FORM 10-K

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

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

For the fiscal year ended September 30, 2000

                                       OR

[ ]      TRANSITION PERIOD 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 No: 1-9917

                             CATALINA LIGHTING, INC.
             (Exact name of Registrant as specified in its charter)

               FLORIDA                                       59-1548266
    State or other jurisdiction of                         (I.R.S Employer
    incorporation or organization                      Identification Number)

                  18191 N.W. 68th Avenue, Miami, Florida 33015
          (Address of principal executive offices, including zip code)

                                 (305) 558-4777
              (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

 Common Stock, par value                        New York Stock Exchange
    $.01 per share

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

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

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

                                     Page 1
<PAGE>
The  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
Registrant computed by reference to the closing price of such stock, as reported
by the New York Stock Exchange, on December 26, 2000 was $14.7 million.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Definitive Proxy Statement for the Company for its 2001
Annual Meeting of Stockholders  or the Company's Form 10K/A are  incorporated by
reference into Part III.

         Number  of shares  outstanding  of  Registrant's  common  stock,  as of
December 26, 2000: 7,357,880.

                            Exhibit Index at Page 70

                                     Page 2
<PAGE>
                                     PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
-------------------------------------------------

         Certain  statements  in this  Annual  Report on Form 10-K  (this  "Form
10-K"),  including statements under "Item 1. Business" and "Item 7. Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations,"
including  without  limitation  expectations  as to future  sales and  operating
results as discussed under  "Outlook," and the discussion  under  "Liquidity and
Capital Resources" constitute "forward-looking statements" within the meaning of
the Private  Securities  Litigation Reform Act of 1995 (the "Reform Act"). Words
such as "expects,"  "anticipates,"  "believes," "plans," "intends," "estimates,"
variations of such words and similar  expressions  are intended to identify such
forward-looking  statements.  These statements  involve known and unknown risks,
uncertainties and other factors which may cause the actual results,  performance
or achievements of Catalina Lighting,  Inc. and its subsidiaries  (collectively,
the "Company") to be materially  different from any future results,  performance
or achievements  expressed or implied by such forward-looking  statements.  Such
factors include,  but are not limited to, the following:  the highly competitive
nature of the lighting industry; reliance on key customers who may delay, cancel
or fail to place orders;  consumer demand for lighting  products;  dependence on
third party vendors and imports from China which may limit the Company's margins
or affect the timing of revenue  and sales  recognition;  general  domestic  and
international  economic  conditions  which may affect consumer  spending;  brand
awareness,  the existence or absence of adverse publicity,  continued acceptance
of the Company's  products in the  marketplace,  new products and  technological
changes, and changing trends in customer tastes, each of which can effect demand
and pricing for the Company's products; pressures on product pricing and pricing
inventories;  cost of labor and raw materials;  the availability of capital, the
ability to satisfy  covenants under credit and loan agreements and the impact of
increases in borrowing costs, each of which affect the Company's  short-term and
long-term  liquidity  and ability to operate as a going  concern;  the costs and
other effects of legal and administrative proceedings; foreign currency exchange
rates;  changes in the  Company's  effective tax rate (which is dependent on the
Company's U.S. and foreign source income);  and other factors referenced in this
Form  10-K.  The  Company  will not  undertake  and  specifically  declines  any
obligation to update or correct any forward-looking statements to reflect events
or circumstances  after the date of such statements or to reflect the occurrence
of anticipated or unanticipated events.

ITEM 1.           BUSINESS.
                  ---------
General
         The Company  designs,  manufactures,  contracts for the manufacture of,
imports,  warehouses and distributes a broad line of lighting fixtures and lamps
under  the  Westinghouse(R)  brand,  and  the  Catalina(R),  Dana(R),  Ring  and
Illuminada(R)  trade names. The Company also functions as an original  equipment
manufacturer,  selling goods under its customers'  private  labels.  The Company
sells in the  United  States  through  a variety  of  retailers  including  home
centers,  national retail chains,  office superstore chains, mass merchandisers,
warehouse clubs,  discount  department  stores, and hardware stores. The Company
also sells its  products  in the United  Kingdom,  continental  Europe,  Canada,
Mexico and South America.  Currently, its product line is comprised primarily of
lighting  fixtures and lamps.  The Company has  supplemented  its product  lines
through  acquisitions  but has remained focused on lighting  products.  Catalina
Lighting,  Inc. was incorporated under the laws of the state of Florida in 1974,
started selling lighting in 1985, and became a public company in 1988.

         On July 5, 2000, the Company  acquired Ring Limited,  formerly Ring PLC
("Ring"),  a leading supplier of lighting,  automotive  aftermarket products and
industrial  consumables in the United  Kingdom.  The Company paid  approximately
$33.8 million for Ring,  and the  acquisition  has been  accounted for under the
purchase  method.  Goodwill of $21.3  million  was  recorded as a result of this
transaction.

         Ring had  revenues  of  $116.3  million  and  operating  income of $3.6
million for its most recent fiscal year ended June 30, 2000. Ring's total assets
and  stockholders'  equity as of June 30,  2000  were  $49.2  million  and $12.6
million,  respectively.  Operating results for Ring from the date of acquisition
to September 30, 2000 (excluding  related  goodwill  amortization  and financing
costs  aggregating  $1.1 million) and the results for the comparable  prior year
quarter ended September 30, 1999, are as follows (in thousands):

                                           Quarter Ended September 30,
                                        ---------------------------------
                                          2000                    1999
                                        ---------               ---------
Sales                                   $ 24,529                $ 26,680
Gross profit                            $  3,459                $  4,583
Income (loss) before taxes              $   (188)               $    846


                                     Page 3
<PAGE>
         In July 2000,  the Company  entered into a five-year $75 million credit
facility  with a bank  syndication  group to fund the Ring  acquisition  and the
Company's U.S. and U.K. operations (see "Liquidity and Capital Resources").

Products

         The Company markets a diverse product line,  consisting  principally of
lighting  products used primarily in residential  and office  environments.  The
Company's product line consists mainly of two categories:  lighting fixtures and
lamps.  Lighting  fixtures consist of  outdoor/security  lighting,  chandeliers,
recessed  and track  lighting,  and wall and ceiling  lights.  Lamps sold by the
Company  include  both table and floor  models and may be either  functional  or
decorative. Functional lamps consist of halogen desk lamps, bankers lamps, swing
arm desk lamps,  torchiere lamps, magnifier lamps, and any other lamps generally
used for task oriented functions. Decorative lamps are fashion oriented and made
of such  materials as metal,  ceramic,  stained glass,  and crystal  glass.  The
Company also sells other  lighting-related  products such as flashlights,  and a
small portion of the Company's product line consists of industrial  consumables,
products for the automotive aftermarket, and train and bus lighting. The Company
develops,  manufactures  and maintains  separate product lines for sale in North
America, Europe and the United Kingdom due to the different consumer preferences
and electrical specifications of each of these markets. The Company may continue
to expand its product lines internally or through acquisitions.

Distribution Methods

         The Company utilizes two distribution methods to sell products:  direct
and warehouse.  The backlogs of unshipped  orders at September 30, 2000 and 1999
were  approximately  $25.1  million  and  $24.9  million,  respectively,  and at
December 15, 2000 and 1999 were  approximately  $22.0 million and $24.3 million,
respectively.   Although  these  orders  are  subject  to  cancellation  by  the
customers, the Company believes substantially all such orders are firm.

         The  Company's  direct  sales are made  either by  delivering  lighting
products to the  customers'  common  carriers at a shipping point in China or by
shipping the products from China  directly to customers'  distribution  centers,
warehouses  or  stores.  Direct  sales are made in large  quantities  (generally
container-sized lots) to customers, who pay pursuant to their own international,
irrevocable  letters of credit (which may or may not be transferable) or on open
credit with the Company.  Upon receipt of a  customer's  transferable  letter of
credit,  the Company  transfers the portion of the letter of credit covering the
cost of  merchandise  to its  supplier.  The terms of the transfer  provide that
draws may not be made by the  supplier  until the Company is entitled to be paid
pursuant to the terms of the  customer's  letter of credit.  The Company has the
right to draw  upon the  customer's  letter  of  credit  once the  products  are
inspected by the Company or its agents, delivered to the port of embarkation and
the appropriate  documentation has been presented to the issuing bank within the
time periods  established by such letter of credit.  With the exception of sales
made into Europe,  direct sales are made by one of the Company's  North American
subsidiaries.  The Company's China manufacturing and sourcing subsidiary, Go-Gro
Industries, Ltd. ("Go-Gro"), either manufactures or procures the product for the
Company's North American subsidiaries, and records an intercompany sale when the
products  are  delivered  to the  carrier or  shipped.  For fiscal  years  ended
September  30,  2000 and 1999,  69% and 75%,  respectively,  of net  sales  were
attributable to direct sales.

         The Company also purchases  products for its own account and warehouses
the products for subsequent resale to customers.  The Company is responsible for
costs  of  shipping,  insurance,  customs  clearance  and  duties,  storage  and
distribution  related to such warehouse products and therefore,  warehouse sales
usually  command  higher per unit sales  prices  than  direct  sales of the same
items.  The Company owns a 473,000 square foot  warehouse  facility near Tupelo,
Mississippi,  leases warehousing  facilities in Toronto and Mexico City and owns
and leases various warehouses  facilities in the U.K. For the fiscal years ended
September  30,  2000  and  1999,  warehouse  sales  accounted  for 31% and  25%,
respectively, of net sales.

         The relative proportion of the Company's sales generated by each method
is dependent  upon customer  buying  preferences  and Company sales  strategies.
Purchasing  on a direct basis  allows the customer to generally  pay a lower per
unit price than  purchasing the same items from the  warehouse,  but such method
typically  requires  the  customer to purchase  in greater  quantities  and thus
assume the costs,  risks and  liquidity  requirements  associated  with  holding
larger  inventories.  Customer buying  preferences are influenced by a number of
business,  economic and other factors.  The underlying  factors driving customer
buying  preferences  often vary from  customer  to  customer  and are subject to
change.  Over the past six years,  the  Company's  larger  U.S.  customers  have
greatly  increased  their direct  business with the Company while reducing their
purchases  from the warehouse.  Substantially  all of Ring's sales are warehouse
sales.

                                     Page 4
<PAGE>
Business Segments

         For internal  management  reporting purposes the Company operates three
primary  business  segments,  which  also  correspond  to the  major  geographic
segments of the Company's business:  Catalina Industries (United States), Go-Gro
Industries  (China) and Ring Limited  (United  Kingdom).  The Company  added the
United Kingdom as a primary business segment with the acquisition of Ring PLC on
July 5, 2000. The Company also maintains parent company corporate administrative
offices in Miami,  Florida and other operating  subsidiaries in Canada (Catalina
Canada),  Mexico  (Catalina  Mexico) and South  America.  Sales for each primary
segment  for the  fiscal  years  ended  September  30,  2000,  1999 and 1998 (in
thousands)  are set forth in the table below.  Sales for Ring for 2000 represent
sales from July 5, 2000 to September 30, 2000.
<TABLE>
<CAPTION>
                                                             Years Ended September 30,
                                                -------------------------------------------------
                                                  2000                1999                 1998
                                                --------             --------            --------
<S>                                             <C>                  <C>                 <C>
         Catalina Industries                    $122,222             $135,308            $123,385
         Go-Gro Industries                       141,356              136,945             111,344
         Ring Limited                             24,529                    -                   -
         Others                                   29,914               23,806              18,632
         Intersegment eliminations              (115,391)            (119,498)            (91,501)
                                                --------             --------            --------
                                                $202,630             $176,561            $161,860
                                                ========             ========            ========
</TABLE>

See Management's  Discussion and Analysis of Financial  Condition and Results of
Operations  and  Note 15 of  Notes  to  Consolidated  Financial  Statements  for
financial information by primary segment.


Catalina Industries (United States)
-----------------------------------

         Catalina  Industries  designs,  imports,   warehouses  and  distributes
lighting  fixtures and lamps in the United States to major retailers,  including
home centers, office superstore chains, mass merchandisers,  discount department
stores and  warehouse  clubs.  Order entry,  customer  service and other support
functions for this segment are performed at the corporate headquarters in Miami,
Florida  and at another  office  located in  Boston,  Massachusetts.  To improve
customer  service and lower costs the Company  finalized plans in September 2000
to close  the  Boston  office  and  consolidate  its  functions  into its  Miami
headquarters.  This  consolidation  was  completed  in December  2000.  Catalina
Industries  also owns and operates a 473,000 square foot  distribution  facility
located near Tupelo, Mississippi.

         Catalina Industries sells its products under the Westinghouse(R) brand,
the  Catalina(R),  Dana(R),  and  Illuminada(R)  trade names, and also under its
customers'  private labels.  Catalina  Industries markets a diverse product line
used primarily in  residential  and office  settings.  Its product line consists
mainly of two categories: lighting fixtures and lamps. Lighting fixtures consist
of outdoor/security lighting, chandeliers, recessed and track lighting, and wall
and ceiling  lights.  Lamps sold by Catalina  Industries  include both table and
floor  models  and may be either  functional  or  decorative.  Functional  lamps
consist of halogen desk lamps,  bankers lamps,  swing arm desk lamps,  torchiere
lamps,  magnifier  lamps,  and  other  lamps  generally  used for task  oriented
functions.  Decorative  lamps are fashion oriented and made of such materials as
metal, ceramic, stained glass, and crystal glass.

         Catalina  Industries  purchases its products from Go-Gro, the Company's
China manufacturing and sourcing subsidiary.  These products are manufactured by
Go-Gro or purchased from other factories by Go-Gro. Catalina Industries arranges
for the shipment of its products  directly from Go-Gro or other China  factories
to the customers' distribution centers or stores. Catalina Industries also sells
and  ships  from  its  Mississippi   distribution  facility  (see  "Distribution
Methods").

         Catalina   Industries'   business  is  somewhat   seasonal  in  nature.
Historically  this  segment's  sales have been greater during the quarters ended
June 30 and  September  30 due to home  improvement  activity  occurring  in the
spring and summer and retailer back-to-school promotions.

         Catalina Industries  competes on the basis of service,  price and scope
of product offerings (see "Strategy").  Its industry is highly fragmented,  with
no one  competitor or small group of  competitors  possessing a dominant  market
position (see "Competition").

                                     Page 5
<PAGE>
         Home Depot and  Wal-Mart  represent  the two largest  customers of this
segment constituting 32.6% and 10.5% respectively,  of this segment's sales, and
23.2% and 9.3%,  respectively,  of the  Company's  consolidated  sales in fiscal
2000. These customers and two others constituted 63% of this segment's sales for
2000 and 1999.

         At  December  15,  2000 and 1999,  the  backlog of orders for  Catalina
Industries amounted to $8.9 million and $13.6 million,  respectively.  While any
of these orders could be cancelled by the customer prior to shipment  management
believes,  based upon  experience,  substantially  all of these  orders  will be
shipped.


Go-Gro Industries (China)

         Catalina Industries,  Catalina Canada and Catalina Mexico obtain almost
all of their lighting products from Go-Gro which both manufactures  products and
purchases  products from independent  suppliers  primarily  located in China. In
addition,  Ring has  historically  purchased a small amount of its products from
Go-Gro. Go-Gro maintains  administrative  offices in Hong Kong and manufacturing
facilities in the Guangdong Province of China.

         Go-Gro's  manufacturing  operations  are conducted  through its Chinese
subsidiary,  Shenzhen Jiadianbao  Electrical  Products Co., Ltd. ("SJE"),  which
both leases and owns factory buildings in the Guangdong Province. Through fiscal
2000, SJE was a cooperative  joint venture  between Go-Gro and Shenzhen  Baoanqu
Fuda Industries Co., Ltd.  ("Fuda"),  a Chinese company.  Under the terms of the
cooperative  joint venture with Fuda, Go-Gro owned 70% of SJE's land use rights,
building and  equipment,  and received  100% of SJE's  profits and losses.  Fuda
owned the  remaining  30% of SJE's land use rights  and  property,  for which it
received a management fee of approximately  $400,000  annually.  SJE also leases
three factory buildings from Fuda. In September 2000 Go-Gro purchased Fuda's 30%
interest in SJE's land use rights and property for approximately $1.0 million.

         Go-Gro's owned manufacturing  facilities were constructed pursuant to a
Land Use  Agreement  entered  into in April 1995  between  SJE and the Bureau of
National Land Planning Bao-An Branch of Shenzhen City.  This agreement  provides
SJE with the non-transferable  right to use approximately 467,000 square feet of
land in Bao-An County, China until January 18, 2042. Under this agreement SJE is
obligated to construct  approximately  500,000 square feet of factory  buildings
and 211,000  square  feet of  dormitories  and  offices.  A 162,000  square foot
factory,  77,000 square foot warehouse and 60,000 square foot  dormitory  became
fully  operational  in June  1997,  and the  remainder  of the  construction  is
underway and should be completed in 2001.

         Go-Gro manufactures a wide range of products, including lamps, recessed
lighting  fixtures,  track lighting fixtures and flashlights.  Goods produced by
Go-Gro  constituted  approximately  40% in 2000 and 1999 of the  total  products
either  purchased or manufactured  by the Company.  Go-Gro sells the products it
manufactures to other Company  subsidiaries at prices  established by management
intended to provide an appropriate  profit allocation  between the manufacturing
and distribution activities of the Company.

         The raw materials and  components  essential to Go-Gro's  manufacturing
process are purchased from  distributors  and  manufacturers  located in various
countries as follows: plastic resin (Germany,  China, Japan, Thailand, Korea and
Taiwan), steel (Korea, Japan, Taiwan and China), cable (China and Taiwan), light
bulbs  (China,  Taiwan,  Germany,  Indonesia  and Hong Kong) and  various  other
components (China, Europe, U.S., Taiwan and others).

         Through  Go-Gro,  Catalina  Industries  and other Company  subsidiaries
arrange for, and  coordinate,  the purchase of a significant  volume of products
from independent Chinese manufacturers. See "Dependence on China".

         The Company chooses its contract  manufacturers based on price, quality
of  merchandise,   reliability   and  ability  to  meet  the  Company's   timing
requirements  for  delivery.  Manufacturing  commitments  are made on a purchase
order basis.  Go-Gro,  Ring Limited, or the customer is often required to post a
letter of credit prior to shipment.

         Go-Gro  employees  supervise the Company's  manufacturing  contractors.
These  employees'   responsibilities   include  the  establishment  and  ongoing
development of close  relationships with the manufacturers,  setting product and
manufacturing  standards,   performing  quality  assurance  functions  including
inspection at various  stages,  tracking costs,  performing  and/or working with
engineering, and oversight of the manufacturing processes. The Company maintains
a quality control and quality assurance  program and has established  inspection
and test criteria for each of its products.  These methods are applied by Go-Gro
or its agents regularly to product samples in each manufacturing  location prior
to shipment and shipments are tested for quality control inspection.

                                     Page 6
<PAGE>
         In addition to its sales to other  Company  subsidiaries,  Go-Gro sells
directly for its own account to European distributors and retailers.  Such sales
were approximately $27 million and $19.5 million in 2000 and 1999, respectively.
At  December  15,  2000 and 1999,  Go-Gro's  backlog of orders to third  parties
amounted to $5.5 million and $6.3 million, respectively.

Ring Limited (United Kingdom)
-----------------------------

         The Company acquired Ring Limited  (formerly Ring PLC) ("Ring") on July
5, 2000. Ring is a wholesaler and distributor  headquartered  in Leeds,  England
consisting  of  eight  companies  comprising  three  operating  divisions:  Ring
Lighting,  Ring Automotive and  Consumables.  These divisions are engaged in the
sale of lighting,  automotive after-market and industrial consumable products in
the United Kingdom.

         Ring Lighting,  a division of Ring Lamp Company,  Ltd., sells a product
line of lamps and  lighting  fixtures  comparable  to that  offered by  Catalina
Industries.  These  products are sold from warehouse  facilities  under the Ring
trade  name or the  customers'  label to a  variety  of  retailers  in the U.K.,
including home centers and mass  merchandisers.  B&Q, a subsidiary of Kingfisher
PLC, is the largest  customer of this  division.  Sales to B&Q comprised 21% and
37% of Ring's consolidated sales for the year ended June 30, 2000 and the period
from July 5, 2000 to September  30, 2000,  respectively.  The lighting  division
purchases its products from independent  suppliers located  worldwide  including
China,  the U.K. and the rest of Europe,  with China being the  dominant  supply
source,  accounting for approximately 50% of the lighting  division's  purchases
for the quarter ended  September 30, 2000. A wide variety of  competitors  exist
for this division including U.K.,  European and Chinese  manufacturers and other
U.K. distributors and importers.  Ring competes on the basis of service, product
range and price, and does not believe any competitor has a dominant  position in
the lighting markets it serves.  The lighting  division  comprised 61% of Ring's
consolidated  sales  for the  year  ended  June  30,  2000,  and  63% of  Ring's
consolidated sales for the period from July 5, 2000 to September 30, 2000.

         Ring  Automotive  consists  of the  automotive  division  of Ring  Lamp
Company,  Ltd. and four companies:  Grove Products (Caravan  Accessories)  Ltd.,
Lighten Point Corporation Europe, Ltd., Lancer Products Ltd. and BMAC Ltd. These
companies sell an extensive line of products under each company's  trade name or
under the customers' label, to the caravan,  train and automotive  aftermarkets.
Products  sold  include  replacement  headlights,  antennas,  security  devices,
caravan accessory systems, flasher units and relays, windshield wiper blades and
wash  systems,  steering  wheels,  engine and  suspension  components  and other
automotive electrical components.  In addition,  BMAC sells lighting used in the
manufacture  of trains and buses.  A number of  competitors  are present in each
segmental  market  of this  division  including  manufacturers  and  other  U.K.
distributors and importers, but it is believed that no competitor has a dominant
position in these  markets  other than for H Burden Ltd. in the caravan  sector.
Ring Automotive competes on the basis of service,  product range and price. This
division  obtains most of its products  from  suppliers  located in the U.K. and
China. The automotive  division  comprised 29% of Ring's  consolidated sales for
the year  ended  June 30,  2000,  and 27% of Ring's  consolidated  sales for the
period from July 5, 2000 to September 30, 2000.

         Van-Line  Ltd.,  Arctic  Products,  Ltd.,  and PH Products  form Ring's
consumables division. Van-Line is a leading supplier of workshop consumables and
brand tools to  independent  distributors.  Arctic  Products sells portable pipe
freezing equipment. PH Products sells a variety of products for the plumbing and
gas industry,  including  smoke alarms,  carbon  monoxide  detectors,  soldering
sprays and pressurized air cans.  Approximately 10% of Ring's consolidated sales
were generated in the consumables  division for the year ended June 30, 2000 and
for the period from July 5, 2000 to September 30, 2000.

         Ring's  business  is  somewhat  seasonal,   with  slightly  more  sales
occurring in the winter months.

Strategy

         Economic and other business factors led to a consolidation in the 1990s
in the  retail  sector for  consumer  products,  with a limited  number of large
retailers acquiring  ever-increasing market shares. The Company focuses on these
major retailers,  which include home centers,  office product  superstores,  and
mass merchandisers. The Company's strategies to strengthen its relationships and
increase its sales with these major retailers include the following:

1.   International Expansion - Many of the Company's U.S.-based retail customers
     are expanding  internationally.  The Company  believes these retailers need
     sophisticated suppliers capable of meeting their worldwide requirements and
     expanding  with  them  - -  manufacturers  and  distributors,  such  as the
     Company, possessing global expertise, resources and operations.

     The Company established  operations in Canada in 1992 and in Mexico in 1995
     to  support  the  international  growth  of  several  key  customers.   The
     acquisition  of Ring  represents  a major  step  for the  Company's  global
     distribution  network.  Management  believes Ring strengthens the Company's
     strategic   position  by  providing  both  increased  access  to  the  U.K.
     marketplace  and an important  platform for continental  Europe.  Ring will
     enable the Company to better  service its major  North  American  customers
     upon their entry into the U.K. and other European markets.

                                     Page 7
<PAGE>
2.   Customer-Centric Activities - The Company attempts to increase its value to
     each major  customer  and  differentiate  itself  from its  competition  by
     "customizing" its business for its most important customers.  To do so, the
     Company:

     (i)  Seeks  input  from  buyers  and other  customer  personnel  to develop
          product offerings,  merchandising  approaches and branding  strategies
          specific to each major retail customer;

     (ii) Dedicates Company-owned  production resources and capabilities to each
          major retailer and;

     (iii)Pursues  technology  linkages,  the  sharing of  critical  product and
          sales data and the alignment of supply chain activities with its major
          customers.

3.   Program  Selling - The Company strives to be the primary source of lighting
     products  to its  retailers  by  offering  a complete  program of  lighting
     products in a variety of categories.  The  availability of over 1000 styles
     of such products as outdoor/security  lighting,  table, floor and torchiere
     lamps, chandeliers, recessed and track lighting and wall and ceiling lights
     - the  majority  of which are  available  in several  colors or  finishes -
     provides retailers the opportunity to simplify their purchasing function by
     buying more of their lighting products from the Company as opposed to using
     several different suppliers.

4.   Turnkey  Departments  - The  Company  consults  with  many  of  its  retail
     customers to establish  departments  which allow the Company to display its
     products in a customized  layout designed to meet each retailer's  specific
     merchandising  and marketing  goals.  The Company can design,  assemble and
     maintain  these   departments   and  provide  the  retailer  with  shelving
     plan-o-grams,  signs, point-of-purchase promotional strategies and in-store
     inventory  stocking  programs.  Turnkey  departments  ensure the  Company's
     retail  customers  efficient  and  convenient  management  of the Company's
     products  within  their  stores  and  allow  the  Company  to  maintain  an
     attractive and informative presentation of its products.

5.   Warehouse Supply of Goods - The Company's  warehouses in the United States,
     United  Kingdom,  Canada and Mexico enable it to provide its customers with
     the advantage of short delivery time.  Warehouse  sales allow  retailers to
     receive  products in days as compared to months for items shipped  directly
     to them from China.  Timely  deliveries can help to increase the customer's
     inventory turns and profits.

Dependence on China

         A very high percentage of the lighting products sold by the Company are
obtained from factories located in China. The Company  manufactures a portion of
these  products  at its Go-Gro  subsidiary  and  purchases  the  remainder  from
independent suppliers.

         Goods  produced  by Go-Gro  constituted  approximately  40% in 2000 and
1999, of the total products either purchased or manufactured by the Company. The
raw materials and  components  essential to Go-Gro's  manufacturing  process are
purchased from  distributors and  manufacturers  located in various countries as
follows:  plastic resin (Germany,  China,  Japan,  Thailand,  Korea and Taiwan),
steel (Korea,  Japan, Taiwan and China),  cable (China and Taiwan),  light bulbs
(China, Taiwan,  Germany,  Indonesia and Hong Kong) and other various components
(China, Europe, U.S., Taiwan and others).

         The Company selects its contract  manufacturers based on price, quality
of  merchandise,   reliability   and  ability  to  meet  the  Company's   timing
requirements  for  delivery.  Manufacturing  commitments  are made on a purchase
order  basis.  Go-Gro,  another  Company  subsidiary,  or the  customer is often
required to post a letter of credit prior to shipment.

         The Company has employees  located in the U.S., Hong Kong and China who
supervise   the   Company's   manufacturing   contractors.    These   employees'
responsibilities  include the  establishment  and ongoing  development  of close
relationships  with  the   manufacturers,   setting  product  and  manufacturing
standards,  performing  quality  assurance  functions  including  inspection  at
various stages, tracking costs, performing and/or working with engineering,  and
oversight  of the  manufacturing  processes.  The  Company  maintains  a quality
control and quality  assurance  program and has established  inspection and test
criteria for each of its  products.  These methods are applied by the Company or
its agents regularly to product samples in each manufacturing  location prior to
shipment and shipments are inspected for quality control purposes.

         The Company  expects to  continue  to use a limited  number of contract
manufacturers  and accordingly will continue to be highly dependent upon sources
outside the Company for timely production and quality workmanship.

         In  fiscal  2000  and  1999,  Chinese  suppliers,  other  than  Go-Gro,
accounted for  approximately  50% and 58%,  respectively,  of the total products
either  purchased  or  manufactured  by the  Company.  Shunde No. 1 Lamp Factory
("Shunde")  accounted  for  approximately  21%  of  the  total  products  either
purchased or manufactured by the Company in 2000 and 29% in 1999. Purchases from
Go-Gro  and  the  top  five  independent   suppliers   comprised  75%  and  88%,
respectively,  of the total of the products either

                                     Page 8
<PAGE>
purchased or manufactured by the Company for fiscal 2000 and 1999, respectively.
Other than Shunde,  no independent  supplier  accounted for more than 10% of the
total of the products either purchased or manufactured by the Company in 2000.

         On July 20, 1999, the Company  renewed an agreement with Shunde whereby
Shunde  agreed to  manufacture  lighting  products for the Company to be sold in
North and South America and the European  Community on an exclusive  basis for a
three  year  period  beginning  October  1, 1999 in return  for  annual  minimum
purchase  requirements from the Company.  The agreement can be terminated if the
Company  does not meet its  minimum  purchase  requirements,  at which  time the
exclusivity  clause would  cease.  However,  no amounts  would be due Shunde for
failure to meet the purchase requirements.  Since inception of this agreement in
1993, the Company has met its minimum purchase requirements under the agreement.

         While the Company  purchases  its products from a small number of large
suppliers with whom it maintains close alliances,  the Company believes the same
products could be purchased from numerous other Chinese suppliers.

         The  continued  importation  of products  from China and the  Company's
business could be affected by any trade issues impacting U.S. - China relations.
The People's Republic of China currently enjoys Normal Trade Relations  ("NTR").
In the context of United States tariff  legislation,  such treatment  means that
products are subject to favorable  duty rates upon entry into the United States.
The United States annually reconsiders the renewal of NTR trading status for the
PRC. Members of Congress and the "human rights community" also monitor the human
rights issues in China and adverse  developments in human rights and other trade
issues in China  could  affect  U.S. - China  relations.  As a result of various
political and trade  disagreements  between the U.S. Government and China, it is
possible  restrictions  could be placed on trade with China in the future  which
could adversely impact the Company's operations and financial position.

         The Company  obtained a political risk  insurance  policy issued by the
Multilateral  Investment  Guarantee Agency, a member of the World Bank Group, in
the  amount of $14.4  million  covering  existing  assets  of SJE in China.  The
contract  is  a  long-term   non-cancelable  guarantee  covering  the  risks  of
expropriation and war and civil disturbance.

Competition

         The  Company's  product lines span major  segments  within the lighting
industry  and,  accordingly,  the  Company's  products  compete  in a number  of
different markets with a number of different  competitors.  The Company competes
with other independent distributors,  importers, manufacturers, and suppliers of
lighting  fixtures  and other  consumer  products in the United  States,  United
Kingdom,   continental  Europe  and  China.  The  lighting  industry  is  highly
competitive.  Other  competitors  market similar  products that compete with the
Company  on the  basis of  price.  Some of  these  competitors  do not  maintain
warehouse  operations  or do not perform  some of the  services  provided by the
Company  that  require  the Company to charge  higher  prices to cover the added
costs.  The relatively low barriers to entry into the lighting  industry and the
limited proprietary nature of many lighting products also permit new competitors
to enter the industry easily. The ability of the Company to compete successfully
in this highly  competitive  market depends upon its ability to manufacture  and
purchase a variety of quality products on favorable  terms,  ensure its products
meet safety standards, deliver the goods promptly at competitive prices, provide
a wide range of services  such as electronic  data  interchange  and  customized
products,  packaging,  and store  displays and otherwise  adapt its services and
product offerings to the demands of its major retail customers.

