<PAGE>

                     U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                               AMENDMENT NO. 2 TO

                                   FORM 10-KSB

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

     For the Fiscal Year Ended December 31, 2001.

                           Commission File No. 2-69336

                                  CRAMER, INC.

KANSAS                                            I.R.S. EMPLOYER IDENTIFICATION
                                                  NUMBER 48-0638707
1222 QUEBEC STREET, NORTH KANSAS CITY, MO 64116
TELEPHONE: (816) 471-4433


Securities registered under Section 12(g) of the Exchange Act:   Common Stock

Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

Yes    No X  (The issuer's annual report on Form 10-KSB for the year ended
   ---   ---
December 31, 2000 and the issuer's quarterly report on Form 10-QSB for the
quarter ended April 1, 2001 were filed late.)

Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or other information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

The issuer's revenues for the 2001 fiscal year were $10,447,000

As of December 31, 2001 the aggregate market value of the common shares of
Cramer, Inc. held by non-affiliates was approximately $40,414, assuming the
market value of Cramer, Inc. common stock is approximately equal to $0.01 per
share at December 31, 2001. This valuation per share was determined by an
independent appraisal of the Company performed by Meara, King & Co., a Kansas
City accounting and valuation firm (See Item 5, "Market for Common Equity and
Related Stockholder Matters").

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 4,039,607 shares of common stock
(July 31, 2002).

Transitional Small Business Disclosure Format (check one): Yes    No  X
                                                              ---    ---




1
<PAGE>



                                      INDEX

<TABLE>
<CAPTION>


                                                                                                 PAGE NO.
                                                                                                 --------
<S>                                                                                             <C>
PART I

     Item 1.      Description of Business                                                            4
     Item 2.      Description of Property                                                           12
     Item 3.      Legal Proceedings                                                                 12
     Item 4.      Submission of Matters to a Vote of Security Holders                               13

PART II

     Item 5.      Market for Common Equity and Related Stockholder Matters                          14
     Item 6.      Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                               15
     Item 7.      Financial Statements                                                              22
     Item 8.      Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure                                               38

PART III

     Item 9.      Directors, Executive Officers, Promoters and Control
                  Persons; Compliance with Section 16(a) of the Exchange Act                        39
     Item 10.     Executive Compensation                                                            39
     Item 11.     Security Ownership of Certain Beneficial Owners and
                  Management                                                                        39
     Item 12.     Certain Relationships and Related Transactions                                    39
     Item 13.     Exhibits and Reports on Form 8-K                                                  39
     Item 14.     Controls and Procedures                                                           51
</TABLE>







2
<PAGE>



                                     PART I



ITEM 1. DESCRIPTION OF BUSINESS

Cramer, Inc. is a Kansas corporation engaged in the manufacture and sale of
seating and utility products designed for office and industrial settings. The
Company was established in 1886 as a manufacturer of safes and office products.
Descendants of the Cramer family owned the Company until 1961 when it was sold
to OLIX Industries, a public company located in Austin, Texas. In January 1981,
OLIX made a public distribution of its Cramer common stock.

Substantial Doubt About the Company's Ability to Continue as a Going Concern

The Company experienced continued recurring losses from operations, cash flow
difficulties and negative working capital during 2000 and 2001. As a result, the
Company is not in compliance with the financial net worth covenant in its bank
credit agreement, which includes a $2,000,000 loan and a $320,000 line of
credit. The $320,000 line of credit has been classified as non-performing. The
Company initially relied on a letter of credit posted by Rotherwood Ventures,
LLC ("Rotherwood") and subsequently on Rotherwood's pledge of $2M of securities
to the lender, in addition to the assets of Pacer, Inc. a wholly owned
subsidiary of Rotherwood, to secure the Company's credit facility. This credit
facility has been extended to February 3, 2003. There can be no assurance that
the Company can further extend the bank credit agreement or obtain substitute or
additional debt financing, or obtain any equity financing or that a proposed
$900,000 equity investment in the Company by Rotherwood will be consummated (see
Item 5- "Market for Common Equity and Related Stockholder Matters" and Item 6-
"Management's Discussion and Analysis of Financial Condition and Results of
Operations"), and thus there is no assurance the Company can remain in business
or avoid bankruptcy proceedings.

The primary factors causing the Company's continued lagging performance include
the following: 1) The recent recession and reduction in capital expenditures
across the country contributed to a rapid sales decline, particularly in the
seating business, and 2) Previous operating management allowed the Company's
operations and marketing focus to deteriorate. As a result, the Company
continues to invest in fundamental restructuring, which has adversely affected
the pace of new product development and marketing efforts.

The Company's auditors, in their audit report on the Company's 2001 financial
statements, opined that these financial statements and operational conditions
raise substantial doubt about the Company's ability to continue as a going
concern. The Company's previous auditors also issued a "going concern" opinion
on our 2000 financial statements (see Item 6 - "Management's Discussion and
Analysis of Financial Condition and Results of Operations", the financial
statements and notes thereto in Item 7 and "Management Changes and Turnaround
Plan" below).





3
<PAGE>

Management Changes and Turnaround Plan

The Board of Directors has responded to the uncertainty about the Company's
continued viability as a going concern and the conditions which created that
uncertainty by supporting ongoing efforts to reform operations, restore the
Company to positive cash flow and profitability and secure adequate financing.

On January 24, 2001, the Board appointed a new Chief Executive Officer, who
terminated the executives who served as President and Chief Operating Officer,
Chief Financial Officer and Vice President of Sales and Marketing during 1999
and 2000. The Company also eliminated a senior marketing position and changed or
restructured various supervisory positions. Two turnaround professionals were
also retained to perform defined duties in the areas of accounting/finance,
production methodology and marketing strategy. In November 2001 the Company
hired a new General Sales Manager to focus on overall sales management and
account development.

Following the appointment of the new CEO on January 24, 2001, the Company's new
management conducted a thorough review of the Company's operations and
strategies. As a result, new management commenced the following initiatives
designed to achieve positive cash flow and return the Company to profitability:

         -        The proprietary keyboard line was discontinued
         -        The direct-to-end-user marketing strategy was de-emphasized
         -        Efforts to eliminate obsolete and weak performing seating and
                  utility products have continued
         -        Marketing efforts are being concentrated on the Company's core
                  products and sales channels
         -        Manufacturing and inventory management practices have been
                  improved
         -        The manufacture of certain utility products was outsourced to
                  third-party manufacturers to increase margins and reduce
                  operating overhead
         -        The Company reduced its workforce to accommodate declining
                  sales and new production strategies
         -        The Company has leased a smaller facility to streamline
                  operations and achieve greater production efficiencies
         -        The Company has begun the process of identifying a new
                  management information system to replace the current legacy
                  application and improve business processes, reporting and
                  analysis
         -        The Company has reviewed its marketing strategies and will
                  implement new pricing, discount and commission structures to
                  improve margins and simplify the administration of current
                  sales channels
         -        The Board will recommend that its shareholders approve the
                  authorization of additional shares of common stock to
                  accommodate a letter of credit/pledge fee payable to
                  Rotherwood in common stock and a proposed equity investment in
                  the Company by Rotherwood (see Item 6 - "Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations")




4
<PAGE>

New management will continue to evaluate the Company's products, operations and
financing options in an effort to improve the Company's performance, achieve
positive cash flow, restore profitability and secure adequate capital.
Management is optimistic these goals can be achieved, but there can be no
assurance these measures will be successful. In fact, the Company's revenues
were substantially lower, and its gross margins significantly lower, in 2001
than 2000 (see Item 6 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations")

The Company intends to enter into a proposed equity investment transaction with
Rotherwood, who is planning to take the Company private after the proposed
investment is made (See Item 5- "Market for Common Equity and Related
Shareholder Matters" and Item 6- "Management's Discussion and Analysis of
Financial Condition and Results of Operations").

Business

The Company is a manufacturer that offers two lines of products with national
distribution. The largest line consists of various specialty seating products
designed and positioned in the marketplace for intensive use or 24/7
application. The Company distributes seating products through traditional
furniture channels, including independent manufacturers representatives,
wholesalers, dealers and catalogs. End-users consist of a variety of
enterprises, public and private, including the industrial, education, health
care and government sectors. The second line of products consists of various
utility products such as stepladders and stepstools, which are distributed
primarily through major domestic industrial catalogs.

The Company's business is not highly seasonal, but economic conditions do
influence purchase behavior by its customers.

The Company's seating products compete in the estimated $11 billion domestic
market for office furniture, which includes seating, desks, files, and panel
systems. Major companies serving this market are Steelcase, Herman Miller,
Knoll, Hayworth, Kimball, and HON Industries. These six companies supply
products in all major categories of this market. Together they account for an
estimated 60% of sales in this market. The remaining 40% of the market is served
by numerous smaller companies (typically sales of less than $75 million) that
primarily compete in selected segments of the market. These market segments are
delineated either by product type, such as seating or case goods, or by customer
category, for example high style, wood-finish, or budget-price.

Cramer's seating products are primarily non-wood, characterized by painted metal
finish and upholstered seats and backs. The product line includes standard
height chairs and a wide range of raised height models and stools. The Company
also manufactures Clean Room and Electro-Static Discharge seating which meet the
needs of certain specialized manufacturing and research environments. All offer
ergonomic design with varying degrees of adjustability to accommodate individual
users. The Company's seating products are recognized for quality construction
and lasting durability.







5
<PAGE>

The Company's utility products include step stools and aluminum ladders
featuring the use of retractable casters. The design of these products and the
retractable caster concept are well recognized and accepted in the marketplace.
Certain utility products have been continuously manufactured by the Company for
sale in the United States since the 1950's.

Product Lines

Office Seating - The Company's flagship seating product is the Triton(R) chair.
The Company believes this chair is unique in the industry because it combines a
15-year, 24/7 warranty with steel structural components with full ergonomic
adjustability.

The Triton's(R) design significantly upgrades the user's ability to meet
emerging ergonomic adjustability requirements yet have a chair that exceeds
industry durability specifications. The Triton(R) is designed to meet or exceed
all current standards of adjustability for prevention of repetitive stress
trauma, including the Human Factors Society standards and the San Francisco VDT
work-station standards; all flame-retarding specifications, including California
TB 117 and California TB 133; and industry testing for strength and component
failure (ANSI/BIFMA specifications). Additionally, a version of the Triton(R)
has been independently certified to pass the more rigorous U.S. General Services
Administration Intensive Use Seating specifications.

Typical purchasers of the Triton(R) are health-care facilities, professional
offices, production lines, airline reservation centers, police and emergency
dispatch stations and similar 24-hour use applications. The Triton product line
includes both a regular size version and a larger version called the Triton Max.
This version was specifically designed to accommodate larger-sized users.

Other significant seating products include the Fusion II(R), Aspira and Centris
chairs. They are intended to complement the Triton(R) line with its unique steel
seat pan and 24/7 warranty. Fusion II(R) chairs provide full ergonomic task
seating at moderate prices. Aspira and Centris chairs provide well-made
ergonomic seating for normal single-shift use in the workplace. Each of these
chairs follow the strict standards for design and function found in all of the
Company's active ergonomic seating lines. These products are designed to
function within office, manufacturing and laboratory settings. The Company
discontinued a number of seating products in 2000 and 2001 due to lagging sales
and/or unacceptable gross margins.

Utility - The Company's utility products include the Kik-Step(R), a round,
all-steel, 2-step stool that rolls on retractable casters and is frequently used
in libraries, file rooms, and stockrooms. This product was designed by Cramer in
1957 and continues to be an important part of the Company's product line. In
addition to the Kik-Step(R), Cramer manufactures several other small stools and
the PAL and StopStep ladders, a series of lightweight aluminum ladders featuring
the same retractable caster concept as the Kik-Step(R).

Industrial Seating - The Company's industrial seating line includes the Rhino
and RhinoPLUS chairs. Both are designed for a more rugged setting than a typical
office




6
<PAGE>

chair. The Rhino seating line is distinguished by its seat and back, which are
made from "tough-skinned" urethane foam. This technology offers
industrial-strength reliability for factory seating, including the ability to
easily wash the chair. The product line includes two sizes of chair or stool
components, a round backless stool, and a sit-stand model designed to relieve
weight from an individual's feet in industrial situations while allowing freedom
for physical activity. The RhinoPlus is a unique product that combines the tough
industrial strength urethane skin of the original Rhino with a separate soft
padded foam cushion. As a result, the RhinoPlus is significantly more
comfortable than other urethane chairs currently on the market. This product was
introduced in 2000.

Net sales by product group in 2001 and 2000 were as follows:



<TABLE>
<CAPTION>
                                                                  Year Ended December 31,
                                                                  ----------------------
                                                              2001                       2000
                                                              ----                       ----
                <S>                                     <C>                         <C>
                    Seating products                     $  6,336,000                $  8,204,000
                    Utility products                        4,111,000                   4,893,000
                                                            ---------                   ---------
                                                         $ 10,447,000                $ 13,097,000
                                                         ============                ============
</TABLE>



Marketing and Sales

The majority of the Company's seating products are sold to independent office
furniture dealers who resell the products to end-users. Cramer has approximately
1,300 dealer accounts, although only a portion of these accounts is active in
any given year. For the past several years, sales to independent office
furniture dealers have accounted for 60% to 70% of the Company's revenue. These
sales efforts are focused through approximately 21 independent commissioned
sales representative organizations located in major markets throughout the
United States. These sales organizations typically employ from one to six
people, and represent three to six complimentary product lines such as desks,
panel systems, and lighting. Average tenure for the Company's sales
representatives is more than four years. These representatives initiate and
develop business directly with end users, designers and architects for
specification projects and coordinate and manage the Company's business
relationships with the independent office furniture dealers in their
territories.

