SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 --------------

                                    FORM 10-K
(Mark One)
[  X ]            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES AND EXCHANGE ACT OF 1934
                  For the fiscal year ended October 1, 2000

                                       OR

[     ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                  For the transition period from ________ to ________

                         Commission file number 0-20686

                         UNIROYAL TECHNOLOGY CORPORATION
             (Exact name of registrant as specified in its charter)

              Delaware                                       65-0341868
   (State or other jurisdiction of                        (I.R.S. Employer
    incorporation or organization)                       Identification No.)

                       Two North Tamiami Trail, Suite 900
                          Sarasota, Florida 34236-5568
               (Address of principal executive offices) (Zip Code)

                                 (941) 361-2100
              (Registrant's telephone number, including area code)

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

          Title of each class        Name of each exchange on which registered
                  None                             Not Applicable

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

                     Common Stock, par value $.01 per share
                                (Title of class)

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K (29,405 of this chapter) 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 30, 2000, the aggregate  market value of the voting stock held by
non-affiliates  of the registrant  (assuming for this purpose that all directors
and officers of the registrant and all holders of 5% or more of the common stock
of the registrant are affiliates) was  approximately  $104,190,000  based on the
closing price for the stock on November 30, 2000.

APPLICABLE  ONLY TO REGISTRANTS  INVOLVED IN BANKRUPTCY  PROCEEDINGS  DURING THE
PRECEDING FIVE YEARS:

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

 Yes  [ X ]   No [   ]


As of November 30, 2000, 25,444,859 shares of the registrant's common stock were
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Part III - Portions of the registrant's  definitive proxy statement to be issued
in connection with the registrant's annual meeting of stockholders to be held in
2001.


<PAGE>


Item 1.  Business

         General

                  Uniroyal  Technology  Corporation  ("Uniroyal") is a leader in
         the  development,  manufacture  and sale of a broad range of  materials
         employing compound semiconductor  technologies,  plastics and specialty
         chemicals used in the production of consumer, commercial and industrial
         products.

                  We  are  organized  into  three  primary  business   segments:
         Compound   Semiconductor  and   Optoelectronics,   Coated  Fabrics  and
         Specialty Adhesives.

                  The  Compound   Semiconductor  and   Optoelectronics   segment
         manufactures  wafers,  epitaxial wafers and package-ready  dies used in
         high  brightness  light emitting  diodes  ("HB-LEDs"),  and in power or
         microwave semiconductors.  It was formerly known as the Optoelectronics
         segment  until May 31,  2000 when we changed the name of the segment to
         the Compound  Semiconductor and Optoelectronics  segment to reflect the
         acquisition   of  the   business   of  Sterling   Semiconductor,   Inc.
         ("Sterling").

                  The Coated  Fabrics  segment  manufactures a wide selection of
         plastic  vinyl  coated   fabrics  for  use  in  furniture  and  seating
         applications.

                  The Specialty Adhesives segment  manufactures liquid adhesives
         and  sealants  for use in the  commercial  roofing  industry and in the
         manufacture of furniture, truck trailers and recreational vehicles.

                  The Compound Semiconductor and Optoelectronics  businesses are
         in the development  stage and are in the beginning stages of commercial
         production.

                  The Coated  Fabrics and  Specialty  Adhesives  businesses  are
         leading  suppliers in their markets because of their ability to provide
         specialized  materials with performance  characteristics  customized to
         the end user and  their  ability  to  provide  technical  and  customer
         support in connection with the use of their products in manufacturing.

                  Uniroyal is a Delaware  corporation.  Our principal  executive
         offices are located at Two North Tamiami  Trail,  Suite 900,  Sarasota,
         Florida  34236,  and our  telephone  number  at that  address  is (941)
         361-2100.

         Recent Developments

                  On December 24, 1999,  we entered into a definitive  agreement
         to sell certain net assets of our High Performance Plastics segment for
         $217,500,000  in  cash  to  Spartech  Corporation   ("Spartech").   The
         transaction  closed on February 28, 2000, and resulted in cash proceeds
         of  $208,976,000  net of  certain  transaction  costs  and  preliminary
         purchase price adjustments (the "Spartech Sale"). The ultimate purchase
         price adjustments have not been agreed to by both parties. We estimate,
         and have  provided  for, an  ultimate  reduction  in purchase  price of
         approximately  $5,100,000,   which  would  result  in  a  loss  of  the
         $5,000,000  holdback  as  well  as an  additional  payment  from  us to
         Spartech  of  approximately  $100,000.  In  addition  to  what  we have
         provided  for,  Spartech  is  seeking  an  additional   purchase  price
         reduction  up to  approximately  $4,237,000.  We believe  the  ultimate
         resolution of the purchase price adjustment  should not have a material
         adverse  effect on the results of  operations,  cash flows or financial
         position.   After   consideration  of  the  estimated   purchase  price
         adjustments  of  $5,100,000,   we  recorded  a  gain  on  the  sale  of
         approximately $55,821,000 (net of taxes of approximately  $38,146,000).
         The  High  Performance  Plastics  segment  manufactured  specialty  and
         general purpose  thermoplastic  sheet,  injection molding resins, color
         concentrates,  extruded  profiles and fabricated  acrylic sheet for the
         aerospace,  marine,  specialty and general  purpose  markets as well as
         acrylic rods and tubes.

                  On May 31, 2000, we acquired Sterling, a Virginia corporation,
         which is a  developer  and  manufacturer  of  silicon  carbide  ("SiC")
         semiconductor  wafer  substrates,  related  semiconductor  devices  and
         substrates  with epitaxial thin film coatings.  In addition to offering
         SiC wafers for sale, Sterling sells a limited product line of epitaxial
         thin film coatings,  the active  materials  used in making  functioning
         electronic  devices,  on SiC wafers. In connection with the acquisition
         of Sterling,  we filed a registration  statement to register the shares
         of common  stock  acquired  in a private  placement  by certain  former
         security holders of Sterling who are the selling stockholders.

         Coated Fabrics Segment

                  The Coated Fabrics segment accounted for  approximately  $33.7
         million  (49%) of our net  sales  from  continuing  operations  for the
         fiscal  year ended  October 1, 2000.  It is a leading  manufacturer  of
         vinyl coated fabrics. The coated fabrics are durable,  stain resistant,
         cost-effective   alternatives  to  leather  and  cloth  coverings.  The
         segment's product lines include the well-known  Naugahyde(R) brand name
         in vinyl coated fabric products.

                  The Coated Fabrics  segment  previously  made products for the
         automobile manufacturing industry, which accounted for approximately 2%
         of total  net sales of the  segment  for  fiscal  2000.  The  segment's
         automotive  products line consisted of plastic vinyl coated fabrics and
         vinyl laminated composites used by manufacturers and custom fabricators
         in the production of vehicle seat  coverings,  door panels,  arm rests,
         consoles and instrument  panels. On October 17, 1997, we agreed to sell
         certain  assets of the  automotive  operations  of the  Coated  Fabrics
         segment  located at our Port Clinton,  Ohio facility for  approximately
         $5.3 million plus the value of purchased  inventories and plus or minus
         adjustments   contingent  upon  the  transfer  of  certain   automobile
         programs.   We  received   $4.9  million  in  July  1998  and  received
         approximately  $1.5 million during fiscal 1999.  During fiscal 1999 and
         1998, we recognized approximately $667,000 and $512,000,  respectively,
         of income relating to the sale of the automotive operations.  We ceased
         production  and closed the Port Clinton  facility in November 1998. The
         Port  Clinton  real  property  is listed as held for sale at October 1,
         2000 and is expected to be sold in fiscal 2001.

                  General

                  The Coated Fabrics segment's Naugahyde(R) vinyl coated fabrics
         products  have  various  performance  characteristics.  We  sell  these
         products   in   various   markets   depending   upon  the   performance
         characteristics  required by end users.  For example,  for recreational
         products which are used outdoors,  such as boats,  personal watercraft,
         golf carts and  snowmobiles,  the segment sells a Naugahyde(R)  product
         that is designed  primarily for  weatherability.  It also  manufactures
         Naugahyde(R)  products that can  withstand  powerful  cleaning  agents,
         which are widely used in hospitals and other medical facilities.  Flame
         and smoke  retardant  Naugahyde(R)  vinyl coated fabrics are used for a
         variety  of  commercial  and  institutional   furniture   applications,
         including hospital furniture and school bus seats.

                  The  segment  has a  state-of-the-art  production  line  which
         produces  coated  fabrics in more than 600 colors and 45  textures  and
         patterns.

                  Competition

                  The  Coated  Fabrics  segment  competes  with  respect  to its
         Naugahyde(R)  products  primarily  on the  basis of  style,  color  and
         quality,  as well as  price  and  customer  service  through  technical
         support and performance characteristics which meet customer needs.

                  The  segment's  principal  competitors  with  respect  to  its
         Naugahyde(R) products are:

                  o C. G. Spradling & Company;
                  o Morbern, Inc.; and
                  o OMNOVA Solutions  (formerly a part of GenCorp, Inc.).

                  Marketing

                  A predecessor of the segment  introduced the segment's  coated
         fabrics  products  more  than 50 years  ago.  Today,  we  market  these
         products under several  nationally  recognized  brand names,  including
         NAUGAHYDE(R),   NAUGAFORM(R)  and  DURAN(R).  We  market  our  cleaning
         agent-resistant  coated fabrics under the name  BEAUTYGARD(R),  and our
         flame and smoke  retardant  coated  fabrics  under the brand name FLAME
         BLOCKER(R).

                  We market and sell our  coated  fabrics  primarily  through 12
         national  sales  representatives,  who are  employees of Uniroyal,  and
         independent  sales  representatives.  In  the  furniture  manufacturing
         market,  we  generally  sell  our  coated  fabrics  through  our  sales
         representatives   and   to   distributors   who   sell   to   furniture
         manufacturers,  upholsterers and fabric distributors. Approximately 31%
         of the  segment's  non-automotive  market  sales in fiscal 2000 were to
         distributors.

                  Representative  customers and end users of the Coated  Fabrics
         segment include:

                  o Bombardier, Inc.;
                  o Club Car, Inc.;
                  o Deere & Co.;
                  o Freightliner Corporation;
                  o Harley-Davidson, Inc.;
                  o Kawasaki Heavy Industries, Inc.;
                  o Lazy-Boy, Incorporated;
                  o Michigan Seat Co.;
                  o Monaco Coach Corporation;
                  o Okamoto USA, Inc.;
                  o Polaris Industries, Inc.;
                  o Shelby Williams Industries, Inc.; and
                  o Yamaha Motor Corporation, USA.

                  Manufacturing Facilities

                  We  manufacture  our coated  fabrics  products at our facility
         located in Stoughton,  Wisconsin.  The segment ceased  manufacturing at
         the facility in Port Clinton, Ohio on November 11, 1998. We own both of
         these facilities.  The Port Clinton facility is listed as held for sale
         and is expected to be sold in fiscal 2001.

                  Raw Materials

                  The principal raw materials for the segment's  coated  fabrics
         are casting paper, knit fabric, PVC plastic resins and plasticizers. We
         have multiple sources for these materials.

         Specialty Adhesives Segment

                  The Specialty  Adhesives  segment  accounted for approximately
         $31.6 million (46%) of our total net sales from  continuing  operations
         for fiscal 2000.

                  General

                  The  Specialty   Adhesives  segment  comprises  three  general
         product lines: roofing adhesives and sealants, industrial adhesives and
         sealants  and mirror  mastics and  sealants.  The segment is one of the
         leading  manufacturers of adhesives for  fully-bonded,  EPDM commercial
         roofs. We support Firestone  Building  Products Company,  a division of
         Bridgestone/Firestone,  Inc.  ("Firestone"),  an industry leader in the
         supply of Rubber Gard(R) EPDM single ply membrane,  with a full line of
         bonding,  splice, primer and sealer products.  Approximately 64% of the
         segment's   fiscal  2000  sales  were  roofing  product   shipments  to
         Firestone.  The fully-bonded  adhesive  products sold to Firestone pass
         through a rigorous  development and production  qualification  process,
         resulting  in an applied  roof  capable  of  withstanding  exposure  to
         environmental  extremes.  The segment also produces and sells more than
         200 industrial and commercial  mirror  adhesives and sealants under the
         brand names of Silaprene(R),  Hydra Fast-En(R),  Gunther Ultra/Bond(R),
         Gunther Extra/Build(R),  SolidSeal(R) and SolidBond(R). We market these
         products  to  the  transportation  (non-automotive),   furniture,  foam
         fabrication and commercial mirror installation industries.

                  We have increased the size of the segment's  industrial  sales
         force,  introduced new Silaprene(R) products and packaging that feature
         the  well-recognized  brand name,  and  expanded  the  segment's  Hydra
         Fast-En(R)  adhesive  line of  water-based  adhesives to position it to
         capitalize  on   opportunities   created  by   increasingly   stringent
         government legislation regarding health and safety requirements.

                  The segment  sells splice and bonding  adhesives  for the EPDM
         rubber roofing market  exclusively to Firestone pursuant to a five-year
         contract  which was entered into in fiscal 1995 and extended on June 9,
         1998, by an additional 34 months to expire on December 31, 2002.  Under
         the  terms  of the  Firestone  agreement,  Firestone  is  obligated  to
         purchase  from  the  segment  a  minimum  of 80% of its  annual  volume
         requirements  of  splice  and  bonding  adhesives  for the EPDM  rubber
         roofing market. In fiscal 2000, 1999 and 1998, Firestone purchased 64%,
         68%  and  67%,  respectively,  of the  segment's  total  net  sales  of
         adhesives and sealants for such periods.  Sales to Firestone during the
         fiscal year ended  October 1, 2000,  represented  approximately  30% of
         Uniroyal's net sales from  continuing  operations for such fiscal year.
         The loss of Firestone as a customer would have an adverse effect on the
         Specialty Adhesives segment and Uniroyal.

                  Competition

                  As to our adhesives and sealants,  we compete  principally  on
         the basis of price and the performance characteristics of our products.
         Under our agreement with Firestone,  Firestone is obligated to purchase
         a minimum  of 80% of its  annual  volume  requirements  of  splice  and
         bonding  adhesives for the EPDM rubber roofing market from us. However,
         we compete with other suppliers for marginal sales to Firestone.

                  The  segment's  principal  competitors  in the  adhesives  and
         sealants market for EPDM rubber roofing applications are:

                  o Adco Technologies, Inc.;
                  o Ashland Chemical Company; and
                  o ITW TACC/Illinois Tool Works, Inc.

                  Carlisle Syntec Systems manufactures these adhesives primarily
         for  its  own  single-ply  roofing  system  and  consequently  competes
         indirectly with the segment.

                  In  the  industrial   adhesives  and  sealants  markets,   the
         segment's primary competitors include:

                  o Imperial   Adhesives,   division  of   Sovereign   Specialty
                    Chemicals, Inc.;
                  o Manus Products, Inc.;
                  o Minnesota Mining and Manufacturing Corporation;
                  o Palmer Products Corp.; and
                  o Sika Corporation.

                  Marketing

                  We market the  segment's  industrial  adhesives  and  sealants
         under the brand names Silaprene(R) and Hydra Fast-En(R).  We market the
         segment's  water-based adhesives under the brand name Hydra Fast-En(R).
         The segment's  Silaprene(R)  products have established name recognition
         in and are  important  in the  recreational  vehicle and truck  trailer
         manufacturing  markets.  Hydra  Fast-En(R)  water-based  adhesives  are
         beginning to establish  market share in the foam  fabrication,  plastic
         fabrication,   recreational  vehicle  and  marine  markets.  Recognized
         trademarks in the mirror and glass industry are Gunther  Ultra/Bond(R),
         Gunther Extra/Build(R),  Prime-N-Seal(TM), Gunther Premier(R), Mirror &
         More Cleaner(TM) and Seal-Kwik(TM).

                  We market the segment's  roofing  adhesives and sealants under
         Firestone's  brand names. We indirectly  hold an important  position in
         the splice adhesives and bonding  adhesives  market through  Firestone,
         which  controls a significant  market share of the EPDM rubber  roofing
         market.

                  We market the  segment's  industrial  adhesives  and  sealants
         throughout  the United  States and Canada  primarily  to  manufacturers
         through  a  network  of 200  authorized  distributors,  19  independent
         representatives and five sales  representatives  located throughout the
         United  States  and  Canada.  Pursuant  to  our  obligation  under  the
         Firestone agreement,  we do not market the segment's splice and bonding
         adhesives for the EPDM rubber roofing market.

                  The  segment's   roofing   adhesives   business  is  seasonal,
         increasing  in the  warmer  months  of the year due to an  increase  in
         roofing  and  other  construction  activities  in such  months,  and is
         sensitive to adverse weather conditions.

                  Manufacturing Facility

                  On July 17,  1996,  we  acquired a  manufacturing  facility in
         South Bend, Indiana consisting of approximately 240,000 square feet for
         $1.8  million  and  spent  an  additional  $6.7  million  for  building
         renovations,  new equipment and moving expenses. The move was completed
         on February 18, 1997 and the South Bend  facility now provides a modern
         and efficient manufacturing plant.

                  Raw Materials

                  The  division's  adhesives  and  sealants use a variety of raw
         materials  such as rubber,  resins and  solvents,  which are  generally
         available from multiple sources.  The division's principal suppliers of
         such raw materials and containers include:

                  o Ashland Chemical;
                  o Bayer Corporation;
                  o Caraustar Industrial and Consumer Products Group/Caraustar;
                  o Citgo Petroleum Corporation;
                  o Cleveland Steel Container Corp.;
                  o DuPont Dow Elastomers;
                  o Elementis Specialty Polymers;
                  o Schenectady International; and
                  o Sun Chemical Company, Inc.

                  We have long-term supply agreements with:

                  o Cleveland Steel Container Corp.;
                  o Caraustar Industrial and Consumer Products Group/Caraustar;
                  o Elementis Specialty Polymers; and
                  o Sun Chemical Company, Inc.

                  We believe that  adequate  supplies of raw  materials  for our
         adhesives and sealants will be available to the division from alternate
         suppliers.  However,  if the  division  is  required  to use  alternate
         suppliers,  production  could  be  affected  while  the  raw  materials
         produced by such  alternate  suppliers are qualified by the division to
         meet the product specifications of its customers.

         Compound Semiconductor and Optoelectronics Segment

                  Optoelectronics Business

                  In February  1998,  Uniroyal and Emcore  Corporation  formed a
         joint venture (Uniroyal Optoelectronics,  LLC) to manufacture, sell and
         distribute HB-LED wafers and package-ready dies. Uniroyal owns, through
         a wholly-owned  subsidiary,  the majority interest in the joint venture
         company.  The  Optoelectronics  joint venture started operations in the
         second quarter of fiscal 2000 and has a limited operating  history.  It
         is projected  that the joint venture will reach  commercial  production
         levels in the first half of fiscal  2001.  As of  October 1, 2000,  the
         Optoelectronics   joint   venture   had  an   accumulated   deficit  of
         approximately  $21.0 million.  It incurred net losses of  approximately
         $16.2  million in fiscal  2000.  We expect the  venture to  continue to
         incur losses for the next year.

                  General

                  HB-LEDs are solid state  compound  semiconductor  devices that
         emit light. The global demand for HB-LEDs is experiencing  rapid growth
         because HB-LEDs have a long useful life,  consume  approximately 10% of
         the power  consumed by  incandescent  or halogen  lighting  and improve
         display  visibility.  The  segment  expects  to  provide  the  lighting
         industry  with both InGaN  (blue and green) and AlInGaP  (red,  orange,
         yellow)  products.  Applications  for HB-LEDs include traffic  signals,
         automotive  applications,  miniature  lamps,  flat panel  displays  and
         indoor/outdoor signs.

                  Competition

                  The HB-LED  marketplace,  according to industry  data sources,
         grew 54% in 1999  over the  previous  year and  industry  data  sources
         forecast substantial growth each year for the foreseeable future.

                  The principal  competitors for HB-LEDs and our Optoelectronics
         business include:

                  o Cree, Inc.;
                  o Hewlett Packard Corporation;
                  o LumiLeds   Lighting,   a  joint  venture   between   Agilent
                    Technologies and Philips Lighting;
                  o Nichia Chemical Industries, Ltd.;
                  o Siemens AG's subsidiary, Osram;
                  o Toshiba Corporation; and
                  o Toyoda Gosei Co. Ltd.

                  Marketing

                  We market our  optoelectronics  products  generally through an
         executive  sales  approach,  relying  predominantly  on the  efforts of
         senior management for domestic sales. Sales in Japan, Taiwan, Hong Kong
         and  Europe  are  conducted  by  distributors  and  independent   sales
         representatives.

                  Manufacturing Facility

                  We lease a state-of-the-art 77,000 square foot plant in Tampa,
         Florida for manufacturing  epitaxial wafers and package-ready  dies for
         use in HB-LEDs.  We completed the initial  build-out during fiscal 1999
         at a cost of  approximately  $11.0  million.  Additional  machinery and
         equipment  of  approximately  $11.0  million  and  $10.0  million  were
         purchased  during  fiscal 2000 and 1999,  respectively.  During  fiscal
         2000, we incurred  approximately  $12.7 million of start-up  costs that
         are included in selling and general administrative expenses.

                  We doubled  the  production  capacity  for HB-LEDs in blue and
         green colors at a cost of approximately $4.0 million.  In addition,  we
         are developing  plans to build out  additional  capacity for HB-LEDs in
         blue and green  colors at our  Tampa,  Florida  facility.  We expect to
         complete the additional  capacity  build-out within  approximately  one
         year.  Additional reactors for blue and green HB-LEDs will be staged in
         thereafter to further increase the production capacity for the blue and
         green colors.  We estimate the cost for  completion of this  additional
         capacity build out at $25.0 million.

                  Research and Development

                  In fiscal  2000,  we  committed  to develop  our own  internal
         research and development  program rather than rely on our joint venture
         partner.  During  fiscal 2000 and the first  quarter of fiscal 2001, we
         have added five research and development scientists.  Current expansion
         efforts at our Tampa facility include a state-of-the-art  research and
         development center.

                  Raw Materials

                  We depend on a limited  number of  suppliers  for  certain raw
         materials,   components  and  equipment  used  in  the  Optoelectronics
         business,  including  certain key materials  and equipment  used in our
         wafering,  polishing,  epitaxial  deposition,  device  fabrication  and
         device  test  processes.   In  addition,   the  availability  of  these
         materials,  components  and equipment to us is dependent in part on our
         ability to provide our suppliers with accurate  forecasts of our future
         requirements.  We endeavor to maintain ongoing  communication  with our
         suppliers  to guard  against  interruptions  in  supply  and,  to date,
         generally have been able to obtain adequate supplies in a timely manner
         from our existing sources.  However,  any interruption in the supply of
         these key materials,  components or equipment  could have a significant
         adverse effect on our operations.

                  Semiconductor Business

                  General

                  On May 31, 2000,  we acquired  Sterling for stock and employee
         stock options  valued at  approximately  $40.6  million.  Sterling is a
         developer and  manufacturer of SiC  semiconductor  wafer substrates (or
         foundations)   and  substrates   with  epitaxial  thin  film  coatings.
         "Epitaxy" is a thin film on the substrate  wafer.  Sterling's SiC wafer
         business was originally  based on proprietary  technology  developed in
         the former  Soviet  Union (the  "Russian  technology")  and licensed to
         Sterling.  Sterling has been producing and selling SiC wafers since the
         first quarter of 1997 and producing and selling  wafers with  epitaxial
         thin films  since  January  1999.  Sterling  sells  these  products  to
         corporate,   government  and  university  programs  that  use  SiC  for
         developing and producing electronic components.

                  SiC is unique in that  semiconductor  devices made from it can
         operate at high temperatures,  high voltages and high frequencies,  and
         it can enable electro-optical  applications in the blue light spectrum.
         For certain  electronic  applications,  SiC has greater heat resistance
         and better  electrical  properties  than  silicon and gallium  arsenide
         ("GaAs"),  which are the primary  substrates used in the  semiconductor
         industry.  We believe  these  properties  are  important  to  advancing
         technology in wireless communications,  automobiles, industrial process
         controls and  optoelectronics,  especially for applications that exceed
         the capabilities of silicon and GaAs.

                  Sterling's current product line consists of 4H and 6H polytype
         SiC  wafers  in  diameters  of 34.9 mm and 50.8 mm,  which  are used by
         semiconductor   manufacturers   as  substrates  for  research  and  for
         developing  semiconductor  devices.  Epitaxial  layers of material with
         different  electrical  characteristics are grown on these substrates to
         be the  foundation for  subsequent  fabrication  of completed  devices.
         Sterling also produces SiC wafers with silicon carbide epitaxial layers
         for  those  device  producers  who do not  have  epitaxial  capability.
         Sterling is also exploring  strategic  relationships  with  specialized
         device  manufacturers  to provide the silicon  carbide  chips that they
         will package into completed devices.

                  Most of Sterling's  customers who intend to use SiC for power,
         communications  or high temperature  applications  must buy wafers with
         epitaxy. Epitaxy on SiC wafers is an essential first step toward making
         SiC devices, as the properties of the thin films determine the function
         of the semiconductor  device.  For instance,  whether the semiconductor
         will be used in, among other things,  heat sensors,  light  emitters or
         communications  devices  is  determined  by the film's  properties.  We
         believe that Sterling has the necessary technology platform to increase
         capacity  to meet the needs of its SiC wafer  customers,  as well as to
         produce semiconductor devices. We expect to begin selling prototype SiC
         semiconductor device components in the future.

                  Sterling's   current    production    capability   is   partly
         attributable to its acquisition in September 1998 of certain assets and
         technology from Advanced Technology Materials, Inc. ("ATMI"), including
         a license to the ISO-9002  certified  SiC wafer  production  process in
         Danbury,  Connecticut.  ISO is known internationally as the designation
         for world-class  manufacturing  facilities.  ISO standards require that
         rigorous  operational  criteria  be met  and  maintained,  and  provide
         important reliability assurances to customers.  ATMI had been producing
         SiC wafers primarily for internal research and development with limited
         sales  to  other  companies.   The  acquisition  of  ATMI's  production
         equipment provides Sterling with additional  capacity to fulfill larger
         orders for SiC wafers.  The acquisition also  complements,  and expands
         Sterling's current production process.

                  Competition

                  The  semiconductor  industry is intensely  competitive  and is
         characterized by rapid technological  change, price erosion and intense
         foreign  competition.  While Cree, Inc.  ("Cree") has historically been
         Sterling's  chief  competitor  with respect to SiC wafer  sales,  a few
         other  companies have recently  begun offering small  quantities of SiC
         wafer  products or have  announced  plans to do so. Such  companies may
         develop new or enhanced  products that are more effective than any that
         Sterling has developed or may develop. These companies may also develop
         technology  that  produces  commercial  products  with  characteristics
         similar to  SiC-based  products,  but at a lower cost.  We believe that
         present and future competitors will aggressively pursue the development
         and  sale  of  competing   products.   The  result  of  this  increased
         competition  could mean lower prices for Sterling's  products,  reduced
         demand for our products and a corresponding reduction in our ability to
         recover development, engineering and manufacturing costs.

                  Marketing and Sales

                  We actively  market our  Sterling  products  through  targeted
         mailings,  telemarketing,  select  advertising  and attendance at trade
         shows and the Internet.  We generally use an executive  sales approach,
         relying  predominantly on the efforts of senior  management and a small
         direct sales staff for sales within the United States. Sales in Europe,
         Japan,  Korea and  Taiwan are  conducted  by  distributors  with a long
         history  of  selling   materials  to  customers  in  the  semiconductor
         industry.  We believe that this  approach is preferable to direct sales
         overseas in view of its current customer base and product mix.

                  Intellectual Property

                  Currently, our SiC production process,  including the Sterling
         and ATMI  technology,  is not patented.  In evaluating  whether to seek
         patent  protection,  Sterling  considered  the view held by some in the
         industry that process patents are easy to circumvent with  engineering,
         and that  infringement  is difficult  to detect and enforce.  Given the
         small number of entities in the world active in SiC technology, and the
         technical  complexity  of  the  process,  we  believe  that  disclosing
         technology  in a patent  could  potentially  harm the business in a way
         that would offset any perceived  benefit of the patent. As a result, we
         retain our SiC  crystal  growth  process as a trade  secret and seek to
         maintain it, along with its other trade secrets,  in confidence through
         appropriate non-disclosure agreements with employees and others to whom
         the  information  is  disclosed.   We  cannot  make  assurances   these
         agreements  will provide  meaningful  protection  against  unauthorized
         disclosure  or  use  of  our  confidential   information  or  that  our
         proprietary  technology and know-how will not otherwise become known or
         independently discovered by others.

                  Our  current   licenses  include  a  license  to  the  Russian
         technology  through the year 2046. This licensing  agreement covers the
         manufacture  and  sale of SiC  wafers  worldwide  under  the  technical
         direction of the Russian  scientists who developed the technology.  The
         license from ATMI is exclusive and worldwide until a 2% royalty up to a
         maximum  of $1.0  million  has been  paid.  The  ownership  of the ATMI
         technology would then transfer to Sterling.

                  Cree entered into a licensing  agreement  with North  Carolina
         State  University  in 1987.  This  agreement  granted Cree an exclusive
         license to several  patents related to silicon  carbide,  including one
         specifically  related to SiC crystal growth. Cree, Northrop Grumman and
         other  companies  continue to patent various  aspects of SiC technology
         and device products.  We regularly  monitor SiC  intellectual  property
         developments,  with  the  assistance  of  counsel,  in  order  to avoid
         infringement  and to execute our own patenting  strategy.  Further,  we
         have applied for trademarks.

                  Research and Development

                  We believe  that our  ability to improve  our  position in the
         semiconductor  industry will depend on our ability to enhance  existing
         products  and to continue  developing  new products  incorporating  the
         latest improvements in SiC technology. Accordingly, we are committed to
         continuing  to  invest  in  research  and  development.   Historically,
         government  agencies  have funded a  significant  portion of Sterling's
         research and development  activities and account for most of Sterling's
         total revenues. A description of certain of Sterling's current research
         and  development  projects  is  included  under  "Item 7.  Management's
         Discussion   and  Analysis  of  Financial   Condition  and  Results  of
         Operations."

                  In  addition,  Sterling has been  awarded  certain  government
         contracts for SiC wafers,  epitaxy and device research and development,
         primarily  through  the Small  Business  Innovation  Research  ("SBIR")
         program.  Since its inception,  through  October 1, 2000,  Sterling has
         been awarded SBIR and similar  contracts  totaling  approximately  $2.2
         million,  and there is a backlog  of SBIR and  similar  contracts  with
         expected  revenues of  approximately  $2.0  million.  Additionally,  in
         August 1999,  Sterling was awarded a  Department  of Defense  Title III
         contract for  approximately  $3.0 million over three years to establish
         world  class  merchant  manufacturing  capabilities  and to develop the
         capacity  to  produce  and ship  75,000  square  inches  of  three-inch
         diameter wafers during the last contract year.  This contract  requires
         Sterling to demonstrate the feasibility of four-inch diameter wafers by
         the end of the contract term.

                  Raw Materials

                  We depend on a limited  number of  suppliers  for  certain raw
         materials,  components  and equipment  used in SiC products,  including
         certain key materials and equipment used in crystal  growth,  wafering,
         polishing,  epitaxial  deposition,  device  fabrication and device test
         processes. We generally purchase these limited source items pursuant to
         purchase  orders and have no guaranteed  supply  arrangements  with our
         suppliers. In addition, the availability of these materials, components
         and  equipment to us is dependent in part on our ability to provide our
         suppliers  with  accurate  forecasts  of our  future  requirements.  We
         endeavor to maintain ongoing  communication with our suppliers to guard
         against  interruptions in supply and, to date, have been able to obtain
         adequate  supplies  in a  timely  manner  from  our  existing  multiple
         sources.   However,  any  interruption  in  the  supply  of  these  key
         materials,  components or equipment  could have a  significant  adverse
         effect on Sterling's operations.

                  Manufacturing Facility

                  Sterling's   primary  facilities  and  executive  offices  are
         located in Sterling,  Virginia.  At this location,  we conduct research
         and development in SiC crystal growth and SiC epitaxy. We have our main
         production facility at Danbury,  Connecticut,  where we manufacture SiC
         in an ISO-9002 certified facility and perform research and development.
         We lease both of these facilities.

                  In September  2000, we entered into a lease  agreement for the
         construction  of  a  50,000  square  foot  new  manufacturing  facility
         approximately   two  miles   from  our   current   Virginia   location.
         Construction  has started at the site,  and we expect the structure and
         interior  build-out to be completed during 2001.  We expect to relocate
         our Virginia  operations to this  facility  when it is  completed,  and
         begin consolidating our Connecticut operations in the facility as well.