Independent Safety Testing

         As part of its marketing strategy,  the Company voluntarily submits its
products to recognized product safety testing laboratories in countries in which
it markets its products.  Such laboratories  include  Underwriters  Laboratories
(UL) in the  United  States,  Canadian  Standards  Association  (CSA) in Canada,
British Standards (BS) in Great Britain, Association Nacional de Normalization y
Certification  del  Sector  Electrico  (ANCE) in  Mexico  and  various  European
electrical testing organizations.  If the product is acceptable,  the laboratory
issues a report, which provides a technical  description of the product. It also
provides the  Company's  suppliers  with  procedures  to follow in producing the
products and periodically conducts inspections at such suppliers' facilities for
compliance. Electrical products which are manufactured in accordance with safety
certification  marks are generally  recognized by consumers as safe products and
such certification marks are often required by various governmental  authorities
to comply with local codes and  ordinances.  The Company does not anticipate any
difficulty  in  maintaining  the  right  to  use  the  listing  marks  of  these
laboratories.

Product Liability

         The Company is engaged in a business  which could expose it to possible
claims for  injury  resulting  from the  failure of its  products.  The  Company
maintains  primary  product  liability  insurance  coverage  of $1  million  per
occurrence,  $2 million in the  aggregate,  as well as a $25  million  aggregate
umbrella insurance policy and $75 million excess umbrella insurance. The primary
insurance  coverage  requires the Company to self-insure for a maximum amount of
$10,000 per incident  occurring after January 1,

                                     Page 9
<PAGE>
1999.  No  assurance  can be given  that the claims  will not  exceed  available
insurance  coverage or that the Company  will be able to maintain the same level
of insurance. See "Liquidity and Capital Resources - Other Matters."

Trademarks and Patents

         On April 26, 1996,  the Company  entered into a license  agreement with
Westinghouse  Electric  Corporation  to market  and  distribute  a full range of
lighting  fixtures,  lamps and other lighting  products  under the  Westinghouse
brand name in  exchange  for  royalty  payments.  Subject to the  minimum  sales
conditions discussed below, the agreement terminates on September 30, 2002, with
the Company having options to extend the agreement for two additional  five-year
terms.  The royalty payments are due quarterly and are based on a percent of the
value of the Company's net shipments of Westinghouse  branded products,  subject
to annual minimum net shipments.  Commencing September 30, 2000 either party has
the right to  terminate  the  agreement if the Company does not meet the minimum
net  shipments of $25 million for fiscal  2000,  $40 million for fiscal 2001 and
$60 million for fiscal 2002. Net sales of Westinghouse branded products amounted
to $29 million and $20.5  million  for the years  ended  September  30, 2000 and
1999, respectively.

         The Company's  licensed  brand,  Westinghouse(R)  and the Company's own
trademarks,  Catalina(R), Dana(R) and Illuminada(R) are registered in the United
States,  Canada,  China  and  Mexico  as well as in  numerous  countries  in the
European Community.

Employees

         As of November 30, 2000 the Company employed  approximately  700 people
in the United States, United Kingdom, Canada and Mexico. The Hong Kong and China
operations, including Go-Gro's cooperative joint venture, employed approximately
2,900 people.  None of the Company's  employees are  represented by a collective
bargaining  unit  and the  Company  believes  that  its  relationships  with its
employees are good.

Financial Information about Foreign and Domestic Operations and Export Sales

         The Company  operates in the United  States,  United Kingdom and China,
and to a lesser extent,  Canada, Mexico and South America. The Company's primary
operating  segments are located in the United States,  United Kingdom and China.
These  operating  segments   generally  follow  the  management   organizational
structure  of the  Company.  Net  sales to  external  customers  by U.S.-based
operations  are made  primarily  into the United  States.  Net sales to external
customers by U.K.-based  operations  are made primarily into the U.K. Net sales
to external customers by China-based  operations are made primarily into Europe.
See Note 15 of Notes to Consolidated Financial Statements.


EXECUTIVE OFFICERS OF THE REGISTRANT

         The following  table sets forth certain  information as of December 15,
2000 with respect to the executive officers of the Company:

<TABLE>
<CAPTION>
             Name                        Age                    Position With the Company
-------------------------------- ----- -------- ---- ------------------------------------------------
<S>                                      <C>         <C>
Robert Hersh                             54          Chairman, President,
                                                     Chief Executive Officer, Director

Dean S. Rappaport                        48          Executive Vice President,
                                                     Chief Operating Officer

Nathan Katz                              45          Executive Vice President


David W. Sasnett                         44          Senior Vice President, Chief Financial
                                                     Officer, Chief Accounting Officer
</TABLE>

         None of the  Company's  officers has any family  relationship  with any
director or other  officer.  "Family  relationship"  for this purpose  means any
relationship by blood, marriage, or adoption, not more remote than first cousin.

                                    Page 10
<PAGE>
         Robert Hersh is a co-founder of the Company, has been the President and
Chief Executive  Officer of the Company since April 1991,  Chairman of the Board
since June 1991 and a Director of the Company since April 1988. Mr. Hersh served
as the  Executive  Vice  President of the Company from 1985 to April 1991 and as
Secretary from June 1989 until June 1991.

         Dean S. Rappaport  became an Executive Vice President of the Company in
January  1988 and was a Director of the Company  from April 1988 until May 1999.
From January 1988 to November 1996 Mr. Rappaport was Chief Financial Officer and
Treasurer of the Company.  Mr. Rappaport was promoted to Chief Operating Officer
of the Company in November 1996.

         Nathan Katz has been an Executive  Vice  President of the Company since
October 1, 1993 and Chief  Executive  Officer of Catalina  Industries  (formerly
known as Dana Lighting), a wholly-owned  subsidiary of the Company, since August
1989. From October 1983 to August 1989, Mr. Katz was the Chief Executive Officer
of Dana Imports, Inc., an importer of lamps located in Boston, Massachusetts.

         David W.  Sasnett  became a Vice  President  of the Company in November
1994.  In November  1997,  Mr.  Sasnett  became a Senior Vice  President  of the
Company. In November 1996, Mr. Sasnett became the Chief Financial Officer of the
Company. Prior to that time, he was the Company's Controller. From 1993 until he
joined the Company,  Mr. Sasnett was the Vice President - Finance and Controller
of Hamilton Bank,  N.A. and from 1980 to 1993 was employed by the  international
accounting firm of Deloitte & Touche.

ITEM 2.       PROPERTIES.
              ----------
         The following  table sets forth  details  about the Company's  offices,
manufacturing plants and warehouse facilities:
<TABLE>
<CAPTION>
                                                                                      LEASED/
            LOCATION                                FACILITY                           OWNED
----------------------------------   ----------------------------------------   --------------------
<S>                                  <C>                                         <C>
United States:
     Miami, FL                       headquarters/office                        owned (1)
     Tupelo, MS                      warehouse                                  owned (1)
     Dallas, TX                      office/warehouse                           leased (2)

China:
     Hong Kong                       office                                     leased
     Shenzhen                        office/manufacturing plant/warehouse       leased
                                     dormitories                                leased
                                     manufacturing plant/ warehouse/
                                     dormitories                                owned (3)

United Kingdom:
    Leeds                            office/warehouse; warehouse                leased; owned
    Hyde                             warehouse                                  owned
    Walsall                          warehouse                                  leased
    Corby                            two warehouses                             leased

Other:
    Toronto, Canada                  office/warehouse                           leased
    Mexico City, Mexico              office/warehouse                           leased
----------------------------------   ----------------------------------------   --------------------
</TABLE>
(1)      Owned subject to a first mortgage.

(2)      The Company has subleased  the  warehouse  space under this lease to an
         unrelated party. The lease and sublease expire in February 2001.

                                    Page 11
<PAGE>
(3)      This  facility  is owned by a joint  venture in which the Company had a
         70% interest as to ownership of the facility  through  September  2000.
         The Company  purchased  the other 30% interest in September  2000.  The
         joint  venture  purchased  land use rights which  terminate in the year
         2042.

         All of the Company's  properties  are fully utilized with the exception
of the Dallas  facility,  which has been fully  subleased  except for the office
space. All of the Company's properties are suitable for its operations.



ITEM 3.           LEGAL PROCEEDINGS.
                  ------------------

         The  Company  is a  party  to  routine  litigation  incidental  to  its
business. In the opinion of management the ultimate resolution of any such legal
proceeding will not have a material adverse effect on the financial  position or
annual results of operations of the Company.



ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
                  -----------------------------------------------------
         During the quarter ended  September 30, 2000, no matters were submitted
for a vote of the Company's stockholders.

                                    Page 12
<PAGE>
                                     PART II

ITEM 5.           MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                  -------------------------------------------------
                  STOCKHOLDER MATTERS.
                  --------------------

         The  Company's  common  stock is traded on the New York Stock  Exchange
("NYSE") under the symbol LTG. The following  table sets forth,  for the periods
indicated,  the high and low closing  prices of the common  stock as reported by
the New York Stock Exchange.

                                                    High            Low
    Fiscal Year Ended September 30, 1999
             First Quarter                        2 3/4             2
             Second Quarter                       3 11/16           2 1/8
             Third Quarter                        5 1/8             2 11/16
             Fourth Quarter                       5 11/16           4 1/8

    Fiscal Year Ended September 30, 2000
             First Quarter                        5 9/16            3 15/16
             Second Quarter                       6 1/16            4 1/2
             Third Quarter                        4 14/16           3 11/16
             Fourth Quarter                       5                 3 3/8

         On December 26, 2000,  the closing price of the Company's  common stock
as reported on the New York Stock  Exchange  was $2.00.  As of December 15, 2000
there were approximately  1,700 holders of record of the Company's common stock,
including  some brokerage  firms,  which hold shares in street name on behalf of
their clients.

         The  Company has never paid cash  dividends  on its common  stock.  The
Company intends to retain future  earnings,  if any, to finance the expansion of
its business and does not anticipate that any cash dividends will be paid in the
foreseeable  future.  In addition,  the terms of the Company's credit facilities
prohibit the payment of any cash dividends or other  distribution  on any shares
of the Company's common stock,  other than dividends payable solely in shares of
common  stock,  unless  approval is obtained from the lenders.  Future  dividend
policy  will  depend  on  the   Company's   earnings,   capital  and   financing
requirements, expansion plans, financial condition and other relevant factors.

         The Company's Board of Directors has authorized the repurchase of up to
$2.7  million  of  common  shares of the  Company  from time to time in the open
market or in  negotiated  purchases.  As of December 15,  2000,  the Company had
repurchased 641,932 shares of its stock for $2.5 million.

         On August 9, 1999 the NYSE notified the Company that it had changed its
rules regarding  continued listing for companies which have shares traded on the
NYSE.  The new rules changed and increased the  requirements  to maintain a NYSE
listing.  Through  September  30, 2000,  the Company did not meet the new rules,
which require a total market  capitalization  of $50 million and the maintenance
of minimum total stockholders' equity of $50 million. The Company's total market
capitalization  and  stockholders'  equity as of  September  30, 2000 were $25.3
million and $50.8 million,  respectively.  The Company  expects to report a loss
for the quarter  ending  December  31, 2000 (see  "Management's  Discussion  and
Analysis of Financial  Condition  and Results of  Operations - Outlook") and the
Company's  total market  capitalization  as of the close of business on December
26, 2000 was $14.7 million. As requested by the NYSE, the Company had previously
provided the NYSE with its plan to meet the new standards by February  2001. The
Company's  plan was  accepted by the NYSE in October  1999 and  continues  to be
monitored by the NYSE through the current quarter. However, no assurances can be
given that the objectives of the plan will be  accomplished by February 2001. If
the Company is ultimately unable to meet the new NYSE listing rules or obtain an
extension for its plan, the Company's  shares could be suspended from trading on
the NYSE,  however the Company  believes  other trading venues are available for
its stock.

         In November 2000,  the Company's  Board of Directors  reauthorized  its
stockholder  rights plan,  by adopting a plan similar to a  pre-existing  rights
plan which expired on November 20, 2000.  Under the Company's new rights plan, a
preferred  stock purchase right was  distributed  for each share of common stock
outstanding at the close of business on the November 30, 2000 record date and is
issued in connection  with each share issued after such date. The rights are not
initially  exercisable,  but upon the  occurrence  of  certain  takeover-related
events, the holders of the rights (other than an adverse or acquiring person, or
group  thereof),  under  certain  circumstances,  have  the  right  to  purchase
additional  shares of Company  stock (or, in some cases,  stock of the acquiring
entity) at a discount  to the then market  price.  The rights can be redeemed by
the Company at any time,  and will  otherwise  expire on November 20, 2005.  The
thresholds  for triggering the rights plan is a person (as defined in the rights
plan) acquiring 21%

                                    Page 13
<PAGE>
of the  outstanding  stock  of the  Company  or a  declaration  by the  Board of
Directors  that a person is an "adverse  person" as defined in the rights  plan,
and the exercise price of the rights is $17.

ITEM 6.           SELECTED FINANCIAL DATA.
                  ------------------------
                  (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                               At or For the Years Ended September 30,
                                          -------------------------------------------------------------------------------------
                                             2000 (1)         1999 (2)            1998            1997 (3)           1996
                                          ---------------   --------------   ---------------   ---------------  ---------------
<S>                                            <C>              <C>                <C>              <C>              <C>
Net sales                                      $ 202,630        $ 176,561          $161,860         $ 196,955        $ 184,630

Net income (loss)                              $   2,845        $   6,489          $  1,102         $  (3,093)       $   1,603

Basic earnings (loss) per share                $    0.40        $    0.92          $   0.15         $   (0.44)       $    0.23
Diluted earnings (loss) per share              $    0.37        $    0.80          $   0.15         $   (0.44)       $    0.21

Total assets                                   $ 167,971        $ 101,897          $ 98,960         $ 116,581        $ 117,462
Long-term borrowings                           $   6,888        $  24,774          $ 28,224         $  39,737        $  36,571
</TABLE>

         Certain amounts  presented above for prior years have been reclassified
to conform to the current year's  presentation.  No cash dividends were declared
during the five-year period ended September 30, 2000.


(1)      Includes  a  $500,000  charge to close the  Boston  office,  a $788,000
         charge related to the reorganization of executive management and assets
         and  liabilities  acquired upon the acquisition of Ring on July 5, 2000
         and the  operating  results  for Ring for the  period  July 5,  2000 to
         September 30, 2000. Long-term borrowings reflect  classification of all
         borrowings  under the Company's $75 million credit  facility to current
         liabilities as of September 30, 2000.

(2)      Reflects  the  reversal  of a $2.7  million  provision  for a  judgment
         related to  litigation  with a former  officer of the  Company  and the
         reversal  of  an  associated   $893,000  provision  for  post  judgment
         interest.

(3)      Includes  $930,000 in plant  closing  costs due to the  termination  of
         manufacturing operations at the Company's Meridian Lamps subsidiary and
         $7.5 million in litigation costs and related professional fees.

                                    Page 14
<PAGE>
ITEM 7.         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                ---------------------------------------------------------------
                RESULTS OF OPERATIONS.
                ----------------------

         Certain  statements  in this  Management's  Discussion  and Analysis of
Financial  Condition and Results of  Operations,  including  without  limitation
expectations  as to future  sales  and  operating  results  as  discussed  under
"Outlook" and the discussion under "Liquidity and Capital Resources"  constitute
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation  Reform Act of 1995 (the  "Reform  Act").  Words  such as  "expects,"
"anticipates,"  "believes," "plans," "intends,"  "estimates," variations of such
words and similar  expressions  are  intended to identify  such  forward-looking
statements.  These statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
Catalina Lighting, Inc. and its subsidiaries (collectively, the "Company") to be
materially  different  from any  future  results,  performance  or  achievements
expressed or implied by such forward-looking  statements.  Such factors include,
but are not  limited to, the  following:  the highly  competitive  nature of the
lighting  industry;  reliance on key customers who may delay,  cancel or fail to
place orders;  consumer demand for lighting products;  dependence on third party
vendors and imports from China which may limit the  Company's  margins or affect
the timing of revenue and sales recognition;  general domestic and international
economic  conditions which may affect consumer  spending;  brand awareness,  the
existence or absence of adverse publicity, continued acceptance of the Company's
products  in the  marketplace,  new  products  and  technological  changes,  and
changing trends in customer tastes,  each of which can effect demand and pricing
for  the  Company's   products;   pressures  on  product   pricing  and  pricing
inventories;  cost of labor and raw materials;  the availability of capital, the
ability to satisfy  covenants under credit and loan agreements and the impact of
increases in borrowing costs, each of which affect the Company's  short-term and
long-term  liquidity  and ability to operate as a going  concern;  the costs and
other effects of legal and administrative proceedings; foreign currency exchange
rates;  changes in the  Company's  effective tax rate (which is dependent on the
Company's U.S. and foreign source income);  and other factors referenced in this
Form  10-K.  The  Company  will not  undertake  and  specifically  declines  any
obligation to update or correct any forward-looking statements to reflect events
or circumstances  after the date of such statements or to reflect the occurrence
of anticipated or unanticipated events.

         The Company's  fiscal years ended September 30, 2000, 1999 and 1998 are
referred to herein as "2000", "1999" and "1998", respectively.  Unless otherwise
noted,  U.S. dollar  equivalents of foreign  currency amounts are based upon the
exchange rates prevailing at September 30, 2000.

RESULTS OF OPERATIONS

Comparison of Fiscal Years Ended September 30, 2000 and 1999
------------------------------------------------------------

Consolidated Results

         The Company earned $2.8 million,  or $0.37 per diluted share,  in 2000.
Net income for 1999, which included a non-recurring  reversal of a provision for
litigation (and related  interest) that increased pretax income by $3.6 million,
was $6.5 million,  or $0.80 per diluted share.  Net income and diluted  earnings
per share  for  1999,  as  adjusted  to  exclude  the  impact of the  litigation
settlement, were $4.5 million and $0.57, respectively.

          The  Company's  July 5,  2000  acquisition  of Ring  PLC  ("Ring"),  a
supplier of lighting,  automotive and consumable  products located in the United
Kingdom,  significantly affected 2000 operating results and the comparability of
current year results to those for 1999. The Company's  2000 results  include net
sales of $24.5  million and a pretax loss of $1.3 million  attributable  to Ring
for the period July 5, 2000 to September  30, 2000.  Ring's  pretax loss of $1.3
million includes interest and financing costs and goodwill  amortization related
to the acquisition aggregating $1.1 million. Ring's results for the period after
its acquisition were negatively  affected by an increasingly  competitive retail
sector,  consolidation  and  direct  importation  trends in Ring's  markets  and
product lines and a weakening of the British pound relative to the U.S.  dollar.
See  "Results By Segment - Ring  Limited" for a  comparative  analysis of Ring's
results.

         Actions  taken by the Company in two areas of its business  resulted in
charges that reduced 2000 pretax  earnings by  approximately  $1.3 million.  The
Company  expensed  $788,000  pursuant  to  a  reorganization  of  its  executive
management structure in December 1999. Separately,  in September 2000 plans were
finalized  to  consolidate  the  functions  of the Boston  office into the Miami
headquarters.  Management  believes this consolidation will allow the Company to
service its U.S. customers more effectively and to generate future cost savings.
A $500,000  charge to provide  for  employee  severance  costs and to  writedown
equipment  and other  property  was  recorded in  September  2000 for the Boston
office closure.

         Net sales for 2000 were a record $202.6 million as a result of the Ring
acquisition. Excluding Ring, net sales for 2000 were $178.1 million, as compared
to $176.6  million in 1999.  Higher unit sales to  Canadian,  European and other
international  customers offset lower unit sales and an overall sales decline to
U.S.  customers.  In 2000 sales to U.S. and international

                                    Page 15
<PAGE>
customers (excluding Ring) were $121.6 million and $56.5 million,  respectively,
and  in  1999  such  sales   amounted  to  $134.0  million  and  $42.6  million,
respectively.

         Lamps,   lighting  fixtures,   automotive   after-market  products  and
industrial  consumables  accounted for 55%, 40%, 4% and 1% of net sales in 2000.
Lamps and lighting  fixtures  accounted for 64% and 36% of net sales in 1999. In
2000 and 1999 the Company's  largest customer,  Home Depot,  accounted for $47.0
million (23.2%) and $45.6 million  (25.8%),  respectively,  of the Company's net
sales.  Wal-Mart and an affiliate  accounted for $18.8 million  (9.3%) and $25.6
million  (14.5%)  of net sales in 2000 and 1999,  respectively.  For the  fiscal
years ended  September 30, 2000 and 1999, net sales to the Company's ten largest
customers represented approximately 69% and 73%, respectively,  of the Company's
net  sales.  Approximately  69% of the  Company's  sales in 2000  were made on a
direct basis as compared to 75% in 1999.

         Gross profit increased in total dollars,  but decreased as a percentage
of sales,  from 1999 to 2000. The decrease in the gross profit percent is due in
part to the  inclusion  of $24.5  million in sales  from Ring at a gross  profit
percentage  of 14.1%  for the  fourth  quarter  of 2000 and other  factors.  See
"Results By Segment - Catalina Industries".

         Selling,  general and  administrative  expenses  ("SG&A") for 2000 were
$27.0 million (net of  Ring-related  SG&A of $3.8  million),  a decrease of $1.5
million from last year.  The majority of this decrease  relates to reductions in
(i) bonuses for U.S. employees of $916,000;  (ii) professional fees of $269,000;
(iii) tradeshow expenses of $148,000; and (iv) sales commissions of $143,000.

         Greater  interest  expense for 2000  reflects the impact of $800,000 in
interest on the loans to fund the Ring acquisition.

         Other  income  for  2000   consisted   primarily  of  interest   income
($495,000), income from joint ventures ($185,000) and other miscellaneous income
($65,000).  Other income in 2000 was reduced by a net foreign  currency  loss of
$303,000.  Other  income in 1999  consisted  primarily  of a gain on sale of the
Company's Meridian facility ($194,000),  interest income ($349,000), income from
joint ventures ($145,000) and miscellaneous  income ($455,000).  Other income in
1999 was reduced by a net foreign currency loss of $25,000.

         The effective  income tax rates for 2000 and 1999 were 27.4% and 31.2%,
respectively  and  reflect  the  impact of foreign  income,  which is taxed at a
significantly  lower rate than U.S. income.  The Company's  effective income tax
rate is dependent  both on the total amount of pretax  income  generated and the
source of such income (i.e.  domestic or foreign).  Consequently,  the Company's
effective tax rate may vary in future periods.  The Company's  effective  income
tax rate reflects the  anticipated  tax benefits  associated  with the Company's
1999  restructuring of its international  operations.  Should these tax benefits
not  materialize,  the Company  may  experience  an  increase  in its  effective
consolidated income tax rate.

Outlook

         The  highly  competitive  U.K.  retail  environment   impacting  Ring's
business has continued after  September 30, 2000, and management  expects Ring's
pretax loss for the quarter  ending  December 31, 2000 to be  comparable  to the
$1.3 million  pretax loss recorded in the quarter  ended  September 30, 2000. In
addition,  the Company has  experienced a  significant  decline in sales to U.S.
customers  during the first quarter of fiscal 2001, as compared to the first and
fourth quarters of fiscal 2000. The Company  estimates first quarter fiscal 2001
sales to U.S.  customers  will be  approximately  $11  million  less than  those
recorded  for the same  quarter of 2000.  Consequently  the  Company  expects to
report a net loss for the quarter ending December 31, 2000.  Management believes
this sales  decline  represents a general slow down in the U.S.  retail  economy
that has affected the purchasing patterns of its major customers.

         As a  result  of  the  Company's  performance  for  the  quarter  ended
September 30, 2000,  the Company did not satisfy a financial  covenant under its
existing $75 million credit facility.  On December 22, 2000 the Company obtained
an amendment of this facility effective for the quarter ended September 30, 2000
and is in compliance  with the amended  facility for the quarter ended September
30, 2000. However,  based upon current expectations the Company believes it will
not be able to comply with the  financial  covenants  of its $75 million  credit
facility for quarters  subsequent  to September  30, 2000 unless a waiver of the
covenants  or a second  amendment  to the  facility  is obtained  modifying  the
covenants.  See "Liquidity and Capital Resources" and Notes 5 and 19 of Notes to
Consolidated Financial Statements.

Results By Segment

         Refer to Note 15 of  Notes to  Consolidated  Financial  Statements  for
financial tables for each business segment.

                                    Page 16
<PAGE>
Catalina Industries (United States)
-----------------------------------

         The segment  contribution made by Catalina  Industries in 2000 was $5.8
million,  as  compared  to  $9.0  million  in  1999.  The  decrease  in  segment
contribution  in 2000 reflects lower sales to U.S.  customers,  with a resulting
loss of gross profit dollars.

         Sales by Catalina  Industries to external customers were $121.4 million
in 2000, a decrease of $12.3 million,  or 9.2% from 1999. Sales to Wal-Mart were
$12.8  million  or $9.6  million  less  than in  1999,  as  Catalina  Industries
introduced  new programs and benefited from  promotional  sales with Wal-Mart in
1999.  Catalina  Industries  also generated $2.9 million in sales in 1999 from a
customer  that went out of business  prior to fiscal 2000.  Sales to Home Depot,
Catalina Industries' largest customer, were $39.5 million and $40.4 million, for
2000 and 1999, respectively.

         The gross profit  decrease of $4.9 million in 2000 is  attributable  to
the  lower  sales  volume,  and  to a  decrease  in  the  overall  gross  profit
percentage.  The lower gross profit  percentage in 2000 reflects a change in the
product mix and a continuing reduction of Catalina Industries'  warehouse sales.
Presently,  most of the Company's major U.S. customers (including Home Depot and
Wal-Mart) purchase from Catalina Industries primarily on a direct basis, whereby
the  merchandise  is shipped  directly from the factory to the customer,  rather
than from the warehouse. Approximately 79% of Catalina Industries' sales to U.S.
customers  in 2000  were  made on a  direct  basis as  compared  to 75% in 1999.
Warehouse  sales to U.S.  customers  declined  each fiscal year in the  six-year
period  commencing  fiscal 1995,  when the present  warehouse was constructed in
Tupelo, Mississippi,  and warehouse sales were 61% of U.S. sales compared to the
present 21%. This percentage decline represents a significant  decrease in sales
dollars.  With the  continued  decline  in  warehouse  sales  in 2000,  Catalina
Industries  also earned lower  overall  margins on its warehouse  sales,  as the
Company reduced its U.S. inventories from $15.6 million at September 30, 1999 to
$10.6 million at September 30, 2000. Catalina Industries lowered its warehousing
costs by terminating its other U.S.  warehouse  operation located in Los Angeles
effective March 31, 1998 and is attempting to compensate further for the decline
in U.S.  warehouse  sales by  pursuing  new  customers  for the U.S.  warehouse.
Management  also continues to consider other  strategic  alternatives  to reduce
overall  warehousing costs.  Catalina Industries may experience further declines
in sales made from its U.S.  warehouse  and, at least in the short term,  may be
unable to  further  reduce  its  overall  U.S.  warehousing  costs.  The need to
generate  cash to meet the  requirements  of the  Company's  $75 million  credit
facility  (see  "Liquidity  and Capital  Resources")  may  necessitate a further
lowering of U.S. warehouse inventories at lower relative gross margins.  Further
declines in warehouse  sales or the need to lower  inventories  to generate cash
could adversely impact the Company's gross profits in the future.

         Catalina  Industries  lowered its SG&A by  approximately  $1 million in
2000, as this segment of the Company  reduced its  involvement in tradeshows and
its use of certain other  merchandising  approaches,  resulting in a decrease of
more than $700,000 in this expense category.

Go-Gro (China)
--------------

         Go-Gro's  segment  contribution  rose in 2000 to $9.2 million,  up $2.6
million,  or 39%, from $6.6 million for 1999.  Go-Gro became more  profitable in
2000 by growing its sales to third parties and raising its manufacturing output.

         Go-Gro's  sales for 2000  were  $141.4  million,  an  increase  of $4.4
million  from  the  $137.0  million   generated  in  1999.   Sales  of  products
manufactured  by Go-Gro in 2000 (as opposed to sales of products  purchased  for
resale by Go-Gro from other manufacturers)  increased by $13.3 million, to $71.4
million. Third party and intercompany sales by Go-Gro in 2000 were $26.9 million
and $114.5 million,  respectively,  while the comparable  sales amounts for 1999
were $19.5 million and $117.5  million,  respectively.  Sales to one third party
customer were $10.1 million in 2000 and $2.7 million in 1999,  respectively.  In
2000 new  product  introductions  for  Europe  were the  driving  factor  behind
Go-Gro's sales growth to third parties,  while  Go-Gro's  greater  manufacturing
sales reflects the added capacity of Go-Gro's new factory. Go-Gro's gross profit
increased  $2.6 million due to the growth in sales of products  manufactured  by
Go-Gro, as the margins Go-Gro earns on products it manufactures typically exceed
the margins Go-Gro earns on products it purchases from other manufacturers.

Ring Limited (United Kingdom)
-----------------------------

         The Ring segment recorded a pretax loss of $1.3 million for 2000, which
includes  $260,000 in goodwill  amortization  arising from the  acquisition  and
$825,000 in  interest  and  financing  costs for the  acquisition-related  debt.
Excluding  these  acquisition  costs,  Ring's pretax loss for the period July 5,
2000 to September  30, 2000 was  approximately  $200,000,  as compared to pretax
income of approximately $850,000 for the quarter ended September 30, 1999.

         Net  sales  and  gross  profit  for the  period  from  July 5,  2000 to
September  30,  2000 were  $24.5  million  and $3.5  million,  respectively,  as
compared to $26.7 million and $4.6 million,  respectively for the same period of
1999.  Ring's sales volume and gross profit reflect an increasingly  competitive
retail  business  sector  stemming from  consolidation  in both the lighting and
automotive markets, a general decline in the automotive aftermarket, and greater
direct importation of products by Ring's

                                    Page 17
<PAGE>
customers.  In addition,  a weakening of the Great British pound relative to the
U.S.  dollar has  increased  Ring's cost of goods and lowered its  margins.  The
average exchange rate of the dollar to the pound for the quarter ended September
30, 2000 was  approximately  1.48 to 1, a  significant  decline from the average
exchange  rate for the  quarter  ended  September  30, 1999 of 1.61 to 1. Ring's
lighting  division  sales  increased (in local  currency) in the 2000 period but
such  sales  were  made at  lower  margins.  Sales  for  Ring's  automotive  and
consumable  divisions  declined in 2000, as did such  divisions'  gross profits.
Ring's margin erosions are directly  related to the economic  factors  mentioned
previously.

Comparison of Fiscal Years Ended September 30, 1999 and 1998
------------------------------------------------------------

Consolidated Results

         Net sales and gross  profit  for 1999  were  $176.6  million  and $35.7
million,  respectively,  as  compared  to  $161.9  million  and  $31.1  million,
respectively,  for 1998. The Company  generated net income of $6.5 million ($.80
per share) in 1999 compared to $1.1 million  ($0.15 per share) in 1998. In 1999,
results from operations  benefited from the reversal of a $2.7 million provision
for a judgment  related to litigation  with a former  officer of the Company and
the reversal of an associated $893,000 provision for post judgment interest. The
reversal of these  non-recurring  items and related expenses  increased  diluted
earnings per share in 1999 by $.23.  Diluted  earnings per share, as adjusted to
exclude these  non-recurring  items and related expenses in both years, was $.57
in 1999 as compared to $.19 in 1998.

         The $14.7  million  increase in net sales from the prior year  reflects
higher unit sales to U.S. and Canadian  customers  attributable  to additions to
core programs,  promotional opportunities and new product placements. Lamp sales
increased by $13.6 million and net sales for the Company's  other principal line
of products,  lighting fixtures,  increased by $1.1 million.  Lamps and lighting
fixtures  accounted for 66% and 34% of net sales in 1999 compared to 63% and 37%
in 1998,  respectively.  In 1999 and 1998,  Home Depot  accounted  for 25.8% and
27.5%,  respectively,  of the  Company's net sales and Wal-Mart and an affiliate
accounted  for 14.5% and 5.3% of net sales in 1999 and 1998,  respectively.  For
the fiscal years ended  September 30, 1999 and 1998,  net sales to the Company's
ten largest customers represented  approximately 73% and 66%,  respectively,  of
the Company's net sales.  Approximately  75% of the Company's sales in 1999 were
made on a direct basis as compared to 67% in 1998.

