SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K


_X_  Annual report pursuant to section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the fiscal year ended September 30, 2000 or

___  Transition report pursuant to section 13 or 15(d) of the Securities
     Exchange Act of 1934 for the transition period from _________ to _________.

Commission file number                0-2387
                      ----------------------------------------------------------
                              RESEARCH INCORPORATED
--------------------------------------------------------------------------------
             (Exact name of the Company as specified in its charter)

              Minnesota                               41-0908058
---------------------------------------  ---------------------------------------
   (State or other jurisdiction of         (I.R.S. Employer Identification No.)
   incorporation or organization)

P.O. Box 24064, Minneapolis, Minnesota                   55424
---------------------------------------  ---------------------------------------
(Address of principal executive office)               (Zip Code)

(The Company's telephone number, including area code)       (952) 941-3300
                                                     ---------------------------

        Title of each class            Name of each exchange on which registered
        -------------------            -----------------------------------------

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

               None
------------------------------------   -----------------------------------------

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

Common Stock with a par value of $.50 per share         NASDAQ Symbol RESR
-----------------------------------------------  -------------------------------

Indicate by check mark whether the Company (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 Company 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 (Paragraph 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the Company's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. _X_

The aggregate market value of the common shares held by nonaffiliates was
approximately $4.5 million based upon the closing sale price of the Company's
common stock as of December 19, 2000.

As of December 20, 2000; 1,322,663 common shares were outstanding.

Documents incorporated by reference:

1)   Portions of the Proxy Statement for the Annual Meeting of Shareholders to
     be held on February 6, 2001, are incorporated by reference into Part III.

                 Consists of 36 pages, exhibit index on page 14.
<PAGE>


                             RESEARCH, INCORPORATED

                                     PART I

Item 1. Business

     (a)  General Development of the Business

          Research, Incorporated (the "Company") is engaged in the design,
          manufacturing and sale of complete product solutions based on its core
          competencies: precise heating and control. The Company's primary focus
          is on high growth markets including Graphic Arts (ink drying), printed
          circuit boards (solder reflow for surface mount technology (SMT)),
          ball-grid array (BGA), chip scale packaging (CSP) and Plastics. BGA
          and CSP are segments of the semi-conductor industry. Applications for
          the Company's products include, solder reflow for assembly of surface
          mount printed circuit boards and chip production, ink drying for on
          demand printing, forming of plastics, tube shrinking, materials
          testing and curing/finishing.

          In June of 1999, the Company announced that it had retained John G.
          Kinnard & Company to assist in exploring strategic business
          initiatives for accelerating growth and maximizing shareholder value.
          In February, 2000 the Company announced that it was no longer
          retaining John G. Kinnard & Company in this endeavor.

          On September 23, 1999 the Company closed on a sale and leaseback
          transaction for its Minneapolis property. Proceeds from the sale were
          used to reduce debt. The Company leases back the facility under a five
          year operating lease with a two year renewal option. The lease is
          cancelable by either party beginning in 2002 with 18 months prior
          written notice.

          In fiscal 1997, the Company refocused its efforts from a
          product-driven company to a market-driven company. The global market
          for the Company's products includes the United States, Canada, Europe,
          Asia, Australia and Latin America. Sales are made direct and through
          independent sales representatives and distributors. Company operations
          are located in Eden Prairie, Minnesota, a suburb of Minneapolis and
          Guadalajara, Mexico. The Company closed its manufacturing facility in
          Plymouth, England in the fourth quarter of fiscal 1999.

          On November 8, 1995 the Company established a Foreign Sales
          Corporation (FSC) to obtain export incentives related to Research
          Incorporated's international sales activities.

          The Company was organized as a Minnesota corporation in October 1966,
          and prior to that date, operated as the R-I Controls Division of a
          predecessor company which was formed in 1952. Its offices and
          manufacturing operations are located at 6425 Flying Cloud Drive, Eden
          Prairie, Minnesota 55344.

     (b)  Financial Information About Industry Segments

          The Company operates in a single industry segment, industrial process
          furnaces and ovens. Financial information concerning its operations
          has been presented in the financial statements referred to under Item
          8.

     (c)  Narrative Description of the Business

          (1)  (i) Products and Markets - The Company is currently engaged in
               the design, manufacture, and marketing of three product classes;
               reflow ovens, drying systems and heating devices.

               REFLOW OVENS
               The electronics manufacturing market for reflow ovens is
               characterized by significant growth cycles with technology
               rapidly accelerating to stay ahead of obsolescence. SMT and BGA
               represent the most advanced processes for creating
               solder-connections to silicon chips. Automation provided by the
               Company's reflow


                                       1
<PAGE>


               ovens enable semiconductor manufacturers and assemblers around
               the world to remain competitive, low cost producers. The
               microcircuits that pass through the Company's reflow ovens become
               the electronic intelligence of computer workstations, laptops and
               palmtops, as well as cellular phones, pagers and other high
               demand wireless communications products.

               Research Incorporated plans to gain market share through
               technology leadership, market driven to address customers' future
               needs and leadership in customer service and satisfaction. During
               fiscal 1999, the Company was realigned in support of the key
               account strategy. Each sales manager assumed worldwide
               responsibility for a particular key account. Engineering projects
               were matched with available resources for the sole purpose of
               providing unparalleled support to these pivotal customers.

               The No-Clean feature of the Company's MicriFlo(TM) and
               ThermaFlo(TM) ovens for SMT as well as its ChipFlo(TM) oven for
               BGA, enables manufacturers to operate their systems without
               costly, periodic stops (up to 24 hours per month) to clean flux
               buildup in the heater cavities. In the semi-conductor
               manufacturing environment, such interruptions add significant
               costs to their operations.

               The low velocity nitrogen convection (LVNC) feature of the
               ChipFlo oven enables solder leads to be bonded onto substrate
               film without flutter or air movement interfering with the bonding
               process. Similarly, the DeltaFlo(TM) 10LN oven extends low
               nitrogen capabilities to fan-forced convection reflow ovens for
               manufacturers of high volume SMT circuit cards. A product for
               special applications, the DeltaFlo 10LNSV has high output yet a
               small footprint.

               Research Incorporated, in close collaboration with leading SMT
               manufacturers' is developing the Tower(TM) reflow oven. The
               patented Tower reflow oven is one-third the length of
               conventional reflow ovens and can simultaneously handle different
               circuit board profiles. It is the only vertical oven with a board
               transport system situated outside the heating zones for maximum
               reliability.

               In preparing the Tower for use by world-class manufacturers of
               cell phones and other electronic equipment, the Company solved
               key technology and manufacturing challenges and has completed the
               process of doing intensive Beta testing and performance
               profiling. Based on results from the beta test, the Company is
               making final design changes and expects to have the first market
               ready Tower available for sale in early 2001.

               The Company markets its reflow ovens through independent sales
               representatives and distributors utilizing advertising,
               tradeshows, rapid customer response and excellent customer
               support to gain market share.

               INK DRYING PRODUCTS
               The Company's ink drying products focus on opportunities in the
               graphic arts market. The printing industry's quest for top speeds
               and enhanced productivity created the need for products that dry
               ink rapidly as it is applied. Product advantages include precise
               heat control that preserves the integrity of the printed piece,
               speeds of up to 1,000 feet per minute, smaller machine
               footprints, and lower power requirements. The Company estimates
               the size of the overall ink drying market worldwide to be
               approximately $800 million annually.

               The Company has concentrated its efforts primarily on the
               high-end, ink-jet printing market niche, through a strategic
               supplier relationship with Scitex Digital Printing, Inc., the
               world's leading supplier of ink-jet printing equipment used for
               high-volume, high-speed print applications such as lottery
               tickets, magazine sweepstakes, and direct mail. The Company
               signed a distributor agreement with Scitex Digital Printing,
               Inc., that provides Scitex with exclusive worldwide rights to
               market and sell Research, Incorporated drying systems, when
               integrated with Scitex ink-jet printing equipment. Research,
               Incorporated has created a full line of products including the
               Speed-Dri(R) and Web-Dri(R), along with the new Roll-Dri(TM), to
               work in tandem with Scitex printers. This broad product line
               gives users the ability to choose a dryer that gives them the
               appropriate combination of speed, size, power, and price to
               ensure the highest return on their investment.


                                       2
<PAGE>


               Smaller printers also need high speeds in order to compete.
               Research, Incorporated's Speed-Dri was designed to serve smaller
               printers in the short-run, on-demand print marketplace. Several
               manufacturers introduced new, moderately priced ink-jet printers
               to meet the requirements of smaller letter shops that serve the
               short-run direct mail niche. Since the printers are attractively
               priced, users can afford to offer their customers versatile
               ink-jet production as an alternative to pre-printed glued labels.

               In fiscal 1999, the Modular Print System (MPS) was developed in
               response to a request from Scitex for a modular paper transport
               and drying system to be used as the mechanical platform for their
               new variable image, ink-jet printer. Scitex markets the fully
               integrated system under the trade name VersaMark(TM) and targets
               the rapidly growing document processing and short-run publishing
               markets. The system competes favorably in performance and price
               with laser printing systems which hold the predominate share of
               the $1.1 billion digital print market.

               The MPS not only served to showcase the Company's drying talents,
               but also positioned the Company as a total systems integrator.
               The Company continues to expand the MPS's capabilities and
               modules to provide variable print users with even greater
               flexibility and options.