         General

                  Employees

                  The  Company  has  approximately   440  employees,   including
         approximately 180 hourly wage employees and 260 salaried employees.  We
         believe that at the present  time our  workforce is adequate to conduct
         our  business  and that our  relations  with  employees  are  generally
         satisfactory.

                  The   Company  is  a  party  to  two   collective   bargaining
         agreements.  At our coated fabrics  manufacturing  facility  located in
         Stoughton, Wisconsin, approximately 140 hourly employees are covered by
         an agreement expiring on September 17, 2001 with Local 1207 of P.A.C.E.
         (formerly  known as the United  Paperworkers  International  Union).  A
         separate  agreement  expiring on April 25,  2003 with the United  Steel
         Workers of America,  United Rubber Workers Division (the "USWA") covers
         approximately  40 hourly wage  employees at our  adhesives and sealants
         manufacturing facility located in South Bend, Indiana.

                  Richard D.  Kimbel,  the  former  President  of United  Rubber
         Workers Union Local 65 (Mishawaka), is a director of the Company.

                  Trademarks and Patents

                  We own and control patents, trade secrets,  trademarks,  trade
         names, copyrights and confidential information,  which in the aggregate
         are material to our business. We are not materially dependent, however,
         upon any single patent or trademark.  We have several  trademarks  that
         have wide  recognition  and are  valuable  to our  business.  Among the
         trademarks  that are of  material  importance  to us are  NAUGAHYDE(R),
         NAUGAFORM(R),   DURAN(R),   SILAPRENE(R),   HYDRA  FAST-EN(R),  GUNTHER
         ULTRA/BOND(R) and GUNTHER EXTRA/BUILD(R). Our trademarks are registered
         in the  United  States and in a number of  foreign  jurisdictions  with
         terms of  registration  expiring  generally  between 2000 and 2010.  No
         trademark  registration  of material  importance  to us expired  during
         fiscal 2000. We intend to renew in a timely manner all those trademarks
         that are  required  for the  conduct of our  business.  We also hold 13
         patents and pending patents worldwide.

                  We use the trade name and trademark  "Uniroyal"  pursuant to a
         license from Uniroyal Goodrich Licensing Services, Inc.

                  Research and Development

                  We are actively  engaged in research and development  programs
         designed to develop new products,  manufacturing processes, systems and
         technologies  and to  enhance  our  existing  products  and  processes.
         Research  and  development  is  conducted  within each of our  business
         segments.  Investment in research and development has been an important
         factor in establishing and maintaining our competitive position in many
         of the  specialized  niche  markets in which our products are marketed.
         For  example,  our  research  and  development  efforts have led to the
         development  of  water-based   adhesives  (see  "Business   Segments  -
         Specialty Adhesives"). We spent approximately $1.6 million for research
         and  development  during  fiscal 2000  compared to  approximately  $1.1
         million during fiscal 1999.

                  We currently  employ a staff of 31  individuals  in connection
         with our research and  development  efforts.  The  individuals  include
         chemists,  process development engineers and laboratory technicians and
         are  responsible  for  new  product   development  and  improvement  of
         production processes.  The allocation of research and development staff
         among our business segments is as follows: 18 at Compound Semiconductor
         and  Optoelectronics,  seven at  Coated  Fabrics  and six at  Specialty
         Adhesives.

                  Backlog

                  At October 1, 2000,  we had  backlog  orders  from  continuing
         operations  aggregating  approximately  $12.4  million,  as compared to
         approximately  $8.8  million as of  September  26,  1999.  We presently
         anticipate  that all backlog  orders will be filled  within the next 12
         months.  Backlog  orders  for  each of our  business  segments  were as
         follows as of the indicated dates:

                                        October 1,              September 26,
                                          2000                      1999
                                        ----------              -------------
                                                  (in thousands)
         Coated Fabrics                 $   3,187                 $   4,434
         Specialty Adhesives                5,264                     4,394
         Compound Semiconductor and
          Optoelectronics                   3,929                         -
                                        ---------                 ---------
         Total                          $  12,380                 $   8,828
                                        =========                 =========

                  Environmental Matters

                  We  are  subject  to   federal,   state  and  local  laws  and
         regulations  designed to protect the  environment and worker health and
         safety. Management emphasizes compliance with such laws and regulations
         and has instituted programs throughout our Company to provide education
         and  training in  compliance  at and  auditing  of all our  facilities.
         Whenever required under applicable law, we have implemented  product or
         process  changes or invested  in  pollution  control  systems to ensure
         compliance with such laws and regulations.

                  In  fiscal  2000,   1999  and  1998,  the  amount  of  capital
         expenditures  related to  environmental  matters was immaterial and the
         amount of such  expenditures  is  expected to be  immaterial  in fiscal
         2001. In the future,  as the requirements of applicable law impose more
         stringent   controls  at  our  facilities,   expenditures   related  to
         environmental  and worker  health and safety are  expected to increase.
         While  we do not  currently  anticipate  having  to make  any  material
         capital   expenditures   in  order  to  comply   with  these  laws  and
         regulations,  if we are required to do so, such expenditures could have
         a  material  impact on our  earnings  or  competitive  position  in the
         future.

                  Pursuant to a 1992 settlement agreement with the United States
         Environmental   Protection  Agency  (the  "EPA"),   the  United  States
         Department of the Interior and the States of Wisconsin and Indiana (the
         "EPA  Settlement  Agreement")  in the  event  that the  United  States,
         Wisconsin  or Indiana  asserts a claim  against us for  response  costs
         associated with pre-petition  disposal activities at certain sites, the
         governmental party will be entitled to pursue its claim in the ordinary
         course, and we will be entitled to assert all of our defenses. However,
         if and when we are held liable,  and if the  liability is determined to
         arise from pre-petition disposal activities of its predecessors, we may
         pay the liability in discounted  "plan dollars" (i.e., the value of the
         consideration  that the party  asserting such claim would have received
         if the liability  were treated as a general  unsecured  claim under the
         Plan of Reorganization of our  predecessors).  Such payment may be made
         in cash or in the Company's  stock,  or a combination  thereof,  at our
         option.  Claims arising from real property owned by us are not affected
         by the EPA Settlement Agreement.

                  In  connection  with  our  acquisition  of  the  manufacturing
         facility in South Bend,  Indiana on July 17, 1996, we assumed the costs
         of remediation of soil and groundwater contamination resulting from the
         leaking of solvents  used in the  operation  of the plant by its former
         owner.  We are conducting the  remediation  voluntarily  pursuant to an
         agreement with the Indiana Department of Environmental  Management.  We
         estimate that such  remediation  will cost  approximately  $1.0 million
         over a five-to-seven-year period. In connection with our acquisition of
         the facility,  we placed in escrow, in accordance with the terms of the
         purchase agreement,  $1.0 million of the $1.8 million purchase price to
         be applied to such  remediation  costs.  Through  fiscal 2000,  we have
         incurred  costs of  approximately  $688,000  in  connection  with  such
         remediation.

                  In October 1996,  the EPA sent us a General Notice and Special
         Notice of Liability  concerning the Refuse Hideaway Landfill  Superfund
         Site  at  Middleton,  Wisconsin.  While  a unit of  Uniroyal,  Inc.  is
         believed to have sent non-hazardous  waste to the site between 1978 and
         1984, we are not aware that the Uniroyal,  Inc. unit sent any hazardous
         materials to the site. We have entered into an Administrative  Order on
         Consent with the EPA and a Potentially  Responsible  Parties  Agreement
         with certain other potentially responsible parties. We do not presently
         anticipate any material  liability in connection  with the site, and in
         any event,  if we are found to have  liability in  connection  with the
         site, such liability will be subject to the terms of the EPA Settlement
         Agreement.  In August 2000,  the  Department of Justice of the State of
         Wisconsin  approved in principle a resolution of the liabilities of the
         Company and other  potentially  responsible  parties that would require
         future payment by the Company of less than $10,000.  Such settlement is
         subject to successful completion of the negotiation of a consent decree
         between the State of Wisconsin and the EPA.

                  In connection  with the Spartech Sale,  the Company  conducted
         environmental  assessments on two of the plants of the High Performance
         Plastics  segment  in  compliance  with  the  laws  of  the  states  of
         Connecticut  and New Jersey  relating to transfers of  industrial  real
         property.  The asset  purchase  agreement  provided that Spartech could
         defer  taking  title to  certain  parcels  of real  property  until the
         Company provides  evidence that  environmental  contamination  had been
         remediated  to  the   satisfaction  of  Spartech.   The   environmental
         assessment of the Connecticut property indicated that a separate parcel
         purchased by the Company in 1995 was contaminated  with total petroleum
         hydrocarbons,  DDT and  other  pesticide  chemicals.  The  Company  has
         removed  approximately  60% of the  soil on the  property  at a cost of
         approximately  $1,600,000.   The  Company  has  retained  environmental
         consultants  to review its options with regard to the remaining soil on
         the premises. At October 1, 2000, the Company has estimated the cost to
         clean  up the  remaining  contamination  at  the  Connecticut  site  to
         approximate $1,000,000. The environmental assessment of the Hackensack,
         New Jersey facility is still underway.  At October 1, 2000, the Company
         has estimated the clean-up cost to approximate  $60,000.  At October 1,
         2000,  the estimates for  environmental  clean-up costs are included in
         the net liabilities of discontinued operations.  Spartech has agreed to
         lease the  parcels for a nominal  amount  until  after  remediation  is
         complete.

                  Based upon  information  available  as of October 1, 2000,  we
         believe that the costs of environmental remediation for which we may be
         liable  have  either  been  adequately  reserved  for or are  otherwise
         unlikely  to have a material  adverse  effect on our  operations,  cash
         flows or financial position.

         History of Company

                  Our businesses  trace their origins to a number of predecessor
         companies  which  eventually  were  reorganized  pursuant  to the Third
         Amended Plan of  Reorganization  under the Bankruptcy Code for Polycast
         Technology  Corporation  and Its  Affiliated  Debtors (as  subsequently
         modified, the "Plan of Reorganization").

                  A substantial  portion of the thermoplastic  sheet business of
         the High Performance  Plastics segment,  which was sold in fiscal 2000,
         as  well  as the  businesses  of the  Coated  Fabrics  segment  and the
         Specialty Adhesives segment (formerly the Specialty Foams and Adhesives
         segment),  originated  in the chemical and plastics  operations  of the
         U.S. Rubber Company (later known as Uniroyal, Inc. ("Uniroyal").  These
         operations  were  conducted  by segments of Uniroyal  until 1985,  when
         Uniroyal  Plastics  Company,  Inc.  ("UPC") was formed by Uniroyal as a
         wholly-owned subsidiary to hold these operations.  In October 1986, The
         Jesup  Group,  Inc. ("Jesup")  indirectly,   through  its  wholly-owned
         subsidiary,  Uniroyal Plastics Acquisition Corp. ("UPAC"), acquired UPC
         from  Uniroyal.  Following its  acquisition  of UPC, Jesup combined the
         thermoplastic  sheet  operations  acquired  from UPC with its  existing
         thermoplastic  sheet and acrylic  sheet,  rod and tube  businesses in a
         subsidiary known as Polycast  Technology  Corporation ("Old Polycast").
         Jesup also  transferred  what is now the Coated Fabrics  segment of the
         Company's business into Uniroyal Engineered Products,  Inc. ("Old UEP")
         and the  adhesives  and sealants  business of what is now its Specialty
         Adhesives segment into Uniroyal  Adhesives and Sealants  Company,  Inc.
         ("Old UAS"). The assets of the specialty foam business were transferred
         from UPC to Ensolite, Inc. ("Old Ensolite"). Old Polycast, Old UEP, Old
         Ensolite  and  Old UAS  are  referred  to  herein  as the  "Predecessor
         Companies."  UPC is  currently  in  bankruptcy  liquidation  and was an
         affiliate of the Predecessor  Companies.  UPAC's plan of reorganization
         was substantially implemented in November 1993.

                  In October and November  1991, the  Predecessor  Companies and
         one other subsidiary of Jesup filed voluntary bankruptcy petitions with
         the  United  States  Bankruptcy  Court  for the  Northern  District  of
         Indiana,  South Bend Division (the "Bankruptcy Court") for relief under
         Chapter  11 of Title 11 of the United  States  Code,  as  amended  (the
         "Bankruptcy Code").

                  The plan of  reorganization  of the Predecessor  Companies was
         substantially  consummated on September 27, 1992.  Pursuant to the Plan
         of  Reorganization,  each  of  the  Predecessor  Companies  transferred
         substantially all of its assets to a newly organized  subsidiary with a
         name that was substantially  identical to the name of its corresponding
         Predecessor  Company.  In  exchange,  each of these  new  subsidiaries,
         including  Polycast  Technology  Corporation   ("Polycast"),   Uniroyal
         Engineered  Products,  Inc.  ("UEP"),  Uniroyal  Adhesives and Sealants
         Company, Inc. ("UAS") and Ensolite, Inc. ("Ensolite"), agreed to assume
         certain of the liabilities of its corresponding Predecessor Company. In
         addition, we issued, or authorized for issuance, 19,150,000 (post-split
         basis)  shares of our Common  Stock to  holders  of  allowed  unsecured
         claims  against  the  Predecessor  Companies  and 50 shares of Series A
         Preferred  Stock  and 50  shares  of  Series B  Preferred  Stock to the
         Pension Benefit Guaranty Corporation (the "PBGC"). The Bankruptcy Court
         issued its final  decree  closing  the  bankruptcy  of the  Predecessor
         Companies on September 27, 1999.

                  On June 7, 1993, in  conjunction  with the public  offering of
         our  11.75%  Senior  Secured  Notes,  we merged  each of our  operating
         subsidiaries  into the Company.  In May 1993 we called and  repurchased
         from the PBGC all of the outstanding shares of Series A Preferred Stock
         and 15 shares of the outstanding shares of Series B Preferred stock. On
         December 16,  1996,  we  repurchased  an  additional  15 shares of such
         stock,  and on February 4, 1997, we repurchased the remaining 20 shares
         of preferred stock. On November 13, 1997, the Company, certain officers
         and directors of the Company and certain other persons purchased all of
         the common stock held by the PBGC.

                  On April 14,  1998,  we  transferred  all of the assets of our
         High  Performance  Plastics  segment  to a newly  created  wholly-owned
         subsidiary,  High Performance  Plastics,  Inc. (HPPI). On that same day
         HPPI, as borrower,  entered into a credit  agreement  with Uniroyal HPP
         Holdings, Inc. (the parent of HPPI and a wholly-owned subsidiary of the
         Company), the Company and certain banks, including Fleet National Bank.
         The credit agreement provided, among other things, for the borrowing by
         HPPI of an aggregate principal amount of up to $110.0 million. On April
         14, 1998, HPPI paid approximately $95.0 million to the Company. We used
         this amount to defease the outstanding  11.75% Senior Secured Notes due
         June 1, 2003,  including the call premium and interest  accrued through
         the call date and to pay down its  revolving  line of credit  with CIT.
         The redemption of the outstanding Senior Secured Notes was completed by
         June 1, 1998 at a call premium of 4.41%.

                  On February 28, 2000, we sold  substantially all of the assets
         of our High Performance Plastics segment to Spartech  Corporation.  See
         "Business - General - Recent Developments."

         Certain Business Risks and Uncertainties

                  General

                  Possible Volatility of Stock Price

                  The market price of our common stock has been and may continue
         to be subject to wide  fluctuations.  Factors affecting the stock price
         may include:

                  o variations in our operating results and our competitors from
                    quarter to quarter;
                  o changes in earnings estimates by securities analysts;
                  o market  conditions  in the  compound  semiconductor,  coated
                    fabrics and specialty adhesives industries; and
                  o general economic conditions.

                  Our stock price has fluctuated  widely.  For example,  between
         the first quarter of 1999 and the first  quarter of 2000,  the high and
         low sale prices of our common stock  fluctuated  between  approximately
         $3.625 and $6.313 per share.  From the first quarter of 2000 to the end
         of the  fourth  quarter  of 2000,  the high and low sale  prices of our
         common stock fluctuated  between  approximately  $4.406 and $36.438 per
         share.  The prices have been  adjusted to give effect to the 100% stock
         dividend declared on March 10, 2000 for stockholders of record on March
         20,  2000.  The  current  market  price of our common  stock may not be
         indicative  of future market  prices,  and investors may not be able to
         sustain or increase the value of their investment in the common stock.

                  Competition

                  The   coated   fabrics,    specialty    adhesives,    compound
         semiconductor and optoelectronics  industries,  in general,  are highly
         competitive.   Many  of  our  competitors  have  substantially  greater
         resources  than  we  do.   Oversupply  and  intense  price  competition
         periodically  characterize  the coated fabrics and specialty  adhesives
         industries.

                  We believe  that our  reputation  for high  quality  products,
         innovative  technology and strong customer technical service permits us
         to  compete  successfully  in the  markets  that  we  presently  serve.
         However, we may not be able to continue to compete successfully in such
         markets or to apply such strengths  successfully to additional markets.
         In  addition,  new  entrants  may come into the markets  that we serve.
         Companies may offer  products  based on  alternative  technologies  and
         processes  that  may be  superior  to ours  in  price,  performance  or
         otherwise.

                  Joint Venture with Emcore Corporation

                  We  own,  through  a  wholly-owned  subsidiary,  the  majority
         interest in a joint venture company established with Emcore Corporation
         for the  production  of  HB-LEDs.  The joint  venture  company  and the
         business  of  Sterling   (100%  owned  by  us)  comprise  our  Compound
         Semiconductor and Optoelectronics  business segment.  The joint venture
         company is governed by a board of managers  with  representatives  from
         both Emcore and Uniroyal.  Certain  decisions  must be approved by both
         parties to the joint  venture,  which means we will be unable to direct
         extraordinary changes in the operation of the joint venture without the
         agreement  of  Emcore.  If  Uniroyal  and Emcore are unable to agree on
         important  issues,  the business of the joint venture may be delayed or
         interrupted,  which may materially  and adversely  affect our business,
         financial condition and results of operations.

                  We have  devoted  and will be  required  to continue to devote
         significant  funds and technologies to the joint venture to develop and
         enhance its products. In addition, the joint venture requires that some
         of  Uniroyal's  employees  devote  much  of  their  time  to the  joint
         venture's projects.  This could place a strain on Uniroyal's management
         and  financial  employees.  If the joint  venture  is  unsuccessful  in
         developing  and  marketing  its  products,   our  business,   financial
         condition  and results of operations  may be  materially  and adversely
         affected.

                  If the joint venture is successful, we share only a portion of
         the benefits in accordance with our 51% ownership interest in the joint
         venture.

                  Dependence on Management

                  The  continued  success  of  Uniroyal  depends  in part on our
         ability to retain certain members of senior management.  In particular,
         we are highly  dependent on the management  services of Howard R. Curd,
         our Chairman of the Board and Chief Executive Officer, Robert L. Soran,
         our President and Chief Operating Officer, and George J. Zulanas,  Jr.,
         our Executive Vice President and Chief Financial Officer. While we have
         entered  into  employment  agreements  with  Messrs.  Curd,  Soran  and
         Zulanas,  there can be no assurance  that such employees will not leave
         or compete with  Uniroyal.  Failure to retain senior  management  could
         have a material adverse effect on our business, financial condition and
         results of operations.

                  Dependence on Key Personnel

                  The  continued  success  of  Uniroyal  depends  in part on our
         ability  to  attract  and  retain  certain  key  personnel,   including
         scientific,  operational and management personnel. For example, some of
         the equipment  used in the  production of HB-LEDs and SiC products must
         be  modified  before  it is put to use,  and only a  limited  number of
         employees possess the expertise needed to perform these  modifications.
         Furthermore,   the  number  of  individuals   with  experience  in  the
         production  of HB-LEDs and SiC  products is limited.  Accordingly,  the
         future  success  of  the  Compound  Semiconductor  and  Optoelectronics
         segment depends in part on retaining those  individuals who are already
         employees.

                  The  competition  for  attracting  and  retaining   employees,
         especially    scientists   for   the   Compound    Semiconductor    and
         Optoelectronics   segment,   is  intense.   Because  of  this   intense
         competition for these skilled employees, we may be unable to retain our
         existing  personnel or attract  additional  qualified  employees in the
         future.  Specifically,  we may experience  increased  costs in order to
         attract  and  retain  skilled  employees.   Failure  to  retain  senior
         management  and  skilled  employees  and attract  additional  qualified
         employees  could  have a  material  adverse  effect  on  our  business,
         financial condition and results of operations.

                  Intellectual Property

                  Trade Secrets.  Our success and competitive position depend on
         protecting   our  trade  secrets  and  other   intellectual   property.
         Particularly with respect to the business of our Compound Semiconductor
         and Optoelectronics  segment,  including  Sterling,  our strategy is to
         rely more on trade  secrets than  patents to protect our  manufacturing
         and sales processes and products, but reliance on trade secrets is only
         an  effective   business  practice  insofar  as  trade  secrets  remain
         undisclosed  and a  proprietary  product  or  process  is  not  reverse
         engineered  or  independently  developed.  We take certain  measures to
         protect  our  trade   secrets,   including   executing   non-disclosure
         agreements with our employees,  joint venture  partners,  customers and
         suppliers.  If parties breach these  agreements or the measures we take
         are not  properly  implemented,  we may not  have an  adequate  remedy.
         Disclosure  of  our  trade  secrets  or  reverse   engineering  of  our
         proprietary  products,   processes  or  devices  could  materially  and
         adversely  affect our  business,  financial  condition  and  results of
         operations.

                  Patent Protection

                  Although we currently hold nine U.S. patents, these patents do
         not protect any material  aspects of the current or planned  commercial
         versions  of  our   products  for  our   Compound   Semiconductor   and
         Optoelectronics  business segment.  We are actively pursuing patents on
         some of our recent  inventions,  but these  patents  may not be issued.
         Even if these patents are issued,  they may be challenged,  invalidated
         or circumvented.  In addition,  the laws of certain other countries may
         not protect our intellectual property to the same extent as U.S. laws.

                  Other  companies  may hold or obtain  patents on inventions or
         may otherwise claim proprietary  rights to technology  necessary to our
         business,  especially  with  respect to the  business  of our  Compound
         Semiconductor and  Optoelectronics  segment.  We cannot assure you that
         third parties will not attempt to assert infringement claims against us
         with  respect to our  current or future  products,  including  our core
         products.  We cannot  predict the extent to which such  assertions  may
         require us to seek licenses or, if required, whether such licenses will
         be  offered  or offered on  acceptable  terms or that  disputes  can be
         resolved  without  litigation.  Litigation  against  us or  any  of our
         customers could impair our ability to sell our products.  Litigation to
         determine the validity of infringement  claims alleged by third parties
         could result in significant expense to us and divert the efforts of our
         technical and  management  personnel,  whether or not the litigation is
         ultimately determined in our favor. We cannot predict the occurrence of
         future intellectual  property claims that could prevent us from selling
         products,   result  in  litigation  or  give  rise  to  indemnification
         obligations or damage claims.

                  Protracted Product Qualification Periods

                  Many of the markets in which we compete are  characterized  by
         long lead times for new products requiring  significant working capital
         investment by us and extensive  testing,  qualification and approval by
         our customers and the end users of products. We face a significant risk
         that we will incur  significant  costs for  research  and  development,
         manufacturing equipment, training,  facility-related overhead and other
         expenses to develop such  products,  only to have our  customers or end
         users not select them.

                  Even if our products are eventually  approved and purchased by
         customers and end users,  our investment may fail to generate  revenues
         for several years while we develop and test such products.

                  Environmental Considerations

                  Our  operations  are subject to extensive  federal,  state and
         local laws and regulations:  (1) controlling the discharge of materials
         into the  environment  or otherwise  relating to the  protection of the
         environment;  and (2) regulating conditions which may affect the health
         and safety of workers.

                  The operation of any manufacturing  plant in the industries in
         which we  participate  entails  risks under such laws and  regulations,
         many of which provide for substantial fines and criminal  sanctions for
         violation.  For example, our manufacturing processes involve the use of
         certain  hazardous  raw  materials,  including,  but  not  limited  to,
         ammonia,  phosphine and arsene. If the control systems are unsuccessful
         in  preventing a release of these  materials  into the  environment  or
         other  adverse  environmental  conditions  occur,  we could  experience
         interruptions in our operations and incur  substantial  remediation and
         other  costs.  We  believe  that our  current  legal and  environmental
         compliance  and safety  programs  adequately  address such concerns and
         that  we  are  in  substantial  compliance  with  applicable  laws  and
         regulations. However, compliance with, or any violation of, current and
         future  laws  or   regulations   could  require  us  to  make  material
         expenditures  or  otherwise  have  a  material  adverse  effect  on our
         business, financial condition and results of operations.

                  Risks Associated with Acquisition Strategy

                  We  are  actively  pursuing  strategic   acquisitions  in  the
         compound semiconductor  industry.  Our business,  operating results and
         financial  condition  could be negatively  impacted if we are unable to
         integrate  businesses  we acquire.  We may not achieve the  anticipated
         benefits  from any  acquisition  unless  we  successfully  combine  the
         acquired  businesses  with those of Uniroyal in a timely and  efficient
         manner.  The  integration  of  acquisitions  could require  substantial
         attention  from our  management.  The  diversion  of the  attention  of
         management, and any difficulties encountered in the transition process,
         could negatively  impact  Uniroyal's  business,  operating  results and
         financial  condition.  In addition,  the process of integrating various
         businesses  could cause the  interruption of, or a loss of momentum in,
         the  activities  of  some  or all of  these  businesses  as well as our
         ongoing business.

                  Dividends

                  We have never paid any cash dividends on the common stock. The
         payment of any future  dividends  will be subject to the  discretion of
         our Board of  Directors  and will depend on our results of  operations,
         financial   position  and  capital   requirements,   general   business
         conditions,  legal  restrictions  on the payment of dividends and other
         factors our Board of Directors deems relevant. We can give no assurance
         that we will pay a dividend in the future.

                  Historical Performance No Indication

                  The  historical  share  prices and  earnings  performances  of
         Uniroyal are not  necessarily  indicative  of  Uniroyal's  future share
         price or earnings results.

                  Anti-Takeover Provisions

                  Provisions of Uniroyal's charter documents may have the effect
         of  delaying  or  preventing  a change in  control of  Uniroyal  or its
         management,  which could have a material  adverse  effect on the market
         price of the common stock. These include provisions:

                  o eliminating  the ability of  stockholders to take actions by
                    written consent; and
                  o limiting the ability of  stockholders  to raise matters at a
                    meeting of stockholders without giving advance notice.

                  Anti-takeover  provisions may adversely effect the stock price
         and make it more difficult for a third party to acquire Uniroyal.

                  In addition,  the Board of Directors has authority to issue up
         to 1,000 shares of preferred stock and to fix the rights,  preferences,
         privileges and  restrictions,  including voting rights, of these shares
         without any further vote or action by the  stockholders.  The rights of
         the holders of common  stock will be subject to, and could be adversely
         affected  by, the rights of the  holders  of any  preferred  stock that
         Uniroyal  may issue in the future.  The  issuance of  preferred  stock,
         while  providing  desirable  flexibility  in  connection  with possible
         acquisitions  and other  corporate  purposes,  could have the effect of
         making it more  difficult  for a third  party to acquire a majority  of
         Uniroyal's  outstanding  voting stock,  thereby delaying,  deferring or
         preventing a change in control of Uniroyal.

                  Uniroyal's  Stockholder Rights Plan has certain  anti-takeover
         effects.  The plan  grants to holders of common  stock the right,  when
         exercisable,  to  purchase  from  Uniroyal  a  fraction  of a share  of
         Uniroyal's  series C preferred stock. This right will cause substantial
         dilution to a person or group that attempts to acquire Uniroyal without
         conditioning  the offer on the rights being  redeemed or a  substantial
         number of rights being acquired.

                  Risk Factors  Associated with Uniroyal's  Specialty  Adhesives
                    and/or Coated Fabrics Business Segments

                  Labor Relations

                  We are a party to two collective bargaining agreements. During
         July 1999,  negotiations  with the  United  Steel  Workers of  America,
         United  Rubber  Workers  Division,  in connection  with the  collective
         bargaining   agreement  covering  the  hourly  wage  employees  at  our
         adhesives and sealants  manufacturing  facility  located in South Bend,
         Indiana, broke down, and a strike ensued for approximately three weeks.
         The strike did not have a material  adverse effect on operations of the
         Specialty Adhesives business segment.

                  Although we believe our relationships with employees are good,
         we can give no assurance that we will successfully negotiate the hourly
         wages and/or  benefits of employees at two of our  facilities  when the
         applicable collective bargaining agreements expire. Moreover, the wages
         and/or benefits we may agree upon might adversely  affect the segments'
         profitability.  Furthermore,  if we were the subject of another strike,
         we could incur significant costs.

                  Maturity of Business Sectors

                  Our Specialty Adhesives and Coated Fabrics segments compete in
         mature  business  sectors.  We believe the key to generating  growth in
         such sectors (besides  acquiring other  businesses) is to introduce new
         products or product  innovations that address unsatisfied market needs.
         We believe we will need to continue to significantly  increase revenues
         from product  sales and increase  profitability  in these  sectors.  We
         further  believe that  significant  investment  in product  development
         and/or  acquisitions  or a  combination  thereof  over the  mid-term is
         necessary  to do so.  We can  give  no  assurance  that  we  will  have
         resources  available for, or otherwise be successful in, any efforts to
         achieve such growth.

                  Customer Concentration

                  Our  Specialty  Adhesives  business  segment  sells splice and
         bonding  adhesives  for  the  rubber  roofing  market   exclusively  to
         Firestone   Building  Products  Company.   Approximately  64%  of  this
         segment's  fiscal  2000  sales and 30% of  Uniroyal's  net  sales  were
         roofing  product  shipments  to  Firestone.  The loss of Firestone as a
         customer  would  have an  adverse  effect  on the  Specialty  Adhesives
         segment and Uniroyal.

                  Seasonality

                  The  roofing  adhesives  business of the  Specialty  Adhesives
         segment is seasonal.  It increases in the warmer months of the year due
         to an increase in commercial roofing and other construction  activities
         in such months, and is sensitive to adverse weather conditions.

                  Cyclicality

                  The  recreational  vehicle,  marine and roofing  markets among
         others in which the Coated  Fabrics and  Specialty  Adhesives  segments
         compete are sensitive to changes in general  economic  conditions which
         affect  demand for the  commercial  and consumer  items that the Coated
         Fabrics and Specialty Adhesives business segments manufacture.

                  Risk Factors Associated with Uniroyal's Compound Semiconductor
                    and Optoelectronics Business Segment

                  Operating Results Depend on Development of New Products

                  The  future   success  of  the  Compound   Semiconductor   and
         Optoelectronics  segment depends on our ability to develop new products
         and  technology  in the  optoelectronics  and SiC  industries.  We must
         introduce new products in a timely and cost-effective manner and secure
         production orders from our customers. The development of new HB-LED and
         SiC products is a highly complex  process.  The successful  development
         and  introduction  of these  products  depends on a number of  factors,
         including the following:

                  o achievement  of  technology  breakthroughs  required to make
                    commercially viable devices;
                  o the accuracy of our predictions of market  requirements  and
                    evolving standards;
                  o acceptance of our new product designs;
                  o our ability to recruit  and retain  qualified  research  and
                    development personnel;
                  o timely completion of product designs and development;
                  o our ability to develop  repeatable  processes to manufacture
                    new products in sufficient quantities for commercial sales;
                  o acceptance of the products of the Compound Semiconductor and
                    Optoelectronics segment's customers by the market; and
                  o consistent cost-effective manufacturing processes.

                  If any of these or other factors  become  problematic,  we may
         not be able to develop and introduce  these new products in a timely or
         cost-effective manner.

                  Limited Operating History and Operating Losses

                  The  Compound   Semiconductor  and  Optoelectronics   business
         segment  is in  the  development  stage  and  has a  limited  operating
         history. The segment will face risks and difficulties as an early stage
         business in a high growth and rapidly  evolving  industry.  Some of the
         specific risks and difficulties for the segment include the following:

                  o building out our operational infrastructure;
                  o expanding our sales structure and marketing programs;
                  o increasing awareness of our products;
                  o providing  services to our  customers  that are reliable and
                    cost-effective;
                  o responding to technological development or product offerings
                    by competitors; and
                  o attracting and retaining qualified personnel.

