200        $1,821
      State                                                                    240          415           370
                                                                             -----        -----         -----
                                                                               520        2,615         2,191
Deferred:
      Federal                                                                 (576)         173            18
      State                                                                   (324)          37            (9)
                                                                             -----        -----         -----
                                                                             $(380)      $2,825        $2,200
                                                                             =====        =====         =====
</TABLE>

The reconciliation between the effective tax rate and the statutory federal rate
as a percent is as follows:
<TABLE>
<CAPTION>

                                                                              1996         1995          1994
                                                                            ------       ------        ------

<S>                                                                         <C>            <C>           <C>
Statutory federal income tax rate                                           (34.0)         34.0          34.0
State taxes, net of federal income tax benefit                               (4.0)          4.0           4.0
Other                                                                         (.1)           .2           (.3)
                                                                            ------       ------        ------
                                                                            (38.1)         38.2          37.7
                                                                            ======        =====        ======

         The tax effects of temporary  differences that give rise to significant
portions of the deferred tax assets and  deferred tax  liabilities  at September
30, 1996 and 1995 are as follows:
</TABLE>

<TABLE>
<CAPTION>
                                                                                           1996          1995
                                                                                         ------        ------

<S>                                                                                      <C>           <C>
Deferred tax assets:
     Inventories, due to obsolescence reserve and additional
      costs inventoried for tax purposes pursuant to the
      Tax Reform Act of 1986                                                             $  385        $   58
     Compensated absences, principally due to accrual
      for financial reporting purposes                                                      108           110
   Retiree medical benefits, principally due to accrual
      for financial reporting purposes                                                      345           245
   Accounts receivable reserves, accrued for financial
      reporting purposes                                                                    389             -
     Other reserves, principally due to accrual for
      financial reporting purposes                                                          312           103
   State net operating loss carry forward                                                   480             -
                                                                                         ------        ------

   Total gross deferred tax assets                                                        2,019           516
   Less valuation allowance                                                                 270             -
                                                                                         ------        ------
   Net deferred tax assets                                                                1,749           516
                                                                                         ------        ------

Deferred tax liabilities:
     Plant and equipment, principally due to differences
      in depreciation and amortization                                                    1,219           886
                                                                                         ------        ------

Net deferred income tax (asset) liability                                                $ (530)       $  370
                                                                                         ======        ======
</TABLE>
At  September  30,  1996,  the  Company  has  approximately  $7,000 of state net
operating  loss  carryforwards,  which are  available  to the Company in certain
state tax jurisdictions and expire in 2006 through 2011.

                                       30
<PAGE>

Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(Dollars in thousands, except per share amounts)

Note 11.  Common Stock

The Company has issued  stock  options and warrants at exercise  prices  ranging
from $.34 to $3.63 per share,  the market value at the date of  issuance.  These
options and warrants expire between 1997 and 2000.
<TABLE>
<CAPTION>

                                                                                                      Average
                                                                                     Number             Price
                                                                                     ------          --------

<S>                                                                               <C>                  <C>
Outstanding at September 30, 1993                                                 1,050,000            $  .42

Granted                                                                                   -                 -
Exercised                                                                                 -                 -
Canceled                                                                           (300,000)                -
                                                                                  ---------            ------
Outstanding at September 30, 1994                                                   750,000               .46

Granted                                                                              40,000              3.63
Exercised                                                                                 -                 -
Canceled                                                                                  -                 -
                                                                                  ---------            ------
Outstanding at September 30, 1995                                                   790,000               .62

Granted                                                                                   -                 -
Exercised                                                                          (450,000)              .49
Canceled                                                                                  -                 -
                                                                                  ---------            ------
Outstanding at September 30, 1996                                                   340,000            $  .79
                                                                                  =========            ======
</TABLE>

In  addition  to the  options and  warrants  above,  the 1993 Stock  Option Plan
("Plan") reserves an aggregate of 1,500,000 shares of the Company's common stock
for issuance  pursuant to the exercise of stock  options which may be granted to
employees,  officers and directors of and consultants to the Company.  Under the
terms  of  the  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 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. At September 30,
1996, the Company had outstanding  options to purchase  400,000 shares at prices
between $1.63 and $3.23 per share,  1,100,000 shares available for future grants
and 5,000  shares had been issued upon  exercise  of options  granted  under the
Plan.