               In 1999, the Company expanded beyond ink-jet based
               print-technologies into areas such as toner based imaging for
               form manufacturers. The Company also established itself as a
               total system integrator with a new modular drying system that
               included components related to the entire print-production
               process.

               THERMAL SOLUTIONS PRODUCTS
               The Company's thermal solutions products advance the corporate
               core competency of precise heat control. The Company created a
               family of products using IR in the brand, such as the SpotIR(R)
               series, infrared spot heaters and ChambIR(R) series, infrared
               chamber heaters to address multiple markets including plastics,
               metal processing, and coatings as well as paper processing. The
               Company is one of the few manufacturers using "instant on/off"
               infrared lamps and reflectors, with advantages over competing
               hot-wall or hot-air processes in terms of energy efficiency,
               accuracy of focus, high heating rates, and temperature control.
               The Company develops products providing focused heat and complete
               product solutions for customers. These products are marketed
               through independent sales representatives who are knowledgeable
               in the targeted markets.

               Research, Incorporated develops complete solutions using the
               Company's core heat-control technology to address growth
               opportunities. One such total solution product line incorporates
               heater, framework, controller, and cooler in a single package.

               In fiscal 1999, the Company focused on extrusion and related
               processes used to manufacture silicone tubing and plastic
               beverage bottles. The Company's infrared lamp technologies
               provide solutions through the unique application of intense heat
               with precise temperature controls and instant "on-off" for safety
               and material protection. Importantly, both silicone tubing and
               beverage bottles represent rapidly growing markets with
               technology being the major driving force. Silicone has become the
               material of choice in automotive uses, performing to higher
               temperature specifications under the hoods of new cars. In
               hospitals and clinics, silicone is the material of choice for
               inert catheters and intravenous tubing--a growing market as the
               baby boom generation requires increased medical care.

          (ii) Product Investment - The Company believes that the development of
               new products is a key driver in remaining a leader in the markets
               it serves. The Company strives toward having at least 50 percent
               of its sales from new products (those products introduced in the
               past three years). To achieve that goal the Company expects to
               continue expenditures for research and development in excess of
               10 percent of sales, which is higher than the average for its
               industries.

         (iii) Sources and Availability of Raw Materials - Raw materials
               essential to the business of the Company are generally readily
               available from multiple sources.


                                        3
<PAGE>


          (iv) Patents and Trademarks - The Company has a number of patents and
               is a party to certain license agreements which are significant to
               its competitive position as well as other factors such as product
               development, name recognition, reliable product maintenance,
               support and knowledge of employees due to the rapid technological
               changes in the industry.

          (v)  Seasonality - The business of the Company is not seasonal.

          (vi) Working Capital Requirements - The practices of the Company
               relating to working capital items are not considered unusual. The
               Company carries inventory to support customers rapid delivery
               requirements.

         (vii) Customers - The Company had two customers that accounted for 32%
               and 19% of net sales in fiscal 2000, 34% and 13% of net sales in
               fiscal 1999 and 13% and 10% of net sales in fiscal 1998. During
               fiscal 2000, the Company had two customers that represented 28%
               and 22% of net accounts receivable.

        (viii) Backlog - The dollar amount of the Company's backlog of orders
               from operations believed to be firm at September 30, 2000, was
               $2.0 million; compared to $4.1 million at September 30, 1999. It
               is anticipated that all of the backlog at September 30 will be
               shipped within a three to six-month period. Backlog has no
               unusual significance to the business of the Company.

          (ix) Government Contracts - Government contracts, which may be subject
               to renegotiations of profits or termination, do not constitute a
               material portion of the Company's business.

          (x)  Competition - The Company's business is highly competitive,
               particularly in the areas of price, service, technological
               leadership and product performance. Competition involves hundreds
               of companies--ranging from companies, which are much smaller than
               the Company to large companies in the electronics, printing and
               plastics industries.

          (xi) Research and Development - The Company incurred expenses of
               approximately $3.1 million, $2.5 million and $3.0 million in
               fiscal years 2000, 1999, and 1998, respectively, on
               Company-sponsored research activities related to the development
               of new products, new related products and to the improvement of
               existing products. No material funds were expended for
               customer-sponsored research activities.

         (xii) Environmental Regulations - Compliance with federal, state and
               local provisions regulating the discharge of materials into the
               environment or otherwise relating to the protection of the
               environment is not expected to have a material effect upon the
               capital expenditures, earnings or competitive position of the
               Company.

        (xiii) Employees - As of September 30, 2000, the Company had 133
               employees. None of our employees is represented by a collective
               bargaining agreement and the Company believes that it has very
               satisfactory relations with the employees. In addition, as of
               September 30, 2000, the Company had contracted the services of
               approximately 14 temporary workers through employment agencies.

     (d)  Financial Information About Foreign and Domestic Operations and Export
          Sales

          (1)  Export sales involve sales to customers primarily in Asia, Latin
               America, Europe, Canada and Australia. See Note 8, "Foreign
               Sales" of the Notes to Consolidated Financial Statements.

          (2)  Not applicable.

          (3)  Not applicable.


                                        4
<PAGE>


Item 2. Properties

          The Company's plant and office, which are leased, are located on
          approximately 12 acres of property at 6425 Flying Cloud Drive, Eden
          Prairie, Minnesota. The facilities consist of 90,000 square feet of
          completely air-conditioned space deemed suitable for light
          manufacturing and office use. Management considers these facilities to
          be in good condition, well maintained and adequate for its current
          operations. The Company's lease agreement dated September 23, 1999
          provided an increasing base rent starting at $430,000 per year in year
          one and ending at $550,000 per year in year seven. The initial term of
          the lease is five years with an additional two-year renewal option.
          Under the terms of the lease, either party may terminate the lease
          after the first 14 months, provided that the terminating party gives a
          notice of 18 months. In addition, the lease may be terminated at any
          time in the event that the lessor constructs or provides a new
          facility for the Company and the parties subsequently enter into a new
          lease for such facility.


Item 3. Legal Proceedings

          The Company is not a party to any material pending legal proceedings.

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

          No matters were submitted to a vote of security holders during the
          fourth quarter of fiscal 2000.

Item 4A. Executive Officers

          None of the executive officers of the Company has any family
          relationship with any other officer, and all officers serve at the
          pleasure of the Board of Directors. The following table sets forth
          other information regarding the Company's executive officers:

          NAME             AGE    POSITION                       OFFICER SINCE
          ----             ----   --------                       -------------

          C.C. Johnson     56     President, CEO and Director        1984

          B.E. Bailey      52     Vice President                     1992

          N.R. Cox         45     Vice President                     1998

          R.L. Grose       50     Vice President                     1997

          K.M. O'Rourke    43     Vice President                     1993

          B.C. Yopp        46     Treasurer                          2000

          There are no arrangements or understandings between any of the
          officers and any other person pursuant to which any of them was
          selected as an officer.

          Messrs. Johnson, Bailey, Cox, Grose and Ms. O'Rourke have each been
          employed by the Company for more than five years. Mr. Grose became
          Vice President in 2000; was Treasurer since 1997 and previously was
          Controller. In 1998 Mr. Cox became Vice President; previously Mr. Cox
          was General Manager since 1996 and prior to that Engineering Manager.
          Mr. Yopp became Treasurer in 2000. Prior to joining the Company, Mr.
          Yopp served as Chief Financial Officer for Ultra Pac Inc. since
          September 1991.


                                       5
<PAGE>


                                     PART II


Item 5. Market for The Company's Common Stock and Related Stockholder Matters

     (a) & (c) Market Information and Dividends

          The Company's Board of Directors has not declared any dividends since
          the dividend paid March 31, 1998. The Company's Loan and Security
          Agreement prohibits the payment of dividends.

          The price range per share of common stock is as follows:

          Beginning on October 20, 1998, the Company's common stock began
          trading on the Nasdaq SmallCap Market symbol (RESR), rather than on
          the Nasdaq National Market tier of the Nasdaq Stock Market.

                                                 Bid Price Range
                                                 ---------------
                                          2000                   1999
                                          ----                   ----
         During Quarter Ended       High        Low        High        Low
         --------------------------------------------------------------------

         December 31               $6.500      $4.000     $4.375      $2.000
         March 31                   8.875       4.625      4.000       2.750
         June 30                    8.250       5.625      7.813       2.625
         September 30               7.500       5.063      8.438       5.000
         --------------------------------------------------------------------

     (b)  Holders

          The number of holders of record of the Company's common stock as of
          December 15, 2000, was 506. The Company estimates that an additional
          450 shareholders own stock held for their accounts at brokerage firms
          and financial institutions.