The Company's utility products are sold primarily to approximately 85 wholesale
and catalog distributors. These distributors include office and industrial
suppliers, as well as specialty distributors serving health-care, scientific,
and safety markets. The Kik-Step(R) stool is also distributed to the home market
through catalog distributors. During 2001, the Company achieved promising
results with several new "upscale" specialty catalogs. Other manufacturers
produce competing products, but these competitors have, thus far, not been
successful in significantly reducing the Company's market share in utility
products. However, there is no guarantee that competitors will not be successful
in reducing the Company's market share in the future. While six wholesale and
catalog distributors accounted for 79% of the Company's 2001 utility product
sales, no single customer accounted for more than 8% of the Company's total
sales in 2001.





7
<PAGE>

Cramer regularly participates in national office, industrial, and ergonomic
products trade shows and conferences. Sales representatives display product
samples and provide demonstration chairs for dealers and end-users.

Sales in the contract furnishing industry, where Cramer's seating products
compete, follow a pattern of slightly lower volume in the winter and summer and
higher volume in the spring and fall. Utility product sales are generally equal
through each quarter of the year.

The Company is currently in the process of creating new price books for the
seating and utility lines. As part of this process, the discount and commission
structures in place for each channel will be updated and simplified to enable
more efficient management of sales channel partners.

Manufacturing and Distribution

The Company's products are fabricated from components such as aluminum tubing,
plastic forms, foam and fabric purchased from sources locally and throughout the
United States and internationally.

Cramer understands the importance of developing partnerships with its vendors,
and has undertaken a program to work closely with suppliers to improve quality,
delivery, and price, while offering technical assistance and production planning
forecasts. Although this approach includes focusing greater purchases with fewer
vendors, the Company believes it retains the ability to change to alternative
suppliers in most cases.

Certain components of the Company's products are sourced from a single vendor.
Any disruption in these supply arrangements could result in temporary shipment
delays or increased costs. However, the Company believes it has the ability to
substitute suppliers for any component within a three-month period of time.

Production equipment used to manufacture the Company's products is owned and
maintained by the Company at its factory in North Kansas City, Missouri.
Production equipment ranges from metalworking machinery to a powder coat
painting system. Some of the tooling used in the fabrication of specialized and
proprietary components is owned by the Company but located at vendor locations.
The Company believes it has sufficient production capacity to support a
significant increase in sales volume.

During 2001, the Company engaged an overseas manufacturer to produce certain
utility products for the Company. The Company receives these products in
finished form and retains responsibility for distribution to customers. The
Company has been able to improve margins under this new approach and continues
to explore additional outsourcing opportunities with this and other
manufacturers. The Company believes that successfully implementing the
outsourced manufacture of certain products will enable the Company to increase
its focus on marketing and distribution and reduce costs.






8
<PAGE>

The Company's promised delivery schedule includes 5-day lead times for orders of
30 units or less. This schedule is significantly shorter than that offered by a
large portion of the Company's competition and is a competitive advantage in
certain situations. The Company produces most products to order and maintains
relatively little finished goods inventory, with the exception of outsourced
products. Some competitors offer a 5-day or "Quick Ship" program; however, most
of these orders are fulfilled from a limited selection of product built for
inventory. The Company's larger orders typically are given a 3 week lead time,
which is equal to or better than average for our competition. While the majority
of sales are configured using standard components and options, Cramer is able to
customize product specifications for particular needs. At December 31, 2001, the
Company's backlog of unfilled orders was $326,687, the majority of which were
shipped in the first quarter of 2002.

Employees

In response to the decline in sales and as part of the Company's overall
initiative to improve operating efficiencies, total employment was reduced from
86 as of December 31, 2000 to 55 full time employees at December 31, 2001: 21
office, supervisory and managerial personnel and 34 production personnel.
Additional layoffs were implemented in the first quarter of 2002, resulting in a
further reduction in workforce of 15 employees. Remaining employees have been
able to successfully continue required tasks and responsibilities.

Cramer management considers the ability to attract, train, and retain skilled
professional employees and production workers to be an important aspect of the
Company's competitive advantage. Management believes that it enjoys a good,
interdependent relationship with its employees and has instituted personnel
policies intended to maintain this relationship. The Company is an equal
opportunity employer and an active non-discrimination policy is integral to this
concept.

The factory workers are covered by a collective bargaining agreement with the
United Steelworkers of America that expired on September 30, 2003. The economic
portion of the agreement expired on October 1, 2001 and subsequently has been
renewed on a month-to-month basis. Any work stoppage could impact the Company's
ability to manufacture product, on-time delivery and product quality, which
could have a material adverse effect on the Company's business and financial
condition. While no work stoppages have occurred over the past ten years and
labor negotiations are an ordinary part of the Company's business, there can be
no assurance that a work stoppage can be avoided. At year-end, 16 of the 34
factory workers were not dues paying union members. The Company believes that
strong labor relations are an important aspect of its business.

Competition

The domestic ergonomic furniture market is highly competitive. In addition to
its large competitors that offer broad lines of products, Cramer frequently
competes in its narrow market area against similar-sized specialty
manufacturers. Cramer competes by







9
<PAGE>

focusing on products that have high quality and a reputation for long-term
reliability. The Company also differentiates itself by a commitment to customer
service and on-time delivery. The Company's 110+ year history and the proven
reliability of its products support a strong reputation and product awareness in
the marketplace.

Patents, Trademarks and Government Regulation

The name Cramer and the Company's Kik-Step(R), Triton(R), and Fusion(R) product
names are registered trademarks. The Company's other office and utility seating
products are marketed under the Nimbus, RhinoPLUS and Rhino trademarks. The
Company also considers the overall design and appearance of the Kik-Step(R) to
be a trademark of the product.

The Company has filed for patent protection for the urethane skins used in
RhinoPlus seating products.

No government approval is required for Cramer's products. The Company designs
its products to meet voluntary industry standards for strength and reliability
(ANSI/BIFMA). The Company maintains ANSI/BIFMA test equipment at its factory and
has implemented a program of systematically testing its products for
reliability. Certain products are designed to meet the more rigorous
requirements of the General Services Administration. This provides the Company
with competitive advantages in certain situations.

The Federal Occupational Safety and Health Administration (OSHA) conducted an
inspection of the Company in late 2000 during which a number of areas of
noncompliance were detected. On April 23, 2001, the Company received
notification that it was subject to citation and fines totaling $117,500 based
on these areas of non-compliance. Prior to receiving the citation, the Company
had taken proactive steps to correct areas of non-compliance identified at the
time of the OSHA site inspection and believes these measures have brought the
Company into substantial compliance. The Company requested a reduction or
suspension of the fines and signed a settlement agreement with OSHA that
requires total payments of $23,000 over two years to settle all outstanding
fines. As of June 30, the Company had made scheduled payments of $2,000.
Management believes modifications to its existing facility and operating methods
required to bring the Company into OSHA compliance, and compliance with other
laws and regulations, will not have a material adverse effect on its overall
business. An accrual of $23,000 was recorded at December 31, 2001 for the OSHA
settlement.

Environment

The Company's production processes use several hazardous or polluting
substances. Employees are provided protective clothing and equipment where
necessary or appropriate, such as breathing masks on the paint line. Disposal of
wastes is conducted according to applicable regulations using authorized and/or
licensed vendors where required. These substances are commonly used in the
industry and the Company does not use them in great quantity. Accordingly, the
impact of


10
<PAGE>

environmental compliance costs on the Company's operations is believed to be
minimal.

ITEM 2.  DESCRIPTION OF PROPERTY

The Company's corporate headquarters and manufacturing facility have been
located on a 5-acre tract at 625 Adams Street, Kansas City, KS in a building
owned and occupied by the Company since 1957. This facility comprises 165,000
square feet, including 20,000 office, 2,000 showroom, and 143,000 manufacturing
space.

Due to the facility's age, its overall condition is relatively poor and requires
continuous maintenance. The Company believes that its facilities are adequately
insured.

In the first quarter of 2002, management began exploring the feasibility of
relocating to a new facility that more closely matches the Company's current
size and manufacturing needs. The Company has signed a lease for a 34,000 square
foot facility and relocated in September 2002. The minimum lease term is three
years with the right to extend for an additional eight years. Annual rent during
the initial term is $111,000/ year. The Company anticipates that relocating the
business could reduce operating overhead significantly and improve production
efficiency. However, there is no assurance we can sell or lease our existing
facility without spending significantly on renovation.

ITEM 3. LEGAL PROCEEDINGS

The Company is a defendant in several lawsuits relating to product liability
claims arising from accidents allegedly occurring in connection with the use of
its products. The claims are covered by insurance and are being defended by the
Company's independent counsel or by counsel assigned by the Company's insurance
carriers. These claims are subject to deductibles ranging from $0 to $50,000
($50,000 is the most common deductible). The Company maintains product liability
insurance coverage with limits of $1 million per occurrence and $2 million
aggregate, plus $15 million in umbrella coverage. After the Company has
exhausted its deductible by paying a total of $50,000 (whether in legal fees and
expenses, settlement amounts, damages awards, or any combination thereof) on any
single claim, its liability insurance carrier is obligated to pay any sums owed
for legal fees and expenses, settlement amounts and damages awards in excess of
$50,000 for that claim. The Company has been able to offset settlement costs
through amounts paid by co-defendants in certain cases historically.

Over the last five fiscal years, the Company has averaged 3.7 new claims per
year. An average of approximately 50% of those claims resulted in defense costs
and settlement amounts or awards exceeding $50,000. The average total cost of
defense and settlement awards paid by the Company over that period was $35,000
per claim. On average, approximately half of the costs per claim represented
settlement awards and the other half represented legal defense costs. The
Company's claims history has leveled out over the past three years to two to
three new claims per year. The number of new claims made or lawsuits filed
against the Company during years 2000 and 2001 were two and three, respectively,
which reflects a reduction in claims experience




11
<PAGE>

compared to prior years. The Company settled two claims during 2000 and four
claims during 2001. The Company's average out-of-pocket cost per settled claim
was $7,500 in 2000 and $41,000 in 2001.

The Company had six open claims at December 31, 2001 and seven open claims at
December 31, 2000. The Company has incurred aggregate defense costs of $115,200
with respect to the six open claims at December 31, 2001, $66,300 of which has
been paid by the Company and $48,900 has been paid by insurance carriers. The
Company does not believe these open claims will have materially different
average results than the historical experience described above. None of the
claims allege damages in excess of policy limits. However, several of the
claimants allege substantial damages. The largest such claim alleges damages of
$375,000 and is discussed separately below. While management believes the
Company has substantial defenses with respect to these claims, the ultimate
outcome of such litigation cannot be predicted with certainty. Such claims are
an ordinary aspect of the Company's business and industry. The Company believes
its products are safe and reliable when assembled, used and maintained in a
reasonable manner, and believes it adequately reserves against its reasonably
likely exposure under these claims based upon past experience.

The Company discusses each claim with its legal counsel to determine the merits
of the case and the most likely outcome. In some cases, it is too early to make
that assessment. At December 31, 2001, unless specific information pertaining to
the case indicated a higher or lower amount was required, a specific reserve for
each case was calculated, equal to the historical average cost per completed
case of $35,000 less costs incurred to date. The insurance deductible amounts
were also considered in each case. The Company recorded a reserve for specific
claims of $105,000 at December 31, 2001.

In addition to reserves for specific cases, the Company estimates its exposure
for unasserted claims and records additional reserves using the claims history
discussed above as well as recent trend insights. The Company had received
notice of six incidents for which no claims had been asserted at December 31,
2001. The Company recorded a reserve for unasserted claims of $113,000 at
December 31, 2001.

Although the Company's claims history has stabilized in recent years, the
Company cannot be certain that future claims experience will be consistent with
historical claims experience. Any increase in the frequency or average cost of
future claims could increase the Company's exposure to product liability
expense. However, the maximum total legal defense cost, settlement costs and
damages awards for each claim is limited to the $50,000 deductible. Management
does not anticipate that future product liability claims will have a material
adverse effect on the Company's operating results and liquidity.

On February 25, 1998, the Company was served with a suit filed by Pauline and
Daniel Robitaille ("Plaintiff") in the Superior Court of Massachusetts, Norfolk
County. On October 20, 2000, the Plaintiff made a demand of $375,000 against the
Company. The Plaintiff claims she was injured when she fell from a three-step
ladder manufactured





12
<PAGE>

and/or distributed by the Company, suffering a foot injury. The Company's
$50,000 insurance deductible is now exhausted and the Company's insurance
carrier has assumed defense of this claim. All future legal expenses, including
attorney's fees, settlement and any verdict against the Company, are the
responsibility of the Company's insurer.