During 1995 the  shareholders  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 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.  During 1996 options were  granted to purchase  30,000  shares at
$3.63.  At September 30, 1996 there were 60,000 options  outstanding at $3.63 to
$3.66 per share and 140,000 were available for future grant under the Plan.

                                       31
<PAGE>

Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(Dollars in thousands, except per share amounts)

Note 12. Stock Repurchase Program

In  January  1996 the  Company  initiated  a stock  repurchase  program of up to
1,000,000  shares of its  common  stock.  Under this  program  the  Company  has
acquired  approximately  195,200  shares at an average price of $2.77 per share,
which include 100,000 shares of common stock at $2.75 per share representing the
market price on the date purchased from Enercorp, Inc., a publicly-held business
development  company which  beneficially owns approximately 11% of the Company's
stock. The Chairman and President of the Company is a significant shareholder of
Enercorp.


Note 13. Restructuring Charge

In July  1996,  the  Company  adopted a plan for  restructuring  its  automotive
accessories  business.  This plan was developed by the Company's  management and
approved by the Company's  Board of Directors and its  objectives  are to return
the  automotive   accessories  business  to  profitability,   primarily  through
implementation  of product line changes,  as well as a new  management  team and
cost reduction program.

The Company implemented the plan of restructuring  during the third quarter, and
as a  results  the  Company  recorded  a  restructuring  charge of  $2,250.  The
restructuring provision primarily represents non-cash,  asset write-offs related
to product line restructuring.

                                       32
<PAGE>

Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(Dollars in thousands, except per share amounts)

Note 14.  Business Segment Information
<TABLE>
<CAPTION>

                                                                              1996         1995          1994
                                                                            ------       ------        ------
<S>                                                                        <C>          <C>           <C>
Net sales by classes of similar products
Heavy vehicle components                                                   $36,141      $35,105       $28,678
Automotive accessories                                                      16,263       15,863        13,083
Landscape maintenance equipment (1)                                         11,026        6,783             -
Electrical components (2)                                                    4,112        2,863             -
                                                                           -------      -------       -------
                                                                            67,542       60,614        41,761
                                                                           =======      =======       =======

Earnings (loss) from operations
Heavy vehicle components                                                     6,831        8,738         6,095
Automotive accessories*                                                     (4,353)        (286)          520
Landscape maintenance equipment (1)                                           (578)         857             -
Electrical components (2)                                                     (659)         182             -
                                                                            -------      -------       -------
                                                                             1,241        9,491         6,615
                                                                            =======      =======       =======


Identifiable assets
Heavy vehicle components                                                    20,732       18,624        20,795
Automotive accessories                                                      13,698       12,486        11,364
Landscape maintenance equipment (1)                                         11,806        8,528             -
Electrical components (2)                                                    7,542        7,544             -
                                                                           -------      -------       -------
 Total assets                                                               53,778       47,182        32,159
                                                                           =======      =======       =======


Capital expenditures
Heavy vehicle components                                                       532          852           130
Automotive accessories                                                         358          535           239
Landscape maintenance equipment (1)                                            487          220             -
Electrical components (2)                                                      218           76             -
                                                                           -------      -------       -------
                                                                             1,595        1,683           369
                                                                            ======      =======       =======
Depreciation and amortization
Heavy vehicle components                                                     1,372        1,142           807
Automotive accessories                                                         257          257           165
Landscape maintenance equipment (1)                                            288          121             -
Electrical components (2)                                                      239          118             -
                                                                           -------      -------       -------
                                                                           $ 2,156      $ 1,638       $   972
                                                                           =======      =======       =======
</TABLE>



(1)  Acquired February 1995
(2)  Acquired April 1995

* Includes restructuring charge of $2,250 in 1996.