                                       6
<PAGE>


Item 6. Selected Financial Data

CONSOLIDATED FINANCIAL SUMMARY

<TABLE>
<CAPTION>
(In thousands, except per share data)
For the Years ended September 30            2000            1999            1998            1997            1996
-------------------------------------    ----------      ----------      ----------      ----------      ----------
<S>                                      <C>             <C>             <C>             <C>             <C>
Consolidated Operations:
  Net sales                              $   28,804      $   24,410      $   16,731      $   22,843      $   19,661
  Gross profit                               10,761           9,412           5,986          10,085           7,955
    Percent of sales                           37.4%           38.6%           35.8%           44.1%           40.5%
Income (loss) from operations (1)(2)          1,691             541          (4,986)            551              89
Other income (3)                                187              --              --           1,147             344
Interest income (expense), net                 (296)           (431)           (345)             (3)             25
Income (loss) before income taxes             1,582             110          (5,331)          1,695             458
  Percent of sales                              5.5%             .5%          (31.9)%           7.4%            2.3%
Income tax provision (benefit)                  478            (270)         (1,813)            578             168
Net income (loss)                        $    1,104      $      380      $   (3,518)     $    1,117      $      290
  Percent of sales                              3.8%            1.6%          (21.0)%           4.9%            1.5%
-------------------------------------    ----------      ----------      ----------      ----------      ----------
 Earnings (Loss) per Share:
    Basic                                $      .84      $      .30      $    (2.82)     $      .80      $      .20
    Diluted                                     .81             .29           (2.82)            .79             .19
-------------------------------------    ----------      ----------      ----------      ----------      ----------
Cash Dividends Paid per Share            $       --      $       --      $     .116      $     .384      $     .205
-------------------------------------    ----------      ----------      ----------      ----------      ----------
Return on Beginning
 Stockholders' Equity                          30.4%           11.8%            N/A            15.3%            4.0%
-------------------------------------    ----------      ----------      ----------      ----------      ----------
Weighted Average Number of
  Shares Outstanding:
    Basic                                     1,308           1,277           1,247           1,391           1,444
    Diluted                                   1,359           1,294           1,247           1,418           1,492
-------------------------------------    ----------      ----------      ----------      ----------      ----------

<CAPTION>
As of September 30                          2000            1999            1998            1997            1996
-------------------------------------    ----------      ----------      ----------      ----------      ----------
<S>                                      <C>             <C>             <C>             <C>             <C>
Consolidated Financial Condition:
  Net working capital                    $    5,027      $    4,348      $       41      $    3,934      $    5,091
  Current ratio                            1.7 to 1        1.7 to 1        1.0 to 1        1.6 to 1        2.7 to 1
Property and Equipment, Net              $      860      $      821      $    2,392      $    2,521      $    2,100
-------------------------------------    ----------      ----------      ----------      ----------      ----------
Total Assets                                 13,293          11,870          11,373          12,849          10,338
Total Stockholders' Equity                    4,875           3,635           3,218           6,516           7,275
-------------------------------------    ----------      ----------      ----------      ----------      ----------
</TABLE>

(1)  For fiscal 1999 income from operations includes a $354 restructuring charge
     and inventory write-down of $171.
(2)  For fiscal 1998 loss from operations includes a $1,676 restructuring charge
     and inventory write-down of $697.
(3)  Other income consists of $187 gain on sale of equipment in fiscal 2000,
     $1,147 gain on sale of land in fiscal 1997, and $344 gain on sale of
     product line in fiscal 1996.


                                       7
<PAGE>


Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

OVERVIEW

The Company designs and manufacturers complete product solutions based on its
core competency: the precise control and application of heat. The Company
conducts business worldwide. Its products target high-potential industries such
as graphic arts (ink drying and system integration), semiconductor and printed
circuit boards, and plastic extrusion. In each area, the Company identified key
customers and strategic partners with whom it would work most closely to meet
their respective needs. The Company also identified key geographic markets,
where it would make additional investments to capitalize on growth potential.
The Company believes the SMT, plastics/extrusions and graphic arts markets have
the greatest potential for growth. In the SMT market, the Company dedicated
additional resources to key customers that have ongoing needs for high-quality
products and excellent customer service. The Company continued to focus on niche
markets particularly those requiring high-speed variable imaging for its drying
products and focused on extrusion and related processes used to manufacture
silicone tubing and plastic beverage bottles for its thermal solutions products.

Strategic partnerships, technological leadership and high levels of customer
service are the key components of the Company's market-driven strategy. While
the breadth of the Company's product lines will probably decrease as efforts are
focused on selected markets, the Company will invest in new product development
at levels that will support its goal of achieving 50% of sales from products
developed in the last three years.

RESULTS OF OPERATIONS

The following table sets forth the percentage of net sales of certain items in
our consolidated financial statements for the periods indicated.

CONSOLIDATED STATEMENTS OF OPERATIONS

------------------------------------------------------------------------
For the Years Ended September 30        2000         1999         1998
------------------------------------------------------------------------

Net Sales                              100.0%       100.0%       100.0%
Cost of Sales                           62.6         61.4         64.2
------------------------------------------------------------------------

  Gross profit                          37.4         38.6         35.8
------------------------------------------------------------------------
Expenses:
  Selling                               17.3         21.1         32.8
  Research and development              10.6         10.1         17.7
  General and administrative             3.6          3.7          5.0
  Restructuring                           --          1.4         10.1
------------------------------------------------------------------------
Income (Loss) From Operations            5.9          2.3        (29.8)
Interest Expense                        (1.0)        (1.8)        (2.1)
Other Income                             0.6           --           --
------------------------------------------------------------------------
Income (Loss) Before Income Taxes        5.5          0.5        (31.9)
Income Tax Provision (Benefit)           1.7         (1.1)       (10.9)
------------------------------------------------------------------------
Net Income (Loss)                        3.8%         1.6%       (21.0)%
========================================================================


CONSOLIDATED OPERATIONS

2000-1999 COMPARISON
Sales for fiscal 2000 increased 18% to $28,804,000 from $24,410,000 in fiscal
1999. The increase in sales was due in large part to very strong sales of the
Company's reflow ovens for the printed circuit board assembly and semiconductor
chip manufacturers. Total sales sold into this market increased by 32% as
compared to last year. This growth reflects the strong market for both the
telecommunication and computer industries. In addition, sales of the


                                       8
<PAGE>


Company's line of drying products for the digital print market increased by 9%
as compared to last year. New product sales for the drying products group
accounted for approximately 60% of its sales, while overall total company new
product sales was 36% of total sales in fiscal 2000 compared to 55% in fiscal
1999.

Gross profit margins declined slightly to 37.4% for fiscal 2000 from 38.6% in
fiscal 1999. This decline was due in part to a change in product mix reflecting
a greater level of reflow oven sales some of which are sold on a direct sales
basis discounted to reflect no commission and the impact of costs associated
with the discontinuance of the sheet metal operations in the first quarter of
the year.

Selling expenses declined both in real dollars and as a percent of sales.
Selling expenses were $4,976,000 or 17.3% of sales for fiscal 2000 compared to
$5,144,000 or 21.1% of sales for fiscal 1999. The improvement in costs as a
percent of sales is due in large part to the increase in sales while actual
costs declined. The decline in actual expenditures is primarily due to lower
commission costs due to an increase in sales direct to customers with no
commission involved.

Expenditures for research and development were $3,057,000 or 10.6% of sales for
fiscal 2000 as compared to $2,481,000 or 10.1% for fiscal 1999. The Company's
goal is to generate at least 50% of its sales from products developed in the
last three years and to continue investing at least 10% or more of sales dollars
on research and development.

General and administrative expenses were $1,037,000 or 3.6% of sales in fiscal
2000 compared to $893,000 or 3.7% of sales in fiscal 1999. The increase was due
in part to employee benefit costs such as profit sharing and incentive
compensation tied to the Company's operating performance.

Net interest expense was $296,000 or 1.0% of sales for fiscal 2000 as compared
to $431,000 or 1.8% of sales for fiscal 1999. The decrease in dollars was due to
the impact of interest earned on short-term investments offset in part by higher
interest rates.

Other income of $187,000 related primarily to the gain recognized on the sale of
the Company's sheet metal equipment in the first half of this year.

The effective tax rate for fiscal 2000 and 1999 was 30% and (245%) respectively.
The primary cause for the significant change in the effective tax rate was due
to the tax benefit realized in 1999 from the closing of the Company's United
Kingdom facility.


1999-1998 COMPARISON
Sales for fiscal 1999 increased 46% to $24,410,000 from $16,731,000 in fiscal
1998. This overall increase is attributable to the success of new product
introductions and a general improvement in the electronics industry in Asia.
Sales to the electronics industry in the surface mount technology (SMT) market
increased 63% from the prior year. Sales in the graphic arts market increased
89%. A significant factor in the results for the year was the extraordinary
success of the Modular Printing System (MPS) developed in cooperation with our
strategic partner Scitex Digital Printing, Inc., enabling their ink-jet printers
to compete successfully against laser printers in the digital print market.
Another significant factor was the resurgence of our SMT sales to electronic
manufacturing services companies. Sales of new products introduced in the past
three years accounted for 55 percent of total sales in fiscal 1999, up from 38
percent the year prior.

Gross margins improved to 38.6% in fiscal 1999 from 35.8% in fiscal 1998 despite
new product introduction costs, a $171,000 inventory write-off in the United
Kingdom and a higher percentage of purchased product. The Company continues to
outsource non-critical functions which should continue to improve gross margins.

Gross margins in the graphic arts market were lower than the previous fiscal
year due to product introduction costs and the high content of purchased
product. This is offset by increases in volume and significant leveraging of
selling expenses. Gross margins in the SMT market were up significantly in
fiscal 1999 due to higher volume in fiscal 1999 and the effect of inventory
write-off in fiscal 1998.