The Company was assessed $117,500 in penalties by OSHA as a result of an
inspection conducted in 2000 and signed a settlement agreement with OSHA which
calls for payments of $23,000 (see "Patents, Trademarks and Government
Regulation" in Item 1). As of June 30, the Company had made scheduled payments
of $2,500.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None












13
<PAGE>



                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Cramer's common stock is not listed on NASDAQ or any exchange and there is no
public trading market for the stock.

As of December 31, 2001, there were 746 shareholders of record.

Since being publicly held, the Company has never paid cash dividends and does
not anticipate paying any cash dividends in the foreseeable future. The
Company's ability to pay cash dividends on its common stock will depend upon its
capital surplus, loan covenants and cash requirements.

Odd Lot Tender Offer

In the fourth quarter of 2001, the Board approved an "Odd Lot" Tender Offer, in
which the Company offered to purchase the shares held by shareholders owning
fewer than 100 shares.

There are two reasons the Board undertook this offer. First, since there is no
trading in Cramer Inc. stock, shareholders have not had a way to trade their
shares in order to recognize any income tax loss they may have in their stock.
This offer provided "Odd Lot" holders a method to do this. Second, the Company
continues to look for every cost saving it can find. "Odd Lot" shareholders
represented 35% of all shareholders. The Company's intention was to save the
annual expenses associated with reporting to these shareholders.

Since Cramer's stock is not traded on NASDAQ or any exchange, there is no market
for the stock and it is difficult to know its value. Cramer hired Meara, King &
Co., a Kansas City accounting and valuation firm, to analyze the current value
of Cramer and its stock. The results of their study, which included, among other
considerations, earnings tests and asset appraisals, valued the stock at $.01
per share. The Company offered to pay $.015 per share in cash to each "Odd Lot"
shareholder. In recognition of this low value, the Company also agreed to send a
Kik-Step to every "Odd Lot" shareholder who accepted this offer.

48 "Odd Lot" shareholders, holding an aggregate of 1,889 shares, accepted the
offer and tendered their shares to the Company for an aggregate purchase price
of $28.34 plus Kik-Steps valued at $2,400. The Odd Lot Tender Offer is now
closed.

Meara, King & Co. performed an update of its valuation in July 2002 and their
assessment of the updated value remained $0.01 per share.

Going Private Transaction






14
<PAGE>

As a result of the Company's tenuous cash/liquidity position and its need for
additional capital to execute its restructuring plans, the Company plans to
enter into an investment transaction with Rotherwood. Rotherwood intends to
purchase 18 million shares of newly issued Company common stock for a cash
purchase price of $.05 per share. This equity investment of $900,000 would allow
the Company to substantially reduce its bank debt and restructure its balance
sheet. Upon Rotherwood's purchase of the shares, combined with the issuance of
800,000 shares of common stock per quarter in payment of a letter of
credit/pledge fee to Rotherwood, Rotherwood would own more than 90% of the
Company's outstanding shares of common stock. Rotherwood then plans to cause a
"short-form" merger to occur during the year 2002 in which each outstanding
share of the Company's common stock owned by shareholders other than Rotherwood
would be converted into the right to receive a cash payment of $.05 per share
for an aggregate cash consideration of $98,000, after which Rotherwood plans to
take the Company private. The Company plans to amend its articles of
incorporation to increase its authorized shares of common stock from 8,200,000
to 74,200,000 shares to permit Rotherwood to acquire the 18 million shares of
common stock and permit Cramer to pay the 800,000 share quarterly letter of
credit/pledge fee. Rotherwood intends to enter into such a transaction, but is
not subject to any binding obligation to do so.

The Company has incurred substantial expenses in connection with its relocation
to a smaller, more efficient facility. The Company has not had sufficient cash
to pay those expenses. Rotherwood intends to advance approximately $100,000 to
enable the Company to pay the relocation expenses. Upon consummation of the 18
million-share purchase by Rotherwood, the advance will be credited against the
$900,000 purchase price for the shares. See Item 6- "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Transaction
Statement on Schedule 13E-3, filed on behalf of the Company, Rotherwood,
Rotherwood Investments, LLC and James R. Zicarelli and incorporated by reference
herein, for additional information regarding the proposed equity investment,
cash-out merger and going private transaction.














15
<PAGE>


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS


A.       FORWARD LOOKING STATEMENTS

         Except for the historical information contained herein, this report on
         Form 10-KSB contains forward-looking statements that involve risks and
         uncertainties. The Company's actual results could differ materially. In
         connection with the "safe harbor" provisions of the Private Securities
         Litigation Reform Act of 1995, Cramer reminds readers that there are
         many important factors that could cause the Company's actual results to
         differ materially from those projected in forward-looking statements
         made by, or on behalf of, the Company. When used in this Form 10-KSB
         and in other filings by the Company with the Securities and Exchange
         Commission, in the Company's press releases and in oral statements made
         with the approval of an authorized executive officer, words or phrases
         such as "will likely result", "expects", "are expected to", "will
         continue", "is anticipated", "estimate", "project" or similar
         expressions are intended to identify forward-looking statements. The
         Company wishes to caution readers not to place undue reliance on such
         forward-looking statements.

         There are a number of reasons why investors should not place undue
         reliance on forward-looking statements. Among the risks and
         uncertainties that could cause the Company's actual results for future
         periods to differ materially from any forward-looking statements made
         are the following:

            -     The inability of shareholders other than Rotherwood to
                  participate in any future upturn in the Company's operations
                  or financial condition, if the short-form merger is
                  consummated.
            -     The Company's continuing declines in revenues and continuing
                  losses
            -     Questions about the Company's continuing viability as a going
                  concern and management's plans to address that issue
            -     Any failure of the Company's turnaround plan to achieve its
                  objectives
            -     The possibility that the bank will call or not renew the
                  Company's credit facility and that the Company could not
                  obtain substitute or additional debt financing, or obtain any
                  equity financing
            -     Rotherwood's intention to take the Company private
            -     Fluctuations or reductions in product demand and market
                  acceptance
            -     The level of product development by the Company
            -     Capacity, facility and supply constraints or difficulties
            -     The possibility that Cramer's sister company will borrow more
                  funds than anticipated under the Rotherwood credit facility,
                  which would further reduce the Company's borrowing capacity
                  under the Company's credit facility
            -     The effect of new laws and regulations






16
<PAGE>

            -     Unexpected additional expenses or operating losses
            -     Strong competition
            -     Reliance on certain vendors for key products and components
            -     Deferred plant maintenance and the cost of future maintenance
            -     If product and warranty liability claims exceed the amounts
                  reserved
            -     Control by insiders

         The foregoing list of risks and uncertainties is not meant to be
         complete.

B.       QUESTIONS ABOUT THE COMPANY'S ABILITY TO CONTINUE AS A GOING CONCERN

         In light of our continuing losses and negative cash flow and the other
         contingencies cited in Item 1 - "Business - Substantial Doubt About the
         Company's Ability to Continue as a Going Concern" and in the report of
         our independent auditors on our 2001 financial statements, our auditors
         have issued a "going concern" opinion on our 2001 financial statements
         that raises substantial doubt about the Company's ability to continue
         as a going concern. The Company's management are performing a thorough
         review of Company operations and implementing a turnaround plan with
         the objective of generating positive cash flow and returning the
         Company to profitability. The Company suffered a substantial reduction
         in 2001 revenues, which is making this task more difficult. If
         management is unsuccessful in achieving these objectives, or if the
         Company cannot obtain new or increased debt or equity financing, the
         Company may not remain viable and may have to cease operations or find
         a buyer for the Company, which cannot be assured. If the short-form
         merger with Rotherwood is consummated and the Company's turnaround plan
         is successful, shareholders will not receive any benefit from that
         success, but will not bear the risk of any continuing losses by the
         Company.

C.       SUMMARY OF OPERATIONS

         Comparison of Fiscal Year 2001 vs. Fiscal Year 2000

         Net sales decreased in 2001 to $10,447,000, a decline of $2,650,000 or
         20% from 2000. This decrease was due to the following factors: 1)
         Seating products declined by 24% overall, primarily due to lagging
         sales of the Triton and Aspira lines. These products were impacted
         directly by the recent recession and are subject to more intense
         competition. A $301,500 increase in the Rhino product line offset the
         overall seating decline. The Rhino Plus was introduced in 2000 and
         continued to experience improved market acceptance. 2) Utility products
         declined consistently across all models, decreasing by 15% as a group.
         The weaker performance of catalog distributors as a whole contributed
         to the decline.





17
<PAGE>

         The Company's order backlog at December 31, 2001 of $326,687 was
         $826,313 lower than December 31, 2000 backlog, a 69% decline. This
         could mean further reduction in 2002 revenues.

         Gross margins declined from $3,341,000 in 2000 to $2,314,000 in 2001.
         As a percent of sales, Gross margins were 22% in 2001, compared to 26%
         in 2000. Lower margins as a percent of sales were the combined result
         of increased freight and material costs, less efficient utilization of
         plant overhead due to lower sales volume and adjustments to warranty
         reserves.

         Operating expenses declined in total by $588,000 from $3,916,000 in
         2000 to $3,328,000 in 2001.

         General and administrative costs were $1,305,000 in 2001 compared to
         $1,222,000 in 2000, an increase of $83,000. The following factors
         contributed to higher general and administrative costs: 1) The Company
         had significant payroll severance costs associated with the management
         restructuring discussed in Item 1. 2) Legal costs were significantly
         higher, due primarily to costs associated with the OSHA settlement,
         significant layoffs, the Odd Lot Tender Offer and additional assistance
         in preparation of the 2000 10KSB and 2001 and 2002 proxy statements in
         light of the additional disclosures resulting from the Company's recent
         problems, and 3) The Company incurred a $40,000 charge in connection
         with the letter of credit provided by Rotherwood (see "Financial
         Condition, Liquidity and Capital Resources" below).

         The Company had no charges for impairment of assets in 2001, compared
         to $289,000 of asset impairment charges in 2000 associated with the
         write-off of intangible assets related to the discontinued keyboard
         business.

         Selling expenses declined from $2,405,000 in 2000 to $2,023,000, a
         decrease of $382,000. The most significant factor was a decrease in
         costs of $271,000 in 2001 as a result of closing the Minneapolis sales
         office and ceasing related direct-to-end user sales and marketing
         efforts. In addition, direct mail and marketing literature costs
         declined in 2001. These decreases were offset by increased catalog
         program costs and higher personnel and consulting costs associated with
         the management restructuring.

         Interest expense decreased from $222,000 in 2000 to $174,000 in 2001.
         While the credit facility balance was higher on average throughout
         2001, the interest rate is tied to the prime rate, which decreased
         significantly throughout 2001.

         The Company incurred a net loss before tax of $1,202,000 in 2001,
         compared to a loss of $1,017,000 in 2000. Included in the 2000 loss
         were total charges for the discontinued keyboard business of $363,000,
         including a write-off of long-term assets and accounts receivable.





18
<PAGE>

         Comparison of Fiscal Year 2000 vs. Fiscal Year 1999

         At $13,097,000, net sales in 2000 increased by $404,000, or 3.2%, over
         1999. This increase was due to an 18% increase in sales of utility
         products to catalog distributors. The increase in utility products was
         offset by a 4% decline in sales of the Company's seating line to
         furniture dealers. This decrease was primarily due to greater
         competition in the 24 hour, heavy duty seating market which affected
         the Company's Triton seating line.

         The Company's order backlog at the end of December 2000 was $1,189,000,
         an increase of $189,000 over 1999.

         As a percentage of net sales, gross margins in 2000 were 25.5% as
         compared to 28.2% in 1999. This decrease in gross margins was largely
         the result of three factors: (1) a write-down of raw materials and
         finished goods inventory due to product discontinuance and
         obsolescence, including abandonment of the proprietary keyboard line,
         (2) additional inventory carrying costs associated with the
         unsuccessful implementation of a Kanban production control system, and
         (3) decreased direct labor productivity.

         Total operating expenses during 2000 were $3,916,000, compared to
         $3,675,000 during 1999.

         Fiscal year 2000 interest expense of $222,000, when compared to 1999
         interest expense of $122,000, increased by $100,000. In light of the
         Company's cash flow difficulties, the Company has been utilizing the
         Rotherwood revolving line of credit more extensively, as evidenced by
         the comparison of year ending borrowing balances of $2,302,000 in 2000
         and $1,842,000 in 1999.

         The Company incurred a net loss before tax of $1,017,000 in 2000,
         compared to a loss of $292,000 in 1999. Included in the 2000 loss are
         charges for the discontinued keyboard business totaling $363,000.
         Additional charges for bad debt expense and obsolete inventory totaled
         $19,000 and $219,000, respectively.

D.       ACCOUNTING ESTIMATES

         Accounting estimates are an integral part of the financial statements
         and are based on management's knowledge and experience about past and
         current events and assumptions about future events. Certain accounting
         estimates are particularly sensitive because of their significance to
         the financial statements and because of the possibility that future
         events affecting them may differ significantly from those expected. The
         most sensitive estimates affecting the financial statements were the
         warranty and product liability accruals, and the inventory reserve.




