<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

                     FOR THE FISCAL YEAR ENDED JUNE 30, 2001
                                               -------------
                                       OR
                  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
-----             THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
                  TRANSITION PERIOD FROM             TO

                          COMMISSION FILE NUMBER 0-5888

                             WAXMAN INDUSTRIES, INC.
                             -----------------------

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


             DELAWARE                                  34-0899894
             --------                                  ----------
   (STATE OF INCORPORATION)             (I.R.S. EMPLOYER IDENTIFICATION NUMBER)

         24460 AURORA ROAD,
        BEDFORD HEIGHTS, OHIO                            44146
        ---------------------                            -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)               (ZIP CODE)

                                 (440) 439-1830
                                 --------------
               (REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      NONE



          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      NONE

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety (90) days.

                           Yes   X      No
                               -----       -----

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

         Aggregate market value of voting stock held by non-affiliates of the
registrant based on the closing price at which such stock was sold on the
Over-The-Counter Bulletin Board on August 20, 2001: $1,363,575

         Number of shares of Common Stock outstanding as of August 20, 2001:

                     Common Stock                       997,861
                     Class B Common Stock               214,189


<PAGE>   2


                       DOCUMENTS INCORPORATED BY REFERENCE

         Registrant intends to file with the Securities and Exchange Commission
a definitive Proxy Statement pursuant to Regulation 14A of the Securities
Exchange Act of 1934 within 120 days of the close of its fiscal year ended June
30, 2001, portions of which document shall be deemed to be incorporated by
reference in Part I and Part III of this Annual Report on Form 10-K from the
date such document is filed.

         The Company consists of Waxman Industries, Inc. and subsidiaries in
which Waxman Industries, Inc. directly or indirectly has a majority voting
interest. Until its sale on September 29, 2000, the Company owned 44.2% of the
common stock of Barnett Inc. (the "Barnett Common Stock"), a direct marketer and
distributor of plumbing, electrical, hardware, and security hardware products,
and accounted for Barnett Inc. ("Barnett") under the equity method of
accounting.

CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

         This Annual Report on Form 10-K contains certain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 that are based on the beliefs of the Company and its management. When
used in this document, the words "anticipate," "believe," "continue,"
"estimate," "expect," "intend," "may," "should," and similar expressions are
intended to identify forward-looking statements. Such statements reflect the
current view of the Company with respect to future events and are subject to
certain risks, uncertainties and assumptions, including, but not limited to,
risks associated with currently unforeseen competitive pressures and risks
affecting the Company's industry, such as decreased consumer spending, customer
concentration issues and the effects of general economic conditions. In
addition, the Company's business, operations and financial condition are subject
to the risks, uncertainties and assumptions which are described in the Company's
reports and statements filed from time to time with the Securities and Exchange
Commission, including this Report. Should one or more of those risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein.


                                     PART I

ITEM 1. BUSINESS

        GENERAL

        The Company believes it is one of the leading suppliers of specialty
plumbing, floor and surface protection and other hardware products to the repair
and remodeling market in the United States. The Company distributes its products
to approximately 680 customers, including a wide variety of large national and
regional retailers, independent retail customers and wholesalers. The Company's
consolidated net sales were $73.5 million in fiscal 2001.

        The Company conducts its business primarily through its wholly-owned
subsidiaries, Waxman Consumer Products Group Inc. ("Consumer Products"), WAMI
Sales, Inc. ("WAMI Sales") and TWI, International, Inc. ("TWI"). Consumer
Products, the Company's largest operation, is a supplier of specialty plumbing,
floor and surface protection and other hardware products to a wide variety of
large retailers. WAMI Sales distributes galvanized, black, chrome and brass pipe
nipples and fittings to industrial and wholesale distributors. TWI includes the
Company's foreign operations, including manufacturing, packaging and sourcing
operations in China and Taiwan. Until March 31, 2001, the Company also supplied
plumbing and hardware products to hardware stores and smaller independent
retailers through Medal of Pennsylvania, Inc. ("Medal", formerly known as WOC
Inc. ("WOC")), when substantially all of the assets and certain liabilities of
this business were sold (see Note 5). Consumer Products and WAMI Sales utilize
the Company's and non-affiliated foreign suppliers.

         Until its sale on September 29, 2000, the Company owned 44.2% of
Barnett, a direct marketer and distributor of an extensive line of plumbing,
electrical, hardware and security hardware products to approximately 73,000
active customers throughout the United States. The Company recorded equity
earnings from this investment of $1.4 million for the first fiscal quarter ended
September 30, 2000. The Company did not report equity earnings thereafter, due
to the sale of its ownership interest in Barnett. See Management's Discussion
and Analysis "Comprehensive Financial Restructuring Plan" section and Note 2 of
the notes to consolidated financial statements in this Annual Report on Form
10-K.


CONSUMER PRODUCTS

         Consumer Products markets and distributes approximately 3,970 products
to a wide variety of retailers, primarily do-it-


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yourself ("D-I-Y") warehouse home centers, home improvement centers and mass
merchandisers. Consumer Products' customers include large national retailers
such as Wal-Mart, Kmart, Lowe's and Sears, as well as several regional D-I-Y
retailers such as Meijers, Fred Meyers and Menards. Consumer Products works
closely with its customers to develop comprehensive marketing and merchandising
programs designed to improve their profitability, efficiently manage shelf
space, reduce inventory levels and maximize floor stock turnover. Consumer
Products also offers certain of its customers the option of private label
programs and direct import programs. Consumer Products' net sales for fiscal
2001 were $39.3 million, excluding direct import sales.

         In recent years, the rapid growth of large mass merchandisers and D-I-Y
retailers has contributed to a significant consolidation of the United States
retail industry and the formation of large, dominant, product specific and
multi-category retailers. These retailers demand suppliers who can offer a broad
range of quality products and can provide strong marketing and merchandising
support. Due to the consolidation in the D-I-Y retail industry, a substantial
portion of Consumer Products' net sales are generated by a small number of
customers. Sales to Wal-Mart accounted for 25.8%, 14.6% and 12.7% and sales to
Kmart accounted for 19.9%, 21.2% and 20.8%, of Consumer Products' net sales for
fiscal 2001, 2000 and 1999, respectively. The retail industry consolidation has
resulted in the cessation of business for a number of weaker organizations over
the past several years, including some companies served by Consumer Products. In
September 1999, the combined Hechinger / Builders Square operations filed for
Chapter 7 liquidation. Those operations accounted for $3.7 million, or 7.8% and
3.8% of Consumer Products' and the Company's revenue, respectively, in fiscal
1999. Due to the loss of this revenue base, Consumer Products reduced its cost
structure to be more in line with its revenue base, but was unable to absorb all
of the expenses due to this revenue loss. In the event Consumer Products were to
lose any of its larger retail accounts as a customer or one of its largest
accounts were to significantly curtail its purchases from Consumer Products,
there would be material short-term adverse effects until the Company could
further modify Consumer Products' cost structure to be more in line with its
anticipated revenue base. Consumer Products would likely incur significant
charges if a materially adverse change in its customer relationships were to
occur.

         In fiscal 1999, Consumer Products moved its distribution center from
Bedford Heights, Ohio to a more modern and efficient center in Groveport, Ohio,
a suburb of Columbus. In the fourth quarter of fiscal 2000, Consumer Products
closed its warehouse in Grand Prairie, Texas, and now operates from one national
distribution center in Groveport. Consumer Products also closed its packaging
facility in Tijuana, Mexico. The items previously packaged in Mexico are now
packaged at the Company's overseas operations and, to a lesser extent, with
domestic packagers. The closure of these facilities resulted in a charge of $0.6
million, but Consumer Products has benefited from significant cost savings as a
result of this consolidation.

         In the past several years, certain retailers have begun to develop
direct import programs to improve their profitability. Those retailers generally
select certain product categories and import full containers of such products to
their domestic distribution centers. Consumer Products has responded to this
trend by working with the Company's foreign sourcing operations to provide the
products, while Consumer Products provides certain value added services, such as
account management, selling and marketing support and customer service. Due to
the sharing of responsibilities in servicing the domestic retail accounts,
profits are shared by Consumer Products and the foreign operation. The direct
shipment arrangement generally results in lower gross profit margins for the
Company, but also lower selling, general and administrative costs.

         Consumer Products' marketing strategy includes offering mass
merchandisers and D-I-Y retailers a comprehensive merchandising program, which
includes design, layout and setup of selling areas. Sales and service personnel
assist the retailer in determining the proper product mix in addition to
designing category layouts to effectively display products and optimally utilize
available floor and shelf space. Consumer Products supplies point-of-purchase
displays for both bulk and packaged products, including color-coded product
category signs and color-coordinated bin labels to help identify products and
backup tags to identify products that require reordering. Consumer Products also
offers certain of its customers the option of private label programs for their
plumbing and floor care products. In-house design, assembly and packaging
capabilities enable Consumer Products to react quickly and effectively to
service its customers' changing needs. Consumer Products' products are packaged
and designed for ease of use, with "how to" instructions to simplify
installation, even for the uninitiated D-I-Y consumer. In addition, Consumer
Products has sophisticated EDI capabilities, enabling customers to reduce
inventory levels and increase return on investment.

PRODUCTS

         The following is a discussion of Consumer Products' principal product
groups:

         Plumbing Products. Consumer Products' plumbing repair products include
toilet repair, sink and faucet repair, water supply repair, drain repair, shower
and bath repair, hose and pipe repair, and connection repair. Consumer Products
also offers


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proprietary lines of faucets under the trade name AquaLife(R) and a line of
shower and bath accessories under the proprietary trade name Spray
Sensations(R). Consumer Products' product line also includes a full line of
valves and fittings, rubber products and tubular products such as traps and
elbows. Many of Consumer Products' plumbing products are sold under the
proprietary trade names Plumbcraft(R) and PlumbKing(R). In addition, Consumer
Products offers certain of its customers the option of private label programs.

         Floor and Surface Protective Hardware Products. Consumer Products'
floor and surface protective hardware products include casters, doorstops, and
other floor, furniture, felt and rubber surface protective and wall protective
items. Consumer Products markets a complete line of floor and surface protective
hardware products under the proprietary trade name SoftTouch(TM) and also under
private labels.


OTHER DOMESTIC OPERATIONS

         WAMI Sales

         WAMI Sales Inc. ("WAMI Sales") was started by the Company in July 1997
to distribute pipe nipples that were manufactured in Tijuana, Mexico by Western
American Manufacturing, an operation that was sold effective March 31, 2000.
WAMI Sales distributes pipe nipples, fittings and other products to industrial
supply and wholesale operations throughout the United States and, to a lesser
extent, Canada. It distributes approximately 2,500 products to approximately 560
customers through its own sales force and through outside sales representative
organizations. WAMI Sales has developed relationships with foreign suppliers,
including producers from Asia and with the acquirer of Western American
Manufacturing, to supply the products it distributes. WAMI Sales' net sales
amounted to $3.9 million in fiscal 2001.

         Medal

         Prior to its sale effective March 31, 2001, Medal was a supplier of
hardware and plumbing products to approximately 600 independent hardware stores
and small independent retailers within a 250 mile radius of its facility in
Sharon, Pennsylvania. Medal was formerly a division of WOC Inc., which also
included U.S. Lock, a full line supplier of security hardware products, until
its sale on January 1, 1999. In fiscal 2001, WOC was renamed Medal of
Pennsylvania, Inc. to reflect its only remaining operation. Medal's net sales
amounted to $3.4 million for the nine-month period they operated in fiscal 2001.


FOREIGN OPERATIONS

         Through TWI, the Company conducts its foreign operations in Taiwan
(through TWI International Taiwan Inc. and TWI Industrial, Inc.) and in China
(through CWI International China, Ltd.), which were initially intended to
support Consumer Products and other companies that were affiliated with the
Company. The foreign operations have begun to develop their own base of
customers, which includes Barnett and other former affiliates, non-affiliated
companies and certain retailers which have begun to source a portion of their
product requirements through direct import programs. TWI and Consumer Products
have responded to the increasing interest by certain retailers in direct import
programs, with the added benefit of domestic account management. For the years
ended June 30, 2001 and 2000, products purchased from the foreign operations
accounted for approximately 15.1% and 16.8%, respectively, of the total product
purchases made by the Company. For fiscal 2001, the operations owned by TWI had
net sales of $34.8 million, of which $16.6 million were to Barnett and $7.8
million were intercompany transactions, which are eliminated in consolidation.
Although a significant portion of the Company's non-retail sales are to Barnett,
the Company has made significant progress in recent years in its effort to
develop the non-retail customer base served by its foreign operations.

         TWI, through its subsidiaries, operates the Taiwan and Mainland China
facilities, which source, manufacture, assemble and package plumbing products.
In addition, facilities in Mainland China manufacture and package floor
protective hardware products. The Company believes that these facilities give it
competitive advantages in terms of cost and flexibility in sourcing. Both labor
and physical plant costs are significantly below those in the United States.
Substantially all of the other products purchased by the Company are
manufactured by third parties. The Company estimates that it purchases products
and materials from approximately 600 suppliers and is not dependent on any
single unaffiliated supplier for a material portion of its requirements.

         Effective March 31, 2000, the Company sold nearly all of the assets and
certain liabilities of Western American Manufacturing Inc., a company that
manufactured galvanized, black, brass and chrome pipe nipples in Tijuana,
Mexico. In June


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2000, the Company closed one of its facilities in China that manufactured faucet
components, resulting in a restructuring charge of $1.2 million to write down
assets to their fair value and provide for two months of costs to close the
facility. The Company will continue to distribute faucets that have been
assembled by the Company, with components being manufactured by outside
suppliers.


PRINCIPAL PRODUCT GROUPS

         The following table sets forth the approximate percentage of net sales
attributable to the Company's principal product groups.

                                            2001       2000       1999
                                            ----       ----       ----

         Plumbing                             77%        79%        68%
         Electrical                            0%         0%         1%
         Hardware                             23%        21%        31%
                                             ---        ---        ---
         Total net sales                     100%       100%       100%
                                             ===        ===        ===

IMPORT RESTRICTIONS AND CUSTOMS ISSUES

         Under current United States government regulations, some products
manufactured offshore are subject to import restrictions. The Company currently
imports goods from China and Taiwan. During a portion of fiscal 2000, the
Company also imported United States goods assembled in Mexico under the
preferential import regulations commonly known as '9802', formerly item `807'.
The '9802' arrangement permits an importer who purchases raw materials in the
United States and then ships the raw materials to an offshore factory for
assembly, to re-import the goods without quota restriction and to pay a duty
only on the value added in the offshore factory.

         When the Company chooses to directly import goods purchased outside of
the United States, the Company may be subject to import quota restrictions,
depending on the country of origin of assembly. These restrictions may limit the
amount of goods from a particular country that may be imported into the United
States. If the Company cannot obtain the necessary quota, the Company will not
be able to import the goods into the United States. Export visas for the goods
purchased offshore by the Company are readily available.

         The above arrangements, both '9802' and quota restrictions, were
superseded by more favorable regulations with respect to Mexico under the North
American Free Trade Agreement ("NAFTA") and may be limited by revision or
canceled at any time by the United States government. As a result of the passage
of NAFTA, importation from Mexico is more competitive relative to importation
from other exporting countries. The Company does not believe that its relative
competitive position is adversely affected by NAFTA. As indicated above, many of
the Company's imported goods are of Chinese origin, which was granted most
favored nations status in the spring of 2000. There is no guarantee this will
continue to be the case in the future.

EQUITY INVESTMENT - BARNETT AFFILIATE

         Barnett is a direct marketer and distributor of an extensive line of
plumbing, electrical, hardware and security hardware products to professional
contractors, independent hardware stores, maintenance managers, liquid propane
gas dealers and locksmiths throughout the United States. Barnett was a
wholly-owned subsidiary of the Company until the completion of an initial public
offering in April 1996 (the "Barnett Initial Public Offering"), when the Company
completed an initial public offering of the Barnett Common Stock, reducing its
interest in the former wholly-owned subsidiary to 49.9% of the outstanding
Barnett Common Stock and, together with certain convertible non-voting preferred
stock owned by the Company, approximately a 54% economic interest. In April
1997, a secondary offering of 1,300,000 shares of Barnett Common Stock (the
"Barnett Secondary Offering", and together with the Barnett Initial Public
Offering, the "Barnett Public Offerings") was completed and the Company
converted its remaining convertible non-voting preferred stock of Barnett to
Barnett Common Stock, reducing its voting and economic interests to 44.5% and,
accordingly, the Company began to account for its interest in Barnett under the
equity method of accounting. On July 10, 2000, the Company announced that it had
reached an agreement to monetize its remaining shares of Barnett Common Stock
for $13.15 per share as part of the purchase of all of Barnett's outstanding
shares by B&W Acquisition Inc., a merger subsidiary formed by Wilmar Industries,
Inc. (the "Barnett Merger"). The Barnett Merger was approved by Barnett's
shareholders on September 27, 2000, and the Company's remaining shares of
Barnett Common Stock were sold on September 29, 2000.


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         The gross proceeds from the sale of the remaining 7,186,530 shares of
Barnett Common Stock amounted to $94.5 million. The Company's equity investment
in Barnett amounted to $44.3 million immediately prior to the sale, including
equity earnings recognized by the Company in the quarter ended September 30,
2000 of $1.4 million. The Company reported a net gain on the sale of Barnett of
$47.5 million, after the write-off of $2.7 million in transaction related costs
associated with the Barnett Merger and other costs associated with the
comprehensive financial restructuring of the Company. In addition, the Company
recognized $7.8 million in deferred gain on the sale of U.S. Lock in fiscal
2001, which was being recognized as Barnett amortized the goodwill associated
with its purchase of U.S. Lock.


COMPETITION

         The Company faces significant competition within each of its product
lines, although it has no competitor offering the range of products in all of
the product lines that the Company offers. The Company believes that its buying
power, extensive inventory, emphasis on customer service and merchandising
programs have contributed to its ability to compete successfully in its various
markets. The Company faces significant competition from smaller companies which
specialize in particular types of products and larger companies which
manufacture their own products and have greater financial resources than the
Company. The Company believes that competition in sales to retailers is
primarily based on price, product quality and selection, as well as customer
service, which includes speed of responses for packaging, delivery and
merchandising for retailers.

EMPLOYEES

         As of June 30, 2001, the Company employed 370 persons, 125 of whom were
clerical and administrative personnel, 44 of whom were sales and service
representatives and 201 of whom were either production or warehouse personnel.
None of the Company's employees are represented by collective bargaining units.
The Company considers its relations with its employees to be satisfactory.

TRADEMARKS

         Several of the trademarks and trade names used by the Company are
considered to have significant value in its business. See "Business -- Consumer
Products -- Products".

ENVIRONMENTAL REGULATIONS

         The Company is subject to certain federal, state and local
environmental laws and regulations. The Company believes that it is in material
compliance with such laws and regulations applicable to it. To the extent any
subsidiaries of the Company are not in compliance with such laws and
regulations, the Company, as well as such subsidiaries, may be liable for such
non-compliance.

         The Company or one of its indirect subsidiaries have been threatened
  with litigation by two separate California public interest groups alleging
  unlawful discharge of chemicals under California's Safe Drinking Water and
  Toxic Enforcement Act of 1986. The Company is researching the merits of the
  allegations and intends to contest and vigorously defend itself. Any potential
  liability related to this threatened litigation cannot be assessed at this
  time as the Company is in the very preliminary stages of its investigation.

SEASONALITY

         The Company's sales are generally consistent throughout its fiscal
year, although the third fiscal quarter is generally weaker in sales than the
other quarters.



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ITEM 2. DESCRIPTION OF PROPERTIES

         The following table sets forth, as of June 30, 2001, certain
information with respect to the Company's principal physical properties:


<TABLE>
<CAPTION>
                                                                                         LEASE
                              APPROXIMATE                                              EXPIRATION
    LOCATION                  SQUARE FEET                PURPOSE                         DATE

<S>                             <C>             <C>                                   <C>
24460 Aurora Road               21,000          Corporate Office                          Owned
 Bedford Hts., OH

24455 Aurora Road               29,000          Consumer Products Corporate              6/30/02
 Bedford Hts., OH (1)                           Office

5920 Green Pointe Dr.          114,000          Consumer Products                        11/1/08
 Groveport, OH                                  Office and Distribution Center

24001 Aurora Road               28,000          Consumer Products                       12/31/02
 Bedford Hts., OH                               Warehouse

No. 10, 7th Road                55,000          TWI                                       Owned
 Industrial Park                                Office, Packaging
 Taichung, Taiwan                               and Distribution Center
 Republic of China

Dan Keng Village                57,000          CWI
 Fu Ming County                                 Office, Packaging, Manufacturing          Owned
 Shenzhen, P.R. China                           and Distribution Center

9430 Cabot Drive                13,000          WAMI Sales                               1/31/02
 San Diego, California                          Office and Distribution Center
</TABLE>


(1)      Aurora Investment Co., a partnership owned by Melvin Waxman, Chairman
         of the Board and Co-Chief Executive Officer of the Company, and Armond
         Waxman, President and Co-Chief Executive Officer of the Company,
         together with certain other members of their families, is the owner and
         lessor of this property. In November 1998, Consumer Products completed
         the move of its warehouse to Groveport, Ohio, but continues to lease
         9,000 square feet of office space and 20,000 square feet of warehouse
         space in Bedford Hts., Ohio. The remaining 97,000 square feet of
         warehouse space in this facility has been subleased to Handl-it, Inc.
         (see below for information regarding affiliated ownership) for the
         duration of the lease term. Rent expense under this lease was $326,716
         in fiscal 2001, 2000 and 1999. The Company received rental income from
         Handl-it, Inc. for subleasing the warehouse in Bedford Hts., Ohio of
         $290,496 in fiscal 2001, $290,970 in fiscal 2000 and $95,324 in fiscal
         1999 for a portion of the year.