                  As of October 1, 2000, the  Optoelectronics  joint venture had
         an accumulated  deficit of  approximately  $21.0  million.  It incurred
         losses of  approximately  $16.2  million in fiscal 2000.  We expect the
         joint  venture to continue  to incur  losses.  As of December  31, 1999
         (prior to the  acquisition of Sterling by us),  Sterling's  accumulated
         deficit  was  approximately   $4.9  million.   It  incurred  losses  of
         approximately  $3.1 million in calendar  year 1999  (Sterling's  fiscal
         year was a calendar  year end prior to its  acquisition  by  Uniroyal).
         Since its  acquisition by us,  Sterling has incurred losses of $788,000
         prior to intangible and goodwill  amortization  and the  recognition of
         acquired  in-process  research and  development.  We expect Sterling to
         continue to incur  losses.  To support the  segment's  growth,  we have
         increased  our expense  levels and our  investments  in  inventory  and
         capital equipment.  As a result, we will need to significantly increase
         revenues  and  profit  margins  for  the  Compound   Semiconductor  and
         Optoelectronics segment to become and stay profitable. If the segment's
         sales and profit  margins do not increase to support the higher  levels
         of  operating  expenses  and if  its  new  product  offerings  are  not
         successful, our business, financial condition and results of operations
         could be materially and adversely affected.

                  Production and Expansion Risks

                  The  Compound  Semiconductor  and  Optoelectronics  segment is
         experiencing  rapid growth.  We have added a significant  number of new
         employees to our Compound  Semiconductor and Optoelectronics  business.
         We have a  newly-constructed  plant in Tampa,  Florida  to  manufacture
         epitaxial wafers and  package-ready  dies for use in HB-LEDs.  We began
         limited  production  at our  Tampa  facility  in the  Spring  of  2000.
         However,  equipment  difficulties have delayed commercial production at
         this facility.  We expect to reach commercial  production levels in the
         first half of fiscal  2001,  although we cannot be certain that we will
         do so.  We are  planning  to build  additional  capacity  at the  Tampa
         facility  within  the next  year.  We are also  planning  to expand the
         physical facilities for Sterling in the next year. Expansion activities
         such  as  these  are  subject  to a  number  of  risks,  including  the
         following:

                  o unforeseen environmental or engineering problems relating to
                    the existing facilities;
                  o unavailability  or late delivery of the advanced,  and often
                    customized,   equipment   used  in  the  production  of  the
                    segment's products;
                  o attracting and retaining qualified personnel;
                  o work stoppages and delays; and
                  o delays in bringing production equipment on-line.

                  This   growth  has  placed  and  will   continue  to  place  a
         significant  strain  on our  management,  financial,  sales  and  other
         employees and on our internal systems and controls. If we are unable to
         effectively  manage the rapid growth of the Compound  Semiconductor and
         Optoelectronics segment, our business,  financial condition and results
         of operations could be materially and adversely affected.

                  Rapid Changes in Technology

                  The  Compound   Semiconductor  and   Optoelectronics   segment
         competes  in  markets  characterized  by  rapid  technological  change,
         evolving  industry  standards and continuous  improvements in products.
         Due to constant changes in these markets, its future success depends on
         our ability to improve our  manufacturing  processes  and tools and our
         products.   To  remain  competitive,   we  must  continually  introduce
         manufacturing tools with higher capacity and better production yields.

                  Because we generally  are unable to predict the amount of time
         required  and  the  costs  involved  in  achieving   certain  research,
         development and engineering objectives,  actual development costs could
         exceed budgeted amounts,  and estimated product  development  schedules
         could be extended.  Our  business,  financial  condition and results of
         operations  could be materially and adversely  affected if with respect
         to the Compound Semiconductor and Optoelectronics business:

                  o we are unable to improve our  existing  products on a timely
                    basis;
                  o our new products are not introduced on a timely basis;
                  o we incur  budget  overruns  or  delays in our  research  and
                    development efforts; or
                  o our new products experience reliability or quality problems.

                  Dependence on Key Suppliers

                  We depend on a limited  number of  suppliers  for  certain raw
         materials,  components and equipment used in the Compound Semiconductor
         and  Optoelectronics  segment,  including  certain  key  materials  and
         equipment used in our wafering, polishing, epitaxial deposition, device
         fabrication and device test processes. In addition, the availability of
         these materials, components and equipment to us is dependent in part on
         our ability to provide our  suppliers  with  accurate  forecasts of our
         future requirements. We endeavor to maintain ongoing communication with
         our  suppliers to guard against  interruptions  in supply and, to date,
         generally have been able to obtain adequate supplies in a timely manner
         from our existing sources.  However,  any interruption in the supply of
         these key materials,  components or equipment  could have a significant
         adverse effect on our operations.

                  Difficulty in Manufacturing Products

                  The   manufacture   of   the   Compound    Semiconductor   and
         Optoelectronics  segment's  products  is a highly  complex  and precise
         process.  We are  working to  manufacture  all of our HB-LED  epitaxial
         wafers  and dies at our Tampa,  Florida  facility.  Minute  impurities,
         difficulties in the production process,  defects in the layering of the
         wafers'  and  dies'  constituent  compounds,  wafer  breakage  or other
         factors  can cause a  substantial  percentage  of wafers and dies to be
         rejected or  numerous  dies on each wafer to be  non-functional.  These
         factors  can result in lower than  expected  production  yields,  which
         would delay product shipments and could materially and adversely affect
         our operating results.  Because the majority of the manufacturing costs
         for the  Optoelectronics  business are relatively  fixed, the number of
         shippable  dies  per  wafer  for a given  product  is  critical  to the
         segment's financial results. Additionally,  because we manufacture most
         of our HB-LEDs at our facility in Tampa,  Florida,  any interruption in
         manufacturing resulting from fire, natural disaster, equipment failures
         or  otherwise  could  materially  and  adversely  affect  the  Compound
         Semiconductor  and  Optoelectronics   segment's   business,   financial
         condition and results of operations.

                  A  new  facility  for  the   Sterling   operations   is  under
         construction in Sterling,  Virginia.  The new facility will allow for a
         significant  expansion of Sterling's current  operations.  Construction
         delays and or new equipment delivery delays could prolong our expansion
         efforts and adversely affect our operating results.

Item 2.  Properties

                  The  following  table sets forth the location,  size,  general
         character and nature of the Company's facilities:
<TABLE>
<CAPTION>
                                    SQUARE FEET       GENERAL CHARACTER
LOCATION AND ENTITY                 OF FACILITY          OF PROPERTY                          LEASED OR OWNED
-------------------                 -----------       ------------------                      ----------------
<S>                                 <C>               <C>                                     <C>
Corporate
---------
Sarasota, Florida                         11,000      Corporate offices                             Leased
Stirling, New Jersey                      50,000      Previously manufactured acrylic sheet,        Owned
                                                        rods & tubes - currently for sale
Port Clinton, Ohio                       240,000      Previously manufactured coated fabrics        Owned
                                                        products - currently for sale
Coated Fabrics Segment
----------------------
Stoughton, Wisconsin                     198,275      Manufacture of coated fabrics products        Owned

Specialty Adhesives Segment
---------------------------
South Bend, Indiana                      240,000      Manufacture of adhesives and sealants         Owned

Compound Semiconductor and
  Optoelectronics Segment
--------------------------
Danbury, Connecticut                       4,735      Manufacture of SiC wafers                     Leased
Tampa, Florida                            77,000      Manufacture of epitaxial wafers and
                                                        package-ready die                           Leased
Carol Stream, Illinois                    12,000      Development of optoelectronic devices         Leased
Sterling, Virginia                        50,000      Future manufacturing site for SiC wafers      Leased
Sterling, Virginia                        14,000      Research and development, SiC technology      Leased
</TABLE>


Item 3.  Legal Proceedings

                  By letter dated January 30, 1998, the Denver  Regional  Office
         of the U.S.  Federal Trade  Commission  ("FTC") notified us that it was
         conducting  a  non-public  investigation  into our  acquisition  of the
         Townsend  Plastics  Division of Townsend  Industries in September 1997.
         The  purpose  of  the   investigation  was  to  determine  whether  the
         transaction  violated  Section 7 of the Clayton Act, 15 U.S.C.  Section
         18, Section 5 of the Federal Trade  Commission  Act, 15 U.S.C.  Section
         45, or any other law enforced by the FTC.  While no formal  termination
         of the preceding has been issued, the Company was unofficially informed
         in April 2000, that the investigation  was  discontinued.  The Townsend
         business was sold to Spartech in February, 2000.

                  We are involved in certain  proceedings in the ordinary course
         of our business which, if determined adversely to the Company would, in
         our opinion,  not have a material  adverse effect on the Company or our
         operations.

                  In connection  with its  reorganization,  the Company  entered
         into a number of settlement  agreements,  including certain  agreements
         relating to environmental  matters.  See "Item 1. Business - History of
         the Company - Predecessor Companies."

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

                  No matter was  submitted  during the fourth  quarter of fiscal
         2000 to a vote of security holders, through the solicitation of proxies
         or otherwise.

Part II

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

                  Prior to the  effective  date of the  Plan of  Reorganization,
         none of the  Company's  common  stock,  par value  $.01 per share  (the
         "Common  Stock"),  was  issued,  and  consequently  there was no public
         market for the Common  Stock.  The Common Stock was admitted to trading
         on the NASDAQ National  Market System  ("NASDAQ") on September 28, 1992
         and trades under the symbol "UTCI." At the close of trading on November
         30, 2000, the price per share of Common Stock was $7.00.

                  As of November 30, 2000, there were 1,125 holders of record of
         shares of Common Stock.

                  The  following  table sets forth the high and low sales  price
         per share of the  Company's  Common Stock as reported by NASDAQ for the
         indicated  dates.  The prices have been  adjusted to give effect to the
         two-for-one  stock split declared on March 10, 2000 for stockholders of
         record on March 20, 2000:
<TABLE>
<CAPTION>

                                          Fiscal Year Ended                            Fiscal Year Ended
                                           October 1, 2000                            September 26, 1999
                               ----------------------------------------     ----------------------------------------
                Quarter               High                Low                       High                 Low
                -------             ---------         ----------                 ---------            ---------
<S>                                 <C>               <C>                        <C>                  <C>
                First               $  13.180         $    4.406                 $   5.375            $   4.500
                Second              $  36.438         $   10.281                 $   5.125            $   3.969
                Third               $  26.875         $   10.250                 $   4.969            $   3.625
                Fourth              $  18.875         $   11.000                 $   6.313            $   4.750
</TABLE>

                  We have never paid cash  dividends  on our common  stock.  The
         payment of any future  dividends  will be subject to the  discretion of
         the Board of  Directors  of Uniroyal  and will depend on our results of
         operations,  financial  position  and  capital  requirements,   general
         business conditions, legal restrictions on the payment of dividends and
         other factors our Board of Directors deem relevant. We currently do not
         anticipate paying cash dividends on the common stock in the foreseeable
         future.


<PAGE>
Item 6.  Selected Financial Data

                  The following  historical financial data as of October 1, 2000
         ("Fiscal  2000") and September 26, 1999 ("Fiscal 1999") and for each of
         the three years in the period  ended  October 1, 2000 have been derived
         from  consolidated  financial  statements  of the  Company  audited  by
         Deloitte & Touche LLP and  contained  elsewhere in this Form 10-K.  The
         selected historical  financial data presented below as of September 27,
         1998 ("Fiscal 1998"), September 28, 1997 and September 29, 1996 and for
         the fiscal years ended  September  28, 1997 and September 29, 1996 have
         been derived from audited financial  statements of the Company.  All of
         the financial data set forth below should be read in  conjunction  with
         the  Consolidated  Financial  Statements  and  related  notes and other
         financial information contained in this Form 10-K.
<TABLE>
<CAPTION>
                                                               SELECTED FINANCIAL DATA
                                                        (in thousands, except share and per share data)
                                                                   Fiscal Year Ended
                                        ------------------- ------------------ ------------------- ------------------ --------------
                                            October 1,        September 26,       September 27,      September 28,     September 29,
                                               2000               1999                1998               1997               1996
                                        ------------------- ------------------ ------------------- ------------------ --------------
Operating Data:
<S>                                       <C>                 <C>                <C>                 <C>                <C>
Net sales                                 $    68,253         $    71,214        $    92,036         $    89,677        $    94,278
Depreciation and other amortization (1)         8,145               3,505              3,618               4,117              6,163
(Loss) income  before interest,
  income  taxes, minority interest,
  discontinued operations and
  extraordinary item                          (45,834)             (2,682)             6,708                  47            (19,720)
Interest income (expense) - net                 1,075                (778)            (2,163)             (3,233)            (4,082)
Income tax  benefit (expense)                  26,182               2,520             (2,443)                928              8,313
(Loss) income before minority
  interest, discontinued operations
  and extraordinary item                      (18,577)               (940)             2,102              (2,258)           (15,489)
Minority interest                               7,918               2,191                199                   -                  -
(Loss) income from continuing
  operations before discontinued
  operations and extraordinary item           (10,659)              1,251              2,301              (2,258)           (15,489)
Income from discontinued operations,
  net of income tax expense                    57,346               4,269              5,726               2,637              1,088
Extraordinary loss                                  -                   -             (5,637)                  -                  -
Net income (loss)                         $    46,687         $     5,520        $     2,390         $       379        $   (14,401)
Income (loss) per common share -
  basic: (2), (3)
  (Loss) income from continuing
    operations                            $     (0.43)        $      0.05        $      0.09         $     (0.09)       $     (0.60)
  Income from discontinued
    operations                                   2.30                0.18               0.21                0.10               0.04
  Extraordinary loss                                -                   -              (0.21)                  -                  -
                                          -----------         -----------        -----------         -----------        -----------
  Net income (loss) per share             $      1.87         $      0.23        $      0.09         $      0.01        $     (0.56)
                                          ===========         ===========        ===========         ===========        ===========
Average number of shares used in
  computation (3)                          24,937,364          24,315,992         26,463,084          26,633,930         26,334,932
Income (loss) per common share -
  assuming dilution:(2), (3)
  (Loss) income  from continuing
     operations                           $     (0.43)        $      0.05        $      0.08         $     (0.09)       $     (0.60)
  Income from discontinued
    operations                                   2.30                0.16               0.19                0.10               0.04
  Extraordinary loss                                -                   -              (0.19)                  -                  -
                                          -----------         -----------        -----------         -----------        -----------
  Net income (loss) per share             $      1.87         $      0.21        $      0.08         $      0.01        $     (0.56)
                                          ===========         ===========        ===========         ===========        ===========
Average number of shares used in
computation (3)                            24,937,364          26,572,668         29,262,136          26,633,930         26,334,932

Balance Sheet Data:
Cash and cash equivalents                 $    36,627         $     4,145        $     4,099         $       231        $     2,010
Working capital (deficiency)                   36,282             (10,597)           (13,612)             74,817             63,996
Total assets                                  190,032             107,907             91,540             168,589            161,671
Long-term debt (including current
  portion)                                     22,164              29,651              2,592              86,753             72,155
Stockholders' equity                          106,849              31,133             32,311              40,032             43,499
</TABLE>
                 ---------------------------------------------------------------
                  (1) Includes amortization of reorganization value in excess of
                  amounts allocable to identifiable assets of $377,000, $754,000
                  and $765,000 for the fiscal  years ended  September  27, 1998,
                  September 28, 1997 and September 29, 1996, respectively.

                  (2)Includes  effect of preferred  stock  dividends of $220,000
                  and $420,000 declared for the fiscal years ended September 28,
                  1997 and September 29, 1996, respectively.

                  (3)Includes  the  retroactive  effect of a  two-for-one  stock
                  split declared on March 10, 2000 for stockholders of record on
                  March 20, 2000.
<PAGE>
Item 7.  Management's Discussion and Analysis of Financial Condition and Results
           of Operations

                  The  following   discussion  and  analysis  by  the  Company's
         management  should  be read  in  conjunction  with  "Item  6.  Selected
         Financial  Data" and "Item 8.  Consolidated  Financial  Statements  and
         Supplementary Data" appearing elsewhere in this Form 10-K.

         Results Of Operations

                 Comparison of Fiscal 2000 with Fiscal 1999

                 Three  non-recurring  events materially  affected our financial
         performance   discussed   below.   On  February  28,   2000,   we  sold
         substantially  all of the net assets of our High  Performance  Plastics
         segment to Spartech.  That segment  accounted for  approximately 65% of
         our Fiscal 1999 revenues and 77% of our Fiscal 1999 net income.  On May
         31, 2000, we acquired  Sterling  Semiconductor,  Inc. This  acquisition
         expanded  our  commitment  to  the  compound  semiconductor   business.
         Finally,  in Fiscal 2000 the effects of the 1998 sale of the automotive
         portion of the Coated Fabrics segment were fully  realized.  The runoff
         revenues  from that  operation of $13.1 million in Fiscal 1999 declined
         to $631,000 in Fiscal 2000.

                 Net Sales.  The Company's net sales decreased in Fiscal 2000 by
         approximately  4% to $68.3  million from $71.2  million in Fiscal 1999,
         primarily  due to the sale of the  automotive  operations of the Coated
         Fabrics  segment  in Fiscal  1998 and the  gradual  phase-out  of those
         operations.   Excluding  automotive  sales  from  both  periods,  sales
         increased 16% in Fiscal 2000 compared to Fiscal 1999. The 16% increase,
         excluding automotive sales from both periods, was due to an increase in
         sales from the Compound  Semiconductor and Optoelectronics  segment and
         the  inclusion  of  fifty-three  weeks in Fiscal 2000 versus  fifty-two
         weeks in Fiscal 1999.

                  The Coated Fabrics segment's net sales decreased approximately
         21% in Fiscal 2000 to $33.7  million from $42.3 million in Fiscal 1999.
         The decrease resulted  primarily from a decline in automotive sales due
         to the gradual phase-out of its automotive operations. Automotive sales
         approximated  $631,000  during  Fiscal 2000  compared to  approximately
         $13.1  million in Fiscal  1999.  Excluding  automotive  sales from both
         periods,   sales  of  Naugahyde(R)   vinyl  coated  fabrics   increased
         approximately 13% in Fiscal 2000 as compared to Fiscal 1999 as a result
         of an increase in unit volume and selling  prices and the  inclusion of
         fifty-three weeks in Fiscal 2000 versus fifty-two weeks in Fiscal 1999.

                  Net sales by the  Specialty  Adhesives  segment  increased  in
         Fiscal 2000 by approximately 11% to $31.6 million from $28.4 million in
         Fiscal 1999, primarily due to increased sales of its branded industrial
         adhesives and sealant  products and the inclusion of fifty-three  weeks
         in Fiscal 2000 versus fifty-two weeks in Fiscal 1999.

                  Net sales by the Compound  Semiconductor  and  Optoelectronics
         segment  for Fiscal  2000 were $3.0  million  compared  to  $485,000 in
         Fiscal  1999.  The  increase  is  attributable  to the  acquisition  of
         Sterling  in Fiscal 2000 and net sales from  Sterling of  approximately
         $1.2 million, as well as an increase in the sales at the joint venture.
         The Compound  Semiconductor and  Optoelectronics  segment began limited
         commercial  sales and  production  in  Fiscal  2000 but is still in the
         development stage.

                  (Loss) Income Before Interest, Income Taxes, Minority Interest
         and  Discontinued  Operations.  Loss  before  interest,  income  taxes,
         minority interest and discontinued operations for Fiscal 2000 was $45.8
         million,  compared  to a loss of $2.7  million  for  Fiscal  1999.  The
         greater loss is due to the net effect of a number of non-recurring  and
         unusual items including:

                  o the  gain  realized  on the  sale of the  investment  in the
                    preferred stock of Emcore Corporation ($2.9 million);

                  o the  write-off of a note  receivable  (and  related  accrued
                    interest)  related to the sale of the  Ensolite  closed cell
                    foam  division,  due to the  deterioration  of the financial
                    condition  of the buyer (RBX  Group,  Inc.) as a result of a
                    prolonged  strike at its  major  facility  and the  ultimate
                    settlement of the note with RBX Group, Inc. ($5.4 million);

                  o a reduction in the fair value of certain property, plant and
                    equipment  related  to  the  Company's  Port  Clinton,  Ohio
                    facility  which is expected to be disposed of in Fiscal 2001
                    ($1.8 million);

                  o payments made in connection  with the sale of the net assets
                    of  the  High  Performance   Plastics   segment,   including
                    incentive payments and benefit costs to and for officers and
                    directors  related to the  achievement of certain  strategic
                    initiatives  ($5.3  million) and a special  contribution  of
                    Company  stock to the 401(k) plan for  incentives  to retain
                    key personnel ($2.2 million);

                  o the  write-down  of a  technology  license  of $4.0  million
                    related  to the  future  transfer  of  technology  for  high
                    brightness  light  emitting  diodes  (HB-LEDs)  from  Emcore
                    Corporation;   (the  Company  has  added  highly   qualified
                    scientists  to  internally   advance  and  develop   certain
                    technology for HB-LEDs);

                  o the   write-off   of  acquired   in-process   research   and
                    development   ("IPR&D")  of  $6.6  million  related  to  the
                    acquisition  of  Sterling  on May 31,  2000  (see  "Item  1.
                    Business - Recent Developments");

                  o a  reduction  of  revenues   associated   with  the  gradual
                    phase-out of the automotive operations of the Coated Fabrics
                    segment; and

                  o start-up   losses  for  the   Compound   Semiconductor   and
                    Optoelectronics segment.

         Also during  Fiscal 2000,  there were no corporate  allocations  to the
         discontinued  operations of the High Performance  Plastics segment. The
         corporate allocations for Fiscal 1999 were $4.6 million.

                  The Coated  Fabrics  segment's  loss before  interest,  income
         taxes, minority interest and discontinued operations in Fiscal 2000 was
         $276,000  compared  to  income of $4.2  million  in  Fiscal  1999.  The
         decrease  is  attributable  to the loss of  revenues  from the  gradual
         phase-out of its automotive operations,  as well as certain incremental
         costs  related  to the  closure  of the  Port  Clinton,  Ohio  facility
         previously used to produce automotive products,  the write-down to fair
         value of certain  machinery and equipment to be disposed of at the Port
         Clinton,  Ohio  facility  of  approximately  $657,000,  and  a  special
         contribution to the 401(k) plan for eligible participants of the Coated
         Fabrics segment of approximately $506,000.

                  The Specialty  Adhesives  segment's  income  before  interest,
         income taxes,  minority interest and discontinued  operations in Fiscal
         2000 and Fiscal 1999 was $2.7.  In Fiscal 2000, a special  contribution
         to the 401(k) plan for eligible participants of the Specialty Adhesives
         segment of $459,000 was  substantially  offset by the increase in sales
         volume of branded industrial products.

                  The Compound Semiconductor and Optoelectronics  segment's loss
         before  interest,  income  taxes,  minority  interest and  discontinued
         operations in Fiscal 2000 was $25.8  million compared to a loss of $5.1
         million in Fiscal 1999.  The losses relate to the start-up and training
         costs of the Compound  Semiconductor and Optoelectronics  segment and a
         special  contribution  to the 401(k) plan for eligible  participants of
         the Compound Semiconductor and Optoelectronics segment of approximately
         $638,000. Also contributing to the increase in loss is a charge of $6.6
         million   related  to  acquired   IPR&D  and  goodwill  and  intangible
         amortization  of $2.3 million  during Fiscal 2000  attributable  to the
         purchase  of certain  assets of  Sterling  which were  acquired  by the
         Company on May 31, 2000. The goodwill and intangible  assets associated
         with the acquisition of approximately $34.5 million are being amortized
         over five years.

                  The identifiable  intangible assets and IPR&D of Sterling were
         valued on the  acquisition  date using an income  approach  and, in the
         case of the trained  workforce  intangible  asset,  a cost to replicate
         approach.  In the income approach, a cash flow was developed associated
         with the respective  asset after charges for the use of existing assets
         (as  applicable)  and  consideration  of the economic life of the asset
         (reflected  by  the  obsolescence   factor).   The  income  stream  was
         discounted to its present value based upon the estimated discount rate.
         The discount  rate was based upon our required  rate of return,  useful
         life of the technology and risks associated with the timely  completion
         of the product lines. In the case of IPR&D, the "exclusionary rule" was
         applied by which the indicated  value was multiplied by the estimate of
         the  percentage  of the total  technology  that was  complete as of the
         valuation date.  Percentage of completion was determined based upon the
         relative  number of  critical  issues  solved  to the  total  number of
         critical issues identified.  Significant  appraisal assumptions include
         revenue  projections,  margins and expense levels and the risk adjusted
         discount rate applied to the project's expected cash flows.

                  As  of  the  acquisition   date,   Sterling  had  developed  a
         commercial  production  capability  for 2-inch 4H and 6H  (measures  of
         hardness) SiC wafers.  Sterling was also engaged in concurrent  efforts
         to develop  potential  product  lines for large  diameter  (3-inch  and
         4-inch 4H and 6H) wafers,  semi-insulating  wafers,  epitaxial coatings
         and device  designs  that would  produce an  economical  device die for
         discrete semiconductor devices.
<PAGE>

                  The purchased IPR&D is summarized as follows (in thousands):
<TABLE>
<CAPTION>

            IPR&D Technology            Discount     Economic     Percent                       Expected Date for Full
              Description                 Rate         Life       Complete        Fair Value    Commercial Viability
          ------------------------      --------     --------     --------        ----------    ----------------------
<S>                                     <C>           <C>             <C>         <C>                 <C>
          3" and 4" large diameter
          SiC wafers                       32.7%      11 years        70%         $    858            2004
          Semi-insulating wafers           32.7%      11 years        75%              456            2004
          Epitaxy coatings                 32.7%      11 years        40%              723            2005
          Devices                          32.7%      11 years        40%            4,553            2005
                                                                                  --------
          Total IPR&D                                                             $  6,590
                                                                                  ========
</TABLE>

                  The cost to complete all projects  approximates $13.2 million.
         The nature of the efforts  required to develop the acquired  IPR&D into
         technologically  feasible and commercially viable products  principally
         relate to the completion of all planning, design and testing activities
         necessary  to  establish  a product  that can be  produced  to meet its
         design  requirements   including  functions,   features  and  technical
         performance  requirements.  The Company  currently expects the acquired
         IPR&D will be successfully  developed but there can be no assurance the
         technological  feasibility  or commercial  viability of these  products
         will be achieved. If none of these products are successfully developed,
         the  Company's  sales and  profitability  may be adversely  affected in
         future periods.

                  Approximately  $22.4 million of net costs,  non-recurring  and
         unusual  items  recorded  in  Fiscal  2000  were not  allocated  to any
         business  segment  compared to $4.5  million of  unallocated  costs for
         Fiscal 1999. Included in the non-allocated items in Fiscal 2000 are the
         following:

                  o gain realized on the sale of the investment in the preferred
                    stock of Emcore Corporation ($2.9 million);

                  o the  write-off  of the RBX  Group,  Inc.  note (and  related
                    accrued interest) ($5.4 million);

                  o a reduction  in the fair value of real  property  related to
                    the Company's Port Clinton,  Ohio facility which is expected
                    to be disposed of this year ($1.1 million);

                  o incentive payments and benefit costs to and for officers and
                    directors  related to the  achievement of certain  strategic
                    initiatives ($5.3 million);

                  o the  write-down  of a  technology  license  of $4.0  million
                    related  to the  future  transfer  of  technology  for  high
                    brightness  light  emitting  diodes  (HB-LEDs)  from  Emcore
                    Corporation   (the  Company  has  added   highly   qualified
                    scientists to internally  develop and advance the technology
                    for HB-LEDs); and

                  o a  special   contribution   of  Company  stock  to  eligible
                    participants  of  the  corporate   office  of  approximately
                    $554,000 for the 401(k) plan.

         Also during  Fiscal 2000,  there were no corporate  allocations  to the
         discontinued operations of the High Performance Plastics segment. Prior
         year corporate allocations for Fiscal 1999 were $4.6 million.

                  Interest Income (Expense). Interest income for Fiscal 2000 was
         $3.2  million  compared  to $225,000 in Fiscal  1999.  The  increase is
         attributable  to  interest  income  earned  on  the  investment  of the
         proceeds  received  from the  sale of the  Company's  High  Performance
         Plastics  segment on  February  28,  2000.  Interest  expense  was $2.1
         million in Fiscal 2000  compared to $1.0  million in Fiscal  1999.  The
         increase in interest  expense is due to a lower  amount of  capitalized
         interest in Fiscal 2000  compared to Fiscal 1999.  During  Fiscal 2000,
         approximately $287,000 of interest was capitalized related to the build
         out  of  the  Optoelectronics   facility  in  Tampa,  Florida,   versus
         approximately $791,000 in Fiscal 1999.

                  Income  Tax  Benefit.  Income tax  benefit in Fiscal  2000 was
         $26.2  million  as  compared  to  $2.5  million  in  Fiscal  1999.  The
         provisions  for income tax benefit were  calculated  through the use of
         the estimated  income tax rates based upon  annualized  income.  Fiscal
         2000  benefited  from the  reversal of $13.7  million of  deferred  tax
         valuation allowance related to capital loss carryforwards. The reversal
         was  due to the use of the  capital  losses  to  offset  capital  gains
         resulting  from the sale of the preferred  stock of Emcore  Corporation
         and the sale of the High Performance Plastics segment.

                  Discontinued   Operations.   Net  income   from   discontinued
         operations of the High Performance  Plastics segment increased to $57.3
         million in Fiscal 2000  compared to $4.3  million in Fiscal  1999.  The
         increase is  attributable  to the net effect of the gain  recognized on
         the February 28, 2000 sale of the High Performance  Plastics segment of
         approximately  $55.8  million  (net of  taxes  of  approximately  $38.1
         million)  and  operating  income for the period  September  27, 1999 to
         February 28, 2000.  The decline in  operations is primarily a result of
         production inefficiencies at the Stamford,  Connecticut facility due to
         a major  plant  modernization  and only five  months of  operations  in
         Fiscal 2000 versus  twelve  months of  operations  in Fiscal 1999.  The
         decline in  operations  was  partially  offset by the  suspension  of a
         corporate allocation to this segment in Fiscal 2000.

                  Comparison of Fiscal 1999 with Fiscal 1998

                  Net Sales. The Company's net sales decreased approximately 23%
         in Fiscal 1999 to $71.2 million from $92.0 million in Fiscal 1998.  The
         decrease  is  primarily  attributable  to the  sale  of the  automotive
         operations of the Coated Fabrics segment in Fiscal 1998 and the gradual
         phase-out of those  operations.  Excluding  automotive  operations from
         both periods, sales increased approximately 13% in Fiscal 1999 compared
         to Fiscal 1998.

                  The Coated Fabrics segment's net sales decreased approximately
         38% in Fiscal 1999 to $42.3  million from $67.9 million in Fiscal 1998.
         The decrease resulted  primarily from a decline in automotive sales due
         to the gradual phase-out of its automotive operations. Automotive sales
         approximated $13.1 million during Fiscal 1999 compared to approximately
         $40.4  million in Fiscal  1998.  Excluding  automotive  sales from both
         periods,   sales  of  Naugahyde(R)   vinyl  coated  fabrics   increased
         approximately  6% in Fiscal 1999 as compared to Fiscal 1998 as a result
         of an increase in unit volume and selling prices.

                  Net sales in the  Specialty  Adhesives  segment  increased  in
         Fiscal 1999 by approximately 18% to $28.4 million from $24.1 million in
         Fiscal  1998.  This  increase in sales is primarily  attributable  to a
         strong demand for roofing adhesives and sealants and increased sales as
         a result of a tolling agreement with a major adhesives company.

                  Net sales in the Compound  Semiconductor  and  Optoelectronics
         segment  were  $485,000  during  Fiscal  1999.  The  segment  is in the
         developmental  stage.  Inventory  was  provided to the segment  under a
         supply agreement with the segment's joint venture partner.  The segment
         did not have sales during Fiscal 1998.

                  (Loss)  Income  Before   Interest,   Income  Taxes,   Minority
         Interest,  Discontinued  Operations and  Extraordinary  Item. In Fiscal
         1999,  the Company had loss before  interest,  income  taxes,  minority
         interest,  discontinued  operations  and  extraordinary  item  of  $2.7
         million as compared to income before interest,  income taxes,  minority
         interest,  discontinued  operations  and  extraordinary  item  of  $6.7
         million for Fiscal 1998.  The  decrease is  primarily  due to a loss of
         revenues  associated  with  the  gradual  phase-out  of the  automotive
         operations  of the Coated  Fabrics  segment and start-up  costs for the
         Compound Semiconductor and Optoelectronics segment.

                  The Coated Fabrics  segment's income before  interest,  income
         taxes,  minority  interest,  discontinued  operations and extraordinary
         item in Fiscal 1999 was  approximately  $4.2 million compared to income
         before  interest,   income  taxes,   minority  interest,   discontinued
         operations and  extraordinary  item of $8.9 million in Fiscal 1998. The
         decrease of $4.7  million was  principally  due to the loss of revenues
         from the gradual  phase-out of its  automotive  operations,  as well as
         certain  incremental  costs related to the closure of the Port Clinton,
         Ohio facility used to produce automotive products.

                  Income  before  interest,  income  taxes,  minority  interest,
         discontinued  operations  and  extraordinary  item  for  the  Specialty
         Adhesives segment increased approximately 42% to $2.7 million in Fiscal
         1999 from $1.9  million in Fiscal  1998.  The  increase is  primarily a
         result of increased sales volume.