                                       33
<PAGE>

Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(Dollars in thousands, except per share amounts)

Note 15.  Net Sales - Export
<TABLE>
<CAPTION>

                                                                              1996         1995          1994
                                                                           -------      -------       -------

<S>                                                                       <C>          <C>           <C>
Canada                                                                    $  4,570     $  5,326      $  4,248
Other                                                                        3,261        2,754         2,472
                                                                            ------       ------        ------
Net sales-export                                                             7,831        8,080         6,720
United States                                                               59,711       52,534        35,041
                                                                            ------       ------        ------
Net sales                                                                 $ 67,542     $ 60,614      $ 41,761
                                                                            ======       ======        ======
</TABLE>

In 1996 and 1995 the Company had one customer who  accounted  for  approximately
10% and 12% of net sales. In 1994 one customer  accounted for approximately 14%,
and two customers who each accounted for 10% of net sales. These sales were made
by the Company's  heavy vehicle  components  segment.  The Company grants credit
generally without collateral to its customers.  The Company's  customers are not
concentrated in any geographic region.


Note 16.  Other Benefit Plans

The Company  maintains an Employee  Stock  Ownership  Plan (ESOP) for  non-union
employees.  The ESOP may buy  shares  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  institution to finance the purchase of the Company's common stock. At
September 30, 1996 the outstanding  balance of the loan was  approximately  $511
which has been used to finance the purchase of  approximately  530,000 shares of
common stock. The Company is required to make contributions to the ESOP to repay
the loan including interest.

The Company  sponsors a 401(k) plan in which  eligible  salaried  employees  may
elect to  contribute a portion of their  compensation.  The Company  contributed
approximately  $87 and $85 in the  form of  matching  contributions  in 1996 and
1995.

Note 17.  Post Retirement Benefits other than Pensions

The Company  provides  health care and life  insurance  benefits for many of its
retired  employees.  These  benefits  are  subject  to  deductibles,  co-payment
provisions  and other  limitations.  The  Company  may amend or change  the plan
periodically. The cost of these benefits is expensed as claims are paid.

Effective  October 1, 1993 the Company adopted  Financial  Accounting  Standards
Standard 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.

                                       34
<PAGE>

Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(Dollars in thousands, except per share amounts)

The following  table  provides  information  on the Plan status at September 30,
1996:
<TABLE>
<S>                                                                                                  <C>
Accumulated Post Retirement Benefit Obligation
      Retirees                                                                                       $  1,364
      Fully eligible active participants                                                                  619
      Other active Plan participants                                                                      837
                                                                                                      -------
                                                                                                        2,820
   Plan assets                                                                                              -
                                                                                                      -------

   Accumulated post retirement benefit
         obligation in excess of Plan assets                                                            2,820

   Unrecognized gain                                                                                      155
   Prior service cost                                                                                    (287)
   Unrecognized transition obligation                                                                  (1,950)
                                                                                                      -------

   Accrued post retirement benefit cost
         in the balance sheet                                                                        $    738
                                                                                                      =======

Post retirement benefits expense for 1996 included the follow components:

Service cost                                                                                         $     65
Interest cost                                                                                             219
Amortization of unrecognized net obligation at transition                                                 139
                                                                                                      -------
Post retirement benefits expense                                                                     $    423
                                                                                                      =======
</TABLE>

The assumed health care cost trend rate used in measuring the  Accumulated  Post
Retirement  Benefit  Obligation  (APBO) ranged  between 3%-5% in the first year,
declining to 0% after four years. The discount rate used in determining the APBO
was 8.0%.

If the  assumed  medical  costs  trends  were  increased  by 1%,  the APBO as of
September  30, 1996 would  increase by $8, and the aggregate of the services and
interest cost components of the net annual post retirement benefit cost would be
increased by $1.

                                       35
<PAGE>

Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(Dollars in thousands, except per share amounts)

Note 18.  Acquisitions

In April 1996,  the Company  acquired the assets of the Burda Group of Companies
located in West Linn,  Oregon,  a distributor of a commercial  chipper line, for
$20. This company is being operated as Techwood Williams, Inc.

In April 1996, the Company also acquired the assets of Neumann Manufacturing and
Engineering,  Inc.  located in Madison  Heights,  Michigan,  a  manufacturer  of
plastic  components for the  automotive  industry,  for $1,200.  This company is
being operated as Premier Plastics Technologies, Inc.