         Handl-it Inc., a corporation owned by John S. Peters, a director of and
consultant to the Company, together with certain other members of his family,
Melvin Waxman and Armond Waxman, has provided Consumer Products with certain
outside warehousing services under month-to-month rental arrangements from time
to time. Consumer Products may enter into month-to-month leases in the future,
depending on its business requirements at the time. There were no lease
arrangements of this nature in fiscal 2001 and fiscal 2000, but rent expense
under this type of lease arrangement was $10,000 for fiscal 1999. Consumer
Products Group also paid Handl-it Inc. approximately $27,000, $40,000 and
$55,000 for the cost of transportation of products in fiscal 2001, 2000 and
1999, respectively. From July 1, 1999 through April 2001, WAMI Sales utilized
Handl-it to provide all warehousing, labor and shipping functions in Cleveland,
Ohio for a fee equal to a percentage of monthly sales plus other direct costs
from this operation. The charge amounted to $67,000 and $74,000 in fiscal 2001
and 2000, respectively.

         The Company believes that its facilities are suitable for its
operations and provide the Company with adequate productive capacity and that
the related party leases and rental arrangements are on terms comparable to
those that would be available from unaffiliated third parties.


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ITEM 3. LEGAL PROCEEDINGS

         The Company is subject to various legal proceedings and claims that
arise in the ordinary course of business. In the opinion of management, the
amount of any ultimate liability with respect to these actions will not
materially affect the financial position or operations of the Company.

         As further described in Note 14 of the notes to the consolidated
  financial statements in this Annual Report on Form 10-K, the Company or one of
  its indirect subsidiaries have been threatened with litigation by two separate
  California public interest groups. The Company is researching the merits of
  the allegations and intends to contest and vigorously defend itself. Any
  potential liability related to this threatened litigation cannot be assessed
  at this time as the Company is in the very preliminary stages of its
  investigation.


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

       There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

     The following is a list of the executive officers of the Company and a
brief description of their business experience. Each executive officer will hold
office until his successor is chosen and qualified.

         Mr. Melvin Waxman, age 67, was elected Co-Chairman of the Board in June
1995. Upon consummation of the Barnett Initial Public Offering in April 1996,
Mr. Waxman became Chairman of the Board of the Company. Mr. Waxman was elected
Co-Chief Executive Officer of the Company in May 1988. Mr. Waxman has been a
Chief Executive Officer of the Company for over 20 years and has been a director
of the Company since 1962. Mr. Waxman has been Chairman of the Board of the
Company since August 1976. Mr. Waxman is the Chairman of the Board of Barnett.
Melvin Waxman and Armond Waxman are brothers.

         Mr. Armond Waxman, age 62, was elected Co-Chairman of the Board in June
1995. Upon consummation of the Barnett Initial Public Offering in April 1996,
Mr. Waxman became President of the Company. Mr. Waxman was elected Co-Chief
Executive Officer of the Company in May 1988. Mr. Waxman has been the President
and Treasurer of the Company since August 1976. Mr. Waxman has been a director
of the Company since 1962 and was Chief Operating Officer of the Company from
August 1976 to May 1988. Mr. Waxman is the Vice Chairman of the Board of
Barnett. Armond Waxman and Melvin Waxman are brothers.

         Mr. Laurence Waxman, age 44, has been Senior Vice President of the
Company since November 1993 and is also President of Consumer Products, a
position he has held since 1988. Mr. Waxman joined the Company in 1981. Mr.
Waxman has been a director of the Company since July 1996. Mr. Laurence Waxman
is the son of Melvin Waxman.

         Mr. Mark Wester, age 46, a certified public accountant, joined the
Company in October 1996 as Corporate Controller and in January 1997 became the
Vice President-Finance. Upon completion of the Barnett Secondary Offering in
April 1997, Mr. Wester became the Chief Financial Officer of the Company. In
March 2001, the Company merged the Corporate and Consumer Products Group
accounting departments and Mr. Wester became the Vice President and Chief
Financial Officer of the Company. Mr. Wester provided consulting services to the
Company from May 1996 through September 1996. From March 1992 to April 1996, Mr.
Wester was a limited partner with a privately owned telecommunications company,
Capital Communications Cooperative and the Chief Financial Officer of
Progressive Communications Technologies. From 1978 to 1992, Mr. Wester was
employed by The Fairchild Corporation (formerly, Banner Industries, Inc.), where
he held several positions during his tenure, including Vice President and
Corporate Controller.



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                                     PART II

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


PRICE RANGE OF COMMON STOCK

         The Company's Common Stock is quoted on the Over-The-Counter Bulletin
Board ("OTCBB"). On February 20, 2001, the Company enacted a 1 for 10 reverse
stock split (the "Reverse Stock Split") for the Company's Common Stock, which
trades under the symbol "WAXM", and Class B Common Stock. From March 22, 1999
until the Reverse Stock Split, the Company's Common Stock traded under the
symbol "WAXX". Prior to March 22, 1999, the Company's stock was listed on the
New York Stock Exchange ("NYSE") under the symbol "WAX". The Company's Class B
Common Stock does not trade in the public market due to restricted
transferability. However, the Class B Common Stock may be converted into Common
Stock on a share-for-share basis at any time.

         The following table sets forth the high and low closing quotations as
reported by the OTCBB for fiscal 2001 and 2000 (adjusted for the Reverse Stock
Split).

<TABLE>
<CAPTION>
                                             2001                                2000
                                            ------                              ------

                                        HIGH           LOW               HIGH            LOW
                                        ----           ---               ----            ---

<S>                                     <C>            <C>               <C>            <C>
       First Quarter                    $3.44          $1.25             $8.75          $2.81
       Second Quarter                    3.50           1.25              7.19           3.70
       Third Quarter                     3.13           1.50              4.80           3.50
       Fourth Quarter                    2.05           1.50              3.75           2.30
</TABLE>


HOLDERS OF RECORD

         As of August 20, 2001, there were 617 holders of record of the
Company's Common Stock and 109 holders of record of the Company's Class B Common
Stock.


DIVIDENDS

         The Company declared no dividends in fiscal 2001 or 2000. Restrictions
contained in the Company's debt instruments currently prohibit the declaration
and payment of cash dividends.




9
<PAGE>   10


ITEM 6.   SELECTED FINANCIAL DATA


<TABLE>
<CAPTION>
INCOME STATEMENT DATA:
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)             2001(6)      2000(7)      1999(8)       1998         1997
                                                            ---------    ---------    ---------    ---------    ---------
<S>                                                         <C>          <C>          <C>          <C>          <C>
Net sales                                                   $  73,524    $  81,360    $  99,116    $ 105,662    $ 119,006
Cost of sales(1)                                               49,890       59,259       69,264       69,429       84,574
                                                            ---------    ---------    ---------    ---------    ---------
Gross profit                                                   23,634       22,101       29,852       36,233       34,432
Selling, general and administrative expenses                   21,763       27,094       31,635       30,290       34,996
Restructuring, impairment and procurement charges (1)           2,504       10,370        4,515           24        1,522
                                                            ---------    ---------    ---------    ---------    ---------
       Operating  income (loss)                                  (633)     (15,363)      (6,298)       5,919       (2,086)
Gain on sale of Barnett stock, net(2)                          47,473           --           --           --       16,693
Loss on the sale of Medal, net(3)                              (1,105)          --           --           --           --
Loss on sale of WAMI, net(1)(3)                                    --       (2,024)          --           --           --
Gain on sale of U.S. Lock, net(3)                                  --           --       10,298           --           --
Equity earnings of Barnett                                      1,370        6,511        6,744        6,341        5,843
Amortization of deferred U.S. Lock gain(4)                      7,815          202           --           --           --
Interest expense, net                                           5,414       18,201       17,192       16,031       16,477
                                                            ---------    ---------    ---------    ---------    ---------
Income  (loss) from  operations  before  income taxes and
extraordinary items                                            49,506      (28,875)      (6,448)      (3,771)       3,973
Provision  (benefit) for income taxes                           1,680          (27)       1,029          537          401
                                                            ---------    ---------    ---------    ---------    ---------

Income (loss) from operations before extraordinary items
                                                               47,826      (28,848)      (7,477)      (4,308)       3,572
Extraordinary items(5)                                         52,222           --           --          192           --
                                                            ---------    ---------    ---------    ---------    ---------
Net income (loss)                                           $ 100,048    $ (28,848)   $  (7,477)   $  (4,500)   $   3,572
                                                            =========    =========    =========    =========    =========
Average number of shares outstanding                            1,212        1,207        1,206        1,203        1,192
                                                            =========    =========    =========    =========    =========

Basic earnings (loss) per share:
  From operations before extraordinary items                $   39.46    $  (23.91)   $   (6.20)   $   (3.58)   $    3.00
  Extraordinary items                                           43.09           --           --         (.16)          --
                                                            ---------    ---------    ---------    ---------    ---------
  Net income (loss) per share                               $   82.55    $  (23.91)   $   (6.20)   $   (3.74)   $    3.00
                                                            =========    =========    =========    =========    =========
Diluted earnings (loss) per share:
   From operations before extraordinary items               $   39.46    $  (23.91)   $   (6.20)   $   (3.58)   $    2.62
  Extraordinary items                                           43.09           --           --         (.16)          --
                                                            ---------    ---------    ---------    ---------    ---------
  Net income (loss) per share                               $   82.55    $  (23.91)   $   (6.20)   $   (3.74)   $    2.62
                                                            =========    =========    =========    =========    =========


   Cash dividends per share:
     Common stock                                           $      --    $      --    $      --    $      --    $      --
     Class B common stock                                   $      --    $      --    $      --    $      --    $      --

   BALANCE SHEET DATA:
   Working capital                                          $   7,209    $  (5,725)   $  21,945    $  15,776    $  31,093
   Total assets                                                40,832       94,218      100,210      105,743      107,232
   Total long-term debt                                           532      128,453      128,480      118,314      120,994
   Stockholders' equity (deficit)                              19,032      (80,543)     (52,086)     (44,744)     (39,506)
</TABLE>

(1)      In the fiscal 2001 first quarter, the Company recorded a $0.35 million
         charge associated with additional restructuring costs for warehouses
         closed by Consumer Products in prior years. The Company also incurred a
         business procurement charge of $0.15 million, $0.3 million, $0.3
         million and $1.4 million in the fiscal 2001 first, second, third and
         fourth quarters, respectively. In the fiscal 2000 second quarter, the
         Company recorded a $1.3 million restructuring charge related to the
         consolidation of its packaged plumbing products under the Plumbcraft(R)
         brand name. In the fiscal 2000 fourth quarter, the Company recorded a
         $0.6 million restructuring charge related to (i) the closure of its
         Grand Prairie, Texas distribution center, which was consolidated into
         Consumer Products' distribution center near Columbus, Ohio, and (ii)
         the closure of a


10
<PAGE>   11

         packaging operation in Tijuana, Mexico that was transferred to the
         Company's operations in Taiwan and China. In the fiscal 2000 fourth
         quarter, Consumer Products also wrote off $1.7 million in packaging
         material and other inventory associated with these closings, which are
         recorded in cost of sales. The Company incurred a business procurement
         charge of $150,000 in the first quarter and $500,000 in the third
         quarter of fiscal 2000. In the fourth quarter of fiscal 2000, the
         Company also recorded an asset impairment charge of $6.7 million
         related to the write-off of goodwill as required by SFAS No. 121
         "Accounting for the Impairment of Long-Lived Assets and Assets to Be
         Disposed Of", for two product lines that were acquired by Consumer
         Products in December 1986 and May 1988. Also included is a $1.2 million
         charge from the closure of Premier Faucet Corporation in June 2000. In
         addition, the closure of the faucet operation resulted in a reduction
         in sales of $0.4 million and additional charges to cost of sales of
         $0.5 million for the realizability of receivables and inventory. In
         fiscal 1999, the Company recorded a $2.1 million restructuring charge
         associated with the move of one of Consumer Products' warehouses and a
         business procurement charge of $2.5 million. In the first quarter of
         fiscal 1998, the Company recorded an estimated restructuring charge of
         $133,000 for warehouse closure costs and other expenses associated with
         the sale of LeRan Gas Products. In the fourth quarter of fiscal 1998,
         the estimated loss was adjusted to the actual loss of $24,000. In the
         fourth quarter of fiscal 1997, the Company sold Madison Equipment
         Company and recorded a loss on sale of $0.7 million. In fiscal 1997,
         Consumer Products also recorded a business procurement charge of $0.8
         million See Note 1 to the Consolidated Financial Statements for further
         discussion of the fiscal 1999 and 1997 business procurement charges and
         Note 4 for further discussion of the fiscal 1998 and 1997 charges.
(2)      In September 2000, the Company sold its remaining 7,186,530 shares of
         Barnett common stock as part of its comprehensive debt restructuring,
         recognizing a net gain of $47.5 million. The fiscal 1997 amount
         reflects the gains on the Barnett Public Offerings. See Note 2 to the
         Consolidated Financial Statements.
(3)      The sale of significantly all of the assets and certain liabilities of
         these operations are detailed in Note 5 to the Consolidated Financial
         Statements, including the $1.1 million loss on the March 31, 2001 sale
         of Medal of Pennsylvania, Inc., the $2.0 million loss on the March 31,
         2000 sale of Western American Manufacturing, Inc. and the $10.3 million
         gain on the January 1, 1999 sale of U.S. Lock.
(4)      The Company deferred $8.1 million of the gain on the sale of U.S. Lock
         in fiscal 1999 due to its continued ownership interest in Barnett. The
         gain was being amortized as Barnett wrote-off the goodwill associated
         with the U.S. Lock purchase. In fiscal 2001, the Company recognized the
         remaining $7.8 million in deferred gain on the U.S. Lock sale due to
         the disposal of its remaining interest in Barnett. See Notes 2 and 5 to
         the Consolidated Financial Statements.
(5)      Fiscal 2001 amounts reflect the extraordinary gain on the defeasance of
         debt at a discount, net of the write-off of deferred financing costs
         (see Note 6 to the Consolidated Financial Statements). Fiscal 1998
         extraordinary charges represents the write-off of deferred financing
         costs resulting from the repayment and refinancing of debt, as further
         described in Notes 2 and 7 to the Consolidated Financial Statements.
(6)      The results of Medal of Pennsylvania, Inc. were consolidated by the
         Company until its sale, which was effective March 31, 2001. As a result
         of the sale, fiscal 2001 includes results for Medal for nine months,
         while the previous fiscal years include results for twelve months. See
         Note 5 to the Consolidated Financial Statements for further discussion
         of the sale of Medal. Fiscal 2001 also includes equity earnings for
         Barnett through September 2000, when the remaining Barnett stock was
         sold. Prior periods presented include equity earnings from Barnett for
         the full fiscal year.
(7)      The results of Western American Manufacturing Inc. were consolidated by
         the Company until its sale, which was effective March 31, 2000. As a
         result of the sale, fiscal 2000 only includes nine months of WAMI's
         results while the previous fiscal years include results for twelve
         months. See Note 5 to the Consolidated Financial Statements for further
         discussion of the sale of WAMI.
(8)      The results of U.S. Lock were consolidated by the Company until its
         sale, which was effective January 1, 1999. As a result of the sale,
         fiscal 1999 only includes six months of U.S. Lock's results while the
         previous fiscal years include results for twelve months. See Note 5 to
         the Consolidated Financial Statements for further discussion of the
         sale of U.S. Lock.




11
<PAGE>   12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

GENERAL

         The Company operates in two business segments -- the distribution of
specialty plumbing and hardware products to retailers and the distribution of
plumbing and other products to non-retail businesses. Distribution of plumbing
and hardware products to retailers is primarily conducted through domestic
operations, but is also conducted through direct import programs from the
foreign sourcing, manufacturing and packaging operations. In fiscal 2001,
approximately 22.5% and 47.6% of the Company's foreign operations' sales were to
the Company's domestic wholly-owned operations and Barnett, respectively, which
are considered non-retail sales. Intercompany sales are eliminated in
consolidation.

COMPREHENSIVE FINANCIAL RESTRUCTURING PLAN

         The Company has endeavored over the past several years to reduce its
significant amount of debt through the monetization of assets and by improving
the efficiencies of its continuing businesses. As a result, the Company has
undertaken various initiatives to raise cash, improve its cash flow and reduce
its debt obligations and / or improve its financial flexibility during that
period.

         On December 13, 1999, the Company and an ad hoc committee (the
"Committee") representing the holders of approximately 87% of the $92.8 million
outstanding principal amount of the 12 3/4% Senior Secured Deferred Coupon Notes
due 2004 (the "Deferred Coupon Notes") and approximately 65% of the 11 1/8%
Senior Notes due 2001 (the "Senior Notes") of Waxman USA Inc. entered into an
agreement (the "Debt Reduction Agreement") that provided, subject to certain
conditions (including Bankruptcy Court approval), for the full satisfaction of
the Deferred Coupon Notes and the Senior Notes as part of a comprehensive
financial restructuring of the Company.

         The key provisions of the financial restructuring plan were:

         -        As contemplated in the Debt Reduction Agreement, Barnett
                  engaged an investment banker to conduct an orderly process to
                  sell itself, or otherwise maximize shareholder value, in
                  connection with such transaction. To that end, on December 13,
                  1999, Barnett issued a press release announcing the engagement
                  of Deutsche Bank Alex. Brown to pursue initiatives to maximize
                  shareholder value.
         -        This effort resulted in the sale of all of Barnett, including
                  the Company's 7,186,530 shares of Barnett common stock owned
                  by Waxman USA Inc., a direct, wholly-owned subsidiary of the
                  Company.
         -        On September 1, 2000, the Company sold to Barnett 160,723
                  shares of Barnett Common Stock to fund the interest due on the
                  Company's Senior Notes.
         -        On September 27, 2000, the Barnett shareholders approved the
                  Barnett Merger.
         -        On September 28, 2000, the holders of approximately 97% of the
                  Deferred Coupon Notes voted in favor of accepting the Joint
                  Plan, with the remaining holders not voting.
         -        On September 29, 2000, the Company received gross proceeds
                  from the sale of the remaining Barnett Common Stock, which
                  together with the shares sold to Barnett on September 1, 2000,
                  amounted to $94.5 million. The Company utilized the proceeds
                  from the sale of the Barnett Common Stock in the following
                  order:
                  -        paid or reserved for payment approximately $1.35
                           million for state and federal taxes associated with
                           the sale of the Barnett shares.
                  -        reduced its borrowings under its working capital
                           credit facility by approximately $10 million.
                  -        retired all of its approximately $35.9 million
                           principal amount of Senior Notes, plus accrued
                           interest.
                  -        paid approximately $6.0 million in semi-annual
                           interest due on June 1, 2000 to its Deferred Coupon
                           Note holders.
                  -        funded a dedicated account with the remaining gross
                           proceeds of approximately $39.0 million, which was
                           used for the full satisfaction of the Deferred Coupon
                           Notes, including accrued interest, upon confirmation
                           of the Joint Plan.
         -        On October 2, 2000, the Company, excluding Waxman USA Inc. and
                  all of its direct and indirect operating subsidiaries, filed a
                  petition for reorganization under Chapter 11 of the U.S.
                  Bankruptcy Code in the United States Court for the District of
                  Delaware. The petition sought confirmation by the court of the
                  plan of reorganization that was jointly sponsored with the
                  Committee to settle, at a discount, all amounts due on the
                  Company's Deferred Coupon Notes (the "Joint Plan"). Under the
                  Joint Plan, the only impaired creditors were the Deferred
                  Coupon Note holders.
         -        On November 14, 2000, the Company's Joint Plan was approved by
                  the Court
         -        On November 16, 2000, the Company's Joint Plan became
                  effective, and the Company paid its obligation to the Deferred
                  Coupon Note holders.
         -        On March 14, 2001, the Court closed the Chapter 11 case, and
                  the Company emerged from bankruptcy.