                  Loss  before  interest,   income  taxes,   minority  interest,
         discontinued   operations  and  extraordinary  item  for  the  Compound
         Semiconductor  and  Optoelectronics  segment was $5.1 million in Fiscal
         1999  compared  to a loss of  $398,000  in  Fiscal  1998.  The  loss is
         attributable   to   start-up   expenses   incurred   by  the   Compound
         Semiconductor and Optoelectronics segment.

                  Approximately $4.5 million of miscellaneous  expense in Fiscal
         1999  was  not  allocated  to any  segment  of the  Company's  business
         compared to $3.7 million in Fiscal 1998.

                  Interest  Income  (Expense).  Interest  income in Fiscal  1999
         approximated  $225,000  versus $542,000 in Fiscal 1998. The decrease is
         attributable to reduction of cash balances  available for investment in
         Fiscal 1999  compared to Fiscal 1998.  Interest  expense in Fiscal 1999
         was $1.0 million  compared to $2.7 million in Fiscal 1998. The decrease
         is due to an increase in capitalized interest in Fiscal 1999 ($791,000)
         compared  to no  capitalized  interest  in Fiscal  1998 and an  overall
         reduction  in  interest  cost  as  a  result  of  a  Fiscal  1998  debt
         refinancing.

                  Income Tax  Benefit  (Expense).  Income tax  benefit in Fiscal
         1999 was  approximately  $2.5 million compared to income tax expense of
         approximately  $2.4 million in Fiscal 1998.  The  provisions for income
         tax benefit (expense) were calculated by the Company through use of the
         effective  income tax rates based upon its actual  (loss)  income.  The
         Fiscal 1999 tax benefit  included  approximately  $2.3 million due to a
         tax benefit  recognized  through the carryback  effect of a Fiscal 1999
         capital loss.

                  Discontinued   Operations.   Net  income   from   discontinued
         operations of the High Performance  Plastics segment  decreased to $4.3
         million in Fiscal 1999 from $5.7 million in Fiscal  1998.  The decrease
         was due to  production  inefficiencies  as a  result  of a major  plant
         consolidation at the Polycast acrylic division as well as reduced sales
         volume for both Royalite  thermoplastic  products and Polycast  acrylic
         products.

                  Extraordinary   Loss  on  the   Extinguishment  of  Debt.  The
         extraordinary loss on the extinguishment of debt during Fiscal 1998 was
         $5.6  million.  This amount  represents  the loss  recognized  when the
         Company early retired the remaining  $72.3 million of its 11.75% Senior
         Secured Notes,  including a call premium payment of 4.41% and write-off
         of applicable debt issuance cost and unamortized debt discount,  net of
         income  tax  benefit of  approximately  $2.8  million.  See "Note 10 to
         Consolidated Financial Statements."

         Liquidity and Capital Resources

                  For Fiscal 2000,  continuing operations provided $14.6 million
         of cash as compared to $5.5 million  provided by continuing  operations
         during  Fiscal  1999.  The  increase  in cash  provided  by  continuing
         operations  for Fiscal 2000 resulted  primarily  from the reversal of a
         $13.7 million deferred tax valuation  allowance related to capital loss
         carryforwards;  an increase in depreciation and amortization expense as
         a  result  of  the  Sterling   acquisition  and  the   commencement  of
         depreciation  at the  Optoelectronics joint venture; and an increase in
         certain  accrued  and  other  expenses  in  connection  with a  special
         contribution to the Company's  401(k) plan and special  incentive costs
         awarded to officers and other  liabilities  recorded in connection with
         the High Performance Plastics segment sale.

                  Net cash provided by investing  activities for Fiscal 2000 was
         $167.8   million  as  compared  to  $13.9  million  used  in  investing
         activities  during Fiscal 1999.  Significant cash provided by investing
         activities  during Fiscal 2000 included net cash proceeds from the sale
         of the High Performance Plastics segment of $209.0 million, the sale of
         the remaining Emcore Corporation  preferred stock for $8.1 million, net
         of certain  transaction costs, and was offset by the net effect of debt
         securities  purchased  and sold.  During  Fiscal 2000,  the purchase of
         machinery  and  equipment  of  approximately  $25.8  million  primarily
         related  to the  new  Optoelectronics  production  facility  in  Tampa,
         Florida and the modernization of the High Performance Plastics Polycast
         production facility in Stamford, Connecticut

                  Net cash used in financing  activities  during Fiscal 2000 was
         $104.6  million as compared to $7.8 million of cash used during  Fiscal
         1999.  The primary use of cash in financing  activities  during  Fiscal
         2000 was to repay  $99.4  million  of  outstanding  term and  revolving
         credit  borrowings  to a syndicate  headed by Fleet  National Bank as a
         result of the sale of the High Performance  Plastics  segment.  Cash of
         approximately  $13.9  million was also used to purchase  the  Company's
         common stock for treasury.

                  On  October 1,  2000,  the  Company  had  approximately  $36.6
         million in cash and cash equivalents as compared to approximately  $4.1
         million at September 26, 1999.  Working  capital at October 1, 2000 was
         $36.3 million compared to a working capital deficiency of $10.6 million
         at September 26, 1999. On October 1, 2000, the Company had  outstanding
         borrowings  of $1.3  million  under its  $10,000,000  revolving  credit
         facility  with  the  CIT  Group/Business  Credit,  Inc.  (subject  to a
         borrowing base limitation of  approximately  $7.0 million at October 1,
         2000).  The  principal  uses of cash  during  Fiscal 2000 were to repay
         debt,   repurchase   shares  in  the  open  market  and  fund   capital
         expenditures and operating losses at the new  Optoelectronics  facility
         in Tampa,  Florida.  The Company plans to spend an  additional  $75.0 -
         $85.0 million on capital  expenditures  for the Compound  Semiconductor
         and  Optoelectronics  segment over the next three years for  expansion.
         The Company plans to fund these expenditures with the proceeds from the
         sale  of  the  High  Performance  Plastics  segment  and/or  additional
         financing  as  needed.   The  Company   believes  that  cash  from  its
         operations,  its ability to borrow under the revolving  credit facility
         mentioned  above  and  proceeds  from the sale of the High  Performance
         Plastics  segment  will  provide  sufficient  liquidity  to finance its
         existing  level of  operations  and meet its debt service  obligations.
         However,  there  can be no  assurance  that  the  Company's  operations
         together with amounts  available under the revolving credit  facilities
         will  continue  to be  sufficient  to  finance  its  existing  level of
         operations and meet its debt service obligations. The Company's ability
         to meet its debt  service and other  obligations  depends on its future
         performance,  which in turn, is subject to general economic  conditions
         and to financial,  business and other factors, including factors beyond
         the Company's control.  If the Company is unable to generate sufficient
         cash flow from  operations,  it may be required to  refinance  all or a
         portion of its existing debt or obtain additional  financing  including
         equity  financing.  There can be no assurance  that the Company will be
         able to obtain such refinancing or additional financing.

         Effects of Inflation

                  The  markets  in  which  the  Company   sells   products   are
         competitive. Thus, in an inflationary environment the Company might not
         in all  instances be able to pass through to  consumers  general  price
         increases,  in which event the Company's  operations  may be materially
         impacted if such conditions  were to occur.  The Company has not in the
         past been adversely impacted by general price inflation.

         Forward Looking Information

                  Certain  statements  contained in or incorporated by reference
         into this report are "forward looking statements" within the meaning of
         the United States  Private  Securities  Litigation  Reform Act of 1995.
         Forward looking  statements  include statements which are predictive in
         nature,  which  depend  upon or refer to future  events or  conditions,
         which  include  words  such  as  "expects,"  "anticipates,"  "intends,"
         "plans," "believes," "estimates," or similar expressions.  In addition,
         any  statements  concerning  future  financial  performance  (including
         future revenues, earnings or growth rates), ongoing business strategies
         or prospects,  and possible  future  actions,  which may be provided by
         management,  are also  forward  looking  statements  as  defined by the
         United States Private Securities Litigation Reform Act of 1995. Forward
         looking  statements are based on current  expectations  and projections
         about  future  events  and are  subject  to  risks,  uncertainties  and
         assumptions  about the  Company,  economic  and market  factors and the
         industries  in  which  we  do  business,   among  other  things.  These
         statements  are not  guaranties  of future  performance  and we have no
         specific intention to update these statements.

                  These forward  looking  statements,  like any forward  looking
         statements,  involve  risks and  uncertainties  that could cause actual
         results to differ materially from those projected or anticipated. Among
         the  important  factors  which  could  cause  actual  results to differ
         materially from those in the forward looking statements are:

                  o cancellations, rescheduling or delays in product shipments;
                  o manufacturing capacity constraints;
                  o lengthy sales and qualification cycles;
                  o difficulties in the production process;
                  o the effectiveness of our capital expenditure programs;
                  o our future financial performance;
                  o delays in developing and commercializing new products;
                  o competition;
                  o changes  in the  industries  in which we  compete or plan to
                    compete, especially the HB-LED and semiconductor industries,
                    including overall growth of the industries;
                  o the continued acceptance of our products;
                  o availability and performance of key personnel;
                  o relations with employees,  customers,  suppliers and venture
                    partners;
                  o our ability to obtain and protect key intellectual property;
                  o acquisitions  and our success in  integrating  the  acquired
                    businesses; and
                  o economic conditions generally and in our industries.

                  For a discussion of important  factors that could cause actual
         results  to  differ  materially  from the  forward  looking  statements
         contained in or incorporated  by reference into this Form 10-K,  please
         read "Item 1. Business - Certain Business Risks and Uncertainties."

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

                  We  are  exposed  to  changes  in  short-term  interest  rates
         primarily as a result of our cash,  investing and borrowing  activities
         used to maintain liquidity and fund working capital  requirements.  Our
         earnings and cash flows are subject to  fluctuations  due to changes in
         interest  rates on our  floating  rate  revolving  credit  advances and
         investment  portfolio.  Our risk management  policy included the use of
         derivative  financial  instruments  (interest rate swaps) to manage our
         interest  rate exposure on long-term  variable  rate debt.  The counter
         parties  were  major  financial  institutions.  We do  not  enter  into
         derivatives or other  financial  instruments for trading or speculative
         purposes.  During Fiscal 2000,  we liquidated  all of our interest rate
         swap  instruments  for cash  proceeds and a gain of $950,000,  which is
         included in the income of discontinued  operations on the  Consolidated
         Financial Statements.

                  At October  1, 2000,  we had  approximately  $47.9  million of
         cash, cash equivalents and investments  subject to variable  short-term
         interest  rates.  On the same date we had a $1.3 million  floating rate
         revolving credit advance.  Because of the short-term nature or floating
         rates,  interest changes  generally do not affect the fair market value
         but do impact future earnings and cash flows assuming other factors are
         held constant.  Based upon the net balance,  a change of one percent in
         the  interest  rate  would  cause a change  in net  interest  income of
         approximately $466,000 on an annual basis.

                  At September  26,  1999,  approximately  $19.5  million of our
         floating rate  long-term  debt and revolving  credit  advances were not
         covered under an interest rate swap agreement. Based upon this balance,
         a change of one percent in the interest rate would have caused a change
         in interest expense of approximately $195,000 on an annual basis.

                  The changes in the  composition  and balances of items subject
         to interest  rate risk from Fiscal 1999 to Fiscal 2000 is  attributable
         to the Spartech  Sale. The proceeds from the Spartech Sale were used to
         repay  outstanding  debt with the balance  invested  primarily  in debt
         securities.

Item 8.  Consolidated Financial Statements and Supplementary Data

         See Index to Consolidated Financial Statements on Page F-1.

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

         None.

Part III

Item 10. Directors and Executive Officers of the Registrant

                  Information  with  respect  to  the  directors  and  executive
         officers  of the Company is  incorporated  herein by  reference  to the
         Company's  definitive proxy statement pursuant to Regulation 14A, which
         statement  will be filed not later  than 120 days  after the end of the
         fiscal year covered by this Report.

Item 11. Executive Compensation

                  Information   with  respect  to  executive   compensation   is
         incorporated  herein by reference  to the  Company's  definitive  proxy
         statement pursuant to Regulation 14A, which statement will be filed not
         later than 120 days after the end of the  fiscal  year  covered by this
         Report.

Item 12. Security Ownership of Certain Beneficial Owners and Management

                  Information   with  respect  to  the  security   ownership  of
         directors and executive  officers and  substantial  stockholders of the
         Company is incorporated herein by reference to the Company's definitive
         proxy  statement  pursuant to Regulation  14A, which  statement will be
         filed not later than 120 days after the end of the fiscal year  covered
         by this Report.

Item 13. Certain Relationships and Related Transactions

                  Information   with  respect  to  certain   relationships   and
         transactions  between  directors,  executive  officers and  substantial
         stockholders of the Company with the Company is incorporated  herein by
         reference  to the  Company's  definitive  proxy  statement  pursuant to
         Regulation  14A, which  statement will be filed not later than 120 days
         after the end of the fiscal year covered by this Report.

Part IV

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

         (a) Consolidated  Financial  Statements  as  of  October  1,  2000  and
             September  26,  1999  and for the  Years  Ended  October  1,  2000,
             September 26, 1999 and September 27, 1998:

             Independent Auditors' Report                                   F-2

             Consolidated Balance Sheets as of October 1, 2000
             and September 26, 1999                                         F-3

             Consolidated  Statements of Operations  for the Years
             Ended October 1, 2000, September 26, 1999 and
             September 27, 1998                                             F-5

             Consolidated Statements of Comprehensive Income for the
             Years Ended October 1, 2000, September 26, 1999 and
             September 27, 1998                                             F-6

             Consolidated  Statements of Changes in Stockholders'
             Equity for the Years Ended  October 1, 2000,  September
             26, 1999 and September 27, 1998                                F-7

             Consolidated  Statements  of Cash Flows for the Years
             Ended October 1, 2000, September 26, 1999 and
             September 27, 1998                                             F-8

             Notes to Consolidated Financial Statements                     F-10

         (b) Consolidated Financial Statement Schedule:

             Independent Auditors' Report                                   S-1

             Schedule II - Valuation and Qualifying Accounts                S-2

         (c) Exhibits:

       2.1   Certificate  of  Ownership  and  Merger,  dated  June 7,  1993,  of
             Polycast  Technology  Corporation,  Uniroyal  Engineered  Products,
             Inc., Uniroyal Adhesives and Sealants, Inc. and Ensolite, Inc. with
             Uniroyal. (2)

       3.1   Amended and Restated  Certificate of  Incorporation  of Uniroyal as
             corrected  by a  Certificate  of  Correction  of  the  Amended  and
             Restated Certificate of Incorporation of Uniroyal. (1)

       3.2   By-Laws of Uniroyal, as amended to March 28, 1997. (7)

       4.2   Warrant  Agreement,  dated as of June 1, 1993, between Uniroyal and
             The Bank of New York, as warrant agent. (2)

       10.7  Amended and Restated  Employment  Agreement,  dated as of April 25,
             1995, between Howard R. Curd and Uniroyal. (3)

       10.8  Amended and Restated  Employment  Agreement,  dated as of April 25,
             1995, between Oliver J. Janney and Uniroyal. (3)

       10.9  Amended and Restated  Employment  Agreement,  dated as of April 25,
             1995, between Robert L. Soran and Uniroyal. (3)

       10.10 Amended and Restated  Employment  Agreement,  dated as of April 25,
             1995, between George J. Zulanas, Jr. and Uniroyal. (3)

       10.16 Amended and Restated  Uniroyal  Technology  Corporation  1992 Stock
             Option Plan. (10)

       10.28 Amended  and  Restated   Uniroyal   Technology   Corporation   1992
             Non-Qualified Stock Option Plan as amended November 30, 2000. (15)

       10.39 Financing Agreement dated as of June 5, 1996 by and between The CIT
             Group/Business  Credit, Inc. and Uniroyal  Technology  Corporation.
             (4)

       10.40 Amended and Restated  Uniroyal  Technology  Corporation  1994 Stock
             Option Plan as amended May 19, 2000. (15)

       10.41 Amended  and  Restated   Uniroyal   Technology   Corporation   1995
             Non-Qualified Stock Option Plan. (15)

       10.44 Shareholder  Rights  Agreement,  dated  as of  December  18,  1996,
             between Uniroyal Technology Corporation and The Bank of New York,
             as rights agent. (5)

       10.45 First  Amendment to Financing  Agreement dated September 5, 1997 by
             and between The CIT Group/Business Credit, Inc. and
             Uniroyal Technology Corporation. (8)

       10.47 Amendment  and  Consent  Agreement  dated  April  14,  1998  by and
             between the CIT Group/Business Credit, Inc. and Uniroyal Technology
             Corporation. (9)

       10.48 Consent  Agreement  dated  April  1,  1999 by and  between  The CIT
             Group/Business  Credit, Inc. and Uniroyal  Technology  Corporation.
             (10)

       10.49 Assumption  Agreement  dated  April 1, 1999 by and  between The CIT
             Group/Business  Credit,  Inc., Uniroyal Technology  Corporation and
             Uniroyal Engineered Products, Inc. (10)

       10.50 Guaranty  dated  April  1,  1999  between  The  CIT  Group/Business
             Credit, Inc. and Uniroyal Technology Corporation. (10)

       10.51 Asset  Purchase  Agreement  dated as of December  24,  1999,  among
             Spartech Corporation,  High Performance Plastics, Inc. Uniroyal HPP
             Holdings, Inc. and Uniroyal Technology Corporation. (11)

       10.52 Memorandum of  Understanding  and  Confidentiality  Agreement dated
             February 23, 1995 between Uniroyal and Firestone  Building Products
             Division of  Bridgestone/Firestone,  Inc. and  amendments  thereto.
             (12)

       10.53 Amended  and  Restated  Uniroyal  Technology  Corporation  Deferred
             Compensation Plan Effective August 1, 1995, as amended April
             3, 2000. (12)

       10.54 Merger  Agreement  dated  as of  April  10,  2000,  among  Uniroyal
             Technology Corporation, BayPlas4, Inc., and Sterling Semiconductor,
             Inc. (13)

       10.55 Uniroyal  Technology Long Term Growth Plan, as amended to August 3,
             2000. (14)

       10.56 Split Dollar  Insurance  Agreement  dated as of August 15, 1995, as
             amended  to March 10,  2000,  by and  between  Uniroyal  Technology
             Corporation and Howard R. Curd. (15)

       10.57 Split Dollar  Insurance  Agreement  dated as of August 15, 1995, as
             amended  to March 10,  2000,  by and  between  Uniroyal  Technology
             Corporation and Robert L. Soran. (15)

       10.58 Split Dollar  Insurance  Agreement  dated as of August 15, 1995, as
             amended  to March 10,  2000,  by and  between  Uniroyal  Technology
             Corporation and George J. Zulanas, Jr. (15)

       10.59 Split Dollar  Insurance  Agreement  dated as of August 15, 1995, as
             amended  to March 10,  2000,  by and  between  Uniroyal  Technology
             Corporation and Oliver J. Janney. (15)

       10.60 Split Dollar  Insurance  Agreement  dated as of August 15, 1995, as
             amended  to March 10,  2000,  by and  between  Uniroyal  Technology
             Corporation and Martin J. Gutfreund. (15)

       10.61 Uniroyal  Technology   Corporation  2000  Stock  Plan,  as  amended
             November 30, 2000. (15)

       11.1  Statement Regarding Computation of Per Share Earnings. (15)

       21.1  Subsidiaries of Uniroyal Technology Corporation. (15)

       23.1  Independent Auditors' Consent. (15)

       27.1  Financial Data Schedule (Filed for EDGAR only)

             (1)   Contained  in  Amendment  No.  2 to  Uniroyal's  Registration
                   Statement on Form 10, dated September 25, 1992.

             (2)   Contained in Uniroyal's Form 8-K, dated June 9, 1993.

             (3)   Contained in Uniroyal's Quarterly Report on Form 10-Q for the
                   quarterly period ended April 2, 1995 filed on May 12, 1995.

             (4)   Contained in Uniroyal's Quarterly Report on Form 10-Q for the
                   quarterly period ended June 30, 1996 filed August 13, 1996.

             (5)   Contained in Uniroyal's  Registration  Statement on Form 8-A,
                   dated December 20, 1996.

             (6)   Contained in  Uniroyal's  Annual  Report on Form 10-K for the
                   year ended September 29, 1996 filed on December 27, 1996.

             (7)   Contained in Uniroyal's Quarterly Report on Form 10-Q for the
                   quarterly period ended March 30, 1997 filed May 9, 1997.

             (8)   Contained in  Uniroyal's  Annual  Report on Form 10-K for the
                   year ended September 28, 1997 filed on December 22, 1997.

             (9)   Contained in Uniroyal's Form 8-K/A dated April 22, 1998.

             (10)  Contained in  Uniroyal's  Annual  Report on Form 10-K for the
                   year ended September 26, 1999 filed on December 23, 1999.

             (11)  Contained in Uniroyal's 8-K dated March 14, 2000.

             (12)  Contained in Uniroyal's Quarterly Report on Form 10-Q for the
                   quarterly  period ended April 2, 2000, filed on May 17, 2000.
                   Confidential  treatment  was  obtained  for  portions  of the
                   agreement.

             (13)  Contained in Uniroyal's 8-K dated June 14, 2000.

             (14)  Contained in Uniroyal's Quarterly Report on Form 10-Q for the
                   quarterly  period  ended  July 2,  2000,  filed on August 16,
                   2000.

             (15)  Filed with this report.

        (d)  Reports on Form 8-K:

               Report on Form 8K/A dated  August 14, 2000  related to the merger
               with Sterling Semiconductor, Inc.
<PAGE>

Item 8.  Consolidated Financial Statements and Supplementary Data.


         Index to Consolidated Financial Statements

         Consolidated  Financial  Statements as of October 1, 2000 and September
         26, 1999 and for the Years Ended  October 1, 2000,  September  26, 1999
         and September 27, 1998:

                 Independent Auditors' Report                               F-2

                 Consolidated Balance Sheets as of October 1, 2000 and
                   September 26, 1999                                       F-3

                 Consolidated  Statements  of  Operations  for the
                   Years  Ended October 1, 2000,  September  26, 1999
                   and  September 27, 1998                                  F-5

                 Consolidated  Statements of Comprehensive  Income for
                   the Years Ended  October 1, 2000,  September  26, 1999
                   and  September 27, 1998                                  F-6

                 Consolidated  Statements of Changes in Stockholders'
                   Equity for the Years  Ended  October 1,  2000,
                   September  26,  1999 and September 27, 1998              F-7

                 Consolidated  Statements  of Cash  Flows  for the
                   Years  Ended October 1, 2000,  September  26, 1999
                   and  September 27, 1998                                  F-8

                 Notes to Consolidated Financial Statements                 F-10



         Consolidated Financial Statement Schedule:

                 Independent Auditors' Report                               S-1

                 Schedule II - Valuation and Qualifying Accounts            S-2

                 Schedules  Omitted - Certain other  schedules have been omitted
                   because  they are not  required  or because  the  information
                   required  therein has been included in Notes to  Consolidated
                   Financial Statements.


<PAGE>


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
   Uniroyal Technology Corporation


We have  audited  the  accompanying  consolidated  balance  sheets  of  Uniroyal
Technology  Corporation and  subsidiaries  (the "Company") as of October 1, 2000
and September 26, 1999, and the related  consolidated  statements of operations,
comprehensive income, changes in stockholders' equity and cash flows for each of
the three years in the period ended October 1, 2000. These financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the financial position of the Company as of October 1, 2000
and September 26, 1999 and the results of its  operations and its cash flows for
each of the three years in the period ended October 1, 2000, in conformity  with
accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP
Certified Public Accountants


Tampa, Florida
December 5, 2000


<PAGE>
<TABLE>
<CAPTION>

                UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                 (In thousands)

                                     ASSETS

                                                                                October 1,       September 26,
                                                                                   2000              1999
                                                                              ------------       -------------

    Current assets:
<S>                                                                            <C>                <C>
       Cash and cash equivalents (Note 2)                                      $    36,627        $     4,145

       Short-term investments (Notes 2 and 3)                                       12,425                  -

       Trade accounts receivable (less estimated reserve for
         doubtful accounts of $119 and $88, respectively) (Notes 2                   5,669              4,808
         and 10)

       Inventories (Notes 2, 4 and 10)                                              11,079              9,550

       Deferred income taxes (Notes 2 and 13)                                        5,460              2,779

       Prepaid expenses and other current assets                                     1,408              1,413
                                                                               -----------        -----------

         Total current assets                                                       72,668             22,695

    Property, plant and equipment - net (Notes 2 and 5)                             57,386             43,804

    Property, plant and equipment held for sale - net (Note 2)                       2,301              4,217

    Investments (Note 2 and 3)                                                       8,902                  -

    Investment in preferred stock (Notes 2 and 6)                                        -              5,383

    Note receivable (Note 7)                                                             -              5,000

    Goodwill - net (Notes 2 and 8)                                                  27,772              1,310

    Deferred income taxes - net (Notes 2 and 13)                                     7,828             15,350

    Other assets - net (Notes 2 and 9)                                              13,175             10,148
                                                                               -----------        -----------
    TOTAL ASSETS                                                               $   190,032        $   107,907
                                                                               ===========        ===========

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (Continued)

                        (In thousands, except share data)

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                                               October 1,         September 26,
                                                                                  2000                1999
                                                                             ------------         -------------
      Current liabilities:
<S>                                                                          <C>                  <C>
         Current portion of long-term debt (Note 10)                         $     6,702          $     5,282
         Trade accounts payable                                                   11,563                9,688
         Net liabilities of discontinued operations (Note 11)                      4,632                8,380
         Accrued expenses:
           Compensation and benefits                                               9,180                7,326
           Interest                                                                  156                  222
           Taxes, other than income                                                  391                  388
           Accrued income taxes                                                      623                    -
           Other                                                                   3,139                2,006
                                                                             -----------          -----------
           Total current liabilities                                              36,386               33,292

      Long-term debt, net of current portion  (Note 10)                           15,462               24,369
      Other liabilities (Note 12)                                                 23,800               15,288
                                                                             -----------          -----------
           Total liabilities                                                      75,648               72,949
                                                                             -----------          -----------
      Commitments and contingencies (Note 16)

      Minority interest (Notes 1, 2 and 18)                                        7,535                3,825

      Stockholders' equity (Note 14):
         Preferred stock:
           Series C - 0 shares issued and outstanding; par value
           $0.01; 450 shares authorized                                                -                    -
         Common stock:
           30,707,976 and 29,362,838 shares issued or to be issued,
           respectively; par value $0.01; 35,000,000 shares
           authorized                                                                307                  294
         Additional paid-in capital                                               94,296               57,524
         Retained earnings (deficit)                                              40,575               (6,112)
         Unrealized (loss) gain on securities held for sale - net                    (44)                 100
                                                                             -----------          -----------
                                                                                 135,134               51,806
         Less treasury stock at cost - 4,841,059 and 5,343,974
           shares, respectively                                                  (28,285)             (20,673)
                                                                             -----------          -----------
           Total stockholders' equity                                            106,849               31,133
                                                                             -----------          -----------
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                             $   190,032          $   107,907
                                                                             ===========          ===========
</TABLE>

                 See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>



                UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (In thousands, except per share data)
                                                                                     Fiscal Years Ended
                                                                  --------------------------------------------------------
                                                                     October 1,         September 26,        September 27,
                                                                        2000                1999                 1998
                                                                  --------------       --------------       --------------
<S>                                                               <C>                  <C>                  <C>
Net sales                                                         $    68,253          $    71,214          $    92,036
Costs, expenses and (other income):
   Costs of goods sold                                                 53,346               53,680               69,868
   Selling and administrative                                          37,751               18,276               12,128
   Depreciation and other amortization                                  8,145                3,505                3,618
   Gain on sale of preferred stock investment (Note 6)                 (2,905)                (898)                   -
   Provision for uncollectible note receivable (Note 7)                 5,387                    -                    -
   Purchased in-process research and development (Note 8)               6,590                    -                    -
   Write-down of technology license (Note 9)                            4,000                    -                    -
   Loss on assets to be disposed of (Notes 2 and 17)                    1,773                    -                  226
   Gain on sale of division (Note 17)                                       -                 (667)                (512)
                                                                  -----------          -----------          -----------
(Loss) income before interest, income taxes, minority
   interest, discontinued operations and extraordinary item           (45,834)              (2,682)               6,708

Interest income                                                         3,189                  225                  542
Interest expense                                                       (2,114)              (1,003)              (2,705)
                                                                  -----------          -----------          -----------
(Loss) income before income taxes, minority interest,
   discontinued operations and extraordinary item                     (44,759)              (3,460)               4,545

Income tax benefit (expense) (Notes 2 and 13)                          26,182                2,520               (2,443)
                                                                  -----------          -----------          -----------
(Loss) income before minority interest, discontinued
   operations and extraordinary item                                  (18,577)                (940)               2,102

Minority interest in net losses of consolidated joint venture           7,918                2,191                  199
                                                                  -----------          -----------          -----------
(Loss) income from continuing operations before discontinued
   operations and extraordinary item                                  (10,659)               1,251                2,301

Income from discontinued operations, net of income tax
   expense of $1,038, $2,675 and $3,164,  respectively
   (Note 11)                                                            1,525                4,269                5,726
Gain on disposition of discontinued operations, net of income
   taxes of $38,146 (Note 11)                                          55,821                    -                    -
                                                                  -----------          -----------          -----------
Income before extraordinary item                                       46,687                5,520                8,027
Extraordinary loss on the extinguishment of debt - net of
   income tax of $2,787 (Note 10)                                           -                    -               (5,637)
                                                                  -----------          -----------          -----------
Net income                                                        $    46,687          $     5,520          $     2,390
                                                                  ===========          ===========          ===========

Net income per common share - basic (Notes 2 and 19)
----------------------------------------------------
   (Loss) income from continuing operations                       $     (0.43)         $      0.05          $      0.09
   Income from discontinued operations                                   2.30                 0.18                 0.21
   Extraordinary loss                                                       -                    -                (0.21)
                                                                  -----------          -----------          -----------
   Net income                                                     $      1.87          $      0.23          $      0.09
                                                                  ===========          ===========          ===========
Net income per common share - assuming dilution (Notes 2
   and 19)
--------------------------------------------------------
   (Loss) income from continuing operations                       $     (0.43)         $      0.05          $      0.08
   Income from discontinued operations                                   2.30                 0.16                 0.19
   Extraordinary loss                                                       -                    -                (0.19)
                                                                  -----------          -----------          -----------
   Net income                                                     $      1.87          $      0.21          $      0.08
                                                                  ===========          ===========          ===========
</TABLE>

                 See notes to consolidated financial statements


<PAGE>
<TABLE>
<CAPTION>


                UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                 (In thousands)

                                                                             Fiscal Years Ended
                                                           -----------------------------------------------------
                                                            October 1,         September 26,       September 27,
                                                               2000                 1999                1998
                                                           -----------         -------------        ------------


<S>                                                        <C>                  <C>                 <C>
      Net income                                           $    46,687          $     5,520         $     2,390
                                                           -----------          -----------         -----------
      Net unrealized (loss) gain on securities
        available for sale, net of income taxes:

           Unrealized (loss) gain on securities
             available for sale                                    (44)                 648                   -

           Less: reclassification adjustment for gains
             realized in net income                               (100)                (548)                  -
                                                           -----------          -----------         -----------
      Net unrealized (loss) gain                                  (144)                 100                   -
                                                           -----------          -----------         -----------
      Comprehensive income (Note 2)                        $    46,543          $     5,620         $     2,390
                                                           ===========          ===========         ===========
</TABLE>

                 See notes to consolidated financial statements


<PAGE>
<TABLE>
<CAPTION>

                UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

 FOR THE FISCAL YEARS ENDED OCTOBER 1, 2000, SEPTEMBER 26, 1999 AND SEPTEMBER 27, 1998

                                 (In thousands)

                                                                                                Accumulated
                                                                        Additional  Retained       Other
                                                               Common    Paid-In    Earnings   Comprehensive  Treasury Stockholders'
                                                                Stock    Capital    (Deficit)      Income       Stock    Equity
                                                               ------   ---------   ---------   ------------  -------- ------------

<S>                                                           <C>       <C>         <C>          <C>         <C>          <C>
Balance at September 28, 1997                                 $   276   $ 53,899    $(14,022)    $    -      $   (121)    $  40,032
Common stock issued under stock option plans                        8      1,505           -          -          (894)          619
Common stock issued to employee benefit plan                        -        191           -          -             -           191
Amounts received pursuant to Directors' stock option plan           -         73           -          -             -            73
Purchases of treasury stock                                         -          -           -          -        (9,797)       (9,797)
Tax benefit from exercise of stock options                          -        117           -          -             -           117
Purchases of warrants                                               -     (1,314)          -          -             -        (1,314)
Net income                                                          -          -       2,390          -             -         2,390
                                                              -------   --------    --------      -----      --------     ---------
Balance at September 27, 1998                                     284     54,471     (11,632)         -       (10,812)       32,311

Common stock issued for acquisitions                                -        775           -          -           598         1,373
Common stock issued under stock option plans                       10      1,688           -          -        (1,345)          353
Common stock issued to employee benefit plan                        -        199           -          -             -           199
Amounts received pursuant to Directors' stock option plan           -        121           -          -             -           121
Purchases of treasury stock                                         -          -           -          -        (9,114)       (9,114)
Tax benefit from exercise of stock options                          -        562           -          -             -           562
Purchases of warrants                                               -       (292)          -          -             -          (292)
Net income                                                          -          -       5,520          -             -         5,520
Comprehensive income                                                -          -           -        100             -           100
                                                              -------   --------    --------      -----      --------     ---------
Balance at September 26, 1999                                     294     57,524      (6,112)       100       (20,673)       31,133

Common stock issued for acquisition                                15     40,599           -          -             -        40,614
Common stock issued under stock option plans                       13      2,127           -          -        (1,368)          772
Common stock issued to employee benefit plan                        -        182           -          -            37           219
Amounts received pursuant to Directors' stock option plan           -        112           -          -             -           112
Purchases of treasury stock                                         -          -           -          -       (13,850)      (13,850)
Cancellation of treasury stock                                    (16)    (7,553)          -          -         7,569             -
Tax benefit from exercise of stock options                          -        564           -          -             -           564
Exercise of warrants                                                1        741           -          -             -           742
Net income                                                          -          -      46,687          -             -        46,687
Comprehensive loss                                                  -          -           -       (144)            -          (144)
                                                              -------   --------    --------      -----      --------     ---------
Balance at October 1, 2000                                    $   307   $ 94,296    $ 40,575      $ (44)     $(28,285)    $ 106,849
                                                              =======   ========    ========      =====      ========     =========
</TABLE>

                 See notes to consolidated financial statements.


