SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549

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

                                 FORM 10-K

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

For fiscal year ended December 31, 2000     Commission File Number 333-19257

                               KINETEK, INC.
             (Exact name of registrant as specified in charter)

         Illinois                                               36-4109641
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                             Identification No.)


ArborLake Centre, Suite 550                                       60015
1751 Lake Cook Road                                             (Zip Code)
Deerfield, Illinois
(Address of Principal Executive Offices)


            Registrant's telephone number, including Area Code:
                               (847) 945-5591
                     Former Name: Motors & Gears, Inc.
        Securities registered pursuant to Section 12(b) of the Act:

                                                      Name of Each Exchange
       Title of Each Class                              On Which Registered
       -------------------                            ----------------------
             None                                               N/A

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

                                    None

         Indicate by checkmark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding twelve (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 ninety (90)
days.

                Yes      x                No
                        ---

         The aggregate market value of voting stock held by non-affiliates
of the Registrant is not determinable as such shares were privately placed
and there is currently no public market for such shares.

         The number of shares outstanding of Registrant's Common Stock as of
March 23, 2001:  100,000.


<PAGE>

                             TABLE OF CONTENTS
                             -----------------
                                                                           Page
Part I                                                                     ----
------
Item 1.        Business                                                      3
Item 2.        Properties                                                    8
Item 3.        Legal Proceedings                                             9
Item 4.        Submission of Matters to a Vote of Security Holders           9

Part II
-------
Item 5.        Market for the Registrant's Common Equity and Related
               Stockholder Matters                                           9
Item 6.        Selected Financial Data                                      10
Item 7.        Management's Discussion and Analysis of Financial
               Condition and Results of Operations                          11
Item 7A.       Quantitative and Qualitative Disclosures About Market Risks  14
Item 8.        Financial Statements and Supplementary Data                  15
Item 9.        Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure                          38

Part III
--------
Item 10.       Directors and Executive Officers                             38
Item 11.       Executive Compensation                                       41
Item 12.       Security Ownership of Certain Beneficial Owners
               and Management                                               42
Item 13.       Certain Relationships and Related Transactions               43

Part IV
-------
Item 14.       Exhibits, Financial Statement Schedules, and Reports
               on Form 8-K                                                  46

               Signatures                                                   47





                                      2

<PAGE>

                                    PART I
                                    ------
Item 1.  BUSINESS

The Company

Kinetek, Inc. (the "Company") was incorporated in the State of Illinois on
September 8, 1995 (The Company was incorporated as Motors and Gears, Inc.,
and changed its name to Kinetek, Inc. on January 8, 2001). On November 1,
1996, the Company effected a reincorporation merger whereby MK Group, Inc.,
an Illinois corporation, was merged with and into the Company, with the
Company being the surviving entity. The Company is a direct, wholly-owned
subsidiary of Motors and Gears Holdings, Inc., a Delaware corporation
("Parent"). The Parent is a majority owned subsidiary of Jordan Industries,
Inc. ("JII"), a private holding company which owns and manages a widely
diversified group of operating companies. Preferred shares of stock of the
Parent owned by JII represent a majority ownership interest in the Parent.
All remaining preferred stock and common stock is owned by executive
officers and directors of the Company and other employees of JII. The
Company was organized by JII to acquire and operate companies in the
motors, gears and motion control industries. The Company and its
subsidiaries are included in JII's consolidated financial statements, and
will continue to be part of the JII consolidated group for financial
reporting and tax purposes until the redemption of the Parent's Junior
Preferred Stock or until such time as the Company can no longer be
consolidated for federal income tax purposes.

         The Company's principal executive offices are located at ArborLake
Centre, Suite 550, 1751 Lake Cook Road, Deerfield, Illinois 60015, and its
telephone number is (847)945-5591.

Business

         The Company is a manufacturer of specialty purpose electric
motors, gearmotors, gearboxes, gears, transaxles and electronic motion
controls for a wide variety of consumer, commercial and industrial markets.
The Company has a diverse base of customers and its products are used in a
broad range of applications including vending machines, golf carts, lift
trucks, industrial ventilation equipment, automated material handling
systems and elevators. The Company competes primarily in the electric
motors and electronic motion control systems industries.

Business Segment Information

         The Company operates in two separate business segments; electric
motors ("motors") and electronic motion control systems ("controls"). The
Company entered the controls business segment through the acquisition of
two companies during 1997. See Note 12 to the Company's consolidated
financial statements for financial segment data.

Products

         The Company has established itself as a reliable niche
manufacturer of high-quality, economical, custom electric motors,
gearmotors, gears and electronic motion control systems used in a wide
variety of applications including vending machines, refrigerator ice
dispensers, commercial dishwashers, commercial floor care equipment, golf
carts, lift trucks, automated material handling systems and elevators. The
Company's products are custom designed to meet specific application
requirements. Less than 5% of the Company's products are sold as stock
products.

                                  3
<PAGE>

         The Company offers a wide variety of options to provide greater
flexibility in its custom designs. These options include thermal
protectors, special mounting brackets, custom leads and terminals, single
or double shaft extensions, brakes, cooling fans, special heavy gearing,
custom shaft machining and custom software solutions. The Company also
provides value-added assembly work, incorporating some of the above options
into its final motor and control products. All of the custom-tailored
motors, gearmotors and control systems are designed for long life, quiet
operation, and superior performance.

Electric Motors

         Electric motors are devices that convert electric power into
rotating mechanical energy. The amount of energy delivered is determined by
the level of input power supplied to the electric motor and the size of the
motor itself. An electric motor can be powered by alternating current
("AC") or direct current ("DC"). AC power is generally supplied by power
companies directly to homes, offices and industrial sites whereas DC power
is supplied either through the use of batteries or by converting AC power
to DC power. Both AC motors and DC motors can be used to power most
applications; the determination is made through the consideration of power
source availability, speed variability requirements, torque considerations,
and noise constraints.

         The power output of electric motors is measured in horsepower.
Motors are produced in power outputs that range from less than one
horsepower up to thousands of horsepower.

         Subfractional Motors. The Company's subfractional horsepower
products are comprised of motors and gearmotors which power applications up
to 30 watts (1/25 horsepower). These small, "fist-size" AC and DC motors
are used in light duty applications such as snack and beverage vending
machines, refrigerator ice dispensers and photocopy machines.

         Fractional/Integral Motors. The Company's fractional/integral
horsepower products are comprised of AC and DC motors and gearmotors having
power ranges from 1/8 to 100 horsepower. Primary end markets for these
motors include commercial floor care equipment, commercial dishwashers,
commercial sewing machines, industrial ventilation equipment, golf carts,
lift trucks and elevators.

         Gears and Gearboxes. Gears and gearboxes are mechanical components
used to transmit mechanical energy from one source to another source. They
are normally used to change the speed and torque characteristics of a power
source such as an electric motor. Gears and gearboxes come in various
configurations such as helical gears, bevel gears, worm gears, planetary
gearboxes, and right-angle gearboxes. For certain applications, an electric
motor and a gear box are combined to create a gearmotor.

         The Company's precision gear and gearbox products are produced in
sizes of up to 16 inches in diameter and in various customized
configurations such as pump, bevel, worm and helical gears. Primary end
markets for these products include original equipment manufacturers
("OEMs") of motors, commercial floor care equipment, aerospace and food
processing product equipment.

                                   4
<PAGE>

Electronic Motion Control Systems

         Electronic motion control systems are assemblies of electronic and
electromechanical components that are configured in such a manner that the
systems have the capability to control various commercial or industrial
processes such as conveyor systems, packaging systems, elevators and
automated assembly operations. The components utilized in a motion control
system are typically electric motor drives (electronic controls that vary
the speed and torque characteristics of electric motors), programmable
logic controls ("PLCs"), transformers, capacitors, switches and software to
configure and control the system. The majority of the Company's motion
control products control elevators and automated conveyor systems used in
automotive manufacturing.

Acquisitions

         In March 1996 the Company acquired the net assets of Colman, Inc. and
Colman Motor Products, Inc. (collectively, "Barber-Colman"). In November
1996, the Company acquired the business and net assets of Imperial Electric
Company ("Imperial") and Imperial's subsidiaries, Scott Motor Company
("Scott") and Gear Research, Inc. ("Gear") from JII. In June 1997, the
Company purchased all of the common stock of FIR Group Companies ("FIR")
consisting of CIME S.p.A., SELIN S.p.A. and FIR S.p.A.. In October 1997,
the Company purchased all outstanding stock of E.D. and C. Company, Inc.
through its newly formed wholly-owned subsidiary, Electrical Design and
Control Company ("ED&C"). In December 1997, the Company acquired all of the
stock of Motion Control Engineering, Inc. ("Motion Control"). In May 1998,
the Company purchased all of the outstanding stock of Advanced D.C. Motors,
Inc. and its affiliated corporations ("ADC"). In December 1998, the
Company, through its wholly-owned subsidiary Imperial, acquired all of the
stock of Euclid Universal Corporation ("Euclid"). Euclid was subsequently
merged into Imperial. See Note 1 to the consolidated financial statements.
In December 1999, the Company, through its wholly-owned subsidiary FIR
acquired certain net assets of the L'Europea hoists division ("L'Europea")
from Pramac Industriale. L'Europea was subsequently merged into FIR. See
Note 1 to the consolidated financial statements.

Backlog

         The Company's approximate backlog of unfilled orders at the dates
specified was as follows:


                                                 Backlog
                 Year Ended                    (Dollars in
                December 31,                    thousands)
                -----------                    -----------
                    2000
                   Motors                        $52,925
                  Controls                        30,691
                                                 -------
                                                 $83,616

                    1999
                   Motors                        $54,279
                  Controls                        26,587
                                                 -------
                                                 $80,866
                                                 =======

         The Company will ship substantially its entire 2000 year-end
backlog during 2001.

                                 5
<PAGE>

Marketing and Support Services

         The Company's sales and marketing success is characterized by
long-term customer relationships which are the result of continuity of
management, outstanding delivery records, high-quality products, and
competitive pricing. The Company utilizes a combination of direct sales
personnel and manufacturers' representatives to market the Company's
product lines. Generally, the inside sales organization is compensated
through a fixed salary while the manufacturers' representative
organizations receive commission.

         National account managers serve large national original equipment
manufacturers/OEM's such as General Electric, Whirlpool and Vendo. More
than 95% of the Company's sales are to OEM customers. However, the Company
has a distribution program with four distributors in its subfractional
horsepower product line to increase coverage and generate more revenue
growth.

         The Company's motion control systems business is served primarily
through internal sales and marketing professionals as well as independent
representatives. The Company continues to add sales talent to this product
group in order to expand its presence into additional motion control
markets.

         The Company's advertising efforts consist of specific product
literature which is printed and provided to customers as applications are
developed. In addition, the Company attends various trade shows to market
products and to stay abreast of industry trends. It also advertises in
trade magazines on a periodic basis.

International Operations

         The Company currently operates seven manufacturing facilities, one
research and development facility and one warehouse in Europe and Mexico.
See Note 12 to the Company's consolidated financial statements.

Employee and Labor Relations

         As of December 31, 2000, the Company employed approximately 2,025
employees, of which approximately 1,485 were non-union and 540 were
represented by unions. The Company has experienced no work stoppages since
inception. It considers its relations with its employees to be excellent.

Competition

         The electric motor and electronic motion control systems markets
are highly fragmented with a multitude of manufacturing companies servicing
numerous markets. Motor manufacturers range from small local producers
serving a specific application or end user, to high volume manufacturers
offering general-purpose "off the shelf" motors to a wide variety of end
users. While there are numerous manufacturers of gears and gearboxes that
service a wide variety of industries and applications, the Company competes
in certain niche markets.

         The Company's motion control systems business competes primarily
within the automated conveyor system controls market and sells to conveyor
manufacturers that serve the automotive manufacturing industry and the
elevator modernization market. These niche markets consist of four to five
major competitors.

                                      6
<PAGE>

         The principal competitive factors in the electric motor and
electronic motion control systems markets include price, quality and
service. Major manufacturers include General Electric, Baldor Electric
Company, Emerson Electric Company and Reliance Electric Company; however,
the Company generally competes with smaller, specialized manufacturers.
While many of the major motor manufacturers have substantially greater
assets and financial resources, the Company believes that its leading
position in certain niche markets, its high-quality products and its
value-added custom applications are adequate to meet competition.

Raw Materials and Suppliers

         The primary raw materials used by the Company to produce its
products are steel, copper, and miscellaneous purchased parts such as
endshield castings, powdered metal gears, commutators, electronic
components and packaging supplies. All materials are readily available in
the marketplace. The Company is not dependent upon any single supplier in
its operations for any materials essential to its business or not otherwise
commercially available to the Company. The Company has been able to obtain
an adequate supply of raw materials, and no shortage of raw materials is
currently anticipated. Surcharges and/or raw material price escalation
clauses are often used to insulate the Company from fluctuations in prices.

Intellectual Property

         The Company's patents and trademarks taken individually, and as a
whole, are not critical to the ongoing success of its business. The
proprietary nature of the Company's products is attributable to the custom
application designs for particular customers' needs rather than
attributable to proprietary patented or licensed technology.

