<PAGE>

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

                               AMENDMENT NO. 3 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 $40,414.00, 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").




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<PAGE>

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
(November 30, 2002).

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

2





<PAGE>
                                      INDEX

<Table>
<Caption>
                                                                                                        PAGE NO.
                                                                                                        --------
<S>               <C>                                                                                   <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                                       14

PART II

     Item 5.      Market for Common Equity and Related Stockholder Matters                                  15
     Item 6.      Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                                       17
     Item 7.      Financial Statements                                                                      25
     Item 8.      Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure                                                       27

PART III

     Item 9.      Directors, Executive Officers, Promoters and Control
                  Persons; Compliance with Section 16(a) of the Exchange Act                                28
     Item 10.     Executive Compensation                                                                    31
     Item 11.     Security Ownership of Certain Beneficial Owners and
                  Management                                                                                32
     Item 12.     Certain Relationships and Related Transactions                                            34
     Item 13.     Exhibits and Reports on Form 8-K                                                          36
     Item 14.     Controls and Procedures                                                                   37
</Table>



3
<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 earned net income of $87,000 in the first nine months of 2002 but
remains in a liquidity crisis and has a substantial accumulated deficit and
continued declines in sales. 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 $2,000,000 bank loan. 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 third-party 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



4
<PAGE>

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).

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:

         o        The proprietary keyboard line was discontinued

         o        The direct-to-end-user marketing strategy was de-emphasized

         o        Efforts to eliminate obsolete and weak performing seating and
                  utility products have continued

         o        Marketing efforts are being concentrated on the Company's core
                  products and sales channels

         o        Manufacturing and inventory management practices have been
                  improved

         o        The manufacture of certain utility products was outsourced to
                  third-party manufacturers to increase margins and reduce
                  operating overhead

         o        The Company reduced its workforce to accommodate declining
                  sales and new production strategies

         o        The Company has leased a smaller facility to streamline
                  operations and achieve greater production efficiencies

         o        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

         o        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




5
<PAGE>

         o        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")

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


6
<PAGE>

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.

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



7
<PAGE>

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 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)



8
<PAGE>

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.

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.



9
<PAGE>
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.

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 expires 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



10
<PAGE>

be avoided. The State of Kansas is a right-to work state, so not all factory
workers belong to the Union. At year-end, 16 of the 34 factory workers were not
dues paying 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 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 $2,500.
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



11
<PAGE>

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 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 $10 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



12
<PAGE>

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 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 alleged 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.



13
<PAGE>

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 in the Superior Court of Massachusetts, Norfolk County. The
claim alleged damages of $375,000 due to personal injury. The Company's $50,000
self-insured retention was exhausted and the Company's insurance carrier assumed
defense of the claim. The Company therefore has no further financial
responsibility for this claim. The case was recently settled by the carrier.

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


14
<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.


15
<PAGE>



Going Private Transaction


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 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. In November 2002 the
Company borrowed $125,000 from Rotherwood in the form of a demand note bearing
interest at 7% to cover a portion of its relocation expenses. Rotherwood intends
to convert this $125,000 demand note into common stock as part of the $900,000
proposed investment discussed above. See Item 6- "Managements 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, and
Rotherwood Investments, LLC and incorporated by reference herein, for additional
information regarding the proposed equity investment, cash-out merger and going
private transaction.



16
<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:

         o        The inability of shareholders other than Rotherwood to
                  participate in any future improvement in the Company's
                  operations or financial condition, if the short-form merger is
                  consummated

         o        The Company's continuing declines in revenues and history of
                  losses and uncertain future profitability

         o        Questions about the Company's continuing viability as a going
                  concern and management's plans to address that issue

         o        Any failure of the Company's turnaround plan to achieve its
                  objectives

         o        The possibility that the bank will not renew the Company's
                  credit facility

         o        The Company's lack of prospects for obtaining substitute or
                  additional debt financing, or obtain any equity financing from
                  a party other than Rotherwood