12
<PAGE>   13

         The Company continues to evaluate its operations, including various
options to streamline its operations, reduce expenses and improve margins. The
Company expects to complete this review and initiate various expense reduction
plans at various stages over the remainder of the calendar year. The Company has
enacted certain expense reductions in the fiscal 2001 third quarter, including
the reduction of certain expenses at the Company's corporate office, Consumer
Products Group, WAMI Sales and the Company's operations in Asia. The Company
completed its evaluation of its Medal business, which sold a wide range of
products to small independent hardware stores and other independent retailers in
a 250-mile radius of Sharon, Pennsylvania. Over the past several years, Medal's
customer base and operating results have deteriorated due to competitive
pressures. Effective March 31, 2001, the Company sold the assets of Medal to
stem the continued operating losses and negative cash flow and avoid the cost
that would have been incurred to relocate the business upon the expiration of
the building lease. In furtherance of its effort to enhance its liquidity
position, the Company sold substantially all of the assets and certain
liabilities of Western American Manufacturing Inc. effective March 31, 2000 for
$1.8 million, excluding trade receivables, trade payables and certain other
obligations, which were retained by the Company.


HISTORICAL OVERVIEW

         A historic overview of some of the Company's other recent strategic and
restructuring developments are summarized below.

         Effective March 31, 2001, the Company sold nearly all of the assets and
certain liabilities of Medal of Pennsylvania, Inc., which sold a wide range of
products to small independent hardware stores and other independent retailers in
a 250-mile radius of Sharon, Pennsylvania.

         In September 2000, the Company sold its remaining 7,186,530 shares of
Barnett Common Stock for $94.5 million, resulting in a net pre-tax gain of $47.5
million. Barnett was a wholly-owned subsidiary until April 1996, when the
Company completed the Barnett Initial Public Offering (see Note 2 for additional
information related to Barnett stock transactions). The sale of the Barnett
Common Stock enabled the Company to complete its comprehensive financial
restructuring.

         In June 2000, the Company closed its Premier Faucet Corporation
facility in China that manufactured faucets and faucet components, resulting in
a restructuring charge of $1.2 million to write down assets to their fair value
and provide for costs to close the facility. The closure of this operation also
resulted in an additional loss in gross profit of $0.9 million due to the
reduction in sales of $0.4 million and additional charges to cost of sales of
$0.5 million for the realizability of receivables and inventory. The Company
will continue to distribute faucets that have been assembled by the Company,
with components manufactured by outside suppliers.

         In the fourth quarter of fiscal 2000, Consumer Products consolidated
certain operations to improve its efficiencies, including the closure of
Consumer Product's Grand Prairie distribution center and packaging operations in
Tijuana, Mexico. Distribution operations for Consumer Products will be conducted
from a national distribution center near Columbus, Ohio, while the packaging
operations will be conducted at the Company's operations in China and Taiwan.

         Effective March 31, 2000, the Company sold nearly all of the assets and
certain liabilities of Western American Manufacturing Inc., a company that
manufactured galvanized, black, brass, and chrome pipe nipples in Tijuana,
Mexico, for $1.8 million in cash.

         In December 1999, the Company agreed to a process with the Committee
that would lead to the full satisfaction of the Deferred Coupon Notes and the
Senior Notes as part of a comprehensive financial restructuring of the Company.
On July 10, 2000, the Company announced that it has reached agreements with the
Committee, among others, for the monetization of its ownership of Barnett Inc.
common stock and the financial restructuring of Waxman Industries. These
agreements include the Company's agreement to vote in favor of the acquisition
of Barnett Inc. by Wilmar Industries Inc. for $13.15 per share. (See "Debt
Restructuring Effort".)

         In June 1999, the remaining $0.9 million of the Company's 13 3/4%
Senior Subordinated Notes matured and were paid by the Company. Also in June
1999, the Company entered into a loan and security agreement with Congress
Financial Corporation (the "Loan and Security Agreement") to replace the Credit
Agreement with BankAmerica Business Credit, Inc. that was to expire on July 15,
1999. The Loan and Security Agreement provides for, among other things,
revolving credit advances of up to $20.0 million.

         In December 1998, the Company announced it had entered into an
agreement to sell certain of the assets and liabilities of U.S. Lock, a division
of WOC, to Barnett for approximately $33.0 million in cash, less certain
adjustments. The sale of U.S. Lock was completed effective January 1, 1999. The
proceeds were used by the Company to reduce the portion of the BankAmerica
Business Credit Agreement collateralized by U.S. Lock's assets and to reinvest
in the Company's remaining businesses.

         In the first quarter of fiscal 1999, Consumer Products recorded a
restructuring charge of $1.35 million related to the


13
<PAGE>   14

relocation of its Bedford Heights, Ohio warehouse to Groveport, Ohio. Included
in the charge are severance benefits for personnel and the loss on the write-off
of tangible assets at the Bedford Heights warehouse. In the third and fourth
quarters of fiscal 1999, Consumer Products recorded additional charges of $0.45
million and $0.27 million, respectively, for additional costs involved in the
relocation of the Bedford Heights warehouse, the recruiting and training of
personnel at the Groveport warehouse and the future shortfall on subleasing the
warehouse in Bedford Heights. The relocation to a more modern and efficient
facility has enabled Consumer Products to provide more sophisticated
distribution services to its customers and help it remain competitive through
annual cost savings.


RESULTS OF OPERATIONS

         The following table sets forth certain items reflected in the Company's
consolidated statements of operations as a percentage of net sales:


                                             Fiscal Year Ended June 30,
                                             --------------------------

                                             2001       2000       1999
                                            ------     ------     ------
Net sales                                   100.0%    100.0%    100.0%

Cost of sales                                67.9%     72.8%     69.9%

Gross profit                                 32.1%     27.2%     30.1%

Selling, general and administrative
  Expenses                                   29.6%     33.3%     31.9%

Restructuring, impairment and procurement
charges                                       3.4%     12.8%      4.6%

Operating income (loss)                      (0.9%)   (18.9%)    (6.4%)

Gain on sale of Barnett, net                 64.6%       --        --

Gain on sale of U.S. Lock, net                 --        --      10.4%

Loss on sale of Medal, net                   (1.5%)      --        --

Loss on sale of WAMI, net                      --      (2.5%)      --

Equity earnings of Barnett                    1.9%      8.0%      6.8%

Amortization of deferred U.S. Lock gain      10.6%      0.3%       --

Interest expense, net                         7.4%     22.4%     17.3%
Income (loss) before income taxes and
 extraordinary items                         67.3%    (35.5%)    (6.5%)

Provision (benefit) for income taxes          2.2%      0.0%      1.0%

Income (loss) before extraordinary items     65.1%    (35.5%)    (7.5%)

Extraordinary items                          71.0%       --        --

Net income (loss)                           136.1%    (35.5%)    (7.5%)



14
<PAGE>   15



YEAR ENDED JUNE 30, 2001 VS. YEAR ENDED JUNE 30, 2000


NET SALES
---------

         Net sales for fiscal 2001 totaled $73.5 million, as compared to $81.4
million for fiscal 2000. Included in the prior year were $8.3 million in net
sales for WAMI Manufacturing, which was sold effective March 31, 2000, and
Premier Faucet, which was closed in June 2000, and Medal, which was sold
effective March 31, 2001. Excluding the results of disposed or closed
businesses, net sales for fiscal 2001 amounted to $70.1 million as compared to
$73.0 million in fiscal 2000. The results were lower due to weak sales to
retailers in the first half of fiscal 2001.

         Net sales for the continuing businesses in fiscal 2001, while 4.0%
lower than fiscal 2000, improved in the second half of fiscal 2001 by 4.5%. The
reduction for the fiscal year is due to weaker than anticipated sales to
retailers for the first six months of fiscal 2001, including sales made through
the direct import program from our Asian operations. In part, this reduction was
due to the closure of certain retailers served by the Company. The largest
retailer closing that affected the Company was the loss of Associated
Distributors, Inc., which closed all but 11 of its stores in August 2000. The
Company believes that Associated Distributors, which accounted for nearly $2.2
million of Consumer Products' net sales in fiscal 2000, has changed its strategy
for its remaining stores and has discontinued the distribution of plumbing
products. The Company believes that the impact on net sales due to the closing
or reformatting of other retailers, such as Associated Distributors, Pergaments,
Bradlee's, Homeplace and HomeBase, will be offset by increased business
opportunities with certain of the Company's stronger retail customers.

         Retail sales amounted to $56.9 million and $61.0 million for fiscal
2001 and 2000, respectively. The reduction is primarily the result of the
exclusion of sales for WAMI Manufacturing and Premier Faucet in the current
period's results, the inclusion of Medal for only nine months in fiscal 2001 and
lower sales to Barnett.

         Effective March 31, 2001, the Company sold substantially all of the
assets, net of certain liabilities, of Medal. Medal's results of operations have
been included in the operating results of the Company through March 31, 2001,
including $3.4 million and $4.7 million in net sales for fiscal 2001 and fiscal
2000, respectively.

         Effective March 31, 2000, the Company sold substantially all of the
assets, net of certain liabilities, of WAMI, excluding trade receivables, trade
payables and certain other liabilities, which were retained by the Company. The
net sales of $2.9 million and an operating loss of $0.4 for WAMI have been
consolidated in the results of operations through March 31, 2000.

GROSS PROFIT
------------

         The gross profit margin for fiscal 2001 improved to 32.1% from 27.2%
for fiscal 2000. The improvement is due to a favorable mix of product sold and
the sale and closure of WAMI Manufacturing and Premier Faucet, respectively,
which had lower gross profit levels. The gross profit for fiscal 2001 amounted
to $23.6 million as compared to $22.1 million for fiscal 2000.

         Gross profit for fiscal 2000 was lower due to a $1.7 million fourth
quarter charge in cost of sales at Consumer Products to write-off packaging
material and other inventory associated with the move of its packaging facility
to Asia, and the consolidation of its Grand Prairie, Texas facility into its
National Distribution Center in Groveport, Ohio. In addition, the June 2000
closure of Premier Faucet Corporation resulted in a reduction in gross profit of
$0.9 million due to the reduction in sales of $0.4 million and additional
charges to cost of sales of $0.5 million for the realizability of receivables
and inventory.


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------

         Selling, general and administrative ("SG&A") expenses decreased to
$21.8 million for fiscal 2001 from $27.1 million for fiscal 2000. Approximately
$1.4 million of the prior year SG&A expenses were attributed to WAMI
Manufacturing and Premier Faucet. SG&A expenses for continuing operations
amounted to $20.6 million in fiscal 2001 as compared to $24.3 million in the
prior fiscal year. The majority of the improvement in the expenses is due to the
consolidation of Consumer Product's distribution operations into one national
center, the relocation of its packaging operations to the Company's facilities
overseas and cost improvements at the Company's foreign operations. In addition,
the percentage of SG&A expenses to net sales improved to 29.6% in the current
fiscal year from 33.3% in the prior fiscal year.

RESTRUCTURING, IMPAIRMENT AND PROCUREMENT CHARGES
-------------------------------------------------

         In fiscal 2001, the Company recorded a business procurement charge of
$2.15 million. Business procurement charges include costs associated with the
development of business opportunities with new and existing customers. In
addition, Consumer Products


15
<PAGE>   16
recorded $0.35 million in restructuring charges in the quarter ended September
30, 2000 for costs associated with its closed warehouse facilities. Based on
current estimates, the Company believes it has provided for all remaining costs
to be incurred in connection with the closing of these facilities.

         In fiscal 2000, Consumer Products recorded $10.4 million in
non-recurring charges, including procurement costs of $0.65 million related to
customer agreements to purchase product for a period of time, $1.3 million for
the consolidation of its packaged plumbing products under the Plumbcraft(R)
brand name, $0.6 million for the completion of its plan to create a National
Distribution Center and consolidate its Grand Prairie, Texas warehouse into the
Groveport, Ohio facility and the move of the packaging operations from Tijuana,
Mexico to the Company's operations in China, which should reduce certain
packaging costs. In the fourth quarter of fiscal 2000, Consumer Products also
recorded an asset impairment charge of $6.7 million related to the write-off of
goodwill as required by SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and Assets to Be Disposed Of", for two product lines that were
acquired by Consumer Products in December 1986 and May 1988. In addition, in
June 2000 the Company closed its Premier Faucet Corporation facility in China
that manufactured faucets and faucet components, resulting in a restructuring
charge of $1.2 million to write down assets to their fair value and provide for
costs to close the facility. The closure of this operation also resulted in an
additional loss in gross profit of $0.9 million due to the reduction in sales of
$0.4 million and additional charges to cost of sales of $0.5 million for the
realizablity of receivables and inventory. The Company continues to distribute
faucets that have been assembled by the Company, with components manufactured by
outside suppliers.

OPERATING LOSSES:
-----------------

         For fiscal 2001, the Company reported a loss of $0.6 million, as
compared to the loss of $15.4 million for fiscal 2000. The fiscal 2001 loss
included $2.5 million of restructuring and business procurement charges, while
the large loss in fiscal 2000 included $10.4 million of restructuring,
impairment and procurement charges and higher cost of sales and SG&A expenses
for the realizability of accounts receivable and inventory from the closure of
the Company's Premier Faucet business in fiscal 2000.

EQUITY EARNINGS OF BARNETT
--------------------------

         As a result of the sale of the Company's interest in Barnett in
September 2000, the Company only reported equity earnings for the fiscal 2001
first quarter, which amounted to $1.4 million. The Company recorded equity
earnings from its ownership interest in Barnett of $6.5 million for fiscal 2000.

GAIN ON SALE OF EQUITY INVESTMENT AND AMORTIZATION OF DEFERRED GAIN ON SALE OF
------------------------------------------------------------------------------
U.S. LOCK
---------

         On July 10, 2000, the Company announced that it has reached an
agreement to monetize its 7,186,530 shares of Barnett Common Stock for $13.15
per share in connection with the Barnett Merger. On September 1, 2000, as part
of the agreement on the Barnett Merger, the Company sold to Barnett 160,723
shares the Barnett Common Stock to fund the interest payment on its Senior
Notes. The Barnett Merger was approved by Barnett's shareholders on September
27, 2000, and the Company's remaining shares of Barnett Common Stock were sold
on September 29, 2000. The gross proceeds from the sale of the 7,186,530 shares
of Barnett Common Stock amounted to $94.5 million. The Company's equity
investment in Barnett amounted to $44.3 million immediately prior to the sale.
The Company reported a net gain on the sale of Barnett of $47.5 million, after
the write-off of $2.7 million in transaction related costs associated with the
Barnett Sale and other costs associated with the comprehensive financial
restructuring of the Company.

         Effective January 1, 1999, the Company sold U.S. Lock to Barnett for
$33.0 million in cash, before certain adjustments and expenses. The sale of U.S.
Lock resulted in a net pretax gain of $18.3 million, with approximately $10.2
million being recognized in the fiscal 1999 third quarter. The remaining $8.1
million was originally reported as a deferred gain in the Company's consolidated
balance sheet due to the Company's continued ownership of 44.2% of Barnett, the
acquirer of U.S. Lock. Until the sale of its remaining interest in Barnett, the
Company recognized the deferred gain as the goodwill generated by the purchase
of U.S. Lock was amortized by Barnett, resulting in an amortization of the
deferred gain of $0.2 million in fiscal 2000. As a result of the sale of its
remaining interest in Barnett, the Company recognized the remaining $7.8 million
of unamortized deferred gain in the quarter ended September 30, 2000.

LOSS ON SALE OF OPERATION, NET
------------------------------

         In April 2001, the Company sold substantially all of the assets and
certain liabilities of Medal to Medal USA Inc. for approximately $0.80 million
in cash and the assumption of certain liabilities (the "Medal Sale"). The Medal
Sale was effective March 31, 2001, resulting in a net pretax loss of $1.1
million in the quarter ended March 31, 2001. This operation, which served the
small, independent hardware stores within a 250 mile radius of Sharon,
Pennsylvania, had been losing a significant share of its customer base over the
past several years to the larger do-it-yourself retailers that established
operations throughout the area served by Medal.

         Effective March 31, 2000, the Company sold substantially all of the
assets and certain liabilities of WAMI to Niples Del

16
<PAGE>   17

Norte, S.A. de C.V. for approximately $1.8 million in cash, resulting in a net
pretax loss of $2.0 million, including a write-off of approximately $1.0 million
of goodwill.


INTEREST EXPENSE
----------------

         Net interest expense for fiscal 2001 totaled $5.4 million, as compared
to $18.2 million in fiscal 2000. The significant decrease in interest is due to
the use of proceeds from the September 2000 sale of the Barnett Common Stock to
retire the Senior Notes in September 2000, reduce working capital debt and to
retire the Deferred Coupon Notes in November 2000. In addition, the reduction in
the prime rate has also been a factor in reducing interest expense. Average
borrowings for fiscal 2001 amounted to $44.9 million, with a weighted average
interest rate of 11.9%, as compared to $140.8 million in fiscal 2000, with a
weighted average interest rate of 12.3%. Included in net interest expense for
fiscal 2001 is interest income of $0.3 million earned on the proceeds from the
sale of Barnett until they were used to satisfy the Deferred Coupon Notes.

PROVISION FOR INCOME TAXES
--------------------------

         The provision for income taxes amounted to $1.7 million for fiscal
2001. The Company utilized a portion of its net operating loss carryforwards to
offset its federal tax due based on the regular method of computing tax
liability. The Company's tax provision for fiscal 2001 provides for federal
taxes based on the alternative minimum tax method and for state and various
foreign taxes.

         In fiscal 2000, the Company recognized a state tax benefit due to a
refund from a prior year payment, which offset various state and foreign taxes
and resulted in a net tax benefit of $27,000.

EXTRAORDINARY ITEM
------------------

         In fiscal 2001, the Company reported net extraordinary income of $52.2
million from the retirement of the Company's Deferred Coupon Notes, after the
write-off of $1.9 million of deferred loan costs associated with the Deferred
Coupon Notes and costs incurred as part of the restructuring process of $2.4
million. In addition, in the quarter ended September 30, 2000, the Company
recorded an extraordinary loss of $57,000, net of a tax benefit of $38,000, to
write-off deferred loan costs associated with the retirement of the Senior
Notes.

NET INCOME (LOSS)
-----------------

         The Company's net income for fiscal 2001 amounted to $100.0 million, or
$82.55 per basic and diluted share, as compared to the net loss of $28.8
million, or $23.91 per basic and diluted share, in fiscal 2000. The fiscal 2001
results include the $47.5 million net gain on the sale of the Barnett Common
Stock, the $52.2 million extraordinary gain, or $43.09 per share, from the
defeasance of debt at a discount, the recognition of $7.8 million of deferred
gain from the sale of U.S. Lock and the loss on the sale of Medal.

         The Company's fiscal 2000 net loss amounted to $28.8 million, or $23.91
per basic and diluted share. The fiscal 2000 results were affected by $10.4
million of restructuring, impairment and procurement charges, $1.7 million in
costs for the consolidation of the KF(R) packaged plumbing line and $2.0 million
from the loss on the sale of WAMI.



YEAR ENDED JUNE 30, 2000 VS. YEAR ENDED JUNE 30, 1999

NET SALES

         Net sales of the Company's comparable continuing businesses for fiscal
2000 amounted to $77.8 million as compared to $81.9 million for fiscal 1999, a
decrease of $4.1 million. The loss of the Hechinger / Builders Square business
accounted for $3.4 million of the decrease in comparable net sales. Excluded
from those results are net sales of U.S. Lock, which was sold effective January
1, 1999, WAMI Manufacturing Inc., which was sold effective March 31, 2000, and
Premier Faucet Corporation, which was closed in June 2000. Reported net sales of
the Company's wholly-owned operations, including those operations sold, totaled
$81.4 million for fiscal 2000, as compared to $99.1 million for the same period
in the prior fiscal year.

GROSS PROFIT

         The gross profit for the comparable continuing businesses for fiscal
2000 decreased to $22.4 million, as compared to $25.4 million for fiscal 1999.
Including results from U.S. Lock and WAMI while they were owned by the Company,
the gross profit amounted to $22.1 million and $29.9 million for fiscal 2000 and
1999, respectively. Gross profit for fiscal 2000 was lower due to a


17
<PAGE>   18

$1.7 million fourth quarter charge in cost of sales at Consumer Products to
write-off packaging material and other inventory associated with the move of its
packaging facility to Asia, and the consolidation of its Grand Prairie, Texas
facility into its National Distribution Center in Groveport, Ohio. In addition,
the June 2000 closure of Premier Faucet Corporation resulted in a reduction in
gross profit of $0.9 million due to the reduction in sales of $0.4 million and
additional charges to cost of sales of $0.5 million for the realizability of
receivables and inventory. For fiscal 2000, the gross profit margin for the
continuing businesses decreased to 28.8% from 31.0% for fiscal 1999, principally
due to the adjustments mentioned above.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         SG&A expenses, excluding U.S. Lock, WAMI and Premier Faucet, amounted
to $25.7 million and $27.0 million for fiscal 2000 and 1999, respectively.
Including the operations while they were operated as part of the Company, SG&A
expenses amounted to $27.1 million for fiscal 2000 and $31.6 million for fiscal
1999. As a percentage of net sales, SG&A expenses for the continuing businesses
increased from 33.0% in fiscal 1999 to 33.1% in fiscal 2000, primarily due to
the decrease in net sales and the relatively fixed nature of certain SG&A
expenses and the decrease in sales of the continuing businesses.