19
<PAGE>

         The Company offers product warranties with terms of up to fifteen
         years. The majority of the Company's warranty claims relate to failed
         seating parts. The Company estimates its accrual for future warranty
         costs based on durability testing, engineering studies, actual costs
         incurred in prior years, warranty terms and historical sales data. We
         increased our warranty accrual from $100,000 at December 31, 2000 to
         $232,000 at December 31, 2001. This increase can be attributed in part
         to the introduction of new chair models with more extensive warranties,
         along with changes to existing product warranties that increase the
         Company's warranty expense exposure. For example, the warranty on
         certain models was increased to cover 24X7 use in the field. These
         warranty changes were implemented to solidify the Company's reputation
         in the market as a premium supplier of intensive task seating. The
         increase in the warranty accrual also reflects management's
         re-evaluation of cost exposure and desire to be conservative. The
         increase was not the result of escalating warranty costs, as warranty
         claims remained consistent in 2001.

         The reserve for obsolete and slow-moving inventory is based on
         management's analysis of inventory turns, historical write-offs, future
         production plans including any product line changes, and sales trends.
         The decrease in inventory reserves from $162,000 at December 31, 2000
         to $110,000 as of December 31, 2001 was the result of an overall
         decrease in inventories due to declining sales and production.


E.       FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

         Cash flow from operations improved from a deficit of $295,000 in 2000
         to a surplus of $580,000 in 2001. The increase in cash from operations
         was due primarily to reductions of inventories and accounts receivable.

         Accounts receivable totaled $563,000 at December 31, 2001 compared to
         $1,509,000 at December 31, 2000. The decline was a combination of lower
         December sales in 2001 compared to the prior year and improved
         collection results. Days' sales outstanding decreased from 43 in 2000
         to 36 in 2001.

         Inventories declined from $1,558,000 at December 31, 2000 to $721,000
         at December 31, 2001, a 54% decrease. A general decline in sales,
         combined with efforts to manage purchasing more tightly contributed to
         the change. In addition, raw and WIP inventories were increased at
         December 31, 2000 to support a large, end-of-year chair order.

         Accounts payable declined $281,000 in 2001 as a result of reduced
         production levels.

         Capital expenditures of $30,000 during 2001 related primarily to
         manufacturing equipment and plant updates.





20
<PAGE>

         The Company participates with Pacer Corporation, an affiliate of
         Rotherwood, in a combined credit facility of $2,320,000 (consisting of
         a $320,000 revolving line of credit and a $2,000,000 loan) which is
         secured by substantially all of the assets of the Company and Pacer.
         The Company borrowed an additional $18,000 from its combined bank
         credit facility in 2001, increasing the total outstanding balance to
         the maximum amount allowed under the agreement, or $2,320,000. The
         $2,000,000 loan is also secured by Rotherwood's pledge of $2,000,000 in
         securities as collateral for the loan. The $2,000,000 securities pledge
         replaced a $2,000,000 letter of credit previously posted by Rotherwood
         in favor of the lender. Cramer and Pacer are jointly liable for
         principal and interest under the loans, and each company may obtain
         advances under the loans. However, because all existing advances under
         the loans have been made to Cramer, Cramer is currently making all
         interest payments under the loans. The loans are fully drawn, and thus
         neither company may obtain any further advances under the loans unless
         and until the principal amounts are reduced. The loans matured on
         January 27, 2002 and have been temporarily extended at periodic
         intervals, with the latest extension expiring on February 3, 2003.

         The loan agreement provides that the bank may declare a default and
         call and accelerate the loans if there is a material adverse change in
         the business, properties, financial condition or affairs of Cramer,
         Pacer or Rotherwood. The bank also has the right to call the loans if
         the bank in good faith deems itself "insecure." In light of these
         provisions in the loan agreement (the "MAC/Insecurity Clause") and the
         Company's financial condition, declining sales and history of losses,
         the bank could call the loans at any time even if Cramer is current on
         its debt service obligations and Cramer and Pacer have not violated any
         other provisions of the loan documents.

         In addition, Cramer and Pacer are not in compliance with the $500,000
         financial net worth covenant under the loans, and the $320,000 credit
         line has been classified as non-performing. The lender has requested
         that the Company either pay off the $320,000 revolving credit line or
         provide additional collateral in the form of a guaranty or additional
         security by February 3, 2003 and the Company believes the lender would
         call that loan if it did not pay off the loan or provide additional
         security. The Company does not believe the lender will call the
         $2,000,000 loan so long as Rotherwood maintains its securities pledge
         as collateral for that loan; however, Rotherwood has advised the
         Company that it does not wish to continue the securities pledge
         indefinitely. The Company does not have sufficient assets to pay off
         the loans, so any acceleration of either or both loans by the bank
         could force the Company to declare bankruptcy, cease operations and
         liquidate. If the bank were to call the $2,000,000 loan and foreclose
         upon the collateral posted by Rotherwood, Rotherwood could succeed to
         the bank's position as the lender on that loan, call the loan and
         proceed against the Company's assets in satisfaction of the loan.
         Rotherwood has no personal liability under the $2,000,000 loan in
         excess of the value of its pledged collateral. The Company





21
<PAGE>

         believes that the latest loan extension granted by the bank was made
         with the expectation that the $320,000 credit line would be repaid or
         that the Company would provide additional collateral or guarantees on
         the $320,000 credit line by the February 3, 2003 extended maturity
         date.

         A letter of credit in the amount of $139,000, which had previously been
         issued on behalf of Pacer under the credit facility, has expired. Pacer
         has no indebtedness or letters of credit issued under the credit
         facility. The Company, having access to Pacer's financial condition and
         management plans, believes Pacer has no intentions of using the credit
         facility, even if amounts drawn by Cramer under the credit facility
         were less than the maximum amount allowed.

         In exchange for Rotherwood's financial accommodation to the Company,
         the Company agreed to pay Rotherwood a fee equal to 2% per quarter of
         the total amount of the $2,000,000 letter of credit or securities
         pledge for so long as it remains in place for the Company's benefit.
         This agreement took effect on October 1, 2001. If the fee were paid in
         cash, it would equal $40,000 per quarter. The Company is not generating
         sufficient cash flow to pay the fee in cash. Rotherwood has agreed to
         accept payment in shares of Common Stock at the rate of one share for
         each $0.05 of the 2% quarterly fee amount, or an aggregate of 800,000
         shares per quarter. The per share valuation price of $0.05 is higher
         than the price per share determined by the Meara King valuation of
         $0.01 (see Item 5), resulting in fewer shares issued. If the fee
         payable to Rotherwood were paid in Common Stock at the rate of $0.01
         per share, an aggregate of 4,000,000 shares of Common Stock would be
         issued to Rotherwood each quarter during the remaining term of the
         letter of credit. The Company has sufficient authorized Common Stock to
         pay the letter of credit/ securities pledge fee for two quarters
         (1,600,000 shares), but will not have sufficient authorized Common
         Stock to pay the fee for any additional quarters or to issue the 18
         million shares of Common Stock to Rotherwood (see discussion below
         regarding the proposed increase in authorized shares). At December 31,
         2001, the Company recorded a liability of $40,000 for Rotherwood
         guarantee fees accruing in the fourth quarter of 2001. The Company
         plans to issue common stock for these fees in the future. The Company
         engaged Meara, King & Co. to update its appraisal in July 2002 and
         their assessment of the updated value remained $0.01 per share.

         Management believes that the Company would not be able to secure
         financing of this nature without the credit enhancements provided by
         Pacer and Rotherwood. Management also believes that access to this
         larger credit facility more than offsets the risk of potential exposure
         associated with Pacer's ability to utilize the credit facility as a
         co-borrower. The interest rate charged on $2,000,000 of outstanding
         borrowings is at the Bank's prime interest rate and the remaining
         $320,000 is at the prime rate plus 2%. Management believes this is a
         lower combined interest rate than the rate Cramer would be required to
         pay if it tried to finance its working capital needs by itself.





22
<PAGE>
         The Company believes significant investments in property, equipment and
         working capital will be required to execute its operating plans in
         2002. Among the anticipated requirements are the cost of a new
         management information system, costs associated with the relocation of
         operations, final production and printing of the new price book and
         increased investment in inventory as a result of outsourced
         manufacturing initiatives discussed in Item 1. Management believes the
         cost of these initiatives as a whole could total $300,000 or more. The
         Company will not be able to implement these initiatives if it cannot
         obtain an increase and extension of the credit facility or the
         Rotherwood investment doesn't materialize. The Company has incurred
         substantial expenses in connection with its relocation to a smaller,
         more efficient facility. The Company has not had sufficient cash to pay
         those expenses. Rotherwood intends to advance approximately $100,000 to
         enable the Company to pay the relocation expenses. Upon consummation of
         the 18 million-share purchase by Rotherwood, the advance will be
         credited against the $900,000 purchase price for the shares.

         Management believes that the turnaround plans discussed in Item 1 will
         improve operations significantly, and in some cases these efforts have
         already had a positive impact on the Company's performance, although
         there was a substantial decrease in sales for 2001. However, since the
         Company has no additional borrowing capacity and there is no assurance
         the Company can obtain an extension of or increase in the current
         credit facility or a substitute credit facility, the Company will seek
         needed additional capital by offering shares of common stock or
         preferred stock to one or more large investors in a private negotiated
         transaction. Although the Company would prefer to find an outside
         source of capital, that would appear unlikely given the Company's
         financial condition. For this reason, the Company is pursuing an
         additional investment transaction with Rotherwood. Although the Company
         has no definitive agreement with Rotherwood, the Company is planning to
         sell 18 million shares of Common Stock to Rotherwood for cash at a
         purchase price of $0.05 per share. This transaction would provide
         $900,000 in much needed capital to the Company to support operations,
         reduce amounts owed under the bank line of credit and enable the
         Company to continue its turnaround plans. If Rotherwood makes an
         additional equity investment in the Company, Rotherwood plans to take
         the Company private following a short-form cash-out merger of the
         Company into Rotherwood.

         The Company does not have a sufficient number of authorized shares of
         Common Stock to complete any such investment transaction. For this
         reason, the Board of Directors considers it advisable to increase the
         authorized shares of Common Stock and is planning to bring this matter
         to a vote of shareholders at the upcoming Annual Meeting.

         There is no assurance the Company will be able to obtain any equity
         investment from Rotherwood or any other investor. If the Company is not
         able






23
<PAGE>

         to obtain a significant equity investment in the near future, the
         uncertainty regarding the Company's ability to continue as a going
         concern will continue and may increase. The continuing viability of the
         Company as a going concern will depend on management's ability to
         increase sales, achieve positive cash flow, restore the Company to
         profitability, extend its credit facility and/or obtain additional debt
         or equity financing, none of which can be assured. However, if
         Rotherwood makes the proposed equity investment and effects the
         cash-out merger and takes the Company private, shareholders would not
         derive any benefit from any turnaround of the Company.




ITEM 7.  FINANCIAL STATEMENTS

The following financial statements of Cramer, Inc. are included herewith:


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                           Page
                                                                                                           ----
<S>                                                                                                     <C>
Independent Auditors' Report - 2001                                                                        F-1

Independent Auditors' Report - 2000                                                                        F-1a.


Financial Statements:

   Balance Sheets                                                                                          F-2

   Statements of Operations                                                                                F-3

   Statements of Stockholders' Equity (Deficit)                                                            F-4

   Statements of Cash Flows                                                                                F-5

   Notes to Financial Statements                                                                           F-6

</TABLE>













24
<PAGE>

To the Board of Directors and Stockholders
CRAMER, INC.
Kansas City, Kansas

                          INDEPENDENT AUDITORS' REPORT


We have audited the accompanying balance sheet of Cramer, Inc. (a majority-owned
subsidiary of Rotherwood Ventures, LLC) as of December 31, 2001, and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The financial statements of Cramer,
Inc. as of December 31, 2000, were audited by other auditors whose report dated
May 4, 2001, on those statements included an explanatory paragraph describing
conditions that raised substantial doubt about the Company's ability to continue
as a going concern.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. 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 audit provides a
reasonable basis for our opinion.

In our opinion, the 2001 financial statements present fairly, in all material
respects, the financial position of Cramer, Inc. as of December 31, 2001, and
the results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's recurring losses from operations, cash flow
difficulties, negative working capital, stockholders' capital deficiency and
lack of compliance with debt covenants raise substantial doubt about its ability
to continue as a going concern. Management's plans concerning these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.



/s/ Stirtz Bernards Boyden Surdel & Larter, P.A.

Stirtz Bernards Boyden Surdel & Larter, P.A.
Edina, Minnesota
March 6, 2002






F-1
<PAGE>




To the Board of Directors and Stockholders
CRAMER, INC.
Kansas City, Kansas

                          INDEPENDENT AUDITORS' REPORT


We have audited the accompanying balance sheet of Cramer, Inc. (a majority-owned
subsidiary of Rotherwood Ventures, LLC) as of December 31, 2000 and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. 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 audit provides a
reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2000, and the
results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's recurring losses from operations, cash flow
difficulties, negative working capital, stockholders' capital deficiency and
lack of compliance with debt covenants raise substantial doubt about its ability
to continue as a going concern. Management's plans concerning these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.



/s/ Deloitte & Touche LLP

Deloitte & Touche LLP
Kansas City, Missouri
May 4, 2001






F-1a.
<PAGE>


                                  CRAMER, INC.