                                       9
<PAGE>


Selling expenses decreased both in absolute dollars and as a percentage of
sales. Selling expenses were $5,144,000 or 21.1% of sales in fiscal 1999
compared to $5,491,000 or 32.8% in fiscal 1998. This improvement is due to the
higher level of sales and leveraging expenses by focusing on major accounts.

Expenditures for research and development were $2,481,000 or 10.1% of sales in
fiscal 1999 compared to $2,968,000 or 17.7% in fiscal 1998. Expenditures were
lower in fiscal 1999 due to significantly higher level of sales. The Company's
goal is to generate 50% of sales from products developed in the last three
years.

General and administrative expenses were $893,000 or 3.7% of sales in fiscal
1999 compared to $838,000 or 5.0% in fiscal 1998. This improvement is due to
higher sales volume, the Company's focus on leveraging expenses and cost
containment measures in the first half of the year.

Interest expense was $431,000 or 1.8% of sales in fiscal 1999 compared to
$345,000 or 2.1% of sales in fiscal 1998. The increase was due to a higher
average borrowing position and a higher rate of interest than was on the
Company's line of credit for the prior year.

The Company recorded a $354,000 restructuring charge in the fourth quarter of
fiscal 1999 due to the closing of its manufacturing operation in Plymouth,
England. The restructuring charge included estimated costs for severance, lease
commitments and professional services to effect the closure. The impact of this
charge was partially offset by a significant tax benefit related to the
write-off of its investment. The full amount of these costs have been paid in
fiscal 2000.

The effective tax rate for fiscal 1999 and 1998 was (245%) and 34%,
respectively. The primary cause for the change in the effective tax rate was due
to the tax benefit realized from closing the Company's United Kingdom facility.


LIQUIDITY AND CAPITAL RESOURCES AND OTHER MATTERS

The Company's operations are funded from cash and cash equivalents, cash flow
from operations and borrowings available under a line of credit. At September
30, 2000, the principal source of liquidity was cash and cash equivalents of
$2,765,000 and $805,000 which could be borrowed in addition to the $2,660,000
already borrowed under the $8,000,000 line of credit. The amount we can borrow
under this line of credit is limited to the levels of eligible accounts
receivable and inventory.

Operating activities provided cash of $701,000 in fiscal 2000, used $425,000 in
cash in fiscal 1999 and used $2,700,000 cash in fiscal 1998. The increase in
fiscal 2000 from fiscal 1999 was primarily due to a strong earnings performance
and a decrease in accounts receivable and deferred taxes offset in part by a
decrease in accounts payable and deferred revenues and an increase in
inventories. The Company's working capital was $5,027,000 at September 30, 2000
compared to $4,348,000 at September 30, 1999.

Investing activities used cash of $189,000 in fiscal 2000, provided $3,671,000
of cash in fiscal 1999 and used $485,000 of cash in fiscal 1998. The significant
change from fiscal 1999 to fiscal 2000 is due to the sale of property in fiscal
1999, which provided cash of $3,650,000.

Financing activities provided cash of $1,914,000 in fiscal 2000, used $2,974,000
of cash in fiscal 1999 and provided $2,036,000 of cash in fiscal 1998. The
significant change from fiscal 1999 to fiscal 2000 is a result of the proceeds
from the sale of the property in fiscal 1999, as discussed earlier, which were
used to pay down debt.

In January 1999, the Company signed a new three-year loan and security agreement
with a bank. The agreement provides for total borrowing of up to $8 million
subject to lending formulas based on eligible receivables, inventories, certain
long-term assets and other terms specified in the agreement. The agreement
consists of a line of credit with interest charged at 2.25% above the prime rate
and two available term loans with interest charged at 2.75% above the prime
rate. Because of the Company's favorable performance over the first two quarters
of fiscal year 2000, the interest rate charged on the line of credit was reduced
effective May 2, 2000 to 1.75% over prime rate and to 2.25% over prime rate on
the two term loans.


                                       10
<PAGE>


The agreement contains certain restrictive covenants and any outstanding
borrowing are secured by substantially all of the Company's assets. Effective
September 30, 2000, the Company was in compliance with all such covenants.


INFLATION

In the past three years, inflation has not had a significant effect on
operations.


FORWARD-LOOKING STATEMENTS

The statements included herein that are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. There are certain important
factors that could cause actual results to differ materially from those
anticipated by some of the statements made herein. Investors are cautioned that
all forward-looking statements involve risks and uncertainty. Some of the
factors that could affect results are the effectiveness of new product
introductions, the product mix of our sales, the amount of sales generated or
volatility in the major markets, competition, currency fluctuations,
availability of labor, general economic conditions, market cycles, dependence on
capital expenditures of contract manufacturers in SMT, product cancellations or
rescheduling, and loss of a significant customer.


                                       11
<PAGE>


Item 7A. Quantitative and Qualitative Disclosure About Market Risk

         The Company does not hold any derivative financial instruments,
         derivative commodity instruments or other financial instruments. The
         Company engages neither in speculative nor derivative trading
         activities. As of September 30, 2000, the Company had $2.8 million of
         debt outstanding with a variable interest rate (see Note 4 to the
         financial statements). A fluctuation in the underlying interest rate on
         this debt at its current balance would not have a material effect on
         the Company's financial condition or results of operations.

Item 8.  Financial Statements and Supplementary Data

         The Company's consolidated financial statements, together with the
         report of the Company's independent public accountants, Arthur Andersen
         LLP, are included in Item 14.

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

         None.


                                       12
<PAGE>


                                    PART III


Items 10., Pursuant to General Instruction G (3), the information required by
11., 12.,  Item 10 - Directors and Executive Officers of the Company,
and 13.    Item 11 - Executive Compensation,
           Item 12 - Security Ownership of Certain Beneficial Owners and
           Management, and
           Item 13 - Certain Relationships and Related Transactions, except that
           portion of Item 10 relating to executive officers of the Company,
           which is set forth in Item 4A of this report, is hereby incorporated
           by reference from the Company's definitive Proxy Statement, to be
           filed with the Commission with respect to the Annual Meeting of
           Shareholders to be held on February 6, 2001.


                                       13
<PAGE>


                                     PART IV


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

                                                                       Page #
                                                                       ------

   (a)(1) Financial Statements:

          The following consolidated financial statements of Research,
          Incorporated and the Report of the Independent Public Accountants
          thereon, are filed as part of this Form 10-K.

          (i)       Report of Independent Public Accountants            F-1

          (ii)      Consolidated Balance Sheets as of September 30,
                    2000 and 1999                                       F-2

          (iii)     Consolidated Statements of Operations and
                    Consolidated Statements of Stockholders' Equity
                    for the years ended September 30, 2000, 1999,
                    and 1998                                          F-3, F-4

          (iv)      Consolidated Statements of Cash Flows for the
                    years ended September 30, 2000, 1999, and 1998       F-5

          (v)       Notes to Consolidated Financial Statements       F-6 to F-14

      (2) Financial Statement Schedule

          The following financial statement schedule is filed with
          this report:

          (i)  Schedule II - Valuation and qualifying accounts S-1

          All schedules except those listed above are omitted because they are
          not applicable or not required, or because the required information is
          included in the financial statements or notes thereto.

      (3) Exhibits

          (3.1)   Articles of Incorporation - Incorporated by reference
                  to Exhibit (3.1) of the Company's Form 10-K for the
                  period ended September 30,1994

          (3.2)   Bylaws - Incorporated by reference to Exhibit (3.2) of
                  the Company's Form 10-K for the period ended September
                  30,1994

          (4.1)   Loan and Security Agreement between Coast Business
                  Credit, a division of Southern Pacific Bank and the
                  Company dated December 17, 1998 Incorporated by
                  reference to Exhibit (4.4) of the Company's Form 10-K
                  for the period ended September 30, 1998

          (4.2)   Amendment to Loan and Security Agreement (supplemental
                  loan) between Coast Business Credit, a division of
                  Southern Pacific and the Company dated July 15, 1999
                  Incorporated by reference to Exhibit (4.1) of the
                  Company's Form 10-Q for the period ended June 30, 1999

          (4.3)   Secured Promissory Note between Coast Business Credit,
                  a division of Southern Pacific Bank and the Company
                  dated July 15, 1999 Incorporated by reference to
                  Exhibit (4.2) of the Company's Form 10-Q for the
                  period ended June 30, 1999

          (4.4)   Amendment to Loan and Security Agreement (supplemental
                  loan due date) between Coast Business Credit, a
                  division of Southern Pacific Bank and the Company
                  dated September 30, 1999 Incorporated by reference to
                  Exhibit (4.7) of the Company's Form 10-K for the
                  period ended September 30, 1999


                                   14
<PAGE>


          (4.5)   Amendment to Loan and Security Agreement (U.K.
                  closure) between Coast Business Credit, a division of
                  Southern Pacific Bank and the Company dated October
                  30, 1999 Incorporated by reference to Exhibit (4.8) of
                  the Company's Form 10-K for the period ended September
                  30, 1999

          (10.1)  1991 Stock Plan - Incorporated by reference to Exhibit
                  4(a) registration statement on Form S-8, file No.
                  33-75256 (filed February 14, 1994)

          (10.2)  Employee Stock Purchase Plan Incorporated by reference
                  to Exhibit 4.1 of registration statement on Form S-8,
                  file 333-39567 (filed November 5, 1997)