         o        The possibility that the bank may call the credit facility if
                  Rotherwood does not make the proposed equity investment in the
                  Company or Rotherwood decides not to continue the securities
                  pledge

         o        Rotherwood's intention to take the Company private

         o        Fluctuations or reductions in product demand and market
                  acceptance

         o        Continued adverse conditions in the office furniture industry

         o        The level of product development by the Company



17
<PAGE>

         o        Capacity, facility and supply constraints or difficulties

         o        The effect of new laws and regulations

         o        Unexpected additional expenses or operating losses

         o        Strong competition

         o        Reliance on certain vendors for key products and components

         o        Deferred maintenance at the Company's owned facility from
                  which it recently relocated, the potential need to renovate
                  the facility in order to sell or lease it, and the cost of
                  future maintenance at that facility

         o        If product and warranty liability claims exceed the amounts
                  reserved

         o        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,



18
<PAGE>

         decreasing by 15% as a group. The weaker performance of catalog
         distributors as a whole contributed to the decline.

         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 $620,000 from $3,916,000 in
         2000 to $3,296,000 in 2001.

         General and administrative costs were $1,273,000 in 2001 compared to
         $1,222,000 in 2000, an increase of $51,000. 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 an $8,000 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 $1,170,000 in 2001,
         compared



19
<PAGE>

         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.

         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



20
<PAGE>


         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.

         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 and accrued liabilities declined $313,000 in 2001,
         primarily as a result of reduced production levels.



21
<PAGE>

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

         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 reduce the principal balance of 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 may call that loan if it did not pay off the loan
         or provide additional security by that date. The Company does not
         believe it will be able to reduce the $320,000 line of credit balance
         or provide additional security by that date. 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


22
<PAGE>

         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
         believes that the latest loan extension granted by the bank was made
         with the expectation that the principal balance of the $320,000 credit
         line would be reduced 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,
         without which the bank would probably call the $2,000,000 loan, the
         Company agreed to pay Rotherwood a fee equal to 2% per quarter of the
         total amount of the letter of credit/securities pledge until the pledge
         agreement expires. Rotherwood agreed to accept 800,000 shares of common
         stock per quarter in payment of the guarantee fee at an agreed upon
         exchange value of $0.05 per share as the Company is not generating
         sufficient cash flow to pay the fee in cash. This agreement took effect
         on October 1, 2001. 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).

         The Company originally accrued guarantee fees of $40,000 for the fourth
         quarter of 2001 and $40,000 in each of the first and second quarters of
         2002 based upon the $0.05 per share exchange rate. The Company in 2001
         obtained an independent appraisal which determined that the fair market
         value of the Company's common stock was $0.01 per share. The Company
         and Rotherwood determined that the $0.05 per share exchange rate would
         be less dilutive to the Company's shareholders other than Rotherwood
         (the "Public Shareholders"), because it would result in fewer shares
         being issued to Rotherwood each quarter (800,000 shares) than if the
         shares were valued at an exchange rate of $0.01 (4,000,000 shares). The
         $0.05 per share


23
<PAGE>

         exchange value was also consistent with the price per share being paid
         by Rotherwood for 18 million new shares of the Company, and the price
         being paid by Rotherwood to the Public Shareholders in a proposed
         cash-out merger, as described below. The Company has since determined
         that the guarantee fee should have been recorded on the basis of the
         fair market value of the consideration being paid to Rotherwood in the
         form of common stock ($8,000, or 800,000 shares x $0.01 per share)
         rather than on the basis of the exchange rate agreed to by Rotherwood
         ($40,000, or 800,000 shares x $0.05 per share). The effect of this
         accounting change is to decrease accrued expenses and decrease net loss
         by $32,000 for the fourth quarter of 2001 and to decrease accrued
         expenses and increase net income by $32,000 in each of the first two
         quarters of 2002. The Company has restated the financial results
         reported in its 2001 Form 10-KSB/A and its first and second quarter
         2002 Form 10-QSB's to reflect this change in accounting treatment
         related to the guarantee fee.