In July 1996, the Company completed the acquisition of GeoFocus, Inc. located in
Gainesville,  Florida for 150,000 shares of the Company's common stock valued at
$290. GeoFocus provides geographical information systems and consulting services
and  develops  mobile  computing,  mapping  and  tracking  software  for private
industry and government agencies.

These acquisitions were accounted for as purchases and the results of operations
of these businesses have been included in the consolidated results of operations
of the Company from the acquisition  dates.  The proforma  results of operations
for 1996 and 1995,  as if the  acquisitions  had occurred on October 1, 1995 and
1994, would not be materially different from the historical results.

                                       36
<PAGE>

Notes to Consolidated Financial Statements
Years ended September 30, 1996, 1995, 1994
(Dollars in thousands, except per share amounts)

Note 19.  Quarterly Data (unaudited)
<TABLE>
<CAPTION>


                                                           First          Second          Third         Fourth
     1996                                                Quarter         Quarter        Quarter (1)    Quarter (2)     Annual
     ----                                            -----------     -----------    -----------    -----------    -----------

<S>                                                   <C>            <C>            <C>            <C>            <C>
Net sales                                              $  16,428      $   16,135      $  17,475      $  17,504      $  67,542
Gross margin                                               4,404           3,704          3,807          2,295         14,210
Operating expenses                                         2,261           2,333          4,974          3,401         12,969
Earnings (loss) from operations                            2,143           1,371         (1,167)        (1,106)         1,241
                                                     ===========     ===========    ===========    ===========    ===========
Net earnings (loss)                                        1,001             543         (1,044)        (1,117)          (617)
                                                     ===========     ===========    ===========    ===========    ===========
Minority interest in earnings (loss) of consolidated
  subsidiaries                                                11              29             50           (146)           (56)
                                                     -----------     -----------    -----------    -----------    -----------
Net earnings (loss) applicable to common shareholders  $     990       $     514      $  (1,094)     $    (971)     $    (561)
                                                     ===========     ===========    ===========    ===========    ===========
Primary earnings (loss) per common share               $     .06       $     .03      $    (.06)     $    (.06)     $    (.03)
                                                     ===========     ===========    ===========    ===========    ===========
Fully diluted earnings (loss) per common share$        $     .06       $     .03      $    (.06)     $    (.06)     $    (.03)
                                                     ===========     ===========    ===========    ===========    ===========
Weighted average shares outstanding                   17,900,000      17,600,000      17,600,000    17,800,000     17,800,000
                                                     ===========     ===========    ===========    ===========    ===========
</TABLE>

<TABLE>
<CAPTION>


                                                           First          Second          Third         Fourth
     1995                                                Quarter         Quarter        Quarter (1)    Quarter (2)     Annual
     ----                                            -----------     -----------    -----------    -----------    -----------

<S>                                                    <C>             <C>            <C>            <C>            <C>
Net sales                                              $  11,576       $  15,238      $  18,088      $  15,712      $  60,614
Gross margin                                               3,334           4,443          5,209          4,220         17,206
Operating expenses                                         1,291           1,862          2,387          2,175          7,715
                                                     -----------     -----------    -----------    -----------    -----------
Earnings from operations                                   2,043           2,581          2,822          2,045          9,491
                                                     ===========     ===========    ===========    ===========    ===========
Net earnings                                                 988           1,432          1,446            710          4,576
                                                     ===========     ===========    ===========    ===========    ===========
Minority interest in earnings of consolidated
  subsidiaries                                                 -              17             25             22             64
                                                     -----------     -----------    -----------    -----------    -----------
Net earnings applicable to common shareholders        $      988       $   1,415     $    1,421     $      688      $   4,512
                                                     ===========     ===========    ===========    ===========    ===========
Primary earnings per common share                     $      .06       $     .08     $      .08     $      .04      $     .26
                                                     ===========     ===========    ===========    ===========    ===========
Fully diluted earnings per common share               $      .06       $     .08     $      .08     $      .04      $     .26
                                                     ===========     ===========    ===========    ===========    ===========
Weighted average shares outstanding                   17,500,000      17,500,000     18,000,000     18,000,000     17,600,000
                                                     ===========     ===========    ===========    ===========    ===========
</TABLE>