          (10.3)  Form of Employment (change of control) Agreement dated
                  May 21, 1999 Incorporated by reference to Exhibit
                  (10.1) of the Company's Form 10-Q for the period ended
                  June 30, 1999

          (10.4)  Research, Incorporated Severance Plan dated May 21,
                  1999 Incorporated by reference to Exhibit (10.2) of
                  the Company's Form 10-Q for the period ended June 30,
                  1999

          (10.5)  Distributor/Reseller Purchase Agreement (Scitex
                  Digital Printing, Incorporated) dated October 6, 1998
                  Incorporated by reference to Exhibit (10.3) of the
                  Company's Form 10-Q for the period ended June 30, 1999

          (10.6)  Purchase Agreement between the Company and Continental
                  Property Group, Inc. dated June 25, 1999 Incorporated
                  by reference to Exhibit (10.4) of the Company's Form
                  10-Q for the period ended June 30, 1999

          (10.7)  Form of Amendment No. 1 to Employment (change of
                  control) Agreement for employees of the Registrant
                  dated November 4, 1999 Incorporated by reference to
                  Exhibit (10.7) of the Company's Form 10-K for the
                  period ended September 30, 1999

          (21.1)  Subsidiaries of the Company

          (23.1)  Consent of Arthur Andersen LLP

          (27.0)  Financial Data Schedule

   (b)    Reports on Form 8-K:

          None


                                       15
<PAGE>


                                   SIGNATURES


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


                                       RESEARCH, INCORPORATED



                                       By /s/ Claude C. Johnson
                                       ------------------------------------
                                       Claude C. Johnson, President and CEO


                                       By /s/  Brad C. Yopp
                                       ------------------------------------
                                       Brad C. Yopp, Treasurer




Date: December 22, 2000

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


Signature                       Title                          Date

/s/ Claude C. Johnson.          President, CEO and Director    December 22, 2000
---------------------------
Claude C. Johnson *

/s/ Brad C. Yopp.                Treasurer                     December 22, 2000
---------------------------
Brad C. Yopp **

/s/ John G. Colwell, Jr.         Director                      December 22, 2000
---------------------------
John G. Colwell, Jr.

/s/ Edward L. Lundstrom          Director                      December 22, 2000
---------------------------
Edward L. Lundstrom

/s/ Gerald E. Magnuson           Director                      December 22, 2000
---------------------------
Gerald E. Magnuson

/s/ Charles G. Schiefelbein      Director                      December 22, 2000
---------------------------
Charles G. Schiefelbein


 * Principal executive officer
** Principal financial officer


                                       16
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Research, Incorporated:

We have audited the accompanying consolidated balance sheets of Research,
Incorporated (a Minnesota corporation) and Subsidiary 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. These consolidated financial statements and supplemental schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
supplemental schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Research, Incorporated and
Subsidiary 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.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed as a part of Item 14 in this
Form 10-K is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.



                                       ARTHUR ANDERSEN LLP

Minneapolis, Minnesota,
October 27, 2000


                                      F-1
<PAGE>


CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                         As of September 30
                                                                   ------------------------------
ASSETS                                                                 2000              1999
--------------------------------------------------------------     ------------      ------------
<S>                                                                <C>               <C>
CURRENT ASSETS:
 Cash and cash equivalents                                         $  2,764,637      $    350,487
 Accounts receivable, net of reserves of $100,000                     4,359,760         5,244,383
 Inventories                                                          3,830,010         3,448,701
 Deferred income tax benefit                                            428,637           789,249
 Prepayments                                                            368,563           482,812
--------------------------------------------------------------     ------------      ------------

     Total current assets                                            11,751,607        10,315,632
--------------------------------------------------------------     ------------      ------------

PROPERTY AND EQUIPMENT
 Machinery and equipment                                              3,406,959         3,836,960
 Less accumulated depreciation                                       (2,547,036)       (3,015,989)
--------------------------------------------------------------     ------------      ------------

     Net property and equipment                                         859,923           820,971
--------------------------------------------------------------     ------------      ------------

DEFERRED INCOME TAX BENEFIT                                             681,288           733,000
--------------------------------------------------------------     ------------      ------------

     Total assets                                                  $ 13,292,818      $ 11,869,603
==============================================================     ============      ============


LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

CURRENT LIABILITIES:
 Notes payable and current maturities of long-term debt            $  2,806,201      $    681,988
 Accounts payable                                                     1,786,138         2,340,345
 Deferred revenues                                                      331,176           989,490
 Deferred gain, current portion                                         334,733           315,089
 Accrued liabilities:
  Salaries and benefits                                                 675,518           607,253
  Warranty reserve                                                      300,000           300,000
  Restructuring reserve                                                      --           298,065
  Other                                                                 490,978           434,945
--------------------------------------------------------------     ------------      ------------

     Total current liabilities                                        6,724,744         5,967,175
--------------------------------------------------------------     ------------      ------------

 Long-term debt                                                          19,411           376,660
 Deferred gain                                                        1,673,669         1,890,534

COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY:
 Common stock, $.50 par value, 5,000,000 shares authorized,
     1,322,663 and 1,290,144  shares issued and outstanding             661,332           645,072
 Additional paid-in capital                                             794,962           646,858
 Accumulated other comprehensive income                                  50,871            61,963
 Retained earnings                                                    3,367,829         2,281,341
--------------------------------------------------------------     ------------      ------------

     Total stockholders' equity                                       4,874,994         3,635,234
--------------------------------------------------------------     ------------      ------------

     Total liabilities and stockholders' equity                    $ 13,292,818      $ 11,869,603
==============================================================     ============      ============
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
BALANCE SHEETS.


                                   F-2
<PAGE>


CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

For the Years Ended September 30                          2000              1999              1998
-------------------------------------------------     ------------      ------------      ------------
<S>                                                   <C>               <C>               <C>
Net Sales                                             $ 28,803,622      $ 24,409,992      $ 16,730,935
Cost of Sales                                           18,042,376        14,998,159        10,745,255
-------------------------------------------------     ------------      ------------      ------------

  Gross profit                                          10,761,246         9,411,833         5,985,680
-------------------------------------------------     ------------      ------------      ------------

Expenses:
  Selling                                                4,976,482         5,143,689         5,490,800
  Research and development                               3,057,268         2,480,721         2,967,803
  General and administrative                             1,036,512           892,573           837,670
  Restructuring                                                 --           354,000         1,676,000
-------------------------------------------------     ------------      ------------      ------------

     Total expenses                                      9,070,262         8,870,983        10,972,273
-------------------------------------------------     ------------      ------------      ------------

Income (Loss) From Operations                            1,690,984           540,850        (4,986,593)
Interest Expense                                          (295,626)         (430,832)         (344,871)
Other Income                                               187,203                --                --
-------------------------------------------------     ------------      ------------      ------------

Income (Loss) Before Income Taxes                        1,582,561           110,018        (5,331,464)
Income Tax Provision (Benefit)                             478,324          (270,000)       (1,813,000)
-------------------------------------------------     ------------      ------------      ------------

Net Income (Loss)                                     $  1,104,237      $    380,018      $ (3,518,464)
-------------------------------------------------     ------------      ------------      ------------

Net Income (Loss) Per Common Share:
     Basic                                            $       0.84      $       0.30      $      (2.82)
     Diluted                                                  0.81              0.29             (2.82)

Weighted Average Common Shares Outstanding:
     Basic                                               1,307,783         1,276,722         1,246,530
     Diluted                                             1,358,837         1,294,038         1,246,530
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.


                                  F-3
<PAGE>


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                Common Stock              Additional                      Other
                                                -----------                Paid-In       Retained     Comprehensive     Accumulated
                                           Shares          Amount          Capital       Earnings      Income (Loss)       Total
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>           <C>             <C>             <C>             <C>             <C>
Balance, September 30, 1997              1,211,468     $   605,734     $   307,111     $ 5,563,874     $    39,752     $ 6,516,471
    Stock options exercised                 32,030          16,014         210,385              --              --         226,399
    Employee stock purchase plan            22,839          11,420          74,410              --              --          85,830
    Dividends                                   --              --              --        (144,087)             --        (144,087)
    Net loss                                    --              --              --      (3,518,464)             --
    Other comprehensive income-
       Foreign currency translation             --              --              --              --          52,345
    Total comprehensive loss                                                                                            (3,466,119)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1998              1,266,337         633,168         591,906       1,901,323          92,097       3,218,494
    Employee stock purchase plan            23,807          11,904          54,952              --              --          66,856
    Net income                                  --              --              --         380,018              --
    Other comprehensive income-
       Foreign currency translation             --              --              --              --         (30,134)
    Total comprehensive income                                                                                             349,884
-----------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1999              1,290,144     $   645,072     $   646,858     $ 2,281,341     $    61,963     $ 3,635,234
===================================================================================================================================
    Stock options exercised                 32,562          16,281         139,423                                         155,704
    Stock purchased and retired             (9,866)         (4,933)        (36,504)        (17,749)                        (59,186)
    Employee stock purchase plan             9,823           4,912          45,185              --              --          50,097
    Net income                                  --              --              --       1,104,237              --
    Other comprehensive income-
       Foreign currency translation             --              --              --              --         (11,092)
    Total comprehensive income                                                                                           1,093,145
-----------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 2000              1,322,663     $   661,332     $   794,962     $ 3,367,829     $    50,871     $ 4,874,994
===================================================================================================================================
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.