                                 BALANCE SHEETs

                    (Amounts In Thousands, Except Share Data)



<TABLE>
<CAPTION>
                                                                                   DECEMBER 31,
                                                                           ----------------------------
                                                                              2001              2000
                                                                           ----------        ----------
                                ASSETS
<S>                                                                       <C>                <C>
Current assets:
   Cash                                                                      $   282           $     -
   Accounts  receivable,  less  allowance for doubtful  accounts of
     $30 in 2001 and $38 in 2000                                                 563             1,509
   Inventories,  less allowance for  obsolescence  and shrinkage of
     $110 in 2001 and $162 in 2000                                               721             1,558
   Prepaid expenses and other current assets                                     325               336
                                                                             -------           -------

         Total current assets                                                  1,891             3,403
                                                                             -------           -------

Property, plant and equipment                                                  6,215             6,187
Less accumulated depreciation                                                 (5,585)           (5,369)
                                                                             -------           -------

         Total property, plant and equipment                                     630               818
                                                                             -------           -------

Other assets:
   Intangible pension asset                                                        4                56
                                                                             -------           -------


         Total assets                                                        $ 2,525           $ 4,277
                                                                             =======           =======

</TABLE>






F-1a.
<PAGE>

(Balance Sheets, continued)


<TABLE>
<CAPTION>

                                                                                          DECEMBER 31,
                                                                                --------------------------------
                                                                                    2001                2000
                                                                                ------------        ------------
            LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<S>                                                                             <C>                <C>
Current liabilities:
   Cash overdrafts                                                                 $     -             $   282
   Notes payable                                                                     2,320               2,302
   Accounts payable                                                                    485               1,004
   Accounts payable - related party                                                    101                   -
   Accrued liabilities                                                                 801                 664
                                                                                   -------             -------

         Total current liabilities                                                   3,707               4,252
                                                                                   -------             -------

Noncurrent liabilities:
   Pension benefits payable                                                            326                 316
   Other                                                                               218                 185
                                                                                   -------             -------

         Total noncurrent liabilities                                                  544                 501
                                                                                   -------             -------

Commitments and contingencies (Note 7)

Stockholders' equity (deficit):
   Common stock, no par value, authorized, 6,000,000 shares; issued and
     outstanding 4,041,400 shares in 2001 and 4,051,400
     shares in 2000                                                                  3,820               3,824
   Accumulated deficit                                                              (5,198)             (3,996)
                                                                                   -------             -------
                                                                                    (1,378)               (172)
   Accumulated other comprehensive income (loss)                                      (348)               (304)
                                                                                   -------             -------
         Total stockholders' equity (deficit)                                       (1,726)               (476)
                                                                                   -------             -------

         Total liabilities and stockholders' equity (deficit)                      $ 2,525             $ 4,277
                                                                                   =======             =======
</TABLE>




                       See Notes to Financial Statements.


F-2
<PAGE>


                                  CRAMER, INC.

                            STATEMENTS OF OPERATIONS

                  (Amounts In Thousands, Except Per Share Data)




<TABLE>
<CAPTION>
                                                                             YEARS ENDED DECEMBER 31,
                                                                          ------------------------------
                                                                              2001              2000
                                                                          ------------      ------------
<S>                                                                       <C>               <C>
Net sales                                                                   $ 10,447          $ 13,097
Cost of sales                                                                  8,133             9,756
                                                                            --------          --------

         Gross profit                                                          2,314             3,341
                                                                            --------          --------

Operating expenses:
   Selling                                                                     2,023             2,405
   General and administration                                                  1,305             1,222
   Impairment of intangibles                                                       -               289
                                                                            --------          --------

         Total operating expenses                                              3,328             3,916
                                                                            --------          --------

         Loss from operations                                                 (1,014)             (575)

Other expense:
   Interest expense                                                             (174)             (222)
   Other                                                                         (14)             (220)
                                                                            --------          --------

         Loss before income taxes                                             (1,202)           (1,017)

Income taxes                                                                       -                 -
                                                                            --------          --------

         Net loss                                                           $ (1,202)         $ (1,017)
                                                                            ========          ========


Net loss per common share - basic and diluted                               $  (0.30)         $  (0.25)
                                                                            ========          ========

Weighted  average  number of common  and common  equivalent  shares
   outstanding, basic and diluted                                              4,041             4,051
                                                                            ========          ========

Comprehensive loss:
   Net loss                                                                 $ (1,202)         $ (1,017)
   Minimum pension liability adjustment, net of $-0- taxes                       (44)             (107)
                                                                            --------          --------

         Total comprehensive loss                                           $ (1,246)         $ (1,124)
                                                                            ========          ========

</TABLE>

                       See Notes to Financial Statements.



F-3
<PAGE>
                                  CRAMER, INC.

                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                             (Amounts in Thousands)



<TABLE>
<CAPTION>
                                                                                             ACCUMULATED        TOTAL
                                                                                                OTHER        STOCKHOLDERS'
                                              NUMBER OF                      ACCUMULATED    COMPREHENSIVE       EQUITY
                                               SHARES        COMMON STOCK      DEFICIT      INCOME (LOSS)     (DEFICIT)
                                            -------------   -------------   -------------   -------------   -------------
<S>                                         <C>             <C>             <C>             <C>             <C>
BALANCE, December 31, 1999                       4,051         $ 3,824         $(2,979)        $  (197)        $   648

   Net loss                                          -               -          (1,017)              -          (1,017)

   Minimum pension liability adjustment              -               -               -            (107)           (107)
                                               -------         -------         -------         -------         -------

BALANCE, December 31, 2000                       4,051           3,824          (3,996)           (304)           (476)

   Net loss                                          -               -          (1,202)              -          (1,202)

   Retirement of common stock                      (10)             (4)              -               -              (4)

   Minimum pension liability adjustment              -               -               -             (44)            (44)
                                               -------         -------         -------         -------         -------

BALANCE, December 31, 2001                       4,041         $ 3,820         $(5,198)        $  (348)        $(1,726)
                                               =======         =======         =======         =======         =======

</TABLE>



                       See Notes to Financial Statements.



F-4
<PAGE>

                                  CRAMER, INC.

                            STATEMENTS OF CASH FLOWS

                           Increase (Decrease) in Cash

                             (Amounts in Thousands)




<TABLE>
<CAPTION>
                                                                     YEARS ENDED DECEMBER 31,
                                                                  ----------------------------
                                                                      2001            2000
                                                                  -----------      -----------
<S>                                                               <C>              <C>
Cash flows from operating activities:
   Net loss                                                         $(1,202)         $(1,017)
   Adjustments to reconcile net loss to net cash flows from
     operating activities:
       Depreciation                                                     218              267
       Impairment of intangibles                                          -              289
   Changes in operating assets and liabilities:
     Accounts receivable                                                946             (246)
     Inventories                                                        837             (203)
     Prepaid expenses and other current assets                           11              (27)
     Intangible pension asset                                            52               52
     Accounts payable and accrued liabilities                          (281)             725
     Noncurrent pension benefits payable                                (34)             (92)
     Other noncurrent liabilities                                        33              (43)
                                                                    -------          -------
         Net cash flows from operating activities                       580             (295)
                                                                    -------          -------

Cash flows from investing activities:
   Purchases of property, plant and equipment                           (30)            (250)
                                                                    -------          -------

Cash flows from financing activities:
   Retirement of common stock                                            (4)               -
   Net change in cash overdraft                                        (282)              85
   Net change in notes payable                                           18              460
                                                                    -------          -------
         Net cash flows from financing activities                      (268)             545
                                                                    -------          -------

         Net change in cash                                             282                -

Cash at beginning of year                                                 -                -
                                                                    -------          -------

Cash at end of year                                                 $   282          $     -
                                                                    =======          =======


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

   Cash paid during the year for:
     Interest                                                       $   174          $   222
                                                                    =======          =======

     Income tax                                                     $     -          $     -
                                                                    =======          =======



</TABLE>



                       See Notes to Financial Statements.





F-5
<PAGE>


                                  CRAMER, INC.

                          NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000



1.       SUMMARY OF ACCOUNTING POLICIES

       Organization

       Cramer, Inc. ("Cramer" or "the Company") is a manufacturer of a variety
       of products for office and industrial use. The Company sells its products
       throughout the United States. International sales are limited. The
       Company's principal customers are office furniture dealers (seating
       products) and wholesale catalog distributors (utility and seating
       products). Approximately 61% and 63% of net sales were seating products
       and approximately 39% and 37% of net sales were utility products in 2001
       and 2000, respectively. Cramer is a 51.5% owned subsidiary of Rotherwood
       Ventures LLC ("Rotherwood"), a Minneapolis, Minnesota based holding
       company.

       Going Concern

       The accompanying financial statements have been prepared on a going
       concern basis, which contemplates the realization of assets and the
       satisfaction of liabilities in the ordinary course of business. The
       Company experienced recurring losses from operations, cash flow
       difficulties and negative working capital during 2001 and 2000 and had a
       stockholders' capital deficiency of $1,726,000 at December 31, 2001. As a
       result, the Company is not in compliance with the financial net worth
       covenant in its bank credit agreement. These conditions raise substantial
       doubt about the Company's ability to continue as a going concern.

       Management plans include obtaining adequate equity financing from
       Rotherwood, paying down certain bank debt and obtaining adequate working
       capital financing. Management continues to evaluate the Company's
       products, methods and operations in an effort to improve Company
       performance, achieve positive cash flow and restore profitability. There
       can be no assurance these measures will be successful. Management is
       uncertain whether its bank credit facility can be renewed after it
       expires on April 27, 2002, whether substitute debt financing can be
       obtained, or whether Rotherwood or any other party will make an equity
       investment in the Company. If adequate debt or equity financing cannot be
       obtained, the Company may not be able to remain in business.

       Pervasiveness of Estimates

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

       Revenue Recognition

       The Company recognizes revenue when products are shipped to customers.
       Provisions for discounts, estimated returns and allowances, and other
       adjustments are provided for in the same period the related sales are
       recorded.



(Continued)

F-6
<PAGE>

                                  CRAMER, INC.

                          NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000


1.      SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

       Inventories

       Inventories consist of raw materials, work-in-process and finished goods
       and are valued at the lower of cost or market. Cost is determined by the
       first-in, first-out (FIFO) method.

       Property, Plant and Equipment

       Property, plant and equipment are carried at cost. Depreciation is
       computed using the straight-line method over the estimated useful lives.
       When assets are retired or otherwise disposed of, the cost and related
       accumulated depreciation are removed from the accounts and any resulting
       gain or loss is recognized. The cost of maintenance and repairs is
       expensed as incurred and significant renewals and betterments are
       capitalized.

       Impairment of Long-Lived Assets

       The Company reviews its long-lived assets for impairment whenever events
       or changes in circumstances indicate that the carrying amount of an asset
       may not be recoverable. Recoverability of assets to be held and used is
       measured by a comparison of the carrying amount of an asset to
       undiscounted future net cash flows expected to be generated by the
       assets. If these assets are considered to be impaired, the impairment to
       be recognized is measured by the amount by which the carrying amount of
       the assets exceeds the fair value of the assets.

       Income Taxes

       Deferred income taxes are provided to reflect the tax effect of
       differences between financial and income tax bases of certain assets and
       liabilities. Items with differences between financial and income tax
       bases are shown in Note 5.

       Warranties

       Depending on the product model, the Company warranties its products for
       periods up to 15 years. The Company's reserve for anticipated warranty
       costs of $223,000 at December 31, 2001, and $100,000 at December 31,
       2000, is included in accrued liabilities. The warranty reserve is
       estimated based on durability testing, engineering studies, and actual
       costs incurred in prior years.

       Advertising Costs

       The Company expenses advertising costs as incurred. Advertising costs
       were $100,000 in 2001 and $127,000 in 2000.

       Comprehensive Income




(Continued)

F-7
<PAGE>

                                  CRAMER, INC.

                          NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000



       The Company reports comprehensive income (loss) in accordance with FASB
       Statement No. 130, "Reporting Comprehensive Income." This statement
       establishes standards for reporting comprehensive income in financial
       statements. Material components of accumulated other

1.       SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

       comprehensive income (loss) must also be disclosed. This statement only
       modifies disclosures, including financial statements disclosures, and
       does not result in other changes to the results or financial position of
       the Company.

       Earnings (Loss) Per Share

       Basic and diluted earnings (loss) per share are calculated in accordance
       with the provisions of SFAS No. 128, "Earnings Per Share." Basic earnings
       (loss) per share is computed by dividing income available to common
       shareholders by the weighted average number of common shares outstanding
       for the reporting period. Diluted earnings (loss) per share reflects the
       potential dilution that could occur if securities or other contracts to
       issue common stock were exercised or converted into common stock. There
       were no dilutive securities or contracts outstanding in 2001 or 2000.

       New Accounting Pronouncements

       In June 2001, the Financial Accounting Standards Board issued SFAS No.
       141, "Business Combinations," and SFAS No. 142. "Goodwill and Other
       Intangible Assets." Under these new standards, all acquisitions
       subsequent to June 30, 2001, must be accounted for under the purchase
       method of accounting, and purchased goodwill is no longer amortized over
       its useful life. Rather, goodwill will be subject to a periodic
       impairment test based on its fair value. SFAS 142 is effective for fiscal
       years beginning after December 15, 2001, although earlier adoption is
       permitted. We will adopt these standards beginning in 2002.