         Gross profit  increased by $4.6 million in 1999 due to improved margins
earned on direct sales attributable to new product placement,  a more profitable
product mix and the increase in net sales. The gross profit percentage increased
from  19.2% in 1998 to  20.2%  in 1999.  The  improvement  in the  gross  profit
percentage  from 1998 to 1999 was  attributable  to the  increase  in net sales,
which lessened the effect on such percentage of purchasing and warehousing costs
as most of these costs are fixed, and improved margins on direct sales.

         Selling,  general and administrative expenses increased by $1.9 million
reflecting an increase in professional  and consulting fees ($657,000,  of which
approximately  $360,000 was related to the  implementation  of the Company's new
computer system),  an increase in bonuses due to executive  officers under their
employment  agreements  ($569,000  in the  aggregate),  an  increase in expenses
related to the Company's  operations in Mexico ($387,000) and an increase in the
provision for uncollectible accounts receivable in Mexico ($391,000).

         During  the  1997  fiscal  year the  Company  recorded  a $4.2  million
provision for an adverse jury verdict and judgment  arising from litigation with
a former  officer.  The  Company  subsequently  appealed  the jury  verdict  and
ultimately  settled  the  case in June  1999 for $1.5  million.  The  settlement
resulted in a reversal in 1999 of $2.7  million of the $4.2  million  previously
accrued and the reversal of $893,000 in interest  accrued since 1997 on the $4.2
million judgment.

         Interest expense decreased to $2.4 million in 1999 from $3.8 million in
1998 due to lower average  outstanding  borrowings and a lower average  interest
rate.

         Other income for 1999  consisted  primarily  of a $194,000  gain on the
sale of the Company's  Meridian  facility,  investment  income,  equity  income,
foreign currency gains and losses and other miscellaneous income.

         The effective  income tax rates for 1999 and 1998 were 31.2% and 24.9%,
respectively  and  reflect  the  impact of foreign  income,  which is taxed at a
significantly  lower rate than U.S.  income.  The  increase in the tax rate from
1998 to 1999 was due to higher  proportionate U.S. source income, which is taxed
at a higher rate than foreign source income. The Company's  effective income tax
rate is dependent  both on the total amount of pretax  income  generated and the
relative  distribution  of  such  total  income  between  domestic  and  foreign
operations.  Consequently,  the Company's  effective tax rate may vary in future
periods.  The Company's  effective  income tax rate reflects the anticipated tax
benefits  associated with the Company's 1999  restructuring of its international
operations.   Should  these  tax  benefits  not  materialize,  the  Company  may
experience an increase in its effective consolidated income tax rate.

                                    Page 18
<PAGE>
Results By Segment

Catalina Industries (United States)
-----------------------------------

         The segment  contribution  of  Catalina  Industries  increased  to $9.0
million in 1999 from $7.6 million in 1998, as this segment  increased its sales,
while reducing its interest expense.

         Net sales for Catalina Industries increased by $12.0 million in 1999 to
$135.3  million due to additions to core  programs,  new product  placements and
promotional opportunities,  most notably with Wal-Mart. Sales to Wal-Mart and an
affiliate  in 1999  increased  by $16.5  million  to $22.4  million.  Sales to a
significant  customer that went out of business in fiscal 1999 decreased from $9
million  in 1998 to $2.9  million  in 1999.  Catalina  Industries'  sales to its
largest  customer,  Home Depot,  were $40.4 million in 1999 and $40.8 million in
1998. Catalina  Industries' direct sales were 75% and 62% of total sales in 1999
and 1998, respectively.

         Catalina Industries' profitability and cash flow for 1999 allowed it to
lower its outstanding  borrowings from the parent,  reducing interest expense by
approximately $600,000.

Go-Gro (China)
--------------

         Go-Gro's  segment  contribution  rose to $6.6  million in 1999 from the
$1.9  million  generated  in 1998.  Go-Gro's  additional  pretax  income in 1999
relates in part to additional intercompany sales made by Go-Gro as a result of a
corporate  decision  made during 1998 to  discontinue  the business  practice of
allowing  Catalina  Industries  and Catalina  Canada to deal directly  with, and
purchase from, Chinese factories other than Go-Gro.  This purchasing change took
place in the latter  half of fiscal  1998.  As a result,  Go-Gro's  intercompany
sales rose from $90.0 million in 1998 to $117.4 million in 1999, resulting in an
increase in Go-Gro's  gross profit.  Go-Gro's  sales to third  parties  declined
slightly from $21.3 million in 1998 to $19.5 million in 1999. In addition to the
increase  in  intercompany  sales,  sales of  products  manufactured  by  Go-Gro
increased by $8 million  from 1998 to 1999 as well as the margin  earned on such
sales,  also  contributing to the increase in gross profit dollars and the gross
profit percent.  The margins Go-Gro earns on products it manufactures  typically
exceeds the margin earned on products purchased from other manufacturers.

LIQUIDITY AND CAPITAL RESOURCES

         The Company meets its short-term  liquidity needs through cash provided
by operations,  borrowings under various credit facilities with banks,  accounts
payable and the use of letters of credit from  customers  to fund certain of its
direct  import sales  activities.  Lease  obligations,  mortgage  notes,  bonds,
subordinated  debt and capital stock are additional  sources for the longer-term
liquidity and financing needs of the Company.

Cash Flows and Financial Condition
----------------------------------

         The Company's operating, investing and financing activities resulted in
a net decrease in cash and cash  equivalents  of $4.9 million from September 30,
1999 to September 30, 2000.

         The Company's  operating  activities  provided $8.1 million in net cash
for the year ended September 30, 2000.

         The Company used $4.9 million of the cash and cash  equivalents on hand
at September 30, 1999 and the net cash provided by operations for the year ended
September  30,  2000  for  capital  expenditures  and  to pay  down  outstanding
obligations. Capital expenditures for the period totaled almost $4.3 million, of
which $3.1 million related to the planned expansion of the Go-Gro  manufacturing
facility and Go-Gro equipment purchases. In addition to a $2.5 million scheduled
repayment  made in  March  2000,  the  Company  elected  to make a $5.1  million
prepayment in June and July 2000 on its convertible  subordinated notes and $1.3
million in common stock was  repurchased  under a stock  repurchase plan through
August 2000. The Company  financed the Ring acquisition with $30 million in term
loans and borrowings under its U.S. revolving credit facility.

         Management  estimates that net capital expenditures in fiscal 2001 will
approximate $5.2 million,  representing $2.2 million in additional  construction
costs and equipment for Go-Gro's manufacturing facilities,  and $3.0 million for
computer  software and  hardware,  equipment,  vehicles and other  miscellaneous
capital  additions.  These  capital  expenditures  will be  financed  by leasing
facilities with financial institutions and cash generated from operations.

         As  discussed  in the  following  paragraphs,  in July 2000 the Company
completed  a major  acquisition  and funded this  acquisition  with a new credit
facility.

                                    Page 19
<PAGE>
Acquisition and Credit Facilities
---------------------------------

         On July 5,  2000 the  Company  acquired  Ring Plc  ("Ring"),  a leading
supplier  of  lighting,   automotive   after-market   products  and   industrial
consumables in the United Kingdom.  The total  consideration for the acquisition
was  approximately  22.4 million Great British Pounds  ("GBP") or  approximately
U.S. $33.8 million.

         The Company entered into a five-year credit facility for  approximately
$75 million with a bank syndication group to finance the acquisition of Ring and
repay and terminate its existing U.S. credit facility and Ring's U.K.  facility.
The new facility consists of two term loans amounting to $15 million and the GBP
equivalent  of  U.S.  $15  million  (GBP  9.9  million),  respectively,  and two
facilities for revolving loans,  acceptances,  and trade and stand-by letters of
credit for the  Company's  ongoing  operations  in the U.S. and the U.K., of $20
million  and the  GBP  equivalent  of U.S.  $25  million  (approximately  GBP 17
million),  respectively.  Borrowings  under the facility bear interest,  payable
monthly,  at the Company's option of either the prime rate plus 1.75% (11.25% at
December 15, 2000) or the LIBOR rate plus a variable spread based upon earnings,
debt and interest  expense levels defined under the credit  agreement  (9.46% at
December 15, 2000).  Obligations under the facility are secured by substantially
all of the Company's U.S. and U.K. assets, including 100% of the common stock of
the Company's U.S.  subsidiaries and 65% of the stock of the Company's  Canadian
and first tier United Kingdom and Hong Kong subsidiaries. The agreement contains
covenants  requiring that the Company  maintain a minimum level of equity,  meet
certain debt to adjusted  earnings and fixed charge coverage ratios and limiting
capital expenditures.  Borrowings are subject to a borrowing base defined as the
aggregate of certain percentages of the Company's U.S. and U.K.  receivables and
inventory.  The  agreement  prohibits  the  payment of cash  dividends  or other
distribution on any shares of the Company's  common stock,  other than dividends
payable solely in shares of common stock,  unless  approval is obtained from the
lenders.  At  September  30,  2000,  $33.6  million  in net  assets of Ring were
restricted  under U.K. law and the credit  facility and could not be transferred
to the parent Company.  The Company pays a quarterly  commitment fee of .50% per
annum based on the unused portion of the revolving facilities.  At September 30,
2000, the Company had used $31.1 million under the revolving facilities and $6.2
million was available for additional borrowings under the borrowing base.

         The $75 million credit facility contains financial  covenants requiring
the  Company to  maintain a minimum  level of equity  and meet  certain  debt to
adjusted  earnings (i.e.  leverage) ratios and fixed charge coverage ratios on a
quarterly basis. As a result of the loss generated by Ring for the quarter ended
September  30,  2000  and  Ring's  acquisition  costs  and  purchase  accounting
adjustments  the Company did not initially  meet the leverage ratio at September
30, 2000. The $75 million  credit  facility was amended on December 22, 2000 and
the Company now meets the financial  covenants  for the quarter ended  September
30, 2000. However, as discussed further below, the Company does not expect to be
in compliance  with the financial  covenants for the quarter ending December 31,
2000  and  subsequent  quarters  unless a waiver  of the  covenants  or a second
amendment is obtained.

         The  Company's  credit  facilities,  U.K.  laws,  and U.S.  income  tax
considerations,  impact  the  flow of the  Company's  funds  between  its  major
subsidiaries.  The Hong Kong credit facility  prohibits the payment of dividends
without the consent of the bank and limits the amount of loans or advances  from
Go-Gro to other  Company  subsidiaries.  Any loan made or dividends  paid either
directly or indirectly by Go-Gro to the Company or its U.S.  subsidiaries  could
be considered by U.S.  taxing  authorities as a  repatriation  of foreign source
income  subject to taxation  in the U.S. at a higher rate than that  assessed in
Hong  Kong.  The net impact of such a funds  transfer  from  Go-Gro  could be an
increase in the Company's U.S.  income taxes payable and its effective tax rate.
The U.S./U.K.  credit facility prohibits loans to Go-Gro from either Ring or the
Company  other than  normal  intercompany  payables  arising  from  trade.  This
facility permits loans from the Company to Ring, but restricts the flow of funds
from Ring to the  Company  to  payments  constituting  dividends  or a return of
capital.  U.K.  laws also  restrict the amount of funds that may be  transferred
from Ring to the parent Company and other subsidiaries.

         The acquisition of Ring and the related new $75 million credit facility
have greatly  increased the Company's  outstanding  borrowings  and debt service
requirements  and also raised the  Company's  overall costs of  borrowings.  The
Company  expects to report a net loss for the quarter  ending  December 31, 2000
(See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -  Consolidated  Results - Outlook") and has begun  reducing  capital
expenditures,  eliminating discretionary expenses, and evaluating possible sales
of assets to improve its cash position. Any material need for cash above current
expectations  or a  significant  decline  in the  Company's  profitability  from
current expectations could require the Company to take further such actions with
respect   to   capital   expenditures,    cost-cutting,   incurring   additional
indebtedness,  or selling  assets,  any or all of which actions could reduce the
Company's liquidity and earnings and the scope of its competitive options. There
can be no assurance  that any of such  actions can be effected,  that they would
enable the Company to continue to satisfy its capital  requirements or that they
would be permitted  under the terms of the  Company's  various debt  instruments
then in effect.  Should the Company fail to meet the financial  covenants of its
amended $75 million  credit  facility,  the lenders would have the right to take
actions  that  could  further  adversely  impact  the  Company's  liquidity  and
earnings,  including  accelerating  the maturity of the debt,  in which case the
Company may not have sufficient  liquidity to meet its obligations.  As a result
of the Company's  operating  results for the fourth quarter of fiscal 2000, most
notably the pretax loss incurred by the Company's United Kingdom

                                    Page 20
<PAGE>
operations,  the  Company  initially  was  not in  compliance  with a  financial
covenant under its $75 million credit  facility for the quarter ended  September
30, 2000. The Company  obtained an amendment of the credit  facility on December
22, 2000 for the quarter ended  September 30, 2000 and is in compliance with the
financial  covenants under the amended facility.  However,  due to the sales and
profitability  declines  the  Company is  experiencing  for the  quarter  ending
December 31,  2000,  the Company  does not expect to be in  compliance  with the
financial  covenants of the $75 million  credit  facility for the quarter ending
December 31, 2000 and  subsequent  quarters  unless the  covenants are waived or
modified through another amendment of the facility.

         The Company is exploring  strategic  alternatives  including  potential
divestitures,  a merger,  a  recapitalization  or other actions.  The investment
banking firm of SunTrust Equitable Securities has been hired to assist with this
strategic   review  and  to  formulate   proposed  plans  and  actions  for  the
consideration of the Board of Directors.  Because SunTrust Equitable  Securities
is  currently  conducting  its  review and  formulation  of  proposed  plans and
actions,  no assessment  can be made of the  likelihood  that any such plans and
actions are  feasible or can be  effectively  implemented.  The Company does not
intend to provide information updating the status of this strategic review or of
any efforts to implement plans or actions that may be developed,  and a negative
or positive inference should not be drawn from the absence of any such updates.

         Regardless of the outcome of the strategic  review  discussed above the
Company  believes  that a waiver  covering  the  financial  covenants of the $75
million  credit  facility,  or a  second  amendment  of the $75  million  credit
facility,  will be  required  for the  quarter  ending  December  31,  2000  and
subsequent  quarters.  Without such waiver or second  amendment,  based upon the
Company's  current  expectations  there would be an event of default  under that
credit  facility  for the  quarter  ending  December  31,  2000.  A  default  or
subsequent  breaches of the  financial  covenants  under the $75 million  credit
facility could result in  acceleration of the Company's  indebtedness,  in which
case the debt would become  immediately due and payable.  Although no assurances
can be given,  the Company  believes it will be able to  successfully  negotiate
with its present  $75 million  credit bank  syndicate,  as is  necessary,  for a
waiver,  or  a  second  amendment,   so  as  to  preclude  acceleration  of  its
indebtedness  for  the  quarter  ending  December  31,  2000.  If  there  is  no
modification  or waiver of the  existing  financial  covenants  for the  quarter
ending  December  31, 2000,  the Company may not be able to  generate,  raise or
borrow  sufficient funds to repay its debt and/or to refinance its debt. Even if
new  funding is  available,  it may not be on terms that are  acceptable  to the
Company.

         Based upon the Company's  current  assessment of market  conditions for
its business,  the Company intends to negotiate for a waiver or second amendment
to the  financial  covenants of its $75 million  credit  facility that will also
cover quarters ending  subsequent to December 31, 2000. The Company's ability to
satisfy the financial  covenants in subsequent quarters will depend on the terms
of any such waiver or second  amendment,  business  conditions for the Company's
products  and any  results  from  the  strategic  review  described  above.  The
Company's  continuation  as a going  concern is  dependent  upon its  ability to
successfully  establish the necessary financing  arrangements and to comply with
the terms  thereof.  Although no assurances can be given,  the Company  believes
that it will be able to continue operating as a going concern.

         Ring has an  arrangement  with a U.K.  bank which is secured by standby
letters of credit issued under the GBP five-year revolving credit facility.  The
arrangement  provides  for  borrowings,  trade  letters  of credit  and  foreign
currency forward contracts and transactions.  Borrowings,  letters of credit and
foreign currency forward contracts  outstanding under this arrangement  amounted
to $3.2 million, $7.9 million and $9.4 million,  respectively,  at September 30,
2000.

         The Company's Canadian subsidiary has a credit facility with a Canadian
bank  which   provides  5.5  million   Canadian   dollars  or  U.S.   equivalent
(approximately  U.S. $3.7 million) in revolving  demand credit.  Canadian dollar
advances  bear  interest at the Canadian  prime rate plus .5% (8.0% at September
30, 2000) and U.S.  dollar  advances  bear interest at the U.S. base rate of the
bank  (10.0%  at  September  30,  2000).  The  credit  facility  is  secured  by
substantially  all of the  assets  of the  Company's  Canadian  subsidiary.  The
agreement  contains  certain  minimum  covenants  to  be  met  by  the  Canadian
subsidiary,  prohibits the payment of dividends, and limits advances by the bank
to a  borrowing  base  calculated  based  upon  receivables  and  inventory.  At
September  30,  2000,  $2.5  million  in net  assets of the  Company's  Canadian
subsidiary  were  restricted   under  the  credit  facility  and  could  not  be
transferred to the parent  Company.  This facility is payable upon demand and is
subject to an annual review by the bank.  The Company pays a monthly  commitment
fee of .25% based on the unused portion of the facility.  At September 30, 2000,
total  Canadian  and  U.S.  dollar  borrowings  amounted  to U.S.  $2.2  million
(included  in credit  lines)  and U.S.  $1.2  million  was  available  under the
borrowing base calculation.

         Go-Gro, the Company's Hong Kong subsidiary,  has a 35 million Hong Kong
dollars (approximately U.S. $4.5 million) credit facility with a Hong Kong bank.
The  facility  provides  credit in the form of  acceptances,  trade and stand-by
letters of credit, overdraft protection, and negotiation of discrepant documents
presented under export letters of credit issued by banks. Advances bear interest
at the Hong Kong  prime  rate  plus .25%  (9.75% at  September  30,  2000).  The
facility is secured by a guarantee  issued by the Company and requires Go-Gro to
maintain a minimum  level of equity.  This  agreement  prohibits  the payment of
dividends  without  the  consent  of the bank and  limits the amount of loans or
advances  from  Go-Gro to the  Company  at any time to 50% of  Go-Gro's  pre-tax
profits for the previous 12 months.  At September 30, 2000, $17.2 million in net
assets  of  Go-Gro  were  restricted  under  the  agreement  and  could  not  be
transferred to the parent Company. This facility is repayable

                                    Page 21
<PAGE>
upon demand and is subject to an annual  review by the bank.  At  September  30,
2000,  the  Company  had used $1.8  million  of this line for  letters of credit
(there were no borrowings) and U.S. $2.7 million was available. The availability
under this facility was increased to 60 million Hong Kong dollars (approximately
U.S. $7.7 million) in December 2000.

         The Company arranged for the issuance in 1995 of $10.5 million in State
of Mississippi  Variable Rate Industrial  Revenue  Development  Bonds to finance
(along with internally  generated cash flow and the Company's $1 million leasing
facility)  its  warehouse  located  near Tupelo,  Mississippi.  The bonds have a
stated  maturity of May 1, 2010 and require  mandatory  sinking fund  redemption
payments,  payable monthly, of $900,000 per year through 2002, $600,000 per year
in 2003 and  2004,  and  $500,000  per year from  2005 to 2010.  The bonds  bear
interest at a variable  rate (6.65% at September  30,  2000) that is  adjustable
weekly to the rate the  remarketing  agent for the bonds  deems to be the market
rate for such bonds. The bonds are secured by a lien on the land, building,  and
all other property financed by the bonds.  Additional  security is provided by a
$7.0  million  direct  pay letter of credit  which is not part of the  Company's
credit lines.  This direct pay letter of credit  provides that any default under
any other agreement  involving a material  borrowing or guarantee  constitutes a
default under the direct pay letter of credit. The unpaid balance of these bonds
was $6.0 million at September  30, 2000. In January  1999,  the Company  entered
into an  interest  rate swap  agreement  maturing  May 1,  2004,  to manage  its
exposure to interest rate  movements by  effectively  converting its debt from a
variable  interest  rate  to a  fixed  interest  rate of  5.52%.  Interest  rate
differentials paid or received under the agreement are recognized as adjustments
to interest expense.

         On June 30, 2000, the Company  prepaid $4.3 million of the $5.1 million
outstanding  balance on its 8% convertible  subordinated notes and the remaining
$733,000 was prepaid in July 2000. The $5.1 million balance was due in two equal
installments  on March 15, 2001 and March 15, 2002.  The Company had  previously
repaid $2.5 million of these notes in March 2000. The Company's 8%  subordinated
notes were  convertible  at the option of the holder into  common  shares of the
Company's  stock at a  conversion  price of $6.63 per share at any time prior to
maturity.

         The Company has a $1 million facility with a U.S. financial institution
to finance the purchase of equipment in the United States, of which $699,000 was
available at September 30, 2000. Ring has a GBP 1.5 million  (approximately U.S.
$2.2 million) facility with a U.K. financial institution to finance the purchase
of vehicles and equipment of which $960,000 was available at September 30, 2000.
This facility is renewed annually.

         The Company financed its corporate  headquarters in Miami, Florida with
a loan payable monthly through 2004, based on a 15-year  amortization  schedule,
with a balloon  payment in 2004. The loan bears interest at 8% and is secured by
a  mortgage  on the land and  building.  The  unpaid  balance  of this  loan was
$896,000 at September 30, 2000.

Capital Expenditures
--------------------

         Shenzhen   Jiadianbao   Electrical   Products  Co.,  Ltd.  ("SJE"),   a
cooperative joint venture  subsidiary of Go-Gro, and the Bureau of National Land
Planning  Bao-An  Branch of  Shenzhen  City  entered  into a Land Use  Agreement
covering  approximately  467,300  square feet in Bao-An  County,  Shenzhen City,
People's  Republic of China on April 11, 1995.  The agreement  provides SJE with
non-transferable rights to use this land until January 18, 2042. Under the terms
of the SJE joint venture  agreement,  ownership of the land and buildings of SJE
was divided 70% to Go-Gro and 30% to the other joint venture  partner  (Shenzhen
Baoanqu Fuda Industries Co., Ltd.  ("Fuda") a Chinese company) through September
2000. Land costs,  including the land use rights,  approximated  $2.6 million of
which Go-Gro has paid its 70%  proportionate  share of $1.8  million.  Under the
terms of this agreement, as amended, SJE is obligated to construct approximately
500,000 square feet of factory  buildings and 211,000 square feet of dormitories
and offices.  A 162,000  square foot factory,  77,000 square foot  warehouse and
60,000 square foot  dormitory  became fully  operational in June 1997. The total
cost for this project is  estimated  at $16 million (of which $13.3  million had
been  expended as of September 30, 2000) and includes  approximately  $1 million
for a Municipal  Coordination  Facilities Fee (MCFF). The MCFF is based upon the
square footage to be constructed. The agreement calls for the MCFF to be paid in
installments  beginning  in  January  1997 of which  $588,000  had been  paid or
accrued as of September 30, 2000. SJE began  construction  of the final phase of
this facility in December 1999 and the remainder of the construction is underway
to be completed in 2001. In September 2000, Go-Gro purchased Fuda's 30% interest
in SJE's land use rights and property for approximately $1 million.

Westinghouse License
--------------------

         On April 26, 1996,  the Company  entered into a license  agreement with
Westinghouse  Electric  Corporation  to market  and  distribute  a full range of
lighting  fixtures,  lamps and other lighting  products  under the  Westinghouse
brand name in  exchange  for  royalty  payments.  Subject to the  minimum  sales
conditions  discussed below, the agreement terminates on September 30, 2002 with
the Company having options to extend the agreement for two additional  five year
terms.  The royalty payments are due quarterly and are based on a percent of the
value of the Company's net shipments of Westinghouse  branded products,  subject
to annual minimum net shipments.  Commencing September 30, 2000 either party has
the right to  terminate  the  agreement if the Company does not meet the minimum
net  shipments of $25 million for fiscal  2000,  $40 million for fiscal 2001

                                    Page 22
<PAGE>
and $60 million for fiscal  2002.  Net sales of  Westinghouse  branded  products
amounted to $29 million and $20.5 million for 2000 and 1999, respectively.

NYSE Listing
------------

         On August 9, 1999 the NYSE notified the Company that it had changed its
rules regarding  continued listing for companies which have shares traded on the
NYSE.  The new rules changed and increased the  requirements  to maintain a NYSE
listing.  Through  September  30, 2000,  the Company did not meet the new rules,
which require a total market  capitalization  of $50 million and the maintenance
of minimum total stockholders' equity of $50 million. The Company's total market
capitalization  and  stockholders'  equity as of  September  30, 2000 were $25.3
million and $50.8 million,  respectively.  The Company  expects to report a loss
for the quarter  ending  December  31, 2000 (see  "Management's  Discussion  and
Analysis of Financial  Condition  and Results of  Operations - Outlook") and the
Company's  total market  capitalization  as of the close of business on December
26, 2000 was $14.7 million. As requested by the NYSE, the Company had previously
provided the NYSE with its plan to meet the new standards by February  2001. The
Company's  plan was  accepted by the NYSE in October  1999 and  continues  to be
monitored by the NYSE through the current quarter. However, no assurances can be
given that the objectives of the plan will be  accomplished by February 2001. If
the Company is ultimately unable to meet the new NYSE listing rules or obtain an
extension for its plan, the Company's  shares could be suspended from trading on
the NYSE,  however the Company  believes  other trading venues are available for
its stock.

Other Matters
-------------

         The  People's   Republic  of  China  currently  enjoys  normal  trading
relations  ("NTR").  In the context of United  States tariff  legislation,  such
treatment  means that  products are subject to  favorable  duty rates upon entry
into the United States.  The United States  annually  reconsiders the renewal of
NTR  trading  status for the PRC.  Members  of  Congress  and the "human  rights
community"   also  monitor  the  human  rights   issues  in  China  and  adverse
developments in human rights and other trade issues in China could affect U.S. -
China  relations.  As a result of  various  political  and  trade  disagreements
between the U.S.  Government  and China,  it is possible  restrictions  could be
placed on trade  with  China in the  future  which  could  adversely  impact the
Company's operations and financial position.

         During fiscal years 2000,  1999 and 1998 the Company  received a number
of  claims  relating  to  halogen  torchieres  sold by the  Company  to  various
retailers.  Management does not currently  believe these claims will result in a
material uninsured liability to the Company. The Company experienced an increase
in its liability  insurance premiums effective for the 1999 calendar year and is
required to  self-insure up to $10,000 per incident  occurring  after January 1,
1999.  Based upon its  experience,  the Company is  presently  accruing for this
self-insurance  provision and had accrued  $177,000 for this  contingency  as of
September  30,  2000.  Management  does not  believe  that  this  self-insurance
provision  will  have a  material  adverse  impact  on the  Company's  financial
position or annual  results of  operations.  However,  no assurance can be given
that the number of claims will not exceed  historical  experience or that claims
will not exceed available insurance coverage or that the Company will be able to
maintain the same level of insurance.

         The Company's Board of Directors has authorized the repurchase of up to
$2.7  million  of  common  shares of the  Company  from time to time in the open
market or in  negotiated  purchases.  At  December  15,  2000,  the  Company had
repurchased 641,932 shares for approximately $2.5 million.

         Ring has a  defined  benefit  pension  plan  which  covers  29  current
employees and over 1,000 other members  formerly  associated with Ring. The plan
is  administered  externally and the assets are held  separately by professional
investment managers. The plan is funded by contributions at rates recommended by
an actuary. The Company is reviewing the future of the plan and believes that in
the future it may begin the process of terminating the Company's liability under
the plan. It is anticipated  that a termination  will require  payment of a lump
sum equal to the "Minimum Funding  Requirement  ("MFR") shortfall.  The last MFR
valuation as of April 6, 2000 placed the MFR shortfall at $1.4 million.

         As of September 30, 2000, Ring had outstanding 9.5 million  convertible
preference shares of which 2.5 million shares were held by third parties and the
remaining  7 million  shares  were  owned by the  Company.  The  holders  of the
convertible  preference shares are entitled to receive in priority to the equity
shareholders  a fixed  cumulative  dividend of 19.2 % per annum until January 1,
2004. The shares are convertible into fully paid ordinary shares on the basis of
two ordinary shares for every five preference shares. Any outstanding preference
shares on January 1, 2004  automatically  will convert into fully paid  ordinary
shares on the same basis.

         Pursuant to a  reorganization  of the  Company's  executive  management
structure,  William D. Stewart, an Executive  Vice-President of the Company left
the employ of the Company in December 1999 to pursue other interests.  Under the
terms  of the  settlement  agreement,  Mr.  Stewart  will  continue  to  provide
consulting services under a three-year non-compete

                                    Page 23
<PAGE>
and consulting agreement. The Company has recorded a non-recurring pretax charge
of $788,000 during the quarter ended December 31, 1999 related to the settlement
of its contractual  employment obligation to Mr. Stewart and is obligated to pay
$250,000  annually  through  December 2002 under the  non-compete and consulting
agreement.

Impact of New Accounting Pronouncements

         Statement of Financial  Accounting  Standards No. 133,  "Accounting for
Derivative  Instruments and Hedging  Activities" ("SFAS 133") was issued in June
1998.  SFAS 133  establishes  standards  for the  accounting  and  reporting  of
derivative instruments embedded in other contracts  (collectively referred to as
derivatives) and of hedging  activities.  It requires that an entity  recognizes
all  derivatives  as  either  assets or  liabilities  in the  balance  sheet and
measures those instruments at fair value. This statement is effective for fiscal
years  beginning  after June 15, 2000. The Company adopted SFAS 133 in the first
quarter of fiscal 2001. Given the Company's  limited hedging  activities and the
Company's belief that such hedging activities are highly effective in accordance
with SFAS 133, the impact of the  transition  to SFAS 133 should not be material
to the Company's financial statements.

         In December 1999, the Securities and Exchange  Commission  issued Staff
Accounting  Bulletin No. 101 ("SAB 101") which summarizes certain of the staff's
view in applying generally accepted accounting principles to revenue recognition
in financial  statements.  The effective  date of SAB 101 for the Company is the
quarter ending September 30, 2001. The Company has evaluated the impact that SAB
101 will have on the  timing  of  revenue  recognition  in  future  periods  and
believes SAB 101 will not have a material  impact on its  financial  position or
results of operations.

Impact of Inflation and Economic Conditions

         Go-Gro has periodically experienced price increases in the costs of raw
materials,   which  reduced  Go-Gro's  profitability  due  to  an  inability  to
immediately pass on such price increases to its customers. Significant increases
in raw materials  prices could have an adverse impact on the Company's net sales
and income from continuing operations.


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

         The  Company is exposed to market  risk  related to changes in interest
rates and fluctuations in foreign currency exchange rates.

Interest Rate Risk
------------------

         Approximately  87% of the  Company's  debt  at  September  30,  2000 is
subject to variable  interest  rates.  The remainder of the  Company's  debt has
fixed  interest  rates.  The  Company's  fixed  interest  rate debt includes the
Company's bonds for the financing of its Tupelo  warehouse,  whose variable rate
has been fixed by means of an interest rate swap.  The carrying value and market
value of the  Company's  debt at September 30, 2000 were $60.3 million and $60.1
million,  respectively.  Based upon debt balances  outstanding  at September 30,
2000, a 100 basis point (i.e.  1%) addition to the  Company's  weighted  average
effective  interest  rate  would  increase  the  Company's  interest  expense by
approximately $524,000 on an annual basis.