RESTRUCTURING, IMPAIRMENT AND PROCUREMENT CHARGES

         Consumer Products recorded restructuring, impairment and procurement
charges for fiscal 2000 of $10.4 million, including procurement costs of $0.65
million related to customer agreements to purchase product for a period of time,
$1.3 million for the consolidation of its packaged plumbing products under the
Plumbcraft(R) brand name, $0.6 million for the completion of its plan to create
a National Distribution Center and consolidate its Grand Prairie, Texas
warehouse into the Groveport, Ohio facility and the move of the packaging
operations from Tijuana, Mexico to the Company's operations in China, which
should reduce certain packaging costs. In the fourth quarter of fiscal 2000,
Consumer Products also recorded an asset impairment charge of $6.7 million
related to the write-off of goodwill as required by SFAS No. 121 "Accounting for
the Impairment of Long-Lived Assets and Assets to Be Disposed Of", for two
product lines that were acquired by Consumer Products in December 1986 and May
1988. In addition, in June 2000 the Company closed its Premier Faucet
Corporation facility in China that manufactured faucets and faucet components,
resulting in a restructuring charge of $1.2 million to write down assets to
their fair value and provide for costs to close the facility. The closure of
this operation also resulted in an additional loss in gross profit of $0.9
million due to the reduction in sales of $0.4 million and additional charges to
cost of sales of $0.5 million for the realizability of receivables and
inventory. The Company continues to distribute faucets that have been assembled
by the Company, with components manufactured by outside suppliers.

         In the fiscal 1999 first quarter, Consumer Products recorded a
restructuring charge of $1.35 million related to the relocation of its Bedford
Heights, Ohio warehouse to Groveport, Ohio. Included in the charge were
severance benefits for personnel and the loss on the write-off of tangible
assets at the Bedford Heights warehouse. In the third and fourth quarters of
fiscal 1999, Consumer Products recorded additional restructuring charges of
$0.45 million and $0.27 million, respectively, for additional costs involved in
the relocation of the Bedford Heights warehouse, the recruiting and training of
personnel at the Groveport warehouse and the future shortfall on subleasing the
warehouse in Bedford Heights. The Company believes that the relocation to a more
modern and efficient facility has enabled Consumer Products to provide more
sophisticated distribution services to its customers and has helped it remain
competitive through annual cost savings.

         In addition to the restructuring charge for the relocation of the
warehouse, the Company's operations also recorded a business procurement charge
of $2.5 million in fiscal 1999.

EQUITY EARNINGS OF BARNETT

         The Company recorded equity earnings from its 44.2% ownership interest
in Barnett of $6.5 million for fiscal 2000, as compared to $6.7 million in
fiscal 1999. See "Comprehensive Financial Restructuring Plan" section and Note 2
of the Notes to Consolidated Financial Statements in this Annual Report on Form
10-K for a discussion of the Company's agreement to sell its interest in
Barnett.

(LOSS) GAIN ON SALES OPERATIONS AND AMORTIZATION OF DEFERRED GAIN ON SALE OF
U.S. LOCK

         Effective March 3l, 2000, the Company sold substantially all of the
assets and certain liabilities of WAMI to Niples Del Norte, S.A. de C.V. for
approximately $1.8 million in cash, resulting in a net pretax loss of $2.0
million in the quarter ended March 31, 2000, including a write-off of
approximately $1.0 million of goodwill.

         Effective January 1, 1999, the Company sold U.S. Lock to Barnett for
$33.0 million in cash, before certain adjustments and expenses. The sale of U.S.
Lock resulted in a net pretax gain of $18.3 million, with approximately $10.2
million being recognized in the fiscal 1999 third quarter. The remaining $8.1
million was originally reported as a deferred gain in the Company's consolidated
balance sheet due to the Company's continued ownership of 44.2% of Barnett, the
acquirer of U.S. Lock. Until the sale of the


18
<PAGE>   19

remaining interest in Barnett, the Company recognized the deferred gain as the
goodwill generated by the purchase of U.S. Lock was amortized by Barnett, and
fully recognized the remaining balance upon the September 2000 sale of its
ownership interest in Barnett. In fiscal 2000, the Company recognized $202,000
of this deferred gain.

INTEREST EXPENSE

         Interest expense for fiscal 2000 totaled $18.2 million, an increase of
$1.0 million from the $17.2 million in fiscal 1999. The increase was primarily
due to an increase in borrowings under the Company's bank credit agreement, an
increase in the borrowing rate on that facility during the fiscal year and an
increase in the interest on the Deferred Coupon Notes. Average borrowings for
fiscal 2000 amounted to $140.8 million, with a weighted average interest rate of
12.3%, as compared to $141.3 million for fiscal 1999, with a weighted average
interest rate of 11.6%. The average borrowings were slightly lower due to the
proceeds received from the sale of U.S. Lock effective January 1, 1999, while
the weighted average interest rate increased due to the increased proportion of
debt with a higher interest rate and due to increases in the federal fund rates
that influence the rate charged by lending institutions for working capital
loans.

PROVISION (BENEFIT) FOR INCOME TAXES

         In fiscal 2000, the Company recognized a state tax benefit due to a
refund from a prior year payment, which offset various state and foreign taxes
and resulted in a net tax benefit of $27,000. The provisions for income taxes
amounted to $1.0 million for fiscal 1999. The Company's tax provision for fiscal
1999 represents the provision for the alternative minimum tax due on the U.S.
Lock Sale and for various state and foreign taxes. The difference between the
effective and statutory tax rates was primarily due to domestic operating losses
not benefited and non-deductible goodwill amortization.

NET LOSS

         The Company's fiscal 2000 net loss amounted to $28.8 million, or $2.39
per basic and diluted share, as compared to the net loss of $7.5 million, or
$0.62 per basic and diluted share, in fiscal 1999. The fiscal 2000 results were
affected by $10.4 million of restructuring, impairment and procurement charges,
$1.7 million in costs for the consolidation of the KF(R) packaged plumbing line
and $2.0 million from the sale of WAMI.

         The fiscal 1999 results included a non-recurring charge of $2.1 million
for the relocation of the Consumer Products' warehouse from Bedford Hts., Ohio
to Groveport, Ohio, a $2.45 million charge for business procurement costs and
the $10.2 million gain on the sale of U.S. Lock.


LIQUIDITY AND CAPITAL RESOURCES

         Over the past several years, the Company has endeavored to reduce its
high level of debt through the monetization of assets and to improve the
efficiencies of its continuing businesses. As a result, the Company has
undertaken various initiatives to raise cash, improve its cash flow and reduce
its debt obligations and / or improve its financial flexibility during that
period. These efforts resulted in the Company reaching an agreement with an ad
hoc committee representing the holders of approximately 87% of its Deferred
Coupon Notes and approximately 65% of its Senior Notes. See Note 3 and
Management's Discussion and Analysis - Comprehensive Financial Restructuring
Plan section in this Form 10-K for a discussion of the Company's sale of its
interest in Barnett as part of a comprehensive financial reorganization. The
financial reorganization did not involve any of the Company's operating
subsidiaries, which have their own bank credit facility. The operating companies
paid all of their trade creditors, employees and other liabilities under normal
trade conditions.

         The Company encountered a sluggish retail environment in the first half
of fiscal 2001, and in the second half of fiscal 2001 has experienced increased
demands by certain of the Company's larger retail customers and the cessation of
business of certain smaller retail accounts. The Company's has $1.0 million
available under its working capital facility at June 30, 2001. The Company has
had discussions with lenders regarding the use of other assets to secure
additional borrowing capacity, which it believes it will need to meet its
operating cash flow demands, including working capital to support its existing
business and to fund business retention and procurement costs. The Company
believes that securing this additional capital is important in meeting all of
its growth and operating needs. The current working capital facility may not be
sufficient to fund all of these working capital requirements. The Company took
certain steps to modify its expense structure in the fiscal 2001 third quarter
and continues to evaluate ways to further modify its expense structure and
create additional liquidity, including the monetization of assets, to weather
the effects of a slowdown in the retail industry, closure of weaker retailers
and other competitive issues.

         In June 1999, the Company entered into the Loan and Security Agreement
with Congress Financial Corporation to replace the Credit Agreement with
BankAmerica Business Credit, Inc. that was to expire on July 15, 1999. The Loan
and Security Agreement


19
<PAGE>   20

is between Consumer Products, Medal of Pennsylvania, Inc. (formerly known as WOC
Inc.), WAMI and WAMI Sales, as borrowers (the "Borrowers"), with the Company,
Waxman USA Inc. ("Waxman USA") and TWI as guarantors. In March 2000, the Company
and Congress Financial Corporation amended the loan agreement to, among other
changes, increase the facility by up to $3.0 million. The Loan and Security
Agreement provided, among other things, for revolving credit advances of up to
$22.0 million. In April 2000, the Loan and Security Agreement was further
amended to allow the sale of substantially all of the assets of WAMI. This
facility decreased to $20 million with the completion of the Barnett Sale in
September 2000. In the fiscal 2001 fourth quarter, this facility was amended to
allow the sale of Medal and further decreased to $15.0 million due to the
reduction in the Company's asset borrowing base. As of June 30, 2001, the
Company had $9.9 million in borrowings under the revolving credit line of the
facility and had approximately $1.0 million available under such facility. The
Loan and Security Agreement, which was to expire on September 1, 2001, was
extended until June 17, 2002 as a result of the retirement of the Company's
Senior Notes and Deferred Coupon Notes.

         The Loan and Security Agreement provides for revolving credit advances
of (a) up to 85.0% of the amount of eligible accounts receivable and (b) up to
the lesser of (i) $10.0 million or (ii) 60% of the amount of eligible raw and
finished goods inventory. Revolving credit advances bear interest at a rate
equal to (a) First Union National Bank's prime rate plus 0.5% or (b) LIBOR plus
2.50%. The Loan and Security Agreement includes a letter of credit subfacility
of $10.0 million, with none outstanding at June 30, 2001. Borrowings under the
Loan and Security Agreement are secured by the accounts receivable, inventories,
certain general intangibles, and unencumbered fixed assets of Waxman Industries,
Inc., Consumer Products, TWI, International Inc. and WOC, and a pledge of 65% of
the stock of various foreign subsidiaries. The Loan and Security Agreement
requires the Borrowers to maintain cash collateral accounts into which all
available funds are deposited and applied to service the facility on a daily
basis. The Loan and Security Agreement prevents dividends and distributions by
the Borrowers except in certain limited instances including, so long as there is
no default or event of default and the Borrowers are in compliance with certain
financial covenants, and contains customary negative, affirmative and financial
covenants and conditions. The Company was in compliance with all loan covenants
at June 30, 2001. The Loan and Security Agreement also contains a material
adverse condition clause, which allows Congress Financial Corporation to
terminate the Agreement under certain circumstances.

         The Company relies primarily on Consumer Products for cash flow.
Consumer Products' customers include D-I-Y warehouse home centers, home
improvement centers, mass merchandisers and hardware stores. Consumer Products
may be adversely affected by prolonged economic downturns or significant
declines in consumer spending. There can be no assurance that any such prolonged
economic downturn or significant decline in consumer spending will not have a
material adverse impact on Consumer Products' business and its ability to
generate cash flow. Furthermore, Consumer Products has a high proportion of its
sales with a concentrated number of customers. Consumer Products' largest
customers, Wal-Mart and Kmart, accounted for approximately 25.8% and 19.9% of
its net sales in fiscal 2001, respectively. In the event Consumer Products were
to lose one of its large retail accounts as a customer or one of its largest
accounts were to significantly curtail its purchases from Consumer Products,
there would be material adverse effects until the Company could further modify
Consumer Products' cost structure to be more in line with its anticipated
revenue base. Consumer Products would likely incur significant charges if
additional material adverse changes in its customer relationships were to occur.

         The Company paid $1.2 million and $0.8 million in income taxes in
fiscal 2001 and 2000, respectively. The Company did not record a tax provision
on the extraordinary gain from the defeasance of debt due to its favorable
treatment in a bankruptcy. For regular federal tax purposes, the Company's net
operating loss carryforwards were sufficient to offset any regular federal tax
liability. However, the Company has provided for federal taxes based on the
alternative minimum tax method in fiscal 2001 and for state and various foreign
taxes. At June 30, 2001, the Company had $17.5 million of available domestic net
operating loss carryforwards for income tax purposes, which will expire in 2010
through 2020.


         The Company has total future lease commitments for various facilities
and other leases totaling $3.0 million, of which approximately $0.7 million is
due fiscal 2002 and $0.8 million was paid in fiscal 2001. The Company does not
have any other commitments to make substantial capital expenditures. The fiscal
2002 capital expenditure plan includes expenditures to improve the efficiencies
of the Company's operations, to provide new data technology and certain
expansion plans for the Company's foreign operations.

         At June 30, 2001, the Company had working capital of $7.2 million and a
current ratio of 1.3 to 1.

DISCUSSION OF CASH FLOWS

         Net cash used for operations was $10.7 million in fiscal 2001,
principally due to the payment of accrued liabilities and an increase in prepaid
expenses, offset by a decrease in trade receivables and inventories and an
increase in accounts payable. Also affecting the net cash used for operations
were the $47.5 million net gain on the sale of Barnett stock, the recognition of
a $7.8 million deferred gain on the sale of U.S. Lock, the extraordinary income
recognized from the defeasance of debt at a discount, $1.4 million in equity
earnings of Barnett and the $1.1 million loss on the sale of Medal. Cash flow
provided by investments totaled $96.0 million,


20
<PAGE>   21

due principally to the net proceeds from the Barnett stock sale. Cash flow used
in financing activities totaled approximately $85.4 million. Included in the
cash used in financing activities is the retirement of Waxman USA's Senior
Notes, which amounted to $35.9 million and the retirement of the $92.8 million
of the Company's Deferred Coupon, which were retired for $39.3 million in full
settlement of the Company's Deferred Coupon Notes as provided in the Joint Plan.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The U.S. dollar is the functional currency for a significant portion of
the Company's consolidated operations. However, certain transactions of the
Company are completed in foreign currencies. In addition, for certain of the
Company's foreign operations, the functional currency is the local currency. As
a result, the Company is exposed to currency transaction and translation risks,
which primarily result from fluctuations of the foreign currencies in which the
Company deals as compared to the U.S. dollar over time.

         Gains and losses that result from foreign currency transactions are
included in the Company's consolidated statements of operations on a current
basis and affect the Company's reported net income (loss). The cumulative
foreign currency translation effects for the Company's foreign operations that
utilize the local currency as their functional currency are included as a
separate component of stockholders' equity in the Company's consolidated balance
sheets and are considered in determining comprehensive income as reported in the
Company's consolidated statements of operations.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                           (Begins on Following Page)



21
<PAGE>   22



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of Waxman Industries, Inc.:

We have audited the accompanying consolidated balance sheet of Waxman
Industries, Inc. (a Delaware corporation) and Subsidiaries (the Company) as of
June 30, 2001, and the related consolidated statement of operations,
stockholders' equity and cash flows for the year ended June 30, 2001. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audit 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Waxman Industries,
Inc. and Subsidiaries as of June 30, 2001, and the results of their operations
and their cash flows for the year ended June 30, 2001, in conformity with
accounting principles generally accepted in the United States.





Meaden & Moore, Ltd.
Cleveland, Ohio,
August 10, 2001.



To the Stockholders and Board of Directors of Waxman Industries, Inc.:

We have audited the accompanying consolidated balance sheets of Waxman
Industries, Inc. (a Delaware corporation) and Subsidiaries (the Company) as of
June 30, 2000, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the two years in the period
ended June 30, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 Waxman Industries, Inc. and
Subsidiaries as of June 30, 2000, and the results of their operations and their
cash flows for each of the two years in the period ended June 30, 2000, in
conformity with accounting principles generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has suffered
recurring losses from operations, has not paid its interest payment on its
Deferred Coupon Notes, has a net stockholders' deficit and plans to file a
pre-negotiated consensual joint plan of reorganization under Chapter 11 of the
U.S. Bankruptcy Code. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are described in Note 14 to the consolidated financial
statements. The consolidated financial statements do not include any
adjustments that might result should the Company be unable to continue as a
going concern.

                                       Arthur Andersen LLP

Cleveland, Ohio,
August 28, 2000.




22
<PAGE>   23





                    WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             JUNE 30, 2001 AND 2000
                                 (IN THOUSANDS)

                                     ASSETS




                                                         2001            2000
                                                         ----            ----

CURRENT ASSETS:
  Cash and cash equivalents                            $    740        $    811
  Trade receivables, net                                 12,592          13,140
  Other receivables                                       1,400           2,127
  Inventories                                            11,895          15,184
  Prepaid expenses                                        1,850           1,506
                                                       --------        --------
      Total current assets                               28,477          32,768
                                                       --------        --------

INVESTMENT IN BARNETT                                        --          42,896
                                                       --------        --------

PROPERTY AND EQUIPMENT:
  Land                                                      551             585
  Buildings                                               4,318           4,545
  Equipment                                              10,415          11,061
                                                       --------        --------
                                                         15,284          16,191
Less accumulated depreciation and
amortization                                             (6,996)         (7,137)
                                                       --------        --------

Property and equipment, net                               8,288           9,054
                                                       --------        --------

CASH SURRENDER VALUE OF OFFICERS LIFE
INSURANCE POLICIES                                        2,934           2,725

UNAMORTIZED DEBT ISSUANCE COSTS, NET                        142           2,444

DEFERRED TAX ASSET                                           --             367

OTHER ASSETS                                                991           3,964
                                                       --------        --------
                                                       $ 40,832        $ 94,218
                                                       ========        ========









          The accompanying Notes to Consolidated Financial Statements
                   are an integral part of these statements.





23
<PAGE>   24



                    WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             JUNE 30, 2001 AND 2000
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

                      LIABILITIES AND STOCKHOLDERS' EQUITY


                                                         2001           2000
                                                         ----           ----


CURRENT LIABILITIES:
  Current portion of long-term debt                    $  10,045      $  20,366
  Accounts payable                                         6,932          6,484
  Accrued liabilities                                      4,291          3,018
  Accrued income taxes payable                                --            394
  Accrued interest                                            --          8,231
                                                       ---------      ---------
      Total current liabilities                           21,268         38,493
                                                       ---------      ---------

OTHER LONG-TERM DEBT, NET OF CURRENT PORTION
                                                             532            780

SENIOR SECURED DEFERRED COUPON NOTES, NET                     --         91,818

SENIOR NOTES                                                  --         35,855

DEFERRED GAIN ON SALE OF U.S. LOCK                            --          7,815

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value per share:
authorized and unissued 2,000 shares                          --             --
Common stock, $0.01 par value per share:
22,000 shares authorized; 998 and 991
shares issued and outstanding, respectively                   99             99
Class B common stock, $.01 par value per
  share: 6,000 shares authorized; 214 and
  214 shares issued and outstanding,
  respectively                                                21             21
Paid-in capital                                           21,752         21,752
Retained deficit                                          (1,708)      (101,756)
                                                       ---------      ---------

                                                          20,164        (79,884)
   Accumulated other comprehensive loss                   (1,132)          (659)
                                                       ---------      ---------

      Total stockholders' equity (deficit)                19,032        (80,543)
                                                       ---------      ---------

                                                       $  40,832      $  94,218
                                                       =========      =========



          The accompanying Notes to Consolidated Financial Statements
                   are an integral part of these statements.



24
<PAGE>   25




                    WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                          Fiscal Year Ended June 30,
                                                          --------------------------

                                                        2001          2000          1999
                                                        ----          ----          ----
<S>                                                  <C>           <C>           <C>
Net sales                                            $  73,524     $  81,360     $  99,116
Cost of sales                                           49,890        59,259        69,264
                                                     ---------     ---------     ---------
Gross profit                                            23,634        22,101        29,852
Selling, general and administrative expenses            21,763        27,094        31,635
Restructuring, impairment and procurement charges
(Notes 1 and 3)                                          2,504        10,370         4,515
                                                     ---------     ---------     ---------
Operating loss                                            (633)      (15,363)       (6,298)
Gain on sale of Barnett, net (Note 2)                   47,473            --            --
Loss on sale of Medal, net (Note 5)                     (1,105)           --            --
Gain on sale of U.S. Lock, net (Note 5)                     --            --        10,298
Loss on sale of WAMI, net (Note 5)                          --        (2,024)           --
Equity earnings of Barnett                               1,370         6,511         6,744
Amortization of deferred U.S. Lock gain                  7,815           202            --
Interest expense                                         5,414        18,201        17,192
                                                     ---------     ---------     ---------
Income (loss) before income taxes                       49,506       (28,875)       (6,448)

Provision (benefit) for income taxes                     1,680           (27)        1,029
                                                     ---------     ---------     ---------
Income (loss) before extraordinary gain                 47,826       (28,848)       (7,477)
Extraordinary gain                                      52,222            --            --
                                                     ---------     ---------     ---------
Net income (loss)                                    $ 100,048     $ (28,848)    $  (7,477)
                                                     =========     =========     =========

Other comprehensive income (loss):
Foreign currency translation adjustment                   (473)          370           134
                                                     ---------     ---------     ---------
Comprehensive income (loss)                          $  99,575     $ (28,478)    $  (7,343)
                                                     =========     =========     =========
</TABLE>








          The accompanying Notes to Consolidated Financial Statements
                   are an integral part of these statements.