                                  F-4
<PAGE>


CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

For the Years Ended September 30                               2000             1999             1998
-------------------------------------------------------    ------------     ------------     ------------
<S>                                                        <C>              <C>              <C>
Operating Activities:
  Net income (loss)                                        $  1,104,237     $    380,018     $ (3,518,464)
  Adjustments to reconcile net income (loss) to
    net cash used in operating activities:
      Depreciation and amortization                             315,051          461,202          675,709
      Gain on disposal of assets                               (165,081)              --               --
      Deferred income taxes                                     412,324         (199,249)        (918,000)
      Changes in operating elements:
        Accounts receivable, net                                884,623       (2,346,880)       1,081,796
        Inventories                                            (381,309)         494,456          542,673
        Prepayments                                             114,249         (267,028)         (24,319)
        Accounts payable and accrued liabilities               (429,909)         498,093         (398,043)
        Deferred revenues                                      (855,535)         366,294          623,196
        Restructuring reserves                                 (298,065)        (304,658)         602,723
        Income taxes payable (receivable)                            --          493,241       (1,366,980)
-------------------------------------------------------    ------------     ------------     ------------

    Net cash provided by (used in) operating activities         700,585         (424,511)      (2,699,709)
-------------------------------------------------------    ------------     ------------     ------------

Investing Activities:
  Property and equipment purchases                             (400,417)          20,981         (489,303)
  Proceeds from sale of assets                                  211,495               --            4,343
  Proceeds from sale of property                                     --        3,650,000               --
-------------------------------------------------------    ------------     ------------     ------------

    Net cash provided by (used in) investing activities        (188,922)       3,670,981         (484,960)
-------------------------------------------------------    ------------     ------------     ------------

Financing Activities:
  Proceeds from (payment on) line of credit, net              2,124,213       (3,564,016)       1,868,002
  Proceeds from long-term debt                                       --        2,515,000               --
  Payments on long-term debt                                   (357,249)      (1,992,336)              --
  Issuance of common stock                                      146,615           66,856          312,229
  Cash dividends paid                                                --               --         (144,087)
-------------------------------------------------------    ------------     ------------     ------------

    Net cash provided by (used in) financing activities       1,913,579       (2,974,496)       2,036,144
-------------------------------------------------------    ------------     ------------     ------------

Effects of exchange rates on cash                               (11,092)         (30,134)          52,345
-------------------------------------------------------    ------------     ------------     ------------

  Net increase (decrease) in cash and cash equivalents        2,414,150          241,840       (1,096,180)
  Cash and Cash Equivalents Beginning of year                   350,487          108,647        1,204,827
-------------------------------------------------------    ------------     ------------     ------------

  Cash and Cash Equivalents End of year                    $  2,764,637     $    350,487     $    108,647
=======================================================    ============     ============     ============

Supplemental Cash Flow Information:
 Cash paid for:
  Interest                                                 $    360,709     $    394,788     $    287,598
  Income taxes                                                   81,000           18,000           31,000
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.


                                  F-5
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

NATURE OF BUSINESS - The Company designs and manufacturers complete product
solutions based on its core competency: the precise control and application of
heat. The Company conducts business worldwide. Its products target
high-potential industries such as graphic arts (ink drying and system
integration), semiconductor and printed circuit boards, and plastic extrusion.

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
Research, Incorporated and its wholly owned subsidiaries, Research International
Incorporated, Research Incorporation Limited and Research International Latin
America, S. de R. L. de C. V. (collectively, the Company). All significant
intercompany accounts and transactions have been eliminated in consolidation.

FOREIGN CURRENCY TRANSLATION - The assets and liabilities of the Company's
subsidiary are translated into U.S. dollars using current exchange rates at the
end of the period. Results of operations are translated at the average exchange
rates prevailing during the period. Translation gains or losses are accumulated
as a separate component of stockholders' equity.

CASH & CASH EQUIVALENTS - Cash equivalents represent money market investments
with original maturities of three months or less and are stated at cost, which
approximates fair value.

ACCOUNTS RECEIVABLE - Accounts receivable consisted of the following at
September 30:

                                                 2000               1999
-------------------------------------------------------------------------
Trade receivables, net                     $4,359,760         $5,152,463
Revenues in excess of billing
   on percentage-of-completion
   contracts                                       --             91,920
-------------------------------------------------------------------------
Total                                      $4,359,760         $5,244,383
=========================================================================

INVENTORIES - Inventories are stated at the lower of first-in, first-out
("FIFO") cost or market. Inventories consisted of the following at September 30:

                                                 2000               1999
-------------------------------------------------------------------------
Manufactured subassemblies
   and purchased parts                     $3,229,502         $2,457,783
Work in process                               600,508            990,918
-------------------------------------------------------------------------
Total                                      $3,830,010         $3,448,701
=========================================================================

PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at
cost. For financial reporting purposes, depreciation is provided on the
straight-line method over the following estimated useful lives:

-------------------------------------------------------------------------
Machinery and equipment                                    3 to 10 Years
=========================================================================

Accelerated depreciation methods are used for tax reporting purposes.

Maintenance and repairs are charged to expense as incurred. Major betterments
and improvements which extend the useful life of the item are capitalized and
depreciated. The cost and accumulated depreciation of property, plant and
equipment retired or otherwise disposed of are removed from the related accounts
and any residual values are charged or credited to income.


                                      F-6
<PAGE>


REVENUE RECOGNITION - Sales and related cost of sales are recorded at the time
of shipment, except for system contracts, which are recognized on a
percentage-of-completion basis. Revenue on contracts requiring longer delivery
periods (long-term contracts) and other customized orders that permit progress
billings is recognized using the percentage-of-completion method based on the
cost incurred to date relative to estimated total cost of the contract
(cost-to-cost method). The cumulative effects of revisions of estimated total
contract costs and impact on revenues are recorded in the period in which the
facts become known. When a loss is anticipated on a contract, the amount of the
loss is provided currently.

WARRANTY OBLIGATIONS - The Surface Mount Technology (SMT) products are under
warranty against defects in material and workmanship for a two-year period with
an extended warranty on three components. The Company's other products are
generally under warranty for a one-year period. Estimated warranty costs are
accrued in the same period as products are shipped. An analysis of reserves for
product warranties is performed on a quarterly basis by reviewing the status of
new product introductions, trends of warranty expense by product, and internal
management information to identify known or potential defects and the estimated
warranty exposure.

INCOME TAXES - The Company accounts for income taxes following the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, which requires
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using currently enacted tax rates.

USE OF ESTIMATES - The preparation of financial statements, in conformity with
accounting principles generally accepted in the United States, 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 reported amounts of revenues and
expenses during the reporting period. Ultimate results could differ from those
estimates.

COMPREHENSIVE INCOME - The Company follows the provisions of SFAS No. 130,
"Reporting Comprehensive Income," which established standards for reporting and
display of comprehensive income and its components. Comprehensive income
reflects the change in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources. For the
Company, comprehensive income represents net income adjusted for foreign
currency translation adjustments. In accordance with SFAS No. 130, the Company
has chosen to disclose comprehensive income in the consolidated statements or
stockholders' investment.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amount of cash and cash
equivalents, accounts receivable, accounts payable and revolving credit
facilities approximates fair value because of the short maturity of these
instruments. The carrying amount of the Company's non-subordinated long-term
debt approximates fair value because of the variablity of the interest cost
associated with these instruments.

NEW ACCOUNTING PRONOUNCEMENTS - SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", becomes effective for fiscal years
beginning after June 15, 2000. The Company will adopt SFAS No. 133 effective
October 1, 2000. SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument, including certain derivative
instruments embedded in other contracts, be recorded in the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133 requires
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met and requires that a company
must formally document, designate and assess the effectiveness of transactions
that receive hedge accounting. The Company believes the adoption of SFAS No. 133
will not have a material impact on its financial position or results of
operations.

Staff Accounting Bulletin (SAB) No. 101 "Revenue Recognition in Financial
Statements." SAB No. 101 issued in December 1999, provides further guidance on
the recognition, presentation and disclosure of revenue in financial statements
filed with the SEC. SAB No. 101 is required for fiscal years beginning after
December 15, 1999. The Company plans to adopt SAB No. 101 effective October 1,
2000. The Company believes the adoption of SAB No. 101 will not have a material
impact on its results of operations.


                                      F-7
<PAGE>


2. SALE AND LEASEBACK OF PROPERTY:

SALE AND LEASEBACK OF PROPERTY - On September 23, 1999, the Company closed on a
sale and leaseback transaction for its Minneapolis property. The sale price for
the Company's manufacturing and office facility and surrounding 11 acres of land
was $3,650,000. The pretax gain of $2,200,000 will be recognized over the
seven-year term of the operating lease. Accordingly, no gain was recognized for
fiscal 1999. The transaction also allowed the Company to utilize $600,000 of its
deferred tax assets. Proceeds from the sale were used to reduce debt. The
Company recognized $315,000 of the gain during fiscal 2000 as an offset to its
rent expense.

The Company has leased back the facility under an operating lease. The initial
term of the lease is five years with an additional two-year renewal option. The
lease is cancelable by either party beginning on April 24, 2002 with an 18 month
prior written notice. The Company is required to pay taxes, insurance and
maintenance costs.