Foreign Currency Risk
---------------------

         The Company maintains investments in subsidiaries in Canada, Mexico and
Chile and sells its products  into these  foreign  countries.  The Company sells
into Europe and maintains major capital investments in manufacturing  facilities
in  China  and  supporting   administrative  offices  in  Hong  Kong.  With  the
acquisition of Ring in July 2000, the Company has a major capital investment and
significant  operations in the United  Kingdom.  Due to the  significance of its
international sales and operations, the Company's business and operating results
are impacted by fluctuations in foreign  currency  exchange rates. If any of the
currencies of the foreign  countries in which it conducts  business  depreciated
against the U.S. dollar the Company could experience  significant changes in its
translations  of assets,  liabilities  and  transactions  denominated in foreign
currencies,  which could adversely impact the Company's  future earnings.  Large
fluctuations in currency  exchange rates could have a material adverse effect on
the  Company's  cost of goods  purchased (or  manufactured)  or on the Company's
selling  prices  thereby   harming  the  Company's   competitive   position  and
profitability.  The Company borrows in British pounds, Canadian dollars and Hong
Kong dollars and will increase or decrease these foreign  borrowings for various
business reasons  (including  anticipated  movements in foreign exchange rates).
Ring also enters into forward  contracts to exchange  Great  British  pounds for
various foreign  currencies.  These contracts are intended to hedge purchases of
inventory in currencies other than the GBP, and are entered into at the time the
goods are shipped to Ring.  The  Company  does not  otherwise  hedge its foreign
currency exposure. During the year ended September 30, 2000 the Company's pretax
income  reflected  foreign  currency gains or (losses) for its China,  Canadian,
Mexican and Chilean operations of ($214,000),  $49,000, ($38,000) and ($61,000),
respectively.  In addition,

                                    Page 24
<PAGE>
the Company's  stockholders'  equity at September 30, 2000 has been reduced by a
$461,000 foreign currency translation adjustment related to U.K. operations.

          Based upon the results of operations of each of the Company's  foreign
subsidiaries for the year ended September 30, 2000, and their financial position
at September 30, 2000, an assumed 10% depreciation in their  respective  foreign
currencies  against the U.S.  dollar  (i.e.  - in  addition  to actual  exchange
experience for 2000) would have resulted in the following  adjusted  amounts for
net  sales and  combined  translation/transaction  gains or losses  for 2000 (in
thousands, with a comparison to amounts reported for 2000):
<TABLE>
<CAPTION>
                                   Net Sales                             Gains (Losses)
                        ------------------------------           ------------------------------
                        As Reported          Adjusted            As Reported          Adjusted
                        -----------          --------            -----------          --------
<S>                       <C>                <C>                   <C>               <C>
China                     $141,356           $141,356              $ (214)           $ (2,503)
United Kingdom            $ 24,529           $ 22,076              $ (461)*          $ (1,370)*
Canada                    $ 25,150           $ 24,121              $   49            $    (70)
Mexico                    $  4,331           $  3,898              $  (38)           $   (354)
Chile                     $    337           $    302              $  (61)           $   (139)
</TABLE>

               The adjusted  amounts  above assume that each exchange rate would
change in the same  direction  relative to the U.S.  dollar.  In addition to the
direct  effects  of changes  in  exchange  rates  quantified  above,  changes in
exchange rates also affect the volume of sales or foreign  currency sales prices
as the Company's  products  become more or less affordable in the foreign market
and as competitors' products become more or less attractive.

* Reflected as an adjustment to stockholders' equity.

                                    Page 25
<PAGE>
ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                  --------------------------------------------
<TABLE>
<CAPTION>
                             Index to Consolidated Financial Statements and Financial Statements Schedules             Page

<S>                                                                                                                     <C>
Independent Auditors' Report.............................................................................................27

Consolidated Balance Sheets - September 30, 2000 and 1999................................................................28

Consolidated Statements of Operations - Years Ended September 30, 2000, 1999 and 1998....................................29

Consolidated Statements of Stockholders' Equity - Years Ended September 30, 2000,
                1999 and 1998............................................................................................30

Consolidated Statements of Cash Flows - Years Ended September 30, 2000, 1999 and 1998....................................31

Notes to Consolidated Financial Statements...............................................................................33

Schedule I - Condensed Financial Information.............................................................................64

Schedule II - Valuation and Qualifying Accounts - Years ended September 30, 2000, 1999 and 1998..........................68
</TABLE>

(All other  schedules  have been  omitted as the  related  information  has been
provided in the notes to consolidated financial statements or is not required or
applicable).

                                    Page 26
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------

Board of Directors and Stockholders
Catalina Lighting, Inc.
Miami, Florida

We have  audited  the  accompanying  consolidated  balance  sheets  of  Catalina
Lighting,  Inc. and its  subsidiaries as of September 30, 2000 and 1999, and the
related  consolidated  statements of operations,  stockholders'  equity and cash
flows for each of the three years in the period ended  September  30, 2000.  Our
audits also included the financial  statement  schedules  listed in Item 14a(2).
These   financial   statements  and  financial   statement   schedules  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on the financial  statements and financial  statement schedules 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 consolidated
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 Catalina  Lighting,  Inc. and its
subsidiaries  as of  September  30,  2000 and  1999,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
September 30, 2000 in conformity with accounting  principles  generally accepted
in the United States of America.  Also, in our opinion, such financial statement
schedules,  when  considered  in  relation to the basic  consolidated  financial
statements  taken  as a whole,  present  fairly  in all  material  respects  the
information set forth therein.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will  continue as a going  concern.  As discussed in Note 19 to
the consolidated financial statements,  at September 30, 2000, the Company would
not have been in compliance  with a certain  covenant of its $75 million  credit
facility  had the  lenders not amended  the  agreement.  Based on the  Company's
current  expectations,  the  Company  will not be able to  comply  with  certain
covenants of the amended agreement for the quarter ending December 31, 2000. The
Company is attempting to further  negotiate the terms of the amended $75 million
credit  facility  and  is  also  reviewing  other  strategic  alternatives.  The
Company's  difficulties  in meeting the credit facility  covenants  discussed in
Note 19 raise  substantial  doubt  about  its  ability  to  continue  as a going
concern.  Management's  plans in regard to these  matters are also  described in
Note 19. The  consolidated  financial  statements do not include any adjustments
that might result from the outcome of this uncertainty.



/s/ Deloitte & Touche LLP


Certified Public Accountants
Miami, Florida
December 26, 2000

                                    Page 27
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                         September 30,
                                                                                  -----------------------------
                                                                                   2000                  1999
                                                                                   ----                  ----
                                ASSETS                                                    (In thousands)
<S>                                                                               <C>                   <C>
Current assets
             Cash and cash equivalents                                            $ 2,309               $ 7,253
             Restricted cash equivalents and short-term investments                   727                 1,721
             Accounts receivable, net of allowances
                 of $12,475,000 and $8,591,000, respectively                       36,632                20,150
             Inventories                                                           52,780                28,668
             Income taxes receivable                                                    -                 1,049
             Deferred tax asset                                                     2,190                 2,247
             Other current assets                                                   5,153                 3,139
                                                                                ---------             ---------
                              Total current assets                                 99,791                64,227

Property and equipment, net                                                        29,932                24,431

Goodwill, net                                                                      30,663                10,561
Other assets                                                                        7,585                 2,678
                                                                                ---------             ---------
                                                                                $ 167,971             $ 101,897
                                                                                =========             =========

                 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
             Credit lines                                                        $ 22,786               $ 2,200
             Term loans                                                            28,415                     -
             Current maturities of subordinated notes                                   -                 2,500
             Accounts and letters of credit payable                                36,310                14,939
             Current maturities of bonds payable-real estate related                  900                 2,210
             Current maturities of other long-term debt                             1,339                   487
             Income taxes payable                                                   2,678                     -
             Accrued employee compensation and benefits                             2,429                 2,718
             Other current liabilities                                             10,540                 3,719
                                                                                ---------             ---------
                              Total current liabilities                           105,397                28,773

Credit lines                                                                            -                12,150
Convertible subordinated notes                                                          -                 5,100
Bonds payable - real estate related                                                 5,100                 6,000
Other long-term debt                                                                1,788                 1,524
Other liabilities                                                                   3,782                   293
                                                                                ---------             ---------
                              Total liabilities                                   116,067                53,840
                                                                                ---------             ---------

Minority interest                                                                   1,075                     -
Commitments and contingencies

Stockholders' equity
             Preferred stock, $.01 par value
                 authorized 1,000,000 shares; none issued                               -                     -
             Common stock, $.01 par value
                 authorized 20,000,000 shares; issued and outstanding
                 7,999,812 shares and 7,373,013 shares, respectively                   80                    74
             Additional paid-in capital                                            28,560                26,927
             Retained earnings                                                     25,111                22,266
             Accumulated other comprehensive loss                                    (461)                    -
             Treasury stock, 641,932 and 378,200 shares, respectively              (2,461)               (1,210)
                                                                                ---------             ---------
                              Total stockholders' equity                           50,829                48,057
                                                                                ---------             ---------
                                                                                $ 167,971             $ 101,897
                                                                                =========             =========


</TABLE>
See accompanying notes to consolidated financial statements.

                                    Page 28
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)
<TABLE>
<CAPTION>
                                                                           Years Ended September 30,
                                                       ------------------------------------------------------
                                                             2000               1999              1998
                                                       -----------------   ---------------  -----------------
<S>                                                     <C>                 <C>               <C>
Net sales                                               $       202,630     $     176,561     $      161,860

Cost of sales                                                   164,216           140,906            130,763
                                                       -----------------   ---------------  -----------------
Gross profit                                                     38,414            35,655             31,097

Selling, general and administrative expenses                     30,817            28,554             26,513
Litigation settlement                                                 -            (2,728)                 -
Restructuring charge                                                500                 -                  -
Executive management reorganization                                 788                 -                  -
                                                       -----------------   ---------------  -----------------
Operating income                                                  6,309             9,829              4,584
                                                       -----------------   ---------------  -----------------

Other income (expenses)
      Interest expense                                           (2,832)           (2,413)            (3,801)
      Reversal of post judgment interest related to
        litigation settlement                                         -               893                  -
      Other income                                                  442             1,118                684
                                                       -----------------   ---------------  -----------------
Total other expenses                                             (2,390)             (402)            (3,117)
                                                       -----------------   ---------------  -----------------

Income before income taxes                                        3,919             9,427              1,467

Income tax provision                                             (1,074)           (2,938)              (365)
                                                       -----------------   ---------------  -----------------
Net income                                              $         2,845     $       6,489    $         1,102
                                                       =================   ===============  =================

Earnings per share
   Basic
   Earnings per share                                   $          0.40     $        0.92    $          0.15
   Weighted average number of shares                              7,074             7,055              7,128

   Diluted
   Earnings per share                                   $          0.37     $        0.80    $          0.15
   Weighted average number of shares                              8,419             8,688              7,477
</TABLE>
See accompanying notes to consolidated financial statements.

                                    Page 29
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                                            Accumulated
                                               Common Stock       Additional                   Other
                                           -------------------     Paid-in      Retained    Comprehensive
                                           Shares       Amount     Capital      Earnings    Income (Loss)
                                           ------       ------     -------      --------    -------------

<S>                                       <C>            <C>      <C>            <C>           <C>
Balance at September 30, 1997             7,094,569      $ 71     $ 26,311       $14,675       $    -

Exercise of stock options                    80,100         1          222             -            -
Stock options issued under sales agreement        -         -           68             -            -
Cancellation of stock options issued
   under sales agreement                          -         -         (126)            -            -
Net income                                        -         -            -         1,102            -
                                          ---------      ----     --------       -------       ------
Balance at September 30, 1998             7,174,669        72       26,475        15,777            -

Exercise of stock options                   185,898         2          402             -            -
Common stock issued to outside directors     12,446         -           50             -            -
Repurchase of common stock                                  -            -             -            -
Net income                                        -         -            -         6,489            -
                                          ---------      ----     --------       -------       ------
Balance at September 30, 1999             7,373,013        74       26,927        22,266            -

Exercise of stock options                   616,767         6        1,605             -            -
Common stock issued to outside directors     10,032         -           28             -            -
Repurchase of common stock                        -         -            -             -
Comprehensive income:
    Foreign currency translation loss             -         -            -                       (461)
    Net income                                    -         -            -         2,845            -
Total comprehensive income                        -         -            -             -            -
                                          ---------      ----     --------       -------       ------
Balance at September 30, 2000             7,999,812      $ 80     $ 28,560       $25,111       $ (461)
                                          =========      ====     ========       =======       ======

<CAPTION>
                                                  Treasury Stock               Total
                                              ---------------------        Stockholders'
                                              Shares         Amount           Equity
                                              ------         ------           ------

Balance at September 30, 1997                       -       $     -          $ 41,057

Exercise of stock options                           -             -               223
Stock options issued under sales agreement          -             -                68
Cancellation of stock options issued
   under sales agreement                            -             -              (126)
Net income                                          -             -             1,102
                                             --------       -------          --------
Balance at September 30, 1998                       -             -            42,324

Exercise of stock options                           -             -               404
Common stock issued to outside directors            -             -                50
Repurchase of common stock                   (378,200)       (1,210)           (1,210)
Net income                                          -             -             6,489
                                             --------       -------          --------
Balance at September 30, 1999                (378,200)       (1,210)           48,057

Exercise of stock options                           -             -             1,611
Common stock issued to outside directors            -             -                28
Repurchase of common stock                   (263,732)       (1,251)           (1,251)
Comprehensive income:
    Foreign currency translation loss               -             -                 -
    Net income                                      -             -                 -
Total comprehensive income                          -             -             2,384
                                             --------       -------          --------
Balance at September 30, 2000                (641,932)      $(2,461)         $ 50,829
                                             ========       =======          ========
</TABLE>
  See accompanying notes to consolidated financial statements.

                                    Page 30
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                               Years Ended September 30,
                                                                                   -------------------------------------------
                                                                                       2000           1999           1998
                                                                                   -------------   ------------   ------------
<S>                                                                                   <C>           <C>             <C>
Cash flows from operating activities:
  Net income                                                                            $ 2,845         $6,489         $1,102
                                                                                   -------------   ------------   ------------

     Adjustments  to  reconcile  net  income to net cash  provided  by (used in)
       operating activities:
         Exchange (gain) loss                                                                43            308             16
         Depreciation and amortization                                                    6,132          5,392          5,479
         Deferred income taxes                                                            (463)          1,951            705
         Loss (gain) on disposition of property and equipment                                 7           (175)            38
         Other                                                                              (53)             -              -
         Change in assets and liabilities, net of effect of
           acquisition:
            Decrease (increase) in accounts receivable                                    1,551         (1,493)         5,374
            Decrease (increase) in inventories                                           (2,851)          (421)         6,128
            Decrease (increase) in income taxes receivable                                3,780              -          2,818
            Decrease (increase) in other current assets                                    (757)          (163)          (769)
            Decrease (increase) in other assets                                          (1,486)          (342)          (144)
            Increase (decrease) in income taxes payable                                       -         (1,487)             -
            Increase (decrease) in accrued litigation judgment under appeal                   -         (4,909)           423
            Increase (decrease) in accounts and letters of credit payable, accrued
              employee compensation and benefits and other liabilities                     (676)         3,511         (5,774)
                                                                                   -------------   ------------   ------------
        Total adjustments                                                                 5,227          2,172         14,294
                                                                                   -------------   ------------   ------------
        Net cash provided by operating activities                                         8,072          8,661         15,396
                                                                                   -------------   ------------   ------------

Cash flows from investing activities:
    Capital expenditures, net                                                            (4,295)        (1,699)        (1,958)
    Proceeds from sale of property                                                           39            997              -
    Payment for Ring acquisition, net of cash acquired                                  (33,351)             -              -
    Decrease (increase) in restricted cash equivalents and
       short-term investments                                                             1,872            986            954
                                                                                   -------------   ------------   ------------
       Net cash provided by (used in) investing activities                              (35,735)           284         (1,004)
                                                                                   -------------   ------------   ------------
</TABLE>

(Continued on page 32)
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                                 Years Ended September 30,
                                                                                    --------------------------------------------
                                                                                        2000           1999            1998
                                                                                    -------------   ------------    ------------
<S>                                                                                       <C>            <C>             <C>
Cash flows from financing activities:
      Proceeds from term loans                                                            30,000              -               -
      Payments on term loans                                                              (1,244)             -               -
      Proceeds from credit lines                                                          46,955         35,972          32,900
      Payments on credit lines                                                           (42,109)       (35,550)        (45,546)
      Payments on convertible subordinated notes                                          (7,600)             -               -
      Sinking fund redemption payments on bonds                                             (878)          (900)           (878)
      Payments on other long-term debt                                                      (753)          (737)           (692)
      Payments on bonds payable- real estate related                                      (2,210)          (980)           (975)
      Payments to repurchase common stock                                                 (1,251)        (1,210)              -
      Proceeds from issuance of common stock and
        related income tax benefit                                                         1,611            404             223
                                                                                    -------------   ------------    ------------
     Net cash provided by (used in) financing activities                                  22,521         (3,001)        (14,968)
                                                                                    -------------   ------------    ------------

Effect of exchange rate changes on cash                                                      198           (481)            519
Net increase (decrease) in cash and cash equivalents                                      (4,944)         5,463             (57)
Cash and cash equivalents at beginning of year                                             7,253          1,790           1,847
                                                                                    -------------   ------------    ------------
Cash and cash equivalents at end of year                                                  $2,309         $7,253          $1,790
                                                                                    =============   ============    ============
</TABLE>

                       Supplemental Cash Flow Information


                                                  Years Ended September 30,
                                 ----------------------------------------------
                                     2000            1999             1998
                                 -------------    ------------    -------------
Cash paid (refunded) for:
  Interest                            $ 2,771          $2,304           $3,435
                                 =============    ============    =============
  Income taxes                         $ (584)         $2,439          $(3,210)
                                 =============    ============    =============

On July 5, 2000, the Company acquired Ring as follows:


Fair value of assets acquired, net
  of cash and cash equivalents                           $70,001
Liabilities assumed                                      (36,650)
                                                   --------------
Net cash payment made                                    $33,351
                                                   ==============

During the years ended September 30, 2000 and 1999, the Company issued 1,672 and
1,778 common shares to each of its outside  directors as compensation  for their
services. The aggregate market value of the stock issued was $28,000 and $50,000
for 2000 and 1999, respectively.

 During  the  years  ended  September  30,  2000,  1999 and 1998  capital  lease
 obligations  aggregating   approximately  $427,000,   $102,000,  and  $438,000,
 respectively,  were  incurred  when the  Company  entered  into  leases for new
 office, computer, machinery and warehouse equipment.

 See accompanying notes to consolidated financial statements.

                                    Page 32
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  Years Ended September 30, 2000, 1999 and 1998

 1.      Summary of Significant Accounting Policies and Nature of Operations

 (a)     The Business

 Catalina Lighting,  Inc. ("the Company") is a United  States-based  wholesaler,
 distributor and  manufacturer of lamps,  lighting  fixtures and other products.
 The Company sells  principally  in the U.S. and the United Kingdom to a variety
 of retailers including home centers,  national retail chains, office superstore
 chains,  mass  merchandisers,  warehouse clubs,  discount department stores and
 hardware  stores.  The  Company  also  sells  its  products  in other  European
 countries, Canada, Mexico and other foreign markets.

(b)      Going Concern

 The accompanying consolidated financial statements for the year ended September
 30, 2000 have been prepared on a going concern basis,  which  contemplates  the
 realization of assets and the  satisfaction of liabilities in the normal course
 of business. As described in Note 19, management believes that the Company will
 not comply with the financial  covenants of its $75 million credit facility for
 quarters  subsequent  to September 30, 2000 unless a waiver of the covenants or
 an  amendment  to the  facility  modifying  the  covenants  is  obtained.  This
 uncertainty  may  indicate  that the  Company  may not be able to continue as a
 going concern.

 The Company's  continuation as a going concern is dependent upon its ability to
 comply with the terms and covenants of its $75 million  credit  facility and to
 obtain additional  financing or refinancing as may be required.  The Company is
 attempting to renegotiate the terms and financial  covenants of its $75 million
 credit facility and is also reviewing other strategic alternatives.

 (c)     Principles of Consolidation

 The consolidated  financial  statements include the accounts of the Company and
 its wholly-owned subsidiaries.  The consolidated statements include the results
 of the wholly-owned  subsidiaries  Catalina  Industries,  Inc.,  Go-Gro Limited
 ("Go-Gro"),  Ring Limited  ("Ring"),  a  subsidiary  purchased on July 5, 2000,
 Catalina  Canada,  Catalina  Mexico and other  wholly-owned  subsidiaries.  All
 significant  intercompany  accounts and  transactions  have been  eliminated in
 consolidation.

 (d)     Use of Estimates

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

(e)      Geographic Risks

 Substantially all of the Company's products are obtained from suppliers located
 in China.  Any inability by the Company to continue to obtain its products from
 China could significantly  disrupt the Company's business.  In addition, in the
 Company's  consolidated  balance  sheet at September 30, 2000 are net assets of
 $17.4  million  of  Company  subsidiaries  located  in China and Hong  Kong,  a
 sovereign  territory  of China.  With  respect  to these  assets,  the  Company
 maintains $14.4 million in noncancelable political risk insurance.

 (f)     Cash and Cash Equivalents

 Cash on hand and in banks,  money market funds and other short-term  securities
 with  maturities of three months or less when purchased are considered cash and
 cash equivalents.

 (g)     Accounts Receivable

  Pursuant  to an  agreement  between  the  Company  and  a  bank,  the  Company
  transferred  to the bank the credit risk of certain of its U.S.  and  Canadian
  receivables for a fee equal to .50 percent of billings to customers covered by
  the arrangement.  The Company  terminated the arrangement  related to its U.S.
  receivables  effective October 1, 2000. Ring has a similar arrangement related
  to its  receivables  for a fee equal to .085  percent of U.K.  billing and .57
  percent of non-U.K. billing. Gross accounts receivable secured

                                    Page 33
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)


 1.      Summary of Significant Accounting Policies and Nature of Operations
         (continued)

 under such  agreements at September 30, 2000 and 1999 amounted to $20.6 million
 (U.S.  receivables  were $5.3  million)  and $10.5  million,  respectively.  In
 addition, certain of the Company's sales are made to customers who pay pursuant
 to their own international,  irrevocable, transferable letters of credit. Gross
 accounts receivable secured by such letters of credit at September 30, 2000 and
 1999 amounted to $7.0 million and $12.4 million, respectively.

 The Company  provides  allowances  against  accounts  receivable  for  doubtful
 accounts, sales returns and sales incentives.

 (h)     Inventories

 Inventories are stated at the lower of cost or market. Cost is determined using
 the first-in, first-out (FIFO) method.

  (i)     Property and Equipment

 Property and equipment are stated at cost, less  accumulated  depreciation  and
 amortization.  Interest  expense incurred for the construction of facilities is
 capitalized  until such facilities are ready for use.  Depreciation is computed
 using the  straight-line  method over the estimated useful lives of the related
 assets.   Amortization   of  leasehold   improvements  is  computed  using  the
 straight-line  method  over the shorter of the lease term or  estimated  useful
 lives of the related assets.

 (j)     Restricted Cash Equivalents and Short-Term Investments

 The  Company's  restricted  cash  equivalents  and short  term  investments  at
 September 30, 2000 represented sinking fund payments on bonds issued to finance
 the Company's U.S.  warehouse and investment income earned on such payments and
 $350,000  held  in  escrow  in  Mexico  pursuant  to the  resolution  of  legal
 proceedings.   Restricted  cash  equivalents  and  short  term  investments  at
 September 30, 1999 represented the sinking fund payments on the bonds issued to
 finance the Company's U.S.  warehouse and  investment  income earned and a $1.4
 million escrow  payment made on the bonds which  financed the Company's  former
 Meridian facility.

 (k)     Goodwill

 Goodwill  represents the excess of cost over fair value of net assets  acquired
 and is being  amortized  on a  straight-line  basis over periods from twenty to
 forty years. The Company periodically  evaluates the recoverability of recorded
 costs for goodwill  based upon  estimations  of future  undiscounted  operating
 income from the related  acquired  companies.  Should the Company  determine it
 probable that future  estimated  undiscounted  operating income from any of its
 acquired  companies  will be less than the  carrying  amount of the  associated
 goodwill, an impairment of goodwill would be recognized,  and goodwill would be
 reduced to the amount estimated to be recoverable.  Accumulated amortization of
 goodwill  amounted to $3.6 million and $2.9  million at September  30, 2000 and
 1999, respectively.

 (l)     Capital Leases

 Leases that transfer  substantially  all of the benefits and risks of ownership
 to the Company are accounted for as the acquisition of assets and assumption of
 obligations   under  the  capital  lease  standards  issued  by  the  Financial
 Accounting Standards Board. Accordingly, capitalized leased assets are recorded
 as property and equipment and the present  values of the minimum lease payments
 are  recorded  as  capital  lease   obligations  under  other  long-term  debt.
 Depreciation of such assets is computed using the shorter of the lease terms or
 estimated useful lives of the assets and is included in depreciation expense.

 (m)      Income Taxes

 The  Company  and its  wholly-owned  domestic  subsidiaries  file  consolidated
 federal  and state tax  returns  in the United  States.  Separate  foreign  tax
 returns  are filed for the  Company's  Hong Kong,  Canadian,  U.K.  and Mexican
 subsidiaries  and  China  joint  venture.  The  Company  follows  the asset and
 liability  method of  accounting  for income taxes  prescribed  by Statement of
 Financial Accounting Standards No. 109 "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

                                    Page 34
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)


 1.      Summary of Significant Accounting Policies and Nature of Operations
        (continued)

 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 year  that
 includes the enactment date.

 (n)     Earnings Per Share

 The  Company  adopted  Statement  of  Financial  Accounting  Standards  No. 128
 "Earnings  per Share"  ("SFAS 128") during  fiscal 1998.  SFAS 128 requires the
 presentation of "basic" earnings per share and "diluted"  earnings per share on
 the face of the statement of  operations.  Basic earnings per share is computed
 by  dividing  net income or loss  attributable  to common  shareholders  by the
 weighted average number of common shares  outstanding  during the year. Diluted
 earnings  per  share  reflects  the  potential  dilution  that  could  occur if
 securities or other contracts to issue common stock were exercised or converted
 into common  stock or resulted in the issuance of common stock that then shared
 in the earnings of the entity.

  (o)    Foreign Currency Translation

 The accounts of the Company's  foreign  subsidiaries  are translated  into U.S.
 dollars in accordance with Statement of Financial  Accounting Standards No. 52,
 "Foreign Currency Translation".  For subsidiaries where the functional currency
 is the U.S.  dollar,  monetary  balance  sheet  accounts are  translated at the
 current exchange rate and nonmonetary  balance sheet accounts are translated at
 historical  exchange rates.  Income and expense  accounts are translated at the
 average  exchange rates in effect during the year.  Adjustments  resulting from
 the translation of these entities are included in net income.  For subsidiaries
 where the functional  currency is other than the U.S. dollar, all balance sheet
 accounts  are  translated  at the  current  exchange  rate.  Income and expense
 accounts are  translated  at the average  exchange  rates in effect  during the
 year. Resulting  translation  adjustments are reflected as a separate component
 of stockholders' equity ("other comprehensive income (loss)"). Foreign currency
 transaction gains and losses are included in consolidated net income.

 (p)     Stock-Based Compensation

 The Company  adopted  Statement  of  Financial  Accounting  Standards  No. 123,
 "Accounting  for  Stock-Based  Compensation"  ("SFAS 123"),  in fiscal 1997. As
 permitted by SFAS 123, the Company continues to measure  compensation  costs in
 accordance with  Accounting  Principles  Board Opinion No. 25,  "Accounting for
 Stock Issued to  Employees,"  but provides pro forma  disclosures of net income
 and earnings per share as if the fair value method (as defined in SFAS 123) had
 been applied.

 (q)     Long-Lived Assets

 The Company  reviews its long-lived  assets for impairment  whenever  events or
 changes in  circumstances  indicate that the carrying value of an asset may not
 be  recoverable.  In  performing  the review  for  recoverability  the  Company
 estimates  the future  cash flows  expected to result from the use of the asset
 and its eventual  disposition.  If the sum of the expected future cash flows is
 less than the carrying amount of the assets, an impairment loss is recognized.

  (r)    Comprehensive Income (loss)

  Effective  October  1,  1998,  the  Company  adopted  Statement  of  Financial
  Accounting  Standards No. 130 "Reporting  Comprehensive  Income ("SFAS 130"),"
  which establishes  standards for reporting and display of comprehensive income
  and its  components.  For the year ended  September  30,  2000,  comprehensive
  income included a $461,000  foreign  currency  translation loss related to the
  Company's  United  Kingdom  operations.   The  Company's  investment  in  such
  operations is permanent in nature and  consequently  no adjustment  for income
  taxes was made.  The  Company's  net income for the years ended  September 30,
  1999 and 1998 equals comprehensive income for the same periods.

  (s)    Disclosures About Segments and Related Information

  Effective  October 1, 1998,  the Company  adopted  SFAS No. 131,  "Disclosures
  about Segments of an Enterprise and Related  Information,"  which  establishes
  standards for the way that public companies report selected  information about
  operating  segments in financial  statements and requires that those companies
  report selected information about segments in interim and annual financial

                                    Page 35
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)


  1.       Summary of Significant Accounting Policies and Nature of Operations
           (continued)

  reports  issued to  shareholders.  It also  establishes  standards for related
  disclosures   about  products  and  services,   geographic  areas,  and  major
  customers.  SFAS No. 131, which supersedes SFAS No. 14,  "Financial  Reporting
  for Segments of a Business Enterprise",  but retains the requirement to report
  information  about major  customers,  requires  that a public  company  report
  financial and descriptive information about its reportable operating segments.
  Operating  segments  are  components  of an  enterprise  about which  separate
  financial  information is available  that is evaluated  regularly by the chief
  operating  decision-maker  in  deciding  how  to  allocate  resources  and  in
  assessing  performance.  Generally,  financial  information  is required to be
  reported  on the  basis  that it is used  internally  for  evaluating  segment
  performance and deciding how to allocate  resources to segments.  SFAS No. 131
  requires  that a public  company  report a measure of segment  profit or loss,
  certain specific revenue and expense items, and segment assets.  However, SFAS
  No. 131 does not require the reporting of information that is not prepared for
  internal  use if  reporting  it would  be  impracticable.  SFAS  No.  131 also
  requires that a public company report  descriptive  information  about the way
  that the  operating  segments  were  determined,  the  products  and  services
  provided by the operating segments,  differences between the measurements used
  in  reporting   segment   information  and  those  used  in  the  enterprise's
  general-purpose  financial  statements,  and  changes  in the  measurement  of
  segment  amounts from period to period.  Upon adoption,  information for prior
  years is required to be  restated.  Information  presented in Note 15 has been
  restated to comply with SFAS 131.

  (t)      Impact of Recently Issued Accounting Standards

  Statement  of  Financial   Accounting   Standards  No.  133,  "Accounting  for
  Derivative Instruments and Hedging Activities" ("SFAS 133") was issued in June
  1998.  SFAS 133  establishes  standards  for the  accounting  and reporting of
  derivative  instruments embedded in other contracts  (collectively referred to
  as  derivatives)  and of  hedging  activities.  It  requires  that  an  entity
  recognizes  all  derivatives  as either assets or  liabilities  in the balance
  sheet  and  measures  those  instruments  at fair  value.  This  statement  is
  effective for fiscal years  beginning after June 15, 2000. The Company adopted
  SFAS 133 in the first  quarter of fiscal  2001.  Given the  Company's  limited
  hedging  activities  and its belief that such  hedging  activities  are highly
  effective in accordance with SFAS 133, the Company believes that the impact of
  the transition to SFAS 133 will not be material to its financial statements.