25
<PAGE>   26




                    WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)



<TABLE>
<CAPTION>
                                                                              Fiscal Year Ended June 30,
                                                                              --------------------------
                                                                          2001           2000           1999
                                                                          ----           ----           ----

<S>                                                                       <C>          <C>             <C>
Basic income (loss) per share:
Income (loss) before extraordinary gain                                   $ 39.46      $ (23.91)       $ (6.20)
Extraordinary gain                                                          43.09             --             --
                                                                            -----          -----          -----
Net income (loss)                                                         $ 82.55      $ (23.91)       $ (6.20)
                                                                          =======      =========       ========

Diluted income (loss) per share:
Income (loss) before extraordinary gain                                   $ 39.46      $ (23.91)       $ (6.20)
Extraordinary gain                                                          43.09             --             --
                                                                            -----          -----          -----
Net income (loss)                                                         $ 82.55      $ (23.91)       $ (6.20)
                                                                          =======      =========       ========

Weighted average number of common shares outstanding
                                                                            1,212          1,207          1,206
                                                                            =====          =====          =====
</TABLE>






          The accompanying Notes to Consolidated Financial Statements
                   are an integral part of these statements.



26
<PAGE>   27


                    WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
            FOR THE FISCAL YEARS ENDING JUNE 30, 2001, 2000 AND 1999
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                                               Accumulated
                                                          Class B                                  Other         Total
                                              Common      Common       Paid-in     Retained    Comprehensive  Stockholders'
                                              Stock        Stock       Capital      Deficit    Income (Loss)     Equity
                                            ---------    ---------    ---------    ---------     ---------     ---------
<S>                                         <C>          <C>          <C>          <C>           <C>           <C>
Balance June 30, 1998                       $      98    $      21    $  21,731    $ (65,431)    $  (1,163)    $ (44,744)

    Net loss                                       --           --           --       (7,477)           --        (7,477)

    Exercise of stock options,                     --           --            1           --            --             1
    warrants and convertible notes

    Currency translation adjustment                --           --           --           --           134           134
                                            ---------    ---------    ---------    ---------     ---------     ---------

Balance June 30, 1999                              98           21       21,732      (72,908)       (1,029)      (52,086)

     Net loss                                      --           --           --      (28,848)           --       (28,848)
     Employee Stock Purchase                        1           --           20           --            --            21
        Plan purchases

     Currency translation adjustment               --           --           --           --           370           370
                                            ---------    ---------    ---------    ---------     ---------     ---------
Balance June 30, 2000                              99           21       21,752     (101,756)         (659)      (80,543)

     Net income                                    --           --           --      100,048            --       100,048

     Conversions of Class B common stock           --           --           --           --            --            --

     Exercise of stock options,                    --           --           --           --            --            --
     warrants and convertible notes

     Currency translation adjustment               --           --           --           --          (473)         (473)
                                            ---------    ---------    ---------    ---------     ---------     ---------

Balance June 30, 2001                       $      99    $      21    $  21,752    $  (1,708)    $  (1,132)    $  19,032
                                            =========    =========    =========    =========     =========     =========
</TABLE>










          The accompanying Notes to Consolidated Financial Statements
                   are an integral part of these statements.




27
<PAGE>   28


                    WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                 Fiscal Year Ended June 30,
                                                                                 --------------------------
Cash From (Used For):                                                         2001          2000          1999
                                                                            ---------     ---------     ---------
<S>                                                                         <C>           <C>           <C>
Operations:

   Net income (loss)                                                        $ 100,048     $ (28,848)    $  (7,477)

   Adjustments to reconcile net income (loss) to net cash used
   for operations:

   Extraordinary item - debt defeasance                                       (52,222)           --            --

   Non-cash restructuring and impairment charges                                1,050        11,677            --

   Gain on sale of Barnett stock, net                                         (47,473)           --            --

   Loss on sale of Medal                                                        1,105            --            --

   Loss on sale of WAMI                                                            --         2,024            --

   Gain on sale of U.S. Lock                                                       --            --       (10,298)

   Non-cash interest                                                               83           250        10,200

   Amortization of deferred U.S. Lock gain                                     (7,815)         (203)

  Equity earnings of Barnett                                                   (1,370)       (6,511)       (6,744)

   Depreciation and amortization                                                2,314         2,767         2,555

   Deferred income taxes                                                          367           173          (540)

   Bad debt provision                                                             215           242           274

   Changes in assets and liabilities:

            Trade and other receivables                                         1,307        (1,840)        1,989

            Inventories                                                         1,860          (600)        1,097

            Prepaid expenses and other                                         (1,922)         (437)          179

            Accounts payable                                                      749          (315)          813

            Accrued liabilities                                                (8,484)        4,022           189

            Net change in operating assets and liabilities of  U.S. Lock           --           185        (1,109)

            Other, net                                                           (473)          249           134
                                                                            ---------     ---------     ---------
         Net cash  used for operations                                        (10,661)      (17,165)       (8,738)
                                                                            ---------     ---------     ---------
Investments:

     Capital expenditures, net                                                 (1,229)       (1,794)       (2,741)

     Change in other assets                                                     2,764        (2,388)          201

     Net proceeds from sales of businesses                                     94,503         1,800        28,249
                                                                            ---------     ---------     ---------

         Net cash provided by (used for) investments                           96,038        (2,382)       25,709
                                                                            ---------     ---------     ---------
</TABLE>






          The accompanying Notes to Consolidated Financial Statements
                   are an integral part of these statements.










28
<PAGE>   29



<TABLE>
<CAPTION>

Financing:                                                2001         2000         1999
                                                        --------     --------     --------
<S>                                                       <C>          <C>          <C>
   Borrowings under credit agreements                     52,435       76,869       56,327

   Payments under credit agreements                      (62,699)     (57,717)     (70,872)

   Debt issuance costs                                        --         (137)        (282)

   Retirement of 11 1/8% Senior Securred Notes           (35,855)          --           --

   Retirement of 12 3/4% Deferred Coupon Notes           (39,329)

   Retirement of Senior Subordinated Notes                    --           --         (895)

   Issuance of common stock
                                                        --------     --------     --------
                                                              --           21            1
                                                        --------     --------     --------

         Net cash provided by (used for) financing       (85,448)      19,036      (15,721)
                                                        --------     --------     --------

Net increase (decrease) in cash and cash equivalents         (71)        (511)       1,250
Balance, beginning of year                                   811        1,322           72
                                                        --------     --------     --------

Balance, end of year                                    $    740     $    811     $  1,322
                                                        ========     ========     ========
</TABLE>




          The accompanying Notes to Consolidated Financial Statements
                   are an integral part of these statements.



29
<PAGE>   30


                    WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                FOR THE YEARS ENDED JUNE 30, 2001, 2000 AND 1999


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         A.       BASIS OF CONSOLIDATION AND DESCRIPTION OF THE COMPANY

         The accompanying consolidated financial statements include the accounts
of Waxman Industries, Inc. ("Waxman Industries") and its wholly-owned
subsidiaries (collectively, the "Company"). Until September 29, 2000, the
Company owned 44.2% of the common stock of Barnett Inc. ("Barnett Common
Stock"), a direct marketer and distributor of plumbing, electrical and hardware
products, and accounted for Barnett Inc. ("Barnett") under the equity method of
accounting. See Management's Discussion and Analysis "Comprehensive Financial
Restructuring Plan" section and Note 2 in these notes to consolidated financial
statements for information regarding the sale of the Company's interest in
Barnett. Certain reclassifications have been made to the prior year statements
in order to conform to the current year presentation. All significant
intercompany transactions and balances are eliminated in consolidation.

        The Company is a supplier of specialty plumbing, floor and surface
protection and other hardware products to the repair and remodeling market in
the United States. The Company distributes its products to approximately 680
customers, including a wide variety of large national and regional retailers,
independent retail customers and wholesalers. The Company conducts its business
primarily through its wholly-owned subsidiaries, Waxman Consumer Products Group
Inc. ("Consumer Products"), WAMI Sales, Inc. ("WAMI Sales") and TWI,
International, Inc. ("TWI"). Consumer Products, the Company's largest operation,
is a supplier of specialty plumbing, floor and surface protection and other
hardware products to a wide variety of large retailers. WAMI Sales distributes
galvanized, black, chrome and brass pipe nipples and fittings to industrial and
wholesale distributors. TWI includes the Company's foreign operations, including
manufacturing, packaging and sourcing operations in China and Taiwan. Until
March 31, 2001, the Company also supplied plumbing and hardware products to
hardware stores and smaller independent retailers through Medal of Pennsylvania,
Inc. ("Medal", formerly known as WOC Inc. ("WOC"), when substantially all of the
assets and certain liabilities of this business were sold (see Note 5). Until
the sale of Western American Manufacturing Inc. ("WAMI") effective March 31,
2000, TWI also included a manufacturing operation in Mexico that threaded
galvanized, black, brass, and chrome pipe and imported malleable fittings.
Consumer Products utilize the Company's and non-affiliated foreign sourcing
suppliers.

         B.       CASH AND CASH EQUIVALENTS

         In accordance with the terms of the Loan and Security Agreement (as
discussed in Note 7), all restricted cash balances have been excluded from cash
and have been applied against outstanding borrowings under the Loan and Security
Agreement. Cash balances include certain unrestricted operating accounts and
accounts of foreign operations. The Company considers all highly liquid
temporary cash investments with original maturities of less than three months to
be cash equivalents. Cash investments are valued at cost plus accrued interest,
which approximates market value.

         C.       TRADE RECEIVABLES

         Trade receivables are presented net of allowances for doubtful accounts
of $0.5 million and $0.9 million at June 30, 2001 and 2000, respectively. Bad
debt expense totaled $0.2 million in fiscal 2001, $0.2 million in fiscal 2000
and $0.3 million in fiscal 1999.

         The Company sells specialty plumbing, floor and surface protection and
other hardware products throughout the United States to do-it-yourself ("D-I-Y")
retailers, mass merchandisers, smaller independent retailers and wholesalers.
The Company performs ongoing credit evaluations of its customers' financial
conditions. The Company's largest customers are retailers. As a percentage of
the Company's net sales, the largest customer of Consumer Products, Wal-Mart,
accounted for 13.8%, 7.6% and 6.1% in fiscal 2001, 2000 and 1999, respectively,
and Kmart accounted for 10.6%, 11.0% and 10.0% in fiscal 2001, 2000 and 1999,
respectively. During the same periods, the Company's ten largest customers
accounted for approximately 48.7%, 41.5% and 39.6% of net sales and
approximately 51.0% and 51.3% of accounts receivable at June 30, 2001 and 2000,
respectively.


30
<PAGE>   31


         D.       INVENTORIES

         At June 30, 2001 and 2000, inventories, consisting primarily of
finished goods, are carried at the lower of first-in, first-out (FIFO) cost or
market. The Company regularly evaluates its inventory carrying value, with
appropriate consideration given to any excess, slow-moving and/or nonsalable
inventories. In fiscal 2001, 2000 and 1999, the Company recorded charges of $0.6
million, $0.1 million and $0.6 million, respectively, in connection with its
evaluation of its inventory carrying value.

         E.       PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost. For financial reporting
purposes, buildings and equipment are depreciated on a straight-line basis over
the estimated useful lives of the related assets. Depreciable lives are 15 to 40
years for buildings and 3 to 15 years for equipment. Leasehold improvements are
amortized on a straight-line basis over the term of the lease or the useful life
of the asset, whichever is shorter. For income tax purposes, accelerated methods
of depreciation are used. Depreciation expense in each of the last three fiscal
years ended June 30, 2001, 2000 and 1999 totaled $1.4 million, $1.6 million and
$1.6 million, respectively. Repairs and maintenance are expensed as incurred.

         F.       COST OF BUSINESSES IN EXCESS OF NET ASSETS ACQUIRED

         In the fourth quarter of fiscal 2000, management evaluated its goodwill
in accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be
Disposed Of," on an originating entity basis considering future undiscounted
operating cash flows and the inconsistency of the Company's earnings. In fiscal
2000, based on the lack of operating cash flow from operations to support future
growth, the inconsistency of the Company's and Consumer Products' earnings, the
competitiveness of the industry in supplying customers in the D-I-Y retail
market and the cash flow expectations of the business, as compared to the
contribution of those product lines, along with the Company's comprehensive
financial restructuring plan, the Company wrote off $6.7 million of goodwill at
its Consumer Products operation, which relates to two product lines acquired in
December 1986 and May 1988. In prior years, the cost of businesses in excess of
net assets acquired was being amortized primarily over 40 years using the
straight-line method. Goodwill amortization expense totaled $0.3 million in
fiscal 2000 and $0.3 million in fiscal 1999.

         G.       UNAMORTIZED DEBT ISSUANCE COSTS

         Unamortized debt issuance costs relate to the Company's long-term and
short-term debt (See Note 7) and are amortized over the life of the related
debt. Amortization expense totaled $0.4 million in fiscal 2001, $0.8 million in
fiscal 2000 and $0.8 million in fiscal 1999, and is included in interest expense
in the accompanying consolidated statements of operations. The Company incurred
an extraordinary charge in fiscal 2001 related to the accelerated amortization
of unamortized debt issuance costs. (See Note 6).

         H.       ISSUANCES OF STOCK BY A SUBSIDIARY

         The Company recognizes gains on issuances of stock by a subsidiary in
its consolidated statements of operations in amounts proportionate to its
ownership percentage of the subsidiary.

         I.       PROCUREMENT CHARGES

         Procurement costs represent the amount paid by the Company in
connection with a customer's agreement to purchase products from the Company for
a specific period. The amount includes the consideration paid to the new or
existing customer (i) for the right to supply such customer for a specified
period, (ii) to assist such customer in reorganizing its store aisles and
displays in order to accommodate the Company's products and (iii) to purchase
competitor's merchandise that the customer has on hand when it changes
suppliers, less the salvage value received by the Company. The Company expenses
these costs in the fiscal year incurred. Procurement costs for (i) above totaled
$2.0 million in fiscal 2001, $0.65 million in fiscal 2000 and $2.0 million in
fiscal 1999. Procurement costs for type (ii) above totaled $0.2 million in
fiscal 2001 and $0.5 million in fiscal 1999, and the Company did not incur
procurement costs related to (ii) above in fiscal 2000. Types (i) and (ii) of
procurement costs are included as procurement charges in the accompanying
consolidated statements of operations. Procurement costs for type (iii) above
totaled $0.9 million, $1.5 million and $1.1


31
<PAGE>   32

million in fiscal 2001, 2000 and 1999, respectively, and are included as a
contra-sales amount in net sales in the accompanying consolidated statements of
operations.

         The Financial Accounting Standards Board ("FASB") has reviewed the
industry practices regarding the accounting for up-front "slotting fees" charged
by retailers for the right to shelf space and issued EITF Issue No. 00-25
related to these types of charges. The FASB has concluded that charges of this
nature be reported as a reduction in revenue beginning in annual or interim
periods beginning after December 15, 2001, with financial statements for prior
periods being reclassified to comply within this requirement. The Company
expects to comply with the pronouncement when required.

         J.       FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

         All balance sheet accounts of foreign subsidiaries are translated at
the exchange rate as of the end of the fiscal year. Income statement items are
translated at the average currency exchange rates during the fiscal year. The
resulting translation adjustment is recorded as a component of stockholders'
equity and comprehensive loss. Foreign currency transaction gains or losses are
included in the consolidated statements of operations as incurred.

         K.       FINANCIAL STATEMENT ESTIMATES

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

         L.       EARNINGS PER SHARE

         In February 1997, The Financial Accounting Standards Board ("FASB")
issued SFAS No. 128, "Earnings per Share" to be effective for financial
statements issued for periods ending after December 15, 1997. Under SFAS No.
128, primary earnings per share have been replaced by "basic earnings per
share", which represents net income divided by the weighted average number of
common shares outstanding. Diluted earnings per share continues to utilize the
weighted average number of common stock and common stock equivalents, which
include stock options and warrants. Since the Company was in a loss position in
fiscal 2000 and 1999, the impact of these options and warrants is anti-dilutive,
therefore the Company has disclosed basic earnings per share as basic and
diluted for these years. For fiscal 2001, the impact of the options and warrants
is anti-dilutive as the price of the Company's stock was below the exercise
prices of those instruments.

         As further described in Note 12, the Company's shareholders voted in
favor of a 1 for 10 reverse stock split, which became effective on February 20,
2001. Accordingly, the share information presented below and on the face of the
income statement has been restated to reflect the reverse stock split.

         The number of common shares used to calculate basic and diluted
earnings per share are as follows (in thousands):


<TABLE>
<CAPTION>
                                       2001             2000             1999
                                       ----             ----             ----
<S>                                    <C>              <C>              <C>
         Basic                         1,212            1,207            1,206
         Diluted                       1,212            1,207            1,206
</TABLE>

2.       BARNETT

         In April 1996, the Company completed an initial public offering of the
Barnett Common Stock, reducing its interest in the former wholly-owned
subsidiary to 49.9% of the outstanding Barnett Common Stock and, together with
certain convertible non-voting preferred stock owned by the Company,
approximately a 54% economic interest. In April 1997, the Company completed a
secondary offering of 1.3 million shares of Barnett Common Stock, reducing its
voting and economic interests to 44.5% and, accordingly, began to account for
its interest in Barnett under the equity method of accounting. In July 1997, as
a result of the sale of a substantial portion of the business of LeRan Gas
Products, one of WOC's operations, to Barnett, the Company received cash and an
additional 24,730 shares of Barnett Common Stock, which increased the Company's
ownership in Barnett to 7,186,530 shares. On July 10, 2000, the Company
announced that it had reached an agreement to monetize the remaining Barnett
Common Stock for $13.15 per share as part of the purchase of all of Barnett's
outstanding shares by B&W Acquisition Inc., a merger subsidiary formed by Wilmar
Industries, Inc. (the


32
<PAGE>   33

"Barnett Merger"). An additional agreement provided for the sale of enough
shares of Barnett Common Stock, based on a ten day average market price, to
provide the $2.0 million needed by Waxman USA Inc. ("Waxman USA"), a direct
wholly-owned subsidiary of the Company, to pay the September 1, 2000 interest
payment under its 11 1/8% Senior Notes due 2001 (the "Senior Notes").
Accordingly, on September 1, 2000, the Company sold 160,723 shares of common
stock to Barnett, reducing its remaining interest in Barnett to 7,025,807
shares. The agreement also provided for the Company to receive the difference in
the market price paid for the shares sold on September 1, 2000 and the $13.15
offering price within ten days following the Barnett Merger closing. The Barnett
Merger was approved by Barnett's shareholders on September 27, 2000, and the
Company's remaining shares of Barnett Common Stock were sold on September 29,
2000.

         The gross proceeds from the sale of the 7,186,530 shares of Barnett
Common Stock amounted to $94.5 million. The Company's equity investment in
Barnett amounted to $44.3 million immediately prior to the sale, including
equity earnings recognized by the Company in the quarter ended September 30,
2000 of $1.4 million. The Company reported a net gain on the sale of Barnett of
$47.5 million, after the write-off of $2.7 million in transaction related costs
associated with the Barnett Merger and other costs associated with the
comprehensive financial restructuring of the Company. In addition, the Company
recognized $7.8 million in deferred gain on the sale of U.S. Lock in the quarter
ended September 30, 2000, which was being recognized as Barnett amortized the
goodwill associated with its purchase of U.S. Lock.