         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.

         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 planned
         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. In November 2002, Rotherwood advanced $125,000 to
         enable the Company to pay the relocation expenses. Upon consummation of
         the 18 million-share purchase by Rotherwood, the $125,000 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



24
<PAGE>

         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 selling shares of common stock to 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 reduce amounts owed under the bank line of credit and credit
         Rotherwood for a $125,000 advance used by the Company to pay relocation
         expenses. 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 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.

         If the proposed equity investment by Rotherwood is not consummated for
         any reason, 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, the Public
         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.
</Table>



25
<PAGE>


<Table>
<S>                                                                    <C>
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>



26
<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
                                                                   ------------    ------------
<S>                                                                <C>             <C>
                                ASSETS

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                                       69              --
   Accrued liabilities                                                   801             664
                                                                ------------    ------------

         Total current liabilities                                     3,675           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                                                (5,166)         (3,996)
                                                                ------------    ------------
                                                                      (1,346)           (172)
   Accumulated other comprehensive income (loss)                        (348)           (304)
                                                                ------------    ------------
         Total stockholders' equity (deficit)                         (1,694)           (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                          1,273           1,222
   Impairment of intangibles                              --             289
                                                ------------    ------------

         Total operating expenses                      3,296           3,916
                                                ------------    ------------

         Loss from operations                           (982)           (575)

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

         Loss before income taxes                     (1,170)         (1,017)

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

         Net loss                               $     (1,170)   $     (1,017)
                                                ============    ============


Net loss per common share - basic and diluted   $       (.29)   $      (0.25)
                                                ============    ============

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

Comprehensive loss:
   Net loss                                     $     (1,170)   $     (1,017)
   Minimum pension liability adjustment,
     net of $-0- taxes                                   (44)           (107)
                                                ------------    ------------

         Total comprehensive loss               $     (1,214)   $     (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                                      --              --         (1,170)              --           (1,170)

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

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

BALANCE, December 31, 2001                    4,041    $      3,820    $    (5,166)   $        (348)   $      (1,694)
                                          =========    ============    ===========    =============    =============
</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                                                   $     (1,170)   $     (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                         (313)            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 $1,694,000 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

         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


(Continued)

F-7
<PAGE>
                                  CRAMER, INC.

                          NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000


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 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-8

<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
                              2001           2000        USEFUL 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-9
<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-10
<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 provision (benefit) at statutory rate               $       (398)   $       (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                                                             (8)             (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-11
<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>


(Continued)

F-12
<PAGE>
                                  CRAMER, INC.

                          NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000

         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 $8,000 for a loan guarantee fee by Rotherwood. At
         December 31, 2001, Cramer owed Rotherwood $68,900 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,
         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 in turn could have a
         material adverse effect on the Company's business and financial
         condition.


14.      SIGNIFICANT ITEMS AFFECTING FOURTH QUARTER

         In the fourth quarter of 2001, the Company recorded charges for
         warranty reserves and other accruals of approximately $164,000, 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 $.06 per share.


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

The Company previously reported a change in accountants.



27
<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.



28
<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:

     o    recommends the independent accounting firm to be retained each year

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

     o    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

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



29

<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.


30

<PAGE>
ITEM 10. EXECUTIVE COMPENSATION -

DESCRIPTION OF COMPENSATION ARRANGEMENTS

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 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 $57,600 for the period
from April 1-November 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       2000         $111,592        $10,000
and Marketing               1999         $107,945        $ 5,000
</Table>

(1)  Mr. Kovach was terminated in January 2001

(2)  Mr. Myer was terminated in March 2001



31
<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
    NAME AND ADDRESS OF           BENEFICIAL OWNERSHIP          PERCENT OF
     BENEFICIAL OWNER                      (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 $2,000,000 bank loan. The fee is equal to 2%
     per quarter of the letter of credit/pledge amount 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 three
     quarters of 2002, Rotherwood will own 5,283,212 shares of common stock, or
     73.0% of the total outstanding shares. See additional discussion




32
<PAGE>
     regarding the accounting treatment of the guarantee fees in Item 6-
     "Management's Discussion and Analysis of Financial Condition and Results of
     Operations"

(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.