  In  December  1999,  the  Securities  and  Exchange  Commission  issued  Staff
  Accounting  Bulletin  No.  101 ("SAB  101")  which  summarizes  certain of the
  staff's view in applying generally accepted  accounting  principles to revenue
  recognition  in financial  statements.  The effective  date of SAB 101 for the
  Company is the quarter  ending  September 30, 2001.  The Company has evaluated
  the  impact  that SAB 101 will have on the timing of  revenue  recognition  in
  future  periods and  believes  SAB 101 will not have a material  impact on its
  financial position or results of operations.

  (u)      Reclassifications

  Certain amounts presented in the financial statements of prior years have been
  reclassified to conform to the current year presentation.

  2.       Acquisition

  On July 5, 2000 the Company  acquired all of the  outstanding  ordinary shares
  and 74% of the convertible  preference shares of Ring Plc ("Ring").  Ring is a
  leading supplier of lighting,  automotive  aftermarket products and industrial
  consumables  in the  United  Kingdom.  The  acquisition,  recorded  under  the
  purchase method of accounting,  included the purchase of 39.6 million ordinary
  shares at 50 pence per share  (approximately  U.S. $30.1  million),  7 million
  convertible  preference shares at 20 pence per share  (approximately U.S. $2.1
  million) plus  acquisition  costs,  resulted in a total purchase price of U.S.
  $33.8  million.  A portion of the purchase  price has been allocated to assets
  acquired and  liabilities  assumed based on estimated fair market value at the
  date of  acquisition.  The excess of the  purchase  price over the fair market
  value of Ring's  tangible  assets  was $21.3  million.  This  amount  has been
  allocated to goodwill on a preliminary  basis while the Company  obtains final
  information  regarding  the fair  value of  assets  acquired  and  liabilities
  assumed.  The  goodwill is being  amortized  over 20 years on a  straight-line
  basis.  Although  the  allocation  and  amortization  period  are  subject  to
  adjustment,  the  Company  does not expect that such  adjustments  will have a
  material  effect  on the  consolidated  financial  statements.  The  following
  summary,  prepared on a proforma basis,  presents the consolidated  results of
  operations  of the Company as if Ring had been acquired as of the beginning of
  the fiscal years presented,

                                    Page 36
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)


  2.       Acquisition (continued)

  after  including  the  impact  of  certain   adjustments,   such  as  (1)  the
  amortization of goodwill, (2) the increase in interest expense from additional
  borrowings  to fund the  acquisition  and the  increase in  interest  rates on
  borrowings  under  the  new  U.K.  and  U.S.  revolving  facilities,  (3)  the
  amortization of fees related to the new credit facilities, (4) the elimination
  of inter-company sales and profits, and (5) the related income tax effects.

                                           Years Ended September 30,
                                    -------------------------------------
                                      (Unaudited)            (Unaudited)
                                         2000                   1999
                                    --------------         --------------
                                    (In thousands, except per share data)
  Net sales                           $ 287,245              $ 285,682
  Net income                          $   1,686              $   6,276

  Earnings per share
    Basic                             $    0.24              $    0.89
    Diluted                           $    0.22              $    0.77

  The above pro forma  financial  information  is  presented  for  informational
  purposes only and is not necessarily  indicative of the operating results that
  would have occurred had the acquisition  been  consummated as of the beginning
  of the years presented, nor is it indicative of future operating results.

  3.       Inventories

  Inventories consisted of the following:


                                  September 30,
                      ----------------------------------
                             2000               1999
                      ----------------    --------------
                                 (In thousands)
Raw materials                 $ 6,700           $ 4,050
Work-in-progress                1,159               932
Finished goods                 44,921            23,686
                      ----------------    --------------

                             $ 52,780          $ 28,668
                      ================    ==============


  The Company capitalizes  certain costs in finished goods inventory  associated
  with acquiring,  storing and preparing inventory for distribution.  Such costs
  aggregated  approximately $9.3 million,  $8.8 million and $8.2 million for the
  years ended  September 30, 2000,  1999 and 1998,  respectively,  of which $1.6
  million and $2.2 million remained in inventory at September 30, 2000 and 1999,
  respectively.

  Inventory  allowances  amounted to $3.4  million and $2.3 million at September
  30, 2000 and 1999, respectively.

                                    Page 37
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)


4.       Property and Equipment

Property and equipment and related depreciable lives were as follows:
<TABLE>
<CAPTION>
                                                        September 30,
                                         ----------------------------------      Depreciable
                                              2000               1999               lives
                                         ---------------    ---------------    -----------------
                                                        (In thousands)
<S>                                               <C>                <C>       <C>
Land                                            $ 1,707            $ 1,354      -
Land use rights                                   1,898              1,912     47 years
Buildings and improvements                       15,615             15,352     5 to 50 years
Leasehold improvements                            2,544              1,619     lease terms
Furniture and office equipment                    1,477              1,151     3 to 7 years
Computer software and equipment                   4,912              4,299     2 to 5 years
Machinery, molds and equipment                   14,879             13,457     3 to 15 years
Vehicles                                          2,681                460     4 to 5 years
Construction in progress                          2,168                  -      -
Other assets                                        179                259     2 years
                                         ---------------    ---------------
                                                 48,060             39,863
Less accumulated depreciation                    18,128             15,432
                                         ---------------    ---------------
                                               $ 29,932           $ 24,431
                                         ===============    ===============
</TABLE>

Depreciation expense (including the amortization expense of assets under capital
leases) for the years ended September 30, 2000, 1999 and 1998 was  approximately
$4,130,000, $4,297,000 and $4,376,000, respectively.

5.        Credit Lines

The Company  entered  into a five-year  credit  facility for  approximately  $75
million with a bank  syndication  group to finance the  acquisition  of Ring and
repay and terminate its existing U.S. credit facility and Ring's U.K.  facility.
The new facility consists of two term loans amounting to $15 million and the GBP
equivalent  of  U.S.  $15  million  (GBP  9.9  million),  respectively,  and two
facilities for revolving loans,  acceptances,  and trade and stand-by letters of
credit for the  Company's  ongoing  operations  in the U.S. and the U.K., of $20
million  and the  GBP  equivalent  of U.S.  $25  million  (approximately  GBP 17
million),  respectively.  Borrowings  under the facility bear interest,  payable
monthly,  at the Company's option of either the prime rate plus 1.75% (11.25% at
December 15, 2000) or the LIBOR rate plus a variable spread based upon earnings,
debt and interest  expense levels defined under the credit  agreement  (9.46% at
December 15, 2000).  Obligations under the facility are secured by substantially
all of the Company's U.S. and U.K. assets, including 100% of the common stock of
the Company's U.S.  subsidiaries and 65% of the stock of the Company's  Canadian
and first tier United Kingdom and Hong Kong subsidiaries. The agreement contains
covenants  requiring that the Company  maintain a minimum level of equity,  meet
certain debt to adjusted  earnings and fixed charge coverage ratios and limiting
capital expenditures.  Borrowings are subject to a borrowing base defined as the
aggregate of certain percentages of the Company's U.S. and U.K.  receivables and
inventory.  The  agreement  prohibits  the  payment of cash  dividends  or other
distribution on any shares of the Company's  common stock,  other than dividends
payable solely in shares of common stock,  unless  approval is obtained from the
lenders.  At  September  30,  2000,  $33.6  million  in net  assets of Ring were
restricted  under the credit facility and U.K. laws and could not be transferred
to the parent Company.  The Company pays a quarterly  commitment fee of .50% per
annum based on the unused portion of the revolving facilities.  At September 30,
2000, the Company had used $31.1 million under the revolving facilities and $6.2
million was available for additional  borrowings  under the borrowing base. As a
result of the Company's operating results for the fourth quarter of fiscal 2000,
most  notably  the  pretax  loss  incurred  by  the  Company's   United  Kingdom
operations,  the  Company  initially  was  not in  compliance  with a  financial
covenant under its $75 million credit  facility for the quarter ended  September
30, 2000. The Company  obtained an amendment of the credit  facility on December
22,  2000 and is in  compliance  with  financial  covenants  under  the  amended
facility for the quarter ended September 30, 2000.

                                    Page 38
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)

5.       Credit Lines (continued)

However,  based upon the Company's  current  expectations,  the Company does not
expect to be in  compliance  with the  financial  covenants  of the $75  million
credit facility for the quarter ending December 31, 2000 and subsequent quarters
unless the covenants  are waived or modified  through  another  amendment of the
facility.  Any  default or  subsequent  breach of the  financial  covenants  for
quarters  subsequent to September 30, 2000 could result in  acceleration of this
indebtedness,  in which case the debt would become  immediately due and payable.
The Company believes it will be able to successfully  negotiate with its present
$75 million credit bank syndicate,  as necessary,  for a second amendment of the
facility or a waiver of the financial covenants,  so as to preclude acceleration
of  this  indebtedness.   However,   no  assurances  can  be  given  that  these
negotiations will be successful.  Due to this  uncertainty,  all amounts payable
under the Company's $75 million credit  facility have been classified as current
liabilities in the accompanying  September 30, 2000 balance sheet. See also Note
19 of Notes to Consolidated Financial Statements.

Ring has an arrangement  with a U.K. bank which is secured by standby letters of
credit issued under the GBP five-year revolving credit facility. The arrangement
provides for borrowings,  trade letters of credit and foreign  currency  forward
contracts and transactions.  Borrowings,  letters of credit and foreign currency
forward contracts  outstanding  under this arrangement  amounted to $3.2 million
$7.9  million  and $9.4  million,  respectively,  at  September  30,  2000.  The
borrowings were included in credit lines.

The Company  has a credit  facility  with a Canadian  bank which  provides  four
million Canadian dollars or U.S. equivalent (approximately U.S. $2.7 million) in
revolving demand credit.  Canadian dollar advances bear interest at the Canadian
prime rate plus .5% (8% at September  30, 2000) and U.S.  dollar  advances  bear
interest at the U.S.  base rate of the bank (10% at  September  30,  2000).  The
credit facility is secured by  substantially  all of the assets of the Company's
Canadian subsidiary.  The agreement contains certain minimum covenants to be met
by the  Canadian  subsidiary,  prohibits  the payment of  dividends,  and limits
advances by the bank to a borrowing base calculated  based upon  receivables and
inventory.  At September  30, 2000,  $2.5 million in net assets of the Company's
Canadian  subsidiary were restricted  under the credit facility and could not be
transferred to the parent  Company.  This facility is payable upon demand and is
subject to an annual review by the bank.  The Company pays a monthly  commitment
fee of .25% based on the unused portion of the facility.  At September 30, 2000,
total  Canadian  and  U.S.  dollar  borrowings  amounted  to U.S.  $2.2  million
(included  in credit  lines)  and U.S.  $1.2  million  was  available  under the
borrowing base calculation.

Go-Gro has a 35 million  Hong Kong dollars  (approximately  U.S.  $4.5  million)
credit facility with a Hong Kong bank. The facility  provides credit in the form
of acceptances,  trade and stand-by letters of credit, overdraft protection, and
negotiation  of discrepant  documents  presented  under export letters of credit
issued by banks.  Advances  bear  interest at the Hong Kong prime rate plus .25%
(9.75% at September 30, 2000).  The facility is secured by a guarantee issued by
the Company and  requires  Go-Gro to  maintain a minimum  level of equity.  This
agreement prohibits the payment of dividends without the consent of the bank and
limits the amount of loans or advances from Go-Gro to the Company at any time to
50% of Go-Gro's  pre-tax  profits for the previous 12 months.  At September  30,
2000,  $17.2 million in net assets of Go-Gro were restricted under the agreement
and could not be transferred to the parent  Company.  This facility is repayable
upon demand and is subject to an annual  review by the bank.  At  September  30,
2000,  the  Company  had used $1.8  million  of this line for  letters of credit
(there  were  no  borrowings)   and  U.S.  $2.7  million  was  available.   This
availability  under this  facility was increased to 60 million Hong Kong dollars
(approximately U.S. $7.7 million) in December 2000.

                                    Page 39
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)



5.       Credit Lines (continued)


The Company's availability under its credit lines consisted of the following:
<TABLE>
<CAPTION>
                                                               September 30,
                                                -------------------------------------
                                                      2000                 1999
                                                -----------------      --------------
                                                             (In thousands)
<S>                                                     <C>                 <C>
Total lines of credit                                   $ 53,149            $ 32,248
Less:
   Borrowings                                            (19,550)            (14,350)
   Stand-by letters of credit                            (13,293)             (1,213)
   Open letters of credit and other                       (2,292)             (4,126)
   Amount unavailable under borrowing base                (7,904)                  -
                                                -----------------      --------------
Lines of credit available                               $ 10,110            $ 12,559
                                                =================      ==============
</TABLE>

The weighted  average  interest rate on the current  portion of credit lines was
9.16% and 8.75% at September 30, 2000 and 1999,  respectively,  and was 9.15% on
the term loans at September 30, 2000.

                                    Page 40
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)

6.       Bonds Payable - Real Estate Related


The  Company  arranged  for the  issuance  in 1995 of $10.5  million in State of
Mississippi Variable Rate Industrial Revenue Development Bonds to finance (along
with  internally  generated  cash  flow and the  Company's  $1  million  leasing
facility) a warehouse located near Tupelo, Mississippi.  The bonds have a stated
maturity of May 1, 2010 and require mandatory sinking fund redemption  payments,
payable monthly,  aggregating  $900,000 per year through 2002, $600,000 per year
in 2003 and  2004,  and  $500,000  per year from  2005 to 2010.  The bonds  bear
interest at a variable  rate (6.65% at September  30,  2000) that is  adjustable
weekly to the rate the  remarketing  agent for the bonds  deems to be the market
rate for such bonds. The bonds are secured by a lien on the land, building,  and
all other property financed by the bonds.  Additional  security is provided by a
$7 million direct pay letter of credit which is not part of the Company's credit
line. This direct pay letter of credit provides that any default under any other
agreement  involving a material  borrowing  or guarantee  constitutes  a default
under the direct pay letter of credit.  The  outstanding  balance of these bonds
was $6 million and $6.9 million,  at September 30, 2000 and 1999,  respectively.
In January  1999,  the  Company  entered  into an interest  rate swap  agreement
maturing  May 1, 2004,  to manage its  exposure to interest  rate  movements  by
effectively  converting  its  debt  from a  variable  interest  rate  to a fixed
interest rate of 5.52%.  Interest rate  differentials paid or received under the
agreement are recognized as adjustments to interest expense.


The  aggregate  maturities  and sinking fund  requirements  of bonds  payable at
September 30, 2000, are as follows (in thousands):

                      2001                   $ 900
                      2002                     900
                      2003                     600
                      2004                     600
                      2005                     500
                      Thereafter             2,500
                                      --------------
                                           $ 6,000
                                      ==============

The Company financed the purchase and  improvements of a manufacturing  facility
located in  Meridian,  Mississippi  through the issuance of a series of State of
Mississippi  General Obligation Bonds (Mississippi Small Enterprise  Development
Finance Act Issue, 1994 Series GG) with an aggregate available principal balance
of  $1,605,000,  a  weighted  average  coupon  rate of 6.23%  and a  contractual
maturity of November 1, 2009.  In June 1997,  the Company  ceased  manufacturing
operations  at this  location  and leased the  facility  to a  non-manufacturing
entity.  As a result,  the Company made a $1.5 million  payment to escrow on the
bonds,  which  was  included  in  restricted  cash  equivalents  and  short-term
investments in the September 30, 1999 balance sheet. The bonds were secured by a
first  mortgage on land,  building and  improvements  and a  $1,713,000  standby
letter of credit, which was not part of the Company's credit lines.  Interest on
the bonds was payable semiannually and principal payments were due annually. The
outstanding  balance of these bonds was $1.3 million at September 30, 1999.  The
Company  redeemed  the bonds at their  earliest  redemption  date of November 1,
1999.

                                    Page 41
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)


7.       Convertible Subordinated Notes

On June  30,  2000,  the  Company  prepaid  $4.3  million  of the  $5.1  million
outstanding  balance on its 8% convertible  subordinated notes and the remaining
$733,000 was prepaid in July 2000. The $5.1 million balance was due in two equal
installments  on March 15, 2001 and March 15, 2002.  The Company had  previously
repaid $2.5 million of these notes in March 2000. The Company's 8%  subordinated
notes were  convertible  at the option of the holder into  common  shares of the
Company's  stock at a  conversion  price of $6.63 per share at any time prior to
maturity.

8.       Other Long-Term Debt

Other long-term debt consisted of the following:
<TABLE>
<CAPTION>
                                                                                                   September 30,
                                                                                           -------------- -- ------------
                                                                                               2000             1999
                                                                                           --------------    ------------
                                                                                                  (In thousands)
<S>                                                                                        <C>               <C>
     Loan payable monthly through 2004 based on a 15 year amortization  schedule
     with a balloon  payment  in 2004,  bearing  interest  at 8%,  secured  by a
     mortgage  on land and  building  with a net book  value of $1.3  million at
     September 30, 2000.                                                                   $        896      $      958

     Borrowings  under a leasing  facility with a Hong Kong  financial  institution to
     finance the  purchase  of  equipment  for the China  facility;  payable  monthly,
     bearing  interest  at the Hong  Kong  Interbank  Borrowing  Rate plus 3% (8.6% at
     September  30,  2000),  maturing at various  dates  through 2002 and secured by a
     guarantee issued by the Company and warehouse  equipment with a net book value of
     $230,000 at September 30, 2000; this facility was cancelled in October 2000.                   277             443

     Borrowings under a leasing facility with a U.S. financial  institution to finance
     the purchase of U.S. assets;  payable monthly,  maturing at various dates through
     2004,  bearing interest at 8.75%,  and secured by office,  computer and warehouse
     equipment  with a net book value of $168,000 at September 30, 2000;  $699,000 was
     available for future borrowings at September 30, 2000.                                         301             523

     Borrowings under a leasing facility with a U.K. financial  institution to finance
     the  purchase of vehicles and  equipment,  payable  monthly,  maturing at various
     dates through 2003,  bearing interest at the institution's  base rate plus 1.25%,
     adjusted  monthly  (7.25% at  September  30,  2000),  and secured by vehicles and
     equipment  with a net book  value of $1.3  million at  September  30,  2000;  the
     facility is renewed annually and $960,000 was available for future  borrowings at
     September 30, 2000.                                                                          1,214               -

     Borrowings  which  financed  the  purchase  of  computer  equipment  in the U.S.,
     maturing  in 2003,  bearing  interest at rates  ranging  from 8.81% to 10.81% and
     secured by computer  equipment with a net book value of $382,000 at September 30,
     2000.                                                                                          399               -

     Other                                                                                           40              87
                                                                                           --------------    ------------
     Subtotal                                                                                     3,127           2,011
     Less current maturities                                                                     (1,339)           (487)
                                                                                           --------------    ------------
                                                                                           $      1,788      $    1,524
                                                                                           ==============    ============
</TABLE>

                                    Page 42
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)

8.       Other Long-Term Debt (Continued)

The aggregate  maturities of other  long-term  debt at September 30, 2000 are as
follows (in thousands):

                         2001                   $ 1,339
                         2002                       827
                         2003                       284
                         2004                       677
                         2005                         -
                                          ---------------
                                                $ 3,127
                                          ===============

9.       Income Taxes

The following table summarizes the differences  between the Company's  effective
income tax rate and the statutory federal income tax rate:
<TABLE>
<CAPTION>
                                                            Years Ended September 30,
                                           ------------------------------------------------
                                               2000             1999             1998
                                           --------------   --------------   --------------
<S>                                                 <C>              <C>              <C>
Statutory federal income tax rate                   34.0 %           34.0 %           34.0 %
 Increase (decrease) resulting from:
   State income taxes, net of federal
       income tax effect                             3.4              2.8              2.8
   Foreign tax rate differential                   (18.7)            (6.3)           (33.2)
   Goodwill amortization                             6.2              1.6             10.6
   Adjustment to tax rate applied to U.S.
       temporary differences                           -                -              8.9
   Other                                             2.5             (0.9)             1.8
                                           --------------   --------------   --------------
                                                    27.4 %           31.2 %           24.9 %
                                           ==============   ==============   ==============
</TABLE>

                                    Page 43
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)

9.       Income Taxes (continued)

The income tax provision (benefit) consisted of the following:
<TABLE>
<CAPTION>
                                            Current             Deferred             Total
                                        ----------------     ----------------    ---------------
                                                             (In thousands)
<S>                                      <C>                 <C>                  <C>
Year ended September 30, 2000
  Federal                                $          279      $          (377)     $         (98)
  State                                              64                   70                134
  Foreign                                         1,194                 (156)             1,038
                                        ----------------     ----------------    ---------------
                                         $        1,537      $          (463)     $       1,074
                                        ================     ================    ===============

Year ended September 30, 1999
  Federal                                $          (95)     $         1,788      $       1,693
  State                                              80                  165                245
  Foreign                                         1,002                   (2)             1,000
                                        ----------------     ----------------    ---------------
                                         $          987      $         1,951      $       2,938
                                        ================     ================    ===============

Year ended September 30, 1998
  Federal                                        $ (993)               $ 453             $ (540)
  State                                              22                  341                363
  Foreign                                           631                  (89)               542
                                        ----------------     ----------------    ---------------
                                                 $ (340)               $ 705              $ 365
                                        ================     ================    ===============
</TABLE>

Income (loss) before income taxes by source consisted of the following:

                                       Years Ended September 30,
                 -----------------------------------------------------------
                       2000                  1999                1998
                 ------------------    -----------------    ----------------
United States               $ (733)             $ 5,046            $ (1,265)
Foreign                      4,652                4,381               2,732
                 ------------------    -----------------    ----------------
                           $ 3,919              $ 9,427             $ 1,467
                 ==================    =================    ================



The tax  effects  of each  type of  temporary  difference  that gave rise to the
Company's current net deferred tax asset is as follows:

                                                              September 30,
                                               --------------------------------
                                                    2000               1999
                                               ---------------    -------------
                                                          (In thousands)
Accounts receivable allowances                          $ 916          $ 1,337
Prepaid expenses                                         (150)            (175)
Allowances and capitalized costs for inventory            856              961
Accrued expenses                                          379               76
Restructuring charge                                      175                -
Other                                                      14               48
                                               ---------------    -------------
                                                      $ 2,190          $ 2,247
                                               ===============    =============

                                    Page 44
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)

9.       Income Taxes (continued)

The tax effects of each type of temporary  difference and carryforward that gave
rise to the Company's net long term deferred tax asset (liability)  (included in
other long term assets or other long term liabilities) are as follows:
<TABLE>
<CAPTION>
                                                                     September 30,
                                                      -----------------------------------
                                                           2000               1999
                                                      ---------------    ----------------
                                                                     (In thousands)
<S>                                                          <C>                     <C>
Pension obligation                                           $ 1,409                 $ -
Depreciation:
   U.S. assets                                                  (572)               (523)
   Foreign assets                                                195                 (63)
U.S. tax loss and other U.S. carryforwards                     1,169                 259
Foreign operating tax losses carryforward                      1,510                 796
Foreign capital losses carryforward                            8,292                   -
Other                                                            151                 146
Valuation allowance                                           (9,880)               (796)
                                                      ---------------    ----------------
                                                             $ 2,274              $ (181)
                                                      ===============    ================
</TABLE>

At September  30,  2000,  the Company had a $2.6  million  U.S.  operating  loss
carryforward  for federal  income tax return  purposes.  Foreign  operating  and
capital   losses   carried   forward  were  $4.7  million  and  $27.6   million,
respectively.  The U.S. loss can be carried forward for 20 years and the foreign
losses must be utilized  within the  carryforward  periods of the  international
jurisdictions.  A valuation  allowance  has been provided for all of the foreign
operating and capital tax losses carryforward. The foreign operating and capital
losses expire as follows (in thousands):


             Year of         Net operating        Capital
           expiration           losses             losses
         ---------------  -------------------  --------------
         2001                $           450    $          -
         2005                            319               -
         2006                            409               -
         2007                            529               -
         2008                          1,061               -
         2009                            850               -
         2010                            478               -
         Indefinite                      608          27,600
                          -------------------  --------------
                             $         4,704    $     27,600
                          ===================  ==============


The Company has not provided for possible U.S.  income taxes on $25.5 million in
undistributed  earnings  of  foreign  subsidiaries  that  are  considered  to be
reinvested indefinitely.  Calculation of the unrecognized deferred tax liability
related to these foreign earnings is not practicable.

                                    Page 45
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)


10.                Pension Benefits

Ring has a defined  benefit  pension plan (the  "plan")  which covers 29 current
employees and over 1,000 other members  formerly  associated with Ring. The plan
is  administered  externally and the assets are held  separately by professional
investment managers. The plan is funded by contributions at rates recommended by
an actuary.


The  components of net pension cost for the period from the date of  acquisition
of Ring (July 5, 2000) to September 30, 2000 were as follows (in thousands):

      Service cost                                         $               71
      Interest cost                                                       248
      Expected return on plan assets                                     (250)
                                                           -------------------
                                                                         $ 69
                                                           ===================

The  reconciliation  of  the  beginning  and  ending  balances  of  the  benefit
obligation and fair value of plan assets,  and the funded status of the plan are
as follows (in thousands):

Change in benefit obligation:
      Benefit obligation at July 5, 2000                   $           21,256
      Service cost                                                         71
      Interest cost                                                       248
      Benefits paid                                                      (126)
      Foreign currency gain                                              (471)
                                                           -------------------
      Benefit obligation at September 30, 2000             $           20,978
                                                           ===================

Change in plan assets:
      Fair value of plan assets at July 5, 2000            $           16,566
      Actual return on plan assets                                        (19)
      Employer contributions                                               86
      Benefits paid                                                      (126)
      Foreign currency loss                                              (367)
                                                           -------------------
      Fair value of plan assets at September 30, 2000      $           16,140
                                                           ===================

Funded status:
      Funded status (liability) at September 30, 2000      $           (4,838)
      Unrecognized actuarial gain                                         267
                                                           -------------------
      Net liability recognized                             $           (4,571)
                                                           ===================


Accrued benefit  liability ($1.6 million
included in other current  liabilities
and $3.0  million  included in other long
term  liabilities)  recognized  in the
Company's balance sheet at September 30, 2000              $           (4,571)
                                                           ===================

                                    Page 46
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)

10.                Pension Benefits (continued)

The weighted average assumptions used in the actuarial computations that derived
the above amounts were as follows:


      Discount rate                                                    5.0%
      Expected return on plan assets                                   6.5%
      Average rate of compensation increase                            5.0%
      Rate of pension benefit increase                                 3.0%



The Company is reviewing  the future of the plan and believes that in the future
it may begin the process of terminating the Company's  liability under the plan.
It is anticipated that a termination will require payment of a lump sum equal to
the "Minimum Funding Requirement ("MFR") shortfall. The last MFR valuation as of
April 6, 2000 placed the MFR shortfall at $1.4 million.

Ring also  operates a defined  contribution  plan covering some of its remaining
employees.

                                    Page 47
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)

11.      Earnings Per Share
<TABLE>
<CAPTION>
The computation of basic and diluted earnings per common share ("EPS") is as follows (in thousands except
per share data):
                                                                                         Years Ended September 30,
                                                                              ----------------------------------------------
                                                                              2000                 1999                 1998
                                                                              ----                 ----                 ----
<S>                                                                          <C>                  <C>                  <C>
Basic EPS
Numerator:
Net income                                                                 $ 2,845              $ 6,489              $ 1,102
                                                                           =======              =======              =======
Denominator:
Weighted average shares outstanding during the year                          7,607                7,252                7,128
Weighted average of shares repurchased
  during the year                                                             (533)                (197)                   -
                                                                           -------              -------              -------
Weighted average shares used for basic EPS                                   7,074                7,055                7,128
                                                                           =======              =======              =======

Basic EPS                                                                  $  0.40               $ 0.92               $ 0.15
                                                                           =======              =======              =======
Diluted EPS
Numerator:
Net income                                                                 $ 2,845              $ 6,489              $ 1,102
Interest on convertible subordinated notes, net of
  income taxes*                                                                250                  424                    -
                                                                           -------              -------              -------
Net income available to common stockholders                                $ 3,095              $ 6,913              $ 1,102
                                                                           =======              =======              =======
Denominator:
Weighted average shares outstanding during the year                          7,607                7,252                7,128
Shares upon conversion of convertible subordinated notes*                      748                1,138                    -
Effect of stock options**                                                      597                  495                  349
Weighted average of shares repurchased
  during the year                                                             (533)                (197)                   -
                                                                           -------              -------              -------
Weighted average shares used for diluted EPS                                 8,419                8,688                7,477
                                                                           =======              =======              =======
Diluted EPS                                                                $  0.37              $  0.80              $  0.15
                                                                           =======              =======              =======
</TABLE>
*    The convertible subordinated notes were not included in the denominator for
     diluted EPS for the year ended  September 30, 1998 because their effect was
     anti-dilutive.


**   Weighted  average shares  issuable upon the exercise of stock options which
     were not included in the calculation  because they were  antidilutive  were
     228,000, 540,000 and 1,249,000 for 2000, 1999 and 1998, respectively.

                                    Page 48
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)

12.      Common Stock, Stock Options, Warrants and Rights


Common Stock
------------

The Company's  board of directors has  authorized  the  repurchase of up to $2.7
million of common  shares of the Company from time to time in the open market or
in  negotiated  purchases.  At September 30, 2000,  the Company had  repurchased
641,932 shares for $2.5 million.

Stock Options Under Plans
-------------------------

In August 1987, the Company adopted the Stock Option/Stock  Appreciation  Rights
Plan ("Employee  Plan"),  which provides for the granting of options to officers
and  other  key  employees.  Under  the  Employee  Plan,  the  Company  and  its
shareholders  authorized  the granting of options for up to 1,750,000  shares of
common  stock to be granted as either  incentive  or  nonstatutory  options at a
price of 100% of the fair market value of the shares at the date of grant,  110%
in the case of a holder of more than 10% of the Company's stock. As of September
30,  2000,  options for  approximately  7,692  shares of common  stock  remained
available for future  grants.  Options  generally vest ratably over a three-year
period  commencing on October 1 following the date of grant and are  exercisable
with cash or previously  acquired common stock of the Company,  no later than 10
years from the grant date.

In March 1989, the Company adopted the  Non-Employee  Director Stock Option Plan
("Director  Plan"),  which provides for the granting of options for up to 50,000
shares of common  stock to  non-employee  directors.  Under the  Director  Plan,
options to purchase  2,000 common shares were granted  annually  through 1997 to
non-employee  directors  automatically  upon  their  election  to the  Board  of
Directors  which vest upon the serving of a one-year term. The exercise price is
the fair market  value of the common  stock on the date the options are granted.
As of September 30, 2000,  22,000 shares of common stock remained  available for
future grants.  These options are generally  exercisable no later than ten years
from the date of grant.

In March 2000,  the  Company's  Board of Directors  approved a Stock Option Plan
("Broad  Based  Plan")  which  provides  for the granting of options to purchase
325,000  shares of common  stock at a purchase  price  equal to the fair  market
value on the date of grant.  As of September  30, 2000,  79,000 shares of common
stock  remained  available  for future  grants.  The exercise  price is the fair
market value of the common stock on the date the options are granted.  One third
of the options becomes exercisable one year after the date of the grant with one
third  vesting  during  each of the  following  two  years.  These  options  are
generally exercisable no later than ten years from the date of grant.