Environmental Regulation

         The Company is subject to a variety of U.S. Federal, state,
provincial, local and foreign governmental regulations related to the
storage, use, discharge and disposal of toxic, volatile or otherwise
hazardous materials used in its manufacturing processes. Moreover, the
Company anticipates that such laws and regulations will become increasingly
stringent in the future. The Company does not currently anticipate any
material adverse effect on its business, financial condition or results of
operations as a result of compliance with U.S. Federal, state, provincial,
local or foreign environmental laws or regulations or remediation costs.
However, some risk of environmental liability and other costs is inherent
in the nature of the Company's business. For example, pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, the Company could be responsible for the necessary costs
responding to any releases of hazardous substances for disposal. In
addition, any failure by the Company to obtain and maintain permits that
may be required for manufacturing operations could subject the Company to
suspension of its operations. Such liability or suspension of manufacturing
operations could have a material adverse effect on the Company's results of
operations and financial condition.

         Soils and groundwater, contaminated by historic waste handling
practices at the FIR property in Casalmaggiore, Italy are the subject of an
investigation and remediation under the review of government authorities.
In connection with the FIR Acquisition, the Company obtained
indemnification from the former owners for this investigation and
remediation.

Item 2.  PROPERTIES

         The Company's headquarters are located in an approximately 43,700
square foot office space in Deerfield, Illinois that is provided by JII
pursuant to the Transition Agreement (see Item 13 "Certain Relationships
and Related Transactions"). The Transition Agreement expires in December
2007.

                                  7

<PAGE>

         The principal properties of the Company, the location, the primary
use, the square feet and the ownership status thereof as of December 31,
2000, are set forth in the table below:

<TABLE>
<CAPTION>

                                                                   Square     Owned/         Lease
                      Location                  Use                Feet       Leased       Expiration

<S>                <C>                      <C>                    <C>        <C>        <C>
Subfractional      Des Plaines, IL           Design/                38,000    Leased     September 2002
   Products                                  Administration
                   Darlington, WI            Manufacturing          68,000    Leased     September 2005
                   Richland Center, WI       Manufacturing          45,000    Leased     September 2003
                   Des Plaines, IL           Administration/       112,000    Leased     December 2003
                                             Manufacturing
                   SLP Mexico                Manufacturing          46,000    Leased     December 2007

--------------------------------------------------------------------------------------------------------
                   Akron, OH                 Manufacturing          43,000    Leased     August 2005
                   Middleport, OH            Manufacturing          85,000    Owned
                   Cuyahoga Falls, OH        Manufacturing          63,000    Leased     October 2003
 Fractional/       Alamagordo, NM            Manufacturing          25,800    Leased     October 2002
   Integral
  Horsepower
   Products
                   Casalmaggiore,            Administration/       100,000    Owned
                      Italy                  Manufacturing
                   Varano, Italy             Manufacturing          30,000    Owned
                   Bedonia, Italy            Manufacturing           8,000    Leased     March 2005
                   Genova, Italy             Research &             33,000    Leased     July 2002
                                             Development/
                                             Manufacturing
                   Reggio Emilia, Italy      Manufacturing/         30,000    Leased     August 2002
                                             Distribution
                   Carrollton, TX            Manufacturing/         29,000    Leased     September 2004
                                             Administration
                   Dewitt, NY                Manufacturing          18,500    Leased     July 2005
                   Eternoz, France           Manufacturing/         15,000    Leased     October 2004
                                             Administration
                   Syracuse, NY              Manufacturing          45,000    Leased     December 2004
                   Syracuse, NY              Manufacturing/         49,600    Owned
                                             Administration
                   Putzbrunn, Germany        Warehouse               1,200    Leased     July 2001

--------------------------------------------------------------------------------------------------------
   Motion          Troy, MI                  Manufacturing/         29,000    Leased     March 2003
   Control                                   Administration
   Systems
                   Rancho Cordova, CA        Manufacturing/         40,000    Leased     May 2001
                                             Administration
                   Rancho Cordova, CA        Administration         45,000    Leased     May 2001

--------------------------------------------------------------------------------------------------------
  Gears and        Grand Rapids, MI          Manufacturing/         45,000    Owned
  Gearboxes                                  Administration
                   Oakwood Village, OH       Manufacturing/         25,000    Leased     January 2004
                                             Administration

</TABLE>

         The Company believes that its existing leased facilities are
adequate for the operations of the Company and its subsidiaries. The
Company does not believe that any single leased facility is material to its
operations and that, if necessary, it could readily obtain a replacement
facility.
                                      8

<PAGE>

Item 3.  LEGAL PROCEEDINGS

         The Company is not a party to any pending legal proceeding the
resolution of which, the management of the Company believes, would have a
material adverse effect on the Company's results of operations or financial
condition, nor to any other pending legal proceedings other than ordinary,
routine litigation incidental to its business.

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

         No matters were submitted to a vote of security holders during the
fiscal year ended December 31, 2000.


                                  PART II
                                  -------


Item 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

         The only authorized, issued and outstanding class of capital stock
of the Company is common stock. There is no established public trading
market for the Company's common stock. At December 31, 2000, the Parent
held all common stock of the Company.

         The Company has not declared or paid any cash dividends on its
common stock since the Company's formation in September 1995. The Indenture
(the "Indenture") by and between the Company and State Street Bank and
Trust Company, as Trustee, with respect to the 10 3/4% Senior Notes due
2006, contains restrictions on the Company's ability to declare or pay
dividends on its common stock. The Indenture prohibits the declaration or
payment of any dividends or the making of any distribution by the Company,
or any Restricted Subsidiary (as defined in the Indenture).

Item 6.  SELECTED FINANCIAL DATA

         The following table presents selected financial information
derived from the Company's financial statements.


  (Dollars in thousands)                    Year Ended December 31,
                                 ----------------------------------------------
                                  2000      1999      1998      1997      1996
                                  ----      ----      ----      ----      ----
Statement of Operations
Data:  (1)
 Net Sales                       16,666  $307,877  $275,833  $148,669 $117,571
Gross profit, excluding
depreciation                    116,781   111,119    95,380    51,585   41,820

  Depreciation                    6,162     5,549     4,492     4,311    2,960
  Amortization                   23,802     9,045     8,235     4,704    4,118
  Operating income               36,497    50,597    42,324    27,684   23,229
  Interest expense               33,115    33,802    32,994    22,363   11,134
  Income taxes (2)                9,469     8,698    (3,072)    2,429    5,290
  Net (loss) income (3)          (6,102)    8,618    13,098     3,355    4,834

Balance sheet data (at end of
period): (1)
  Working capital                44,786  $ 69,363  $ 67,922  $ 65,074 $ 25,632
  Total assets                  361,082   382,586   388,821   335,144  175,530
  Long-term debt including
current portion                 312,652   313,179   325,816   283,672  175,067
  Stockholder's equity (net
capital deficiency)               7,139    24,159    22,613     7,552  (15,787)


(1)  The Company has acquired a diversified group of operating companies
     over the five-year period, which significantly affects the
     comparability of the information shown.

(2)  The Company's taxes reflect a reversal of the Company's valuation
     allowance of $9,714 for certain deferred tax assets in 1998.

(3)  The Company's net loss for 2000 reflects a $14,636 write-down of
     goodwill relating to one of its businesses (see Note 13 to the
     Company's consolidated financial statements).


                                            9
<PAGE>

Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Overview

         The following discussion and analysis of the Company's results of
operations and of its liquidity and capital resources should be read in
conjunction with the financial statements and the related notes thereto
appearing elsewhere in this annual report.

Acquisitions

         A substantial portion of the Company's growth during 1999 and 1998
is the result of acquisitions. Each of the acquisitions during this two
year period have been accounted for under the purchase method of accounting
and are included in the Company's consolidated financial statements from
their respective dates of acquisition. As a result of these acquisitions,
the Company's combined results for 1999 and 1998 are not directly
comparable.

Results of Operations

         The following financial information presents the results of
operations of the Company for the years ended December 31, 2000, 1999 and
1998. The results of operations of ADC, Euclid, and L'Europea are included
in the consolidated results of operations since their acquisition on May
15, 1998, December 31, 1998, and December 31, 1999, respectively.

                                         Year Ended December 31,
                             --------------------------------------------------
                                 2000(1)         1999(1)            1998(1)
                                 ----            ----               ----
                                         (Dollars in thousands)
Net sales                      $316,666        $307,877          $275,833
Gross profit (excluding
  depreciation)                 116,781         111,119            95,380
EBITDA (2)                       66,461          65,191            55,051
Operating income (4)             36,497          50,597            42,324
Interest expense                 33,115          33,802            32,994

Gross margin (excluding
  depreciation) (4)              36.9%           36.1%             34.6%
EBITDA margin (4)                21.0            21.2              20.0
Operating margin (4)             11.5            16.4              15.3

(1)       The results of operations include operations for both the motors
          and controls segments. The controls segment accounted for
          $83,556, $72,503 and $61,603 of net sales, $33,180, $27,545 and
          $23,403 of gross profit (excluding depreciation), $13,291,
          $11,291 and $9,605 of EBITDA (earnings before interest, income
          taxes, depreciation and amortization) and $(4,566), $8,367 and
          $7,124 of operating (loss) income for the years ended December
          31, 2000, 1999 and 1998, respectively. Note that the segment
          analysis does not include unallocated corporate overhead and
          management fees in the EBITDA and operating income calculations.

(2)       EBITDA is included  herein because management believes that certain
          investors find it to be a useful tool for measuring the
          ability of the Company to service its debt.

(3)       The Company's operating loss for 2000 reflects a $14,636
          write-down of goodwill relating to one of its businesses (see
          Note 13 to the Company's consolidated financial statements).

(4)       All margins are calculated as a percentage of net sales.


                                        10

<PAGE>

Year ended December 31, 2000 compared to year ended December 31, 1999

         Net sales increased $8.8 million or 2.9% from $307.9 million in
1999 to $316.7 million in 2000. Subfractional motor sales decreased 6.4% in
2000 as compared to 1999 largely due to weakness in the bottle and can
vending market. Shifts in distribution strategies of the major beverage
companies are the primary reason for this decline. In 2000, sales of
fractional/integral products increased 3.4% including the effects of
acquisition. The growth for fractional/integral products is a result of
strong performance in the material handling, utility vehicle, and European
markets, partially offset by an unfavorable Euro exchange rate. Sales of
electronic motion control systems increased by 15.2% mainly attributed to
continued strength in the elevator modernization market.

        Operating income decreased $14.1 million or 21.1% from $50.6 million
in 1999 to $36.5 million in 2000. The decrease was the result of the $14.6
million goodwill impairment charge at ED&C. See Note 13 to the Company's
consolidated financial statements regarding the circumstances that
triggered the impairment and how the impairment was determined. Excluding
the impact of the goodwill impairment, operating income increased 1.1%,
primarily as a result of the increase in sales discussed above coupled with
an improvement in gross margin (excluding depreciation) from 36.1% in 1999
to 36.9% in 2000. The improvement in gross margin is a result of the
Company's continued product design changes, manufacturing process
improvements, and outsourcing and in-sourcing of component purchases.
Improvements in gross margin were offset by increases in selling, general
and administrative expenses related to the Company's focus on product
development and corporate initiatives directed at e-commerce and
development of the Kinetek brand.

Year ended December 31, 1999 compared to year ended December 31, 1998

         Net sales increased $32.0 million or 11.6% from $275.8 million in
1998 to $307.9 million in 1999. The increase in net sales was primarily
driven by the 1998 acquisition of ADC and Euclid which accounted for $21.8
million of the increase. Subfractional motor sales decreased 4.1% in 1999
as compared to 1998 largely due to weakness in the vending markets.
Significant difficulties in international markets of a major beverage
company are the primary reason for this decline. In 1999, sales of
fractional/integral products increased 22.8% including the effects of the
1998 acquisitions, and 3.2% excluding the effects of the 1998 acquisitions.
The growth for fractional/integral products is a result of strong
performance in the material handling, elevator and floor care markets
partially offset by a weak European market and an unfavorable Euro exchange
rate. Sales of electronic motion control systems increased by 17.7% mainly
attributed to continued strength in the elevator modernization market.

         Operating income increased $8.3 million or 19.5% from $42.3
million in 1998 to $50.6 million in 1999. The primary increase in operating
income was a result of the increase in sales discussed above coupled with
an improvement in gross margin from 34.6% in 1998 to 36.1% in 1999. The
improvement in gross margin is a result of product design changes,
manufacturing process improvements and material cost savings experienced
throughout the Company due to efforts put forth by the Company's sourcing
council. Improvements in gross margin were partially offset by increases in
selling, general and administrative expenses primarily as a result of the
1998 acquisitions and increases in depreciation due to the 1998
acquisitions and due to a new systems implementation at one of the
Company's subsidiaries.

         The income tax benefit during 1998 is primarily the result of
reducing the Company's valuation allowance by $9.7 million related to
deferred tax assets arising from the Company's acquisition of Imperial on
November 7, 1996 from an affiliate. The deferred tax assets pertain to
additional tax bases in certain assets related to this transaction. The
valuation allowance was reversed due to continued profitable domestic
operating results and based on management's assessment that it is more
likely than not that all of the net deferred tax assets will be realized
through future taxable earnings, or implementation of tax planning
strategies.


                                     11
<PAGE>


Liquidity and Capital Resources

         In general, the Company requires liquidity for working capital,
capital expenditures, interest, taxes, debt repayment and its acquisition
strategy. Of primary importance are the Company's working capital
requirements, which increase whenever the Company experiences strong
incremental demand or geographical expansion. The Company expects to
satisfy its liquidity requirements through a combination of funds generated
from operating activities and the funds available under its revolving
credit facility.