<PAGE>
<TABLE>
<CAPTION>


                UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (In thousands)

                                                                                             Fiscal Years Ended
                                                                              ---------------------------------------------
                                                                              October 1,     September 26,    September 27,
                                                                                 2000            1999             1998
                                                                              ----------     -------------    -------------

OPERATING ACTIVITIES:
<S>                                                                            <C>              <C>               <C>
   Net income                                                                  $ 46,687         $  5,520          $  2,390
   Deduct income from and gain on disposition of discontinued operations        (57,346)          (4,269)           (5,726)
                                                                               --------         --------          --------
   (Loss) income from continuing operations after extraordinary item            (10,659)           1,251            (3,336)
   Adjustments to reconcile net income to net cash provided by operating
     activities:
       Depreciation and other amortization                                        8,145            3,505             3,618
       Deferred tax expense                                                       7,185              706             2,280
       Amortization of debt issuance costs                                            2                -               235
       Amortization of Senior Secured Notes discount                                  -                -                63
       Gain on sale of preferred stock investment                                (2,905)            (898)                -
       Provision for uncollectible note receivable                                5,387                -                 -
       Purchased in-process research and development                              6,590                -                 -
       Write-down of technology license                                           4,000                -                 -
       Loss on assets to be disposed of                                           1,773                -               226
       Gain on sale of division                                                       -             (667)             (512)
       Minority interest in net losses of consolidated joint venture             (7,918)          (2,191)             (199)
       Extraordinary loss on the extinguishment of debt                               -                -             5,637
       Other                                                                        815              290               161
       Changes in assets and liabilities:
         (Increase) decrease in trade accounts receivable                          (303)           4,479             1,403
         (Increase) decrease in inventories                                      (2,246)           2,405              (613)
         Increase in prepaid expenses and other assets                           (1,535)          (1,500)           (6,031)
         Increase (decrease) in trade accounts payable                              805              451            (1,067)
         Increase (decrease) in accrued expenses                                  4,378           (3,440)             (672)
         Increase in other liabilities                                            1,108            1,088               305
                                                                               --------         --------          --------
   Net cash provided by continuing operations                                    14,622            5,479             1,498
   Net cash (used in) provided by discontinued operations                       (45,355)          16,332             9,387
                                                                               --------         --------          --------
   Net cash (used in) provided by operating activities                          (30,733)          21,811            10,885
                                                                               --------         --------          --------
INVESTING ACTIVITIES:
   Purchases of property, plant and equipment                                   (25,836)         (10,445)           (7,288)
   Investment purchases of available-for-sale securities                        (50,115)               -                 -
   Investment purchases of held-to-maturity securities                          (17,434)               -                 -
   Proceeds from sales of available-for-sale securities                          46,150                -                 -
   Purchase of investment                                                        (2,640)               -                 -
   Purchase of preferred stock                                                        -           (9,144)                -
   Proceeds from sale of preferred stock                                          8,125            4,822                 -
   Proceeds from sale of division                                                     -            1,567             5,306
   Business acquisitions, net of cash acquired                                      613             (732)           (1,768)
   Proceeds from sale of discontinued operations                                208,976                -                 -
                                                                               --------         --------          --------
   Net cash provided by (used in) investing activities                          167,839          (13,932)           (3,750)
                                                                               --------         --------          --------
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

                                 (In thousands)
                                                                             Fiscal Years Ended
                                                           ---------------------------------------------------
                                                              October 1,        September 26,    September 27,
                                                                2000                 1999              1998
                                                           -------------       --------------    -------------
 FINANCING ACTIVITIES:
<S>                                                           <C>                   <C>               <C>
   Repayment of term loans                                    (91,704)              (10,173)          (2,372)
   Proceeds from term loans                                         -                 2,582                -
   Net (decrease) increase in revolving loan balances         (13,162)                3,086           (3,827)
   Proceeds from termination of interest rate swaps               950                     -                -
   Proceeds from refinancing                                        -                     -           90,000
   Repurchase of Senior Secured Notes                               -                     -          (72,253)
   Redemption costs for Senior Secured Notes                        -                     -           (3,718)
   Refinancing costs                                                -                     -           (3,545)
   Minority interest capital contributions                     11,628                 5,725              490
   Stock options exercised                                        772                   353              619
   Purchases of warrants                                            -                  (292)          (1,314)
   Exercise of warrants                                           742                     -                -
   Purchases of treasury stock                                (13,850)               (9,114)          (7,347)
                                                             --------              --------         --------
   Net cash used in financing activities                     (104,624)               (7,833)          (3,267)
                                                             --------              --------         --------
Net increase in cash and cash equivalents                      32,482                    46            3,868
Cash and cash equivalents at beginning of year                  4,145                 4,099              231
                                                             --------              --------         --------
Cash and cash equivalents at end of year                     $ 36,627              $  4,145         $  4,099
                                                             ========              ========         ========
</TABLE>
Supplemental Disclosures:

Payments for income taxes and interest were as follows (in thousands):
<TABLE>
<CAPTION>
                                                                             Fiscal Years Ended
                                                           --------------------------------------------------
                                                             October 1,        September 26,    September 27,
                                                               2000                1999             1998
                                                           ------------        -------------    -------------
<S>                                                          <C>                   <C>             <C>
Income tax payments - continuing operations                  $  6,344              $    677        $     353
Income tax payments - discontinued operations                     341                   432               39
Interest payments (net of capitalized interest) -
  continuing operations                                         2,142                   715            8,825
Interest payments (net of capitalized interest) -
  discontinued operations                                       4,686                 6,854            3,833
</TABLE>
<TABLE>
<CAPTION>
Non-cash investing activities were as follows (in thousands):
                                                                             Fiscal Years Ended
                                                             ------------------------------------------------
                                                              October 1,       September 26,    September 27,
                                                                2000               1999             1998
                                                             -----------       -------------    -------------
<S>                                                          <C>                   <C>             <C>
Business acquisitions purchased with Company common
   stock                                                     $ 40,614              $  1,373        $       -
Business acquisitions purchased with notes payable                  -                 3,033            1,000
</TABLE>

The purchases of property,  plant and equipment and the proceeds from term loans
for the fiscal years ended October 1, 2000 and September 26, 1999 do not include
$3,211,000  and  $20,372,000,  respectively,  related  to  property  held  under
capitalized  leases (Note 16). The Company did not enter into any capital  lease
agreements during the fiscal year ended September 27, 1998.

The proceeds from term loans and purchases of treasury stock for the fiscal year
ended  September 27, 1998 does not include a $2,450,000  note payable issued for
the purchase of 600,000 shares of treasury stock (Notes 10 and 14).

During the fiscal years ended October 1, 2000,  September 26, 1999 and September
27, 1998, the Company made matching  contributions to its 401(k) Savings Plan of
$219,000,  $199,000  and  $191,000,  respectively,  through the  re-issuance  of
17,206,   39,344  and  60,520   shares  of  its  common  stock  from   treasury,
respectively.

                 See notes to consolidated financial statements.
<PAGE>
                UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         For the Fiscal Years Ended October 1, 2000, September 26, 1999
                             and September 27, 1998

1.       THE COMPANY

         The accompanying  consolidated  financial statements relate to Uniroyal
         Technology  Corporation,  its wholly-owned  subsidiaries,  Uniroyal HPP
         Holdings,   Inc.,   Uniroyal   Engineered   Products,   Inc.,  Uniroyal
         Optoelectronics,  Inc., Sterling Semiconductor,  Inc., BayPlas3,  Inc.,
         UnitechOH, Inc. and UnitechNJ, Inc., and its majority-owned subsidiary,
         Uniroyal Liability  Management Company  (collectively,  the "Company").
         Uniroyal HPP Holdings, Inc. includes its wholly-owned subsidiary,  High
         Performance Plastics, Inc. ("HPPI"). Uniroyal Engineered Products, Inc.
         includes its operating divisions,  Uniroyal Engineered Products ("UEP")
         and Uniroyal Adhesives and Sealants ("UAS").  Uniroyal Optoelectronics,
         Inc.  includes  its  wholly-owned  subsidiary,  NorLux  Corp.,  and its
         majority-owned joint venture, Uniroyal  Optoelectronics,  LLC. Uniroyal
         Liability  Management  Company  includes  its  wholly-owned  subsidiary
         BayPlas2,  Inc. See Note 8 for information regarding the acquisition of
         Sterling Semiconductor, Inc. See Note 11 for information concerning the
         sale of HPPI's business.

         Uniroyal  Liability  Management  Company,  Inc.  ("ULMC")  is a special
         purpose  subsidiary created in the fiscal year ended September 26, 1999
         to  administer  the  Company's  employee  and retiree  medical  benefit
         programs.  The  Company  owns  a  controlling  interest  (69%)  in  the
         subsidiary;   therefore,   the  accompanying   consolidated   financial
         statements  include the subsidiary's  results of operations.  BayPlas2,
         Inc. is also a special  purpose  subsidiary  created in the fiscal year
         ended October 1, 2000 to hold certain assets of ULMC.

         NorLux Corp.  is a  development  stage company which will engage in the
         development and manufacture of optoelectronic devices.  UnitechNJ, Inc.
         is a special  purpose  subsidiary  created  in the  fiscal  year  ended
         September 26, 1999 to hold the Company's plant in Stirling, New Jersey.
         UnitechOH,  Inc. and BayPlas3,  Inc. are special  purpose  subsidiaries
         created in the fiscal year ended October 1, 2000 to hold certain assets
         of the Company.

         The Company is principally engaged in the development,  manufacture and
         sale of a broad range of  materials  employing  compound  semiconductor
         technologies, plastics and specialty chemicals.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Consolidation

         The consolidated  financial statements include the accounts of Uniroyal
         Technology Corporation, its subsidiaries, its majority-owned subsidiary
         and its  majority-owned  joint venture.  All  significant  intercompany
         transactions  and  balances  have been  eliminated.  Minority  interest
         represents the minority shareholders' proportionate share of the equity
         of the Company's majority-owned entities.

         Fiscal Year End

         The Company's  fiscal year ends on the Sunday following the last Friday
         in  September.  The dates on which the  fiscal  year ended for the past
         three fiscal years were October 1, 2000 ("Fiscal 2000"),  September 26,
         1999 ("Fiscal  1999") and September  27, 1998 ("Fiscal  1998").  Fiscal
         2000 encompassed a 53-week period as compared to Fiscal 1999 and Fiscal
         1998 which encompassed  52-week periods.  The additional week in Fiscal
         2000 occurred in the first quarter ended January 2, 2000.

         Use of Estimates

         The preparation of consolidated 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  consolidated  financial  statements  and the  reported
         amounts of revenues and expenses  during the reporting  period.  Actual
         results could differ from those estimates.

         Cash and Cash Equivalents

         Cash  and  cash  equivalents  include  all  highly  liquid  investments
         purchased with an original maturity of three months or less.

         Investments and Investment in Preferred Stock

         All investments with an original maturity greater than three months are
         accounted  for  under  Statement  of  Financial   Accounting  Standards
         ("SFAS") No. 115, Accounting for Certain Investments in Debt and Equity
         Securities. This statement requires certain securities to be classified
         into three categories:

         (1)Securities  Held-to-Maturity:  Debt  securities  the  entity has the
            ability and intent to hold to  maturity  are  reported at  amortized
            cost.

         (2)Trading  Securities:  Debt and  equity  securities  bought  and held
            principally for the purpose of selling in the near term are reported
            at  fair  value,  with  unrealized  gains  and  losses  included  in
            earnings.

         (3)Securities  Available-For-Sale:   Debt  and  equity  securities  not
            classified  as either  held-to-maturity  or trading are  reported at
            fair value with  unrealized  gains and losses reported as a separate
            component of stockholders' equity.

         Management  determines the appropriate  classification of securities at
         the time of  purchase  and  re-evaluates  such  designation  as of each
         balance  sheet  date.  The  fair  value  of  each  equity  security  is
         determined by the most recently  traded price of the underlying  common
         stock at the balance sheet date.  The fair value of debt  securities is
         determined by broker quotes at the balance sheet date.

         Financial Instruments

         Interest  rate  swap  agreements  are  used  to  manage  interest  rate
         exposures. The interest rate differentials to be paid or received under
         such  swaps  are  recognized   over  the  life  of  the  agreements  as
         adjustments to interest expense.

         The  estimated  fair  value of  amounts  reported  in the  consolidated
         financial  statements  have  been  determined  using  available  market
         information and valuation  methodologies,  as applicable.  The carrying
         value of all current assets and liabilities approximates the fair value
         because of their  short-term  nature.  The fair  values of  non-current
         assets  and  liabilities   approximate   their  carrying  value  unless
         otherwise indicated.

         Trade Accounts Receivable

         The Company  grants  credit to its  customers  generally in the form of
         short-term trade accounts receivable. The creditworthiness of customers
         is evaluated  prior to the sale of inventory.  There are no significant
         concentrations  of credit  risk to the  Company  associated  with trade
         accounts receivable.

         Inventories

         Inventories  are  stated  at the  lower  of  cost  or  market.  Cost is
         determined  using a monthly  average  basis or  standard  costs  (which
         approximates  actual  average costs) for raw materials and supplies and
         the first-in,  first-out ("FIFO") basis of accounting or standard costs
         (which approximates actual FIFO costs) for work in process and finished
         goods.

         Property, Plant and Equipment

         Property, plant and equipment are stated at cost. The cost of property,
         plant and equipment  held under capital leases is equal to the lower of
         the net present value of the minimum  lease  payments or the fair value
         of the leased  asset at the  inception  of the lease.  Depreciation  is
         computed under the straight-line method based on the cost and estimated
         useful lives of the related assets  including assets held under capital
         leases.  Interest costs  applicable to the  construction of major plant
         and expansion projects have been capitalized to the cost of the related
         assets.  Interest  capitalized  during  Fiscal  2000  and  Fiscal  1999
         approximated $287,000 and $791,000, respectively.

         SFAS No. 121,  Accounting for the  Impairment of Long-Lived  Assets and
         for  Long-Lived  Assets  to  be  Disposed  Of,  establishes  accounting
         standards for the impairment of long-lived assets, certain identifiable
         intangibles  and  goodwill  related to those assets to be held and used
         and for long-lived  assets and certain  identifiable  intangibles to be
         disposed of. SFAS No. 121 requires that  long-lived  assets be reviewed
         for impairment  whenever  events or changes in  circumstances  indicate
         that the book value of the asset may not be  recoverable.  The  Company
         evaluates at each balance sheet date whether  events and  circumstances
         have occurred that indicate  possible  impairment.  In accordance  with
         SFAS No. 121, the Company  uses an estimate of the future  undiscounted
         net cash  flows  of the  related  assets  over  the  remaining  life in
         measuring whether the assets are recoverable.

         Property, Plant and Equipment Held for Sale

         The  Company  has  classified  certain  property,  plant and  equipment
         related to its Port  Clinton,  Ohio ("Port  Clinton")  facility and its
         Stirling, New Jersey ("Stirling") facility as held for sale.

         In November of 1998, the Company ceased  operations at its Port Clinton
         facility in connection  with its sale of the  automotive  operations of
         the Coated Fabrics segment (Note 17). The Company expects to dispose of
         the remaining Port Clinton assets, including real property,  during the
         first  quarter of the fiscal year ending  September  30, 2001  ("Fiscal
         2001") and is  carrying  the  property  at fair value less cost to sell
         based upon an executed asset purchase  agreement for the property.  The
         fair value less cost to sell of the property approximates $1,300,000 at
         October 1, 2000. The Company had previously recorded an impairment loss
         for the Port  Clinton  assets in Fiscal  1996 based upon a decision  to
         sell the plant. The Company  recorded an additional  impairment loss in
         Fiscal 2000 of  $1,773,000  related to machinery and equipment and real
         property at Port Clinton.  The Port Clinton facility incurred operating
         (loss)  income of ($74,000)  and  $3,263,000  in Fiscal 1999 and Fiscal
         1998, respectively.

         During Fiscal 1998, in conjunction  with plant  consolidations  at HPPI
         and in  order to  address  concerns  of the  Federal  Trade  Commission
         ("FTC") (Note 16), the Company  decided to sell its Stirling  facility.
         In accordance  with SFAS No. 121, the Company  recorded a write-down of
         the facility totaling  approximately $226,000 in Fiscal 1998 related to
         this  decision.  The Company  expects the  disposition  of the Stirling
         facility to be completed  in Fiscal  2001.  The Company is carrying the
         facility at fair value less cost to sell based upon an  appraisal.  The
         fair  value  less cost to sell  approximates  $1,000,000  at October 1,
         2000. The Stirling operations incurred an operating loss of $261,000 in
         Fiscal 1998.  Separate  operating results were not maintained in Fiscal
         1999.  The Stirling  operations  (excluding  the facility) were sold to
         Spartech Corporation in Fiscal 2000. See Note 11.

         Amortization

         Debt  issuance  costs are  included in other  assets and are  amortized
         using the  interest  method  over the life of the  related  debt.  Debt
         discount for the Senior Secured Notes was amortized  using the interest
         method over the life of the  related  debt until the debt was repaid in
         Fiscal 1998 (Note 10).  Patents and  trademarks  are  included in other
         assets and are amortized  using the  straight-line  method over periods
         ranging from 7 to 20 years.  Reorganization  value in excess of amounts
         allocable to identifiable assets was amortized on a straight-line basis
         over 15 years until Fiscal 1998 when the remaining reorganization value
         was reduced to zero in  connection  with the  reduction of the deferred
         tax  valuation  allowance  related to  acquired  tax loss  carryforward
         benefits,  and with respect to which  $377,000  reported in Fiscal 1998
         was  reclassified  to  depreciation  and   amortization.   Goodwill  is
         amortized  on a  straight-line  basis  over  five  years  for the  high
         technology  business and 25 years for all others.  Goodwill is reported
         net of accumulated  amortization  of $2,098,000 and $146,000 at October
         1, 2000 and September 26, 1999, respectively.

         Research and Development Expenses

         Research  and  development   expenditures  are  expensed  as  incurred.
         Research and development  expenditures were $1,613,000,  $1,075,000 and
         $1,454,000 in Fiscal 2000,  Fiscal 1999 and Fiscal 1998,  respectively.
         The  increase  in  research  and  development  expenditures  is  due to
         start-up  operations of the Compound  Semiconductor and Optoelectronics
         segment.

         Employee Compensation

         The cost of post-retirement  benefits is recognized in the consolidated
         financial  statements  over an  employee's  term of  service  with  the
         Company.

         Income Taxes

         The Company  utilizes the asset and liability  method of accounting for
         income taxes.  Under the asset and liability  method,  deferred  income
         taxes  are   recognized   for  the  tax   consequences   of  "temporary
         differences"  by applying  enacted  statutory  tax rates  applicable to
         future years to differences  between the financial  statement  carrying
         amounts  and the tax basis of  existing  assets  and  liabilities.  The
         effect on  deferred  taxes of a change in tax  rates is  recognized  in
         income in the period that includes the enactment date.

         The  Company  has  recorded  a  deferred  tax  asset  of  approximately
         $13,288,000.  Realization  of the  asset  is  dependent  on  generating
         sufficient  taxable  income prior to expiration  of loss  carryforwards
         available  to  the  Company.   Although  realization  is  not  assured,
         management  believes  it is  more  likely  than  not  that  all  of the
         remaining  deferred  tax  asset  will be  realized.  The  amount of the
         deferred tax asset considered realizable,  however, could be reduced in
         the  near  term if  estimates  of  future  taxable  income  during  the
         carryforward period are reduced.

         Stock-Based Compensation

         In Fiscal 1997, the Company  adopted only the disclosure  provisions of
         SFAS No. 123,  Accounting for  Stock-Based  Compensation.  As permitted
         under this  standard,  the  Company  has  elected to follow  Accounting
         Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
         Employees,  in accounting for its stock options. Pro forma  information
         regarding net income and earnings per share,  as  calculated  under the
         provisions of SFAS No. 123, are disclosed in Note 14.
<PAGE>
         Comprehensive Income

         The Company  adopted  SFAS No.  130,  Reporting  Comprehensive  Income,
         during  Fiscal  1999.  SFAS  No.  130  establishes  standards  for  the
         reporting  and  display of  comprehensive  income  and its  components.
         Comprehensive  income is  defined as the change in equity of a business
         during a period from  transactions  and other events and  circumstances
         from  non-owner  sources.  It includes  all changes in equity  during a
         period  except  those   resulting   from   investments  by  owners  and
         distributions  to owners.  SFAS No.  130  requires  that the  Company's
         change in unrealized  gains and losses on equity  securities  available
         for sale be included in comprehensive  income.  The net unrealized gain
         on securities available for sale is shown net of tax expense of $28,000
         and $63,000 for the years ended October 1, 2000 and September 26, 1999,
         respectively.  The  adoption  of  SFAS  No.  130 had no  impact  on the
         Company's net income or stockholders' equity in Fiscal 1998.

         Income Per Common Share

         Earnings  per share  are  computed  in  accordance  with SFAS No.  128,
         Earnings  Per  Share.  Basic  earnings  per share is based on  weighted
         average  number of common shares  outstanding  for the period.  Diluted
         earnings  per share is based on the sum of weighted  average  number of
         shares  outstanding  for the period and the weighted  average number of
         potential common shares outstanding. Potential common shares consist of
         outstanding   options  under  the  Company's  stock  option  plans  and
         outstanding warrants to purchase the Company's common stock.

         Stock Split

         On March 10, 2000,  the Company  declared a two-for-one  stock split in
         the form of a 100% stock dividend to its common  stockholders of record
         on  March  20,  2000.  The   consolidated   financial   statements  and
         accompanying  notes have been  retroactively  adjusted  to reflect  the
         effect of the split.

         New Accounting Pronouncements

         In June 1998, the Financial  Accounting Standards Board ("FASB") issued
         SFAS  No.  133,  Accounting  for  Derivative  Instruments  and  Hedging
         Activities. SFAS No. 133 establishes accounting and reporting standards
         for derivative instruments and hedging activities.  It requires that an
         entity recognize all derivatives as either assets or liabilities in the
         statement of financial  position and measure those  instruments at fair
         value.  The  accounting  for changes in the fair value of a  derivative
         (that is,  gains  and  losses)  depends  upon the  intended  use of the
         derivative and resulting  designation.  In July 1999,  FASB issued SFAS
         No. 137, Accounting for Derivative Instruments and Hedging Activities -
         Deferral of the  Effective  Date of SFAS No. 133,  which  postponed the
         effective  date of SFAS No. 133 for one year.  SFAS No. 133 will now be
         effective for the Company  beginning in Fiscal 2001. In June 2000, FASB
         issued SFAS No. 138, Accounting for Certain Derivative  Instruments and
         Certain Hedging  Activities,  an amendment to SFAS No. 133. The Company
         currently  does not anticipate  there will be a material  impact on the
         results of operations  or financial  position upon adoption of SFAS No.
         133 as amended by SFAS No. 138.

         Reclassifications

         Certain prior years' amounts have been reclassified to conform with the
         current year's presentation.

3.       INVESTMENTS

         At October 1, 2000,  the Company's  investment  portfolio  consisted of
         marketable  debt   securities   classified  as   held-to-maturity   and
         available-for-sale  as well as marketable equity securities  classified
         as available-for-sale.  The carrying amount of the investment portfolio
         by  investment  type and  classification  as of  October  1, 2000 is as
         follows (in thousands):
<TABLE>
<CAPTION>

                                               Held-to-Maturity        Available-for-Sale                Total
                                               ----------------        ------------------            ------------
         Short-term:
<S>                                               <C>                      <C>                       <C>
           Corporate debt securities              $    12,425              $        -                $    12,425
                                                  -----------              ----------                -----------
         Long-term:
           Corporate debt security                      5,009                       -                      5,009
           State debt security                              -                   2,750                      2,750
           Corporate debt security                          -                   1,000                      1,000
           Common stock                                     -                     143                        143
                                                  -----------              ----------                -----------
           Total long-term securities                   5,009                   3,893                      8,902
                                                  -----------              ----------                -----------
         Total investments                        $    17,434              $    3,893                $    21,327
                                                  ===========              ==========                ===========
</TABLE>

         Held-to-maturity  debt  securities  are carried at amortized  cost. The
         fair  value  of  the  held-to-maturity  debt  securities   approximates
         $17,372,000  at October 1, 2000,  based upon broker  quotes.  The gross
         unrecognized holding loss approximates $62,000 at October 1, 2000.

         Available-for-sale  debt  securities  are carried at fair market  value
         with  the  unrealized  gains  and  losses,  net  of  tax,  reported  in
         stockholders'  equity until  realized.  Gains and losses on  securities
         sold are based upon the specific  identification  method. At October 1,
         2000, the cost of available-for-sale  debt securities was equal to fair
         value (based upon broker quotes); accordingly, there were no unrealized
         gains or losses.  There have been no  realized  gains or losses for the
         year ended October 1, 2000.

         Available-for-sale  equity  securities are carried at fair market value
         with  the  unrealized  gains  and  losses,  net  of  tax,  reported  in
         stockholders'  equity  until  realized.  Gains  and  losses  on  equity
         securities sold are based upon the specific  identification  method. At
         October 1, 2000,  the fair value of the equity  securities  (based upon
         broker quotes) was less than the cost. The net unrealized loss included
         in stockholders' equity was $44,000 (net of tax of $28,000). There were
         no realized  gains or losses on the sale of  available-for-sale  equity
         securities other than those discussed in Note 6.

         Scheduled  maturities of investments  in debt  securities is as follows
         (in thousands):
<TABLE>
<CAPTION>

                                                       Held-to-Maturity                  Available-for-Sale
                                                       -----------------                 ------------------

<S>                                                         <C>                                  <C>
         Less than one year                                 $    12,425                          $       -
         Due in 1-2 years                                         5,009                                  -
         Due after 5 years                                            -                              3,750
                                                            -----------                          ---------
         Total                                              $    17,434                          $   3,750
                                                            ===========                          =========
</TABLE>

         There  were no  investments  at  September  26,  1999  other  than  the
         investment in Emcore Corporation  ("Emcore")  preferred stock discussed
         in Note 6.

4.       INVENTORIES

         Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                                                         October 1,              September 26,
                                                                            2000                     1999
                                                                        -----------              -------------

<S>                                                                      <C>                        <C>
                Raw materials, work in process and supplies              $    6,187                 $  5,226
                Finished goods                                                4,892                    4,324
                                                                         ----------                 --------
                Total                                                    $   11,079                 $  9,550
                                                                         ==========                 ========
</TABLE>

5.       PROPERTY, PLANT AND EQUIPMENT

         Property,   plant  and   equipment   consisted  of  the  following  (in
         thousands):
<TABLE>
<CAPTION>

                                                     Estimated           October 1,             September 26,
                                                   Useful Lives             2000                    1999
                                                   ------------          ----------             -------------

<S>                                                                      <C>                     <C>
                Land and improvements                        -           $     691               $       740
                Buildings and improvements          5-40 years              15,663                    14,804
                Machinery, equipment and office
                     furnishings                    3-20 years              54,385                    32,481
                Construction in progress                     -               7,057                    11,816
                                                                         ---------               -----------
                                                                            77,796                    59,841
                Accumulated depreciation                                   (20,410)                  (16,037)
                                                                         ---------               -----------
                Total                                                    $  57,386               $    43,804
                                                                         =========               ===========
</TABLE>

         Depreciation  expense was  $5,524,000,  $3,185,000  and  $2,921,000 for
         Fiscal 2000, Fiscal 1999 and Fiscal 1998, respectively.

6.       INVESTMENT IN PREFERRED STOCK

         On November  30,  1998,  the Company  purchased  642,857  shares of the
         Series I Redeemable  Convertible Preferred Stock ("Preferred Stock") of
         Emcore for approximately $9,000,000 ($14.00 per share). The shares were
         offered pursuant to a private placement by Emcore.

         Dividends on the Preferred  Stock were  cumulative  and were payable at
         Emcore's  option,  in cash or additional  shares of Preferred  Stock on
         March 31, June 30,  September 30 and December 31,  commencing  December
         31, 1998 at the annual rate of 2% per share of  Preferred  Stock on the
         liquidation preference thereof (equivalent to $0.28 per annum per share
         of Preferred Stock).

         Shares of the  Preferred  Stock were  convertible  at any time,  at the
         option of the holders thereof, into shares of common stock of Emcore on
         a one-for-one basis, subject to adjustment for certain events.

         The Preferred Stock was redeemable,  in whole or in part, at the option
         of Emcore at any time  Emcore's  common stock traded at or above $28.00
         per share for 30  consecutive  trading  days,  at a price of $14.00 per
         share plus  accrued and unpaid  dividends,  if any,  to the  redemption
         date. Emcore was required to provide not less than 30 days and not more
         than 60 days notice of the  redemption.  The shares of Preferred  Stock
         were subject to mandatory  redemption by Emcore on November 17, 2003 at
         a price of $14.00 per share plus accrued and unpaid dividends.

         In June of 1999, the Company  converted 270,000 shares of the Preferred
         Stock into 270,000 shares of Emcore common stock. The Company then sold
         its 270,000 shares of Emcore common stock for $4,822,200 in conjunction
         with a public stock offering by Emcore.  The Company  recognized a gain
         on the  sale of  approximately  $898,000,  net of  certain  transaction
         costs.

         On September 26, 1999, the closing sales price of Emcore's common stock
         on the  Nasdaq  National  Market  was  $14.4375.  This  resulted  in an
         unrealized  gain of $100,000  (net of taxes of $63,000) as of September
         26, 1999.

         During the first  quarter of Fiscal  2000,  the Company  converted  the
         remaining  372,857  shares of its Emcore  preferred  stock into 372,857
         shares of Emcore  common  stock.  The common stock was then sold in the
         open market for  approximately  $8,125,000.  This resulted in a gain of
         approximately $2,905,000, net of certain transaction costs.

7.       NOTE RECEIVABLE

         On June 10, 1996, the Company sold  substantially all the assets net of
         certain  liabilities  of its  Ensolite  closed  cell foam  division  to
         Rubatex Corporation ("Rubatex") for $25,000,000.  Proceeds consisted of
         cash of $20,000,000  and an unsecured  promissory  note receivable (the
         "Note") in the amount of $5,000,000  of RBX Group,  Inc.  ("RBX"),  the
         parent of Rubatex.  Interest on the Note was payable  semi-annually  at
         11.75% per annum. The Note was to mature on May 1, 2006.