                                    Page 49
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)

12.               Common Stock, Stock Options, Warrants and Rights (continued)

Transactions and related information for each plan are as follows:
<TABLE>
<CAPTION>
        Employee Plan:                                                         Number of            Weighted Average
                                                                               Options              Price Per Share
                                                                               -----------          ---------------
<S>                                                                             <C>                       <C>
        Options outstanding at September 30, 1997                               1,326,467                 $3.98
             Options granted                                                        5,000                 $3.38
             Options exercised                                                    (25,100)                $3.03
             Options terminated                                                   (16,719)                $4.36
                                                                                ---------                 -----
        Options outstanding at September 30, 1998                               1,289,648                 $3.99 **
             Options granted                                                       91,000                 $3.28
             Options exercised                                                   (185,898)                $2.20
             Options terminated                                                   (63,848)                $4.10
                                                                                ---------                 -----
        Options outstanding at September 30, 1999                               1,130,902                 $2.81
             Options exercised                                                   (364,767)                $2.27
             Options terminated                                                    (6,201)                $3.93
                                                                                ---------                 -----
        Options outstanding at September 30, 2000                                 759,934                 $3.05
                                                                                =========                 =====
        Options exercisable at September 30, 2000                                 703,262                 $3.04
                                                                                =========                 =====
</TABLE>

**On December 11, 1998,  the exercise price of 784,733  outstanding  options was
restated to $2.4375, the market value of the Company's stock on such date.

<TABLE>
<CAPTION>
      Director Plan:                                                      Number of        Weighted Average
                                                                           Options         Price Per Share
                                                                        --------------   ---------------------
<S>                                                                       <C>                      <C>
      Options outstanding at September 30, 1997
      and 1998                                                                 46,000                   $6.59
         Options terminated                                                    (2,000)                 $12.13
                                                                        --------------   ---------------------

      Options outstanding at September 30, 1999                                44,000                   $6.34
         Options terminated                                                   (20,000)                  $6.25

                                                                        --------------   ---------------------
      Options outstanding at September 30, 2000                                24,000                   $6.42
                                                                        ==============   =====================

      Options exercisable at September 30, 2000                                24,000                   $6.42
                                                                        ==============   =====================
</TABLE>

                                    Page 50
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)

12.      Common Stock, Stock Options, Warrants and Rights (continued)
<TABLE>
<CAPTION>
              Broad Based Plan:                                        Number of          Weighted Average
                                                                        Options            Price Per Share
                                                                      -------------      --------------------
<S>                                                                        <C>                         <C>
              Options outstanding at September 30, 1999                          -                         -
                 Options granted                                           246,000                     $3.94

                                                                      -------------      --------------------
              Options outstanding at September 30, 2000                    246,000                     $3.94
                                                                      =============      ====================

              Options exercisable at September 30, 2000                          -                         -
                                                                      =============      ====================
</TABLE>

Other Stock Options
-------------------

On October 1, 1991,  the Company  issued  options to purchase  20,000  shares at
$3.38 to an employee.  On December 11, 1998 the exercise  price of these options
was restated to $2.4375,  the market value of the Company's  stock on such date.
The options were fully  exercisable  at September 30, 2000 and expire on October
1, 2001.

On  January 3,  1992,  the  Company  issued to  certain  of its  executives  and
non-employee directors options to purchase 275,000 shares at $4.88 per share. On
December 11, 1998,  the exercise  price of 150,000 of these options was restated
to  $2.4375,  the  market  value  of the  Company's  stock on such  date.  As of
September 30, 2000, 225,000 of these options remained unexercised and were fully
exercisable. They expire January 3, 2002.

On January 15,  1993,  the Company  issued to one of its  executives  options to
purchase  50,000 shares of common stock at an exercise price of $5.25 per share.
On December  11,  1998,  the  exercise  price of these  options was  restated to
$2.4375,  the market value of the Company's stock on such date. The options were
fully exercisable at September 30, 2000. The options expire on January 14, 2003.

At various  dates  during  fiscal  1995,  the  Company  granted  to certain  new
employees  options to purchase  91,000 shares of common stock at prices  ranging
from $6.75 to $6.875. In most cases, one-third of the options became exercisable
on October 1, 1995, with one-third vesting on October 1 of each of the following
two years.  The options  expire in 10 years from the grant date.  On October 27,
1995,  the exercise  price of these  options was restated to $4.125,  the market
value of the  Company's  stock on such  date,  and on  December  11,  1998,  the
exercise  price of the  remaining  53,500  shares was  restated to $2.4375,  the
market value of the Company's  stock on such date. As of September 30, 2000, the
remaining 35,000 options were fully exercisable.

On March 4, 1996, the Company issued options to purchase  10,000 shares at $5.38
to a consultant.  The options were fully  exercisable  at September 30, 2000 and
expire on March 4, 2006.

                                    Page 51
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)


12.      Common Stock, Stock Options, Warrants and Rights (continued)


On August 27,  1996,  the  Company  issued to one of its  executives  options to
purchase 5,000 shares of common stock at $3.75 per share.  On December 11, 1998,
the exercise price of these options was restated to $2.4375, the market value of
the  Company's  stock on such  date.  The  options  were  fully  exercisable  at
September 30, 2000 and expire on August 26, 2006.

On March 12,  1997,  the Company  issued  options to purchase  20,000  shares of
common  stock at  $3.75  per  share to new  members  of the  Company's  Board of
Directors.  The options were fully  exercisable at September 30, 2000 and expire
on March 11, 2007.

During  fiscal 1999,  the Company  granted to certain new  employees  options to
purchase 8,000 shares of common stock at prices ranging from $4.69 to $4.94. The
options expire 10 years from the grant date and one-third became exercisable one
year after the date of grant with one-third vesting during each of the following
two years. At September 30, 2000, 2,666 options were exercisable.

During  fiscal  2000,  the Company  issued to certain new  employees  options to
purchase  214,000  shares at prices  ranging from $4.06 to $4.38 per share,  the
market value of the Company's  stock on grant date.  The options expire 10 years
from the grant date. One third of the options becomes exercisable one year after
the date of the grant with one third  vesting  during each of the  following two
years.


Transactions  and  related  information  relating  to other  stock  options  are
summarized as follows:
<TABLE>
<CAPTION>
                                                                         Options                Price Per Share
                                                                  ----------------------   ---------------------------
<S>                                                                             <C>                             <C>
Options outstanding at September 30, 1997                                       800,500                         $3.69
     Options granted                                                             18,000                         $3.53
     Options exercised                                                          (55,000)                        $1.75
     Options terminated                                                        (125,000)                        $3.93
                                                                  ----------------------   ---------------------------
Options outstanding at September 30, 1998                                       638,500                         $3.81 **
     Options granted                                                             11,000                         $3.45
     Options terminated                                                         (24,500)                        $3.00
                                                                  ----------------------   ---------------------------
Options outstanding at September 30, 1999                                       625,000                         $2.84
     Options granted                                                            214,000                         $4.36
     Options exercised                                                         (252,000)                        $1.93
                                                                  ----------------------   ---------------------------
Options outstanding at September 30, 2000                                       587,000                         $3.79
                                                                  ======================   ===========================

Options exercisable at September 30, 2000                                       367,666                         $3.44
                                                                  ======================   ===========================
</TABLE>
 .

**On December 11, 1998,  the exercise price of 290,000  outstanding  options was
restated to $2.4375, the market value of the Company's stock on such date.

                                    Page 52
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)

12.      Common Stock, Stock Options, Warrants and Rights (continued)

The following table summarizes  information about all stock options  outstanding
at September 30, 2000:
<TABLE>
<CAPTION>
                                             Options Outstanding                                Options Exercisable
                            ----------------------------------------------------       ---------------------------------------
                                                 Weighted              Weighted                                   Weighted
                                                  Average               Average                                    Average
       Range of Exercise       Options           Remaining             Exercise               Options             Exercise
             Prices          Outstanding      Contractual Life          Price               Exercisable            Price
--------------------------  --------------   ------------------   -------------------   -------------------   -----------------
<S>                                <C>                <C>                      <C>                 <C>                   <C>
 $2.125 to $2.4375                 759,934            3.2 years                $2.42               734,934               $2.43
 $3.375 to $4.1875                 433,500            7.5 years                $3.90               141,828               $3.78
 $4.375 to $6.63                   355,000            6.5 years                $4.65               149,666               $5.02
 $6.75 to $10.75                    68,500            4.1 years                $6.99                68,500               $6.99
--------------------------  ---------------   ------------------  -------------------   -------------------   -----------------
 $2.125 to $10.75                1,616,934            5.1 years                $3.50             1,094,928               $3.25
==========================  ===============   ==================  ===================   ===================   =================
</TABLE>

For purposes of the following proforma  disclosures,  the weighted-average  fair
value of options has been estimated on the date of grant or repricing  using the
Black-Scholes   options-pricing   model  with  the  following   weighted-average
assumptions  used for grants in 2000, 1999 and 1998,  respectively:  no dividend
yield; expected volatility of 62%, 62% and 58%, risk-free interest rate of 6.4%,
5.2% and 5.4% and an expected  term of six and a half years for options  granted
and two years for options  repriced during 1999. The weighted average fair value
at date of grant of options granted during 2000, 1999, and 1998 was $2.36, $1.97
($.70  for  options  repriced)  and  $1.89  per  option,  respectively.  Had the
compensation  cost  been  determined  based  on the fair  value at the  grant or
repricing  date  consistent  with the  provisions of SFAS 123, the Company's net
income and basic and diluted  earnings  per share would have been reduced to the
proforma amounts indicated below (in thousands, except per share amounts):


                                                  Years Ended September 30,
                                              ---------------------------------
                                               2000          1999        1998
                                               ----          ----        ----
Net income - as reported                      $ 2,845       $ 6,489     $ 1,102
Net income - proforma                         $ 2,685       $ 5,764     $   966

Basic earnings per share - as reported        $  0.40       $  0.92     $  0.15
Basic earnings per share - proforma           $  0.38       $  0.82     $  0.14

Diluted earnings per share - as reported      $  0.37       $  0.80     $  0.15
Diluted earnings per share - proforma         $  0.35       $  0.71     $  0.13

Stock Rights
------------

In November 2000, the Company's Board of Directors  reauthorized its stockholder
rights  plan,  by adopting a plan  similar to a  pre-existing  rights plan which
expired on November 20, 2000.  Under the  Company's new rights plan, a preferred
stock purchase right was distributed for each share of common stock  outstanding
at the close of business on the  November  30, 2000 record date and is issued in
connection  with each share issued after such date. The rights are not initially
exercisable,  but upon the occurrence of certain  takeover-related  events,  the
holders of the rights  (other  than an adverse  or  acquiring  person,  or group
thereof),  under certain  circumstances,  have the right to purchase  additional
shares of Company stock (or in some cases,  stock of the acquiring  entity) at a
discount to the then market price.  The rights can be redeemed by the Company at
any time,  and will  otherwise  expire on November 20, 2005.  The thresholds for
triggering the rights plan is a person (as defined in the rights plan) acquiring
21% of the  outstanding  stock of the Company or a  declaration  by the Board of
Directors  that a person is an "adverse  person" as defined in the rights  plan,
and the exercise price of the rights is $17.

                                    Page 53
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)


12.      Common Stock, Stock Options, Warrants and Rights (continued)

Stock Warrants
--------------

In connection with the Company's  initial public offering of common stock in May
1988,  warrants to purchase 92,000 common shares at $4.20 a share were issued to
the  underwriters.  The warrants are exercisable  through December 31, 2000. The
Company registered the shares underlying the warrants effective May 24, 1995. No
common stock has been issued  pursuant to these warrants  through  September 30,
2000.

13.      Commitments

The Company leases offices,  warehouse facilities,  equipment and vehicles under
non-cancelable  operating  leases that expire at various dates through 2019 with
the  exception  of certain U.K.  land use rights  which expire in 2073.  Certain
leases provide for future rent  adjustments  based on changes in market rates or
increases in minimum lease  payments  based upon increases in annual real estate
taxes  and  insurance.   Future  minimum  lease  payments  under  non-cancelable
operating  leases  and  minimum  rentals  to be  received  under  non-cancelable
subleases  as of  September  30,  2000  by  fiscal  year,  were as  follows  (in
thousands):


                    Minimum Rental             Minimum
                      Payments           Sublease Receipts           Net
                -------------------    --------------------    --------------
2001                       $ 3,625                   $ 535           $ 3,090
2002                         2,446                     150             2,296
2003                         1,944                     149             1,795
2004                         1,712                     132             1,580
2005                         1,623                     117             1,506
Thereafter                  19,177                     434            18,743
                -------------------    --------------------    --------------
                          $ 30,527                 $ 1,517           $29,010
                ===================    ====================    ==============

Total net rental expense for all operating leases amounted to approximately $1.9
million,  $1.5 million and $1.8 million for the years ended  September 30, 2000,
1999 and 1998, respectively.

Shenzhen  Jiadianbao  Electrical Products Co., Ltd. ("SJE"), a cooperative joint
venture  subsidiary of Go-Gro,  and the Bureau of National Land Planning  Bao-An
Branch of Shenzhen City entered into a Land Use Agreement covering approximately
467,300 square feet in Bao-An County,  Shenzhen City, People's Republic of China
on April 11, 1995.  The  agreement  provides SJE with the right to use the above
land until January 18, 2042. The land use rights are  non-transferable.  Through
fiscal 2000,  under the joint venture  agreement  Go-Gro owned 70% of SJE's land
use rights,  building and equipment and Shenzhen  Baoanqu Fuda  Industries  Co.,
Ltd. ("Fuda"), a Chinese Company,  owned the remaining 30%. Go-Gro received 100%
of SJE's  profits  and  losses.  Land  costs,  including  the  land use  rights,
approximated  $2.6 million of which Go-Gro paid its 70%  proportionate  share of
$1.8 million. Under the terms of this agreement, as amended, SJE is obligated to
construct  approximately  500,000  square feet of factory  buildings and 211,000
square  feet of  dormitories  and  offices,  of  which  40% was  required  to be
completed by April 1, 1997. A 162,000  square foot  factory,  77,000 square foot
warehouse  and 60,000 square foot  dormitory  became fully  operational  in June
1997.  SJE began  construction  of the final phase of this  facility in December
1999. The remainder of the construction is underway to be completed in 2001. The
total cost for this project is estimated at $16 million (of which $13.3  million
had been  expended as of  September  30,  2000) and  includes  approximately  $1
million for a Municipal  Coordination  Facilities Fee (MCFF).  The MCFF is based
upon the square footage to be  constructed.  The agreement calls for the MCFF to
be paid in  installments  beginning in January  1997 of which  $588,000 had been
paid or accrued as of September 30, 2000. In September  2000,  Go-Gro  purchased
Fuda's 30% interest in SJE's land use rights and property for approximately $1.0
million.

On  April  26,  1996,  the  Company  entered  into  a  license   agreement  with
Westinghouse  Electric  Corporation  to market  and  distribute  a full range of
lighting  fixtures,  lamps and other lighting  products  under the  Westinghouse
brand name in exchange for royalty

                                    Page 54
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)

payments. Subject to the minimum sales conditions discussed below, the agreement
terminates on September 30, 2002,  with the Company having options to extend the
agreement  for two  additional  five-year  terms.  The royalty  payments are due
quarterly and are based on a percent of the value of the Company's net shipments
of  Westinghouse  branded  products,  subject to annual  minimum net  shipments.
Commencing  September  30,  2000  either  party has the right to  terminate  the
agreement  during  fiscal  years 2000 to 2002 if the  Company  does not meet the
minimum net  shipments  of $25 million for fiscal  2000,  $40 million for fiscal
2001 and $60 million for fiscal 2002. Net sales of Westinghouse branded products
amounted to $29 million and $20.5 million for the years ended September 30, 2000
and 1999, respectively.

In January  2000,  the  Company  renewed a  consulting  agreement  with a former
employee for a two-year  period  beginning  April 1, 2000,  for an annual fee of
$140,000, payable monthly.

14.      Related Party Transactions

The Company leased a facility located in  Massachusetts  from an entity in which
an officer and a former officer had an ownership interest.  The lease expired in
June 1999.  Rent  expense  related to this lease was  approximately  $99,000 and
$159,000 for the years ended September 30, 1999 and 1998, respectively.

Notes and advances  receivable  from  Executive  Vice  Presidents of the Company
aggregated  approximately  $207,000 and $284,000 at September 30, 2000 and 1999,
respectively.  At  September  30, 2000 notes and advances  included  $170,000 in
notes bearing interest at LIBOR plus 250 basis points which were collaterized by
stock  option  agreements  to purchase  150,000  shares of the  Company.  A note
amounting to $100,000  matures in December 2001 and the  remaining  $70,000 note
matures in January 2002.

15.          Segment Information

The Company adopted  Statement of Financial  Accounting  Standards  ("SFAS") No.
131,  Disclosures  about  Segments  of an  Enterprise  and  Related  Information
effective  October  1,  1998.  SFAS No. 131  supersedes  SFAS No. 14,  Financial
Reporting  for  Segments  of a  Business  Enterprise,  replacing  the  "industry
segment"  approach  with the  "management"  approach.  The  management  approach
designates  the  internal  organization  that is used by  management  for making
operating  decisions  and assessing  performance  as the source of the Company's
reportable  operating  segments.  SFAS No. 131 also requires  disclosures  about
products and services,  geographic  areas, and major customers.  The adoption of
SFAS No. 131 did not affect results of operations or financial  position but did
affect the disclosure of segment information.

For internal  management  reporting  purposes the Company operates three primary
business segments, which also correspond to the major geographic segments of the
Company's  business:  Catalina  Industries  (United States),  Go-Gro  Industries
(China) and Ring Limited (United Kingdom).  The Company added the United Kingdom
as a primary  business segment with the acquisition of Ring PLC on July 5, 2000.
Catalina  Industries  and  Ring  Limited  are  engaged  in the  importation  and
distribution of lighting products. Go-Gro manufactures and procures products for
other Company subsidiaries.  The Company also maintains parent company corporate
administrative  offices in Miami,  Florida and other  operating  subsidiaries in
Canada  (Catalina  Canada),  Mexico (Catalina  Mexico) and South America.  These
operating segments generally follow the management  organizational  structure of
the Company.  Net sales to external customers by U.S. and U.K.-based  operations
are made primarily into the United States and the United Kingdom,  respectively.
Net sales to external  customers by  China-based  operations  are made primarily
into  Europe and net sales to  external  customers  other than sales made by the
Company's three reportable operating segments are made primarily into Canada and
to a lesser  extent  Mexico  and South  America.  Intersegment  sales  represent
shipments of finished products sold at prices  determined by management.  During
fiscal 1998, the Company restructured its operations, which resulted in a change
in the  pricing of  intersegment  sales  between  China and the other  segments.
Calculation of the impact of such change on the segment contributions for fiscal
year 1998 is not practicable.

The Company  evaluates the  performance of its operating  segments and allocates
resources  to  them  based  on  net  sales  and  segment  contribution.  Segment
contribution  is defined as income  before  Parent/holding  Company  and certain
administrative  expenses,  unusual items, tax transfer  pricing  adjustments and
income taxes. Prior years' data has been restated to conform to the current year
reportable  operating segments  presentation.  Information on operating segments
and a reconciliation to income before income taxes for the years ended September
30, 2000, 1999 and 1998 are as follows (in thousands):

                                    Page 55
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)

15.           Segment Information (continued)


Net Sales:
<TABLE>
<CAPTION>
                                                    Years Ended September 30,
                        -------------------------------------------------------------------------------------------
                                         2000                                          1999
                        ------------------------------------------      -------------------------------------------
                          External                                        External
                         customers      Intersegment        Total       customers     Intersegment          Total
                         -----------------------------------------       -----------------------------------------
<S>                      <C>            <C>              <C>             <C>          <C>                <C>
United States            $ 121,401      $      821       $ 122,222       $ 133,749    $       1,559      $ 135,308
China                       26,983         114,373         141,356          19,523          117,422        136,945
United Kingdom              24,529             -            24,529             -                -              -
Other segments              29,717             197          29,914          23,289              517         23,806
Eliminations                   -          (115,391)       (115,391)            -           (119,498)      (119,498)
                         -----------------------------------------       -----------------------------------------
  Total                  $ 202,630      $      -         $ 202,630       $ 176,561    $           -      $ 176,561
                         =========================================       =========================================

<CAPTION>
                                 Years Ended September 30,
                         ---------------------------------------------
                                            1998
                         ---------------------------------------------
                            External
                           customers     Intersegment            Total
                         ---------------------------------------------
<S>                        <C>           <C>                 <C>
United States              $ 122,286     $      1,099        $ 123,385
China                         21,309           90,035          111,344
United Kingdom                   -                -                -
Other segments                18,265              367           18,632
Eliminations                       -          (91,501)         (91,501)
                           -------------------------------------------
  Total                    $ 161,860      $       -          $ 161,860
                           ===========================================
</TABLE>

Net Sales by Location of External Customers:

                                        Years Ended September 30,
                                  -------------------------------------
                                      2000         1999          1998
                                  -------------------------------------
United States                     $ 121,558     $ 133,974     $ 122,509
Canada                               24,953        19,938        16,538
United Kingdom                       29,436             -             -
Other                                26,683        22,649        22,813
                                  -------------------------------------
   Net Sales                      $ 202,630     $ 176,561     $ 161,860
                                  =====================================

                                    Page 56
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)

15.            Segment Information (continued)

Segment Contribution:
<TABLE>
<CAPTION>
                                                              Years Ended September 30,
                                                          ------------------------------------
                                                            2000          1999           1998
                                                          ------------------------------------
<S>                                                       <C>           <C>            <C>
United States                                             $ 5,790       $ 8,971        $ 7,554
China                                                       9,196         6,641          1,933
United Kingdom                                             (1,273)            -              -
Other segments                                                577          (463)            31
                                                          ------------------------------------
  Subtotal for segments                                    14,290        15,149          9,518
Reversal of provision for litigation                            -         2,728              -
Reversal of post judgment interest
  related to litigation settlement                              -           893              -
Executive management reorganization                          (788)            -              -
Restructuring charge                                         (500)
Parent/administrative expenses                             (9,083)       (9,343)        (8,051)
                                                          ------------------------------------
  Income before income taxes                              $ 3,919       $ 9,427        $ 1,467
                                                          ====================================

Interest Expense (1):
                                                              Years Ended September 30,
                                                          ------------------------------------
                                                             2000          1999           1998
                                                          ------------------------------------
United States                                               $ 299         $ 947         $1,569
China                                                         161           443            648
United Kingdom                                                957             -              -
Other segments                                                478           440            261
                                                          ------------------------------------
  Subtotal for segments                                     1,895         1,830          2,478
Parent interest expense                                       937           583          1,323
                                                          ------------------------------------
  Total interest expense                                  $ 2,832        $2,413         $3,801
                                                          ====================================

Total Assets:
                                                                  September 30,
                                                          ---------------------------
                                                              2000               1999
                                                          ---------------------------
United States                                             $ 64,263          $  69,068
China                                                       53,170             48,161
United Kingdom                                              75,505                  -
Other segments                                              14,252             14,052
Eliminations                                               (39,219)           (29,384)
                                                          ---------------------------
  Total assets                                           $ 167,971          $ 101,897
                                                          ===========================
</TABLE>
                                    Page 57
<PAGE>


                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)

15.     Segment Information (continued)

Long-Lived Assets (2):
                                               September 30,
                                       -----------------------------
                                          2000                1999
                                       -----------------------------
United States                          $ 12,156              $12,499
China                                    12,516               11,747
United Kingdom                            5,125                    -
Other segments                              135                  185
                                       -----------------------------
  Total long-lived assets              $ 29,932              $24,431
                                       =============================

Expenditures for Additions to Long-Lived Assets (3);

                                            Years Ended September 30,
                                  ---------------------------------------------
                                     2000                1999             1998
                                  ---------------------------------------------
United States                     $ 1,013                $ 538          $ 1,138
China                               3,111                1,019            1,032
United Kingdom                        580                    -                -
Other segments                         18                  244              226
                                  ---------------------------------------------
  Total expenditures              $ 4,722              $ 1,801          $ 2,396
                                  =============================================


(1) Parent and  intersegment  advances bear interest at the U.S. prime rate. The
interest  expense  shown for each segment  includes  interest  paid or earned on
inter-segment advances.

(2) Represents property and equipment, net.

(3) Includes $427,000, $102,000 and $438,000 in expenditures which were financed
via capital lease  obligations for the years ended September 30, 2000, 1999, and
1998, respectively.

Major Customers
---------------

During the years ended September 30, 2000, 1999 and 1998 one customer (primarily
included  in  U.S.-based  operations)  accounted  for  23.2%,  25.8% and  27.5%,
respectively,  of the Company's net sales.  One other customer and its affiliate
(included in the U.S. and other segments)  accounted for 9.3%, 14.5% and 5.3% of
the  Company's  net sales during the years ended  September  30, 2000,  1999 and
1998, respectively.

                                    Page 58
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)


16.      Employment, Change in Control, Consulting and Non-Compete Agreements

The Company has  employment  agreements  with its C.E.O and two  Executive  Vice
Presidents.  The  agreements  expire on September  30, 2001.  All such  officers
receive  compensation  with  minimum  annual cost of living  increases of 5% and
acceleration  of payments due under the  agreements  should there be a change in
control of the Company.  The agreements  provide for severance at the end of the
present  three year term ending  September  30,  2001 in an amount  equal to two
times their base salary and benefits if the employment  agreement is not renewed
upon its expiration.  Each officer is subject to a non-compete provision through
September 30, 2001.  Bonuses paid to the Company's  C.E.O.  and three  Executive
Vice Presidents  pursuant to their  employment  agreements  totaled $674,000 and
$105,000 for fiscal 1999 and 1998,  respectively.  There was no bonus for fiscal
2000.

Pursuant to a reorganization of the Company's executive management structure, an
Executive  Vice  President left the Company in December 1999. The Company agreed
to settle its contractual  employment obligation to this executive for a payment
of $788,000.  The executive will continue to provide consulting services under a
three-year  non-compete and consulting agreement for annual payments of $250,000
through December 2002.

Future  commitments under employment and consulting  agreements at September 30,
2000, by fiscal year, excluding the possible effect of bonuses and severance are
as follows (in thousands):


                           2001                     $ 1,430
                           2002                         250
                           2003                          63
                           2004                           -
                                           -----------------
                                                    $ 1,743
                                           =================

The  Company  entered  into an  employment  agreement  with its Chief  Financial
Officer in October 2000 which replaces the Company's  previous Change in Control
Agreement  with this  employee.  This  agreement  expires in September  2001 and
provides  for a  severance  payment  equal  to (i) the  prorata  portion  of the
employee's  salary for the remainder of the agreement  term plus the  employee's
annual salary if the employee is terminated without cause or (ii) the employee's
annual salary if the  employment  agreement is not renewed upon its  expiration.
This  employment  agreement  also  provides for a lump sum payment  equal to two
times the employee's  salary plus a lump sum benefits  payment upon a "Change in
Control" of the Company, as defined in the agreement.

Ring has employment  agreements  with nineteen of its officers and key employees
which provide for notice periods in the case of termination varying from 6 to 36
months.  Their total annual basic salary cost amounts to approximately U.S. $1.8
million.  The agreements  contain benefit  packages  including  contributions to
Ring's  pension  plans  ranging  from  5% to 10% of  salary.  In  addition,  the
agreements contain post-termination restrictive covenants.

17.      Contingencies

Litigation
----------

On June 4, 1991,  the  Company was served  with a copy of the  Complaint  in the
matter of Browder vs. Catalina  Lighting,  Inc., Robert Hersh, Dean S. Rappaport
and Henry Gayer,  Case No.  91-23683,  in the Circuit Court of the 11th Judicial
Circuit in and for Dade County, Florida. The plaintiff in the action, the former
President  and  Chief  Executive  Officer  of the  Company,  contended  that his
employment  was  wrongfully  terminated and as such brought action for breach of
contract, defamation,  slander, libel and intentional interference with business
and  contractual  relationships,  including  claims for  damages in excess of $5
million against the Company and $3 million against the named  directors.  During
the course of the  litigation  the Company  prevailed on its Motions for Summary
Judgment  and  the  Court  dismissed  the   plaintiff's   claims  of  libel  and
indemnification.  On February 3, 1997, the plaintiff  voluntarily  dismissed the
remaining  defamation  claims against the Company and  directors.  The breach of
contract  claim  was  tried in  February  1997 and the jury  returned  a verdict
against the Company for total damages of $2.4 million (including

                                    Page 59
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)


17.      Contingencies  (continued)

Prejudgment  interest).  On July 14, 1997,  the Court also  granted  plaintiff's
motion for attorney fees and costs of $1.8 million.  A provision of $4.2 million
was  recorded  by the  Company  during the  quarter  ended  March 31, 1997 and a
$893,000  provision for  post-judgment  interest was recorded  through March 31,
1999.  On June 15, 1999 this case was settled and the Company  agreed to pay Mr.
Browder  $1.5  million.   This  settlement  resulted  in  the  reversal  in  the
Consolidated  Statements of Operations for the year ended  September 30, 1999 of
$2.7 million  previously  accrued for damages and attorney  fees and $893,000 in
previously accrued post judgment interest.

During fiscal years 2000, 1999 and 1998 the Company  received a number of claims
relating  to  halogen  torchieres  sold by the  Company  to  various  retailers.
Management  does not  currently  believe  these claims will result in a material
uninsured  liability to the Company.  The Company experienced an increase in its
liability  insurance  premiums  effective  for the  1999  calendar  year  and is
required to  self-insure up to $10,000 per incident  occurring  after January 1,
1999.  Based upon its  experience,  the Company is  presently  accruing for this
self-insurance  provision and has accrued  $177,000 for this  contingency  as of
September  30,  2000.  Management  does not  believe  that  this  self-insurance
provision  will  have a  material  adverse  impact  on the  Company's  financial
position or annual  results of  operations.  However,  no assurance can be given
that the number of claims will not exceed  historical  experience or that claims
will not exceed available insurance coverage or that the Company will be able to
maintain the same level of insurance.

The Company is also a defendant in other legal proceedings arising in the course
of business.  In the opinion of  management,  the ultimate  resolution  of these
other legal proceedings will not have a material adverse effect on the Company's
financial position or annual results of operations.

Other
-----

On August 9, 1999 the NYSE  notified  the Company  that it had changed its rules
regarding  continued listing for companies which have shares traded on the NYSE.
The new rules changed and increased the requirements to maintain a NYSE listing.
Through  September  30,  2000,  the  Company  did not meet the new rules,  which
require a total  market  capitalization  of $50 million and the  maintenance  of
minimum total  stockholders'  equity of $50 million.  The Company's total market
capitalization  and  stockholders'  equity as of  September  30, 2000 were $25.3
million and $50.8 million,  respectively.  The Company  expects to report a loss
for the  quarter  ending  December  31,  2000  and the  Company's  total  market
capitalization  as of the  close of  business  on  December  26,  2000 was $14.7
million.  As requested by the NYSE, the Company had previously provided the NYSE
with its plan to meet the new standards by February 2001. The Company's plan was
accepted by the NYSE in October  1999 and  continues to be monitored by the NYSE
through  the  current  quarter.  However,  no  assurances  can be given that the
objectives of the plan will be  accomplished by February 2001. If the Company is
ultimately  unable to meet the new NYSE listing rules or obtain an extension for
its plan,  the  Company's  shares could be  suspended  from trading on the NYSE,
however the Company believes other trading venues are available for its stock.

                                    Page 60
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)

18.      Disclosure about Fair Value of Financial Instruments

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

Cash  and  cash   equivalents,   restricted  cash   equivalents  and  short-term
investments, accounts receivable and accounts and letters of credit payable:

The carrying amount  approximates  fair value due to the short maturity of those
instruments.

Credit lines, term loans, bonds payable and other long-term debt:

The fair value of the  Company's  credit  lines,  term loans,  bonds payable and
other  long-term  debt is estimated  based on the current  rates  offered to the
Company for borrowings with similar terms and maturities.