3.       COMPREHENSIVE FINANCIAL RESTRUCTURING PLAN / CONFIRMATION OF CHAPTER
         11 FILING

         Over the past several years, the Company has endeavored to reduce its
high level of debt through the monetization of assets and to improve the
efficiencies of its continuing businesses. As a result, the Company undertook
various initiatives to raise cash, improve its cash flow and reduce its debt
obligations and / or improve its financial flexibility during that period.
However, the Company believed that it would have been unable to continue to make
all of the interest and principal payments under its debt obligations without
the monetization of the value of the shares of the Barnett Common Stock owned by
the Company and the development of a comprehensive financial restructuring plan.
The key developments in the comprehensive financial restructuring were as
follows:

         -        On December 13, 1999, the Company and an ad hoc committee (the
                  "Committee") representing the holders of approximately 87.6%
                  of the $92.8 million outstanding principal amount of Waxman
                  Industries' Deferred Coupon Notes and approximately 65% of the
                  Senior Notes of Waxman USA Inc., a direct wholly-owned
                  subsidiary of the Company, entered into an agreement (the
                  "Debt Reduction Agreement") that provided, subject to certain
                  conditions (including Bankruptcy Court approval), for the
                  process that would lead to the full satisfaction of the
                  Deferred Coupon Notes and the Senior Notes as part of a
                  comprehensive financial restructuring of the Company.
         -        On July 10, 2000, the Company announced that it had reached
                  agreements with the Committee, among others, for the
                  monetization of its Barnett Common Stock and the financial
                  restructuring of Waxman Industries. These agreements included
                  the Company's agreement to vote its 7,186,530 shares of
                  Barnett Common Stock owned by Waxman USA Inc. in favor of the
                  acquisition of Barnett by Wilmar Industries, Inc. for $13.15
                  per share.
         -        On August 28, 2000, the Company and the Committee commenced
                  the solicitation for the approval of the Deferred Coupon Note
                  holders for the jointly sponsored, prepackaged plan of
                  reorganization in advance of its filing with the United States
                  Bankruptcy Court (the "Joint Plan"). Under the Joint Plan, the
                  holders of the Deferred Coupon Notes were the only impaired
                  class of creditors; none of the Company's operating
                  subsidiaries or divisions were included in the filing and they
                  paid their trade creditors, employees and other liabilities
                  under normal conditions.
         -        On September 1, 2000, the Company sold to Barnett 160,723
                  shares of Barnett Common Stock to fund the interest due on the
                  Company's Senior Notes.
         -        On September 27, 2000, the Barnett shareholders approved the
                  Barnett Merger.
         -        On September 28, 2000, the holders of approximately 97% of the
                  Deferred Coupon Notes voted in favor of accepting the Joint
                  Plan, with the remaining holders not voting.
         -        On September 29, 2000, the Company received gross proceeds
                  from the sale of the remaining Barnett Common Stock, which
                  together with the shares sold to Barnett on September 1, 2000,
                  amounted to $94.5 million. The Company utilized the proceeds
                  from the sale of the Barnett Common Stock in the following
                  order:
                  -        paid or reserved for payment approximately $1.35
                           million for state and federal taxes associated with
                           the sale of the Barnett shares.
                  -        reduced its borrowings under its working capital
                           credit facility by approximately $10 million.


33
<PAGE>   34

                  -        retired all of its approximately $35.9 million
                           principal amount of Senior Notes, plus accrued
                           interest.
                  -        paid approximately $6.0 million in semi-annual
                           interest due on June 1, 2000 to its Deferred Coupon
                           Note holders.
                  -        funded a dedicated account with the remaining gross
                           proceeds of approximately $39.0 million, which was
                           used for the full satisfaction of the Deferred Coupon
                           Notes, including accrued interest, upon confirmation
                           of the Joint Plan.
         -        On October 2, 2000, the Company, excluding Waxman USA Inc. and
                  all of its direct and indirect operating subsidiaries, filed a
                  petition for reorganization under Chapter 11 of the U.S.
                  Bankruptcy Code in the United States Court for the District of
                  Delaware. The petition sought confirmation by the court of the
                  Joint Plan to settle, at a discount, all amounts due on the
                  Company's Deferred Coupon Notes. Under the Joint Plan, the
                  only impaired creditors were the Deferred Coupon Note holders.
         -        On November 14, 2000, the Company's Joint Plan was approved by
                  the Court
         -        On November 16, 2000, the Company's Joint Plan became
                  effective, and the Company paid its obligation to the Deferred
                  Coupon Note holders.
         -        On March 14, 2001, the Court closed the Chapter 11 case, and
                  the Company emerged from bankruptcy.

4.       MANAGEMENT'S REVIEW OF OPERATIONS - RESTRUCTURING AND IMPAIRMENT
         CHARGES

         Since fiscal 1994, the Company's strategic effort has been to reduce
its high level of debt through the monetization of assets and to improve the
efficiencies from its continuing businesses. As a result, the Company has
undertaken various initiatives to raise cash, improve its cash flow and reduce
its debt obligations or improve its financial flexibility during that period.
Accordingly, management performed strategic reviews of its business operations
in past fiscal years that resulted in the Company recording significant charges
as follows.

FISCAL 2001 --

         DISTRIBUTION AND PACKAGING OPERATIONS CONSOLIDATION: Included in the
results for the fiscal 2001 are $0.35 million in additional costs and
restructuring charges recorded by Consumer Products during the quarter ended
September 30, 2000 which were associated with its warehouses closed in prior
years.

FISCAL 2000 --

         PRODUCT LINE CONSOLIDATION: In the second quarter of fiscal 2000,
Consumer Products recorded a restructuring charge of $1.3 million related to the
consolidation of its packaged plumbing products under the Plumbcraft(R) brand
name. The Company believes the Plumbcraft(R) packaging, which was re-designed,
and the consolidation of brands has resulted in cost savings by reducing the
amount of inventory needed to support the business and creating workforce
efficiencies.

         DISTRIBUTION AND PACKAGING OPERATIONS CONSOLIDATION: In the fourth
quarter of fiscal 2000, Consumer Products recorded a $0.6 million restructuring
charge to consolidate its Grand Prairie, Texas warehouse into its national
distribution center in Groveport, Ohio, and to move its packaging operations
from Tijuana, Mexico to the Company's operations in China. The facilities were
closed at a time when leases expired, therefore, there are no future leases
costs for the closed facilities. The warehouse closure costs included costs
associated with the incremental employee salaries and benefits associated with
closing the warehouse of $0.2 million and other miscellaneous moving and closing
costs of $0.4 million. All but $0.1 million of these costs were paid in fiscal
2000. Consumer Products also wrote off $1.7 million in packaging material and
other inventory associated with these closings, which are recorded in cost of
sales.

         ASSET IMPAIRMENT: In the fourth quarter of fiscal 2000, Consumer
Products recorded an asset impairment charge of $6.7 million related to a
write-off of goodwill as required by SFAS No. 121 "Accounting for the Impairment
of Long-Lived Assets and Assets to Be Disposed Of", for two product lines that
were acquired by Consumer Products in December 1986 and May 1988. This charge
has been reported as a separate component in operating expenses and reflects the
lack of operating cash flow from operations to support future growth, the
inconsistency of the Company's and Consumer Products' earnings, the
competitiveness of the industry in supplying customers in the D-I-Y retail
market and the cash flow expectations of the business, as compared to the
contribution of those product lines, along with management's plans associated
with the Company's comprehensive financial restructuring plan.


34
<PAGE>   35

         CLOSURE OF OPERATIONS: During the fourth quarter of fiscal 2000, TWI
closed Premier Faucet Corporation, one of its facilities in China that
manufactured faucets and faucet components. The closure resulted in a charge of
$1.2 million to write down fixed assets and other long term assets to their fair
value and provide for miscellaneous costs to close the facility. In addition,
the operation recorded a charge of $0.5 million to write down inventory and
other assets, which is recorded in cost of sales and $0.4 million to write down
accounts receivable, which was charged to sales. The loss from this operation in
fiscal 2000 and 1999 amounted to $2.0 million and $0.6 million, respectively

FISCAL 1999 -

         WAREHOUSE MOVE: In the first quarter of fiscal 1999, Consumer Products
recorded a restructuring charge of $1.35 million related to the relocation of
its Bedford Heights, Ohio warehouse to Groveport, Ohio. Included in the charge
were severance benefits for personnel and the loss on the write-off of tangible
assets at the Bedford Heights warehouse. The Company believes that the
relocation to a more modern and efficient facility has enabled Consumer Products
to provide more sophisticated distribution services to its customers and has
helped it remain competitive through annual cost savings. In the third and
fourth quarters of fiscal 1999, Consumer Products recorded an additional
non-recurring charge of $0.45 million and $0.27 million, respectively, for
additional costs involved with the move, the training of personnel and the
future shortfall on subleasing the warehouse in Bedford Heights.

5.       DISPOSAL OF BUSINESSES:

         A. SALE OF MEDAL OF PENNSYLVANIA, INC. - FISCAL 2001

         The Company sold substantially all of the assets and certain
liabilities of Medal of Pennsylvania, Inc. ("Medal"), to a newly formed
corporation, Medal USA, Inc. for approximately $0.8 million in cash and the
assumption of certain liabilities (the "Medal Sale"). The Medal Sale was
effective March 31, 2001, resulting in a net pretax loss of $1.1 million in the
quarter ended March 31, 2001.

         The Company consolidated Medal's financial information in its results
through March 31, 2001. The impact of not consolidating Medal's results would
have been to reduce consolidated net sales and improve the Company's net income
(loss) as follows (in thousands, except per share data):

<TABLE>
<CAPTION>
                                               Fiscal 2001         Fiscal 2000       Fiscal 1999
                                               -----------         -----------       -----------
<S>                                               <C>                 <C>               <C>
          Net sales                               $  3,407            $  4,724          $4,854
          Net loss                                $   (151)           $   (103)         $  (43)
          Basic and diluted loss per share        $  (0.12)           $  (0.09)         $(0.04)
</TABLE>

B.       SALE OF WESTERN AMERICAN MANUFACTURING INC.  - FISCAL 2000

         Effective March 31, 2000, the Company sold substantially all of the
assets and certain liabilities of Western American Manufacturing Inc., a
division of TWI, to a Mexican company, Niples Del Norte, S.A. de C.V. for
approximately $1.8 million in cash (the "WAMI Sale"), resulting in a net pretax
loss of $2.0 million, including approximately $1.0 million for the write-off of
goodwill.

         The Company consolidated WAMI's financial information in its results
through March 31, 2000. The impact of not consolidating WAMI's results would
have reduced the consolidated net sales and reduced the net loss for the Company
as follows (in thousands, except per share data):

<TABLE>
<CAPTION>
                                               Fiscal 2001         Fiscal 2000       Fiscal 1999
                                               -----------         -----------       -----------
<S>                                                 <C>                <C>            <C>
          Net sales                                 --             $  2,923           $3,542
          Net loss                                  --             $   (273)          $ (743)
          Basic and diluted loss per share          --             $  (0.23)          $(0.62)
</TABLE>



35
<PAGE>   36


C.       SALE OF U.S. LOCK - FISCAL 1999

         In January 1999, the Company sold certain of the assets and liabilities
of U.S. Lock, a division of WOC, to Barnett, for approximately $33.0 million in
cash, less certain post closing adjustments. A portion of the proceeds from the
sale of U.S. Lock was used to repay the BankAmerica Business Credit working
capital loan collateralized by the accounts receivable and inventory of U.S.
Lock and to pay expenses associated with the transaction, with the remaining
funds being reinvested in the Company's businesses.

         The sale of U.S. Lock resulted in an estimated net pretax gain of $18.3
million, of which approximately $8.1 million was originally reported as a
deferred gain for financial statement purposes due to the Company's continued
ownership of 44.2% of Barnett, the acquirer of U.S. Lock. The Company recognized
the deferred gain as the goodwill generated by the purchase of U.S. Lock was
amortized by Barnett, or as the Company reduced its ownership interest in
Barnett. In fiscal 2000 and the fourth quarter of fiscal 1999, the Company
recognized $0.2 million and $0.1 million of this deferred gain, respectively. In
fiscal 2001, the Company recognized $7.8 million in deferred gain on the sale of
U.S. Lock in the quarter ended September 30, 2000 due to the sale of the
Company's remaining investment in Barnett. The Company utilized a portion of its
net operating loss carryforwards to offset a portion of the tax on the net gain
from the sale of U.S. Lock.

         The Company consolidated U.S. Lock's financial information in its
results through the date of its sale in December 31, 1998. The impact of not
consolidating U.S. Lock's results would have reduced the consolidated net sales
and increased the net loss for the Company as follows (in thousands, except per
share data):

<TABLE>
<CAPTION>
                                            Fiscal 2001        Fiscal 2000       Fiscal 1999
                                            -----------        -----------       -----------
<S>                                               <C>                <C>            <C>
          Net sales                               --                 --             $13,361
          Net income                              --                 --             $ 1,000
          Basic  and  diluted  income  per
          share                                   --                 --             $  0.83
</TABLE>

6.       EXTRAORDINARY ITEMS

         In September 2000, the Company retired Waxman USA's Senior Notes,
utilizing a portion of the proceeds from the Barnett Merger. As a result, the
Company wrote off $57,000, net of taxes of $38,000, of deferred loan costs
associated with these notes.

         In November 2000, the Company reported net extraordinary income of
$52.2 million, which included a gain of $56.5 million from the retirement of the
Company's $92.8 million of Deferred Coupon Notes at a discount, the write-off of
$1.9 million of unamortized debt issuance costs associated with the Deferred
Coupon Notes and $2.4 million of expenses associated with the debt
restructuring. The Company did not provide a provision on the extraordinary gain
due to the tax regulations on the treatment of debt defeasance income in a
bankruptcy.

7.       DEBT

         A.       LONG-TERM DEBT

         Total other long-term debt consists of the following at June 30, 2001
and 2000 (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                                                     2001        2000
                                                                                                   --------     --------
<S>                                                                                                <C>          <C>
Bank Agreement                                                                                     $  9,870     $ 18,948
Capital lease maturing in 2003, bearing interest at 7.75%, secured by the leased equipment              169          356
Other debt, maturing through 2019, bearing interest at 7.4%, secured by TWI's land and building         538        1,842
                                                                                                   --------     --------
                                                                                                     10,577       21,146
Less:  current portion                                                                              (10,045)     (20,366)
                                                                                                   --------     --------
Long-term debt, net of current portion                                                             $    532     $    780
                                                                                                   ========     ========
</TABLE>


36
<PAGE>   37

         On June 17, 1999, the Company entered into the Loan and Security
Agreement with Congress Financial Corporation ("Congress Financial") to replace
the Credit Agreement with BankAmerica Business Credit, Inc. that was to expire
on July 15, 1999. The Loan and Security Agreement is between Consumer Products,
Medal of Pennsylvania, Inc. ("Medal" and formerly known as WOC Inc.), WAMI and
WAMI Sales, as borrowers (the "Borrowers"), with the Company, Waxman USA Inc.
("Waxman USA") and TWI as guarantors (the "Loan and Security Agreement"). In
March 2000, the Company and Congress Financial Corporation amended the loan
agreement to, among other changes, increase the facility by up to $3.0 million.
The Loan and Security Agreement provided, among other things, for revolving
credit advances of up to $22.0 million. In April 2000, the Loan and Security
Agreement was further amended to allow the sale of substantially all of the
assets of WAMI and in July 2000 to allow the sale of all of the Barnett Common
Stock. This facility decreased to $20 million with the completion of the Barnett
Sale in September 2000. In the fiscal 2001 fourth quarter, this facility was
amended to allow the sale of Medal and further decreased to $15.0 million due to
the reduction in the Company's asset borrowing base. As of June 30, 2001, the
Company had $9.9 million in borrowings under the revolving credit line of the
facility and had approximately $1.0 million available under such facility. The
Loan and Security Agreement, which was to expire on September 1, 2001, was
extended until June 17, 2002 as a result of the retirement of the Company's
Senior Notes and Deferred Coupon Notes.

         The Loan and Security Agreement provides for revolving credit advances
of (a) up to 85.0% of the amount of eligible accounts receivable, (b) up to the
lesser of (i) $10.0 million or (ii) 60% of the amount of eligible raw and
finished goods inventory. Until the sale of the Barnett Common Stock, the Loan
and Security Agreement allowed the Company to borrow up to the lesser of i)
$10,000,000 or ii) 70% of the fair value of the 1,000,000 shares of Barnett Inc.
common stock. Revolving credit advances bear interest at a rate equal to (a)
First Union National Bank's prime rate plus 0.5% or (b) LIBOR plus 2.50%. The
Loan and Security Agreement includes a letter of credit subfacility of $10.0
million, with none outstanding at June 30, 2001. Borrowings under the Loan and
Security Agreement are secured by the accounts receivable, inventories, certain
general intangibles, and unencumbered fixed assets of Waxman Industries, Inc.,
Consumer Products, TWI, International Inc. and Medal, and a pledge of 65% of the
stock of various foreign subsidiaries. The Loan and Security Agreement requires
the Borrowers to maintain cash collateral accounts into which all available
funds are deposited and applied to service the facility on a daily basis. The
Loan and Security Agreement prevents dividends and distributions by the
Borrowers except in certain limited instances including, so long as there is no
default or event of default and the Borrowers are in compliance with certain
financial covenants, and contains customary negative, affirmative and financial
covenants and conditions. The Company was in compliance with all loan covenants
at June 30, 2001. The Loan and Security Agreement also contains a material
adverse condition clause, which allows Congress Financial Corporation to
terminate the Agreement under certain circumstances.

B.       SENIOR SECURED DEFERRED COUPON NOTES

         On May 20, 1994, the Company exchanged $50 million principal amount of
its Senior Subordinated Notes (as defined below) for $50 million initial
accreted value of 12 3/4% Senior Secured Deferred Coupon Notes due 2004 (the
"Deferred Coupon Notes") along with detachable warrants to purchase 295,000
post-split shares of the Company's common stock. The Deferred Coupon Notes were
fully accreted at June 1, 1999, and began accruing cash interest at a rate of 12
3/4% which became payable on December 1, 1999 and semi-annually thereafter. The
Deferred Coupon Notes were redeemable, in whole or in part, at the option of the
Company, after June 1, 1999 at 106.375% of accreted value, which decreased
annually to 100% at the maturity date. The Deferred Coupon Notes were secured by
a pledge of the capital stock of Waxman USA. The Deferred Coupon Notes ranked
senior in right of payment to all existing and future subordinated indebtedness
of the Company and rank pari passu in right of payment with all other existing
or future unsubordinated indebtedness of the Company. The Deferred Coupon Notes
contained certain covenants which, among other things, limited the ability of
the Company and its subsidiaries to incur additional indebtedness, transfer or
sell assets, pay dividends, make certain restricted payments or investments,
create liens or enter into sale lease-back transactions, transactions with
affiliates and mergers.

         The warrants are exercisable through June 1, 2004. As a result of the
Company's reverse stock split in February 2001, the original 2.95 million
warrants exercisable at $2.45 per share became 295,000 warrants exercisable at
$24.50 per share. A portion of the initial accreted value of the Deferred Coupon
Notes had been allocated to the warrants and as a result, paid-in capital
increased by $2.5 million. The related $2.5 million reduction in the recorded
initial accreted value of the Deferred Coupon Notes was being amortized as
interest expense over the life of the Deferred Coupon Notes, and was accelerated
with the settlement of the Deferred Coupon Notes.


37
<PAGE>   38

         On November 14, 2000, the Company's Joint Plan was approved by the
Courts and on November 16, 2000, the Company's Joint Plan became effective and
the Company paid its obligation to the Deferred Coupon Note holders (see Note
3).

         C.       SENIOR NOTES

         On April 3, 1996, the Company, through its wholly-owned subsidiary,
Waxman USA, consummated an offer to exchange $48.8 million principal amount of
its 11 1/8% Senior Notes due September 1, 2001 ("Senior Notes") for a like
amount of the Company's outstanding 13 3/4% Senior Subordinated Notes due June
1, 1999 ("Senior Subordinated Notes"), and in connection therewith solicited
consents to certain amendments to the indenture pursuant to which the Senior
Subordinated Notes were issued. Approximately $43.0 million of Senior
Subordinated Notes were exchanged in fiscal 1996. In fiscal 1997, the Company
initiated a similar exchange offer and exchanged an additional $4.9 million of
Senior Subordinated Notes, bringing the total amount exchanged to $47.9 million.

         In May 1997, the Company commenced an offer to purchase $12.0 million
principal amount of Senior Notes at par (the "Purchase Offer"). The offer
expired on July 2, 1997, with $2.5 million of the notes being purchased. On July
3, 1997, the Company called for the redemption of $9.5 million of Senior Notes
that had not been tendered in the Purchase Offer, and on August 4, 1997, the
Company completed the note redemption. The Company used a portion of the net
proceeds from the Barnett Secondary Offering to purchase the Senior Notes. The
Company recorded an extraordinary charge of $0.2 million in the first quarter of
fiscal 1998 related to the write-off of unamortized deferred financing costs
associated with the purchase and redemption of these Senior Notes. On September
29, 2001, the Company redeemed the remaining Senior Notes as part of its Debt
Reduction Agreement, paying the principal and interest in full.

         The Senior Notes were general unsecured obligations of Waxman USA
ranking pari passu in right of payment to any future indebtedness of Waxman USA
that was not subordinated in right of payment to the Senior Notes and senior in
right of payment to any future indebtedness of Waxman USA that was subordinated
in right of payment to the Senior Notes. The Senior Notes were structurally
subordinated to the Loan and Security Agreement and any refinancing thereof. The
indenture under which the Senior Notes were issued (the "Senior Note Indenture")
contained certain covenants that, among other things, limited the ability of
Waxman USA and its subsidiaries to incur additional indebtedness, transfer or
sell assets, pay dividends, make certain other restricted payments or
investments, create liens or enter into sale lease-back transactions,
transactions with affiliates and mergers.