         In January  1998,  the  Company  brought  suit to compel RBX to honor a
         mandatory early redemption obligation under the terms of the $5,000,000
         Note. In March 1998,  Rubatex filed a  counterclaim  asserting that the
         Ensolite machinery purchased was in breach of the Company's  warranties
         when  Rubatex  purchased  it  in  June  1996.  RBX  did  not  make  the
         semi-annual  interest  payment on the Note of  $293,750 on May 1, 1998.
         The Company stopped accruing  interest on the Note as of June 29, 1998.
         As of September 26, 1999, the Company had accrued  interest  receivable
         related to the Note of  approximately  $387,000.  In March of 2000, the
         Company fully reserved its note receivable and related accrued interest
         from  RBX  in  the  amount  of  $5,387,000.  This  was  a  result  of a
         determination  that based on recent events at RBX,  which  included the
         effects of a  prolonged  strike at its major  facility,  the  financial
         condition of RBX had deteriorated such that  collectibility of the note
         receivable and related accrued interest was in doubt. On June 22, 2000,
         the Company settled all outstanding  claims and counterclaims  with RBX
         for a cash payment from RBX of $250,000.  The settlement is included in
         selling and administrative costs for the year ended October 1, 2000 and
         is substantially offset by legal costs incurred.

8.       ACQUISITION OF STERLING SEMICONDUCTOR, INC.

         On  May  31,  2000,  the  Company  completed  a  merger  with  Sterling
         Semiconductor, Inc. ("Sterling") whereby Sterling became a wholly-owned
         subsidiary of the Company.  Sterling is a developer and manufacturer of
         silicon carbide ("SiC")  semiconductor  wafer substrates and substrates
         with epitaxial thin film coatings.

         Under the terms of the merger  agreement,  the Company exchanged 1.1965
         shares of its  common  stock for each  share of  Sterling's  issued and
         outstanding  preferred and common stocks and exchanged Company employee
         stock options for 1.1965 shares of the Company's  common stock for each
         share of  Sterling  common  stock  covered by an  outstanding  Sterling
         employee  stock  option  (the  majority  of which  were  vested).  This
         resulted in an issuance of  1,531,656  shares of the  Company's  common
         stock valued at approximately  $31,655,000,  the issuance of 508,219 of
         Company employee stock options valued at approximately $8,959,000,  and
         the payment of approximately  $2,000 for fractional  shares.  The total
         purchase price, including acquisition costs,  approximated $41,333,000.
         The  Company  common  stock  issued was valued  based upon the  average
         market value of such shares on the dates surrounding the final purchase
         price  adjustment,  which  occurred  on April  30,  2000.  The  Company
         employee  stock options  issued were recorded at fair value  calculated
         using the Black-Scholes option-pricing model.

         The  Sterling  merger  was  accounted  for by the  purchase  method  in
         accordance  with the APB Opinion  No. 16,  Business  Combinations.  The
         results of  operations  of Sterling  are  included in the  consolidated
         financial  statements  for the period June 1, 2000  through  October 1,
         2000.  The purchase  price was allocated to the estimated fair value of
         assets  purchased,  liabilities  assumed and  in-process  research  and
         development  ("IPR&D") based on an independent appraisal and management
         estimates at the date of acquisition as follows (in thousands):


            Working capital (excluding cash)                     $        (521)
            Cash                                                           613
            Property, plant and equipment                                1,840
            Deferred tax asset                                           2,656
            Intangible assets                                            6,102
            Other assets                                                    81
            Goodwill                                                    28,415
            Notes payable                                               (1,051)
            Other liabilities                                           (3,392)
                                                                 -------------
            Net value of purchased assets                               34,743
            Purchased in-process research and development                6,590
            Value of common stock and employee
               stock options issued                                    (40,614)
            Cash paid for fractional shares                                 (2)
            Accrued acquisition costs                                     (717)
                                                                 -------------
            Cash due at closing                                  $           -
                                                                 =============

         Included  in  other   liabilities  as  of  the   acquisition   date  is
         approximately   $2,640,000  related  to  the  Company's  investment  in
         Sterling prior to the merger. Subsequent to the merger, this amount was
         converted to a capital contribution.

         The  excess  of the  purchase  price  over  the  fair  value of the net
         identifiable assets, totaling $28,415,000 was allocated to goodwill and
         is being amortized on a straight-line basis over 5 years.

         Approximately  $6,102,000  of  the  purchase  price  was  allocated  to
         identifiable  intangible  assets including  existing product line, core
         technology and trained  workforce.  These  intangible  assets are being
         amortized over a 5-year period.

         Approximately  $6,590,000 of the purchase  price was allocated to IPR&D
         for research and development  projects of Sterling that were in various
         stages of development,  had not reached  technological  feasibility and
         for which there was no alternative  future use. In accordance with SFAS
         No. 2, Accounting for Research and  Development  Costs, as clarified by
         FASB  Interpretation  No. 4,  amounts  assigned  to IPR&D that have not
         reached technological feasibility and for which there is no alternative
         use  must be  charged  to  expense  as part  of the  allocation  of the
         purchase price.  The IPR&D was charged to expense in the fourth quarter
         of Fiscal 2000 and had no tax benefit.

         The  identifiable  intangible  assets  and  IPR&D  were  valued  on the
         acquisition  date  using an  income  approach  and,  in the case of the
         trained workforce  intangible asset, a cost to replicate  approach.  In
         the income  approach,  a cash flow was  developed  associated  with the
         respective  asset  after  charges  for the use of  existing  assets (as
         applicable)  and  consideration  of the  economic  life  of  the  asset
         (reflected  by  the  obsolescence   factor).   The  income  stream  was
         discounted to its present value based upon the estimated discount rate.
         The discount  rate was based upon our required  rate of return,  useful
         life of the technology and risks associated with the timely  completion
         of the product lines. In the case of IPR&D, the "exclusionary rule" was
         applied by which the indicated  value was multiplied by the estimate of
         the  percentage  of the total  technology  that was  complete as of the
         valuation date.  Percentage of completion was determined based upon the
         relative  number of  critical  issues  solved  to the  total  number of
         critical issues identified.  Significant  appraisal assumptions include
         revenue  projections,  margins and expense levels and the risk adjusted
         discount rate applied to the project's expected cash flows.

         As of  the  acquisition  date,  Sterling  had  developed  a  commercial
         production  capability  for 2-inch 4H and 6H (measures of hardness) SiC
         wafers.  Sterling  was also  engaged in  concurrent  efforts to develop
         potential  product lines for large  diameter  (3-inch and 4-inch 4H and
         6H)  wafers,  semi-insulating  wafers,  epitaxial  coatings  and device
         designs  that would  produce  an  economical  device  die for  discrete
         semiconductor devices.

         The purchased IPR&D is summarized as follows (in thousands):
<TABLE>
<CAPTION>

             IPR&D Technology             Discount     Economic     Percent                   Expected Date for
               Description                  Rate         Life       Complete    Fair Value     Full Commercial
                                                                                                  Viability
          ---------------------------     --------    ---------     --------    ----------    -----------------
<S>                                        <C>        <C>             <C>         <C>                 <C>
          3" and 4" large diameter
            SiC wafers                     32.7%      11 years        70%         $    858            2004
          Semi-insulating wafers           32.7%      11 years        75%              456            2004
          Epitaxy coatings                 32.7%      11 years        40%              723            2005
          Devices                          32.7%      11 years        40%            4,553            2005
                                                                                  --------
          Total IPR&D                                                             $  6,590
                                                                                  ========
</TABLE>

         The cost to complete all projects approximates $13,200,000.  The nature
         of  the  efforts   required  to  develop   the   acquired   IPR&D  into
         technologically  feasible and commercially viable products  principally
         relate to the completion of all planning, design and testing activities
         necessary  to  establish  a product  that can be  produced  to meet its
         design  requirements   including  functions,   features  and  technical
         performance  requirements.  The Company  currently expects the acquired
         IPR&D will be successfully  developed but there can be no assurance the
         technological  feasibility  or commercial  viability of these  products
         will be achieved. If none of these products are successfully developed,
         the  Company's  sales and  profitability  may be adversely  affected in
         future periods.

         The  following pro forma data  summarize the results of operations  for
         the periods indicated as if the Sterling acquisition had been completed
         as of the beginning of the periods presented.  The pro forma data gives
         effect to actual operating  results prior to the acquisition,  adjusted
         to include the pro forma effect of interest  expense,  amortization  of
         intangibles  and income taxes.  The pro forma results do not include an
         adjustment  for  IPR&D.  These pro forma  results  are not  necessarily
         indicative of the results that would have actually been obtained if the
         acquisition  occurred as of the  beginning of the periods  presented or
         that may be obtained in the future (in thousands):

                                                      Fiscal Year Ended
                                               ---------------------------------
                                                 October 1,       September 26,
                                                    2000              1999
                                               -------------- ------------------
         Pro forma net sales                    $   70,417        $   73,162
         Pro forma net income (loss)            $   39,447        $   (3,669)
         Pro forma earnings (loss) per share:
           Basic                                $     1.58        $    (0.15)
           Diluted                              $     1.58        $    (0.15)

         The  acquisition  costs for Sterling  primarily  include  approximately
         $428,000 paid to an investment  banking firm that employs  relatives of
         one of the Company's executive officers and approximately $137,000 paid
         to a law  firm of  which  one of the  Company's  directors  is a senior
         partner.

9.       OTHER ASSETS

         Other assets consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                          October 1,              September 26,
                                                             2000                     1999
                                                         -----------              -------------

<S>                                                      <C>                      <C>
                  Intangible assets                      $   5,695                $       -
                  Patents and trademarks                     3,109                    3,371
                  Technology license                         1,000                    5,000
                  Deposits                                     518                      472
                  Other                                      2,853                    1,305
                                                         ---------                ---------
                  Total                                  $  13,175                $  10,148
                                                         =========                =========
</TABLE>

         Intangible  assets  were  acquired  in  connection  with  the  Sterling
         acquisition  (Note 8) and are reported net of accumulated  amortization
         of $407,000 at October 1, 2000. Patents and trademarks are reported net
         of accumulated  amortization of $2,562,000 and $2,300,000 at October 1,
         2000 and September 26, 1999, respectively.

         During  Fiscal  1999  and  Fiscal  1998,  the  Company  paid a total of
         $5,000,000  to Emcore in  connection  with a technology  license  dated
         September 29, 1997, for certain technology  relating to the manufacture
         of  epitaxial  wafers used in high  brightness  light  emitting  diodes
         ("LEDs")  for lamps and display  devices  (Note 18).  During the fourth
         quarter  of  Fiscal  2000,  the  Company  wrote  down the  value of its
         technology license in the amount of $4,000,000 based on its decision to
         pursue its own research and development efforts. The remaining value of
         the technology license will be amortized over the estimated life of the
         technology once sales from internal production have commenced.

10.      LONG-TERM DEBT

         Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
                                                         October 1,               September 26,
                                                             2000                       1999
                                                        -----------               -------------

<S>                                                      <C>                         <C>
        Revolving credit agreement                       $    1,266                  $    6,878
        Unsecured promissory notes                            3,069                       4,524
        Capital lease obligations                            17,829                      18,249
                                                         ----------                  ----------
                                                             22,164                      29,651
        Less current portion                                 (6,702)                     (5,282)
                                                         ----------                  ----------
        Long-term debt, net of current portion           $   15,462                  $   24,369
                                                         ==========                  ==========
</TABLE>

         Debt  amounts  become  due during  subsequent  fiscal  years  ending in
         September as follows (in thousands):

                                         2001                        $    6,702
                                         2002                             5,372
                                         2003                             5,881
                                         2004                             3,993
                                         2005                               216
                                                                     ----------
                                         Total debt                   $  22,164
                                                                     ==========

         CIT Revolving Credit Agreement

         On April 14, 1998,  the Company  entered into an Amendment  and Consent
         Agreement  with CIT whereby the  Company's  existing  revolving  credit
         arrangement  was  amended to permit the Company to borrow the lesser of
         $10,000,000  or the  sum of 85% of  Eligible  Receivables  plus  55% of
         Eligible Inventories as defined in the agreement.  On April 1, 1999, in
         connection with the creation of Uniroyal Engineered Products, Inc., the
         CIT  revolving  credit  agreement  was assumed by  Uniroyal  Engineered
         Products,  Inc. The  collateral  securing the credit line includes only
         the assets of Uniroyal  Engineered  Products,  Inc. Interest on the CIT
         revolving  credit  agreement  is payable  monthly at Prime plus .5% per
         annum or at the LIBOR rate plus 2.75% per annum if the  Company  elects
         to borrow  funds  under a LIBOR loan as defined in the  agreement.  The
         loan  matures  on June 5, 2001 and is  subject  to  automatic  one year
         renewals  unless the  agreement is terminated by either party with a 90
         day notice and is  therefore  included as a  short-term  obligation  at
         October 1, 2000.  All of Uniroyal  Engineered  Products,  Inc.'s  trade
         accounts receivables and inventories are pledged as collateral for this
         loan.  The  agreement  restricts  the  creation  of certain  additional
         indebtedness.  The Company was in compliance  with the covenants  under
         this  agreement at October 1, 2000. At October 1, 2000, the Company had
         approximately  $1,266,000 of outstanding borrowings under the revolving
         credit  agreement  and  $7,005,000  of  availability.  The  Company had
         $6,878,000 of outstanding  borrowings under this agreement at September
         26,  1999.  The weighted  average  interest  rate on the CIT  revolving
         credit  agreement  was 9.1% during  Fiscal 2000 and 8.28% during Fiscal
         1999.

         Unsecured Promissory Notes

         On May 31, 2000, in connection  with the  acquisition of Sterling,  the
         Company assumed an unsecured  promissory note payable with a balance of
         approximately  $833,000. The note was payable in two equal installments
         of  approximately  $416,500 on September 1, 2000 and September 1, 2001,
         plus accrued interest at the stated rate of 10.50%. At October 1, 2000,
         the balance of this note payable approximates $416,500.

         On June 14, 1999,  in  connection  with the purchase of Happel  Marine,
         Inc., the Company issued unsecured  promissory notes for $2,400,000 and
         $511,007.   The  $2,400,000  note  is  payable  in  four  equal  annual
         installments  beginning  January 15, 2000, plus accrued interest at the
         stated  rate of 7.75% per annum.  The  $511,007  note is payable in two
         equal annual  installments  beginning  January 15,  2000,  plus accrued
         interest  at the  stated  rate of 7.75%.  The notes  were  adjusted  to
         $2,500,030 and $533,114,  respectively, in connection with a subsequent
         purchase price  adjustment in September,  1999. At October 1, 2000, the
         balances  of  these  notes   approximate   $1,875,000   and   $267,000,
         respectively.

         The Company  entered into an unsecured  promissory  note the balance of
         which was $817,000 at September 26, 1999,  in  connection  with a prior
         year  treasury  stock  purchase at a stated rate of 8.0%. To the extent
         the stated rate was below the current market rate, the Company  imputed
         interest  at the  market  rate in effect on the date of the  respective
         transaction. The note was repaid during Fiscal 2000.

         Capital Lease Obligations

         The Company leases certain machinery and equipment under non-cancelable
         capital leases which extend for varying periods up to 5 years.  Capital
         lease  obligations  entered  into  during  Fiscal  2000 were  primarily
         related  to  the  Company's  majority  owned  joint  venture,  Uniroyal
         Optoelectronics,  LLC.  The  Company  is a  guarantor  of the  Uniroyal
         Optoelectronics   capital  lease  obligations.   The  weighted  average
         interest rate on these  obligations was 8.9% in Fiscal 2000 and 8.8% in
         Fiscal 1999.

         The   approximate   minimum  future  lease   obligations  on  long-term
         non-cancelable  capital lease  obligations  included in long-term  debt
         during  subsequent  fiscal years ending in September are as follows (in
         thousands):

                                   Fiscal Year

                                     2001                             $   5,427
                                     2002                                 5,710
                                     2003                                 5,759
                                     2004                                 4,141
                                     2005                                   220
                                                                       ---------
                                                                         21,257
                                     Less imputed interest               (3,428)
                                                                      ---------
                                     Total                            $  17,829
                                                                      =========

         Interest is imputed  using the rate that would equate the present value
         of  the  minimum  lease  payments  to the  fair  value  of  the  leased
         equipment.

         Senior Secured Notes

         On April 14, 1998,  HPPI paid  $94,944,000 to the Company which in turn
         used such amount to defease the outstanding 11.75% Senior Secured Notes
         due June 1, 2003 ("Senior  Secured  Notes")  including the call premium
         and  interest  accrued  through  the  call  date  and to pay  down  its
         revolving   line  of  credit  and  secured   term  loan  with  the  CIT
         Group/Business  Credit,  Inc.  ("CIT").  The  redemption  of the Senior
         Secured  Notes was completed on June 1, 1998 at a call premium of 4.41%
         ($3,264,000).  In  connection  with the June 1,  1998  redemption,  the
         Company incurred an extraordinary loss on the extinguishment of debt of
         approximately   $5,637,000   (net  of   applicable   income   taxes  of
         approximately $2,787,000).

11.      DISCONTINUED OPERATIONS

         On December 24, 1999, the Company  entered into a definitive  agreement
         to sell certain net assets of its High Performance Plastics segment for
         $217,500,000  in  cash  to  Spartech  Corporation   ("Spartech").   The
         transaction  closed on February 28, 2000, and resulted in cash proceeds
         of  $208,976,000  net of  certain  transaction  costs  and  preliminary
         purchase price adjustments (the "Spartech Sale"). The ultimate purchase
         price adjustments have not been agreed to by both parties.  The Company
         estimates,  and has  provided  for, an ultimate  reduction  in purchase
         price of approximately $5,100,000,  which would result in a loss of the
         $5,000,000  holdback as well as an additional  payment from the Company
         to Spartech of approximately  $100,000. In addition to what the Company
         has provided  for,  Spartech is seeking an  additional  purchase  price
         reduction  up to  approximately  $4,237,000.  Management  believes  the
         ultimate  resolution of the purchase price adjustment should not have a
         material  adverse  effect on the results of  operations,  cash flows or
         financial position. After consideration of the estimated purchase price
         adjustments of $5,100,000,  the Company  recorded a gain on the sale of
         approximately $55,821,000 (net of taxes of approximately $38,146,000).

         The accompanying  consolidated  financial  statements  reflect the High
         Performance  Plastics segment as discontinued  operations in accordance
         with APB Opinion No. 30, Reporting Results of Operations.

         Net liabilities of the discontinued  operations of the High Performance
         Plastics  segment  have  been  segregated  on the  October  1, 2000 and
         September  26, 1999  balance  sheets,  the  components  of which are as
         follows (in thousands):

<PAGE>
<TABLE>
<CAPTION>

         Net Liabilities of Discontinued Operations
                                                                          October 1,         September 26,
                                                                             2000                1999
                                                                        ------------         -------------
        Assets:
<S>                                                                     <C>                  <C>
        Cash                                                            $       100          $        37
        Trade receivables                                                        21               18,261
        Inventories                                                               -               30,028
        Deferred income taxes                                                   186                2,030
        Prepaids and other assets                                               466                1,712
        Property, plant and equipment - net                                       -               45,099
        Goodwill - net                                                            -               11,142
        Other assets - net                                                        -                4,258
                                                                        -----------          -----------
        Total assets                                                            773              112,567
                                                                        -----------          -----------
        Liabilities:
        Current portion of long-term debt                                       158                8,805
        Trade payables                                                          432               13,323
        Other accrued expenses                                                4,815                7,429
        Long-term debt, net of current portion                                    -               84,552
        Deferred income taxes                                                     -                6,322
        Other liabilities                                                         -                  516
                                                                        -----------          -----------
        Total liabilities                                                     5,405              120,947
                                                                        -----------          -----------
        Net liabilities of discontinued operations                      $     4,632          $     8,380
                                                                        ===========          ===========
</TABLE>

         The results of operations for all periods  presented have been restated
         for  discontinued  operations.  The operating  results of  discontinued
         operations are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                 Fiscal Years Ended
                                                                --------------------------------------------------
                                                                   October 1,      September 26,     September 27,
                                                                      2000             1999              1998
                                                                -------------      -------------     -------------

<S>                                                             <C>                <C>                <C>
        Net sales                                               $    55,001        $   130,219        $   128,580
        Cost of goods sold                                           44,434             93,367             90,638
        Selling and administrative                                    3,933             15,538             15,947
        Depreciation and other amortization                           2,511              5,652              5,479
        Loss on assets to be disposed of                                  -                144                407
        Gain on sale of segment                                     (96,027)                 -                  -
                                                                -----------        -----------        -----------
        Income before interest expense and income taxes             100,150             15,518             16,109
        Interest expense - net                                       (3,620)            (8,574)            (7,219)
                                                                -----------        -----------        -----------
        Income before taxes                                          96,530              6,944              8,890
        Tax expense                                                 (39,184)            (2,675)            (3,164)
                                                                -----------        -----------        -----------
        Net income from discontinued operations                 $    57,346        $     4,269        $     5,726
                                                                ===========        ===========        ===========
</TABLE>

         The  following  note  relates to the  business of the High  Performance
         Plastics segment.


         HPPI Credit Agreement

         On April 14,  1998,  the Company  transferred  all of the assets of its
         High  Performance  Plastics  segment  to a newly  created  wholly-owned
         subsidiary,  HPPI. On that same day HPPI,  as borrower,  entered into a
         credit  agreement with Uniroyal HPP Holdings,  Inc. (the parent of HPPI
         and a wholly-owned  subsidiary of the Company), the Company, the banks,
         financial  institutions and other institutional  lenders named therein,
         Fleet  National  Bank (as  Initial  Issuing  Bank,  Swing Line Bank and
         Administrative  Agent)  ("Fleet")  and DLJ  Capital  Funding,  Inc.  as
         Documentation  Agent (the "Credit  Agreement"),  providing  among other
         things,  for the borrowing by HPPI of an aggregate  principal amount of
         up to $110,000,000 (the "Fleet Financing"). The $110,000,000 line under
         the Credit Agreement was composed of a $30,000,000 Term A Advance,  for
         which the weighted  average  interest  rate was 8.0% in Fiscal 2000 and
         7.36% in  Fiscal  1999,  a  $60,000,000  Term B  Advance  for which the
         weighted  average  interest  rate was 8.3% in Fiscal  2000 and 7.57% in
         Fiscal 1999, and a $20,000,000  Revolving  Credit Advance for which the
         weighted  average  interest  rate was 8.8% in Fiscal  2000 and 8.31% in
         Fiscal 1999.  The Fleet  Financing  was repaid on February 28, 2000, in
         connection with the Spartech Sale.

         The advances under the Credit Agreement were  collateralized  by a lien
         on  substantially  all of the  non-cash  assets  of  HPPI.  The  Credit
         Agreement  contained  certain  covenants  which  limited,  among  other
         things,  HPPI's ability to incur additional debt, sell its assets,  pay
         cash  dividends,  make  certain  other  payments and redeem its capital
         stock. The Credit Agreement also contained covenants which required the
         maintenance  of  certain  ratios.  HPPI was in  compliance  with  those
         covenants at September 26, 1999.  The Credit  Agreement  also contained
         annual  mandatory  pre-payments  of  principal  equal to 50% of  HPPI's
         annual Excess Cash Flow (as defined in the Credit Agreement)  beginning
         September 26, 1999. No such prepayment was due on September 26, 1999.

         Under the terms of the Credit  Agreement,  HPPI was  required to obtain
         and keep in effect one or more interest rate Bank Hedge  Agreements (as
         defined in the Credit  Agreement)  covering  at least 50% of the Term A
         and Term B  Advances,  for an  aggregate  period of not less than three
         years.  On May 14, 1998,  HPPI entered  into three  interest  rate swap
         agreements with two banks. The first agreement was a fixed rate swap on
         $30,000,000  notional  amount with an expiration  date of May 14, 2003.
         HPPI's fixed LIBOR rate of interest on this swap was 5.985%.  HPPI paid
         or received  interest based upon the differential  between HPPI's fixed
         LIBOR rate and the bank's  floating  LIBOR  rate.  The bank's  floating
         LIBOR rate was adjusted monthly.  The second agreement was a cancelable
         interest rate swap on  $30,000,000  notional  amount with an expiration
         date of May 14, 2003.  HPPI's fixed LIBOR rate of interest on this swap
         was 5.7375%. HPPI paid or received interest based upon the differential
         between HPPI's fixed LIBOR rate and the bank's floating LIBOR rate. The
         bank's  floating  LIBOR rate was adjusted  quarterly.  The bank had the
         option to cancel this swap on May 14, 2001.  The third  agreement was a
         cancelable  interest rate swap on $20,000,000  notional  amount with an
         expiration date of May 14, 2000. HPPI's fixed LIBOR rate of interest on
         this swap was 5.6725%.  HPPI paid or received  interest  based upon the
         rate  differential  between  HPPI's  fixed  LIBOR  rate and the  bank's
         floating  LIBOR  rate.  The bank's  floating  LIBOR  rate was  adjusted
         quarterly.  The bank had the option to cancel this swap on May 14, 1999
         which it did not exercise.  The differential on interest rate swaps was
         accrued as interest  rates changed and was  recognized as an adjustment
         to interest expense over the life of the agreements.  The fair value of
         these interest rate swap agreements  represented the estimated receipts
         or  payments  that  would  be made to  terminate  the  agreements.  The
         interest rate swap  agreements  were terminated on February 28, 2000 in
         connection  with the  repayment of the Fleet  Financing.  HPPI received
         $950,000  upon  termination  and  recorded  this  amount  as a gain  on
         interest  rate  swap  termination.  The  gain  on  interest  rate  swap
         termination  is  included  in selling  and  administrative  expenses of
         discontinued operations.

         In  connection  with  the  Fleet   Financing,   the  Company   incurred
         approximately  $3,545,000  in  debt  issuance  costs.  The  costs  were
         capitalized and were amortized using the interest method over the lives
         of the  agreements.  The remaining  unamortized  amount at February 28,
         2000 was  written-off  in  connection  with the  Spartech  Sale and the
         repayment of the Fleet Financing.

12.      OTHER LIABILITIES

         Other liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
                                                           October 1,               September 26,
                                                              2000                      1999
                                                         ----------                 -------------
<S>                                                       <C>                        <C>
               Accrued retirement benefits                $    22,545                $    14,653
               Taxes, other than income                            74                         71
               Other                                            1,181                        564
                                                          -----------                -----------
               Total                                      $    23,800                $    15,288
                                                          ===========                ===========
</TABLE>
<PAGE>
13.      INCOME TAXES

         The effective tax rate differs from the  statutory  federal  income tax
         rate for the following reasons (in thousands):
<TABLE>
<CAPTION>
                                                                             Fiscal Years Ended
                                                           ---------------------------------------------------------
                                                           October 1,           September 26,          September 27,
                                                              2000                  1999                   1998
                                                           ----------           -------------          -------------
<S>                                                       <C>                   <C>                    <C>
         Income tax (benefit) expense calculated at
           the statutory rate applied to
           (loss) income before income tax,
           discontinued operations and
           extraordinary item                             $   (12,895)          $      (435)           $     1,925

         Increase (decrease) resulting from:

           Capital loss from medical benefits
             subsidiary                                             -               (15,980)                     -

           Valuation allowance                                (13,702)               13,702                      -

           Goodwill                                             3,061                     -                      -

           State income tax                                    (1,797)                  103                    (31)

           Research and development credit                       (894)                    -                      -

           Other                                                   45                    90                    448

           Exclusion of extraordinary loss on
             the extinguishment of debt                             -                     -                 (2,787)

           Amortization of reorganization
             value in excess of amounts
             allocable to identifiable assets                       -                     -                    101
                                                          -----------           -----------            -----------
         Income tax benefit                               $   (26,182)          $    (2,520)           $      (344)
                                                          ===========           ===========            ===========
</TABLE>

         Allocation of income tax benefit is as follows (in thousands):
<TABLE>
<CAPTION>
                                                                            Fiscal Years Ended
                                                      -------------------------------------------------------------
                                                       October 1,            September 26,            September 27,
                                                          2000                   1999                     1998
                                                      ------------           -------------            -------------
<S>                                                   <C>                    <C>                      <C>
         (Loss) income before extraordinary
            item                                      $   (26,182)           $    (2,520)             $     2,443
         Extraordinary item                                     -                      -                   (2,787)
                                                      -----------            -----------              -----------
         Income tax benefit                           $   (26,182)           $    (2,520)             $      (344)
                                                      ===========            ===========              ===========

</TABLE>
<PAGE>
         Income tax (benefit) expense consisted of the following  components (in
         thousands):
<TABLE>
<CAPTION>
                                                                       Fiscal Years Ended
                                                 -------------------------------------------------------
                                                  October 1,         September 26,         September 27,
                                                     2000                1999                   1998
                                                 -----------         -------------         -------------
<S>                                              <C>                 <C>                    <C>
         Current:
           Federal                               $    (30,786)       $    (2,948)           $    (2,593)
           State                                       (2,581)              (278)                   (31)
                                                 ------------        -----------            -----------
             Total                               $    (33,367)       $    (3,226)           $    (2,624)
                                                 ============        ===========            ===========
         Net deferred tax expense:
           Federal                               $      6,401        $       325            $     2,280
           State                                          784                381                      -
                                                -------------        -----------            -----------
             Total                               $      7,185        $       706            $     2,280
                                                 ============        ===========            ===========
         Total:
           Federal                               $    (24,385)       $    (2,623)           $      (313)
           State                                       (1,797)               103                    (31)
                                                -------------        -----------            -----------
             Total                               $    (26,182)       $    (2,520)           $      (344)
                                                 ============        ===========            ===========
</TABLE>
         The  components  of the  deferred  tax assets and  liabilities  were as
         follows (in thousands):
<TABLE>
<CAPTION>
                                                                            October 1, 2000
                                                         ---------------------------------------------------
                                                            Assets            Liabilities           Total
                                                         -----------         ------------        -----------
         Current
         -------
<S>                                                      <C>                  <C>                <C>
         Accrued expenses deductible in future
           periods                                       $    5,460           $       -          $    5,460
                                                         ===========          =========          ==========
         Non-Current
         -----------
         Acquired tax loss carryforward
           benefits                                      $    4,976           $       -          $    4,976
         Book basis in excess of tax basis of
           assets                                                 -              (4,214)             (4,214)
         Long-term accrual of expenses
           deductible in future periods                       7,066                   -               7,066
                                                         ----------           ---------          ----------
              Total                                      $   12,042           $  (4,214)         $    7,828
                                                         ==========           =========          ==========
</TABLE>
<TABLE>
<CAPTION>
                                                                      September 26, 1999
                                                        --------------------------------------------------
                                                          Assets            Liabilities            Total
                                                        ----------          -----------          ---------
         Current
         -------
<S>                                                     <C>                  <C>                <C>
         Accrued expenses deductible in future
           periods                                      $    2,779           $       -          $    2,779
                                                        ==========           =========          ==========
         Non-Current
         -----------
         Acquired tax loss carryforward
           benefits                                     $    4,951           $       -          $    4,951
         Net operating loss carryforward                     5,496                   -               5,496
         Capital loss                                       13,702                   -              13,702
         Valuation allowance                               (13,702)                  -             (13,702)
         Book basis in excess of tax basis of
           assets                                                -              (1,577)             (1,577)
         Long-term accrual of expenses
           deductible in future periods                      6,141                   -               6,141
         AMT credit carryforward                               339                   -                 339
                                                        ----------           ---------          ----------
           Total                                        $   16,927           $  (1,577)         $   15,350
                                                        ==========           =========          ==========
</TABLE>

         The acquired tax loss  carryforward  benefits  expire in various  years
         starting  in the  year  2007  through  2020.  These  acquired  tax loss
         benefits  consist  of  tax  net  operating  loss   carryforwards   from
         acquisitions of subsidiaries  and are subject to an annual  limitation.
         The annual  limitation  on  utilization  of the acquired net  operating
         losses is approximately $4,000,000 per year.

         In Fiscal 1999, the Company  established a subsidiary to administer the
         Company's  employee  medical benefits  program.  The Company realized a
         one-time federal capital loss tax benefit of approximately  $15,980,000
         arising  from the sale of a portion  of the  stock of this  subsidiary.
         However,  due to the  uncertainty  regarding the  Company's  ability to
         utilize  this  capital  loss in the  future,  only  $2,278,000  of this
         benefit was recognized in Fiscal 1999 as an offset against  current and
         previous  capital  gains.  In Fiscal  2000,  the  Company  realized  an
         additional  state tax benefit of $936,000 and the $13,702,000  previous
         federal  balance  of this  benefit  was  recognized  as an  offset to a
         portion  of the  capital  gain  realized  upon  the  sale  of the  High
         Performance Plastics segment.

14.      STOCKHOLDERS' EQUITY

         The Company's certificate of incorporation provides that the authorized
         capital stock of the Company  consists of  35,000,000  shares of common
         stock and 1,000 shares of preferred  stock,  each having a par value of
         $0.01 per share. At October 1, 2000,  30,707,976 shares of common stock
         were issued or to be issued.