       In October 2001, the Financial Accounting Standards Board issued SFAS No.
       144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
       SFAS 144 supersedes SFAS 121. SFAS 144 primarily addresses significant
       issues relating to the implementation of SFAS 121 and develops a single
       accounting model for long-lived assets to be disposed of, whether
       primarily held, used or newly acquired. The provisions of SFAS 144 will
       be effective for fiscal years beginning after December 15, 2001. We will
       adopt this standard beginning in 2002.

       The Company believes the adoption of the above standards will result in
       no transitional adjustment or have any material impact on its financial
       statements.

       Concentrations

         Credit Risk

         Financial instruments that potentially subject the Company to
         concentrations of credit risk consist principally of trade accounts
         receivable. The Company has many customers across the United States.
         The Company performs ongoing evaluations of its customers' financial
         condition


(Continued)

F-8
<PAGE>


                                  CRAMER, INC.

                          NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000


         and generally requires no collateral from its customers. The risk is
         limited due to the large number of entities comprising the Company's
         customer base. The Company maintains its cash in bank deposit accounts
         which, at times, may exceed federally insured limits. The Company has
         not experienced any losses in such accounts. The Company believes it is
         not exposed to any significant credit risk on cash.





(Continued)

F-9
<PAGE>


                                  CRAMER, INC.

                          NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000



1. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

       Concentrations (Continued)

         Suppliers

         Certain components of the Company's products are sourced from a single
         vendor. Any disruption in these supply arrangements could result in
         temporary shipment delays or increased costs. However, the Company
         believes it has the ability to substitute suppliers for any component
         within a three-month period of time.

         Customers

         No single customer accounted for more than 8% of the Company's net
         sales in 2001.

       Shipping and Handling Costs

       Shipping and handling costs are included in cost of sales.


2. INVENTORIES

     Inventories consisted of the following (in thousands):



<TABLE>
<CAPTION>
                                                                           2001                      2000
                                                                     ---------------           ---------------
<S>                                                                  <C>                       <C>
         Raw materials                                               $           482           $         1,067
         Work-in-process                                                         126                       490
         Finished goods                                                          223                       163
         Reserve for obsolescence and shrinkage                                 (110)                     (162)
                                                                     ---------------           ---------------

                                                                     $           721           $         1,558
                                                                     ===============           ===============
</TABLE>


3.  PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consisted of the following (in thousands):



<TABLE>
<CAPTION>
                                                                                                           ESTIMATED USEFUL
                                                                   2001                   2000                   LIVES
                                                           ---------------------  ---------------------   -------------------
<S>                                                        <C>                    <C>                     <C>
        Land                                                 $            29        $            29                -
        Buildings                                                        917                    908             5  - 40
        Machinery and equipment                                        3,861                  3,848             3  - 10
        Furniture and equipment                                        1,408                  1,402             5  - 10
                                                             ---------------        ---------------

                                                             $         6,215        $         6,187
                                                             ===============        ===============
</TABLE>

(Continued)


F-10

<PAGE>


                                  CRAMER, INC.

                          NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000



4. NOTES PAYABLE

     The Company and Pacer Corporation (a subsidiary of Rotherwood) participate
     in a combined credit facility with Firstar Bank. The credit facility
     provides the Company and Pacer with access to a revolving line-of-credit of
     $2,000,000 with interest payable monthly at the bank's prime rate and a
     $320,000 line-of-credit with interest payable monthly at the prime plus 2%.
     The Company accounted for 100% of the $2,320,000 in borrowings at December
     31, 2001.

     The combined credit facility, which matures on April 27, 2002, is secured
     by the general intangibles, inventory, accounts receivable and equipment of
     the Company and Pacer. Rotherwood has provided the bank with a $2,000,000
     letter of credit as additional collateral for the loan.

     The Company is not in compliance with the net worth covenants in the loan
     agreements governing the credit facility. Accordingly, there is a risk the
     bank could curtail the Company's right to borrow additional funds under the
     credit facility, require the Company to prepay all or a portion of the
     principal balance under the credit facility prior to the maturity date, or
     fail to renew the credit facility when it matures April 27, 2002. Any such
     action would make it much more difficult for the Company to support
     operations and achieve positive cash flow and profitable operations, and
     could require the Company to curtail operations.


5.  INCOME TAXES

     Deferred income taxes reflect the net tax effects of temporary differences
     between the carrying amounts of assets and liabilities for financial
     reporting purposes and the amounts used for income tax purposes.
     Significant components of the Company's deferred tax assets and liabilities
     as of December 31, 2001 and 2000, are as follows (in thousands):



<TABLE>
<CAPTION>
                                                   2001        2000
                                                  -------    -------
           <S>                                    <C>        <C>
           Deferred tax assets:
             Net operating loss carryforwards     $ 4,377    $ 4,011
             Tax credit carryforwards                   -        317
             Pension costs                            126        102
             Product liability accrual                 85         72
             Accrued compensation and vacations         7         22
             Warranty accrual                          87         39
             Inventories                               51         86
             Other - net                               29         37
                                                  -------    -------

                 Total deferred tax assets          4,762      4,686
                 Deferred tax liabilities               -        (16)
                                                  -------    -------

                 Net deferred tax asset             4,762      4,670
                 Valuation allowance               (4,762)    (4,670)
                                                  -------    -------

                                                  $     -    $     -
                                                  =======    =======
</TABLE>






(Continued)

F-11
<PAGE>

                                  CRAMER, INC.

                          NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000


5. INCOME TAXES (CONTINUED)

     A reconciliation of the income tax provision (benefit) to the amounts
     computed at the federal statutory rate is as follows (in thousands):


<TABLE>
<CAPTION>

                                                                       2001     2000
                                                                      ------   ------
             <S>                                                      <C>      <C>
             Tax benefit provision (benefit) at statutory rate        $(409)   $(333)
             State income taxes, net of federal taxes                   (60)     (45)
             Changes in valuation  reserve  related to  utilization
               or generation of tax credits and net operating  loss
               carryforwards                                            466      381
             Other                                                        3       (3)
                                                                      -----    -----

                                                                      $   -    $   -
                                                                      =====    =====
</TABLE>

     At December 31, 2001, the Company has available $11,223,000 of net
     operating loss carryforwards to reduce future income taxes, subject to
     applicable limitations. The carryforwards expire beginning in 2006 through
     2021.



6.       BENEFIT PLANS

         Defined Benefit Plan

         The Company has a defined benefit pension plan covering all of its
         bargaining unit employees working as of September 30, 1988. Effective
         September 30, 1988, the plan was amended to freeze future benefit
         accruals. As a result of freezing the benefits, no further benefits
         accrue to plan participants. The amount of pension a participant will
         receive was frozen at $9.00 multiplied by the number of years of
         service from the later of the date of hire or January 1, 1942, through
         September 30, 1988. Effective September 30, 1988, new employees have
         not accrued benefits under the defined benefit plan. The Company's
         funding of the plan is equal to, or exceeds, the minimum contribution
         required by ERISA and totaled $65,000 and $114,000 in 2001 and 2000,
         respectively.

         Net pension costs included the following components (in thousands):


<TABLE>
<CAPTION>
                                                                       2001    2000
                                                                      ------  ------
               <S>                                                    <C>     <C>
               Service cost - benefits earned during the period        $  -    $  -
               Interest cost on projected benefit obligation             52      58
               Expected return on plan assets                           (38)    (43)
               Net amortization and deferral                             69      59
                                                                       ----    ----

                   Total pension costs                                 $ 83    $ 74
                                                                       ====    ====

</TABLE>





(Continued)

F-12
<PAGE>
                                  CRAMER, INC.

                          NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000


6. BENEFIT PLANS (CONTINUED)

         Defined Benefit Plan (Continued)

         Net regular periodic pension cost was calculated using the following
assumptions:

<TABLE>
<CAPTION>
                                         2001        2000
                                        ------      ------
<S>                                     <C>         <C>
Weighted Average Discount Rate            7.0%       7.5%
Expected Long-Term Rate of Return         8.0%       8.0%
</TABLE>

         The plan's funded status as of December 31, 2001 and 2000, is
summarized below (in thousands):

<TABLE>
<CAPTION>
                                                                                2001                  2000
                                                                         -----------------     -----------------
<S>                                                                      <C>                   <C>
            Actuarial present value of projected benefit obligation       $          (705)      $          (781)
            Plan assets at fair value                                                 379                   465
            Remaining unrecognized net transition obligation                            4                    56
            Unrecognized net loss                                                     348                   304
            Adjustment required to recognize minimum liability                       (352)                 (360)
                                                                          ---------------       ---------------

                  Net pension liability recognized                        $          (326)      $          (316)
                                                                          ===============       ===============
</TABLE>

         An intangible asset of $4,000 equal to the unrecognized prior service
         cost and transition obligation has been included in the balance sheet.
         The remaining additional minimum liability of $348,000 related to the
         unrecognized net loss has been recorded as a decrease in stockholders'
         equity at December 31, 2001. The change in this amount of $44,000
         during 2001 has been included as a component of other comprehensive
         income.

         The fair value of plan assets changed in 2001 and 2000, as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                                  2001                     2000
                                                                          -------------------      -------------------
<S>                                                                       <C>                      <C>
            Fair value of plan assets, beginning of year                    $           465          $           503
            Contributions                                                                65                      114
            Benefit payments                                                            (88)                    (100)
            Investment return, net of investment expenses                               (63)                     (52)
                                                                            ---------------          ---------------

                  Fair value of plan assets, end of year                    $           379          $           465
                                                                            ===============          ===============
</TABLE>

         The projected benefit obligation in 2001 and 2000, as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                                  2001                     2000
                                                                          -------------------      -------------------
<S>                                                                      <C>                       <C>
            Projected benefit obligation, beginning of year                 $          (781)         $          (805)
            Interest costs                                                              (52)                     (58)
            Benefits paid                                                                88                      100
            Actuarial gains and (losses)                                                 40                      (18)
                                                                            ---------------          ---------------

                  Projected benefit obligation, end of year                 $          (705)         $          (781)
                                                                            ===============          ===============
</TABLE>





(Continued)

F-13
<PAGE>

                                  CRAMER, INC.

                          NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000


6. BENEFIT PLANS (CONTINUED)

         Defined Benefit Plan (Continued)

         Plan assets are held by trust funds devoted to servicing pension
         benefits and are invested in a diversified portfolio of fixed income
         and equity securities.

         In providing the Defined Benefit Plan analysis, the Company relied upon
         information provided by an independent actuary.

         Defined Contribution Plan

         The Company sponsors a 401(k) plan covering substantially all
         employees. Participants may contribute from 1% to 15% of compensation,
         subject to annual limitations. In 1999, the Company instituted a
         matching contribution equal to 25% of a participant's contribution that
         is less than or equal to 6% of gross salary. In addition, the plan
         provides for discretionary contributions as determined by the Board of
         Directors. Total Company contributions consisted solely of matching
         contributions in 2001 and 2000 and were $12,000 and $19,000,
         respectively.


7.   COMMITMENTS AND CONTINGENCIES

     The Company is a defendant in lawsuits related to product liability claims
     that are considered a routine aspect of its business. The claims are
     covered by insurance and are being defended by the Company's counsel or by
     counsel assigned by the Company's insurance carriers. The Company's
     liability insurance coverage obligates the Company to pay the first $50,000
     of settlement or award and related defense costs. Any settlement or award
     and defense cost in excess of the $50,000 deductible is covered by
     insurance. Settlement and defense costs paid by the Company typically occur
     within two years after the date a claim is filed.

     At December 31, 2001, unless specific information pertaining to the case
     indicated otherwise, a specific reserve for each case was accrued for based
     on historical case cost not exceeding the deductible, less costs incurred
     to date. The Company recorded a specific case reserve of $105,000 at
     December 31, 2001. In addition to reserves for specific cases, the Company
     estimates its exposure for unasserted claims and records additional
     reserves using claims history as well as recent trend insights. The Company
     recorded a reserve for unasserted claims of $113,000 at December 31, 2001.
     Although the Company's claims history has stabilized in recent years, the
     Company cannot be certain that future claims experience will be consistent
     with historical claims experience. An increase in the frequency or average
     cost of future claims could increase the Company's exposure to product
     liability expense. However, the maximum total legal defense and settlement
     costs for each claim is limited to the $50,000 deductible. The Company has
     recorded an aggregate accrual for product liability claims, including
     reserves for specific claims and unasserted claims, of $218,000 at December
     31, 2001, and $185,000 at December 31, 2000. Management believes the
     outcome of these




(Continued)

F-14
<PAGE>
                                  CRAMER, INC.

                          NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000





     claims will not have a material adverse effect on the Company's financial
     position or results of operations.

     The Company was assessed OSHA penalties aggregating $117,500 as a result of
     an inspection conducted in 2000. In February 2002, the Company and OSHA
     have agreed to settle the claims for $23,000 and settlement documents have
     been submitted to the Company by OSHA. The Company has recorded an accrual
     for OSHA penalties of $23,000 at December 31, 2001, and $35,000 at December
     31, 2000.


(Continued)

F-15
<PAGE>



8.   RELATED PARTY TRANSACTIONS

     Rotherwood, the Company's majority owner, provides management services to
     the Company. The cost to the Company for these services was approximately
     $91,500 in 2001 and $28,000 in 2000. In addition, Cramer incurred expense
     of $40,000 for a loan guarantee fee by Rotherwood. At December 31, 2001,
     Cramer owed Rotherwood $100,900 for these expenses along with other
     expenses incurred by Rotherwood for the benefit of Cramer.