3. RESTRUCTURING:

In September 1999, the Company closed its United Kingdom (UK) manufacturing
facility. In connection with this closing, the Company recorded a restructuring
charge of $354,000 to cover asset write-downs and severance costs. The full
amount of these costs have been paid in fiscal 2000. In addition, the Company
wrote off $171,000 of inventory from the UK facility. The inventory write-down
was included as a cost of goods sold.

In February 1998, the Company consolidated its Control Systems resources into
its Thermal Solutions line of products. In July 1998, the Company announced
additional workforce reductions, mainly in manufacturing and support areas, and
these were accomplished primarily through a voluntary layoff. The total
workforce reductions were 25%. Costs associated with the restructuring were
reflected in the statement of operations and totaled $1,676,000, primarily for
severance costs. Additionally, the Company wrote down inventory by $697,000 to
reflect exiting certain lines of product and excess inventory. This inventory
change was included in cost of goods sold.


4. NOTES PAYABLE AND LONG-TERM DEBT:

Notes payable and long-term debt consisted of the following as of September 30:

                                                        2000              1999
--------------------------------------------------------------------------------
Bank Line of Credit,                                $2,660,197       $  535,984
  interest at prime plus 1.75%, 11.25%
      at September 30, 2000
  interest at prime plus 2.25%, 10.5%
      at September 30, 1999

Bank Term Loans,                                       165,415          522,664
  interest at prime plus 2.25%, 11.75%
     at September 30, 2000
  interest at prime plus 2.75%, 11.0%
     at September 30, 1999

--------------------------------------------------------------------------------
     Total                                           2,825,612        1,058,648
Less - short-term notes and
  current maturities of long-term debt               2,806,201          681,988
================================================================================
     Long-term debt                                 $   19,411       $  376,660

================================================================================


                                      F-8
<PAGE>


Future maturities of notes payable and long-term debt as of September 30, 2000
are as follows:

          2001           $2,806,201
          2002               19,411
         ---------------------------
          Total          $2,825,612
         ===========================

CREDIT FACILITY - In January 1999, the Company entered into a new three-year
loan and security agreement with a bank. The agreement provides for total
borrowings of up to $8 million, subject to lending formulas based on eligible
receivables, inventories, certain long-term assets and other terms specified in
the agreement. This credit facility consists of a line of credit with interest
charged at 2.25% above prime and two term loans with interest charged at 2.75%
above prime. Based on the Company's financial performance during the first half
of fiscal year 2000, the interest charged on both the line of credit and term
loans was decreased by .50% to 1.75% and 2.25% over the prime rate respectively.
The agreement contains certain restrictive covenants and any outstanding
borrowings are secured by substantially all of the Company's assets. Effective
September 30, 2000, the Company was in compliance with all such the covenants.

LINE OF CREDIT - Through the first quarter of fiscal 1999, the Company had a
$5,000,000 secured bank line of credit that carried an interest rate equal to
the bank's prime rate (8.25% at September 30, 1998). The line was secured by
substantially all of the Company's assets.


5. STOCKHOLDERS' EQUITY:

EARNINGS PER SHARE DATA - Basic earnings per common share is computed by
dividing net income by the weighted average number of common shares outstanding
during the year. Diluted earnings per share is computed by dividing net income
by the sum of the weighted average number of common shares outstanding plus all
additional shares that would have been outstanding if potentially dilutive
common shares related to stock options had been exercised. The following table
reconciles the number of shares utilized in the earnings per share calculations.

<TABLE>
<CAPTION>

For the years ended, September 30, (In thousands, except per share amounts)        2000         1999         1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>           <C>          <C>
Net income (loss)                                                              $  1,104      $   380      $ (3,518)
-------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding - Basic                                1,308        1,277         1,247
Effect of dilutive securities - stock options                                        51           17            --
-------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding - Diluted                              1,359        1,294         1,247
Net income (loss) per share - Basic                                            $   0.84      $  0.30      $  (2.82)
-------------------------------------------------------------------------------------------------------------------
Net income (loss) per share - Diluted                                          $   0.81      $  0.29      $  (2.82)
===================================================================================================================
</TABLE>

STOCK SPLIT - On November 5, 1997, the Company's Board of Directors approved a
five-for-four stock split effected in the form of a stock dividend. The stock
split has been retroactively reflected in the accompanying consolidated
financial statements and related notes. All share and per share data have been
restated to reflect the stock split.

STOCK-BASED COMPENSATION - The Company has a stock option plan (the Plan). A
total of 210,000 shares of common stock have been reserved for issuance to
directors, officers, and key employees. Stock options have been granted at their
fair market value as determined by the Board of Directors at the date of grant.
The options are exercisable at a rate of 25% per year on a cumulative basis,
beginning one year after the date of grant. There were 19,972 options available
for future grants to purchase shares of the Company's common stock September 30,
2000.


                                      F-9
<PAGE>


Information regarding stock options is shown below for the years ended September
30:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                                                                 Weighted
                                                              Weighted         Average Fair     Exercisable at
                          Shares Under    Exercise Price       Average       Value of Options    End of Fiscal
                             Option           Range         Exercise Price        Granted             Year
---------------------------------------------------------------------------------------------------------------
<S>                         <C>           <C>                   <C>                <C>                <C>
Outstanding,
September 30, 1997          154,063       $3.80 - $6.20         $4.74              $ .74              43,125
---------------------------------------------------------------------------------------------------------------
   Granted                   37,000               $6.63         $6.63
   Exercised                (32,030)      $3.80 - $5.20         $4.20
   Forfeited                 (7,501)      $4.20 - $6.20         $4.78
Outstanding,
September 30, 1998          151,532       $4.00 - $6.20         $5.35              $2.11              49,354
---------------------------------------------------------------------------------------------------------------
   Granted                   92,500               $3.38         $3.38
   Exercised                     --                  --            --
   Forfeited                (14,438)      $4.00 - $6.63         $4.88
Outstanding,
September 30, 1999          229,594       $3.38 - $6.63         $4.59              $1.64              72,946
---------------------------------------------------------------------------------------------------------------
   Granted                   15,500       $6.31 - $7.09         $6.73
   Exercised                (32,562)      $3.38 - $6.63         $4.78
   Forfeited                (16,563)      $3.38 - $6.63         $3.94
Outstanding,
September 30, 2000          195,969       $3.38 - $7.09         $4.78              $3.47              94,500
===============================================================================================================
</TABLE>

Option holders may exercise options by delivering Company stock already owned,
options, or cash. The options tendered in the exchange are cancelled and,
therefore, reduce shares issued. During fiscal 2000, option holders exchanged
9,866 of the Company's stock options in payment of options exercised.

The weighted average exercise price of options exercisable at the end of year
was $5.03 per share at September 30, 2000, $5.22 at September 30, 1999 and $5.02
at September 30, 1998.

All options granted in the stock plan have a contractual life of 5 years from
the date of grant. The outstanding options as of September 30, 2000 expire as
follows:


---------------------------------------------
                          Number of Options
     Fiscal Year              that Expire
---------------------------------------------
        2001                    21,094
        2002                    51,375
        2003                    31,500
        2004                    76,500
        2005                    15,500
---------------------------------------------
      Total                    195,969
=============================================


                                      F-10
<PAGE>


The Company accounts for the options under APB Opinion No. 25, under which no
compensation cost has been recognized. Had compensation cost for the options
been determined consistent with Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation," the Company's net
income and net income per common share would have been the following pro forma
amounts for the year ended September 30:

                                         2000        1999           1998
-------------------------------------------------------------------------
Net income (loss):
    As reported                    $1,104,237    $380,018    $(3,518,464)
    Pro forma                      $1,040,868    $329,888    $(3,550,431)
Net income (loss) per
  common share-diluted:
    As reported                          $.81        $.29         $(2.82)
    Pro forma                            $.77        $.25         $(2.85)
=========================================================================

The fair market value of each option grant is estimated on the date of the grant
using the Black-Scholes option pricing model. The following weighted average
assumptions were used for grants in fiscal 2000, 1999 and 1998:

Assumptions as of the grant date          2000        1999          1998
-------------------------------------------------------------------------
Expected lives                           5.00        5.00           5.00
Risk-free interest rate                  6.66%       4.60%          5.41%
Expected volatility                        70%         69%            47%
=========================================================================

EMPLOYEE STOCK PURCHASE PLAN - The Company has an Employee Stock Purchase plan.
Under the terms of the plan, employees may purchase stock at 85% of market price
at the beginning or end of a six-month phase; whichever price is lower. There
were 100,000 shares authorized for this plan. As of September 30, 2000, 56,605
shares have been issued.