(1) The third quarter of 1996 includes a restructuring charge of $2,250. 
(2) The fourth quarter of 1996 includes the operation of acquisitions  from date
of purchase.  The results of operations of these  acquisitions are not material.
The fourth  quarter of 1996  includes a $1,000 write down due to an  unfavorable
inventory   adjustment   resulting  from   increased   overhead  and  production
inefficiencies and an unprofitable product line which was discontinued in August
1996  and  an   additional   inventory  and  account   receivable   reserves  of
approximately $700.
(3) The second,  third and fourth  quarters of 1995  include the  operations  of
acquisitions from the date of purchase made in February,  April and August.  Net
sales and earnings from operations from these  acquisitions were $1,658,  $3,915
and $4,093 and $165, $521 and $353 in the second, third and fourth quarters.

                                       37
<PAGE>






                          INDEPENDENT AUDITORS' REPORT




         Board of Directors
         Williams Controls, Inc.
         Portland, Oregon

         We  have  audited  the  accompanying  consolidated  balance  sheets  of
         Williams  Controls,  Inc. and subsidiaries as of September 30, 1996 and
         1995,   and  the  related   consolidated   statements  of   operations,
         stockholders'  equity  and  cash  flows  for  each of the  years in the
         three-year period ended September 30, 1996. 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 generally  accepted auditing
         standards.  Those standards require that we plan and perform the audits
         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, 1996 and
         1995, and the results of their operations and their cash flows for each
         of the years in the  three-year  period ended  September  30, 1996,  in
         conformity with generally accepted accounting principles.







                                     HORWATH GELFOND  HOCHSTADT  PANGBURN  & CO.






         Denver, Colorado
         December 6, 1996, except for Note 7, as
         to which the date is December 20, 1996

                                       38
<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 Company

Incorporated by reference from the Company's 1997 Proxy Statement.


Item 11.      Executive Compensation

Incorporated by reference from the Company's 1997 Proxy Statement.


Item 12.      Security Ownership of Certain Beneficial Owners and Management

Incorporated by reference from the Company's 1997 Proxy Statement.


Item 13.      Certain Relationships and Related Transactions

Incorporated by reference from the Company's 1997 Proxy Statement.


                                     Part IV


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

1.      See Exhibit Index on page 43 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 40 of this Form 10-K.

4.      Reports on Form 8-K.

        None.

                                       39
<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 13, 1997             By /s/ Thomas W. Itin
       -----------------             -------------------------------------------
                                     Thomas W. Itin, Chairman, President and CEO


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 13, 1997             By /s/ Thomas W. Itin
       -----------------             -------------------------------------------
                                     Thomas W. Itin, Chairman, President and CEO



Date:  January 13, 1997             By /s/ Dale J. Nelson
       -----------------             -------------------------------------------
                                     Dale J. Nelson, Controller and
                                     Chief Financial Officer


Date:  January 13, 1997             By /s/ R. William Caldwell
       -----------------             -------------------------------------------
                                     R. William Caldwell, Director


Date:  January 13, 1997             By /s/ H. Samuel Greenawalt
       -----------------             -------------------------------------------
                                     H. Samuel Greenawalt, Director


Date:  January 13, 1997             By /s/ Timothy Itin
       -----------------             -------------------------------------------
                                     Timothy Itin, Director

                                       40
<PAGE>

                             Williams Controls, Inc.
                               Index to Schedules


                                                                            Page

                           Independent Auditors' Report                       42

Schedule II                Valuation and Qualifying Accounts                  43







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

                                       41
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


Board of Directors
Williams Controls, Inc.
Portland, Oregon

We have audited the 1996,  1995 and 1994  consolidated  financial  statements of
Williams  Controls,  Inc.  and  subsidiaries,  referred  to in our report  dated
December 6, 1996,  except for Note 7, as to which the date is  December 20, 1996
which is included under Item 8 in this Form 10K. In connection with our audit of
these  financial  statements,  we  audited  the  1996,  1995 and 1994  financial
statement  schedules,  listed  under Item 14 of this Form 10K.  In our  opinion,
these financial  statement  schedules present fairly, in all material  respects,
the  information  stated  therein,  when considered in relation to the financial
statements taken as a whole.