9.   IMPAIRMENT OF INTANGIBLES

     In 2000, the Company wrote-off $289,000 of goodwill, customer lists and
     patents related to a proprietary keyboard product line that was
     discontinued.


10.  FINANCIAL INSTRUMENTS

     At December 31, 2001 and 2000, the carrying value of the Company's cash,
     accounts receivable, and accounts payable approximate fair value. Based on
     borrowing rates currently available to the Company for bank loans with
     similar terms and collateral, the fair value of the Company's short-term
     notes payable approximates their carrying value.


11.  STOCK OPTION PLAN

     In 1989, the Company implemented a stock option plan (the "Plan") which
     provided for the grant of incentive awards to directors, officers and other
     key employees. The Plan expired in 2000. There were no outstanding stock
     option grants or shares exercised under this plan in 2000.


12.  COLLECTIVE BARGAINING AGREEMENT

     The factory workers are covered by a collective bargaining agreement with
     the United Steelworkers of America that expires on September 30, 2002. The
     economic portion of the agreement expired on October 1, 2001, and
     subsequently has been renewed on a month-to-month basis. Any work stoppage
     could impact the Company's ability to manufacture product, on-time
     delivery, and product quality, which in turn could have a material adverse
     effect on the Company's business and financial condition.


13.  SIGNIFICANT ITEMS AFFECTING FOURTH QUARTER

     In the fourth quarter of 2001, the Company recorded charges for warranty
     reserves and other accruals of approximately $196,000, and wrote-off a
     grant receivable of approximately $82,000 related to expenditures for
     consulting services that were previously expected to be reimbursed through
     a grant. These adjustments increased the fourth quarter net loss by $.07
     per share.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE

The Company previously reported a change in accountants.





<PAGE>

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT -

                                    DIRECTORS

The Company's Board of Directors is currently comprised of two members whose
terms expire at the 2002 annual meeting of shareholders.

Information about each director is included below.


--------------------------------------------------------------------------------
JAMES R. ZICARELLI                                           DIRECTOR SINCE 1992
--------------------------------------------------------------------------------


James R. Zicarelli, 50, is President of Rotherwood Ventures, LLC ("Rotherwood"),
a Minnesota holding company and majority shareholder of your Company. He owns a
6% interest in Rotherwood. Mr. Zicarelli serves as CEO of Sagebrush Corporation,
a library services and publishing company affiliated with Rotherwood.
Previously, he served as CEO of Cramer, Inc. (1995 to 2001); CEO of Pacer
Corporation (1992 to 2001), an affiliate of Rotherwood; CFO of GV Medical, Inc.
(1983 to 1990); and Division Controller of National Computer Systems (1974 to
1983). He holds a B.A. from Carleton College and an MBA from The University of
St. Thomas.

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

--------------------------------------------------------------------------------
DAVID E. CRANDALL                                            DIRECTOR SINCE 1992
--------------------------------------------------------------------------------
David E. Crandall, 59, is Chairman and CEO of PPA Industries, Dallas, Texas, a
company he founded in 1980 and that is engaged in the manufacture of electronic
enclosures, pre-fabricated wall systems and machinery packages.(1) Previously,
he was Senior Vice President of Manufacturing Operations and board member of
Sunshine Mining Company (1977 to 1980); Senior Vice President, Finance for the
Great Western Sugar Company (1974 to 1977); and various positions with
Electronic Data Systems and Citibank on Wall Street (1971 to 1974). Mr. Crandall
served 3-1/2 years in the U.S. Army, during which time he computerized the
Admissions System at West Point Academy. He served ten years on the Board of
Trustees at St. Mark's School of Texas. He holds a B.A. from The University of
Kansas and an MBA from The University of Missouri at Kansas City.

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


(1)PPA Industries filed for reorganization under the Bankruptcy Code in February
2000. The case was subsequently dismissed.

There is no family relationship between any of the directors or officers of the
Company.

The Board of Directors met ten times in 2001. No director attended less than 75%
of those meetings.



<PAGE>

The Board formally appointed an Audit Committee and a Compensation Committee in
2001. Prior to 2001, the Board of Directors served as the Audit Committee and
Compensation Committee. Because there are only two directors on the Board at the
present time, the Audit Committee and Compensation Committee consist of the two
current directors.

Audit Committee  We have elected to apply Rule 4200(a)(15) of the NASDAQ listing
standards ("NASDAQ Rule 4200(a)(15)") to determine whether the members of the
Audit Committee are "independent." Management believes Mr. Crandall is
"independent" as defined by NASDAQ Rule 4200(a)(15). In light of Mr. Zicarelli's
status as President of Rotherwood, his 6% ownership interest in Rotherwood, his
affiliation with other Rotherwood entities, and his prior service as CEO of
Cramer, Mr. Zicarelli is not deemed "independent" as defined by that Rule.
Nevertheless, the Board has determined that Mr. Zicarelli's service on the Audit
Committee is in the best interest of our shareholders in light of the current
size of the Board, the limited size and resources of the Company, the Board's
determination to minimize administrative expenses, the difficulty of recruiting
additional independent directors to serve on the Board and the value which Mr.
Zicarelli's financial expertise and judgment add to the Audit Committee. See
Item 12- "Certain Relationships and Related Transactions").

The Audit Committee assists the Company in fulfilling its responsibility for our
accounting and financial reporting practices and our annual audited financial
statements. As part of these duties, the Audit Committee:

         -        recommends the independent accounting firm to be retained each
                  year

         -        reviews the audit and non-audit activities of the independent
                  accountants and our internal accounting staff

         -        reviews the scope and results of the quarterly unaudited
                  financial statements and the audit of our annual financial
                  statements and any auditor recommendations regarding the
                  quarterly and annual financial statements and our accounting
                  practices

         -        evaluates the independence of the accountants from the Company
                  and its management



<PAGE>


Compensation Committee

The Compensation Committee establishes the compensation for executive officers
and approves and administers the Company's executive compensation programs.

Committee Meetings

The Audit Committee and Compensation Committee did not meet separately from the
Board in 2001.

                                    OFFICERS

Nicholas Christianson, 31, was appointed Interim Chief Financial Officer on
April 1, 2002, and was appointed Acting President and Chief Executive Officer
and Acting Secretary on September 3, 2002. Gregory Coward served as President
and Chief Executive Officer of Cramer from January 24, 2001 until September 3,
2002. Mr. Coward was an officer of Rotherwood during his tenure as the Company's
President and Chief Executive Officer. He was compensated by Rotherwood and did
not receive any compensation from the Company for serving as President and CEO.
Mr. Coward was retained by Cramer's Board of Directors to conduct a thorough
review of the Company's operations and implement a turnaround plan with the
intention of achieving positive cash flow and returning the Company to
profitability. Mr. Coward's assignment concluded upon completing that review and
putting in place the major components of the turnaround plan. Mr. Christianson
is employed by an affiliate of Rotherwood and performs his duties at Cramer on a
part-time basis. Rotherwood intends to name a permanent CEO of the Company upon
completion of the Going Private Transaction. Mr. Christianson served as CFO of
two application service providers, MetaFarms, Inc. and Scout Information
Services, from 1997 to 2001. He participated in the development and spin-off of
several Internet based start-up ventures at Scout and helped MetaFarms launch
its operations. Prior to his position at Scout, Mr. Christianson was an auditor
at PriceWaterhouse Coopers. Mr. Christianson is a licensed CPA.

                COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Based on its review of Forms 3 and 4 and amendments thereto furnished to the
Company under Rule 16a-3(d) of the SEC during the fiscal year ended December 31,
2001, and any Form 5's and amendments thereto furnished with respect to the 2001
fiscal year, we are not aware of any person who, at any time during the 2001
fiscal year, was a director, officer or beneficial owner of more than ten
percent of the Company's common stock and who failed to file on a timely basis,
as disclosed in those Forms, the reports required by Section 16(a) of the
Securities Exchange Act of 1934, with the exception of the Form 3 for Gregory
Coward, which was filed late on January 16, 2002 and which confirmed that Mr.
Coward does not own any shares of Cramer stock.

ITEM 10. EXECUTIVE COMPENSATION -

DESCRIPTION OF COMPENSATION ARRANGEMENTS





<PAGE>

Gregory Coward was compensated by Rotherwood and did not receive any
compensation from the Company for serving as President and Chief Executive
Officer. Mr. Coward's compensation from Rotherwood was not specifically related
to Cramer's performance. Rotherwood has charged Cramer a monthly fee as
compensation for making Mr. Coward's services available to the Company, which
will be payable through December 31, 2002. Rotherwood charged fees to the
Company for Mr. Coward's services and related travel expenses of $103,900 in
2001. Cramer paid $48,000 of these fees during 2001 and recorded the balance due
of $55,900 as an accrued liability in the December 31, 2001 financial
statements.

Mr. Christianson is compensated by a Rotherwood affiliate and does not receive
any compensation from the Company for serving as Interim Chief Financial Officer
or Acting President and Chief Executive Officer or Acting Secretary. Mr.
Christianson's compensation from the Rotherwood affiliate is not related to
Cramer's performance. Rotherwood charges Cramer a fee as compensation for making
Mr. Christianson's services available to the Company, based upon the amount of
time spent by him on the Company's business. Rotherwood has charged fees to the
Company for Mr. Christianson's services in the amount of $43,200 for the period
from April 1-September 30, 2002.


James R. Zicarelli served as CEO of Cramer until the appointment of Mr. Coward
on January 24, 2001. Mr. Zicarelli is President of Rotherwood and did not
receive any compensation from the Company for serving as CEO. Mr. Zicarelli's
compensation from Rotherwood was not specifically related to Cramer's
performance or the time spent by him in Cramer management. Cramer was not
charged by Rotherwood for Mr. Zicarelli's services during 2001.

See Item 11- "Certain Relationships and Related Transactions" below for further
discussion of Cramer's transactions with Rotherwood.

SUMMARY COMPENSATION TABLE

The following table provides information regarding the compensation paid in
2001, 2000 and 1999 to the persons who served as executive officers of the
Company until their termination in 2001 and whose annual compensation exceeded
$100,000 in any of those years.

<TABLE>
<CAPTION>


                  ------------------------------ ------------------- ----------------------------------------
                           NAME AND                                            ANNUAL COMPENSATION
                           PRINCIPAL                                 ----------------------------------------
                           POSITION                     YEAR              SALARY ($)           BONUS ($)
                              (a)                       (b)                  (c)                 (d)
                  ------------------------------ ------------------- -------------------- -------------------
                <S>                              <C>                 <C>                  <C>
                  ROBERT KOVACH(1)                      2001               $23,138                $0
                  President and COO
                                                 ------------------- -------------------- -------------------
                                                        2000              $128,000                $0
                                                 ------------------- -------------------- -------------------
                                                        1999              $124,676             $12,000
                  ------------------------------ ------------------- -------------------- -------------------
                  JEFFREY MYER(2)                       2001               $47,855                $0
                  Vice President, Sales
                  and Marketing
                                                 ------------------- -------------------- -------------------
                                                        2000              $111,592             $10,000
                                                 ------------------- -------------------- -------------------
                                                        1999              $107,945              $5,000
                  ------------------------------ ------------------- -------------------- -------------------
</TABLE>

(1)  Mr. Kovach was terminated in January 2001
(2)  Mr. Myer was terminated in March 2001



<PAGE>

HOW ARE DIRECTORS COMPENSATED?

The Company's policy is to pay each director who is not an employee of Cramer or
Rotherwood $1,000 for each Board meeting attended and to reimburse his expenses
related to the meeting. However, Mr Crandall declined to accept any fees or
reimbursed expenses for Board meetings held in 2001.


ITEM 11.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -


Except as set forth below, we know of no single person or group that is the
beneficial owner of more than 5% of the Company's outstanding stock:


<TABLE>
<CAPTION>

                                                                AMOUNT AND NATURE OF BENEFICIAL         PERCENT OF
           NAME AND ADDRESS OF BENEFICIAL OWNER                          OWNERSHIP (1)                   CLASS (6)
-----------------------------------------------------------    ----------------------------------    -----------------
<S>                                                            <C>                                   <C>
Rotherwood Ventures LLC                                               2,083,212(2)(3)                      51.6%
301 Carlson Parkway
Minnetonka, Minnesota 55305
James R. Zicarelli(2)(3)(4)                                           2,083,212(2)(3)(5)                   51.6%
301 Carlson Parkway
Minnetonka, Minnesota  55305

</TABLE>

(1)      Based solely on disclosures made in Schedule 13D filed with the SEC.
(2)      Mr. Zicarelli and the Chairman of Rotherwood have shared voting and
         investment power over the shares. Mr. Zicarelli may also be deemed to
         have an indirect beneficial ownership of such shares to the extent of
         his 6% ownership interest in Rotherwood.
(3)      The Company is obligated to pay Rotherwood a fee in exchange for
         Rotherwood's provision of a $2,000,000 letter of credit/securities
         pledge in support of the Company's bank line of credit. The fee is
         equal to 2% per quarter of the letter of credit/pledge amount ($40,000
         per quarter) and is payable in shares of common stock at the rate of
         $0.05 per share (800,000 shares per quarter). After the issuance of
         common stock to Rotherwood for guaranty fees earned by Rotherwood in
         the fourth quarter of 2001 and the first two quarters of 2002,
         Rotherwood will own 4,483,212 shares of common stock, or 69.6% of the
         total outstanding shares.