6. INCOME TAXES:

The income tax provision (benefit) consists of the following for the years ended
September 30:

                                         2000        1999           1998
-------------------------------------------------------------------------
Current federal                      $ 64,000   $ (73,000)   $  (749,000)
Current state                           2,000       2,000          2,000
-------------------------------------------------------------------------
                                       66,000     (71,000)      (747,000)
Deferred income taxes                 412,000    (199,000)    (1,066,000)
-------------------------------------------------------------------------
Income tax provision (benefit)       $478,000   $(270,000)   $(1,813,000)
=========================================================================


A reconciliation of the statutory federal rate to the effective tax rate is as
follows for the years ended September 30:

                                         2000        1999          1998
-------------------------------------------------------------------------
Statutory federal rate                     34%         34%          (34)%
Foreign restructuring charge               (5)       (200)           --
R & D credit                               (1)        (68)           --
FSC benefit                                (3)        (21)           --
Other, net                                  5          10            --
-------------------------------------------------------------------------
Effective tax rate                         30%       (245)%         (34)%
=========================================================================


                                      F-11
<PAGE>


The Company has recorded the following net deferred taxes:

As of September 30                                2000              1999
-------------------------------------------------------------------------
Reserves and other accruals                 $  243,000        $  248,000
Net operating loss carryforward                 72,000           434,000
Deferred gain                                  114,000           107,000
-------------------------------------------------------------------------
      Total current deferred taxes             429,000           789,000
-------------------------------------------------------------------------
Depreciation and amortization                  (10,000)          (90,000)
Reserves and other accruals                    122,000           181,000
-------------------------------------------------------------------------
Deferred gain                                  569,000           642,000
      Total noncurrent deferred taxes          681,000           733,000
-------------------------------------------------------------------------
Net deferred taxes                          $1,110,000        $1,522,000
=========================================================================

The Company has a net operating loss carry-forward of $210,000 as of September
30, 2000.


7. COMMITMENTS AND CONTINGENCIES:

LEASES - The Company leases office and manufacturing space and certain equipment
under operating lease agreements which require it to pay maintenance, insurance,
taxes and other expenses in addition to annual rentals. Future annual rental
commitments at September 30, 2000 under these operating leases are as follows:

       Year                         Amount
       -----------------------------------
       2001                     $  475,000
       2002                        489,000
       2003                        504,000
       2004                        519,000
       2005                        535,000
       Thereafter                  550,000
       -----------------------------------
       Total                    $3,072,000
       ===================================

LITIGATION - The Company is subject to various legal actions and claims
incidental to its business, including those arising out of alleged defects,
product warranties, employment-related matters and environmental matters. In the
event of a product recall by an original equipment manufacturer, it is possible
that the manufacturer will seek reimbursement of the costs to repair from the
Company. All such matters are subject to many uncertainties, and the outcomes of
individual matters are not predictable with assurance. Management believes that
the Company maintains adequate insurance, including product liability coverage,
to cover possible claims. The Company has established reserves in amounts
management believes are adequate to cover reasonable adverse judgments not
covered by insurance. Based upon the information available to management and
discussions with legal counsel, it is the opinion of management that the
ultimate outcome of the various legal actions and claims that are incidental to
the Company's business will not have a material adverse impact on the
consolidated financial position, results of operations or cash flows of
Research, Inc.

OTHER MATTERS - In early calendar 2000, the World Trade Organization (WTO) ruled
that the United States Foreign Sales Corporation (FSC) provision constituted an
illegal export subsidy, and specified that the United States withdraw the FSC
provision effective October 1, 2000. In response to the ruling, the United
States government recently enacted The FSC Repeal and Extraterritorial Income
Exclusion Act of 2000. The United States believe this is a WTO-compatible
solution. The Company does not expect that the new legislation will change
materially the tax benefit earned by the Company.

EMPLOYEE BENEFIT PLAN -The Company has a profit-sharing retirement plan that
provides deferred compensation benefits for eligible employees. The annual
contribution to the plan is discretionary and is determined in accordance with
policies established by the Board of Directors. The Board of Directors
authorized contributions of $354,000, $242,000, and $186,000 for fiscal 2000,
1999 and 1998, respectively. Contributions for fiscal 1998 included 401(k),
while 2000 and 1999 included both 401(k) and discretionary profit-sharing.


                                      F-12
<PAGE>


CHANGE OF CONTROL -The Board of Directors has approved the extension of certain
employee benefits, including salary continuation to certain key employees, in
the event of a change in control of the Company.


8. SEGMENT REPORTING:

The Company follows the provisions of SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." The Company is organized in three
divisions based on the products that each division offers to customers. Each
division reports their results of operations, submits budgets and makes capital
expenditure requests to the management team. This group consists of the
president and chief executive officer, the vice-presidents of the three
divisions, the treasurer, the operations manager and the vice-president of human
resources. The Company's operating segments have been aggregated into one
reportable segment, as the Company believes it meets the aggregation criteria of
SFAS No. 131. The divisions, each with a separate vice-president, are dedicated
to providing heating and drying systems to customers. All of the Company's
operations use similar manufacturing techniques and utilize common cost saving
tools.

The following table shows revenue (in thousands) by geographic region for the
years ended September 30:

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------
                             2000                        1999                        1998
 Geographic          Revenues    Long-Lived      Revenues    Long-Lived      Revenues    Long-Lived
   Region                          Assets                      Assets                       Assets
---------------------------------------------------------------------------------------------------
<S>                  <C>            <C>          <C>            <C>          <C>           <C>
U.S.A.               $19,145        $860         $18,017        $821         $11,920       $2,392
Asia                   5,055          --           3,043          --           1,789           --
Latin America          1,259          --           1,380          --           1,030           --
Europe                 2,744          --           1,729          --           1,696           --
Other Foreign
  Countries              601          --             241          --             296           --
---------------------------------------------------------------------------------------------------
TOTAL                $28,804        $860         $24,410        $821         $16,731       $2,392
===================================================================================================
</TABLE>


The following is a summary composition by product category of revenues (in
thousands) for the years ended September 30:

<TABLE>
<CAPTION>

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

Product Line                                    2000         1999         1998
-------------------------------------------------------------------------------

<S>                                          <C>          <C>          <C>
Ink drying products                          $ 2,433      $ 2,868      $ 3,293

Ink drying systems                             7,392        6,426        1,613

Power control products/solutions                 376          586        1,634

Heating products/solutions                     1,948        1,856        1,953

Reflow products                               14,618       10,978        6,687

Parts/service                                  2,037        1,696        1,551
-------------------------------------------------------------------------------

                 TOTAL                       $28,804      $24,410      $16,731
===============================================================================
</TABLE>

The Company had two customers that accounted for 32% and 19% of net sales in
fiscal 2000, 34% and 13% of net sales in fiscal 1999 and 13% and 10% of net
sales in fiscal 1998. During fiscal 2000, the Company had two customers that
represented 28% and 22% of net accounts receivable. During fiscal 1999, the
Company had three customers that represented 32%, 14% and 12% of net accounts
receivable, while in fiscal 1998, the Company had two customers that represented
12% and 11% of net accounts receivable.


                                      F-13
<PAGE>


9. UNAUDITED QUARTERLY FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA):


<TABLE>
<CAPTION>
                                              First        Second          Third        Fourth          2000
2000 Quarterly Results                       Quarter       Quarter        Quarter       Quarter         Total
-----------------------------------------   ----------    ----------    ----------    ----------     -----------
<S>                                         <C>           <C>           <C>           <C>            <C>
Consolidated Operations:
  Net sales                                 $    6,848    $    7,505    $    6,442    $    8,009     $   28,804
  Gross profit                                   2,532         2,830         2,587         2,812         10,761
  Income before income taxes                       402           403           338           440          1,583
  Net Income                                       249           275           219           361          1,104
  Earnings per Share:
    Basic                                   $      .19    $      .21    $      .17    $      .27     $     0.84
    Diluted                                        .19           .20           .16           .26           0.81

================================================================================================================

<CAPTION>
                                              First        Second          Third        Fourth          1999
1999 Quarterly Results                       Quarter       Quarter        Quarter       Quarter         Total
-----------------------------------------   ----------    ----------    ----------    ----------     -----------
<S>                                         <C>           <C>           <C>           <C>            <C>
Consolidated Operations:
  Net sales                                 $    5,394    $    5,545    $    5,464    $    8,007     $   24,410
  Gross profit                                   2,139         2,423         2,112         2,738          9,412
  Income (loss) before income taxes                124           160            44          (218)           110
  Net Income                                        81           106            26           167            380
  Earnings per Share:
    Basic                                   $      .06    $      .08    $      .02    $      .13     $     0.30
    Diluted                                        .06           .08           .02           .12           0.29

================================================================================================================
</TABLE>

The sum of the per share amounts for both periods may not equal the total for
the year due to the effects of rounding.


                                      F-14
<PAGE>


                             RESEARCH, INCORPORATED
                                   SCHEDULE II
                        VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                             Balance,                                             Balance,
                                             Beginning                                             End of
                                             of Period         Additions        Deductions         Period
                                          ---------------   ---------------   --------------   --------------
<S>                                         <C>                <C>              <C>              <C>
Allowance for doubtful accounts:(1)
--------------------------------

     Year ended September 30, 1998          $ 150,000          $ 13,116         $ (13,116)       $ 150,000

     Year ended September 30, 1999            150,000                --           (50,000)         100,000

     Year ended September 30, 2000            100,000           (12,514)           12,514          100,000

Restructuring reserve:(2)
----------------------

     Year ended September 30, 1998          $      --       $ 1,676,000       $(1,073,277)       $ 602,723

     Year ended September 30, 1999            602,723           298,065          (602,723)         298,065

     Year ended September 30, 2000            298,065                --          (298,065)              --
</TABLE>


(1)  Doubtful account deductions represent amounts determined to be
     uncollectible and charged against the reserve net of collections on
     accounts previously written off.

(2)  Restructuring reserve deductions represent amounts actually paid for
     restructuring costs.


                                      S-1