         D.       SENIOR SUBORDINATED NOTES

         In June 1989, the Company issued $100 million principal amount of
Senior Subordinated Notes. During 1994, the Company exchanged $50 million
principal amount of the Senior Subordinated Notes for a like amount of Deferred
Coupon Notes. As discussed above, the Company issued Senior Notes in exchange
for $43.0 million principal amount of Senior Subordinated Notes in fiscal 1996
and an additional $4.9 million in fiscal 1997. On June 1, 1999, approximately
$0.9 million of Senior Subordinated Notes matured, representing the remaining
amount of the Senior Subordinated Notes, and were repaid.

         E.       CAPITAL LEASES

         The Company has certain obligations under capital leases which are
included in the debt balances in the Long-Term Debt table provided in Note 7A.
The obligations under a capital lease with a fixed interest rates of 7.75%,
collateralized by property, plant and equipment. Property under capitalized
leases consists of the following:

<TABLE>
<CAPTION>
                                              2001                    2000
                                              ----                    ----
<S>                                          <C>                     <C>
         Machinery and equipment               411                     411
         Less: Accumulated depreciation         93                      52
                                                --                      --
                                             $ 318                   $ 359
                                             =====                   =====
</TABLE>


38
<PAGE>   39


         The future minimum rentals for property under capital leases are as
follows:

         2002                                                      $120
         2003                                                        59
                                                                  -----
         Total minimum lease obligation                             179
         Less interest                                               10
                                                                  -----
         Present value of total minimum lease obligation          $ 169
                                                                  =====

         F.       MISCELLANEOUS

         The Company made cash interest payments of $9.3 million in fiscal 2001,
$11.3 million in fiscal 2000 and $6.2 million in fiscal 1999. The Company made
its June 1, 2000 interest payment to the Deferred Coupon Note Holders in
September 2000, with a portion of the proceeds from the Barnett Merger as part
of an agreement with the Ad Hoc Committee. The Ad Hoc Committee had provided
instructions to the Trustee for the Deferred Coupon Notes not to take any action
with respect to the failure to pay the June interest payment, pending the
anticipated completion of the Barnett Merger. The Company reported interest
income of $0.3 million in fiscal 2001 and $0.2 million in fiscal 1999, but did
not have interest income in fiscal 2000. Prior to fiscal 2001, the Company also
had a significant amount of non-cash interest, accrued interest and interest
cost from the amortization of deferred financing costs, which made up the
balance of the interest expense presented in the accompanying consolidated
statements of operations.

         Management believes the carrying value of its bank loan approximates
its fair value as it bears interest based upon the banks' prime lending rates.

8.       INCOME TAXES

         The Company accounts for income taxes in accordance with the provisions
of SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 utilizes the asset
and liability method, where deferred tax assets and liabilities are recognized
for the future tax consequences attributable to net operating loss carryforwards
and to differences between the financial statement carrying amounts of assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which these temporary differences are expected to be
recovered or settled.

         The components of income (loss) from continuing operations before
income taxes and extraordinary gain are as follows (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                                    Fiscal Year Ended June 30,
                                                                                    --------------------------
                                                                                  2001          2000          1999
                                                                                  ----          ----          ----

<S>                                                                           <C>         <C>            <C>
        Domestic                                                              $ 47,895    $ (26,683)     $ (7,209)
        Foreign                                                                  1,611       (2,192)           761
                                                                               -------     ---------      --------
        Total                                                                  $49,506     $(28,875)      $(6,448)
                                                                               =======     =========      ========
</TABLE>

         The components of the provision for income taxes are (in thousands of
dollars):

<TABLE>
<CAPTION>
                                                                                    Fiscal Year Ended June 30,
                                                                                    --------------------------
        Currently payable:                                                         2001         2000          1999
                                                                                   ----         ----          ----
<S>                                                                             <C>           <C>          <C>
        U.S. Federal                                                            $   740       $   --       $   171
        Foreign, state and other                                                    573        (200)         1,398
                                                                                -------      -------     ---------
             Total current                                                        1,313        (200)         1,569
        Deferred: State                                                             367          173         (540)
                                                                                -------      -------     ---------
             Total provision                                                    $ 1,680       $ (27)       $ 1,029
                                                                                =======       ======       =======
</TABLE>


39
<PAGE>   40

         Barnett is not included in the Company's consolidated tax return.

         The following table reconciles the U.S. statutory rate to the Company's
effective tax rate:


                                             2001          2000          1999
                                             ----          ----          ----
U.S. statutory rate                           35.0%         35.0%         35.0%
Domestic losses not benefited                   --         (21.5)           --
State taxes, net                               0.8           0.4          (6.0)
Goodwill amortization                           --          (9.6)         (1.5)
Foreign tax items                             (0.6)         (3.1)          0.1
Change in valuation allowance                (32.0)           --         (22.0)
Nondeductible compensation                      --            --         (14.7)
Original issue discount                         --          (0.9)         (3.8)
Other, net                                     0.2          (0.2)         (3.1)
                                            ------        ------        ------
     Effective tax rate                        3.4%          0.1%        (16.0%)
                                            ======        ======        ======

         The deferred tax assets and liabilities as of June 30, 2001 and 2000
are as follows (in thousands of dollars):


                                                        2001             2000
                                                        ----             ----
Net operating loss carryforwards                      $  6,130         $ 23,329
Original issue discount                                     --           16,806
Deferred gain on sale of U.S. Lock                          --            3,103
Accrued expenses                                           163              175
Inventories                                                405              732
Accounts receivable                                        188              284
Procurement costs                                        1,005            1,071
Alternative minimum tax credit                           1,743            1,003
Other                                                      448              321
                                                      --------         --------
     Deferred tax asset                                 10,082           46,824
                                                      --------         --------
Investment in subsidiaries                                  --          (14,464)
Property                                                  (962)            (888)
     Deferred tax liabilities                             (962)         (15,352)
                                                      --------         --------
     Net deferred tax asset                              9,120           31,472
    Valuation allowance                                 (9,120)         (31,105)
                                                      --------         --------
                                                   $        --         $    367
                                                      ========         ========


         SFAS No. 109 requires the Company to assess the realizability of its
deferred tax assets based on whether it is more likely than not that the Company
will realize the benefit from these deferred tax assets in the future. If the
Company determines the more likely than not criteria is not met, SFAS No. 109
requires the deferred tax assets be reduced by a valuation allowance. In
assessing the realizability of its net deferred tax asset as of June 30, 2001,
the Company considered the historic performance of the Company and uncertainty
of it being able to generate enough domestic taxable income to utilize these
assets. At June 30, 2001, the Company's net deferred tax assets were fully


40
<PAGE>   41
offset by a valuation allowance. At June 30, 2000, the Company's net deferred
tax assets were substantially offset by a valuation allowance, except for the
deferred tax asset related to state taxes paid on the deferred gain on the U.S.
Lock sale, due to the uncertainty at the time of the completion of the Barnett
Merger and the other components of the comprehensive financial restructuring
plan. In fiscal 2001, the Company did not record a tax provision on the
extraordinary gain from the defeasance of debt due to its favorable treatment in
a bankruptcy. For regular federal tax purposes, the Company's net operating loss
carryforwards were sufficient to offset any regular federal tax liability.
However, the Company provided for federal taxes based on the alternative minimum
tax method in fiscal 2001 and for state and various foreign taxes. In addition
to the net operating losses utilized, the Company lost a portion of its net
operating loss carryforwards as a result of the bankruptcy. At June 30, 2001,
the Company had $17.5 million of available domestic net operating loss
carryforwards for income tax purposes, which will expire in 2010 through 2020.

         The Company made income tax payments of $1.2 million in fiscal 2001,
$1.2 million in fiscal 2000 and $0.5 million in fiscal 1999. Refunds received
totaled $6,000 in fiscal 2001, $445,000 in fiscal 2000 and $1,300 in fiscal
1999.

9.       LEASE COMMITMENTS

         The Company leases certain warehouse and office facilities and
equipment under operating lease agreements, which expire at various dates
through 2009

         Future minimum rental payments are as follows (in thousands of dollars:

         2002                                      $669
         2003                                       470
         2004                                       360
         2005                                       348
         2006                                       343
         Thereafter                                 800
                                                    ---
                                                 $2,990
                                                 ======

         Total rent expense charged to operations was $0.8 million in fiscal
2001, $1.5 million in fiscal 2000 and $1.6 million in fiscal 1999. Consumer
Products leases certain warehouse space from related parties. Related parties'
rent expense totaled $0.3 million in each of fiscal 2001, fiscal 2000 and fiscal
1999. Those related party relationships consist of the following:

         -        Aurora Investment Co., a partnership owned by Melvin Waxman,
                  Chairman of the Board and Co-Chief Executive Officer of the
                  Company, and Armond Waxman, President and Co-Chief Executive
                  Officer of the Company, together with certain other members of
                  their families, is the owner and lessor of the building used
                  by Consumer Products for its executive offices, administrative
                  functions and, until the move of the warehouse to Groveport,
                  Ohio, one of its distribution facilities. The warehouse
                  portion of this facility has been subleased to Handl-it, Inc.
                  (see below for information regarding affiliated ownership) for
                  the duration of the lease term. Rent expense under this lease
                  was $326,712 in each of fiscal 2001, fiscal 2000 and fiscal
                  1999. The Company reported rental income from Handl-it, Inc.
                  of $290,496 in fiscal 2001, $290,970 in fiscal 2000 and
                  $95,324 for a portion of fiscal 1999 for subleasing the
                  warehouse in Bedford Hts., Ohio. At June 30, 2001, Handl-it
                  owed Consumer Products $99,000 in unpaid rent, which is
                  expected to be paid in fiscal 2002.
         -        Handl-it Inc., a corporation owned by John S. Peters, a
                  director and consultant to the Company, together with certain
                  other members of his family, Melvin Waxman and Armond Waxman,
                  has provided Consumer Products with certain outside
                  warehousing services under month-to-month rental arrangements
                  from time to time. Consumer Products may enter into
                  month-to-month leases in the future, depending on its business
                  requirements at the time. There was no rent paid by Consumer
                  Products to Handl-it in fiscal 2001 and 2000, however, rent
                  expense under these lease arrangements was $10,000 for fiscal
                  1999. Consumer Products Group also paid Handl-it Inc.
                  approximately $27,000, $40,000 and $55,000 for the cost of
                  transportation of products in fiscal 2001, 2000 and 1999,
                  respectively.


41
<PAGE>   42

         From July 1, 1999 through April 2001, WAMI Sales utilized Handl-it Inc.
to provide all warehousing, labor and shipping functions in Cleveland, Ohio for
a fee equal to a percentage of monthly sales plus other direct expenses from
this operation. The charge amounted to $67,000 in fiscal 2001 and $74,000 in
fiscal 2000. The Company believes these terms are comparable to those that would
be available from unaffiliated third parties.

10.      RELATED-PARTY TRANSACTIONS

         The Company's wholly-owned subsidiaries engage in business transactions
with Barnett. Products sold to Barnett for resale totaled $3.9 million through
the date of the Barnett Merger on September 27, 2000 and $16.6 million for
fiscal 2001, $18.8 million in fiscal 2000 and $19.9 million in fiscal 1999.
There were no purchases from Barnett in fiscal 2001, 2000 or 1999.

         The Company and Barnett provided to and received from each other
certain selling, general and administrative services and reimbursed each other
for out-of-pocket disbursements related to those services until the Barnett
Merger under an agreement under which the Company provided certain managerial,
administrative and financial services ("the "Intercorporate Agreement") to
Barnett and was paid by Barnett for the allocable cost of the salaries and
expenses of the Company's employees while they were rendering such services.
Barnett also reimbursed the Company for actual out-of-pocket disbursements to
third parties by the Company required for the provision of such services by the
Company. In addition to the services provided by the Company to Barnett pursuant
to the Intercorporate Agreement, Barnett provided certain services to U.S. Lock,
until its sale. These services included the utilization of Barnett's management
information systems, financial accounting, order processing and billing and
collection services. The Company paid Barnett the allocable cost of the salaries
and expenses of Barnett's employees while they were performing such services.
The Company also reimbursed Barnett for all actual out-of-pocket disbursements
to third parties by Barnett required for the provision of such services. The net
effect of these charges is not material and the Intercorporate Agreement was
terminated with the consummation of the Barnett Merger.

         All amounts incurred by the Company on behalf of Barnett have been
reimbursed by Barnett. All amounts incurred by Barnett on behalf of the Company
have been reimbursed by the Company and are reflected in selling, general and
administrative expenses in the accompanying statements of operations.

         The Company purchases certain products, which it can not manufacture
with its existing operation, from WDI International, Inc., a company owned in
part by certain members of the Waxman family and other non-affiliated
individuals. In fiscal 2001, 2000 and 1999, purchases from WDI International
amounted to $1.7 million, $3.7 million and $1.3 million, respectively. The
Company believes that the prices it receives are on terms comparable to those
that would be available from unaffiliated third parties.

         The Company leases certain facilities and has other related party
relationships as more fully disclosed in Note 9. In addition, at June 30, 2001
and 2000, the Company had $0.5 million and $0.6 million, respectively, of
receivables from related parties.

11.      PROFIT SHARING AND 401(k) PLAN

         The eligible employees of the Company and certain subsidiaries of the
Company participate in a trusteed, profit sharing and 401(k) retirement plan.
Contributions are discretionary and are determined by the Company's Board of
Directors. There were no profit sharing contributions in fiscal 2001, 2000 or
1999; however, the Company contributed a 50% match of up to the first 4% of
salary deferral by employees, which amounted to $0.1 million in fiscal 2001,
2000 and 1999. The Company currently offers no other retirement, post-retirement
or post-employment benefits.

12.      CAPITAL STOCK AND REVERSE STOCK SPLIT

         Each share of the Company's common stock (the "Common Stock") entitles
its holder to one vote, while each share of Class B common stock entitles its
holder to ten votes. Cash dividends on the Class B common stock may not exceed
those on the Common Stock. Due to restricted transferability, there is no
trading market for the Class B common stock. However, the Class B common stock
may be converted, at the stockholder's option, into Common Stock on a
share-for-share basis at any time, without cost to the stockholder.

         The Company is authorized to issue two million shares of preferred
stock in series, with terms fixed by resolution of the Board of Directors. No
preferred shares have been issued as of June 30, 2001.


42
<PAGE>   43

         On February 6, 2001, the Company's shareholders approved a 1 for 10
reverse stock split, which became effective on February 20, 2001 (the "Reverse
Stock Split"). As a result of the Reverse Stock Split, every ten shares of the
Company's common stock and class B common stock were converted into one share of
common stock and class B common stock, respectively. The Company did not issue
certificates for fractional shares. Instead, shareholders who otherwise were
entitled to a fractional share received a full share for such fractional share
interest.

         The Company did not change the number of authorized shares of Common
Stock or Class B Common Stock under its Certificate of Incorporation, which is
set at 22,000,000 shares of Common Stock and 6,000,000 shares of Class B Common
Stock. On the record date for the Reverse Stock Split, there were 9,976,974
shares of Common Stock and 2,141,496 shares of Class B Common Stock outstanding
(not considering the effect of the proposed Reverse Stock Split). An additional
1,800,000 shares of Common Stock had been reserved for issuance under the 1992
Stock Option Plan, 100,000 shares of Common Stock had been reserved for issuance
under the 1996 Non-employee Director Incentive Plan and 500,000 shares of Common
Stock had been reserved for issuance under the Stock Appreciation Rights Plan.
In addition, 2,142,058 shares of Common Stock have been reserved for issuance
upon conversion of the Class B Common Stock. Each of these amounts decreased
ten-fold as a result of the Reverse Stock Split, and the exercise price of the
options issued under the aforementioned plans have been multiplied by ten.

         Warrants issued to the holders of the Company's former Deferred Coupon
Notes (the "Warrants") were also affected by the Reverse Stock Split. As a
result of the Reverse Stock Split, the number of shares purchasable upon
exercise of each Warrant was divided by ten, and the exercise price was
multiplied by ten. Therefore, the pre-split Warrants representing the rights of
the holders to purchase an aggregate of 2,950,000 Warrant Shares at $2.45 per
share became, on a post-split basis , the rights of the holders thereof to
purchase an aggregate of 295,000 Warrant Shares at $24.50 per share.

         Each stockholder's percentage share of total voting rights in the
Company is the same as it was prior to the Stock Split, except for the de
minimus effect of certain stockholders receiving an additional share of Common
Stock or Class B Common Stock in lieu of fractional shares. There was no change
in the number of stockholders as a result of the Stock Split. The par value of
each of the shares was not affected by the Stock Split.

         Shareholders are in the process of exchanging their stock certificates
representing pre-stock split shares for new stock certificates representing
post-stock split shares. The exchange of certificates is being managed by
American Stock Transfer & Trust Company, the Company's transfer agent. The
number of additional shares issued in lieu of fractional shares increased the
number of post-split shares by 154 for the Common Stock and 49 for the Class B
Common Stock.

13.      STOCK OPTION PLANS, RESTRICTED SHARE PLANS, STOCK APPRECIATION RIGHTS
         AND EMPLOYEE STOCK PURCHASE PLAN

         The Company has two plans under which stock options may be granted. The
Company applies APB Opinion No. 25 and related Interpretations in accounting for
these stock options. Accordingly, no compensation costs have been recognized for
these stock based compensation awards. Pro forma net income and earnings per
share for the fiscal years ended June 30, 2001, 2000 and 1999 assuming
compensation costs for the Company had been determined consistent with SFAS No.
123, "Accounting for Stock-Based Compensation", would have been (in thousands of
dollars, except per share data):

<TABLE>
<CAPTION>
                                                                      2001         2000          1999
                                                                      ----         ----          ----
<S>                                                                <C>          <C>          <C>
                    Net income (loss) as reported                  $ 100,048    $ (28,848)   $ (7,477)
                    Pro forma net income (loss)                    $  98,970    $ (29,102)   $ (7,865)

                    Basic income (loss) per share as reported      $   82.55    $  (23.91)   $  (6.20)
                    Pro forma basic income (loss) per share        $   82.48    $  (24.12)   $  (6.52)

                    Diluted income (loss) per share as reported    $   82.55    $  (23.91)   $  (6.20)
                    Pro forma diluted income (loss) per share      $   82.48    $  (24.12)   $  (6.52)
</TABLE>


         Pro forma disclosure for companies using APB Opinion No. 25 requires
calculating compensation cost for the effects of all awards granted in the first
fiscal year beginning after December 15, 1994. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes option pricing
model with the following assumptions used for


43
<PAGE>   44

grants made since July 1, 1995: no dividends; expected volatility of 138.9%;
average risk-free interest rate of 6.0%; and expected life of 8.9 to 10 years.
Because the cost of calculating compensation under SFAS No. 123 has not been
applied to options granted before July 1, 1995, the resulting pro forma expense
may not be representative of the actual expense that may be incurred in the
future.

         The 1992 Non-Qualified and Incentive Stock Option Plan, as amended (the
"1992 Stock Option Plan"), authorizes the issuance of an aggregate of 180,000
shares of Common Stock in the form of stock options to officers and key
employees of the Company or its subsidiaries. Under the terms of the 1992 Stock
Option Plan, all options granted are at an option price not less than the market
value at the date of grant and may be exercised for a period not exceeding 10
years from the date of grant. As of June 30, 2001, 34 persons held such options.

         In fiscal 1994, the Board of Directors of the Company adopted the 1994
Non-Employee Directors Stock Option Plan pursuant to which each current
non-employee director of the Company was granted an option to purchase an
aggregate of 2,000 shares of the Company's Common Stock at an exercise price of
$22.50 per share and each future non-employee director of the Company would be
granted, on the date such person becomes a non-employee director of the Company,
an option to purchase an aggregate of 2,000 shares of Common Stock at an
exercise price equal to the fair market value of the Company's Common Stock at
the date of grant. In addition, during fiscal 1994, the Company granted a
consultant to the Company an option to purchase an aggregate of 1,000 shares of
Common Stock at an exercise price of $22.50 per share. During fiscal 1999,
options to purchase 2,000 shares expired as a result of the retirement of one
non-employee director. As of June 30, 2001, 3 persons held such options.

         Changes in stock options outstanding for the 1992 Stock Option Plan and
the 1994 Non-Employee Directors Stock Option Plan are as follows (in thousands,
except per share prices):

<TABLE>
<CAPTION>
                           1992 Plan                          1994 Plan
                           --Shares        Option Price       -- Shares       Option Price
         Stock Options     Outstanding     Per Share         Outstanding      Per Share
         -------------     -----------     ---------         -----------      ---------

<S>                          <C>           <C>                      <C>         <C>
         Balance as of
           June 30, 1998     154           $10.00 - $56.25          7           $22.50
         Granted               8           $5.625 - $33.75          -                -
         Exercised            (1)          $10.00                   -                -
         Expired or
           terminated        (10)          $10.00 - $42.50         (2)               -
                             ---                                 ----           ------
         Balance as of
           June 30, 1999     151           $10.00- $56.25           5           $22.50
         Granted               9           $4.10                    -                -
         Exercised             -              --                    -                -
         Expired or
           terminated        (17)          $4.10 - $40.63           -           $22.50
                             ---                                 ----           ------
         Balance as of
           June 30, 2000     143           $10.00- $56.25           5           $22.50
         Granted              --               --                   -                -
         Exercised            --               --                   -                -
         Expired or
           terminated        (13)          $4.10 - $56.25           -           $22.50
                             ---                                 ----           ------
         Balance as of
           June 30, 2001     130           $4.10- $56.25            5           $22.50
                             ===                                 ====           ======
</TABLE>

         As of June 30, 2001, options for 119,364 shares were exercisable under
the 1992 Stock Option Plan and 5,000 were exercisable under the 1994
Non-Employee Directors Stock Option Plan.