         On December  18, 1996,  the Board  designated a new series of preferred
         stock of the Company  termed  Series C Junior  Participating  Preferred
         Stock, $.01 par value ("Series C Preferred") and reserved 450 shares of
         the  Series C  Preferred  for  issuance.  At the same  time,  the Board
         declared  a  dividend  of a right to  acquire  1/100,000  of a share of
         Series C  Preferred  to the holder of each  share of common  stock (the
         "Rights")  under a Shareholder  Rights Plan. The Rights will trade with
         the  common  stock  and  be  detachable   from  the  common  stock  and
         exercisable  only in the  event  of an  acquisition  of or grant of the
         right to acquire 15% or more of the common stock by one party or common
         group or a tender offer to acquire 15% or more of the common stock.

         Common Stock

         The holders of record of shares of common stock are entitled to receive
         dividends  when  and as  declared  by the  Board  of  Directors  of the
         Company,  provided that the Company has funds legally available for the
         payment of dividends and is not otherwise contractually restricted from
         the payment of dividends. The Company declared no such dividends during
         Fiscal 2000, Fiscal 1999 and Fiscal 1998.

         Treasury Stock Transactions

         During Fiscal 2000 and Fiscal 1999,  the Company  received  109,149 and
         260,764 shares of its common stock,  respectively,  in lieu of cash for
         the  exercise of stock  options  from  officers  and  employees  of the
         Company. These shares were valued at approximately $1,368,000 in Fiscal
         2000 and $1,345,000 in Fiscal 1999 (which were calculated  based on the
         closing  market  value of the  stock on the day  prior to the  exercise
         dates) and are  included as  treasury  shares as of October 1, 2000 and
         September 26, 1999.

         During Fiscal 2000 and Fiscal 1999, the Company  repurchased  1,008,496
         and  1,810,970  shares,  respectively,  of its common stock in the open
         market for approximately $13,547,000 and $8,451,000, respectively.

         During Fiscal 1999, the Company  received  506,580 shares of its common
         stock in  connection  with the final  distributions  of the  bankruptcy
         proceedings,  36,542 of which were purchased at a cost of approximately
         $181,000. No such shares were received or purchased during Fiscal 2000.

         During Fiscal 2000 and Fiscal 1999, the Company  repurchased 47,984 and
         95,424   shares  of  its  common  stock  from  its  benefit  plans  for
         approximately $303,000 and $482,000, respectively.

         During Fiscal 1998,  the Company  repurchased  1,000,000  shares of its
         common stock for $2,187,500 in connection  with the sale by the Pension
         Benefit  Guaranty  Corporation  ("PBGC") of all of its  holdings of the
         Company's   common  stock.   Also  during  Fiscal  1998,   the  Company
         repurchased  600,000 shares of its common stock,  previously  issued in
         connection  with the Fiscal 1997  purchase of  Townsend  Plastics,  for
         $250,000 cash and an unsecured promissory note for $2,450,000 (Note 10)
         and repurchased  100,000 shares of its common stock,  previously issued
         in connection with the Fiscal 1997  acquisition of C. Gunther  Company,
         for $431,250.

         Subsequent to the fiscal year ended October 1, 2000, and as of November
         30, 2000, the Company repurchased  approximately  459,200 shares of its
         common stock in the open market for approximately $3,640,900.

         Warrants

         The Company has 367,885  warrants  outstanding to purchase an aggregate
         of 735,770  shares of its common  stock at a price  equal to $4.375 per
         warrant,  subject  to  adjustments  under  certain  circumstances.  All
         outstanding warrants are exercisable at any time on or prior to June 1,
         2003, at which time they will  terminate  and become void.  The Company
         originally   issued  800,000  warrants  to  purchase  an  aggregate  of
         1,600,000 shares of its common stock in connection with the issuance of
         its Senior Secured Notes in Fiscal 1993.  The warrants were  detachable
         from the Senior Secured Notes and, therefore,  were allocated a portion
         of the proceeds in the amount of  approximately  $1,566,000,  which was
         their market value at the time they were issued.  This amount was added
         to additional  paid-in  capital.  During Fiscal 2000,  169,650 warrants
         were exercised resulting in cash proceeds of approximately $742,000. No
         warrants were exercised in Fiscal 1999. During Fiscal 1999, the Company
         repurchased  45,615  of  its  outstanding  warrants  for  approximately
         $292,000.  No warrants  were  repurchased  during  Fiscal  2000.  As of
         September 26, 1999, no warrants had been exercised.

         Stock Compensation Plans

         At October 1,  2000,  the  Company  has four  stock-based  compensation
         plans,  which are described  below. The Company applies APB Opinion No.
         25  and  related   interpretations   in   accounting   for  its  plans.
         Accordingly,  no compensation  cost has been recognized for these plans
         except as indicated below. Had compensation  cost been determined based
         on the fair  value at the grant  dates for  awards  under  those  plans
         consistent  with the method of SFAS No. 123, the  Company's  net income
         and earnings per share would have been reduced to the pro forma amounts
         indicated below (in thousands, except earnings per share information):
<TABLE>
<CAPTION>

                                                                            Fiscal Years Ended
                                                           ----------------------------------------------------
                                                            October 1,        September 26,       September 27,
                                                               2000                1999                1998
                                                           -----------        -------------       -------------
<S>                                                         <C>                 <C>                 <C>
         Net income:
           As reported                                      $   46,687          $    5,520          $    2,390
           Pro forma                                        $   43,090          $    4,778          $    2,175
         Earnings per share - basic:
           As reported                                      $     1.87          $     0.23          $     0.09
           Pro forma                                        $     1.73          $     0.20          $     0.08
         Earnings per share - assuming dilution:
           As reported                                      $     1.87          $     0.21          $     0.08
           Pro forma                                        $     1.73          $     0.18          $     0.07
</TABLE>

         The fair value of each  option  grant is  estimated  on the date of the
         grant using the Black-Scholes  option-pricing  model with the following
         weighted-average assumptions used for grants for the fiscal years ended
         October  1,  2000,   September   26,  1999  and   September  27,  1998,
         respectively:   expected  volatility  of  58.65%,  44.16%  and  45.46%,
         dividend yield of 0% for all years,  risk-free interest rates of 6.23%,
         6.014% and 4.523% and expected lives of 3 to 10 years.

         The Company has reserved  2,727,272 shares of common stock to be issued
         and sold pursuant to the 1992 Stock Option Plan that was adopted by the
         Company on September 27, 1992. Generally,  of the options granted under
         this  plan,  60%  vested  on May 1,  1994 and the  remainder  vested on
         November 1, 1995. Vesting provisions for any additional options will be
         determined  by the Board of Directors of the Company at the time of the
         grant of such options.  The stock options are exercisable over a period
         determined by the Board of Directors or its Compensation Committee, but
         no longer than ten years after the date granted.

         During the fiscal year ended  September 26, 1993,  the Company  adopted
         the 1992  Non-Qualified  Stock Option Plan  available  for  non-officer
         directors.  This plan provides  that  directors who are not officers of
         the Company are entitled to forego up to 100% of their annual  retainer
         in exchange  for options to purchase the  Company's  common stock at an
         option price of 50% of the market price of the underlying  common stock
         at the date of grant.  The options are  exercisable  for a period of 10
         years from the date of the grant of each option.  Compensation  expense
         related to these  options  was  approximately  $118,000,  $109,000  and
         $64,000 during Fiscal 2000, Fiscal 1999 and Fiscal 1998, respectively.

         During the fiscal year ended October 2, 1994,  the Company  adopted the
         1994 Stock  Option Plan  available  for certain  key  employees  of the
         Company.  The Company has reserved  approximately  1,624,000  shares of
         common stock to be issued under this plan,  provided that the aggregate
         number of options that may be granted  under the 1994 Stock Option Plan
         and all other stock option plans of the Company for  employees  may not
         at  any  time  exceed  in the  aggregate  15%  of  the  then  currently
         authorized common stock  outstanding,  on a fully diluted basis.  Stock
         options  granted under this plan are  exercisable  until not later than
         January 1, 2004.

         During the fiscal year ended  September 29, 1996,  the Company  adopted
         the 1995 Non-Qualified Stock Option Plan available for directors.  Each
         director  is  granted  an  option  to  purchase  20,000  shares  of the
         Company's  common  stock in the case of the  initial  grant and  10,000
         shares for any  subsequent  grant.  The initial grant occurred upon the
         adoption of this plan or, in the case of new  directors,  30 days after
         becoming an eligible  director of the Company.  Options  granted  under
         this plan have a term of three years and may be  exercised  nine months
         after the date of the grant. This plan terminates on February 14, 2006.
         No director who is not an officer of the Company may receive options to
         purchase more than an aggregate of 60,000 shares of Common Stock in any
         calendar year under all of the Company's  Stock Option Plans.  The plan
         was amended by the  Stockholders  in 1999 to increase the annual amount
         from 20,000 to 35,000 shares of the Company's common stock.

         The following table  summarizes all stock option  transactions  for the
         fiscal years ended October 1, 2000 and September 26, 1999:
<TABLE>
<CAPTION>

                                                                         Fiscal Years Ended
                                                --------------------------------------------------------------------
                                                       October 1, 2000                     September 26, 1999
                                                -------------------------------      -------------------------------
                                                               Weighted-Average                     Weighted-Average
                                                  Shares        Exercise Price        Shares         Exercise Price
                                                ------------ ------------------      ------------ ------------------

<S>                                              <C>               <C>                <C>               <C>
          Outstanding at Beginning of Year       3,695,060         $    2.87          4,352,786         $    2.53
          Grants                                 3,382,079         $   11.37            374,200         $    3.88
          Exercised                             (1,125,520)        $    1.91           (996,926)        $    1.71
          Forfeited                                (15,000)        $   13.59            (35,000)        $    3.92
                                                ----------                           ----------
          Outstanding at End of Year             5,936,619         $    7.87          3,695,060         $    2.87
                                                ==========                           ==========
          Exercisable at End of Year             2,676,093                            2,059,210
                                                ==========                           ==========
          Weighted-average fair value of
          options granted during the year       $    10.84                           $     1.85
</TABLE>

         The  following  table  summarizes  information  about stock  options at
         October 1, 2000:
<TABLE>
<CAPTION>
                                    Options Outstanding                                     Options Exercisable
        ----------------------------------------------------------------------------    ----------------------------

                                  Number         Weighted-Average       Weighted-          Number        Weighted-
            Range of           Outstanding          Remaining            Average         Exercisable      Average
        Exercise Prices         at 10/1/00      Contractual Life      Exercise Price     At 10/1/00   Exercise Price
        ---------------        -----------      -----------------     --------------    ------------  --------------
<S>                             <C>                   <C>               <C>              <C>             <C>
       $ 0.00 - $ 2.99          1,331,616             3.97 Years        $    1.59        1,331,616       $    1.59
       $ 3.00 - $ 5.99          2,640,624             7.49 Years        $    4.56        1,020,992       $    4.50
       $ 6.00 - $ 8.99             78,343             7.33 Years        $    7.15           66,743       $    6.93
       $ 9.00 - $11.99            225,138             7.04 Years        $   10.57          211,094       $   10.53
       $12.00 - $14.99            156,148             8.50 Years        $   13.00           45,648       $   12.54
       $15.00 - $17.99          1,212,500             9.52 Years        $   17.18                -       $       -
       $18.00 - $20.99              2,750             9.65 Years        $   19.45                -       $       -
       $21.00 - $23.99            285,000             2.65 Years        $   23.03                -       $       -
           $29.25                   4,500             9.47 Years        $   29.25                -       $       -
                                ---------                                                ---------
                                5,936,619             6.89 Years        $    7.87        2,676,093       $    3.73
                                =========                                                =========
</TABLE>

         Employee Stock Ownership Plan

         The Company  established the Uniroyal Technology  Corporation  Employee
         Stock  Ownership  Plan (the "ESOP") in 1992. The ESOP was a stock bonus
         plan  intended  to  encourage  eligible  employees  to save  for  their
         retirement and to increase their proprietary interest in the Company by
         accumulating  the Company's  common stock.  Employees  eligible for the
         initial  distribution  generally  were all  employees  employed  by the
         Company on or after January 1, 1993,  excluding  executive  officers of
         the Company.

         The Company made an initial  contribution to the ESOP of 850,000 shares
         of  common   stock.   Future   contributions   by  the   Company   were
         discretionary.  The  initial  contribution  was  allocated  to eligible
         employees of the Company ratably based upon the respective compensation
         levels of the eligible employees.  Shares allocated to each participant
         account under the ESOP became vested upon the participant's  completion
         of three years of cumulative service with the Company.  The Company did
         not make  any  contributions  to the  ESOP  nor did they  have any ESOP
         expense  during Fiscal 2000 and Fiscal 1998.  During  Fiscal 1999,  the
         Company  contributed  approximately  $40,000 to the ESOP. During Fiscal
         1999,  the  Company  merged the ESOP into the three  existing  employee
         savings plans effective  October 1, 1998. No further  contributions are
         to be  made  to the  Plan,  no  further  benefits  will  accrue  to any
         participants  in the Plan and the accounts of all  participants  in the
         Plan as of February 6, 1998 are vested.

15.      EMPLOYEE COMPENSATION

         Post-retirement Healthcare and Life Insurance Benefits

         Certain  retired  employees  are  currently   provided  with  specified
         healthcare and life insurance  benefits.  Generally,  the plan provides
         for  reimbursement of approved medical and prescription  drug costs not
         fully  covered  by  Medicare.   The  plan  also  provides  for  certain
         deductibles and  co-payments.  The life insurance  benefits provide for
         amounts  based  upon the  retirees'  compensation  at the time of their
         retirement.   Eligibility   requirements  for  such  benefits  vary  by
         division,   but  generally  provide  that  benefits  are  available  to
         employees  who  retire  after a  certain  age with  specified  years of
         service or a combined  total of age and years of  service.  The Company
         has the right to modify or  terminate  certain of these  benefits.  The
         Company's  policy  is to  pay  the  actual  expenses  incurred  by  the
         retirees;  the Company does not intend to fund any amounts in excess of
         those obligations. The Company is also obligated to provide benefits to
         certain salaried retirees of Uniroyal  Plastics Company,  Inc. ("UPC"),
         which is currently in  liquidation  proceedings  under Chapter 7 of the
         U.S.  Bankruptcy Code and is an affiliate of the Predecessor  Companies
         (Note 16), and Uniroyal,  Inc.  ("Uniroyal")  (not  affiliated with the
         Company) who are class  members under a federal  district  court order.
         The Company and Uniroyal,  through Uniroyal  Holdings,  Inc., agreed to
         share on a 35%-65% basis, respectively, the costs of providing medical,
         prescription  drug and life insurance  benefits to these retirees.  The
         Company is further  obligated to make payments to a Voluntary  Employee
         Benefits  Association  ("VEBA")  established  to  provide  benefits  to
         certain  retirees of the  Predecessor  Companies and UPC. The Company's
         post-retirement benefit plans are not funded.

         The  Company   adopted  SFAS  No.  106,   Employer's   Accounting   for
         Post-retirement Benefits Other than Pensions, as of September 27, 1992,
         which requires that the cost of the foregoing benefits be recognized in
         the  Company's  consolidated  financial  statements  over an employee's
         service  period  with the  Company.  The  Company  determined  that the
         accumulated    post-retirement    benefit    obligation    ("Transition
         Obligation")  of  these  plans  upon  adoption  of  SFAS  No.  106  was
         $28,085,000.  The  Company  elected  to defer  the  recognition  of the
         Transition  Obligation  and amortize it over the greater of the average
         remaining service period or life expectancy period of the participants,
         which were both expected to be  approximately  16 years.  In connection
         with the Spartech Sale, the Company recognized approximately $6,341,000
         of the transition obligation as a reduction of the gain on sale.

         The  components  of net  periodic  benefit  costs  are as  follows  (in
         thousands):
<TABLE>
<CAPTION>

                                                       October 1,          September 26,        September 27,
                                                          2000                 1999                 1998
                                                      -----------          -------------        -------------

<S>                                                    <C>                  <C>                  <C>
         Service cost                                  $     132            $      61            $      52
         Interest cost                                     2,184                1,864                2,212
         Amortization of prior service credit                (14)                 (14)                 (14)
         Amortization of transition obligation               683                1,114                1,114
         Recognized actuarial loss                           310                  151                  289
                                                       ---------            ---------            ---------
         Net periodic benefit cost                     $   3,295            $   3,176            $   3,653
                                                       =========            =========            =========
</TABLE>

         A  reconciliation  of the  beginning  and  ending  balances  of benefit
         obligations  and the  funded  status of the plans  are as  follows  (in
         thousands):
<TABLE>
<CAPTION>
                                                                   October 1,        September 26,
                                                                      2000                1999
                                                                  -----------        -------------
<S>                                                               <C>                 <C>
         Change in benefit obligations:
         Benefit obligation at beginning of year                  $    28,651         $    34,163
         Service cost before expenses                                     132                  61
         Interest cost                                                  2,184               1,864
         Benefit payments                                              (2,827)             (2,649)
         Actuarial (gain)/loss                                          3,529              (4,788)
                                                                  -----------         -----------
         Benefit obligation at end of year                        $    31,669         $    28,651
                                                                  ===========         ===========

         Reconciliation of funded status:
         Benefit obligation at end of year                        $    31,669         $    28,651
         Unrecognized actuarial loss                                   (5,980)             (2,762)
         Unrecognized prior service credit                                232                 247
         Unrecognized transition obligation                            (2,999)            (10,022)
                                                                  -----------         -----------
          Net amount recognized at year-end                       $    22,922         $    16,114
                                                                  ===========         ===========
</TABLE>

         The weighted  average discount rate assumptions were 7.5% at October 1,
         2000, 6.75% at September 26, 1999 and 6.25% at September 27, 1998.

         The assumed healthcare cost trend rate used in measuring the healthcare
         benefits for Fiscal 2000 was a 8.0% average  annual rate of increase in
         the per capita cost healthcare benefits. This rate is assumed to change
         over the years as follows:  7.5% for the fiscal years  beginning  2001,
         7.0% for the fiscal  years  beginning  2006,  6.5% for the fiscal years
         beginning  2011, 6.0% for the fiscal years beginning 2016, and 5.5% for
         the fiscal years beginning 2020 and later.

         Assumed  healthcare  cost trend rates have a significant  effect on the
         amounts reported for the healthcare plan. A one-percentage-point change
         in assumed cost trend would have the following  effects for Fiscal 2000
         (in thousands):
<TABLE>
<CAPTION>
                                                                           1% Point Increase      1% Point Decrease
                                                                           -----------------      -----------------
<S>                                                                            <C>                     <C>
         Effect on total of service and interest cost components for 2000      $    275                $   (234)
         Effect on year-end 2000 post-retirement benefit obligation               3,389                  (2,850)
</TABLE>

         Post-retirement Benefit Plan

         Effective  October  1,  1998,  the  Company   established  an  unfunded
         post-retirement  defined  benefit  plan for  officers  and  certain key
         employees of the Company.

         The  components  of net  periodic  benefit  costs  are as  follows  (in
         thousands):
<TABLE>
<CAPTION>
                                                                    October 1,        September 26,
                                                                       2000               1999
                                                                   -----------        -------------

<S>                                                                <C>                 <C>
         Service cost                                              $      487          $      525
         Interest cost                                                     35                   -
                                                                   ----------          ----------
         Net periodic benefit cost                                 $      522          $      525
                                                                   ==========          ==========
</TABLE>

         The following  table  provides a  reconciliation  of the changes in the
         plan's benefit  obligations and a  reconciliation  of the funded status
         for Fiscal 2000 and Fiscal 1999 (in thousands):
<TABLE>
<CAPTION>

                                                                    October 1,        September 26,
                                                                       2000               1999
                                                                   -----------        -------------
<S>                                                                <C>                 <C>
         Accrued benefit obligation at beginning of year           $      525          $        -
         Service cost                                                     487                 525
         Interest cost                                                     35                   -
         Benefits paid or transferred                                     (85)                  -
                                                                   ----------          ----------
         Accrued benefit obligation at end of year                 $      962          $      525
                                                                   ==========          ==========

         Projected benefit obligation                              $      903          $      484
         Unrecognized loss                                                 59                  41
                                                                   ----------          ----------
         Accrued benefit obligation at end of year                 $      962          $      525
                                                                   ==========          ==========
</TABLE>

         The discount rate used as of October 1, 2000 and September 26, 1999 was
         8.0% and 7.75%, respectively.

         In  connection  with the  post-retirement  defined  benefit  plan,  the
         Company purchased life insurance contracts on the lives of officers and
         certain key employees of the Company during Fiscal 1999. Life insurance
         premiums  of  approximately  $482,000  and  $383,000  were  paid by the
         Company in Fiscal 2000 and Fiscal 1999,  respectively,  with respect to
         these  policies.  As  of  October  1,  2000  and  September  26,  1999,
         approximately   $660,000   and   $303,000,   respectively,   have  been
         capitalized to reflect the cash surrender value of the contracts.

         During  Fiscal  2000,  the  post-retirement  defined  benefit  plan was
         amended for the officers of the  Company.  The  amendment  provided for
         extended plan benefits.  The extended benefits were immediately  vested
         and fully funded  through life insurance  products.  The Company funded
         and recognized an expense of approximately $2,300,000 in Fiscal 2000 in
         connection with the plan amendment.  This amount is included in selling
         and administrative costs in Fiscal 2000.

         Other Benefit Plans

         The Company provides  additional  retirement benefits to the union wage
         employees of the UEP and UAS divisions through two defined contribution
         savings  plans.  The  plans  provide  for  employee  contributions  and
         employer   matching   contributions  to  employee   savings.   Employer
         contributions are at rates per hour ranging generally from $.05 to $.66
         based on years of  service.  The  expenses  pertaining  to these  plans
         amounted to approximately $92,000,  $98,000 and $280,000 for the fiscal
         years ended in 2000, 1999 and 1998, respectively.

         In addition,  the Company  provides a savings plan under Section 401(k)
         of the  Internal  Revenue  Code.  The savings  plan covers all eligible
         salaried and non-union wage employees of the Company.  The savings plan
         allows all  eligible  employees to defer up to 15% of their income on a
         pre-tax basis  through  contributions  to the savings  plan.  For every
         dollar an employee  contributes,  the Company may  contribute an amount
         equal to 25% of each  participant's  before-tax  obligation up to 6% of
         the participant's compensation.  Such employer contribution may be made
         in cash or in Company  common  stock.  The expenses  pertaining to this
         savings plan for continuing  operations  were  approximately  $137,000,
         $85,000  and $88,000  for the fiscal  years ended 2000,  1999 and 1998.
         During  Fiscal  2000,   Fiscal  1999  and  Fiscal  1998,   the  Company
         contributed 17,206, 39,344 and 60,520 shares of its common stock with a
         market  value  of  approximately   $219,000,   $199,000  and  $191,000,
         respectively,   to  the  savings  plan.  These  contributions  included
         contributions to employees of discontinued operations.

         On August 4, 2000,  the Board of  Directors  of the Company  approved a
         special  contribution  of Company common stock to the Company's  401(k)
         savings  plan for the plan years ended  December  31, 2000 and December
         31, 1999. The contribution  will be made to eligible plan  participants
         employed by the Company and certain of the Company's subsidiaries.  The
         amount of the contribution will approximate $2,157,000 and will be made
         through an undetermined number of shares of Company common stock. As of
         October 1, 2000,  approximately $2,157,000 has been accrued and charged
         to selling and administrative expenses.

16.      COMMITMENTS AND CONTINGENCIES

         Bankruptcy Proceedings

         On September  27, 1992 the Company  acquired the  businesses of certain
         direct and indirect subsidiaries of The Jesup Group, Inc. ("Jesup") for
         $54,400,000  of  the  Company's  common  and  preferred  stocks.  These
         subsidiaries  (collectively,   the  "Predecessor  Companies")  are  the
         current operating divisions of the Company.  The Predecessor  Companies
         previously filed petitions with the United States  Bankruptcy Court for
         the Northern District of Indiana,  South Bend Division (the "Bankruptcy
         Court") seeking protection from their creditors under Chapter 11 of the
         United States  Bankruptcy Code. On August 20, 1992 the Bankruptcy Court
         approved the Third Amended Plan of  Reorganization  under Chapter 11 of
         the  Bankruptcy  Code  for  Polycast  Technology  Corporation  and  its
         Affiliated Debtors (the "Plan"). The Plan was substantially consummated
         at the close of business on September 27, 1992 (the "Effective Date").

         As a  result  of the  bankruptcy  and the  consummation  of the Plan at
         September 27, 1992, the Company recorded certain adjustments to present
         its  consolidated   financial  statements  at  September  27,  1992  in
         conformity  with  Statement of Position  90-7  "Financial  Reporting by
         Entities in Reorganization  Under the Bankruptcy Code" ("SOP 90-7"), of
         the  American  Institute  of Certified  Public  Accountants.  Under the
         provisions  of SOP 90-7,  the Company was required to adopt fresh start
         reporting as of September 27, 1992 because (i) the reorganization value
         of the Company  (approximate fair value on the Effective Date) was less
         than  the  total  of all  post-petition  liabilities  and  pre-petition
         allowed claims and (ii) holders of the voting shares of the Predecessor
         Companies before the Effective Date received less than 50 percent (50%)
         of the voting shares of the Company.

         As of September 26, 1999, all 20,000,000 shares of the Company's common
         stock  allocated for the  disposition  of  bankruptcy  claims have been
         issued for full  settlement to the holders of unsecured  claims against
         the estates of the Predecessor Companies and to the Company's ESOP. The
         Bankruptcy  Court issued its final decree closing the bankruptcy of the
         Predecessor Companies on September 27, 1999.

         Townsend Acquisition

         By letter dated January 30, 1998, the Denver Regional Office of the FTC
         notified the Company that it was conducting a non-public  investigation
         into the Company's  acquisition  of the Townsend  Plastics  Division of
         Townsend Industries,  Inc. (the "Townsend business") in September 1997.
         The  purpose  of  the   investigation  was  to  determine  whether  the
         transaction  violated  Section 7 of the Clayton Act, 15 USC Section 18,
         Section 5 of the Federal  Trade  Commission  Act, 15 USC Section 45, or
         any other law enforced by the FTC.  While no formal  termination of the
         preceding  has been issued,  the Company was  unofficially  informed in
         April,  2000 that the  investigation  was  discontinued.  The  Townsend
         business,  included in the High Performance  Plastics segment, was sold
         to Spartech in February, 2000.

         Litigation

         The Company is also  engaged in  litigation  arising  from the ordinary
         course of business.  Management  believes the ultimate  outcome of such
         litigation  will not have a material  adverse effect upon the Company's
         results of operations, cash flows or financial position.

         Environmental Factors

         The Company is subject to a wide range of federal, state and local laws
         and  regulations  designed to protect the environment and worker health
         and safety. The Company's management  emphasizes  compliance with these
         laws and  regulations.  The Company has instituted  programs to provide
         guidance and training and to audit compliance with  environmental  laws
         and  regulations at Company owned or leased  facilities.  The Company's
         policy is to  accrue  environmental  and  clean-up  related  costs of a
         non-capital  nature when it is probable  both that a liability has been
         incurred and that the amount can be reasonably estimated.

         The  Company  may  become   subject  to  claims   relating  to  certain
         environmental  matters. The operations of the Predecessor Companies and
         certain of their  affiliates  produced waste materials  that,  prior to
         1980, were disposed of at some 36 known  unregulated  sites  throughout
         the United  States.  After 1980,  waste  disposal  was limited to sites
         permitted under federal and state  environmental  laws and regulations.
         If any of the disposal sites (unregulated or regulated) are found to be
         releasing  hazardous  substances  into the  environment,  under current
         federal and state  environmental laws, the appropriate company might be
         subject to liability for clean-up and containment costs.

         Prior to the Effective Date of the Predecessor Companies' Plan, several
         sites were  identified  where there were potential  liabilities for the
         cost of  environmental  clean-up.  In most  instances,  this  potential
         liability  resulted  from  the  alleged  arrangement  for the  off-site
         disposal of hazardous substances by Uniroyal, Inc.

         Pursuant to a settlement agreement with the United States Environmental
         Protection Agency ("EPA"), the United States Department of the Interior
         and  the  States  of  Wisconsin   and  Indiana  (the  "EPA   Settlement
         Agreement"),  entered into in connection with the Plan, the Predecessor
         Companies  compromised and settled (in exchange for common stock of the
         Company)  substantially  all of  the  pre-petition  liabilities  of the
         Predecessor  Companies and the Company relating to disposal  activities
         under Sections 106 and 107 of the Comprehensive  Environmental Response
         Compensation and Liability Act ("CERCLA"), Section 3008 of the Resource
         Conservation  and  Recovery  Act  ("RCRA")  and similar  state laws for
         clean-up of the remaining  unsettled 20  designated  sites not owned by
         any of the  Predecessor  Companies  (the "Known Sites") and for natural
         resource  damages  at 15 of the 20  Known  Sites.  Pursuant  to the EPA
         Settlement  Agreement,   the  Predecessor  Companies  and  the  Company
         received from the United States and the States of Indiana and Wisconsin
         a covenant not to sue for  response  costs and,  with the  exception of
         five Known Sites,  natural resource damages at each of the Known Sites.
         In addition,  pursuant to Section 113(f)(2) of CERCLA,  and as provided
         under the EPA Settlement  Agreement,  the Predecessor Companies and the
         Company will be protected against  contribution claims filed by private
         parties  for any Known Site for matters  covered by the EPA  Settlement
         Agreement. The EPA Settlement Agreement established a mechanism for the
         Company to resolve its liability for any other sites,  except for those
         owned  by  the  Company   (the   "Additional   Sites"),   arising  from
         pre-petition  disposal activity.  The Company also agreed to share with
         such  parties the  proceeds of claims  relating to the known sites made
         against  certain  insurers  of  the  Predecessor  Companies  and  their
         affiliates.

         In the event that the United  States,  or the State of Wisconsin or the
         State  of  Indiana  asserts  a  claim  against  any of the  Predecessor
         Companies  or  the  Company  for   response   costs   associated   with
         pre-petition   disposal   activities  at  any   Additional   Site,  the
         governmental party will be entitled to pursue its claim in the ordinary
         course, and the Company and the Predecessor  Companies will be entitled
         to assert all of their  defenses.  However,  if and when the Company or
         any of the Predecessor  Companies is held liable,  and if the liability
         is  determined  to arise from  pre-petition  disposal  activities,  the
         Company or such  Predecessor  Company may pay the claims in  discounted
         "plan dollars"  (i.e.,  the value of the  consideration  that the party
         asserting  such claim would have received if the liability were treated
         as a general  unsecured claim under the Plan). Such payment may be made
         in cash or securities,  or a combination  thereof,  at the Company's or
         such Predecessor Company's option.

         The Company  received a letter dated  October 30,  1997,  from the EPA,
         Region  5,   informing  the  Company  that  it  might  be   financially
         responsible for a pollution incident at the facility formally leased by
         the  Company  at 312 North Hill  Street,  Mishawaka,  Indiana.  The EPA
         notified  the Company  that it expected  the Company to pay for part or
         all of the  approximately  $1,700,000  of  costs  associated  with  the
         clean-up of a portion of such plant. The Company and the EPA negotiated
         a settlement  whereby the EPA was given an allowed  unsecured  claim of
         $1,700,000  under the Plan,  and the Company made a payment of $525,000
         to the EPA in March of 1999.  The  liability had been fully accrued for
         in a prior fiscal year.

         In October 1996,  the EPA sent the Company a General Notice and Special
         Notice of Liability  concerning the Refuse Hideaway landfill  Superfund
         Site  at  Middleton,  Wisconsin.  While  a unit of  Uniroyal,  Inc.  is
         believed to have sent non-hazardous  waste to the site between 1978 and
         1984,  the Company is not aware that the  Uniroyal,  Inc. unit sent any
         hazardous  materials  to the site.  The  Company  has  entered  into an
         Administrative  Order  on  Consent  with  the  EPA  and  a  Potentially
         Responsible   Parties   Agreement   with  certain   other   potentially
         responsible  parties.  The Company does not  presently  anticipate  any
         material  liability in connection  with the site, and in any event,  if
         the Company is found to have  liability  in  connection  with the site,
         such  liability  will be  subject  to the  terms of the EPA  Settlement
         Agreement.  In August,  2000, the Department of Justice of the State of
         Wisconsin  approved in principle a resolution of the liabilities of the
         Company and other  potentially  responsible  parties that would require
         future payment by the Company of less than $10,000.  Such settlement is
         subject to successful completion of the negotiation of a consent decree
         between the State of Wisconsin and the EPA.

         Claims arising from real property owned by the Company are not affected
         by the EPA  Settlement  Agreement.  In  connection  with the July  1996
         acquisition of a  manufacturing  facility in South Bend,  Indiana,  the
         Company   assumed  costs  of  remediation  of  soil  and  ground  water
         contamination  which  the  Company  estimates  will  cost not more than
         $1,000,000  over a  five-to-seven  year period.  The Company had placed
         $1,000,000  in an  escrow  account  to be used  for  such  clean-up  in
         accordance  with the terms of the  agreement  for the  purchase  of the
         facility. As of October 1, 2000, the Company had incurred approximately
         $688,000 of related remediation costs.