Estimated fair values of the Company's financial  instruments are as follows (in
thousands):
<TABLE>
<CAPTION>
                                                                         September 30,
                                                --------------------------------------------------------------------
                                                             2000                                  1999
                                                ---------------------------            -----------------------------
                                                Carrying            Fair               Carrying              Fair
                                                 Amount             Value               Amount               Value
                                                --------           --------            --------            ---------
<S>                                             <C>                <C>                 <C>                 <C>
Cash and cash equivalents                       $  2,309           $  2,309            $  7,253            $   7,253

Restricted cash equivalents and
  short-term investments                        $    727           $    727            $  1,721            $   1,721

Accounts receivable, net                        $ 36,632           $ 36,632            $ 20,150            $  20,150

Credit lines                                    $ 22,786           $ 22,786            $ 14,350            $  14,350

Term loans                                      $ 28,415           $ 28,415            $    -              $     -

Accounts and letters of credit payable          $ 36,310           $ 36,310            $ 14,939            $  14,939

Bonds payable                                   $  6,000           $  5,758            $  8,210            $   8,160

Other long-term debt                            $  3,127           $  3,099            $  2,011            $   2,002
</TABLE>

It was not  practicable to estimate the fair value of the Company's $7.6 million
in convertible subordinated notes at September 30, 1999.

                                    Page 61
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)


19.        Subsequent Event

The  accompanying  financial  statements  have been  prepared on a going concern
basis,  which  contemplates  the  realization of assets and the  satisfaction of
liabilities  in the  normal  course of  business.  As  discussed  in Note 5, the
Company has significant borrowings which require, among other things, compliance
with certain  financial  ratios,  including a leverage  ratio and a fixed charge
coverage  ratio, on a quarterly  basis.  As a result of the Company's  operating
results  for the fourth  quarter of fiscal  2000,  most  notably the pretax loss
incurred by the Company's United Kingdom  operations,  the Company initially was
not in  compliance  with a  financial  covenant  under  its $75  million  credit
facility  for the quarter  ended  September  30, 2000.  The Company  obtained an
amendment of the credit  facility on December 22, 2000 and is in compliance with
the  financial  covenants  under the  amended  facility  for the  quarter  ended
September 30, 2000.  However,  due to the sales and  profitability  declines the
Company is  experiencing  for the quarter ending  December 31, 2000, the Company
does not expect to be in  compliance  with the  financial  covenants  of the $75
million credit  facility for the quarter ending December 31, 2000 and subsequent
quarters unless the covenants are waived or modified  through another  amendment
of the facility.

The   Company  is   exploring   strategic   alternatives   including   potential
divestitures,  a merger,  a  recapitalization  or other actions.  The investment
banking firm of SunTrust Equitable Securities has been hired to assist with this
strategic   review  and  to  formulate   proposed  plans  and  actions  for  the
consideration of the Board of Directors.  Because SunTrust Equitable  Securities
is  currently  conducting  its  review and  formulation  of  proposed  plans and
actions,  no assessment  can be made of the  likelihood  that any such plans and
actions are  feasible or can be  effectively  implemented.  The Company does not
intend to provide information updating the status of this strategic review or of
any efforts to implement plans or actions that may be developed,  and a negative
or positive inference should not be drawn from the absence of any such updates.

Regardless of the outcome of the strategic  review,  discussed above the Company
believes  that a waiver  covering  the  financial  covenants  of the $75 million
credit facility, or a second amendment of the $75 million credit facility,  will
be required for the quarter ending  December 31, 2000 and  subsequent  quarters.
Without  such  waiver or second  amendment,  based  upon the  Company's  current
expectations  there would be an event of default under that credit  facility for
the quarter  ending  December 31, 2000. A default or subsequent  breaches of the
financial  covenants  under the $75  million  credit  facility  could  result in
acceleration of the Company's indebtedness,  in which case the debt would become
immediately  due and payable.  Although no assurances can be given,  the Company
believes it will be able to successfully  negotiate with its present $75 million
credit bank syndicate, as is necessary,  for a waiver, or a second amendment, so
as to preclude  acceleration of its indebtedness for the quarter ending December
31,  2000.  If there is no  modification  or  waiver of the  existing  financial
covenants for the quarter ending  December 31, 2000, the Company may not be able
to  generate,  raise or  borrow  sufficient  funds to repay  its debt  and/or to
refinance  its debt.  Even if new funding is  available,  it may not be on terms
that are acceptable to the Company.

Based  upon the  Company's  current  assessment  of  market  conditions  for its
business,  the Company intends to negotiate for a waiver or second  amendment to
the financial  covenants of its $75 million credit facility that will also cover
quarters  ending  subsequent  to December 31,  2000.  The  Company's  ability to
satisfy the financial  covenants in subsequent quarters will depend on the terms
of any such waiver or second  amendment,  business  conditions for the Company's
products  and any  results  from  the  strategic  review  described  above.  The
Company's  continuation  as a going  concern is  dependent  upon its  ability to
successfully  establish the necessary financing  arrangements and to comply with
the terms  thereof.  Although no assurances can be given,  the Company  believes
that it will be able to continue operating as a going concern.

                                    Page 62
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 2000, 1999 and 1998 (Continued)


20.      Selected Quarterly Financial Data (Unaudited)
            (In thousands except per share data)
<TABLE>
<CAPTION>
                       1st Quarter*            2nd Quarter              3rd Quarter          4th Quarter**
-----------------------------------------------------------------------------------------------------------
<S>                        <C>                    <C>                      <C>                    <C>
Fiscal 2000
-----------------------------------------------------------------------------------------------------------
Net Sales                  $ 43,208               $ 42,033                 $ 46,705               $ 70,684
-----------------------------------------------------------------------------------------------------------
Gross Profit               $  8,895               $  8,001                 $  8,907               $ 12,611
-----------------------------------------------------------------------------------------------------------
Operating Income           $  1,326               $  1,305                 $  2,138               $  1,540
-----------------------------------------------------------------------------------------------------------
Net Income                 $    537               $    752                 $  1,080               $    476
-----------------------------------------------------------------------------------------------------------
Earnings Per Share:
-----------------------------------------------------------------------------------------------------------
   Basic                   $   0.08               $   0.11                 $   0.15               $   0.07
-----------------------------------------------------------------------------------------------------------
   Diluted                 $   0.07               $   0.10                 $   0.14               $   0.06
===========================================================================================================

<CAPTION>
                        1st Quarter            2nd Quarter           3rd Quarter***            4th Quarter
-----------------------------------------------------------------------------------------------------------
<S>                        <C>                    <C>                      <C>                    <C>
Fiscal 1999
-----------------------------------------------------------------------------------------------------------
Net Sales                  $ 42,803               $ 42,128                 $ 46,315               $ 45,315
-----------------------------------------------------------------------------------------------------------
Gross Profit               $  8,129               $  9,181                 $  9,616               $  8,729
-----------------------------------------------------------------------------------------------------------
Operating Income           $  1,318               $  2,092                 $  4,879               $  1,540
-----------------------------------------------------------------------------------------------------------
Net Income                 $    503               $  1,159                 $  3,873               $    954
-----------------------------------------------------------------------------------------------------------
Earnings Per Share:
-----------------------------------------------------------------------------------------------------------
   Basic                   $   0.07               $   0.16                 $   0.56               $   0.14
-----------------------------------------------------------------------------------------------------------
   Diluted                 $   0.07               $   0.15                 $   0.45               $   0.12
===========================================================================================================
</TABLE>

*    Reflects a $788,000 charge related to the  reorganization  of the executive
     management.

**   Reflects  the results of  operations  of Ring which was acquired on July 5,
     2000 and a $500,000 restructuring charge.

***  Reflects  the reversal of a $2.7 million  provision  related to  litigation
     with a former  officer  of the  Company  and the  reversal  of an  $893,000
     provision for post judgment interest.

                                    Page 63
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                                   SCHEDULE I
                         CONDENSED FINANCIAL INFORMATION


The Company's credit  facilities and U.K. laws place  restrictions on the amount
of assets that may be  transferred  by Ring,  Go-Gro and Catalina  Canada to the
parent or other Company subsidiaries. These restricted net assets totalled $17.2
million, $2.5 million and $33.6 million for the Go-Gro, Catalina Canada and Ring
subsidiaries, respectively, at September 30, 2000. The financial information for
the  Company  has been  adjusted in this  schedule  to report  Ring,  Go-Gro and
Catalina  Canada on the equity basis of accounting.  No cash dividends were paid
by these subsidiaries during the three years ended September 30, 2000.

<TABLE>
<CAPTION>
Balance Sheets                                                                                   September 30,
                                                                                   -----------------------------
                                      ASSETS                                           2000            1999
                                                                                   --------------  -------------
<S>                                                                                <C>             <C>
Current assets                                                                                (In thousands)
             Cash and cash equivalents                                             $         246   $          -
             Restricted cash and short-term investments                                      727          1,721
             Accounts receivable, net of allowances
                 of $5,905,000 and $7,920,000, respectively                               11,957         12,980
             Inventories                                                                  15,092         18,690
             Income taxes receivable                                                         406          1,805
             Deferred tax asset                                                            1,818          2,204
             Other current assets                                                          1,539          2,708
                                                                                   --------------  -------------
                              Total current assets                                        31,785         40,108

Property and equipment, net                                                               12,164         12,523

Investment in and net amounts due to or from Go-Gro                                       17,413         17,854
Investment in and net amounts due to or from Catalina Canada                               2,484          5,462
Investment in and net amounts due to or from Ring                                         33,645              -
Goodwill, net                                                                              4,676          4,839
Other assets                                                                               3,917          1,858
                                                                                   --------------  -------------
                                                                                   $     106,084   $     82,644
                                                                                   ==============  =============
                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
             Credit lines                                                          $      14,400   $        401
             Term loans                                                                   28,415              -
             Current maturities of subordinated notes                                          -          2,500
             Accounts and  letters of credit payable                                         902          1,219
             Current maturities of bonds payable-real estate related                         900          2,210
             Current maturities of other long-term debt                                      424            308
             Other current liabilities                                                     3,487          3,377
                                                                                   --------------  -------------
                              Total current liabilities                                   48,528         10,015

Credit lines                                                                                   -         12,150
Convertible subordinated notes                                                                 -          5,100
Bonds payable - real estate related                                                        5,100          6,000
Other long-term debt                                                                       1,173          1,209
Other liabilities                                                                            454            113
                                                                                   --------------  -------------
                              Total liabilities                                           55,255         34,587
                                                                                   --------------  -------------

Stockholders' equity
             Common Stock                                                                     80             74
             Additional paid-in capital                                                   28,560         26,927
             Retained earnings                                                            25,111         22,266
             Accumulated comprehensive loss                                                 (461)             -
             Treasury stock                                                               (2,461)        (1,210)
                                                                                   --------------  -------------
                              Total stockholders' equity                                  50,829         48,057
                                                                                   --------------  -------------
                                                                                   $     106,084   $     82,644
                                                                                   ==============  =============
</TABLE>

                                    Page 64
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                                   SCHEDULE I
                         CONDENSED FINANCIAL INFORMATION
                                   (Continued)
<TABLE>
<CAPTION>

Statements of Operations                                                                      Years Ended September 30,
------------------------                                                             --------------------------------------------
                                                                                         2000             1999            1998
                                                                                     ----------        ---------       ----------
                                                                                                    (In thousands)
<S>                                                                                    <C>              <C>            <C>
Net sales                                                                              $126,521         $137,415       $ 124,054
Cost of sales                                                                           107,866          116,553         106,524
                                                                                     ----------        ---------       ----------
Gross profit                                                                             18,655           20,862          17,530

Selling, general and administrative expenses                                             17,284           19,261          16,985
Litigation settlement                                                                         -           (2,728)              -
Restructuring charge                                                                        500                -               -
Executive management reorganization                                                         788                -               -
                                                                                     ----------        ---------       ----------
Operating income                                                                             83            4,329             545
                                                                                     ----------        ---------       ----------
Other income (expenses)
      Interest expense                                                                   (2,331)          (2,340)         (3,623)
      Reversal of post judgment interest related to litigation settlement                     -              893               -
      Equity in income of Go-Gro                                                          4,525            4,229           2,782
      Equity in income of Catalina Canada                                                   591               17              38
      Equity in loss of Ring                                                               (825)               -               -
      Interest income on advances to subsidiaries                                           535              683             657
      Administrative fee income from Catalina Canada                                        355              312             203
      Other income (expenses)                                                               (52)             302             323
                                                                                     ----------        ---------       ----------
Total other income (expenses)                                                             2,798            4,096             380
                                                                                     ----------        ---------       ----------
Income before income taxes                                                                2,881            8,425             925

Income tax (provision) benefit                                                              (36)          (1,936)            177
                                                                                     ----------        ---------       ----------
Net income                                                                              $ 2,845          $ 6,489         $ 1,102
                                                                                     ==========        =========       ==========
</TABLE>

                                    Page 65
<PAGE>
                    CATALINA LIGHTING, INC., AND SUBSIDIARIES
                                   SCHEDULE I
                         CONDENSED FINANCIAL INFORMATION
                                   (Continued)
<TABLE>
<CAPTION>
Statements of Cash Flows
------------------------
                                                                                          Years Ended September 30,
                                                                                     ------------------------------------
                                                                                         2000        1999         1998
                                                                                     ---------      -------      --------
                                                                                              (In thousands)
<S>                                                                                     <C>          <C>          <C>
Cash flows from operating activities:
  Net income                                                                            $2,845       $6,489       $1,102
                                                                                     ---------      -------      --------
     Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:
        Equity in income of Go-Gro, Catalina Canada and Ring                            (4,737)      (4,246)      (2,820)
        Depreciation and amortization                                                    2,810        1,977        2,405
        Deferred income taxes                                                             (307)       1,953          794
        (Gain) loss on disposition of property and equipment                                 -         (175)          (5)
        Change in assets and liabilities:
          Decrease (increase) in accounts receivable                                     1,023       (2,361)       1,839
          Decrease (increase) in inventories                                             3,598        1,628        5,452
          Decrease (increase) in income taxes receivable                                 1,399         (657)       2,224
          Decrease (increase) in other current assets                                      744          342         (619)
          Decrease (increase) in other assets                                             (945)        (336)        (374)
          Increase (decrease) in accrued litigation judgment under appeal                    -       (4,909)         423
          Increase (decrease) in accounts and letters of credit
            payable and other liabilities                                                  247         (530)      (5,551)
                                                                                     ---------      -------      --------
        Total adjustments                                                                3,832       (7,314)       3,768
                                                                                     ---------      -------      --------
        Net cash provided by (used in) operating activities                              6,677         (825)       4,870
                                                                                     ---------      -------      --------
Cash flows from investing activities:
    Capital expenditures, net                                                             (580)        (420)        (437)
    Proceeds from sale of property                                                           -          997            -
    Payment for acquisition of Ring, net of cash acquired                              (33,351)           -            -
    Decrease (increase) in investment in and net amounts due to or from
        Go-Gro, Catalina Canada and Ring                                                 7,862        2,249        7,721
    Decrease (increase) in restricted cash equivalents and
       short-term investments                                                            1,872          986          954
                                                                                     ---------      -------      --------
       Net cash provided by (used in) investing activities                             (24,197)       3,812        8,238
                                                                                     ---------      -------      --------
</TABLE>

(Continued on page 67)

                                    Page 66
<PAGE>
                    CATALINA LIGHTING, INC., AND SUBSIDIARIES
                                   SCHEDULE I
                         CONDENSED FINANCIAL INFORMATION
                                   (Continued)
<TABLE>
<CAPTION>
Statements of Cash Flows (continued)
------------------------------------
                                                                                               Years Ended September 30,
                                                                                        ---------------------------------------
                                                                                          2000           1999            1998
                                                                                        ---------       -------        --------
                                                                                                     (In thousands)
<S>                                                                                       <C>            <C>             <C>
Cash flows from financing activities:
      Proceeds from term loans                                                            30,000              -               -
      Payments on term loans                                                              (1,244)             -               -
      Proceeds from credit lines                                                          43,160         35,701          32,900
      Payments on credit lines                                                           (42,510)       (35,550)        (45,300)
      Payments on convertible subordinated notes                                          (7,600)             -               -
      Sinking fund redemption payments on bonds                                             (878)          (900)           (878)
      Payments on other long-term debt                                                      (511)          (576)           (581)
      Payments on bonds payable - real estate related                                     (2,210)          (980)           (975)
      Payments to repurchase common stock                                                 (1,251)        (1,210)              -
      Proceeds from issuance of common stock and
        related income tax benefit                                                         1,611            404             223
                                                                                        ---------       -------        --------
     Net cash provided by (used in) financing activities                                  18,567         (3,111)        (14,611)
                                                                                        ---------       -------        --------

Effect of exchange rate changes on cash                                                     (801)             -               -
Net increase (decrease) in cash and cash equivalents                                         246           (124)         (1,503)
Cash and cash equivalents at beginning of year                                                 -            124           1,627
                                                                                        ---------       -------        --------
Cash and cash equivalents at end of year                                                $    246        $     -        $    124
                                                                                        =========       =======        ========
</TABLE>

                       Supplemental Cash Flow Information

                                            Years Ended September 30,
                                    ----------------------------------------
                                      2000            1999             1998
                                    --------         ------          -------
                                                  (in thousands)
Cash paid (refunded) for:
  Interest                          $ 2,271          $2,228          $ 3,251
                                    =======          ======          =======
  Income taxes                      $(1,343)         $  612          $(3,512)
                                    =======          ======          =======


On July 5, 2000, the Company acquired Ring as follows:

      Fair value of assets acquired, net
        of cash and cash equivalents                        $ 70,001
      Liabilities assumed                                    (36,650)
                                                      ---------------
      Net cash payment made                                 $ 33,351
                                                      ===============

During the years ended September 30, 2000 and 1999, the Company issued 1,672 and
1,778 common shares to each of its outside  directors as compensation  for their
services. The aggregate market value of the stock issued was $28,000 and $50,000
for 2000 and 1999, respectively.

During  the  years  ended  September  30,  2000,  1999  and 1998  capital  lease
obligations  aggregating   approximately,   $427,000,   $102,000  and  $314,000,
respectively, were incurred when the Company entered into leases for new office,
computer, machinery and warehouse equipment.

                                    Page 67
<PAGE>
                    CATALINA LIGHTING, INC. AND SUBSIDIARIES
                                   SCHEDULE II
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                       Additions
                                                          ----------------------------
                                           Balance at      Charged to                                         Balance
                                           beginning of    costs and                                         at end of
             Description                      year          expenses         Other           Deductions         year
---------------------------------------    ------------   -------------   ------------      -------------   -------------
<S>                                            <C>            <C>             <C>              <C>              <C>
Accounts  receivable  allowances-
deducted  from  accounts
receivable  in the balance sheet:

   Year ended September 30, 2000            $    8,591     $    13,540     $    5,066        $   (14,722)    $    12,475
                                           ============   =============   ============      =============   =============

   Year ended September 30, 1999            $    8,408     $    11,575     $        -        $   (11,392)    $    8,591
                                           ============   =============   ============      =============   =============

   Year ended September 30, 1998            $    8,314     $    10,327     $        -        $   (10,233)    $    8,408
                                           ============   =============   ============      =============   =============


Inventory allowances -
deducted from inventory in the balance sheet:

   Year ended September 30, 2000            $    2,318     $    1,300      $   1,561         $   (1,766)     $    3,413
                                           ============   =============   ============      =============   =============

   Year ended September 30, 1999            $    1,656     $      971      $       -         $     (309)     $    2,318
                                           ============   =============   ============      =============   =============

   Year ended September 30, 1998            $    2,390     $      193      $       -         $     (927)     $    1,656
                                           ============   =============   ============      =============   =============

Allowance  for  impairment  of
long-lived  assets - deducted  from
property and equipment in the
 balance sheet:

   Year ended September 30, 2000            $        -     $         -     $        -        $         -     $        -
                                           ============   =============   ============      =============   =============

   Year ended September 30, 1999            $      519     $         -     $        -        $      (519)    $        -
                                           ============   =============   ============      =============   =============

   Year ended September 30, 1998            $      519     $         -     $        -        $         -     $       519
                                           ============   =============   ============      =============   =============
</TABLE>

                                    Page 68
<PAGE>
Item 9.  Changes In and Disagreements with Accountants on Accounting and
         Financial Disclosure.

         None
                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

         The information required by this item is incorporated by reference from
the  definitive  proxy  statement for the Company for its 2000 Annual Meeting of
Stockholders or the Company's Form 10K/A, which will be filed within 120 days of
September 30, 2000.

Item 11. Executive Compensation.

         The information required by this item is incorporated by reference from
the  definitive  proxy  statement for the Company for its 2000 Annual Meeting of
Stockholders or the Company's Form 10K/A, which will be filed within 120 days of
September 30, 2000.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

         The information required by this item is incorporated by reference from
the  definitive  proxy  statement for the Company for its 2000 Annual Meeting of
Stockholders or the Company's Form 10K/A, which will be filed within 120 days of
September 30, 2000.

Item 13. Certain Relationships and Related Transactions.

         The information required by this item is incorporated by reference from
the  definitive  proxy  statement for the Company for its 2000 Annual Meeting of
Stockholders or the Company's Form 10K/A, which will be filed within 120 days of
September 30, 2000.

                                     PART IV

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

         (a)      1.       Documents Filed as Part of this Report. The following
                           consolidated  financial statements of the Company and
                           its subsidiaries are filed as part of this Report:

                           Independent Auditors' Report

                           Consolidated Balance Sheets as of
                              September 30, 2000 and 1999

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

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

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

                           Notes to Consolidated Financial Statements

                  2.       Financial Statement Schedules.  The following
                           financial statement schedules are included in this
                           Report:

                           Schedule I - Condensed Financial Information

                           Schedule II - Valuation and  Qualifying  Accounts for
                           the years ended September 30, 2000, 1999 and 1998

                                    Page 69
<PAGE>
3.       Exhibits.  The following exhibits are filed with this Report or
         incorporated by reference:
<TABLE>
<CAPTION>
  Exhibit                                                                                          Filing In Which Exhibit
  Number                                Description                                              Is Incorporated By Reference
------------     -----------------------------------------------------------    ---------------------------------------------------
<S>              <C>                                                             <C>
     3       -   Amended and Restated Arcticles of Incorporated                 Registration Statement on Form S-1, Number 33-27861

    3.3      -   By-Laws, as amended                                            Filed herewith

     4       -   Certificate Common Shares, par value $.01                      Registration Statement on Form S-18, Number
                                                                                33-17409-A

    4.2      -   Werbel Roth Warrant                                            Registration Statement on Form S-18, Number
                                                                                33-17409-A

    4.3      -   Convertible Debentures                                         Form 8-K, dated August 31, 1989

    4.4      -   Convertible Debentures                                         Amendment No. 1 to Registration
                                                                                Statement No. 33-34444 on Form S-1

    4.5      -   Shareholders' Rights Plan                                      Form 10-K dated January 14, 1990

    4.6      -   Second  Amendment to Rights  Agreement dated as of November    Form 10-Q for the Quarter Ended March 31, 1992
                 20, 1990

   10.46     -   Employment  Agreement between the Company and Robert Hersh,    Form 10-K dated December 28, 1989
                 dated as of October 1, 1989

   10.47     -   Employment  Agreement  between  the  Company  and  Dean  S.    Form 10-K dated December 28, 1989
                 Rappaport, dated as of October 1, 1989

   10.48     -   Employment  Agreement  between  the  Company and William D.    Form 10-K dated December 28, 1989
                 Stewart, dated as of October 1, 1989

   10.49     -   Leases  dated  September  27, 1989  between the Company and    Form 10-K dated December 28, 1989
                 MP-1989-1 Ltd. Partnership

   10.50     -   Promissory  Note from  Nathan  Katz to the  Company,  dated    Form 10-K dated December 28, 1989
                 November 1989

   10.51     -   Promissory  Note from David  Hauser to the  Company,  dated    Form 10-K dated December 28, 1989
                 November 1989

   10.52     -   Amendment to  Agreement  and Option  Agreement  between the    Form 10-K dated December 28, 1989
                 Company and Windmere dated December 14, 1989

   10.53     -   Amendment  No. 2 to Credit  Agreement  dated as of  January    Registration Statement No. 33-34444
                 31, 1990                                                       on Form S-1

   10.54     -   Agreement  dated as of January  1,1990 between the Company,    Registration Statement No. 33-34444
                 Dana, David Hauser and Nathan Katz                             on Form S-1

   10.55     -   Promissory  Note  executed  in favor of Nathan  Katz by the    Registration Statement No. 33-34444
                 Company dated as of January 1, 1990                            on Form S-1

   10.56     -   Promissory Note executed in favor of David Hauser by the       Registration Statement No. 33-34444
                 Company dated as of January 1, 1990                            on Form S-1

   10.57     -   Amendment to 1987 Stock Option Plan                            Registration Statement No. 33-34444 on
                                                                                Form S-1

   10.58     -   Amendment No. 1 dated May 7, 1990 to  Employment  Agreement    Form 10-Q dated August 17,1990
                 between the Company and Robert Hersh

   10.59     -   Amendment  No. 3 to Credit  Agreement  dated as of March 9,    Form 10-Q dated August 17, 1990
                 1990

   10.60     -   Amendment  No. 4 to  Credit  Agreement  dated as of May 31,    Form 10-Q dated August 17, 1990
                 1990

   10.61     -   Assignment  of Credit  Agreement  dated as of May 1,  1990;    Form 10-Q dated August 17,1990
                 Credit Facility between the Company and SunTrust


   10.62     -   Lease  between  Dana  and H & K  Realty  Trust  dated as of    Form 10-Q dated August 17, 1990
                 April 1, 1990
</TABLE>

                                    Page 70
<PAGE>
<TABLE>
<CAPTION>
<S>              <C>                                                             <C>
   10.63     -   Lease between the Company and Paragon  regarding the Dallas    Form 10-Q dated August 17, 1990
                 Facility, dated October 16, 1989

   10.64     -   Amendment   dated  as  of  April  1,  1990  to   Employment    Amendment   No.  1  to   Registration   Statement
                 Agreement between Dana, the Company and Nathan Katz            No. 33-34444 on Form S-1

   10.65     -   Amendment   dated  as  of  April  1,  1990  to   Employment    Amendment   No.  1  to   Registration   Statement
                 Agreement between Dana, the Company and David Hauser           No. 33-34444 on Form S-1

   10.66     -   Amendment  dated  as  of  August  27,  1990  to  Employment    Amendment   No.  1  to   Registration   Statement
                 Agreement between the Company and John H. Browder              No. 33-34444 on Form S-1

   10.67     -   Amendment  dated  as  of  August  27,  1990  to  Employment    Amendment   No.  1  to   Registration   Statement
                 Agreement between the Company and Robert Hersh                 No. 33-34444 on Form S-1

   10.68     -   Amendment  dated  as  of  August  27,  1990  to  Employment    Amendment   No.  1  to   Registration   Statement
                 Agreement between the Company and Dean S. Rappaport            No. 33-34444 on Form S-1

   10.69     -   Amendment  dated  as  of  August  27,  1990  to  Employment    Amendment   No.  1  to   Registration   Statement
                 Agreement between the Company and William D. Stewart           No. 33-34444 on Form S-1

   10.70     -   Amendment  to 1987  Stock  Option  and  Stock  Appreciation    Form 10-K dated January 14, 1990
                 Rights Plan

   10.71     -   Amendment to dated October 1, 1990 to Employment  Agreement    Form 10-K dated January 14, 1990
                 between the Company and Dean S. Rappaport

   10.72     -   First Amendment to Credit  Agreement dated November 1, 1990    Form 10-K dated January 14, 1990
                 between the Company and Sun Bank

   10.73     -   Second  Amendment  to Credit  Agreement  dated  January 11,    Form 10-K dated January 14, 1990
                 1991 between the Company and Sun Bank

   10.74     -   Third  Amendment  to Credit  Agreement  dated March 7, 1991    Form 10-Q for the quarter ended March 31, 1991
                 between the Company and Sun Bank

   10.75     -   Amendment  to  Employment  Agreement  dated  April 8,  1991    Form 10-Q for the quarter ended March 31, 1991
                 between the Company and Robert Hersh

   10.76     -   Amended and Restated  Credit  Agreement dated September 30,    Form 8 Amendment No. 2 to Form 10-Q dated June 30,
                 1991 between the Company and Sun Bank                          1991

   10.77     -   Certain  equipment  leases  between the Company and various    Form 10-K dated December 18, 1991
                 equipment leasing companies

   10.78     -   First  Amendment to Amended and Restated  Credit  Agreement    Form 10-K dated December 18, 1991
                 dated December 1, 1991

   10.79     -   Joint  Venture  Agreement  dated  as of  January  14,  1992    Form 10-Q for the quarter ended March 31, 1992
                 between Catalina  Lighting,  Inc. O'Design  Ceramics,  Inc.
                 Catalina Canada Lighting Inc. and Danny Lavy, as amended

   10.80     -   Employment  Agreement dated April 1, 1992 between  Catalina    Form 10-Q for the quarter ended March 31, 1992
                 Lighting, Inc. and Janet P. Ailstock

   10.81     -   Second  Amended and  Restated  Credit  Agreement  among the    Form 10-Q for the quarter ended March 31, 1992
                 Company  and Sun  Bank,  National  Association  dated as of
                 June 19, 1992

   10.82     -   Amendments  to  Employment  Agreements  between the Company    Form 10-K dated December 10, 1992
                 and  Messrs  Hersh,  Rappaport  and  Stewart  dated  as  of
                 October 1, 1992

   10.83     -   Amendment,  dated  January 26, 1993 between the Company and    Form 10-Q for the quarter ended December 31, 1992
                 David Moss

   10.84     -   First  Amendment  to Second  Amended  and  Restated  Credit    Form 10-Q for the quarter ended December 31, 1992
                 Facility dated as of June 19, 1992

   10.85     -   Second  Amendment  to Second  Amended and  Restated  Credit    Form 10-Q for the quarter ended
                 Agreement   Among  the  Company  and  Sun  Bank,   National    March 31, 1993
                 Association, dated April 30, 1993
</TABLE>

                                    Page 71
<PAGE>
<TABLE>
<CAPTION>
<S>              <C>                                                             <C>
   10.86     -   Amendment  dated  as  of  October  1,  1993  to  Employment    Form 10-K dated December 28, 1993
                 Agreement between the Company and Robert Hersh

   10.87     -   Amendment  dated  as  of  October  1,  1993  to  Employment    Form 10-K dated December 28, 1993
                 Agreement between the Company and Dean Rappaport

   10.88     -   Amendment  dated  as  of  October  1,  1993  to  Employment    Form 10-K dated December 28, 1993
                 Agreement between the Company and William D. Stewart

   10.89     -   Agreement  dated   September  29,  1993  between   Catalina    Form 10-K dated December 28, 1993
                 Lighting, Inc. and Shunde No. 1 Lamp Factory

   10.90     -   Agreement  dated  October 1, 1993  between  Dana  Lighting,    Form 10-Q for the quarter ended December 31, 1993
                 Inc., Catalina Lighting,  Inc., and Nathan Katz terminating
                 the 1989 Employment Agreement

   10.91     -   The  Employment  Agreement  dated  October 1, 1993  between    Form 10-Q for the quarter ended December 31, 1993
                 Dana Lighting,  Inc.,  Catalina Lighting,  Inc., and Nathan
                 Katz

   10.92     -   Note  Agreement  dated March 15, 1994 among the Company and    Form 10-Q for the quarter ended March 31, 1994
                 Massachusetts  Mutual Life  Insurance  Company,  MassMutual
                 Corporate Investors,  MassMutual  Participation  Investors,
                 S.O.  P.A.F.  International  S.A.,  Prudential  Securities,
                 Inc. and Jefferies Group, Inc.