33
<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 (4 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 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



34
<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 reduce the principal balance of 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 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 $775,000 from this investment would be used to
reduce the principal balance of the loan(s), with the remaining $125,000 used to
credit Rotherwood for a $125,000 advance used by the Company to pay relocation
expenses.

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



35
<PAGE>
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.

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 (See Item III below, Item 6, "Management's Discussion and Analysis
of Financial Condition and Results of Operations", and the Transaction Statement
on Form 13E-3 filed jointly by the Company and Rotherwood, Rotherwood
Investments and Mr. Zicarelli (Rotherwood, Rotherwood Investments and Mr.
Zicarelli are collectively referred to as the "Rotherwood Parties") incorporated
by reference herein).

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. In November 2002 Rotherwood advanced $125,000 to enable
the Company to pay a portion of the relocation expenses. Upon consummation of
the 18 million-share purchase by Rotherwood, the $125,000 advance will be
credited against the $900,000 purchase price for the shares.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) None



36
<PAGE>
ITEM 14. CONTROLS AND PROCEDURES

A review and evaluation was performed by the Company's Acting Chief Executive
Officer and Interim Chief Financial Officer (the "Executive Officer") of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as of a date within 90 days prior to the filing of this amended
annual report. Based on that review and evaluation, the Executive Officer has
concluded that the Company's current disclosure controls and procedures, as
designed and implemented by him, were effective. There have been no significant
changes in the Company's internal controls subsequent to the date of his
evaluation. There were no significant material weaknesses identified in the
course of such review and evaluation and, therefore, no corrective measures were
taken by the Company.



37
<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.



December 26, 2002                 /s/ Nicholas M. Christianson
                                  ----------------------------
                                  Acting Chief Executive Officer, Secretary and
                                  Interim 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.



December 26, 2002                        /s/ James R. Zicarelli
                                         ----------------------------
                                         James R. Zicarelli
                                         Director



December 26, 2002                        /s/ David E. Crandall
                                         ----------------------------
                                         David E. Crandall
                                         Director


<PAGE>


                                 CERTIFICATIONS

         I, Nicholas Christianson, Acting Chief Executive Officer and Secretary
and Interim Chief Financial Officer of Cramer, Inc., certify that:

         1.       I have reviewed this annual report on Form 10-KSB of Cramer,
                  Inc.;

         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 periods 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.       The registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and we 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 us by others within
              those entities, particularly during the period in which this
              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 annual report (the "Evaluation Date"); and

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


         5.       The registrant's other certifying officers and I have
                  disclosed, based on our 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


<PAGE>


         6.       The registrant's other certifying officers and I have
                  indicated in this annual report whether or not there were
                  significant changes in internal controls or in other factors
                  that could significantly affect internal controls subsequent
                  to the date of our most recent evaluation, including any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.


                  Date: December 26, 2002    By: /s/ Nicholas Christianson
                                                 -------------------------------
                                                 Nicholas Christianson
                                                 Acting Chief Executive Officer
                                                 and Secretary and Interim Chief
                                                 Financial Officer


In connection with this annual report on Form 10-KSB of Cramer, Inc., I,
Nicholas Christianson, Acting Chief Executive Officer and Secretary and Interim
Chief Financial Officer of the registrant, hereby certify to the best of my
knowledge and belief, that:

               (1)  This annual report 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
                    presents, 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
                                                 -------------------------------
                                                 Nicholas Christianson
                                                 Acting Chief Executive Officer
                                                 and Secretary and Interim Chief
                                                 Financial Officer

Date: December 26, 2002