<PAGE>


(4)      Except as described in footnote 3 above, no Rotherwood Entity has
         acquired any shares of common stock of the Company during the last two
         years.
(5)      Includes the 2,083,212 shares held by Rotherwood.
(6)      Percentage based on common and common equivalent shares.

This table shows as of December 31, 2001 the number of our shares beneficially
owned by the directors and officers of the Company and by the directors and
officers as a group. All information regarding beneficial ownership was
furnished by the persons listed below.







<PAGE>


<TABLE>
<CAPTION>

---------------------------------------- -------------------------------------- --------------------------------------
                                                 AMOUNT AND NATURE OF                     PERCENT OF SHARES
       NAME OF BENEFICIAL OWNER                  BENEFICIAL OWNERSHIP                       OUTSTANDING(4)
---------------------------------------- -------------------------------------- --------------------------------------
<S>                                      <C>                                    <C>
     James R. Zicarelli(1)                            2,083,212(2)                              51.6%
---------------------------------------- -------------------------------------- --------------------------------------
     David E. Crandall                                 125,341(3)                                3.1%
---------------------------------------- -------------------------------------- --------------------------------------
     Nicholas Christianson                                 0                                     0%
---------------------------------------- -------------------------------------- --------------------------------------
     All officers and directors
     as a group (3 persons)                            2,208,553                                54.7%
---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>

(1)  Includes the 2,083,212 shares held by Rotherwood. Mr. Zicarelli is
     President and a 6% owner of Rotherwood. Pursuant to Rule 13d-3 of the SEC,
     the 2,083,212 shares held by Rotherwood and the additional shares issuable
     to Rotherwood as described in footnote 3 of the previous table may be
     attributed to Mr. Zicarelli because of his shared voting and investment
     power over those shares and his 6% ownership interest in Rotherwood.
(2)  Mr. Zicarelli shares voting and investment power over the shares with
     Rotherwood's Chairman.
(3)  Sole voting and investment power.
(4)  Percentage based on common and common equivalent shares


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -

By virtue of its 51.6% ownership of the Company's common stock, Rotherwood
controls the Company and may be deemed a "parent" of the Company.

Rotherwood is a majority-owned subsidiary of Rotherwood Investments, LLC
("Rotherwood Investments"). By virtue of its control of Rotherwood, Rotherwood
Investments also controls the Company and may be deemed a "parent" of the
Company.

James R. Zicarelli, Chairman of Cramer's Board of Directors, served as Cramer's
CEO until Mr. Coward was appointed to that position in January 2001. Mr.
Zicarelli is President of Rotherwood and owns a 6% ownership interest in
Rotherwood. Mr. Zicarelli would be entitled to a portion of any dividends paid
by the Company and a portion of the proceeds from any sale or liquidation of the
Company after the Going Private Transaction is consummated to the extent of his
6% interest in Rotherwood.

Gregory Coward was compensated by Rotherwood and did not receive any
compensation from the Company for serving as President and Chief Executive
Officer. Mr. Christianson is compensated by an affiliate of Rotherwood and does
not receive any compensation from the Company for serving as Interim Chief
Financial Officer, Acting President and Chief Executive Officer or Acting
Secretary (See "Executive Compensation" for more information regarding
compensation arrangements for Mr. Coward and Mr. Christianson).

Cramer participates with Pacer Corporation, an affiliate of Rotherwood, as a
co-borrower in a combined $2,320,000 credit facility with US Bank (formerly
Firststar Bank). The credit facility consists of a loan in the maximum amount of
$2,000,000 with interest payable monthly at the bank's prime rate and a $320,000
revolving line of credit with interest payable monthly at



<PAGE>


prime plus 2%. The Company accounts for 100% of the current borrowings under the
credit facility. The credit facility has been fully drawn by the Company, and no
additional funds are available for borrowing under the credit facility. The
credit facility is secured by the general intangibles, inventory, accounts
receivable and equipment of the Company and Pacer. The $2,000,000 loan is also
secured by a pledge of $2,000,000 in securities by Rotherwood. Rotherwood is
required under the terms of its collateral pledge agreement to maintain the
value of the collateral at $2,000,000 and to pledge additional securities if
required to meet that obligation. A default by the Company under the loan
agreement would constitute a default by Rotherwood under its collateral pledge
agreement. The pledge replaces a $2,000,000 letter of credit posted by
Rotherwood which formerly secured the $2,000,000 loan. Among the covenants in
the loan agreement is a requirement that Pacer and Cramer maintain a $500,000
minimum net worth. Cramer and Pacer are not in compliance with this net worth
covenant, and are thus in default under both loans. The $320,000 line of credit
has been classified as non-performing. The credit facility expired on January
27, 2002 but has been temporarily extended at periodic intervals, with the
latest extension expiring on February 3, 2003. Although the loans have been
extended, the bank has not given the Company a standstill agreement and could
call and accelerate the loans at any time. The Company does not have sufficient
assets to pay off the loans, so any such action by the bank could force the
Company to declare bankruptcy, cease operations and liquidate. If the bank were
to call the $2,000,000 loan and foreclose upon the collateral posted by
Rotherwood, Rotherwood could succeed to the bank's position as the lender, call
that loan and proceed against the Company's assets in satisfaction of the loan.
The Company does not believe the lender will call the $2,000,000 loan so long as
Rotherwood maintains the $2,000,000 securities pledge. The bank has requested
that the Company either pay off the $320,000 revolving credit line or provide
additional collateral in the form of a guaranty or additional security by
February 3, 2003.

In exchange for Rotherwood's financial accommodations to the Company, without
which the Company could not have obtained the $2,000,000 loan and the $2,000,000
loan would probably be called, the Company has agreed to pay Rotherwood a
quarterly fee of 2% of the letter of credit/pledge amount ($40,000 per quarter),
to be paid in shares of common stock. The Company is seeking to amend its
Articles to increase its authorized common stock to enable the Company to pay
this fee in common stock beyond the first quarter of 2002. The Company also
seeks to increase its authorized common stock for the purpose of issuing common
stock to Rotherwood in the proposed $900,000 investment transaction (see Item
III - "Issuance of Common Stock to Rotherwood for Cash and Subsequent 'Going
Private' Transaction"). It is expected that approximately $800,000 from this
investment would be used to reduce the principal balance of the loan(s), with
approximately $100,000 used to pay a portion of the Company's cost of relocating
to a new facility.

Rotherwood has advised the Company that it does not wish to keep the $2,000,000
securities pledge in place indefinitely. Rotherwood is not contractually
obligated to the Company to maintain the securities pledge for any given period
of time.

The loan agreement provides that the bank may declare a default and call and
accelerate the loans if there is a material adverse change in the business,
properties, financial condition or affairs of Cramer, Pacer or Rotherwood. The
bank also has the right to call the loans if



<PAGE>

the bank in good faith deems itself "insecure." In light of these provisions in
the loan agreement (the "MAC/Insecurity Clause") and the Company's financial
condition, declining sales and history of losses, the bank could call the loans
at any time even if Cramer is current on its debt service obligations and Cramer
and Pacer have not violated any other provisions of the loan documents.

If Rotherwood makes the proposed equity investment in the Company, the Company
would become a 90% subsidiary of Rotherwood, permitting Rotherwood to effect a
short-form merger of the Company into Rotherwood without the approval of the
Public Shareholders. The Public Shareholders would receive $0.05 per share in
cash in the Merger, subject to proper exercise of their appraisal rights under
Kansas law. Following completion of the Merger, Rotherwood intends to take the
Company "private" by terminating its status as a reporting company under the
Exchange Act.

From 1995 through December 31, 2001, Cramer paid fees to Rotherwood for
management services, including those provided by Mr. Zicarelli and Mr. Coward.
These fees totaled $103,900 (including expense reimbursements) in 2001 and
$28,000 in 2000. The Company recorded a total accrual of $101,000 at December
31, 2001 for amounts owed to Rotherwood, including the unpaid portion of
management services fees, fourth quarter 2001 letter of credit/pledge fees and
amounts related to tax preparation fees paid by Rotherwood. Management believes
the amounts paid and accrued for the services provided by Rotherwood were no
less favorable than those that would be charged by third parties for comparable
services.

The Company has incurred substantial expenses in connection with its relocation
to a smaller, more efficient facility. The Company has not had sufficient cash
to pay those expenses. Rotherwood intends to advance approximately $100,000 to
enable the Company to pay the relocation expenses. Upon consummation of the 18
million-share purchase by Rotherwood, the advance will be credited against the
$900,000 purchase price for the shares.



ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) None


ITEM 14. CONTROLS AND PROCEDURES

Nicholas Christianson, the Company's Acting President and Chief Executive
Officer and Interim Chief Financial Officer, evaluated the effectiveness of the
Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and
15d-14(c) under the Exchange Act) as of a date within 90 days prior to filing of
this Amendment 2 to the Company's annual report on Form 10-KSB/A for the year
ended December 31, 2001. Based on the evaluation, Mr. Christianson concluded
that the Company's disclosure controls and procedures were effective to ensure
that the information required to be disclosed in this Amendment 2 was recorded,
processed, summarized and reported in accordance with the SEC's rules and forms
and that such information was accumulated and communicated to the Company's
management, including Mr. Christianson as appropriate to allow timely decisions
regarding disclosure. Subsequent to the date of the evaluation, there were no
significant changes or significant deficiencies in the design or operation of
the Company's internal controls or material weaknesses in the Company's internal
controls or other factors that could significantly affect internal controls.







<PAGE>



                                   SIGNATURES



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

                                CRAMER, INC.



10/10/02          /s/ Nicholas M. Christianson
                  ----------------------------
                  Acting Chief Executive Officer, Secretary and
                  Chief Financial Officer
                  (Principal Executive Officer and Principal Financial and
                  Accounting Officer)

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



10/10/02          /s/ James R. Zicarelli
                  -----------------------------
                  James R. Zicarelli
                  Director



10/10/02          /s/ David E. Crandall
                  -----------------------------
                  David E. Crandall
                  Director









<PAGE>
         CERTIFICATION OF ACTING PRESIDENT AND CHIEF EXECUTIVE OFFICER
                      AND INTERIM CHIEF FINANCIAL OFFICER
               PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
                        AND SEC RULES 13a-14 AND 15d-14

I, Nicholas Christianson, Acting President and Chief Executive Officer and
Interim Chief Financial Officer of Cramer, Inc. (the "registrant") certify that:

     1.   I have reviewed this Amendment 2 to the annual report on Form 10-KSB
          of Cramer, Inc. for the year ended December 31, 2001;

     2.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this annual report;

     4.   I am responsible for establishing and maintaining disclosure controls
          and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
          for the registrant and I have:

               a)   designed such disclosure controls and procedures to ensure
                    that material information relating to the registrant,
                    including its consolidated subsidiaries, is made known to
                    me by others within those entities, particularly during the
                    period in which this amended annual report is being
                    prepared;

               b)   evaluated the effectiveness of the registrant's disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this amended annual report (the
                    "Evaluation Date"); and

               c)   presented in this amended annual report my conclusions
                    about the effectiveness of the disclosure controls and
                    procedures based on my evaluation as of the Evaluation Date;

     5.   I have disclosed, based on my most recent evaluation, to the
          registrant's auditors and the audit committee of registrant's board of
          directors (or persons performing the equivalent function):

               a)   all significant deficiencies in the design or operation of
                    internal controls which could adversely affect the
                    registrant's ability to record, process, summarize and
                    report financial data and have identified for the
                    registrant's auditors any material weaknesses in internal
                    controls; and

               b)   any fraud, whether or not material, that involves
                    management or other employees who have a significant role in
                    the registrant's internal controls; and

     6.   I have indicated in this amended annual report whether there were
          significant changes in internal controls or in other factors that
          could significantly affect internal controls subsequent to the date of
          my most recent evaluation, including any corrective actions with
          regard to significant deficiencies and material weaknesses.

     Date: October 21, 2002         /s/ Nicholas Christianson
                                    --------------------------------------------
                                    Acting President and Chief Executive Officer
                                    and Interim Chief Financial Officer
<PAGE>
         CERTIFICATION OF ACTING PRESIDENT AND CHIEF EXECUTIVE OFFICER
                AND INTERIM CHIEF FINANCIAL OFFICER PURSUANT TO
                     SECTION 906 OF THE SARBANES-OXLEY ACT

I, Nicholas Christianson, Acting President and Chief Executive Officer and
Interim Chief Financial Officer of Cramer, Inc. (the "registrant") hereby
certify that, to the best of my knowledge and belief:

     1.   this Amendment 2 to the annual report on Form 10-KSB of Cramer, Inc.
          for the year ended December 31, 2001 fully complies with the
          requirements of Section 13(a) or 15(d) of the Securities Exchange Act
          of 1934; and

     2.   the information contained in this annual report fairly represents, in
          all material respects, the financial condition and results of
          operations of the registrant for and as of the end of such year.

                                        By /s/ Nicholas Christianson
                                           -------------------------------------
                                           Acting President and Chief Executive
                                           Officer and Interim Chief Financial
                                           Officer

Date: October 21, 2002