                                        HORWATH GELFOND HOCHSTADT PANGBURN & CO.







Denver, Colorado
December 6, 1996 except for Note 7,
as to which the date is December 20, 1996

                                       42
<PAGE>

                             Williams Controls, Inc.
                        Valuation and Qualifying Accounts
                                   Schedule II
                             (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                      Beginning             Charged to
        Description                                                     balance               expenses

<S>                                                                      <C>                    <C>
For Year Ended
September 30, 1996

Total reserves for doubtful accounts
   and obsolete inventory                                                $2,959                 $1,691
                                                                          =====                  =====



For Year Ended
September 30, 1995

Total reserves for doubtful accounts
   and obsolete inventory                                                $  575               $  1,125
                                                                          =====                =======



For Year Ended
September 30, 1994

Total reserves for doubtful accounts
    and obsolete inventory                                               $  405                 $  575
                                                                          =====                  =====
</TABLE>


NOTE:   Valuation and qualifying  accounts  were not  individually  significant;
        and,  therefore,  additions  and  deductions  information  has  not been
        provided in this schedule.

                                       43
<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 "Registration Statement"))

        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)

        10.1(a)   Indemnification   Agreement   for   Thomas  W.   Itin   ("Itin
                  Indemnification  Agreement").  (Incorporated  by  reference to
                  Exhibit 10.9 to the Registration Statement)

        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 Stanley V. Intihar, Dale
                  J. Nelson, Bradley R. Petersen, R. William Caldwell, 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)   Loan  Agreement  dated July 25, 1995  between  Registrant  and
                  United   States   National   Bank  of  Oregon  ("the  US  Bank
                  Agreement").  (Incorporated by reference to Exhibit 10.1(a) to
                  the Registrant's  Quarterly Report on Form 10-Q for the period
                  ended June 30, 1995 (the "June 1995 Form 10-Q"))

        10.2(b)   Revolving Loan Note under the US Bank Agreement. (Incorporated
                  by reference to Exhibit 10.1(b) to the Registrant's  June 1995
                  Form 10-Q)

        10.2(c)   Form of Guaranty under the US Bank Agreement,  entered into by
                  each of Aptek Williams,  Inc.; Hardee  Williams,  Inc.; Kenco/
                  Williams,  Inc.; NESC Williams, Inc.; Waccamaw Wheel Williams,
                  Inc. and Williams Controls Industries,  Inc.  (Incorporated by
                  reference  to Exhibit  10.1(c) to the  Registrant's  June 1995
                  Form 10-Q)

        10.2(d)   Form of Security  Agreement  of  Registrant  under the US Bank
                  Agreement.  (Incorporated  by reference to Exhibit  10.1(d) to
                  the Registrant's June 1995 Form 10-Q)

                                       44
<PAGE>

    Exhibit
     Number       Description

    10.2(e)       Form  of  Subsidiary  Security  Agreement  under  the US  Bank
                  Agreement,  entered into by each Aptek Williams,  Inc.; Hardee
                  Williams,  Inc.;  Kenco/Williams,  Inc.; NESC Williams,  Inc.;
                  Waccamaw   Wheel   Williams,   Inc.  and   Williams   Controls
                  Industries, Inc. (Incorporated by reference to Exhibit 10.1(e)
                  to the Registrant's June 1995 Form 10-Q)

    10.2(f)       Line of Credit  Trust  Deed,  Assignment  of  Rents,  Security
                  Agreement,  and  Fixture  Filing  given by  Williams  Controls
                  Industries, Inc. under the US Bank Agreement. (Incorporated by
                  reference to Exhibit 10.1(f) to the June 1995 Form 10-Q)

    10.2(g)        Contribution and Indemnity Agreement under US Bank Agreement,
                   given  by  Registrant  and  Aptek  Williams,   Inc.;   Hardee
                   Williams,  Inc.;  Kenco/Williams,  Inc.; NESC Williams, Inc.;
                   Waccamaw   Wheel   Williams,   Inc.  and  Williams   Controls
                   Industries,   Inc.  (Incorporated  by  reference  to  Exhibit
                   10.1(g) to the Registrant's June 1995 Form 10-Q)