         Operating activities. Net cash provided by operating activities
for the year ended December 31, 2000 was $20.3 million, compared to $28.0
million provided from operating activities during the same period in 1999.
The decrease in cash from operating activities is primarily due to timing
of tax payments to JII under the Company's tax-sharing agreement.

         Investing activities. Net cash used in investing activities was
$15.8 million in 2000 and $7.8 million in 1999. Cash used in investing
activities in 2000 reflects the 1999 acquisition for $2.6 million of
L'Europea Electric Hoist division of Pramac Industriale, $5.1 million for
an investment in JZ International, an affiliated Company and $3.1 million
for a contingent payment based on the Company's acquisition agreement with
Advanced DC Motors, Inc and its affiliated corporations ("ADC").

         Financing activities. The Company's annual cash interest expense
on the Senior Notes, which are due 2006, is approximately $29.0 million.
Interest on the Senior Notes is payable semi-annually on May 15 and
November 15 of each year. Interest on the Junior Seller Notes will be
approximately $0.8 million in 2001.

         The Company is party to a Credit Agreement under which the Company
is able to borrow up to approximately $75.0 million to fund acquisitions
and provide working capital and for other general corporate purposes.
Obligations under the Credit Agreement are guaranteed by Kinetek Industries
subsidiaries, and secured by pledges of the stock of Kinetek Industries'
subsidiaries and liens in respect of certain assets of Kinetek Industries'
and its subsidiaries. As of March 23, 2001, the Company has approximately
$45.2 million of available funds under this Credit Agreement. In addition,
under the terms of the Series D Notes, the Company is able to increase the
credit facility to approximately $115.0 million. The Credit Agreement
expires November 15, 2001. The Company intends to replace the revolving
credit facility made under the Credit Agreement in 2001. Management is
confident such refinancing can be obtained under favorable terms to the
Company, however, such terms will be subject to market conditions which may
change significantly.

         The Company expects its principal sources of liquidity to be from
its operating activities and funding from the revolving line-of-credit
agreement. The Company further expects that these sources will enable it to
meet its cash requirements for working capital, capital expenditures,
interest, taxes, and debt repayment for at least the next 12 months.

Foreign Currency Impact

         The Company's exposure to decreases in the value of foreign
currency is protected by its investment in manufacturing facilities
overseas whose costs, including labor and raw materials, are also
denominated in local currency. Decreases in the value of foreign currencies
relative to the U.S. dollar have not resulted in significant losses from
foreign currency translation. However, there can be no assurance that
foreign currency fluctuations in the future would not have an adverse
effect on the Company's business, financial condition and results of
operations.


                                      12

<PAGE>


Seasonality and Inflation

         The Company's net sales typically show no significant seasonal
variations.

         The impact of inflation on the Company's operations has not been
significant to date. However, there can be no assurance that a high rate of
inflation in the future would not have an adverse effect on the Company's
operating results.

Adoption of Accounting Principles

         In June 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities (Statement 133), which is
required to be adopted for all fiscal quarters of all fiscal years
beginning after June 15, 2000. Statement 133 requires all derivatives to be
recognized in the balance sheet as either assets or liabilities at fair
value. Derivatives that are not hedged must be adjusted to fair value
through income. In addition, all hedging relationships must be designated,
reassessed and documented pursuant to the provisions of SFAS No. 133.
Management believes the adoption of this statement will not have a material
effect on the Company.


Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

         The Company's debt obligations are primarily fixed-rate in nature
and, as such, are not sensitive to changes in interest rates. At December
31, 2000 the Company had variable rate debt outstanding of $26.0 million
with an interest rate of approximately 8.9%. A one percentage point
increase in interest rates would increase the amount of annual interest
paid by approximately $0.3 million. The Company does not believe that its
market risk financial instruments on December 31, 2000 would have a
material effect on future operations or cash flow.

         The Company is exposed to market risk from changes in foreign
currency exchange rates, including fluctuations in the functional currency
of foreign operations. The functional currency of operations outside the
United States is the respective local currency. Foreign currency
translation effects are included in accumulated other comprehensive income
in shareholder's equity.



Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                                                      PAGE NO.
                                                                    -----------

Reports of Independent Auditors                                          16

Consolidated Balance Sheets as of December 31, 2000 and 1999             19

Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998                                         20

Consolidated Statements of Changes in Shareholder's Equity
for the years ended December 31, 2000, 1999 and 1998                     21

Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998                                         22

Notes to Consolidated Financial Statements                               23



                                  13


<PAGE>

REPORT OF INDEPENDENT AUDITORS


The Board of Directors and Shareholder
Kinetek, Inc.


We have audited the accompanying consolidated balance sheets of Kinetek,
Inc. (formerly Motors and Gears, Inc.) as of December 31, 2000 and 1999 and
the related consolidated statements of operations, shareholder's equity,
and cash flows for each of the three years in the period ended December 31,
2000. Our audits also included the financial statement schedule listed in
the index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and the schedule based on
our audits. We did not audit the financial statements of certain
subsidiaries whose statements reflect total assets constituting 34% as of
December 31, 1999 and net sales constituting 33% and 34% for the years
ended December 31, 1999 and 1998, respectively, of the related consolidated
totals. Those statements were audited by other auditors whose reports have
been furnished to us, and our opinion, insofar as it relates to data
included for these subsidiaries, is based solely on the reports of the
other auditors.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits and the reports of other auditors for the years ended
December 31, 1999 and 1998 provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Kinetek, Inc. at December
31, 2000 and 1999, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended December 31,
2000, in conformity with accounting principles generally accepted in the
United States. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the information
set forth therein.


ERNST & YOUNG LLP


Chicago, Illinois
March 9, 2001






                                      14
<PAGE>


                  REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Board of Directors of
Motion Control Engineering, Inc.:



We have audited the balance sheet of MOTION CONTROL ENGINEERING, INC. (a
California corporation and a wholly-owned subsidiary of Kinetek, Inc.
formerly known as Motors & Gears, Inc.) as of December 31, 1999, and the
related statements of income, shareholders' equity and cash flows for each
of the two years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Motion Control
Engineering, Inc. as of December 31, 1999 and the results of its operations
and its cash flows for each of the two years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in
the United States.


                                      ARTHUR ANDERSEN LLP


Sacramento, California
January 21, 2000






                                    15
<PAGE>


                        INDEPENDENT AUDITOR'S REPORT


To the Board of Directors
FIR Group Holding Italia S.p.A.


         We have audited the consolidated balance sheets of FIR Group
Holding Italia S.p.A. (a wholly-owned subsidiary of Kinetek, Inc., formerly
Motors & Gears, Inc.) as of October 31, 1999, and the related consolidated
statements of income for the two years ended October 31, 1998 and 1999, and
the related consolidated statements of retained earnings and cash flow for
the year ended October 31, 1999. 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 audits in accordance with generally accepted
auditing standards. 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 audits
provide a reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
the Company as of October 31, 1999, and the results of its operations for
the two years ended October 31, 1998 and 1999 and its cash flow for the
year ended October 31, 1999, in conformity with generally accepted
accounting principles.


                            PRICEWATERHOUSECOOPERS S.p.A.


Bologna, 26 January 2000





                                     16
<PAGE>

                               KINETEK, INC.
                        CONSOLIDATED BALANCE SHEETS
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)


                                                            December 31,
                                                      -------------------------
                                                          2000            1999
                                                          ----            ----

ASSETS
Current Assets
 Cash and cash equivalents                               $ 8,490      $ 11,260
 Accounts receivable, net allowance of $1,891 and
 $850 at December 31, 2000 and 1999, respectively         51,402        53,473
 Inventories                                              44,548        44,146
 Prepaid expenses and other current assets                 3,941         4,035
 Due from affiliated company                               5,414             -
                                                        --------      ---------
         Total current assets                            113,795       112,914

Property, plant and equipment-Net                         19,933        21,562
Goodwill-Net                                             202,007       223,561
Deferred financing costs-Net                              10,601        12,392
Deferred income taxes                                      1,060         2,851
Investment in affiliate                                   12,344         7,285
Other non-current assets                                   1,342         2,021
                                                        --------      --------
          Total assets                                  $361,082       382,586
                                                        ========      ========

LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
 Accounts payable                                       $ 20,965      $ 22,670
 Accrued interest payable                                  4,860         4,986
 Accrued expenses and other current liabilities           12,829        12,081
 Due to affiliated company                                   -           2,185
 Current portion of long term debt                        30,355         1,629
                                                        --------      --------
      Total current liabilities                           69,009        43,551

Long term debt                                           282,297       311,550
Other non-current liabilities                              2,637         3,326

Shareholder's equity:
 Common stock, $.01 par value, 100,000 shares
  authorized, issued and outstanding                           1             1
 Additional paid-in capital                               50,005        50,005
 Accumulated other comprehensive (loss)                  (16,043)       (5,125)
 Accumulated deficit                                     (26,824)      (20,722)
                                                        --------      --------
          Total shareholder's equity                       7,139        24,159
                                                        --------      --------
          Total liabilities and shareholder's equity    $361,082     $ 382,586
                                                        ========     =========


         See accompanying notes to consolidated financial statements.




                                     17

<PAGE>
<TABLE>
<CAPTION>



                                            KINETEK, INC.
                               CONSOLIDATED STATEMENTS OF OPERATIONS

                                 (ALL DOLLAR AMOUNTS IN THOUSANDS)


                                                                 Year Ended December 31,
                                                      -------------------------------------------------
                                                          2000               1999             1998
                                                          ----               ----             ----

<S>                                                   <C>                <C>              <C>
Net sales                                               $316,666           $307,877         $275,833
Cost of sales, excluding depreciation                    199,885            196,758          180,453
Selling, general and administrative expenses,
 excluding depreciation                                   47,136             42,862           37,559
Depreciation                                               6,162              5,549            4,492
Amortization of goodwill and other intangibles            23,802              9,045            8,235
Management fees to affiliated company                      3,184              3,066            2,770
                                                      ----------         ----------        ---------
Operating income                                          36,497             50,597           42,324

Other (income) expense:
            Interest expense                              33,115             33,802           32,994
            Interest income                                 (406)              (390)            (806)
            Miscellaneous, net                               421               (131)             110
                                                      ----------         ----------        ---------
Income before income taxes                                 3,367             17,316           10,026
Provision (benefit) for income taxes                       9,469              8,698           (3,072)
                                                      ----------         ----------        ---------

Net (loss) income                                     $   (6,102)            $8,618         $ 13,098
                                                      ==========         ==========         ========

















         See accompanying notes to consolidated financial statements.


                                        18
<PAGE>
<CAPTION>

                                                KINETEK, INC.
                        CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
                                     (ALL DOLLAR AMOUNTS IN THOUSANDS)


                                               Common Stock                        Accumulated
                                           ---------------------   Additional         Other                             Total
                                            Number of               Paid-in       Comprehensive     Accumulated     Shareholder's
                                             Shares     Amount      Capital       (Loss) Income       Deficit           Equity

<S>                                         <C>         <C>        <C>            <C>               <C>             <C>

Balance at December 31, 1997                 100,000     $   1       $50,005       $     (16)        $  (42,438)     $   7,552

  Foreign currency translation adjustment          -         -             -           1,963                  -          1,963

  Net Income                                       -         -             -               -             13,098         13,098
                                                                                                                     ---------
  Comprehensive Income                             -         -             -               -                  -         15,061
                                             -------     -----      --------       ---------         ----------      ---------


Balance at December 31, 1998                 100,000         1        50,005           1,947            (29,340)        22,613

  Foreign currency translation adjustment          -         -             -          (7,072)                 -         (7,072)

  Net Income                                       -         -             -               -              8,618          8,618
                                                                                                                     ---------
  Comprehensive Income                             -         -             -               -                  -          1,546
                                             -------     -----      --------       ---------         ----------      ---------


Balance at December 31, 1999                 100,000         1        50,005          (5,125)           (20,722)        24,159

  Foreign currency translation adjustment          -         -             -         (10,918)                 -        (10,918)

  Net Income                                       -         -             -               -             (6,102)        (6,102)
                                                                                                                     ---------
  Comprehensive Income                             -         -             -               -                  -        (17,020)
                                             -------     -----      --------       ---------         ----------      ---------

Balance at December 31, 2000                 100,000     $   1      $ 50,005       $ (16,043)        $  (26,824)      $  7,139
                                             =======     =====      ========       =========         ==========       ========





                                        See accompanying notes to consolidated financial statements.