         The  Company's  acquisition  of  assets  of the  Townsend  business  in
         September 1997, included the building in which the business operates in
         Pleasant Hill,  Iowa. The seller retained the underlying real property,
         which was leased to the  Company  for a term of ten years.  The Company
         also had an option to acquire such real  property  until  September 30,
         2007.   The   real   property   is   subject   to   a   RCRA   Facility
         Investigation/Corrective  Measures Study with Interim  Measures ordered
         by the EPA  pursuant to RCRA.  Two former  lessees of the  property are
         performing  corrective  measures on the real property to remediate soil
         and ground water  contamination.  The Company does not anticipate  that
         such  corrective  measures will interfere with the use of the property.
         The  Company  does not  anticipate  any  liability  to the  Company  in
         connection with such  contamination or corrective  measures.  The lease
         was transferred to Spartech in connection with the Spartech Sale.

         In  connection   with  the  Spartech   Sale,   the  Company   conducted
         environmental  assessments  on two of the plants of HPPI in  compliance
         with the laws of the states of Connecticut  and New Jersey  relating to
         transfers of industrial  real property.  The asset  purchase  agreement
         provided that Spartech  could defer taking title to certain  parcels of
         real property until the Company  provides  evidence that  environmental
         contamination had been remediated to the satisfaction of Spartech.  The
         environmental  assessment of the Connecticut  property indicated that a
         separate parcel purchased by the Company in 1995 was contaminated  with
         total petroleum  hydrocarbons,  DDT and other pesticide chemicals.  The
         Company has removed  approximately 60% of the soil on the property at a
         cost  of   approximately   $1,600,000.   The   Company   has   retained
         environmental  consultants  to review its  options  with  regard to the
         remaining  soil on the  premises.  At October 1, 2000,  the Company has
         estimated  the  cost to  clean up the  remaining  contamination  at the
         Connecticut   site  to  approximate   $1,000,000.   The   environmental
         assessment of the Hackensack, New Jersey facility is still underway. At
         October 1,  2000,  the  Company  has  estimated  the  clean-up  cost to
         approximate   $60,000.   At  October  1,  2000,   the   estimates   for
         environmental  clean-up  costs are included in the net  liabilities  of
         discontinued operations. Spartech has agreed to lease the parcels for a
         nominal amount until after remediation is complete.

         Based on  information  available as of September 26, 1999,  the Company
         believes that the costs of known environmental matters either have been
         adequately  provided  for or are  unlikely  to have a material  adverse
         effect on the Company's operations, cash flows or financial position.

         Leases

         The Company is a party to  non-cancelable  lease  agreements  involving
         equipment.  The  leases  extend for  varying  periods up to 5 years and
         generally  provide for the payment of taxes,  insurance and maintenance
         by the  lessee.  Generally  these  leases  have  options to purchase at
         varying dates.

         The Company's property held under capital leases, included in property,
         plant and equipment (Note 5) consists of the following (in thousands):
<TABLE>
<CAPTION>
                                                               October 1,                   September 26,
                                                                  2000                          1999
                                                               ----------                   -------------
<S>                                                            <C>                           <C>
        Buildings and improvements                             $    5,429                    $    5,426
        Machinery, equipment and office furnishings                18,202                         5,380
        Construction in progress                                        -                         9,755
                                                               ----------                    ----------
                                                                   23,631                        20,561
        Less accumulated amortization                              (2,117)                         (311)
                                                               ----------                    ----------
        Total                                                  $   21,514                    $   20,250
                                                               ==========                    ==========
</TABLE>

         Amortization  of assets  recorded under capital leases is included with
         depreciation expense.

         The Company leases  equipment,  vehicles and warehouse and office space
         under  various  lease  agreements,  certain  of which  are  subject  to
         escalations  based upon  increases in specified  operating  expenses or
         increases in the Consumer Price Index.  The approximate  future minimum
         rentals under non-cancelable  operating leases during subsequent fiscal
         years ending in September are as follows (in thousands):

                                   Fiscal Year

                                     2001                              $  1,450
                                     2002                                 1,525
                                     2003                                 1,320
                                     2004                                 1,148
                                     2005                                 1,148
                                     Subsequent                           5,064
                                                                       --------
                                     Total                             $ 11,655
                                                                       ========

         Rent expense was  approximately  $1,015,000,  $617,000 and $516,000 for
         Fiscal 2000, Fiscal 1999 and Fiscal 1998, respectively.

         Officers' Compensation

         On August 1, 1995, the Company implemented a Deferred Compensation Plan
         providing  certain key employees the  opportunity  to participate in an
         unfunded deferred compensation program. Under the program, participants
         may defer a portion of their base  compensation and bonuses earned each
         year. Amounts deferred earned interest at 12% per annum until March 10,
         2000, at which time the plan was amended to reduce the interest rate to
         7.84%.  The program is not qualified  under Section 401 of the Internal
         Revenue Code.  At October 1, 2000 and  September 26, 1999,  participant
         deferrals,  which are included in other liabilities,  were $938,000 and
         $726,000, respectively. The expense during the Fiscal 2000, Fiscal 1999
         and Fiscal 1998 was $212,000, $208,000 and $184,000, respectively.

         Also during the fiscal year ended  October 1, 1995,  split  dollar life
         insurance  contracts  were purchased on the lives of the five executive
         officers. Annual insurance premiums of $186,000 are paid by the Company
         with  respect  to these  policies.  During  Fiscal  2000,  the  Company
         deposited  approximately  $1,190,000  into a Premium Deposit Fund which
         will be used to fund the remaining annual insurance  premiums under the
         split  dollar  life  insurance  contracts.  As of  October  1, 2000 and
         September 26, 1999,  $2,135,000  and $929,000,  respectively,  has been
         capitalized to reflect the cash surrender  value of these contracts due
         the Company, net of loan balances.

         As of October 1, 2000, the Company had  employment  contracts with four
         officers  of the  Company,  providing  for  total  annual  payments  of
         approximately $1,588,000 plus bonuses through September 1, 2001.

17.      SALE OF THE AUTOMOTIVE DIVISION OF THE COATED FABRICS SEGMENT

         During the fourth  quarter of Fiscal  1996,  management  of the Company
         concluded  that,  based not only on its  decision to sell,  but also on
         discussions with interested buyers, a sale of the automotive operations
         of the Coated Fabrics segment was probable.  The automotive  operations
         were  comprised of 100% of the  operations  at the Port  Clinton,  Ohio
         ("Port  Clinton")  facility and a portion of overall  operations at the
         Stoughton,  Wisconsin facility ("Stoughton").  Further, on December 11,
         1996,  the Board of Directors  approved the closure of the Port Clinton
         operation of the Coated  Fabrics  segment during the fiscal year ending
         September 28, 1997 in the event a sale did not occur.  Port Clinton had
         incurred  operating losses of  approximately  $7,640,000 and $5,540,000
         during the fiscal years ended September 29, 1996 and October 1, 1995.

         In accordance  with SFAS No. 121, the Company  recorded a write-down of
         long-lived  assets  related  to  the  automotive   operations  totaling
         approximately  $8,900,000  during the fiscal year ended  September  29,
         1996.  The  related  assets  were  classified  as  held  for  sale  and
         depreciation  ceased on  September  29, 1996.  The Company  recorded an
         additional  impairment  loss of $1,773,000 in Fiscal 2000. The carrying
         value  of  the  remaining  long-lived  assets  to be  disposed  of  was
         $1,300,000  as of October 1, 2000 and  $3,217,000  as of September  26,
         1999.  The  Company  expects  to dispose  of the  remaining  automotive
         assets,  the  majority  of which  represent  the real  property at Port
         Clinton, in Fiscal 2001.

         On May 15,  1997,  the  Company  agreed to sell  certain  assets of the
         automotive  division  of the  Coated  Fabrics  segment  located  at the
         Company's Stoughton,  Wisconsin, facility ("Stoughton") to Textileather
         Corporation,  a subsidiary of Canadian  General-Tower,  Limited ("CGT")
         for   $6,657,500.   The  Company   received   $4,657,500  in  cash  and
         Textileather  retained  $2,000,000 which was to be paid pursuant to the
         terms of a supply  agreement and to bear interest at the rate of 9% per
         annum.  Under the terms of the supply agreement,  the Company agreed to
         continue to manufacture and supply Stoughton automotive products to its
         customers until Textileather  Corporation could transfer  production of
         the Stoughton  automotive products to its own facility.  The $2,000,000
         plus  accrued  interest was payable in stages and  contingent  upon the
         successful  transfer of certain  automotive  programs  to  Textileather
         Corporation.  The first  installment  was due September  30, 1997.  The
         Company requested payment and was denied payment by CGT. On October 10,
         1997, the Company filed suit against CGT and  Textileather  Corporation
         in the Dane County, Wisconsin Circuit Court. The Company sought damages
         for non-payment of the holdback and declaratory and injunctive  relief.
         On October 30,  1997,  the  defendants  filed their  answer,  basically
         denying  the  claims.   Textileather  Corporation  later  commenced  an
         arbitration  in  Madison,   Wisconsin  in  connection  with  claims  by
         Textileather  Corporation under the asset purchase  agreement.  The two
         cases were  settled on July 17,  1998.  As part of the  settlement  the
         Company  retained  in  perpetuity  certain  automotive  programs it had
         previously  sold,  and two programs  were retained  until  February 28,
         1999. In addition,  Textileather  made a cash payment to the Company of
         approximately $379,000 which was recorded by the Company as a gain, and
         also  transferred  ownership back to the Company of an asset located at
         the Company's Port Clinton, Ohio facility.

         On October 17, 1997 the Company  further  agreed to sell certain assets
         at Port  Clinton  to CGT for  $5,325,000  plus the  value of  purchased
         inventories and plus or minus adjustments  contingent upon the transfer
         of certain automotive  programs to CGT as defined in the agreement.  On
         July 10,  1998,  the Company  received  $4,930,000  from CGT under this
         agreement  relative  to assets  related  to the  Company's  door  panel
         program.  Under the terms of a supply agreement,  the Company agreed to
         continue to manufacture and supply customers of the door panel programs
         until CGT could  transfer the  production of the door panels to its own
         facility.  The  Company  stopped  producing  door  panels  at its  Port
         Clinton,  Ohio  facility in  November,  1998.  The Company  received an
         additional  $800,000  when CGT secured  purchase  orders for the twelve
         months  following  the door panel  closing  from  certain  customers as
         identified  in the  agreement.  The Company also received an additional
         $900,000 on July 19, 1999 for certain customer  approvals and resulting
         transfer  to CGT of  purchased  assets  that  relate  to the  Company's
         instrument  panel  programs.  During  Fiscal 1999 and Fiscal 1998,  the
         Company  recognized a gain of $667,000 and $133,000,  respectively,  in
         connection with this transaction.

         Management  believes  that  the  Company  will  not  have  any  further
         significant  gain or loss  upon  the  disposal  of the  remaining  Port
         Clinton assets.

18.      JOINT VENTURE

         As of  September  29,  1997,  the  Company  entered  into a  technology
         agreement with Emcore to acquire certain technology for the manufacture
         of epitaxial  wafers used in high brightness LEDs for lamps and display
         devices for $5,000,000. See Note 9 regarding the Fiscal 2000 write-down
         of the technology  license.  On September 29, 1997,  Thomas J. Russell,
         the Chairman of the Board of  Directors  of Emcore,  was a director and
         major  stockholder  of the Company and Howard R. Curd,  the Chairman of
         the Board of Directors and Chief Executive Officer of the Company,  was
         a director and  stockholder of Emcore.  Subsequent to the  transaction,
         Thomas J. Russell  resigned  from the Board of Directors of the Company
         and Howard R. Curd resigned from the Board of Directors of Emcore.

         Uniroyal  Optoelectronics,  Inc.,  a  wholly-owned  subsidiary  of  the
         Company, entered into a joint venture (Uniroyal  Optoelectronics,  LLC)
         with Emcore which Uniroyal Optoelectronics, Inc. manages and owns a 51%
         interest.   Emcore  is  the  49%  owner.  In  July  1998,  both  owners
         capitalized the joint venture through cash contributions of $510,000 by
         the Company and $490,000 by Emcore. During Fiscal 2000 and Fiscal 1999,
         Emcore made additional  capital  contributions  to the joint venture of
         $11,628,000  and  $5,500,000,  respectively.  During  Fiscal 2000,  the
         Company made additional  capital  contributions to the joint venture of
         $17,827,000.  The Company did not make any capital contributions to the
         joint venture in Fiscal 1999.

         Included in selling and general administrative  expenses of the Company
         for  Fiscal  2000,   Fiscal  1999  and  Fiscal  1998  are  $12,667,000,
         $4,345,000 and $302,000, respectively, of joint venture start-up costs.

         In July 1998,  the joint venture  entered into a supply  agreement with
         Emcore  whereby  Emcore  agreed to supply  epitaxial  wafers,  dies and
         package-ready  devices to the joint venture until the joint venture was
         ready to produce its own products.  During Fiscal 2000 and Fiscal 1999,
         Uniroyal  Optoelectronics,  LLC sales of  approximately  $1,643,000 and
         $479,000,  respectively,  were  attributable  to  product  supplied  by
         Emcore.

         In July 1998,  the joint venture  entered into a lease  agreement for a
         facility in Tampa,  Florida and  completed  construction  of  leasehold
         improvements  in Fiscal  1999.  Significant  start-up  costs  have been
         incurred during Fiscal 2000 for training and research and  development.
         It  is  anticipated  that  the  joint  venture  will  reach  commercial
         production levels in the first half of Fiscal 2001.

19.      INCOME (LOSS) PER COMMON SHARE

         For the year ended  October 1, 2000,  the  weighted  average  number of
         common  shares  outstanding  for the  calculation  of basic and diluted
         earnings  per share  was  24,937,364.  Inclusion  of stock  options  to
         purchase  5,936,619  shares  of  common  stock at  various  prices  and
         warrants  to  purchase  735,770  shares of common  stock at $2.1875 per
         share in the calculation of diluted  earnings per share would have been
         antidilutive.

         The  reconciliation of the numerators and denominators of the basic and
         diluted  earnings  per share  computation  for the fiscal  years  ended
         September 26, 1999 and September 27, 1998 are as follows:
<TABLE>
<CAPTION>
                                                        For the Fiscal Year Ended September 26, 1999
                                              ----------------------------------------------------------------------
                                                Income (Numerator)       Shares (Denominator)       Per Share Amount
                                              --------------------       --------------------       ----------------
<S>                                              <C>                           <C>                      <C>
          Income from continuing opera-
            tions before discontinued
            operations and extraordinary
            item                                 $    1,251,000

          Basic EPS
          ---------
          Income available to common
            stockholders                              1,251,000                24,315,992               $  0. 05
                                                                                                        ========
          Effect of Dilutive Securities
          -----------------------------
          Stock options                                                         1,656,920
          Warrants                                                                599,756
                                                                               ----------
          Diluted EPS
          -----------
          Income available to common
            stockholders                         $    1,251,000                26,572,668               $   0.05
                                                 ==============                ==========               ========
</TABLE>
<TABLE>
<CAPTION>

                                                        For the Fiscal Year Ended September 27, 1998
                                                 --------------------------------------------------------------------
                                                 Income (Numerator)      Shares (Denominator)        Per Share Amount
                                                 ------------------      --------------------        ----------------
<S>                                              <C>                           <C>                      <C>
          Income from continuing opera-
            tions before discontinued
            operations and extraordinary
            item                                 $   2,301,000

          Basic EPS
          ---------
          Income available to common
            stockholders                             2,301,000                 26,463,084               $  0. 09
                                                                                                        ========
          Effect of Dilutive Securities
          -----------------------------
          Stock options                                                         2,140,244
          Warrants                                                                658,808
                                                                               ----------
          Diluted EPS
          -----------
          Income available to common
            stockholders                         $   2,301,000                 29,262,136               $   0.08
                                                 =============                 ==========               ========
</TABLE>

         Additional stock options to purchase  1,157,696 and 1,155,696 shares of
         common stock at various  prices were  outstanding at September 26, 1999
         and September 27, 1998, respectively. These shares were not included in
         the  computation  of diluted  earnings  per share  because the exercise
         price was greater than the average market price of the common shares.

20.      RELATED PARTY TRANSACTIONS

         The Company  has an  agreement  with an  investment  banking  firm that
         employs  relatives  of one of the  Company's  executive  officers.  The
         investment banking firm has provided financial advisory services to the
         Company for fees of  approximately  $2,452,000,  $157,000  and $732,000
         during Fiscal 2000, Fiscal 1999 and Fiscal 1998,  respectively.  Of the
         $2,452,000 incurred in Fiscal 2000,  approximately  $1,959,000 was paid
         in  connection  with  the  Spartech  Sale  and  $428,000  was  paid  in
         connection with the acquisition of Sterling.  Of the $732,000  incurred
         during Fiscal 1998,  $650,000 was incurred in connection with the Fleet
         Financing.

         During the fiscal years ended  October 1, 2000,  September 26, 1999 and
         September 27, 1998, the Company  incurred  legal fees of  approximately
         $448,000, $299,000 and $326,000, respectively, with a law firm of which
         one of the  Company's  directors  is a  senior  partner.  Approximately
         $164,000 of legal fees  incurred in Fiscal 2000 were paid in connection
         with  the   acquisition  of  Sterling  and  the  related  common  stock
         registration.  Approximately  $231,000  of the legal fees  incurred  in
         Fiscal 1998, were incurred in connection with the Fleet Financing.

         During Fiscal 2000, the Company  incurred  legal fees of  approximately
         $117,000  to  another  law  firm  of  which  another  of the  Company's
         directors  is a senior  partner.  No legal  fees were paid to this firm
         during Fiscal 1999 or Fiscal 1998.

         During  Fiscal  2000,  the  Company  paid  approximately  $17,000  to a
         relative of one of the  Company's  executive  officers  for  consulting
         services.

21.      SEGMENT INFORMATION

         The  Company  adopted  SFAS No.  131,  Disclosures  About  Segments  of
         Enterprise and Related  Information,  which  establishes  standards for
         reporting  information  about a Company's  operating  segments,  in the
         fourth  quarter  of Fiscal  1999.  Operating  segments  are  defined as
         components of an enterprise for which separate financial information is
         available  that is evaluated on a regular basis by the chief  operating
         decision  maker,  or decision making group, in deciding how to allocate
         resources to an individual segment and in assessing  performance of the
         segment.

         The Company's operations are classified into three reportable segments:
         Coated  Fabrics,  Specialty  Adhesives and Compound  Semiconductor  and
         Optoelectronics.  The Coated Fabrics segment  manufactures vinyl coated
         fabric  products.   The  Specialty   Adhesives   segment   manufactures
         industrial  adhesives  and  sealants.  The Compound  Semiconductor  and
         Optoelectronics segment manufactures wafers, epitaxial wafers, dies and
         package-ready  dies  used  in  high  brightness  light-emitting  diodes
         (LEDs), power amplification and radio frequency applications.

         The Company's  reportable  segments are strategic  business  units that
         offer  different   products  and  are  managed   separately   based  on
         fundamental differences in their operations.

         The Coated Fabrics  segment  comprises  Uniroyal  Engineered  Products,
         Inc.'s operating division,  Uniroyal Engineered Products. The Specialty
         Adhesives  segment  comprises  Uniroyal  Engineered  Products,   Inc.'s
         operating  division,  Uniroyal  Adhesives  and  Sealants.  The Compound
         Semiconductor   and    Optoelectronics    segment   includes   Uniroyal
         Optoelectronics,  Inc.  and  its  majority-owned  subsidiary,  Uniroyal
         Optoelectronics, LLC, Sterling Semiconductor, Inc. and NorLux Corp. All
         other subsidiaries are considered part of the corporate office.

         The Company's  assets and  operations are located in the United States.
         The  principal  markets for the  Company's  products  are in the United
         States.  Export  sales to  foreign  countries,  based  upon  where  the
         products are shipped,  were  approximately  $3,966,000,  $2,544,000 and
         $5,980,000 in Fiscal 2000,  Fiscal 1999 and Fiscal 1998,  respectively.
         Sales  to  one  customer  of the  Coated  Fabrics  segment  represented
         approximately  14.5% of consolidated net sales in Fiscal 1998. Sales to
         another  customer  of  the  Specialty   Adhesives  segment  represented
         approximately  30%, 27% and 17.5% of  consolidated  net sales in Fiscal
         2000, Fiscal 1999 and Fiscal 1998, respectively.

         The accounting policies of the segments are the same as those described
         in the summary of significant accounting policies. Management evaluates
         a  segment's  performance  based  upon  profit or loss from  operations
         before   interest  and  income  taxes.   Intersegment   sales  are  not
         significant.
<PAGE>

         Segment data for Fiscal 2000, Fiscal 1999 and Fiscal 1998 is as follows
         (in thousands):
<TABLE>
<CAPTION>

                                                               October 1,    September 26,     September 27,
                                                                   2000           1999              1998
                                                               ----------    -------------     -------------
<S>                                                            <C>            <C>               <C>
        Net Sales:
           Coated Fabrics                                      $   33,651     $   42,341        $   67,906
           Specialty Adhesives                                     31,579         28,388            24,130
           Compound Semiconductor and Optoelectronics               3,023            485                 -
                                                               ----------     ----------        ----------
        Total                                                  $   68,253     $   71,214        $   92,036
                                                               ==========     ==========        ==========
        Operating (loss) income:
           Coated Fabrics                                      $     (276)    $    4,202        $    8,868
           Specialty Adhesives                                      2,662          2,686             1,911
           Compound Semiconductor and Optoelectronics             (25,841)        (5,080)             (398)
           Corporate                                              (22,379)        (4,490)           (3,673)
                                                               ----------     -----------       ----------
        Total                                                  $  (45,834)    $   (2,682)       $    6,708
                                                               ==========     ==========        ==========
        Identifiable assets:
           Coated Fabrics                                      $   20,915     $   23,547        $   35,959
           Specialty Adhesives                                     16,346         16,923            16,826
           Compound Semiconductor and Optoelectronics              74,823         22,474             2,677
           Corporate                                               77,948         44,963            35,456
                                                               ----------     ----------        ----------
        Total                                                  $  190,032     $  107,907        $   90,918
                                                               ==========     ==========        ==========
        Depreciation and amortization:
           Coated Fabrics                                      $    1,719     $    1,702        $    1,704
           Specialty Adhesives                                        944            873               842
           Compound Semiconductor and Optoelectronics               4,906            210                 1
           Corporate                                                  576            720             1,071
                                                               ----------     ----------        ----------
        Total                                                  $    8,145     $    3,505        $    3,618
                                                               ==========     ==========        ==========
        Capital Expenditures:
           Coated Fabrics                                      $      587     $      535        $      448
           Specialty Adhesives                                      1,076            578               911
           Compound Semiconductor and Optoelectronics              16,613         21,353               292
           Corporate                                                  147            787               238
           Discontinued operations                                 10,624          7,564             5,399
                                                               ----------     ----------        ----------
        Total                                                  $   29,047     $   30,817        $    7,288
                                                               ==========     ==========        ==========
</TABLE>
         Included in each segment's  operating  income in Fiscal 2000 and Fiscal
         1999 is an allocation of corporate  overhead based upon 3.5% of segment
         sales  with  the   exception   of  the   Compound   Semiconductor   and
         Optoelectronics segment for which the corporate overhead allocation was
         $1,207,000 in Fiscal 2000 and $876,000 in Fiscal 1999.

         During  Fiscal  1998,  the  Company  changed  its  methodology  for the
         allocation of corporate  overhead from an allocation of 100% of certain
         corporate  costs to an  allocation  of costs  based  upon 3.0 - 3.5% of
         segment sales.  Prior fiscal year  allocations  were not restated.  Had
         prior year  allocations been restated for consistency with current year
         allocations,  it would have resulted in additional  corporate  overhead
         allocation to the Coated Fabrics and Specialty  Adhesives  segments' in
         Fiscal 1998 of $177,000 and $48,000, respectively.

         In Fiscal 2000, the gain on the sale of the preferred stock investment,
         the provision for uncollectible note receivable,  the write-down of the
         technology  license and $1,116,000 of the loss on assets to be disposed
         of (related  to the real  property)  are  included  in  Corporate.  The
         acquired   in-process-research  and  development  is  included  in  the
         Compound Semiconductor and Optoelectronics  segment and $657,000 of the
         loss on assets to be disposed of (relating to machinery and  equipment)
         is included in the Coated Fabrics segment.

         In Fiscal 1999, the gain on the sale of preferred  stock is included in
         Corporate,  and the gain on the sale of  division  is  included  in the
         Coated Fabrics segment.

         In Fiscal  1998,  the loss on assets to be  disposed  of is included in
         Corporate,  and the gain on the sale of  division  is  included  in the
         Coated Fabrics segment.
<PAGE>
22.      QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (in thousands):

<TABLE>
<CAPTION>

                                          First Quarter    Second Quarter     Third Quarter    Fourth Quarter
                                          -------------    --------------     -------------    --------------
         Fiscal 2000
         -----------
<S>                                         <C>              <C>               <C>                <C>
         Net sales                          $   15,195       $   16,103        $   18,276         $   18,679
         Gross profit                            3,781            3,075             4,399              3,652
         Net income (loss)                       2,420           60,225 (1)        (1,827)           (14,131) (2)

         Basic earnings per share           $     0.10       $     2.44        $    (0.07)        $    (0.54)
         Diluted earnings per share         $     0.09       $     2.08        $    (0.07)        $    (0.54)
</TABLE>

         (1)Includes the following unusual adjustments:

           o gain of approximately  $57,118,000 (net of tax) related to the sale
             of the High Performance Plastics segment;

           o incentive  payments  and  benefit  costs  to and for  officers  and
             directors   related  to  the   achievement  of  certain   strategic
             initiatives of approximately $3,324,000 (net of tax);

           o provision for an  uncollectible  note  receivable of  approximately
             $3,286,000  (net of tax);

           o loss on assets to be disposed of of  approximately  $1,356,000 (net
             of tax); and

           o tax benefit of approximately $13,702,000 related to the utilization
             of a capital loss carryforward.


         (2)Includes the following unusual adjustments:

           o reduction  in the selling  price of the High  Performance  Plastics
             segment of approximately $1,297,000 (net of tax);

           o write-off  of purchased  in-process  research  and  development  of
             $6,590,000 for which there is no tax effect;

           o write-off of  approximately  $2,440,000 (net of tax) related to the
             technology license; and

           o accrual  of  approximately  $1,316,000  (net of tax)  related  to a
             special contribution to the Company's 401(k) plan.

<TABLE>
<CAPTION>

         Fiscal 1999                      First Quarter    Second Quarter     Third Quarter    Fourth Quarter
         -----------                      -------------    --------------     -------------    --------------
<S>                                         <C>               <C>                <C>              <C>
         Net sales                          $   18,126        $  16,965          $  18,522        $  17,601
         Gross profit                            3,281            3,812              4,931            5,510
         Net Income                                 19            1,059              1,931            2,511

         Basic earnings per share           $        -        $    0.04          $    0.08        $    0.10
         Diluted earnings per share         $        -        $    0.04          $    0.07        $    0.10

</TABLE>
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
   Uniroyal Technology Corporation

We  have  audited  the  consolidated   balance  sheets  of  Uniroyal  Technology
Corporation and subsidiaries (the "Company") as of October 1, 2000 and September
26, 1999, and the related consolidated  statements of operations,  comprehensive
income,  changes in  stockholders'  equity  and cash  flows for the years  ended
October 1, 2000,  September 26, 1999 and September 27, 1998, and have issued our
report thereon dated December 5, 2000. Our audits also included the accompanying
consolidated  financial  statement  schedule  shown  in  this  Form  10-K.  This
consolidated financial statement schedule is the responsibility of the Company's
management.  Our responsibility is to express an opinion based on our audits. In
our opinion, such consolidated financial statement schedule,  when considered in
relation  to the  basic  consolidated  financial  statements  taken  as a whole,
presents fairly in all material respects the information set forth therein.

DELOITTE & TOUCHE LLP
Certified Public Accountants


Tampa, Florida
December 5, 2000




<PAGE>

<TABLE>
<CAPTION>
                                                                   SCHEDULE II

                 UNIROYAL TECHNOLOGY CORPORATION AND SUBSIDIARY
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)




                                          COLUMN A          COLUMN B          COLUMN C        COLUMN D       COLUMN E
                                          --------          --------          --------        --------       --------
                                                            CHARGED           ADDITIONS
                                          BALANCE AT      (CREDITED)TO         CHARGED
                                          BEGINNING         COSTS AND         TO OTHER                       BALANCE AT
     DESCRIPTION                          OF PERIOD         EXPENSES            ACCTS.        DEDUCTION    END OF PERIOD
     -----------                          ----------       -----------        ---------       ---------    -------------
                                                                                 (a)             (b)

<S>                                         <C>             <C>               <C>            <C>              <C>
  Year ended October 1, 2000
    Estimated reserve for doubtful
      accounts                              $     88        $    101          $     5        $     (75)       $     119
                                            ========        ========          =======        =========        =========
  Year ended September 26, 1999
    Estimated reserve for doubtful
      accounts                              $     87        $      -          $     2        $      (1)       $      88
                                            ========        ========          =======        =========        =========
  Year ended September 27, 1998
    Estimated reserve for doubtful
      accounts                              $    100        $      -          $     -        $     (13)       $      87
                                            ========        ========          =======        =========        =========

</TABLE>

 (a)     Represents  recovery  of amounts  previously  written-off  and  reserve
         established for receivables of an acquired business.

 (b)     Includes write-off of uncollectible accounts.
<PAGE>





                                   SIGNATURES

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

Date:  December 12, 2000
                                      By:/S/ Howard R. Curd
                                         --------------------------------------
                                         Howard R. Curd, Chief Executive Officer

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

/s/ Robert L. Soran                               /s/ Richard D. Kimbel
-------------------------------                   ------------------------------
Robert L. Soran, Director, President              Richard D. Kimbel, Director
  and Chief Operating Officer                     Date:  December 12, 2000
Date:  December 12, 2000



/s/ George J. Zulanas, Jr.                        /s/ Curtis L. Mack
--------------------------------                  ------------------------------
George J. Zulanas, Jr., Executive                 Curtis L. Mack, Director
  Vice President, Treasurer and  Chief            Date:  December 12, 2000
  Financial Officer
Date:  December 12, 2000


/s/ Howard R. Curd                                /s/ Roland H. Meyer
--------------------------------                  ------------------------------
Howard R. Curd, Director, Chairman of             Roland H. Meyer, Director
  the Board and Chief Executive Officer           Date:  December 12, 2000
Date:  December 12, 2000



/s/ Peter C. B. Bynoe                             /s/ John A. Porter
--------------------------------                  ------------------------------
Peter C. B. Bynoe, Director                       John A. Porter, Director
Date:  December 12, 2000                          Date:  December 12, 2000



/s/ Thomas E. Constance
--------------------------------
Thomas E. Constance, Director
Date:  December 12, 2000





<PAGE>


                                POWER OF ATTORNEY

Each person whose  signature to this report appears below hereby appoints Howard
R. Curd, Robert L. Soran and Oliver J. Janney, and each individually, any one of
whom  may  act  without   the   joinder  of  the   others,   as  his  agent  and
attorney-in-fact  to sign on his behalf  individually and in the capacity stated
below and to file all  amendments  to this report,  which  amendments  make such
changes and additions to this report as such agent and attorney-in-fact may deem
necessary and appropriate.



/s/ Howard R. Curd                               /s/ Peter C. B. Bynoe
----------------------------------               -------------------------------
Howard R. Curd, Director, Chairman of            Peter C.B. Bynoe, Director
  the Board and Chief Executive Officer          Date:  December 12, 2000
Date:  December 12, 2000



/s/ Robert L. Soran                              /s/ Thomas E. Constance
----------------------------------               -------------------------------
Robert L. Soran, Director, President             Thomas E. Constance, Director
  and Chief Operating Officer                    Date:  December 12, 2000
Date:  December 12, 2000



                                                 /s/ Richard D. Kimbel
                                                 -------------------------------
                                                 Richard D. Kimbel, Director
                                                 Date:  December 12, 2000


                                                 /s/ Curtis L. Mack
                                                 -------------------------------
                                                 Curtis L. Mack, Director
                                                 Date: December 12, 2000



                                                 /s/ Roland H. Meyer
                                                 -------------------------------
                                                 Roland H. Meyer, Director
                                                 Date:  December 12, 2000



                                                 /s/ John A. Porter
                                                 -------------------------------
                                                 John A. Porter, Director
                                                 Date:  December 12, 2000