    10.3(a)       Guaranty of the Registrant of the  obligations of Ajay Sports,
                  Inc.  under its  $8,500,000  line of credit with United States
                  National Bank of Oregon (the "Ajay Bank Line").  (Incorporated
                  by  reference to Exhibit  10.2 to the  Registrant's  June 1995
                  Form 10-Q)

    10.3(b)       Supplement  to  Guaranty,   dated  October  2,  1995,  by  the
                  Registrant of the Ajay Bank Line.  (Incorporated  by reference
                  to Exhibit 10.3(b) to the Registrant's 1995 form 10-K)

       10.4       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"))

       10.5       Amended and Restated Loan and Security Agreement,  dated as of
                  March 27, 1995, between Williams Controls Industries, Inc. and
                  Ajay  Leisure  Products,  Inc.  (Incorporated  by reference to
                  Exhibit 10.3 to the Registrant's June 1995 Form 10-Q)

       10.6       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)

    10.7(a)       Mortgage and  Security  Agreement,  dated August 31, 1988,  by
                  Sparkomatic  Corporation  in favor of MetLife  Capital  Credit
                  Corporation.  (Incorporated by reference to Exhibit 10.7(a) to
                  the Registrant's 1993 Form 10-K)

    10.7(b)       Mortgage Note in the  principal  amount of  $1,700,000,  dated
                  August  31,  1988,  from  Sparkomatic  Corporation  to MetLife
                  Capital  Credit  Corporation.  (Incorporated  by  reference to
                  Exhibit 10.7(b) to the Registrant's 1993 Form 10-K)

    10.7(c)       Loan  Assumption,  Modification  and Extension  Agreement (the
                  "Assumption  Agreement"), dated August 12, 1993,  among Kenco/
                  Williams,  Inc.,  Sparkomatic  Corporation and MetLife Capital
                  Corporation  and the Guaranty  given by Williams to MetLife to
                  guaranty the  obligations of  Kenco/Williams,  Inc. to MetLife
                  thereunder.  (Incorporated by reference to Exhibit 10.9 to the
                  Registrant's Post-Effective Amendment No. 1, as filed with the
                  Commission   on  September  23,  1993,  on  Form  S-3  to  the
                  Registration Statement (the "Post-Effective Amendment"))

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<PAGE>

    Exhibit
     Number       Description

    10.7(d)       Guaranty  dated as of March 31, 1994 made by the Registrant in
                  favor  of  MetLife  Capital   Corporation.   (Incorporated  by
                  reference to Exhibit 10.1 to the Registrant's Quarterly Report
                  on Form 10-Q for the period ended March 31, 1994)

       10.9       Guaranty  dated as of October 2, 1995 by Thomas W. Itin to the
                  Registrant.  (Incorporated by reference to Exhibit 10.9 to the
                  Registrant's 1995 form 10-K)

      10.10       Guaranty, dated as of October 2, 1995, by Joseph C. Giuffre to
                  the Registrant. (Incorporated by reference to Exhibit 10.10 to
                  the Registrant's 1995 form 10-K)

      10.11       Asset Purchase  Agreement by and among Hardee Williams,  Inc.;
                  Waccamaw Wheel Williams,  Inc.; Hardee Manufacturing  Company,
                  Inc.;  Red Bluff  Grain and Farm  Supply,  Inc.  and Eldred V.
                  Hardee, and exhibit agreements.  (Incorporated by reference to
                  Exhibit 2.1 to the Registrant's  Quarterly Report on Form 10-Q
                  for the period  ended  December 31, 1994 (the  "December  1994
                  Form 10-Q"))

      10.12       Asset Purchase  Agreement,  dated April 12, 1995, by and among
                  the Registrant;  Aptek  Williams,  Inc.;  Aptek  Technologies,
                  Inc.;   Hillsboro   Realty   Associates  and  David  H.  Rush.
                  (Incorporated   by   reference   to  Exhibit   2.1(a)  to  the
                  Registrant's March 1995 Form 10-Q)

       21.1       List of Subsidiaries.  See Item 1 in this report.

         27       Financial Data Schedule.  FILED HEREWITH

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