                                                                 19

<PAGE>
<CAPTION>
                                                     KINETEK, INC.
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          (ALL DOLLAR AMOUNTS IN THOUSANDS)

                                                                            Year Ended December 31,
                                                             -----------------------------------------------------
                                                                    2000              1999               1998
                                                                    ----              ----               ----

<S>                                                            <C>                  <C>               <C>
Cash flows from operating activities:
        Net (loss) income                                      $ (6,102)            $  8,618           $ 13,098
Adjustments to reconcile net (loss) income to
 net cash provided by operating activities:
        Depreciation and amortization                            31,256               15,884             14,018
        Deferred income taxes                                     2,319                1,133             (5,917)

Changes in operating assets and liabilities (net
 of effects from acquisitions):
        Accounts receivable                                       2,071               (1,503)            (6,897)
        Inventories                                                 834                 (828)            (3,017)
        Prepaid expenses and other                                 (435)                 (95)            (1,482)
        Accounts payable                                         (1,705)              (1,161)             3,648
        Accrued expenses and other                                  624                5,037             (2,603)
        Non-current assets & liabilities                           (991)                 (54)             1,081
        Payables to affiliated company                           (7,599)                 969               (272)
                                                              ---------            ---------          ---------
        Net cash provided by operating activities                20,272               28,000             11,657

Cash flows from investing activities:
        Capital expenditures, net                                (5,103)              (4,171)            (4,964)
        Acquisition of subsidiaries                              (5,661)              (3,596)           (58,486)
        Cash acquired in acquisition of subsidiaries                 -                    -                 412
        Investment in affiliate                                  (5,059)                  -              (7,285)
                                                              ---------            ---------          ---------
        Net cash used in investing activities                   (15,823)              (7,767)           (70,323)

Cash flows from financing activities:
        Proceeds from revolving credit facility                  28,000               25,000             59,000
        Repayment of long-term debt                                (625)                (414)            (2,307)
        Repayment of borrowings under revolving
            credit facility                                     (30,000)             (38,000)           (18,000)
        Payment of consent fee to bondholders                        -                    -              (2,550)
                                                               --------            ---------          ---------
        Net cash (used in)/provided by financing activities      (2,625)             (13,414)            36,143
Effect (decrease) increase of exchange rate changes on cash      (4,594)              (2,575)               659
                                                              ---------            ---------          ---------

Net increase (decrease) in cash and cash equivalents             (2,770)               4,244            (21,864)

Cash and cash equivalents at beginning of year                   11,260                7,016             28,880
                                                              ---------            ---------          ---------
Cash and cash equivalents at end of year                         $8,490              $11,260            $ 7,016
                                                              =========            =========          =========


Supplemental disclosures of cash flow information: Cash
paid during the period for:
        Third Party Interest                                    $31,970             $ 32,275           $ 31,286
        Income taxes                                              7,219                5,576              5,257
Non cash investing activities:
        Capital leases                                              392                1,284              1,325
</TABLE>

               See accompanying notes to consolidated financial statements.



                                                      20

<PAGE>


                               KINETEK, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)


1.       Description of Business and Acquisitions


         Kinetek, Inc. (Company),  a wholly-owned  subsidiary of Motors
and Gears Holding, Inc. (Parent), a majority-owned subsidiary of Jordan
Industries, Inc. (JII), operates in the motion control industry.

         On May 15, 1998, the Company acquired all of the outstanding stock
of Advanced D.C. Motors, Inc. and its affiliated corporations (collectively
"ADC") for $59,157. The purchase price, including costs incurred directly
related to the transaction, was allocated to working capital of $9,345;
property and equipment of $4,088; covenants not to compete of $662; other
long-term assets and liabilities of $(51); and resulted in an excess
purchase price over net identifiable assets of $45,113. The Company also
had a contingent purchase price agreement relating to the acquisition of
ADC. The contingent purchase price was dependent upon the acquired entity's
results of operations for 1998 and 1999 exceeding certain targeted levels
set substantially above the historical experience of ADC at the time of
acquisition. Under this agreement the Company paid $3,093 in 2000 related
to 1999 operations and paid $3,200 in 1999 related to 1998 performance. ADC
designs and manufactures special purpose, custom designed motors for use in
electric lift trucks, power sweepers, electric utility vehicles, golf
carts, electric boats, and other niche products. ADC also designs and
manufactures some of its own production equipment as well as electric motor
components known as commutators.

         On December 31, 1998, the Company, through its wholly-owned
subsidiary Imperial, acquired all of the outstanding stock of Euclid
Universal Corporation ("Euclid") for $2,039. The purchase price, including
costs incurred directly related to the transaction, was allocated to
working capital of $772; property and equipment of $953; other long-term
assets and liabilities of ($498); and resulted in an excess purchase price
over net identifiable assets of $812. Euclid designs and manufactures speed
reducers, customer gearing, right angle gearboxes and transaxles for use in
a wide array of industries including material handling, healthcare and
floor care. Euclid has strong technical expertise in the areas of worm,
spur and helical gearing.

         On December 31, 1999, the Company, through its wholly-owned
subsidiary FIR (consisting of FIR Group Holdings, Inc.; FIR Group Holdings
Italia, S.r.L.; Construgioni Italiane Motori Elettrici, S.p.A.; Selin
Sistemi, S.p.A.; FIR Electromeccanica, S.p.A.; T.E.A. Technologie
Electromeccaniche ed Automazione, S.r.l., and Beta), acquired certain net
assets of the L'Europea Electric Hoist division ("L'Europea") from Pramac
Industriale for $2,568 in cash and a $2,632 subordinated seller note
payable in annual installments through 2002. The purchase price, including
costs incurred directly related to the transaction, was allocated to
working capital of $1,236 and resulted in an excess purchase price over net
identifiable assets of $3,964. L'Europea hoists are electric pulleys and
elevators used for lifting applications mainly found at construction sites.

         Acquisitions of the Company have been financed primarily through
the use of the revolving line of credit and the issuance of Senior Debt.
These acquisitions have been accounted for using the purchase method of
accounting. Accordingly, the operating results of each of these
acquisitions have been included in the consolidated operating results of
the Company since the date of their acquisition.




                                        21

<PAGE>

2.       Summary of Significant Accounting Policies

Principles of Consolidation

         The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
transactions and accounts have been eliminated. Operations of certain
subsidiaries outside the United States are included for periods ending two
months prior to the Company's year-end and interim periods to ensure timely
consolidated financial statements.

Cash and Cash Equivalents

         Cash equivalents consist of highly liquid investments with an
initial maturity of three months or less at the time of purchase.

Inventories

         Inventories are stated at the lower of cost or market. Inventories
valued at either average or first-in, first-out (FIFO) cost, accounted for
approximately 77% and 77% of the Company's inventories at December 31, 2000
and 1999, respectively. All other inventories are valued using the last-in,
first-out (LIFO) cost, which approximated current cost at December 31,
2000.

Property, Plant, and Equipment

         Property, plant, and equipment are stated at cost, less
accumulated depreciation. Depreciation is provided using either
straight-line or accelerated methods over the estimated useful lives of the
assets. Leasehold improvements and assets under capital leases are
amortized using the straight-line method over the shorter of the lease term
or their estimated productive lives. Amortization of leasehold improvements
and assets under capital leases is included in depreciation expense.

         The useful lives of plant and equipment for the purpose of
computing book depreciation are as follows:


        Buildings                             5 to 33 years
        Machinery and equipment               3 to 10 years
        Dies and tooling                      2 to 5  years
        Furniture and fixtures                3 to 7  years
        Vehicles                              3 to 5  years


Foreign Currency Translation

         In accordance with Statement of Financial Accounting Standards No.
52, "Foreign Currency Translation", assets and liabilities of the Company's
foreign operations are translated from foreign currencies into U.S. dollars
at the balance sheet date rates while income and expenses are translated at








                                      22

<PAGE>

the weighted-average exchange rates for the year. The Company is exposed to
market risk from changes in foreign currency exchange rates, including
fluctuations in the functional currency of foreign operations. Gains or
losses resulting from the translations of foreign currency financial
statements are deferred and classified as a separate component of
shareholder's equity.

Intangible Assets

         Goodwill is amortized using the straight-line method over 30 years
at Merkle-Korff Industries, Inc., FIR, Motion Control Engineering, Inc.,
and Advanced DC Motors, Inc., and up to 40 years at Imperial (consisting of
The Imperial Electric Company and Gear Research, Inc.) Goodwill at December
31, 2000 and 1999 is net of accumulated amortization of $52,049 and
$29,198, respectively. The covenants not to compete are being amortized
using the straight-line method over the respective terms of the agreements.
The covenants not to compete at December 31, 2000 and 1999 are net of
accumulated amortization of $2,612 and $1,806, respectively. Deferred
financing costs are amortized using the straight-line method over the
shorter of the terms of the related loans or the period such loans are
expected to be outstanding. Deferred financing costs at December 31, 2000
and 1999 are net of accumulated amortization of $6,598 and $4,807,
respectively. Amortization of deferred financing costs is included in
interest expense.

         The Company evaluates its long-lived assets, including goodwill,
on an ongoing basis. Long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
related asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of the asset to
future undiscounted cash flows expected to be generated by the asset. If
the asset is determined to be impaired, the impairment recognized is
measured by the amount by which the carrying value of the asset exceeds its
fair value.

Income Taxes

         Deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that are
expected to be in effect when the differences reverse. The operating
results of the Company are included in the consolidated federal income tax
return of JII. In addition, the Company is party to a tax-sharing agreement
with JII. Under its tax sharing agreement, the Company's income tax
provision has been calculated as if the Company would have filed a separate
federal income tax return.

Revenue Recognition

         Revenues are primarily recognized when products are shipped to
customers.

Use of Estimates

         The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.







                                       23

<PAGE>

Financial Instruments

         The Company's financial instruments include cash equivalents,
trade accounts receivable, accounts payable, accrued expenses, the Senior
Notes, the Subordinated Notes, and the revolving credit facility. Other
than the Senior Notes (see Note 7), the fair values of the Company's
financial instruments are not materially different from their carrying
values at December 31, 2000.

Concentration of Credit Risk

         Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash and cash
equivalents and accounts receivable. The Company deposits cash and cash
equivalents with high-quality financial institutions, which are federally
insured up to prescribed limits. Cash balances may exceed these limits at
any given time.

         The Company closely monitors the credit quality of its customers
and maintains allowances for potential credit losses which, historically,
have not been significant and have been within the range of management's
expectations. The Company generally does not require collateral or other
security on trade receivables.

Freight Expense

         The Company recognizes freight expenses as a component of cost of
goods sold.


3.       Inventories

         Inventories consist of the following:

                                                     December 31,
                                             --------------------------
                                                 2000            1999
                                                 ----            ----

         Raw materials                          $26,599        $27,262
         Work in process                         12,564         12,086
         Finished goods                           5,385          4,798
                                             -----------     ----------
                                                $44,548        $44,146
                                             ===========     ==========


4.       Property, Plant, and Equipment

         Property, plant, and equipment consist of the following:


                                                         December 31,
                                            ---------------------------------
                                                 2000                1999
                                                 ----                ----

Land, buildings and improvements               $ 7,714            $ 8,103
Machinery and equipment                         29,566             27,615
Furniture and fixtures                           9,098              6,321
Other (vehicles, dies and tooling)               5,610              7,770
                                             ----------          ---------
                                                51,988             49,809

Less:  Accumulated depreciation and
amortization                                   (32,055)           (28,247)
                                             ----------          ---------

                                               $19,933            $21,562
                                             ==========          =========



                                      24

<PAGE>


5.       Short Term Notes Payable

         FIR has a number of short-term borrowing facilities available from
         various banks. The total amount available under these facilities is
         approximately $11,150 at interest rates ranging from 6.0% to 8.0% at
         December 31, 2000. There were no outstanding borrowings under these
         arrangements at December 31, 2000 and 1999. A portion of these
         facilities are secured by FIR's assets and a portion are in the form
         of overdraft coverage.


6.       Income Taxes

         Pretax (loss) income was taxed in the following jurisdictions:

                                      Year Ended December 31,
                        ----------------------------------------------
                            2000            1999            1998
                            ----            ----            ----

   Domestic                $ (833)       $ 14,328         $  4,738
   Foreign                  4,200           2,988            5,288
                          --------       ---------        ---------

                           $3,367        $ 17,316         $ 10,026
                          ========       =========        =========


<TABLE>
<CAPTION>

The provision (benefit) for income taxes consists of the following:

                                                    Year Ended December 31,
                                         ------------------------------------------
                                           2000            1999            1998
                                           ----            ----            ----

<S>                                       <C>            <C>             <C>
Current:
       Federal                            $ 2,903         $ 4,167         $  (954)
       State                                1,084             981             (40)
       Foreign                              3,163           2,417           3,839
                                          --------        --------        --------

       Total current                        7,150           7,565           2,845

Deferred:
       Federal                              1,806           1,037          (5,223)
       State                                  400             211            (667)
       Foreign                                113            (115)            (27)
                                          --------        --------        --------

       Total deferred                       2,319           1,133          (5,917)
                                          --------        --------        --------

Provision (benefit) for income taxes      $ 9,469         $ 8,698         $(3,072)
                                          ========        ========        ========
</TABLE>







                                             25

<PAGE>


         The provision (benefit) for income taxes differs from the amount
of income tax provision computed by applying the U.S. federal income tax
rate to income before income taxes. A reconciliation of the differences is
as follows:

<TABLE>
<CAPTION>

                                                                      Year Ended December 31,
                                                          ----------------------------------------------
                                                             2000              1999             1998
                                                             ----              ----             ----

<S>                                                        <C>              <C>              <C>
Computed statutory tax provision                            $ 1,178          $ 5,887          $ 3,409
     Increase/(decrease) resulting from:
        State and local taxes, net of federal benefit           964              463              463
        Higher effective foreign tax rate                     1,806            1,305            2,104
        Change in valuation allowance                            -                -            (9,714)
        Previously unrecorded deferred taxes                   (281)              -               448
        Nondeductible amortization                            5,986              833              674
        Other                                                  (184)            (127)            (366)
                                                            --------         --------         --------

Provision (benefit) for income taxes                         $9,469          $ 8,698          $(3,072)
                                                            ========         ========         ========
</TABLE>

         The change in the Company's valuation allowance is related to
deferred tax assets arising from the Company's acquisition of a subsidiary
on November 7, 1996 from an affiliate. The deferred tax assets pertain to
additional tax bases in certain assets related to this transaction. The
valuation allowance was reversed due to continued profitable domestic
operating results and based on management's assessment that it is more
likely than not that all of the net deferred tax assets will be realized
through future taxable earnings, or implementation of tax planning
strategies. For the year ended December 31, 2000, non-deductible
amortization increased over previous years' amounts as a result of the
Company's write-down of goodwill associated with one of its businesses (see
Note 13).