   10.93     -   Second Amended  Employment  Agreement among the Company and    Form 10-Q for the quarter ended March 31, 1994
                 Janet P. Ailstock dated April 1, 1994.

   10.94     -   Agreement dated December 30, 1993 among the Company,  Danny    Form 10-Q for the quarter ended March 31, 1994
                 Lavy, Susan Lavy and Les Investissements Lavy, Inc.

   10.95     -   Third amended and restated credit  agreement among Catalina    Form 10-Q for the quarter ended June 30, 1994
                 Lighting,  Inc. and Sun Bank, National  association,  dated
                 May 12, 1994

   10.96     -   Letter  of  commitment  between  Catalina  Lighting  Canada    Form 10-Q for the quarter ended June 30, 1994
                 (1992), Inc. and National bank of Canada dated May 19, 1994

   10.97     -   Consulting  Agreement between Catalina  Lighting,  Inc. and    Form 10-Q for the quarter ended June 30, 1994
                 Henry Gayer dated July 6, 1994

   10.98     -   Purchase  Agreement among Catalina  Lighting,  Inc. and the    Form 8-K dated August 9, 1994
                 Stockholders of Go-Gro Industries, Ltd.

   10.99     -   Employment  Agreement  by and among Go-Gro  Industries  and    Form 8-K dated August 9, 1994
                 Mr. Lau

 10.100.1    -   Financial  statements  of Go-Gro  Industries  Ltd.  for the    Amendment No.2 to Form 8-K filed December 15, 1994
                 year ended July 31, 1994

 10.100.2    -   Financial  statements  of Go-Gro  Industries  Ltd.  for the    Amendment No.1 to Form 8-K filed October 13, 1994
                 years ended July 31, 1993 and 1992

 10.100.3    -   Financial  statements  of CIPEL  Development  Ltd.  for the    Amendment No.1 to Form 8-K filed October 13, 1994
                 year ended July 31, 1994

 10.100.4    -   Financial  Statements of CIPEL Development  Limited for the    Amendment No.1 to Form 8-K filed October 13, 1994
                 years ended July 31, 1993 and 1992

 10.100.5    -   Financial  Statements  of Lamp Depot Limited for the period    Amendment No.1 to Form 8-K filed October 13, 1994
                 from  September  23, 1994 (date of  incorporation)  to July
                 31, 1994

 10.100.6    -   Amended Financial Statements of Go-Gro Industries Limited      Amendment No. 2 to Form 8-K/A dated December 15,
                                                                                1994

  10.101     -   First  amendment  to  third  amended  and  restated  credit    Form 10-K dated December 28, 1994
                 agreement  among  Catalina  Lighting,  Inc.  and Sun  Bank,
                 National Association, dated August 12, 1994

  10.102     -   Contract  for the Sale and  Purchase  of Real Estate by and    Form 10-K dated December 28, 1994
                 between  Lauderdale County Economic  Development  District,
                 Meridian  Lamps,  Inc. and Jansko,  Inc.  dated November 1,
                 1994
</TABLE>

                                    Page 72
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<TABLE>
<CAPTION>
<S>              <C>                                                             <C>
  10.103     -   Mississippi Small Enterprise  Development  Finance Act Loan    Form 10-K dated December 28, 1994
                 Agreement among  Mississippi  Business Finance  Corporation
                 (acting  for and on behalf  of the  State of  Mississippi),
                 Bank of  Mississippi  (as  Servicing  Trustee) and Meridian
                 Lamps, Inc. dated November 1, 1994

  10.104     -   $1,200,000   Mortgage  Deed  and  Security   Agreement  and    Form 10-K dated December 28, 1994
                 Mortgage   Note   issued  by  the   Company   in  favor  of
                 Mississippi  Business Finance  Corporation  dated September
                 28, 1994

  10.105     -   Agreement of Lease by and between Anker  Construction  Ltd.    Form 10-K dated December 28, 1994
                 and Catalina  Lighting  Canada  (1992),  Inc. dated October
                 20, 1994

  10.106     -   Sub-Lease   Agreement  dated  September  23,  1994  by  and    Form 10-K dated December 28, 1994
                 between the Company and Shippers Warehouse, Inc.

  10.107     -   Plan   Administration   Support  Services  Agreement  dated    Form 10-K dated December 28, 1994
                 September 12, 1994 by and between Catalina  Lighting,  Inc.
                 and Sun Bank, National Association

  10.108     -   Amended   Complaint  in  the  Matter  of  Holmes   Products    Form 10-K dated December 28, 1994
                 Corporation versus Dana Lighting, Inc. and Nathan Katz

  10.109     -   Financing  agreements between Go-Gro Industries Limited and    Form 10-K dated December 28, 1994
                 Standard Chartered Bank dated May 27, 1994

  10.110     -   Financing  Agreement between Go-Gro Industries  Limited and    Form 10-K dated December 28, 1994
                 The Hong  Kong and  Shanghai  Banking  Corporation  Limited
                 dated May 31, 1993

  10.111     -   Letter of Credit  Agreement  dated as of  November  1, 1994    Form 10-K dated December 28, 1994
                 between  Meridian  Lamps,  Inc.,  the Company and Sun Bank,
                 National Association

  10.112     -   Second  Amendment  to Third  Amended  and  Restated  Credit    Form 10-Q for the quarter ended March 31, 1995
                 Agreement  and Third  Amended and Restated  Stock and Notes
                 Pledge  between  Sun  Bank  National  Association  and  the
                 Company dated February 23, 1995

  10.113     -   Financing  Agreement  between Go-Gro  Industries,  Ltd. and    Form 10-Q for the quarter ended March 31, 1995
                 Standard  Chartered Bank dated October 4, 1994 and amendment to
                 Financing Agreement dated January 5, 1995

  10.114     -   Third  Amendment  to  Third  Amended  and  Restated  Credit    Form 10-Q for the quarter ended June 30, 1995
                 Agreement  and Consent  dated May 1, 1995 between  Catalina
                 Lighting and Sun Bank, National Association

  10.115     -   Fourth  Amendment  to Third  Amended  and  Restated  Credit    Form 10-Q for the quarter ended June 30, 1995
                 Agreement and Consent dated June 30, 1995 between  Catalina
                 Lighting and Sun Bank, National Association

  10.116     -   First   Amendment  to  Note  Agreement   between   Catalina    Form 10-Q for the quarter ended June 30, 1995
                 Lighting and Massachusetts  Mutual Life Insurance  Company,
                 MassMutual  Corporate Investors,  MassMutual  Participation
                 Investors, MassMutual Corporate Value Partners, Prudential
                 Securities  Inc. and SO. P.A.F.  International  S.A.  dated
                 June 28, 1995

  10.117     -   Loan  Agreement   between   Mississippi   Business  Finance    Form 10-Q for the quarter ended June 30, 1995
                 Corporation and Dana Lighting, dated May 1, 1995

  10.118     -   Letter of Credit Agreement between Dana Lighting,  Inc. and    Form 10-Q for the quarter ended June 30, 1995
                 Sun Bank,  National  Association  dated May 1, 1995, and as
                 amended on June 30, 1995

  10.119     -   Shenzhen  Municipal  Agreement  to  transfer  rights to use    Form 10-Q for the quarter ended June 30, 1995
                 land dated April 11, 1995

  10.120     -   Construction  Loan  Agreement  between  Sun Bank,  National    Form 10-Q for the quarter ended June 30, 1995
                 Association and Dana Lighting dated May 1, 1995

  10.121     -   Indenture  of Trust  dated May 1, 1995,  relating  to $10.5    Form 10-Q for the quarter ended June 30, 1995
                 million  Mississippi  Business Finance  Corporation Taxable
                 Variable Rate Industrial  Development  Revenue Bonds Series
                 1995
</TABLE>

                                    Page 73
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<CAPTION>
<S>              <C>                                                             <C>
  10.122     -   Shenzhen Municipal  Construction  Contract dated January 4,    Form 10-Q for the quarter ended June 30, 1995
                 1995

  10.123     -   Final Design and  Construction  Contract  between  Catalina    Form 10-Q for the quarter ended June 30, 1995
                 Industries, Inc., d/b/a Dana Lighting and Jesco, Inc. dated
                 June 20, 1995

  10.124     -   Sublease  Agreement  between  Catalina  Lighting,  Inc. and    Form 10-Q for the quarter ended June 30, 1995
                 Shippers   Warehouse   and   Agreement   between   Catalina
                 Lighting, Inc. and Shippers Warehouse, Inc. and S & W
                 Warehouse, Inc. effective June 15, 1995 as to sell warehouse
                 equipment.

  10.125     -   Land  purchase  Agreement  dated  March  31,  1995  between    Form 10-Q for the quarter ended June 30, 1995
                 Community Development Foundation and Dana Lighting, Inc.

  10.126     -   Fifth  amendment  to  Third  Amended  and  Restated  Credit    Form 10-K dated December 27, 1995
                 Agreement dated December 4, 1995 between Catalina  Lighting
                 and SunTrust Bank,  Central Florida,  National  Association
                 f/k/a SunTrust, National Association

  10.127     -   Contract  to  amend   Cooperative  Joint  Venture  Contract    Form 10-K dated December 27, 1995
                 between  Shenzhen  Baoanqu  Fuda  Industries  Co. (SJE) and
                 Go-Gro Industries, Ltd. dated May 27, 1995

  10.128     -   Second   Amendment  to  Note  Agreement   between  Catalina    Form 10-K dated December 27, 1995
                 Lighting and Massachusetts  Mutual Life Insurance  Company,
                 MassMutual  Corporate investors,  MassMutual  Participation
                 Investors,   MassMutual  Corporate  Value  Partners,  Ltd.,
                 Prudential  Securities  Inc. and SO.  P.A.F.  International
                 S.A. dated September 30, 1995

  10.129     -   Sixth  Amendment  to  third  Amended  and  Restated  Credit    Form 10-Q for the Quarter ended December 31, 1995
                 Agreement  dated  December  28,  1995,   between   Catalina
                 Lighting,   Inc.  and  Sun  Trust  Bank,  Central  Florida,
                 National Association f/k/a SunTrust, National Association

  10.130     -   Second  Amendment to Letter of Credit  Agreement  and First    Form 10-Q for the Quarter ended December 31, 1995
                 Amendment   to   Security    Agreement   between   Catalina
                 Industries,  Inc.  d/b/a Dana  Lighting and SunTrust  Bank,
                 Central  Florida,   National  Association  f/k/a  SunTrust,
                 National Association

  10.131     -   Seventh  Amendment  to third  Amended and  Restated  Credit    Form 10-Q for the Quarter ended March 31, 1996
                 Agreement dated March 18, 1996,  between Catalina Lighting,
                 Inc.  and  Sun  Trust  Bank,   Central  Florida,   National
                 Association

  10.132     -   Third  Amendment to Letter of Credit  Agreement dated March    Form 10-Q for the Quarter ended March 31, 1996
                 27,  1996  between  Catalina  Industries,  Inc.  d/b/a Dana
                 Lighting  and  SunTrust  Bank,  Central  Florida,  National
                 Association f/k/a SunTrust, National Association

  10.133     -   Third  Amendment to  Employment  Agreement  dated April 1,     Form 10-Q for the Quarter ended March 31, 1996
                 1996 between Catalina Lighting, Inc. and Janet P. Ailstock

  10.134     -   License    Agreement   dated   April   26,   1996   between    Form 10-Q for the Quarter ended March 31, 1996
                 Westinghouse  Electric  Corporation and Catalina  Lighting,
                 Inc.

  10.135     -   Press Release dated July 18, 1996                              Form 8-K dated July 18, 1996

  10.136     -   Complaint in the matter of Black & Decker (U.S.), Inc.,        Form 10-Q for the Quarter ended June 30, 1996
                 Black & Decker Inc. vs. Catalina Lighting, Inc., Case No.
                 96-1042-A, in the United States District Court, Eastern
                 Division of Virginia

  10.137     -   Financing   Agreement   between  Catalina  Lighting  Canada    Form 10-K dated December 27, 1996
                 (1992), Inc. and National Bank of Canada dated May 1, 1996

  10.138     -   Lease Financing  Agreement  between Go-Gro Industries Ltd.     Form 10-K dated December 27, 1996
                 and  The  Hong  Kong  and  Shanghai  Banking   Corporation
                 Limited dated October 30, 1996

  10.139     -   Eighth  Amendment  to Third  Amended and  Restated  Credit     Form 10-Q for the Quarter ended December 31, 1996
                 Agreement,  third Amendment to second Amended and Restated
</TABLE>

                                    Page 74
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<CAPTION>
<S>              <C>                                                             <C>
                 Security Agreement,  and Fourth Amendment to Third Amended
                 and Restated  stock and Notes Pledge dated October 4, 1996
                 between  Catalina   Lighting,   Inc.  and  SunTrust  Bank,
                 Central Florida, national Association.

  10.140     -   Ninth  Amendment  to Third  Amended  and  Restated  Credit     Form 10-Q for the Quarter ended March 31, 1997
                 Agreement   dated  December  30,  1996  between   Catalina
                 Lighting,   Inc.  and  SunTrust  Bank,   Central  Florida,
                 National Association.

  10.141     -   Fourth  Amendment  to  Letter of  Credit  Agreement  dated     Form 10-Q for the Quarter ended March 31, 1997
                 December 30, 1996 between  Catalina  Industries,  Inc. and
                 SunTrust Bank, Central Florida, National Association.

  10.142     -   Tenth  Amendment  to Third  Amended  and  Restated  Credit     Form 10-Q for the Quarter ended March 31, 1997
                 Agreement dated March 31, 1997 between Catalina  Lighting,
                 Inc.  and  SunTrust  Bank,   Central   Florida,   National
                 Association.

  10.143     -   Fifth Amendment to Letter of Credit  Agreement dated March     Form 10-Q for the Quarter ended March 31, 1997
                 31, 1997 between  Catalina  Industries,  Inc. and SunTrust
                 Bank, Central Florida, National Association.

  10.144     -   Restated Arcticles of Association for Shenzhen  Jiadianbao     Form 10-Q for the Quarter ended March 31, 1997
                 Electrical   Products  Co.,  Ltd.,  a  Cooperative   Joint
                 Venture Company dated October 18, 1996

  10.145     -   Contract  to  Amend  Cooperative  Joint  Venture  Contract     Form 10-Q for the Quarter ended March 31, 1997
                 between   Shenzhen   Baoanqu  Fuda   Industries  Co.,  and
                 Go-Gro Industries, Ltd. dated October 18, 1996

  10.146     -   Financing  Agreement between Go-Gro  Industries,  Ltd. and     Form 10-Q for the Quarter ended June 30, 1997
                 Standard Chartered Bank dated May 12, 1997.

  10.147     -   Employment and  non-compete  agreement dated April 1, 1997     Form 10-Q for the Quarter ended June 30, 1997
                 between Go-Gro Industries Ltd. and Wai Check Lau.

  10.148     -   Amendment  to   Financing   Agreement   between   Catalina     Form 10-K dated December 24, 1997
                 Lighting  Canada (1992),  Inc. and National Bank of Canada
                 dated October 17, 1997

  10.149     -   Eleventh  Amendment to Third  Amended and Restated  Credit     Form 10-K dated December 24, 1997
                 Agreement  dated  September  30,  1997  between   Catalina
                 Lighting,   Inc.  and  SunTrust  bank,   Central  Florida,
                 National Association.

  10.150     -   Sixth  Amendment  to  Letter  of  Credit  Agreement  dated     Form 10-K dated December 24, 1997
                 September 30, 1997 between Catalina  Industries,  Inc. and
                 SunTrust bank, Central Florida, National Association.

  10.151     -   First   Amendment  to  Shenzhen   Municipal   Construction     Form 10-K dated December 24, 1997
                 Contract dated January 30, 1996.

  10.152     -   First  Amendment to the Loan Agreement  among  Mississippi     Form 10-K dated December 24, 1997
                 Business   Finance   Corporation,   Bank  of  Mississippi,
                 SunTrust Bank and Meridian  Lamps,  Inc.  dated August 28,
                 1997.

  10.153     -   Escrow  Agreement  between  Mississippi  Business  Finance     Form 10-K dated December 24, 1997
                 Corporation,  Meridian Lamps, Inc. and Bank of Mississippi
                 dated August 28, 1997.

  10.154     -   Seventh  Amendment to Letter of Credit  Agreement  between     Form 10-Q for the Quarter ended March 31, 1998
                 Catalina  Industries,  Inc.  and  SunTrust  Bank,  Central
                 Florida, N.A. dated December 31, 1997.

  10.155     -   Twelfth  Amendment to Third  Amended and  Restated  Credit     Form 10-Q for the Quarter ended March 31, 1998
                 Agreement  between  Catalina  Lighting,  Inc. and SunTrust
                 Bank, Central Florida, N.A. dated December 31, 1997.

  10.156     -   Second Amendment to Financing  Agreement  between Catalina     Form 10-Q for the Quarter ended March 31, 1998
                 Lighting  Canada (1992),  Inc. and National Bank of Canada
                 dated December 19, 1997.

  10.157     -   Eighth  Amendment  to Letter of Credit  Agreement  between     Form 10-Q for the Quarter ended March 31, 1998
                 Catalina
</TABLE>

                                    Page 75
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<CAPTION>
<S>              <C>                                                             <C>
                 Industries,  Inc.  and  SunTrust  Bank,  Central
                 Florida, N.A. dated March 31, 1998.

  10.158     -   Thirteenth  Amendment to Third Amended and Restated Credit     Form 10-Q for the Quarter ended March 31, 1998
                 Agreement  between  Catalina  Lighting,  Inc. and SunTrust
                 Bank, Central Florida, N.A. dated March 31, 1998.

  10.159     -   Lease  Agreement  between  Dana Realty  Trust and Catalina     Form 10-Q for the Quarter ended June 30, 1998
                 Industries dated July 23, 1998.

  10.160     -   Offer to Lease from Catalina Lighting Canada,  Inc. to TAG     Form 10-Q for the Quarter ended June 30, 1998
                 Quattro Inc dated March 12, 1998.

  10.161     -   Change in Control  Agreement  between  Thomas M. Bluth and     Form 10-Q for the Quarter ended June 30, 1998
                 Catalina Lighting dated May 7, 1998.

  10.162     -   Change in Control  Agreement  between David W. Sasnett and     Form 10-Q for the Quarter ended June 30, 1998
                 Catalina Lighting dated May 7, 1998.

  10.163     -   Ninth  Amendment  to Letter of  Credit  Agreement  between     Filed herewith
                 Catalina  Industries,  Inc.  and  SunTrust  Bank,  Central
                 Florida, N.A. dated September 30, 1998.

  10.164     -   Fourteenth  Amendment to Third Amended and Restated Credit     Filed herewith
                 Agreement  between  Catalina  Lighting,  Inc. and SunTrust
                 Bank, Central Florida, N.A. dated September 30, 1998.

  10.165     -   Renewal Mortgage Note between Catalina Lighting,  Inc., and    Form 10-Q for the Quarter ended December 31, 1998
                 SunTrust Bank, Central Florida, N.A. dated October 5, 1998.

  10.166     -   Amended and Restated By-Laws of Catalina Lighting, Inc.        Form 10-Q for the Quarter ended March 31, 1999

  10.167     -   Agreement,  dated  as of April  30,  1999,  among  Catalina    Form 10-Q for the Quarter ended March 31, 1999
                 Lighting, Inc., David M. Moss and DMM Investments Ltd.

  10.168     -   Fifteenth  Amendment to Third  Amended and Restated  Credit    Form 10-Q for the Quarter ended June 30, 1999
                 Agreement  between  Catalina  Lighting,  Inc.  and SunTrust
                 Bank, Central Florida, N.A. dated March 31, 1999.

  10.169     -   Tenth  Amendment  to  Letter of  Credit  Agreement  between    Form 10-Q for the Quarter ended June 30, 1999
                 Catalina  Industries,   Inc.  and  SunTrust  Bank,  Central
                 Florida, N.A. dated March 31, 1999.

  10.170     -   Amendment  No. 1 to Change  in  Control  Agreement  between    Form 10-Q for the Quarter ended June 30, 1999
                 Thomas M. Bluth and Catalina  Lighting,  Inc,.  dated March
                 3, 1999.

  10.171     -   Amendment  No. 1 to Change  in  Control  Agreement  between    Form 10-Q for the Quarter ended June 30, 1999
                 David W. Sasnett and Catalina  Lighting,  Inc., dated March
                 3, 1999.

  10.172     -   First   Amendment   to  License   Agreement   between   CBS    Form 10-Q for the Quarter ended June 30, 1999
                 Corporation  (formerly  Westinghouse  Electric Corporation)
                 and Catalina Lighting, Inc., dated March 1, 1999.

  10.173     -   Lease  Agreement  dated  April 30,  1999  between  Catalina    Form 10-Q for the Quarter ended June 30, 1999
                 Industries, Inc. and Dana Realty Trust.

  10.174     -   Purchase  and Sale  Contract  dated  May 6,  1999,  between    Form 10-Q for the Quarter ended June 30, 1999
                 Meridian Lamps, Inc., and Saunders of Meridian, LLC.

  10.175     -   Form of Amendment to  Employment  Agreement,  dated June 4,    Form 10-Q for the Quarter ended June 30, 1999
                 1999 with Executive  officers  Hersh,  Katz,  Rappaport and
                 Stewart.

  10.176     -   Sixteenth  Amendment to third  Amended and Restated  Credit    Form 10-K for the year ended September 30, 1999
                 Agreement  between  Catalina  Lighting,  Inc.  and SunTrust
                 Bank, Central Florida, N.A. dated September 30, 1999.

  10.177     -   Eleventh  Amendment to Letter of Credit  Agreement  between    Form 10-K for the year ended September 30, 1999
                 Catalina  Industries,   Inc.  and  SunTrust  Bank,  Central
                 Florida, N.A. dated September 30, 1999.
</TABLE>

                                    Page 76
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<CAPTION>
<S>              <C>                                                             <C>
  10.178     -   Consulting   and   Non-competition    Agreement   effective    Form 10-K for the year ended September 30, 1999
                 December  24, 1999  between  Catalina  Lighting,  Inc.  and
                 William D. Stewart.

  10.179     -   General Release and Severance  Agreement effective December    Form 10-K for the year ended September 30, 1999
                 23, 1999  between  Catalina  Lighting,  Inc. and William D.
                 Stewart.

  10.180     -   Third  Amendment to Employment  Agreement  dated  September    Form 10-K for the year ended September 30, 1999
                 30, 1999 between Catalina Lighting, Inc. and Nathan Katz

  10.181     -   Consulting and  Non-competition  Agreement  dated September    Form 10-K for the year ended September 30, 1999
                 30, 1999 between Catalina Lighting, Inc. and Nathan Katz

  10.182     -   Amended  and  Restated   Change-in-Control   and  Severance    Form 10-K for the year ended September 30, 1999
                 Agreement  dated July 26, 1999 between  Catalina  Lighting,
                 Inc. and Thomas M. Bluth

  10.183     -   First  Amendment to Amended and Restated  Change-in-Control    Form 10-K for the year ended September 30, 1999
                 and Severance  Agreement  dated  September 30, 1999 between
                 Catalina Lighting, Inc. and Thomas M. Bluth

  10.184     -   Amended  and  Restated   Change-in-Control   and  Severance    Form 10-K for the year ended September 30, 1999
                 Agreement  dated June 4, 1999  between  Catalina  Lighting,
                 Inc. and David W. Sasnett

  10.185     -   First  Amendment to Amended and Restated  Change-in-Control    Form 10-K for the year ended September 30, 1999
                 and  Severance   Agreement  dated  July  26,  1999  between
                 Catalina Lighting, Inc. and David W. Sasnett

  10.186     -   Second Amendment to Amended and Restated  Change-in-Control    Form 10-K for the year ended September 30, 1999
                 Agreement  dated   September  30,  1999  between   Catalina
                 Lighting, Inc. and David W. Sasnett

  10.187     -   Consulting  Agreement  dated  September  30,  1999  between    Form 10-K for the year ended September 30, 1999
                 Catalina Lighting, Inc. and David W. Sasnett

  10.188     -   Form of Seventh  Amendment  to  Employment  Agreement  with    Form 10-K for the year ended September 30, 1999
                 Executive officers Hersh, Rappaport and Stewart

  10.189     -   Press release dated  June 1, 2000                              Form 8-K dated June 7, 2000

  10.190     -   Foreign  Exchange  Contract  dated  May  31,  2000  between    Form 8-K dated June 7, 2000
                 Catalina Lighting, Inc. and SunTrust.

  10.191     -   Foreign  Exchange  Contract  dated  May  31,  2000  between    Form 8-K dated June 7, 2000
                 Catalina International Plc and SunTrust.

  10.192     -   Commitment  Letter  dated May 31, 2000 for $37 million loan    Form 8-K dated June 7, 2000
                 facilities  for  Catalina   Lighting,   Inc.  and  Catalina
                 International  Plc by SunTrust Bank and SunTrust  Equitable
                 Securities Corporation.

  10.193     -   Recommended  Cash Offers by NM Rothschild & Sons Limited on    Form 8-K dated July 20, 2000
                 behalf  of  Catalina  International  PLC,  a  wholly  owned
                 subsidiary of Catalina Lighting,  Inc. to acquire the whole
                 of the ordinary and  convertible  preference  Share capital
                 of Ring PLC.

  10.194     -   Form  429 (4) - Notice  to  non-assenting  shareholders  by    Form 8-K dated July 20, 2000
                 Catalina International PLC dated July 5, 2000.

  10.195     -   Press release dated July 5, 2000.                              Form 8-K dated July 20, 2000

  10.196     -   Third  Amendment to Financing  Agreement  between  Catalina    Form 10-Q for the Quarter ended June 30, 2000
                 Lighting  Canada  (1992),  Inc. and National Bank of Canada
                 dated May 15, 2000.

  10.197         Audited  Financial  Statements  of Ring  PLC for the  years    Amended Form 8-K dated July 20, 2000
                 ended June 30, 2000, 1999 and 1998.

  10.198         Amended  and  Restated  Revolving  Credit  and Term Loan       Filed herewith
                 Agreement dated  September 22, 2000 between  Catalina
                 Lighting,  Inc.,  Catalina  International  PLC,  Ring PLC,  and
                 SunTrust Bank as administrative Agent.
</TABLE>

                                    Page 77
<PAGE>
<TABLE>
<CAPTION>
<S>              <C>                                                             <C>
  10.199         Financing  Agreement  between  Go-Gro  Industries  Ltd. and    Filed herewith
                 Standard Chartered Bank dated July 17, 2000.

  10.200         Executive  Employment  Agreement entered into as of October    Filed herewith
                 1, 2000 between Catalina Lighting, Inc. and David Sasnett

  10.201         Fourth  Amendment to Financing  Agreement  between Catalina    Filed herewith
                 Lighting  Canada  (1992),  Inc. and National Bank of Canada
                 dated December 15, 2000.

  10.202         First Amendment to Amended and Restated  Revolving Credit      Filed herewith
                 and Term Loan  Agreement  between  Catalina  Lighting,
                 Inc.,  Catalina  International  PLC,  Ring Limited and
                 SunTrust  Bank dated December 22, 2000.

    11       -   Computation of Diluted Earnings Per Share                      Filed herewith

    21       -   Subsidiaries of the Registrant                                 Filed herewith

    23       -   Consent of Deloitte & Touche LLP                               Filed herewith
</TABLE>

         (b)      Reports on Form 8-K:
                  --------------------

         On  June 7, 2000, a form 8-K was filed concerning the commencement of a
cash  offer of  approximately  $33  million to  acquire  all of the  outstanding
ordinary and convertible preference shares of U.K.-based Ring PLC.

         On  July 20, 2000, a form 8-K was filed  concerning the completion of a
cash offer for all of the outstanding ordinary and convertible preference shares
of U.K.-based Ring PLC.

         (c)      Undertaking:
                  ------------

         For  the  purposes  of  complying  with  the  amendments  to the  rules
governing  Form S-8  (effective  July 13, 1990) under the Securities Act of 1933
(the "1933 Act"), the undersigned Registrant hereby undertakes as follows, which
understanding shall be incorporated by reference into Registrant's  Registration
Statements on Form S-8 Nos. 33-23900, 33-33292, 33-62378 and 33-94016.

         Insofar  as indemnification  for liabilities arising under the 1933 Act
may  be  permitted  to  directors,  officers  and  controlling  persons  of  the
Registrant pursuant to the foregoing  provisions,  or otherwise,  the Registrant
has been advised that in the opinion of the Securities  and Exchange  Commission
such  indemnification  is against public policy as expressed in the 1933 Act and
is,  therefore,  unenforceable.  In the event  that a claim for  indemnification
against such  liabilities  (other than the payment by the Registrant of expenses
incurred or paid by a director,  officer or controlling person of the Registrant
in the successful defense of any action, suit of proceeding) is asserted by such
director,  officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been  settled by  controlling  precedent,  submit to a court of  appropriate
jurisdiction the question whether such  indemnification  by it is against public
policy  as  expressed  in the  1933  Act  and  will  be  governed  by the  final
adjudication of such issue.

                                    Page 78
<PAGE>
                                   SIGNATURES
                                   ----------

         Pursuant to the  requirements of Section 13 of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                   CATALINA LIGHTING, INC.

                                   By: /s/ Robert Hersh
                                      ---------------------------------------
                                   Robert Hersh, Chairman, President,
                                   Chief Executive Officer and Director

                                   December 26, 2000

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


By:/s/ David W. Sasnett                                       December 26, 2000
   ---------------------------------
   David W. Sasnett,
   Chief Financial Officer,
   Senior Vice President,
   Chief Accounting Officer


By:/s/ Ryan Burrow                                            December 26, 2000
   ---------------------------------
   Ryan Burrow, Director


By:/s/ Robert Lanzillotti                                     December 26, 2000
   ---------------------------------
   Robert Lanzillotti, Director


By:/s/ Henry Latimer                                          December 26, 2000
   ---------------------------------
   Henry Latimer, Director


By:/s/ Jesse Luxton                                           December 26, 2000
   ---------------------------------
   Jesse Luxton, Director


By:/s/ Howard Steinberg                                       December 26, 2000
   ---------------------------------
   Howard Steinberg, Director


By:/s/ Brion G. Wise                                          December 26, 2000
   ---------------------------------
   Brion G. Wise, Director


                                    Page 79
<PAGE>

<TABLE>
<CAPTION>
  Exhibit                                                                                          Filing In Which Exhibit
  Number                                Description                                              Is Incorporated By Reference
------------     -----------------------------------------------------------    ---------------------------------------------------
<S>              <C>                                                            <C>
  10.198         Amended and Restated Revolving Credit and Term Loan            Filed herewith
                 Agreement dated  September 22, 2000 between Catalina
                 Lighting, Inc., Catalina International  PLC, Ring PLC, and
                 SunTrust Bank as administrative Agent.

  10.199         Financing  Agreement  between  Go-Gro  Industries  Ltd. and    Filed herewith
                 Standard Chartered Bank dated July 17, 2000.

  10.200         Executive  Employment  Agreement entered into as of October    Filed herewith
                 1, 2000 between Catalina Lighting, Inc. and David Sasnett

  10.201         Fourth  Amendment to Financing  Agreement  between Catalina    Filed herewith
                 Lighting  Canada  (1992),  Inc. and National Bank of Canada
                 dated December 15, 2000.

  10.202         First Amendment to Amended and Restated  Revolving Credit      Filed herewith
                 and Term Loan  Agreement  between  Catalina  Lighting,
                 Inc.,  Catalina  International  PLC,  Ring Limited and
                 SunTrust  Bank dated December 22, 2000.

    11       -   Computation of Diluted Earnings Per Share                      Filed herewith

    21       -   Subsidiaries of the Registrant                                 Filed herewith

    23       -   Consent of Deloitte & Touche LLP                               Filed herewith

    27       -   Financial Data Schedule                                        Filed herewith
</TABLE>