                                   26


<PAGE>

     Deferred tax liabilities and assets are comprised of the following:

                                                      December 31,
                                            --------------------------------
                                                  2000            1999
                                                  ----            ----

Deferred tax liabilities:
     Goodwill                                   $ 8,233        $ 5,973
     Property, plant and equipment                  269            184
     Foreign deferred taxes                         889            478
     Other                                          109             67
                                                -------        -------

Total deferred tax liabilities                    9,500          6,702

Deferred tax assets:
     Property, plant and equipment                4,385          3,931
     Intangibles other than goodwill              4,925          5,070
     Vacation accrual                               471            407
     State tax                                        -            610
     Franchise tax                                  273            262
     Employee benefits                              403            362
     Uniform capitalization                         301            133
     Allowance for doubtful accounts                165            151
     Inventory obsolescence reserve                 747            352
     Warranty reserve                               266            196
     Other                                          236            219
                                                -------        -------

Total deferred tax assets                        12,172         11,693
                                                -------        -------
Net deferred tax assets                         $ 2,672        $ 4,991
                                                =======        =======

As of December 31, 2000 there was $387 of accumulated unremitted earnings
from the Company's foreign subsidiaries on which deferred taxes have not
been provided as undistributed earnings on foreign subsidiaries are
indefinitely reinvested.


7.       Long Term Debt

         Long-term debt consists of the following:

                                                         December 31,
                                               --------------------------------
                                                    2000             1999
                                                    ----             ----
Series D Senior Notes, including $3,000
and $3,500 of Unamortized premium at
December 31, 2000 and 1999, respectively (A)    $ 273,000         $273,500
Revolving Credit Facility (A)                      26,000           28,000
Subordinated Notes Payable (B)                     11,055            8,850
Capital leases (C)                                  2,597            2,829
                                                ----------        ---------
Current Portion                                   312,652          313,179
                                                  (30,355)          (1,629)
                                                ----------        ---------
                                                $ 282,297         $311,550
                                                ==========        ========





                                   27

<PAGE>


(A)      On February 23, 1998, the Company completed an exchange offer
         under which $270,000 of 10 3/4% Series D Senior Notes ("D Notes")
         were exchanged for the $170,000 of B Notes and the $100,000 of C
         Notes which were issued and outstanding prior to 1998. The terms
         of the D Notes are substantially identical to the terms of the B
         and C Notes. Interest on the D Notes is payable in arrears on May
         15 and November 15 of each year. The D Notes are unsecured
         obligations of the Company and mature on November 15, 2006. The D
         Notes are redeemable at the option of the Company, in whole or in
         part, at any time on or after November 15, 2001. The Indenture
         relating to the D Notes contains certain covenants which, among
         other things, restricts the ability of the Company to incur
         additional indebtedness, to pay dividends or make other restricted
         payments, engage in transactions with affiliates, to complete
         certain mergers or consolidations, or to enter into certain
         guarantees of indebtedness.

         The fair value of the Senior Notes was $251,100 at December 31,
         2000. The fair value was calculated by multiplying the face amount
         by the market price at December 31, 2000.

         The Company's Credit Agreement, expiring November 7, 2001, is in
         the form of a revolving credit facility and provides for
         borrowings of up to $75,000. Borrowings bear interest at a
         floating rate of LIBOR plus 2.25% (8.625% at December 31, 2000) or
         base rate plus 1.25% (9.50% at December 31, 2000), subject to
         reduction based on the Company's leverage ratio, as defined.
         Unused commitments under the revolving credit facility are subject
         to an availability fee of 0.375% per annum subject to reduction
         based on the Company's leverage ratio, as defined. Borrowings are
         secured by the stock and substantially all of the assets of the
         Company. Borrowings outstanding under the revolving credit
         facility at December 31, 2000 and 1999 were $26,000 and $28,000,
         respectively.

         The Credit Agreement contains covenants which, among other things,
         provide for a minimum level of interest coverage, as defined, and
         limit the Company's ability to incur additional indebtedness,
         create liens, make restricted payments, engage in affiliate
         transactions or mergers and consolidations, and make asset sales.

(B)      The Subordinated Notes Payable substantially consists of a $5,000
         note payable to the former shareholder of Merkle-Korff and a
         $3,850 note payable to the former shareholders of ED&C. The note
         payable to the former shareholder of Merkle-Korff is due in
         installments beginning December 31, 2000 (December 31, 2000
         installment was paid on January, 2, 2001) through December 31,
         2003 and bears interest at 9% per annum. The note payable to the
         former ED&C shareholders is due December 31, 2002 and bears
         interest at 9% per annum subject to a two-year cap on accrued and
         unpaid interest. These notes are unsecured obligations of the
         Company.

(C)      Interest rates on capital leases range from 3.9% to 8.4% and mature
         in installments through 2005.






                                         28

<PAGE>


The future minimum lease payments as of December 31, 2000 under capital
leases consist of the following:

     2001                                                       $  839
     2002                                                          770
     2003                                                          740
     2004                                                          484
     2005                                                          116
     Thereafter                                                      3
                                                              --------
             Total                                               2,952
     Less amount representing Interest                            (355)
                                                              --------
     Present value of future minimum lease payments             $2,597
                                                              ========

         The present value of the future minimum lease payments
approximates the book value of property, plant and equipment under capital
leases at December 31, 2000.

         Aggregate maturities of long-term debt including future minimum
lease payments excluding interest at December 31, 2000 are as follows:

                   2001                       $ 30,355
                   2002                          6,543
                   2003                          2,177
                   2004                            464
                   2005                            110
                   Thereafter                 $273,003

8. Leases

         The Company leases certain land, buildings, and equipment under
noncancellable operating lease agreements expiring in various years through
2007. Minimum future lease payments, by year, under noncancellable
operating leases including those with related parties (Note 10), are as
follows at December 31, 2000:

                  2001                         $ 2,825
                  2002                           2,791
                  2003                           2,474
                  2004                           1,608
                  2005                           1,150
                  Thereafter                    $1,277

         Total rent expense was $3,184, $3,586 and $3,777 for the years
ended December 31, 2000, 1999 and 1998, respectively.

9.       Benefit Plans

         Certain of the Company's subsidiaries participate in the JII 401(k)
Savings Plan (the "Plan"), a defined-contribution plan for salaried and
hourly employees. In order to participate in the Plan, employees must be at
least 21 years old and have worked at least 1,000 hours during the first 12
months of employment. Each eligible employee may contribute from 1% to 15%
of their before-tax wages into the Plan. In addition to the JII 401(k)
Plan, certain subsidiaries have additional defined contribution plans in
which employees may participate. The Company made contributions to these
plans totaling approximately $1,756, $1,451 and $1,353 for the years ended
December 31, 2000, 1999 and 1998, respectively.







                                   29

<PAGE>


         FIR provides for a severance liability for all employees at 7.4% of
each respective employee's annual salary. In addition, the amount accrued
is adjusted each year according to an official index (equivalent to 0.75%
of the retail price index). This obligation is payable to employees when
they leave the employ of the Company and approximated $2,277 and $2,900 at
December 31, 2000 and 1999, respectively.

10.      Related Party Transactions

         Services  Agreements.  The parent and its  subsidiaries  (including
         the Company) are subject to the following five agreements and
         arrangements with JII:

         First, the Company and each of its subsidiaries entered into a new
advisory agreement (the "New Subsidiary Advisory Agreement") with JII,
pursuant to which the Company and its subsidiaries are charged by JII (i)
investment banking and sponsorship fees of up to 2.0% of the purchase price
of acquisitions, joint ventures, minority investments or sales involving
the Company and its subsidiaries or their respective businesses or
properties (which were $0, $36 and $1,092 in 2000, 1999, and 1998,
respectively); (ii) financial advisory fees of up to 1.0% of debt, equity,
or other financing or refinancing involving the Company or such subsidiary,
in each case, arranged with the assistance of The Jordan Company or its
affiliates (which were $0, $0 and $400 in 2000, 1999 and 1998,
respectively); and (iii) reimbursement for The Jordan Company's or JII's
out-of-pocket costs in connection with providing such services (which were
$0, $0 and $100 in 2000, 1999 and 1998, respectively). The New Subsidiary
Advisory Agreement expires in December 2007, but is automatically renewed
for successive one-year terms, unless either party provides written notice
of termination 60 days prior to the scheduled renewal date.

         Second, the Company and each of its subsidiaries entered into a
management consulting agreement (the "New Subsidiary Consulting
Agreement"), pursuant to which they are charged by JII annual consulting
fees of 1.0% of the Company's net sales for such services and are required
to reimburse JII for its out-of-pocket costs related to its services. The
New Subsidiary Consulting Agreement expires in December 2007, but is
automatically renewed for successive one-year terms, unless either party
provides written notice of termination 60 days prior to the scheduled
renewal date. Pursuant to the New Subsidiary Consulting Agreement, JII (but
not JII's affiliates) is obligated to present all acquisition, business and
investment opportunities that relate to manufacturing, assembly,
distribution or marketing of products and services in the motors, gears and
motion control industries to the Company, and JII is not permitted to
pursue such opportunities or present them to third parties unless the
Company determines not to pursue such opportunities or consents thereto. In
accordance with this agreement, the Company paid approximately $2,739,
$2,770 and $700 for the years ended December 31, 2000, 1999 and 1998,
respectively.

         Third, the Company and each of its subsidiaries entered into a
services agreement (the "JI Properties Services Agreement") with JI
Properties, Inc. ("JI Properties"), a subsidiary of JII, pursuant to which
JI Properties provides certain real estate and other assets, transportation
and related services to the Company. Pursuant to the JI Properties Services
Agreement, the Company is charged for its allocable portion of such
services based upon its usage of such services and its relative revenues,
as compared to JII and its other subsidiaries. In accordance with this
agreement, such charges were $1,995, $1,593 and $1,214 for the years ended
December 31, 2000, 1999 and 1998, respectively. The JI Properties Services
Agreement expires in December 2007, but is automatically renewed for
successive one-year terms, unless either party provides written notice of
termination 60 days prior to the scheduled renewal date.


                                     30

<PAGE>


         Fourth, JII refined the allocation of its overhead, general and
administrative charges and expense between JII and its subsidiaries,
including the Company, in order to more closely match these overhead
charges with the revenues and usage of corporate overhead by JII and its
subsidiaries. Under this agreement, the Company's allocable portion of
corporate expenses was $2,434, $2,152 and $2,136 for the years ended
December 31, 2000, 1999 and 1998 respectively.

         Fifth, the Company and JII entered into the transition agreement
(the "Transition Agreement") pursuant to which JII provides office space
and certain administrative and accounting services to the Company to
facilitate the operations of the Company. The Company reimburses JII for
services provided pursuant to the Transition Agreement on an allocated cost
basis. The Transition Agreement expires on December 31, 2001, but is
automatically renewed for successive one-year periods (unless either party
provides prior written notice of non-renewal) through 2007. The Transition
Agreement may be terminated by the Company on 90 days' written notice.

         Tax Sharing Agreement. The Company and each of its subsidiaries
are party to a Tax Sharing Agreement (the "Tax Sharing Agreement") between
JII and each of its consolidated subsidiaries for federal income tax
purposes. Pursuant to the Tax Sharing Agreement, each of the consolidated
subsidiaries of JII pays to JII on an annual basis, an amount determined by
reference to the separate return tax liability of the subsidiary as defined
in Treasury Regulation ss.1.1552-1(a) (2) (ii). For the years ended
December 31, 2000 and 1999, the income tax payments by the Company to JII
under the Tax Sharing Agreement were $3,308 and $1,000, respectively. These
income tax payments reflected a federal tax rate of approximately 35% of
each U.S. subsidiary's pre-tax income.

         Related Party Leases. The Company leases certain plants,
warehouses, and offices under net leases from affiliated entities. Rent
expense, including real estate taxes attributable to these leases, amounted
to $1,544, $1,657 and $1,602 for the years ended December 31, 2000, 1999
and 1998, respectively. Future minimum rental payments required under these
leases are as follows:

                        2000                   $  994
                        2001                      932
                        2002                      690
                        2003                      540
                        2004                      540
                        Thereafter             $1,035

         Investment in Affiliate. In April 2000, the Company invested an
additional $5.1 million in Class A Preferred Stock of JZ International,
Ltd. This increases the Company's investment in JZ International, Ltd to
$12,344 at December 31, 2000. JZ International's Chief Executive Officer is
David W. Zalaznick, and its stockholders include Messrs. Jordan, Quinn,
Zalaznick and Boucher, who are the Company's directors and stockholders, as
well as other partners, principals and associates. JZ International is a
merchant bank located in London, England that is focused on making European
and other international investments. The Company is accounting for this
investment under the cost method. At December 31, 2000 and 1999, the cost
of the investment approximates market value.

         Legal Fees. An individual who is a shareholder, Director, General
Counsel and Secretary of the Parent is also a partner in a law firm used by
the Company. The firm was paid $229, $180 and $388 in fees and expenses
during the years ended December 31, 2000, 1999 and 1998, respectively. The
rates charged to the Company were at arms-length.





                                  31

<PAGE>

Due (from) to affiliated Company (JII) consists of:

                                                    December 31,
                                             ----------------------------
                                                 2000           1999
                                                 ----           ----

       Management fee                         $     -         $   559
       Overhead allocation and other            (5,414)         1,626
                                              ---------       --------
                                              $ (5,414)       $ 2,185
                                              =========       ========

11.      Additional Purchase Price Arrangements

         The terms of the Company's Motion Control acquisition agreement
provides for additional consideration to be paid if the acquired entity's
results of operations exceed certain targeted levels. Targeted levels are
set substantially above the historical experience of the acquired entity at
the time of acquisition. The agreement becomes exercisable in 2003 and
payments, if any, under the contingent agreement will be placed in a trust
and paid out in cash in equal annual installments over a four-year period.

         The terms of the Company's ADC acquisition agreement provided for
additional consideration to be paid if the acquired entity's results of
operations exceed certain targeted levels. Targeted levels were set
substantially above the historical experience of the acquired entity at the
time of acquisition. Subject to the terms and conditions of the agreement,
the Company made payments to the sellers on or before April first
immediately following the respective fiscal year during which each such
contingent payment was earned. The contingent payments applied to
operations of fiscal year 1999 and 1998. The Company made a payment related
to this agreement of $3,093 to the sellers of ADC in March 2000 and an
additional $3,200 in March 1999. These contingent payments were recorded as
an addition to goodwill.

12.      Segment Data

       Description of Segments

         The Company operates in two separate business segments; motors and
controls. The motors segment consists of subfractional motors,
fractional/integral motors, and gears and gearboxes. The controls segment
consists of motion control systems.









                                    32

<PAGE>

         The Company's subfractional horsepower products are comprised of
motors and gearmotors which power applications up to 30 watts (1/25
horsepower). These small, "fist-size" AC and DC motors are used in light
duty applications such as snack and beverage vending machines, refrigerator
ice dispensers and photocopy machines.

         The Company's fractional/integral horsepower products are
comprised of AC and DC motors and gearmotors having power ranges from 1/8
to 300 horsepower. Key end markets for these motors include commercial
floor care equipment, commercial dishwashers, commercial sewing machines,
industrial ventilation equipment, golf carts, lift trucks and elevators.

         The Company's precision gear and gearbox products are produced in
sizes of up to 16 inches in diameter and in various customized
configurations such as pump, bevel, worm and helical gears. Key end markets
for these products include original equipment manufacturers ("OEMs") of
motors, commercial floor care equipment, aerospace and food processing
product equipment.

         The Company's motion control systems are used primarily in
automated conveyor systems within the automotive industry and the elevator
modernization market. The systems typically control several components such
as electric motors, hydraulic or pneumatic valves, actuators and switches
that are required for the conveyor or elevator systems to function
properly.

       Measurement of Segment Operating Income and Segment Assets

         The Company evaluates performance and allocates resources based on
operating income. The accounting policies of the reportable segments are
the same as those described in Note 2, "Summary of Significant Accounting
Policies". No single customer accounts for 10% or more of consolidated net
sales. Identifiable assets are those used by each segment in its
operations. Corporate assets consist primarily of cash and deferred
financing fees.

       Factors Used to Identify the Enterprise's Reportable Segments

         The Company's reportable segments are business units that
offer different products. The reportable segments are each managed
separately because they manufacture and distribute distinct products with
different production processes.












                                       33

<PAGE>
<TABLE>
<CAPTION>
                 Summary financial information by business segment is as follows:

                                                            Year Ended
                                                            December 31,
                                      -------------------------------------------------
                                          2000              1999              1998
                                          ----              ----              ----
<S>                                   <C>                <C>               <C>
Net Sales
Motors                                  $233,110          $235,374          $214,230
Controls                                  83,556            72,503            61,603
                                       ---------          --------          --------
                                        $316,666          $307,877          $275,833
                                       =========          ========          ========

Operating Income
Motors                                  $ 50,889          $ 51,076          $ 43,850
Controls (1)                              (4,566)            8,367             7,124
Corporate Expenses (2)                    (9,826)           (8,846)           (8,650)
                                       ---------          --------          --------
   Total Operating Income                 36,497            50,597            42,324
Interest Expense                         (33,115)          (33,802)          (32,994)
Interest Income                              406               390               806
Miscellaneous, net                          (421)              131              (110)
                                       ---------          --------          --------
   Income before Income Tax              $ 3,367          $ 17,316          $ 10,026
                                       =========          ========          ========

Identifiable Assets
Motors                                  $257,567          $267,489          $278,153
Controls                                  70,144            87,207            80,039
Corporate                                 33,371            27,890            30,629
                                       ---------          --------          --------
                                        $361,082          $382,586          $388,821
                                       =========          ========          ========

Capital Expenditures
Motors                                    $4,440            $3,087            $4,164
Controls                                   1,188             1,169             1,011
                                       ---------          --------          --------
                                          $5,628            $4,256            $5,175
                                       =========          ========          ========

Depreciation
Motors                                    $4,943            $4,726            $4,101
Controls                                   1,219               823               391
                                      ----------          --------          --------
                                          $6,162            $5,549            $4,492
                                      ==========          ========          ========

Amortization
Motors                                    $7,163            $6,945            $6,146
Controls                                  16,639             2,100             2,089
                                      ----------          --------          --------
                                         $23,802            $9,045            $8,235
                                      ==========          ========          ========
</TABLE>

(1)  Operating loss in 2000 for the Controls segment reflects the goodwill
     impairment charge of $14,636 (see Note 13).
(2)  Management fees paid to affiliated company have been included in
     corporate expenses.




                                      34

<PAGE>


     Summary financial information by geographic area is as follows:

                                                     Year Ended
                                                     December 31,
                                     -----------------------------------------
                                         2000         1999          1998
                                         ----         ----          ----

Net sales to unaffiliated
  customers
United States                          $275,633      $263,242      $232,880
Europe                                   41,033        44,635        42,953
                                     ----------     ---------     ---------
                                       $316,666      $307,877      $275,833
                                     ==========     =========     =========

Identifiable assets excluding
  intangible assets
United States                          $ 28,207      $ 24,136      $ 22,548
Europe                                    4,727         5,215         6,383
                                     ----------     ---------      --------
                                       $ 32,934      $ 29,351      $ 28,931
                                     ==========     =========      ========


13.      Goodwill Impairment

         The Company evaluates its long-lived assets, including goodwill,
on an ongoing basis. Long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
related asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of the asset to
future undiscounted cash flows expected to be generated by the asset. If
the asset is determined to be impaired, the impairment recognized is
measured by the amount by which the carrying value of the asset exceeds its
fair value.

         During the three months ended September 30, 2000, the Company
recorded a non-cash impairment loss of $14,636 associated with the
write-down of goodwill relating to one of the businesses, ED&C. This
write-down of goodwill is presented in the Consolidated Statements of
Operations in Amortization of goodwill and other intangibles , and is not
deductible for income tax purposes. Significant adverse changes in ED&C's
business environment as well as historical, current and projected cash flow
losses led management to evaluate the operations of ED&C. As a result of
this evaluation, management concluded that ED&C's goodwill was impaired,
and accordingly, it has been written down to zero, the Company's best
estimate of its fair value as determined using expected future cash flows.
Considerable management judgment is necessary to determine fair value.
Accordingly, actual results could vary significantly from these estimates.

14.      Legal Proceedings

         The Company is subject to legal proceedings and claims, which
arise, in the ordinary course of its business. The Company believes that
the final disposition of such matters will not have a material adverse
effect on the financial position or results of operations of the Company.






                                       35


<PAGE>

Item 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
            AND FINANCIAL DISCLOSURE

         None.


                                  PART III
                                  --------

Item 10.    DIRECTORS AND EXECUTIVE OFFICERS

         The following sets forth the names and ages of the Company's
      directors, executive officers and other key employees and the
      positions they hold as of the date of this annual report:

       Name                    Age             Position with Company

  Thomas H. Quinn              53       Chairman
  Ron A. Sansom                41       Chief Executive Officer and a Director
  Daniel Drury                 39       Chief Financial Officer
  Norman Bates                 39       Vice President, Business Development
  John W. Brown                64       Vice President, Programs
  Randall Bays                 45       President, Imperial
  G. Barry Lawrence            54       President, Gear
  Paul Boggs                   51       President, Merkle-Korff
  Paolo Bergamaschi            31       President, FIR
  Todd Williams                43       President, Electrical Design
  Javad Rahimian               50       President, Motion Control
  William Rodgers              66       Chairman, Advanced DC Motors
  Jonathan F. Boucher          44       Vice President and a Director
  John W. Jordan, II           53       Director
  David W. Zalaznick           46       Director
  John D. Simms, Sr.           73       Director

   Set forth below is a brief description of the business experience of
each director and executive officer of the Company.

   Mr. Quinn has served as Chairman of the Company since its  inception.
Since 1988, Mr. Quinn has been President, Chief Operating Officer and a
director of JII. Mr. Quinn is also the Chairman of the Board and Chief
Executive Officer of Archibald Candy Corporation, as well as a director of
AmeriKing, Inc., Welcome Home, and a number of other privately held
companies.

   Mr. Sansom has served as Chief Executive Officer and a director of the
Company since June 1996. Prior to joining the Company, Mr. Sansom held
several senior management positions with General Electric from 1981 to
1996, including General Manager of General Electric's Appliance Components
business.

   Mr. Drury has served as Chief Financial Officer since April, 2000. Prior
to joining the Company, Mr. Drury held a succession of financial management
positions with various divisions of General Electric from 1982 to 2000,
most recently as Finance Manager - Control Products at GE Industrial
Systems.






                                   36


<PAGE>

   Mr. Bates has served as Vice President of Business Development since
April, 2000. Mr. Bates was the Company's Chief Financial Officer from April
1997 until that time. Prior to that, Mr. Bates held several financial
management positions with General Electric from 1984 to 1997, including
Finance Manager of General Electric's Appliance Components business.

   Mr. Bays has served as the President of Imperial since April 1997. Prior
to that, Mr. Bays held several senior management positions in General
Electric's motor and control business from 1991 to 1997. Prior to that, Mr.
Bays held senior management positions in Bomar, Inc.'s electronic business.

   Mr.  Lawrence has served as President of Gear since 1991.  Prior to that,
Mr.  Lawrence held several  senior  management  positions with Gear since 1978.

   Mr. Brown has served as Chairman of Merkle-Korff since 2000. From 1993
to 2000 Mr. Brown served as Merkle-Korff's President. Prior to that, Mr.
Brown held several senior management positions with Merkle-Korff since the
1950's, including Executive Vice President until 1993.

   Mr. Boggs has served as President of Merkle-Korff since 2000. From 1996
through 2000, Mr. Boggs was a Business Team leader for certain motors and
controls divisions of General Electric. Prior to that Mr. Boggs held
several management and engineering positions with General Electric.

   Mr.  Bergamaschi has served as the President of FIR since 1998.  Prior to
that, Mr.  Bergamaschi held several  management  positions within FIR.

   Mr. Williams has served as the President of ED&C since September 1998.
Prior to that, Mr. Williams was a partner and original founder of a
consulting company providing management, operating and marketing support
activities for a variety of companies. From 1985 to 1992, Mr. Williams held
senior management positions at McDonnell Douglas Corporation.

   Mr.  Rahimian has served as the President of Motion Control since its
inception in 1983.  Prior to that,  Mr.  Rahimian was employed
by Elevator Industries as an engineering specialist.

   Mr. Rodgers has served as Chairman and acting  President of ADC since 2000.
From ADC's inception in 1989 through 2000, Mr. Rodgers served as President
of ADC. Prior to 1989, Mr. Rodgers held several management positions at
Prestolite.

   Mr.  Boucher has served as a Vice  President and a director of the Company
since its inception. Since 1983, Mr. Boucher has been a partner of The
Jordan Company, a private merchant banking firm. Mr. Boucher is also a
director of JII as well as other privately held companies.

   Mr. Jordan has served as a director of the Company since its inception.
Mr. Jordan is a managing partner of The Jordan Company, a private
merchant-banking firm which he founded in 1982. Mr. Jordan is also a
director of JII, AmeriKing, Inc., Carmike Cinemas, Inc., Archibald Candy
Corporation, Welcome Home, Inc., GFSI, Inc., GFSI Holdings, Inc., Rockshox,
Inc. and Apparel Ventures, Inc. as well as other privately held companies.






                                   37

<PAGE>

   Mr.  Zalaznick has served as a director of the Company since June 1996.
Since 1982, Mr. Zalaznick has been a managing partner of The Jordan
Company. Mr. Zalaznick is also a director of JII, AmeriKing, Inc., Carmike
Cinemas, Inc., Marisa Christina, Inc., Apparel Ventures, Inc., Jackson
Products, Inc., GFSI, Inc., and GFSI Holdings, Inc. as well as other
privately held companies.

   Mr. Simms has served as a director of the Company  since 1998.  Mr. Simms
was the owner of Merkle-Korff from 1966 until September 22, 1995 when
Merkle-Korff was purchased by the Company. Mr. Simms has nearly fifty years
of experience in the electric motor business.

Board of Directors

      Liability Limitation. The Certificate of Incorporation provides that
a director of the Company shall not be personally liable to it or its
stockholders for monetary damages to the fullest extent permitted by
Delaware Corporation Law. In accordance with Delaware Corporation Law, the
Certificate of Incorporation does not eliminate or limit the liability of a
director for acts or omissions that involve intentional misconduct by a
director or a knowing violation of law by a director for voting or
assenting to an unlawful distribution, or for any transaction form which
the director will personally receive a benefit in money, property, or
services to which the director is not legally entitled. Delaware
Corporation Law does not affect the availability of equitable remedies such
as an injunction or rescission based upon a director's breach of his duty
of care. Any amendment to these provisions of the Delaware Corporation Law
will automatically be incorporated by reference into the Certificate of
Incorporation and the Bylaws, without any vote on the part of its
stockholders, unless otherwise required.

      Indemnification Agreements. The Company and each of its directors and
certain executive officers have entered into indemnification agreements.
The indemnification agreements provide that the Company will indemnify the
directors against certain liabilities (including settlements) and expenses
actually and reasonably incurred by them in connection with any threatened
or pending legal action, proceeding or investigation (other than actions
brought by or in the right of the Company) to which any of them is, or is
threatened to be, made a party by reason of their status as a director,
officer or agent of the Company, or serving at the request of the Company
in any other capacity for or on behalf of the Company; provided that (i)
such director acted in good faith and in a manner not opposed to the best
interest of the Company, (ii) with respect to any criminal proceedings had
no reasonable cause to believe his or her conduct was unlawful, (iii) such
director is not finally adjudged to be liable for negligence or misconduct
in the performance of his or her duty to the Company, unless the court
views in light of the circumstances the director is nevertheless entitled
to indemnification, and (iv) the indemnification does not relate to any
liability arising under Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or the rules or regulations
promulgated thereunder. With respect to any action brought by or in the
right of the Company, directors are also indemnified to the extent not
prohibited by applicable laws or as determined by a court of competent
jurisdiction, against expenses actually and reasonably incurred by them in
connection with such action if they acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of
the Company.







                                   38

<PAGE>


Item 11. EXECUTIVE COMPENSATION

Directors' Compensation

         Directors of the Company receive $20,000 per year for serving as a
director of the Company. In addition, the Company reimburses directors for
their travel and other expenses incurred in connection with attending
meetings of the Board of Directors.


Executive Compensation

         The following table sets forth a summary of certain information
regarding compensation paid or accrued by the Company for services rendered
to the Company for the fiscal year ended December 31, 2000 to those persons
who were, at December 31, 2000: (i) the Company's chief executive officer
and (ii) the Company's four most highly compensated executive officers
other than the chief executive officer whose total salary and bonus
exceeded $100,000 during such period.

Annual
Compensation
                                                               Other Annual
Name and Principal Position       Year     Salary     Bonus    Compensation(1)
---------------------------       ----     ------     -----    ---------------

Thomas H. Quinn (2)
  Chairman of the Board           2000     $ -        $ -           $ -
Ron A. Sansom (2)
  Chief Executive Officer         2000       -          -             -
Daniel D. Drury (2)
  Chief Financial Officer         2000       -          -             -
Norman R. Bates (2)
  V.P. - Business Development     2000       -          -             -


(1)      For the periods indicated, no executive officer named in the
         table received any Other Annual Compensation in an amount in
         excess of the lesser of either $50,000 or 10% of the total of
         Annual Salary and Bonus reported for him in the two preceding
         columns.
(2)      Does not reflect compensation paid to Messrs. Quinn, Sansom,
         Drury and Bates by JII.

   The Company does not maintain a stock option or stock purchase plan and
has not awarded any of its employees individual stock option grants.

Compensation Committee Interlock and Insider Participation

         The Board of Directors does not maintain a Compensation Committee.
During fiscal 2000, however, Messrs. Boucher, Jordan and Quinn participated
in deliberations of the Board of Directors concerning executive officer
compensation. During 2000, certain of the foregoing executive officers of
the Company served and currently serve as directors, executive officers and
members of a compensation committee of another entity, one of whose
executive officers served and currently serves as a director of the
Company.









                                     39


<PAGE>


Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         All of the outstanding common stock of the Company is owned by
Parent. The table below sets forth as of March 23, 2001 certain information
regarding beneficial ownership of the common stock of Parent held by (i)
each of its directors and executive officers who own shares of common stock
of Parent, (ii) all directors and executive officers of Parent as a group
and (iii) each person known by Parent to own beneficially more than 5% of
its common stock. The Company believes that each individual or entity named
has sole investment and voting power with respect to shares of common stock
of Parent indicated as beneficially owned by them, except as otherwise
noted.

                                                    Amount of Beneficial
                                                        Ownership (1)
                                            ---------------------------------
                                               Number of       Percentage
                                                 Shares          Owned
                                                 ------          -----
Executive Officers and Directors:
Ron A. Sansom                                    300.000         1.5%
John W. Jordan II (2) (3) (4) (5)             7,136.8809         36.2
David W. Zalaznick (2) (4) (6)                3,531.2473         17.9
Jonathan F. Boucher (2)                       1,116.5587          5.7
Thomas H. Quinn (2)                           1,799.7294          9.1
All directors and executive officers
  as a Group (12 persons)                    13,884.4163         70.5

Other Principal Stockholders:
Jordan Industries, Inc (7)                        0.0000         0.0%
Leucadia Investors, Inc.                      2,019.7802         10.3
JII Partners Limited Partnership (8)          1,500.0000          7.6

(1)  Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under
     Rule 13d-3(d), shares not outstanding which are subject to options,
     warrants, rights or conversion privileges exercisable within 60 days
     are deemed outstanding for the purpose of calculating the number and
     percentage owned by such person, but not deemed outstanding for the
     purpose of calculating the percentage owned by each other person
     listed. As of March 23, 2001, there were 19,700 shares of common
     stock of Parent issued and outstanding.
(2)  Does not include shares of common stock of Parent owned by JII Partners
     Limited Partnership as to which the named individuals disclaim
     beneficial ownership.
(3)  Includes 0.1650 shares held personally and 7,136.7159 shares held by
     the John W. Jordan II Revocable Trust. Does not include 51.025 shares
     held by Daly Jordan O'Brien, the sister of Mr. Jordan. 51.025 shares
     held by Elizabeth O'Brien Jordan, the mother of Mr. Jordan or 51.025
     shares held by George C. Jordan, Jr., the brother of Mr. Jordan.
(4)  Does not include 16.4973 shares held by the Jordan/Zalaznick Capital
     Company or 577.4053 shares held by JZ Equity Partners PLC, a publicly
     traded U.K. investment trust advised by an affiliate of The Jordan
     Company (which is controlled by Messrs. Jordan and Zalaznick).
(5)  Does not include 535.8871 shares held by The Jordan Family Trust, of
     which John W. Jordan II, George C. Jordan, Jr. and G. Robert Fisher
     are the Trustees.
(6)  Does not include 13.5558 shares held by Bruce H. Zalaznick, the brother
     of Mr. Zalaznick.
(7)  JII owns all of the issued and outstanding junior preferred stock of
     Parent. The junior preferred stock entitles JII to approximately 82%
     of the voting power as of the date hereof. The principal address of
     JII is ArborLake Centre, Suite 550, 1751 Lake Cook Road, Deerfield, IL
     60015.
(8)  JII Partners Limited Partnership is an investment partnership
     whose partners include certain officers and employees of JII and
     its affiliates. The principal address of JI Partners is
     ArborLake Centre, Suite 550, 1751 Lake Cook Road, Deerfield, IL
     60015.


                                   40


<PAGE>


 Item 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Service Agreements. The Company and each of its subsidiaries are
parties to an advisory agreement (the "Subsidiary Advisory Agreement") with
JII, pursuant to which the Company and its subsidiaries will pay JII (i)
investment banking and sponsorship fees of up to 2.0% of the purchase price
of acquisitions, joint ventures, minority investments or sales involving
the Company and its subsidiaries or their respective businesses or
properties (which were $0 in 2000); (ii) financial advisory fees of up to
1.0% of any debt, equity or other financing or refinancing involving the
Company or such subsidiary, in each case, arranged with the assistance of
The Jordan Company or its affiliates (which were $0 in 2000); and (iii)
reimbursement for The Jordan Company's or JII's out-of-pocket costs in
connection with providing such services (which were $0 in 2000). The
Subsidiary Advisory Agreement expires in December 2007, but is
automatically renewed for successive one-year terms, unless either party
provides written notice of termination 60 days prior to the scheduled
renewal date. Mssrs. Jordan, Boucher and Zalaznick, directors of the
Company, are partners of The Jordan Company.

         The Company and each of its subsidiaries are parties to a
management consulting agreement (the "Subsidiary Consulting Agreement"),
pursuant to which they pay JII annual consulting fees of 1.0% of the
Company's net sales for such services and are required to reimburse JII for
its out-of-pocket costs related to its services. The Subsidiary Consulting
Agreement expires in December 2007, but is automatically renewed for
successive one-year terms, unless either party provides written notice of
termination 60 days prior to the scheduled renewal date. Pursuant to the
Subsidiary Consulting Agreement, JII (but not JII's affiliates) is
obligated to present all acquisition, business and investment opportunities
that relate to manufacturing, assembly, distribution or marketing of
products and services in the motors, gears and motion control industries to
the Company, and JII is not permitted to pursue such opportunities or
present them to third parties unless the Company determines not to pursue
such opportunities or consents thereto. In accordance with this agreement,
the Company paid approximately $2.7 million for the year ended December 31,
2000.

         The Company and each of its subsidiaries are parties to a services
agreement (the "JI Properties Services Agreement") with JI Properties, Inc.
("JI Properties"), a subsidiary of JII, pursuant to which JI Properties
provides certain real estate and other assets, transportation and related
services to the Company. Pursuant to the JI Properties Services Agreement,
the Company is charged for its allocable portion of such services based
upon its usage of such services and its relative revenues, as compared to
JII and its other subsidiaries. In accordance with this agreement, such
charges were $2.0 million for the year ended December 31, 2000. The JI
Properties Services Agreement expires in December 2007, but is
automatically renewed for successive one-year terms, unless either party
provides written notice of termination 60 days prior to the scheduled
renewal date.

         JII allocates its overhead, general and administrative charges and
expense among JII and its subsidiaries, including the Company, based on the
respective revenues and usage of corporate overhead by JII and its
subsidiaries. Under this agreement, the Company's allocable portion of
corporate expenses was $2.4 million for the year ended December 31, 2000.

         The Company and JII are parties to a transition agreement (the
"Transition Agreement") pursuant to which JII provides office space and
certain administrative and accounting services to the Company to facilitate
the operations of the Company. The Company reimburses JII for services
provided including payment of salaries to executive officers pursuant to
the Transition Agreement on an allocated cost basis. The Transition
Agreement expires on December 31, 2001, but is automatically renewed for
successive one-year periods (unless either party provides prior written
notice of non-renewal) through 2007. The Transition Agreement may be
terminated by the Company on 90 days' written notice.

         Tax Sharing Agreement. The Company and each of its subsidiaries
are parties to a Tax Sharing Agreement (the "Tax Sharing Agreement")
between JII and each of its consolidated subsidiaries for federal income
tax purposes. Pursuant to the Tax Sharing Agreement, each of the
consolidated subsidiaries of JII pays to JII, on an annual basis, an amount



                                     41


<PAGE>

determined by reference to the separate return tax liability of the
subsidiary as defined in Treasury Regulation ss. 1.1552-1(a)(2)(ii). For
the year ended December 31, 2000 the income tax payment by the Company to
JII under the Tax Sharing Agreement was $3.3 million. This income tax
payment reflected a federal income tax rate of approximately 35% of each
subsidiary's pre-tax income.

         Upon redemption of the Junior Preferred Stock or other
circumstances that cause the Company and its subsidiaries to cease to be
tax consolidated subsidiaries of JII, the Company and its subsidiaries will
be released from making any further payments under the Tax Sharing
Agreement. While the release will discharge the Company and its
subsidiaries from making future income tax payments to JII, the Company and
its subsidiaries will remain contingently liable to JII under the Tax
Sharing Agreement in respect of any increases in their separate return tax
liability for periods prior to the consummation of the offerings. The
Company is not aware of any such liabilities.

         Directors of the Company, John W. Jordan II, David W. Zalaznick
and Thomas H. Quinn each have an ownership interest of more than 10% of the
common stock of Jordan Industries.

         Investment in Affiliate. In April 2000, the Company invested an
additional $5.1 million in Class A Preferred Stock of JZ International,
Ltd. This increases the Company's investment in JZ International, Ltd to
$12,344 at December 31, 2000. JZ International's Chief Executive Officer is
David W. Zalaznick, and its stockholders include Messrs. Jordan, Quinn,
Zalaznick and Boucher, who are the Company's directors and stockholders, as
well as other partners, principals and associates. JZ International is a
merchant bank located in London, England that is focused on making European
and other international investments. The Company is accounting for this
investment under the cost method. At December 31, 2000 the cost of the
investment approximates market value.

         Merkle-Korff Leases. Merkle-Korff leases some of its plants,
warehouse and offices under a net lease (the "Merkle-Korff Leases") from
companies controlled by John Simms, Sr., a Director of the Company. Rent
expenses, including real estate taxes attributable to the Merkle-Korff
Leases, amounted to $0.9 million for the year ended December 31, 2000. The
Company has agreed to pay future minimum rental payments under the
Merkle-Korff Leases amounting to $0.6 million for the year ended December
31, 2001. The Company has the right of first refusal to buy these
facilities from Mr. Simms. See Note 10 to the Company's Consolidated
Financial Statements. The Company believes the terms of the Merkle-Korff
Leases are comparable to the terms it would obtain from a non-affiliated
party.

         Motion Control Leases. Motion Control leases substantially all of
its production and office space under noncancellable operating leases from
a limited partnership whose partners include officers of Motion Control.
These leases expire in 2007. Rent expense under the leases was $0.7 million
for the year ended December 31, 2000. The Company believes the terms of the
Motion Control leases are comparable to the terms it would obtain from a
non-affiliated party.

         Directors and Officers Indemnification. The Company has entered
into indemnification agreements with each member of the Company's Board of
Directors and certain executive officers whereby the Company agreed,
subject to certain exceptions, to indemnify and hold harmless each director
and certain executive officers from liabilities incurred as a result of
such person's status as a director or executive officer of the Company. See
Item 10, Directors and Executive Officers - Board of Directors -
Indemnification Agreements.

         Future Transactions. The Company has adopted a policy to provide
that all transactions between the Company and its officers, directors and
other affiliates must (i) be approved by a majority of the members of the
Board of Directors and by a majority of the disinterested members of the
Board of Directors and (ii) be on terms no less favorable to the Company
than could be obtained from unaffiliated third parties.

                                    42

<PAGE>


                                  PART IV
                                  -------


Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      Documents filed as part of this report:

(1) Financial Statements
    --------------------

       Reference is made to the Index to Consolidated Financial Statements
       Appearing in Item 8, which Index is incorporated herein by
       reference.

(2) Financial Statement Schedule
    ----------------------------

       The following financial statement schedule for the years ended
       December 31, 2000, 1999 and 1998 is submitted herewith:

          Item                                              Page Number
          ----                                              -----------
Schedule II - Valuation and qualifying accounts                  51


All other schedules for which provision is made is in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions, are not applicable and therefore
have been omitted, or the information has been included in the consolidated
financial statements or is considered immaterial.


(3) Exhibits
    --------

         An index to the exhibits required to be listed under this Item
         14(a)(3) follows the "Signatures" section hereof and is
         incorporated herein by reference.

(a) Reports on Form 8-K

       Not Applicable.








                                          43

<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 report
to be signed on its behalf by the undersigned, thereunto duly authorized.


345                                             KINETEK, INC.



                                                By  /s/ Thomas H. Quinn
                                                    ------------------------
Dated:  March 23, 2001                              Thomas H. Quinn
                                                    Chairman of the Board



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


                                         By  /s/ Thomas H. Quinn
                                             -----------------------------
Dated:  March 23, 2001                       Thomas H. Quinn
                                             Chairman of the Board

                                         By  /s/ Ron A. Sansom
                                             -----------------------------
Dated:  March 23, 2001                       Ron A. Sansom
                                             Chief Executive Officer
                                             and a Director

                                         By  /s/ John W. Jordan II
                                             -----------------------------
Dated:  March 23, 2001                       John W. Jordan II
                                             Director

                                         By  /s/ David W. Zalaznick
                                             -----------------------------
Dated:  March 23, 2001                       David W. Zalaznick
                                             Director

                                         By  /s/ Jonathan F. Boucher
                                             -----------------------------
Dated:  March 23, 2001                       Jonathan F. Boucher
                                             Director

                                         By  /s/ John D. Simms, Sr.
                                             -----------------------------
Dated:  March 23, 2001                       John D. Simms, Sr.
                                             Director

                                         By  /s/ Daniel D. Drury
                                             -----------------------------
Dated:  March 23, 2001                       Daniel D. Drury
                                             Chief Financial Officer





                                 44

<PAGE>

                               EXHIBIT INDEX


Exhibit
Number                               Description
-------                              -----------

2.1      Contingent Earnout Agreement, dated as of November 7, 1996, by and
         among Kinetek, Inc., Kinetek Industries, Inc., The New Imperial
         Electric Company, The New Scott Motors Company, New Gear Research,
         Inc., The Imperial Electric Company, The Scott Motors Company and
         Gear Research, Inc. (incorporated by reference to Exhibit 2.2 to
         Kinetek, Inc.'s Form S-4 Registration Statement) (File No.
         333-19257) (The "1996 S-4")

2.2      Share Purchase Agreement, dated March 2, 1997, by and among Motors
         and Gears Holdings, Inc. and the stockholders of FIR Group
         Holdings Italia, S.r.l. (incorporated by reference to exhibit 2.1
         to Form 8-K of Kinetek, Inc., date March 31, 1998)

2.3      Purchase Agreement, dated November 17, 1997, by and among Motion
         Holdings, Inc. and the shareholders of Motion Control Engineering,
         Inc. (incorporated by reference to exhibit 2.2 to Form 8-K of
         Kinetek, Inc., dated March 31, 1998)

2.4      Agreement for purchase and sale of stock of Electrical Design and
         Control Company by and among ED&C Holdings, Inc. and the
         shareholders of Electrical Design and Control Company,
         (incorporated by reference to exhibit 2.3 to Form 8-K of Kinetek,
         Inc., dated March 31, 1998)

2.5      Share Purchase Agreement, dated April 9, 1998, for the direct and
         indirect sale of all the shares of Advanced DC (incorporated by
         reference to exhibit 99.1 to Form 8-K of Kinetek, Inc., dated
         January 28, 2000)

2.6      Amendment No. 1 to Agreement for Purchase and Sale of Stock, dated
         May 15, 1998, for the direct and indirect sale of all the shares
         of Advanced DC (incorporated by reference to exhibit 99.2 to Form
         8-K of Kinetek, Inc., dated January 28, 2000)

3.1      Certificate of Amendment of Certificate of Incorporation of Motors
         And Gears, Inc. and Certificate of Incorporation of Motors And Gears,
         Inc. (File No. 333.44057) (the "1998 Form S-4")

3.2      Bylaws of Kinetek, Inc. (incorporated by reference to Exhibit 3.2 to
         the 1996 S-4)

4.1      Indenture, dated November 7, 1996, between Kinetek, Inc. and Fleet
         National Bank (incorporated by reference to Exhibit 4.1 to the
         1996 S-4)

4.2      First Supplemental Indenture, dated December 17, 1997, between
         Kinetek, Inc. and State Street Bank and Trust Company, as Trustee
         (incorporated by reference to Exhibit 4.2 to the 1998 form S-4)

4.3      Indenture, dated December 17, 1997, between Kinetek, Inc. and State
         Street Bank and Trust Company, as Trustee (incorporated by
         reference to Exhibit 4.3 to the 1998 Form S-4)


                                   45

<PAGE>

10.1     Credit Agreement, dated November 7, 1996 by and among Kinetek
         Industries, Inc., the lenders listed thereto and Bankers Trust
         Company, as Agent (incorporated by reference to Exhibit 4.5 to the
         1996 S-4)

10.2     Amendment No. 1 to Credit Agreement, dated June 3, 1997, by and
         among Kinetek Industries, Inc., the lenders listed thereto and
         Bankers Trust Company, as Agent (incorporated by reference to
         Exhibit 10.2 to the 1998 form S-4)

10.3     Amendment No. 2 to Credit Agreement, dated October 27, 1997, by and
         among Kinetek Industries, Inc., the lenders listed thereto and
         Bankers Trust Company, as Agent (incorporated by reference to
         exhibit 10.3 to the 1998 Form S-4)

10.4     Amendment No. 3 to Credit Agreement, dated November 21, 1997, by and
         among Kinetek Industries, Inc., the lenders listed thereto and
         Bankers Trust Company, as Agent (incorporated by reference to
         Exhibit 10.4 to the 1998 Form S-4)

10.5     Tax Sharing Agreement, dated June 28, 1994, by and among Jordan
         Industries, Inc. and each other corporation which is a signatory
         thereto (incorporated by reference to Exhibit 10.3 to the 1996
         S-4)

10.6     Management Consulting Agreement, dated November 7, 1996, by and
         among Kinetek, Inc. and TJC Management Corporation and the other
         signatories thereto (incorporated by reference to Exhibit 10.5 to
         the 1996 S-4)

10.7     Properties Services Agreement, dated July 25, 1997, by and among JI
         Properties, Inc., Jordan Industries, Inc. and the other
         signatories thereto (incorporated by reference to Exhibit 10.7 to
         the 1998 Form S-4)

10.8     Transition Agreement, dated July 25, 1997, by and between Motors and
         Gears Holdings, Inc. and Jordan Industries, Inc. (incorporated by
         reference to Exhibit 10.8 to the 1998 Form S-4)

10.9     New Subsidiary Advisory Agreement, dated July 25, 1997, by and among
         Motors and Gears Holdings, Inc., Jordan Industries, Inc. and the
         other signatories thereto (incorporated by reference to Exhibit
         10.9 to the 1998 Form S-4)

10.10    New Subsidiary Consulting Agreement, dated July 25, 1997, by and
         among Motors and Gears Holdings, Inc., Jordan Industries, Inc. and
         the other signatories thereto (incorporated by reference to
         Exhibit 10.10(a) to the 1996 S-4)

10.11    Indemnification Agreement, dated November 7, 1996, between Kinetek,
         Inc. and Thomas H. Quinn (incorporated by reference to Exhibit
         10.1(a) to the 1998 S-4)

10.12    Indemnification Agreement, dated November 7, 1996, between Kinetek,
         Inc. and Jonathan F. Boucher (incorporated by reference to Exhibit
         10.1(b) to the 1996 S-4)


                                       46

<PAGE>

10.13    Indemnification Agreement, dated November 7, 1996, between Kinetek,
         Inc. and David W. Zalaznick (incorporated by reference to Exhibit
         10.1(c) to the 1996 S-4)

10.14    Indemnification Agreement, dated November 7, 1996, between Kinetek,
         Inc. and John W. Jordan II (incorporated by reference to Exhibit
         10.1(d) to the 1996 S-4)

10.15    Indemnification Agreement, dated November 7, 1996, between Kinetek,
         Inc. and Ron A. Sansom (incorporated by reference to Exhibit
         10.1(e) to the 1996 S-4)

10.16    Merkle-Korff Industries, Inc. Non-negotiable Subordinated Note in
         the principal aggregate amount of $5,000,000 payable to John D.
         Simms Revocable Trust Under Agreement (incorporated by reference
         to Exhibit 10.9 to the 1996 S-4)

10.17    Electrical Design and Control Company, Inc. Non-negotiable
         Subordinated Note in the principal aggregate amount of $1,333,333
         payable to Tina Levire (incorporated by reference to Exhibit 10.13
         to the 1998 Form S-4)

10.18    Electrical Design and Control Company, Inc. Non-negotiable
         Subordinated Note in the principal aggregate amount of $1,333,333
         payable to Marta Monson (incorporated by reference to Exhibit
         10.14 to the 1998 form S-4)

10.19    Electrical Design and Control Company, Inc. Non-negotiable
         Subordinated Note in the principal aggregate amount of $1,333,334
         payable to Eric Monson (incorporated by reference to Exhibit 10.15
         to the 1998 form S-4)

10.20    Industrial Building Leases, each dated as of September 22, 1996, by
         and between Merkle-Korff Industries, Inc. and the signatory
         thereto (incorporated by reference to Exhibits 10.16 - 10.19 to
         the 1996 S-4)

10.21    Employment and Non Competition Agreement, dated as of September 22,
         1995, by and between Merkle-Korff Industries, Inc. and John D.
         Simms (incorporated by reference to Exhibit 10.20 to the 1996 S-4)

10.22    Employment and Non Competition Agreement, dated as of September 22,
         1995, by and between Merkle-Korff Industries, Inc. and John W.
         Brown (incorporated by reference to Exhibit 10.21 to the 1996 S-4)

12.1    Computations of the Ratios of Earnings to Fixed Charges

21.1    Subsidiaries of Kinetek, Inc.

27.1    Financial Data Schedule


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<PAGE>
<TABLE>
<CAPTION>
                                                                                       Schedule II

                                                     KINETEK, INC.
                                           VALUATION AND QUALIFYING ACCOUNTS
                                                (dollars in thousands)

                                                          Additions
                         Balance at      Additions       Charged to     Write Offs              Balance at
                         Beginning         due to         Costs and       Net of                  end of
                         of Period      acquisitions      Expenses      Recoveries     Other      Period
                         ---------      ------------      --------      ----------     -----      ------

<S>                      <C>            <C>              <C>            <C>            <C>        <C>
December 31, 2000:
  Allowance for
  doubtful accounts         $850             0             1,433          (300)         (92)       $1,891

  Reserve for
  obsolescence             $1,211            0             1,180          (302)         (80)       $2,009

  Warranty reserve          $487             0               150           (12)           -          $625


December 31, 1999:
  Allowance for
  doubtful accounts         $734             0               784          (592)         (76)         $850

  Reserve for
  obsolescence              $761             0               902          (415)         (37)       $1,211

  Warranty reserve          $312             0               209           (34)           0          $487


December 31, 1998:
  Allowance for
  doubtful accounts         $529            67             1,116        (1,001)          23          $734

  Reserve for
  obsolescence              $ 46           258               417          (226)         266          $761

  Warranty reserve          $105            37               170             0            0          $312


</TABLE>



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