         In fiscal 1996, the Board of Directors adopted the 1996 Non-Employee
Directors Restricted Share Plan (the "1996 Plan"). The 1996 Plan is designed to
increase the proprietary and vested interest of the non-employee directors of
the Company in the growth, development and financial success of the Company. The
1996 Plan calls for 500 restricted shares of the Common Stock to be granted to
each non-employee director for each five years of service as a director. The
restricted shares vest on the last day of the second consecutive year during
which the individual serves as a director after


44
<PAGE>   45

the date of the award. Prior to being vested, the shares bear a restricted
legend and are held by the Company's corporate secretary. There were no awards
made in fiscal 2001, 2000 or 1999.

         Also in fiscal 1996, the Stock Option Committee granted Stock
Appreciation Rights ("SAR") for 20,000 shares to each of the Co-Chief Executive
Officers of the Company at a base price of $33.75, and in September 1996, an SAR
for 10,000 shares to the President of Consumer Products at a base price of
$33.75. Each SAR expires ten years from the date of grant and vests in whole,
three years after the date of grant. Upon exercise, the grantee is entitled to
an amount equal to the excess of the fair value per share of the Common Stock on
the date of exercise over the base price of the SAR. Each SAR is exercisable, at
the election of the grantee, for either cash or Common Stock. The SAR ceases to
be exercisable on the date of the termination of the employment of the grantee
with the Company, except due to death, disability or other than "for cause". In
fiscal 1999, the Company recorded into income the reversal of the charge taken
in fiscal 1997 for the SAR's due to the market price of the Company's stock
being below the exercise price of the SAR's. There was no expense recorded for
the value of this plan in fiscal 2001 or 2000.

         The Company also allows employees to defer a portion of their salary to
participate in an Employee Stock Purchase Plan (the "ESPP"). The ESPP allows
employees to make an election to purchase shares at the lower of 85 percent of
the closing market price of the Company's stock on the first or last day of the
calendar year. In fiscal 2000, 6,117 shares were purchased by employees, while
there were no purchases in fiscal 2001 or 1999.

14.      CONTINGENCIES

         The Company is subject to various legal proceedings and claims that
  arise in the ordinary course of business. In the opinion of management, the
  amount of any ultimate liability with respect to these actions will not
  materially affect the Company's consolidated financial statements or results
  of operations.

         The Company or one of its indirect subsidiaries have been threatened
  with litigation by two separate California public interest groups alleging
  unlawful discharge of chemicals under California's Safe Drinking Water and
  Toxic Enforcement Act of 1986. The Company is researching the merits of the
  allegations and intends to contest and vigorously defend itself. Any potential
  liability related to this threatened litigation cannot be assessed at this
  time as the Company is in the very preliminary stages of its investigation.

15.      SEGMENT INFORMATION

         The Company's businesses distribute specialty plumbing products, floor
and surface protection products, galvanized, black, brass and chrome pipe
nipples, imported malleable fittings and other products. Since the foreign
sourcing and manufacturing operations sell a significant portion of their
products through the Company's wholly-owned operations, which primarily sell to
retailers, and to Barnett, a distributor, the Company has classified its
business segments into retail and non-retail categories. Products are sold to
(i) retail operations, including large national and regional retailers, D-I-Y
home centers and smaller independent retailers in the United States, and (ii)
non-retail operations, including wholesale and industrial supply distributors in
the United States. Sales outside of the United States are not significant. Until
the January 1, 1999 sale of U.S. Lock, the Company also distributed security
hardware to non-retail operations, including security hardware installers and
locksmiths. Set forth below is certain financial data relating to the Company's
business segments (in thousands of dollars).

<TABLE>
<CAPTION>
                                                             Corporate and
                                       Retail     Non-Retail     Other    Elimination     Total
                                       ------     ----------     -----    -----------     -----
<S>                                  <C>          <C>          <C>          <C>          <C>
         Reported net sales:
         Fiscal 2001                 $ 56,913     $ 24,177           --     $ (7,566)    $ 73,524
         Fiscal 2000                   61,011       30,597           --      (10,248)      81,360
         Fiscal 1999                   70,783       41,451           --      (13,118)      99,116


         Operating income (loss):
         Fiscal 2001                 $  1,459     $    628     $ (2,720)          --     $   (633)
         Fiscal 2000                  (11,578)        (857)      (2,928)          --      (15,363)
         Fiscal 1999                   (2,564)         164       (3,898)          --       (6,298)
         Identifiable assets:
         June 30, 2001               $ 26,907     $  9,135     $  4,790           --     $ 40,832
         June 30, 2000                 32,601       12,041       49,576           --       94,218
</TABLE>



45
<PAGE>   46

         The Company's foreign operations manufacture, assemble, source and
package products that are distributed by the Company's wholly-owned operations,
Barnett, retailers and other non-retail customers. Net sales for those foreign
operations amounted to $34.5 million, $40.2 million and $46.3 million for the
fiscal years ended June 30, 2001, 2000 and 1999, respectively. Of these amounts,
approximately $7.6 million, $10.2 million and $13.1 million were intercompany
sales for the fiscal years ended June 30, 2001, 2000 and 1999, respectively.
Identifiable assets for the foreign operations were $12.6 million and $14.6
million at June 30, 2001 and 2000, respectively.


                      SUPPLEMENTARY FINANCIAL INFORMATION

         Quarterly Results of Operations:

         Presented below is a summary of the unaudited quarterly results of
operations for the fiscal years ended June 30, 2001 and 2000 (in thousands,
except per share amounts).


<TABLE>
<CAPTION>
FISCAL 2001                                                  1ST QTR.     2ND QTR.     3RD QTR.     4TH QTR.
                                                             --------     --------     --------     --------
<S>                                                          <C>          <C>          <C>          <C>
Net sales                                                    $ 17,443     $ 17,960     $ 20,274     $ 17,847
Gross profit                                                    5,247        5,987        6,710        5,690
Restructuring, impairment and procurement charges                 504          300          300        1,400
Operating income (loss)                                          (916)         234          645         (596)
Gain on sale of Barnett, net                                   47,473           --           --           --
Loss on sale of Medal, net                                         --           --       (1,105)          --
Amortization of U.S. Lock gain                                  7,815           --           --           --
Income (loss) before provision (benefit) for income taxes
and extraordinary items                                        51,017          157         (798)        (870)
Extraordinary items                                               (57)      52,279           --           --
Net income (loss)                                            $ 48,210     $ 52,636     $   (848)    $     50
Basic loss per share:
   Net income (loss) before extraordinary items              $  39.83     $   0.29     $  (0.70)    $   0.04
   Extraordinary items                                           (.05)       43.14           --           --
                                                             --------     --------     --------     --------
   Net income (loss)                                         $  39.78     $  43.43     $  (0.70)    $   0.04
                                                             ========     ========     ========     ========
Diluted loss per share:
   Net income (loss) before extraordinary items              $  39.83     $   0.29     $  (0.70)    $   0.04
   Extraordinary items                                          (0.05)       43.14           --           --
                                                             --------     --------     --------     --------
   Net income (loss)                                         $  39.78     $  43.43     $  (0.70)    $   0.04
                                                             ========     ========     ========     ========

<CAPTION>


FISCAL 2000                                                  1ST QTR.     2ND QTR.     3RD QTR.     4TH QTR.
                                                             --------     --------     --------     --------
<S>                                                          <C>          <C>          <C>          <C>
Net sales                                                    $ 22,837     $ 19,702     $ 19,822     $ 18,999
Gross profit                                                    7,185        5,891        6,175        2,850
Restructuring, impairment and procurement charges                 150        1,300          500        8,420
Operating income (loss)                                           262       (2,192)      (1,065)     (12,368)
Loss on sale of WAMI, net                                          --           --       (1,966)         (58)
Loss before provision (benefit) for income taxes               (2,401)      (4,598)      (5,923)     (15,953)
Net loss                                                     $ (2,634)    $ (4,692)    $ (5,991)    $(15,531)
Basic loss per share:
   Net loss                                                  $  (2.19)    $  (3.89)    $  (4.97)    $ (12.84)
Diluted loss per share:
   Net loss                                                  $  (2.19)    $  (3.89)    $  (4.97)    $ (12.84)
</TABLE>

         Results for the fiscal 2001 first quarter were affected by the $47.5
million gain on the sale of the Company's remaining interest in Barnett, the
recognition a $7.8 million deferred gain on the sale of U.S. Lock and $0.35
million of restructuring charges to provide for additional future costs for
facilities closed in fiscal 2000. In the fiscal 2001 second

46
<PAGE>   47

quarter, the Company reported a net extraordinary gain of $52.3 million on the
defeasance of debt. In the fiscal 2001 third quarter, results were affected by
the $1.1 million loss on the sale of substantially all of the assets of Medal.
In the fiscal 2001 fourth quarter, the Company's tax provision was adjusted,
resulting in a benefit of $0.9 million.

         Results for the fourth quarter for fiscal 2000 were affected by certain
adjustments, including an increase in cost of sales at Consumer Products of $1.7
million to write off packaging material and other inventory associated with the
closing of its warehouse in Texas and packaging center in Mexico. In addition,
adjustments resulting from the closure of the Company's faucet component
manufacturing operation in China, resulted in a charge of $0.5 million to write
down inventory and other assets, which is recorded in cost of sales and $0.4
million to write down accounts receivable, which was charged to sales. The
Company also recorded restructuring and impairment charges in the fourth
quarter, including an asset impairment charge of $6.7 million by Consumer
Products to write off goodwill and a $0.6 million restructuring charge to
consolidate its Grand Prairie, Texas warehouse into its national distribution
center in Groveport, Ohio, and to move its packaging operations from Tijuana,
Mexico to the Company's operations in China. The Company also recorded a $1.2
million loss on the closure of the faucet operation in China.


ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTING AND FINANCIAL DISCLOSURE

         The Registrant filed a report on Form 8-K on March 30, 2001 regarding a
change of the Company's principal accountants responsible for auditing the
Company's financial statements from Arthur Andersen LLP ("AA") to Meaden &
Moore, Ltd. ("Meaden"). AA was dismissed by the Company, effective March 30,
2001, solely in furtherance of the Company's objective to lower certain
administrative expenses. The Board approved the engagement of Meaden as the
Company's principal accountant to audit the Company's financial statements,
effective March 31, 2001.

                                    PART III

         Part III, except for certain information relating to Executive Officers
included in Part I, Item 4A, is omitted inasmuch as the Company intends to file
with the Securities and Exchange Commission within 120 days of the close of its
fiscal year ended June 30, 2001 a definitive proxy statement pursuant to
Regulation 14A of the Securities Exchange Act of 1934.





















47
<PAGE>   48
                                     PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

     (a)      (1)     The following consolidated financial statements are
                      included in Part II, Item 8:

                      Report of Independent Public Accountants

                      Balance Sheets--June 30, 2001 and 2000

                      Statements of Operations--For the Years Ended June 30,
                      2001, 2000 and 1999

                      Statements of Stockholders' Equity--For the Years
                      Ended June 30, 2001, 2000 and 1999.

                      Statements of Cash Flows--For the Years Ended June 30,
                      2001, 2000 and 1999.

                      Notes to Financial Statements For the Years Ended June 30,
                      2001, 2000 and 1999.

                      Supplementary Financial Information

     (a)      (2)     All schedules have been omitted because the required
                      information is not present or not present in amounts
                      sufficient to require submission of the schedule, or
                      because the information required is included in the
                      consolidated financial statements including notes thereto.

     (a)      (3)     Exhibits

     3.1*             Certificate of Incorporation of the Company dated October
                      27, 1989 (Exhibit 3(a) to the Company's Form S-8 filed
                      December 4, 1989, File No. 0-5888, incorporated herein by
                      reference).

     3.2*             By-laws of the Company. (Exhibit 3.2 to Annual Report on
                      Form 10-K for the year ended June 30, 1990, File No.
                      0-5888, incorporated herein by reference.)

     4.7*             Warrant Agreement, dated as of May 20, 1994, by and
                      between Waxman Industries, Inc. and The Huntington
                      National Bank, as Warrant Agent (Exhibit 4.2 to Waxman
                      Industries, Inc.'s Form S-4 filed June 20, 1994,
                      incorporated herein by reference).

     4.8*             Warrant Certificate (Exhibit 4.3 to Waxman Industries,
                      Inc.'s Form S-4 filed June 20, 1994, incorporated herein
                      by reference).

     4.9*             Securities Purchase Agreement for Notes and Warrants dated
                      as of September 17, 1991, among the Company and each of
                      the Purchasers referred to therein. (Exhibit 4.4 to Annual
                      Report on Form 10-K for the year ended June 30, 1991, File
                      No. 0-5888, incorporated herein by reference).

     4.10*            Loan and Security Agreement, dated as of June 17, 1999
                      (the "Loan and Security Agreement"), by and among Congress
                      Financial Corporation, as Lender, and Waxman Consumer
                      Products Group Inc., WOC Inc., Western American
                      Manufacturing, Inc. and WAMI Sales, Inc., as Borrowers,
                      and Waxman Industries, Inc., Waxman USA Inc. and TWI,
                      International, Inc., as Guarantors (Exhibit 99.1 to
                      Waxman Industries Inc.'s Report on Form 8-K filed
                      June 17th 1999, incorporated herein by reference).

     4.37*            Agreement, dated as of December 8, 1999, by and the
                      Company, Waxman USA, each of the holders of the Company's
                      12 3/4% Senior Secured Deferred Coupon Notes due 2004
                      party thereto and each of the holders of Waxman USA's 11
                      1/8% Senior Notes due 2001 party thereto (together, the
                      "Consenting Noteholders") (Exhibit 10.1 to Current Report
                      on Form 8-K filed December 14, 1999, File No. 001-10273,
                      incorporated herein by reference).

     4.38*            Amendment, Consent and Waiver, dated as of July 9, 2000,
                      by and among the Company, Waxman USA and the Consenting
                      Noteholders (Exhibit 10.5 to Current Report on Form 8-K
                      filed July 17, 2000, File No. 0-5888, incorporated herein
                      by reference).



48
<PAGE>   49
     4.39*            Amendment No. 1 to Loan and Security Agreement dated as of
                      December 8, 1999 (Exhibit 4.39 to Annual Report on Form
                      10-K for the year ended June 30, 2000, File No. 0-5888,
                      incorporated herein by reference).

     4.40*            Amendment No. 2 to Loan and Security Agreement dated as of
                      March 29, 2000 (Exhibit 4.40 to Annual Report on Form 10-K
                      for the year ended June 30, 2000, File No. 0-5888,
                      incorporated herein by reference).

     4.41*            Amendment No. 3 to Loan and Security Agreement dated as of
                      May 1, 2000 (Exhibit 4.41 to Annual Report on Form 10-K
                      for the year ended June 30, 2000, File No. 0-5888,
                      incorporated herein by reference).

     4.42*            Amendment No. 4 to Loan and Security Agreement dated as of
                      July 10, 2000 (Exhibit 4.42 to Annual Report on Form 10-K
                      for the year ended June 30, 2000, File No. 0-5888,
                      incorporated herein by reference).

     4.43             Amendment No. 5 to Loan and Security Agreement dated as of
                      March 30, 2001.

     4.44             Amendment No. 6 to Loan and Security Agreement dated as of
                      May 9, 2001.

     10.1*            Lease between the Company as Lessee and Aurora Investment
                      Co. as Lessor dated June 30, 1992 (Exhibit 10.1 to Annual
                      Report on Form 10-K for the year ended June 30, 1992, File
                      No. 0-5888, incorporated herein by reference).

     10.2*            Policy Statement (revised as of June 1, 1980) regarding
                      the Company's Profit Incentive Plan (Exhibit 10(c)-1 to
                      Annual Report on Form 10-K for the year ended June 30,
                      1984, File No. 0-5888, incorporated herein by reference).

     10.4*            Form of Stock Option Agreement between the Company and its
                      Directors. (Exhibit 10.5 to Annual Report on Form 10-K for
                      the year ended June 30, 1991, File No. 0-5888,
                      incorporated herein by reference).

     10.6*            Tax Sharing Agreement dated May 20, 1994 among Waxman
                      Industries, Waxman USA, Waxman Consumer Products Group
                      Inc., WOC Inc. and Western American Manufacturing, Inc.
                      (Exhibit 10.6 to Waxman Industries, Inc.'s Form S-4 filed
                      June 20, 1994, incorporated herein by reference).

     10.7*            1992 Non-Qualified and Incentive Stock Option Plan of
                      Waxman Industries, Inc., adopted as of July 1, 1992
                      (Exhibit 10.7 to Annual Report of Form 10-K for the year
                      ended June 30, 1993, File No. 0-5888, incorporated herein
                      by reference).

     10.8*            Intercorporate Agreement dated May 20, 1994 among Waxman
                      Industries, Waxman USA, Waxman Consumer Products Group
                      Inc., WOC Inc. and Western American Manufacturing, Inc.
                      (Exhibit 10.7 to Waxman Industries, Inc.'s Form S-4).

     10.9*            Employee Stock Purchase Plan of Waxman Industries, Inc.,
                      adopted on September 1, 1992 (Exhibit 10.8 to Annual
                      Report on Form 10-K for the year ended June 30, 1993, File
                      No. 0-5888, incorporated herein by reference).

     10.10*           Employment Agreement dated November 1, 1994 between Waxman
                      Consumer Products Group Inc. and Laurence Waxman (Exhibit
                      10.5 to Waxman Industries, Inc.'s Amendment No. 4 to
                      Registration Statement on Form S-2 filed October 10, 1995,
                      Registration No. 33-54211, incorporated herein by
                      reference).

     10.11*           Intercorporate Agreement dated March 28, 1996 among Waxman
                      Industries, Inc., Waxman USA Inc., Waxman Consumer
                      Products Group Inc., WOC Inc. and TWI, International, Inc.
                      (Exhibit 10.8 to Waxman Industries, Inc.'s Amendment No. 8
                      to Registration Statement on Form S-2 filed April 15,
                      1996, Registration No. 33-54211, incorporated herein by
                      reference).


49
<PAGE>   50

     10.12*           Waxman Industries, Inc. 1996 Non-Employee Directors'
                      Restricted Share Plan (Exhibit A to Waxman Industries,
                      Inc. 1996 Proxy Statement, File No. 001-10273,
                      incorporated herein by reference).

     10.13*           SAR Agreement, dated as of March 29, 1996, between Waxman
                      Industries, Inc. and Armond Waxman (Exhibit 10.18 to
                      Waxman Industries, Inc. Form S-2 filed January 18, 1997,
                      incorporated herein by reference).

     10.14*           SAR Agreement, dated as of March 29, 1996, between Waxman
                      Industries, Inc. and Melvin Waxman (Exhibit 10.19 to
                      Waxman Industries, Inc. Form S-2 filed January 18, 1997,
                      incorporated herein by reference).

     10.25*           SAR Agreement, dated as of September 27, 1996, between
                      Waxman Industries, Inc. and Laurence Waxman (Exhibit 10.20
                      to Waxman Industries, Inc. Form S-2 filed January 18,
                      1997, incorporated herein by reference).

     10.26*           Merger Agreement, dated as of July 10, 2000, by and among
                      Wilmar Industries, Inc. ("Wilmar"), BW Acquisition, Inc.
                      ("BW Acquisition") and Barnett Inc. ("Barnett") (Exhibit
                      10.1 to Current Report on Form 8-K filed July 17, 2000,
                      File No. 0-5888, incorporated herein by reference).

     10.27*           Stockholder Agreement, dated as of July 10, 2000, by and
                      among the Company, Waxman USA, Wilmar and BW Acquisition
                      (Exhibit 10.2 to Current Report on Form 8-K filed July 17,
                      2000, File No. 0-5888, incorporated herein by reference).

     10.28*           Voting Trust Agreement, dated as of July 10, 2000, by and
                      among Waxman USA, Wilmar, BW Acquisition, Barnett and
                      American Stock Transfer & Trust Company. (Exhibit 10.3 to
                      Current Report on Form 8-K filed July 17, 2000, File No.
                      0-5888, incorporated herein by reference).

     10.29*           Agreement, dated as of July 7, 2000, by and between Waxman
                      USA and Barnett (Exhibit 10.4 to Current Report on Form
                      8-K filed July 17, 2000, File No. 0-5888, incorporated
                      herein by reference).

     16.1*            Letter Regarding Change in Certifying Accountants (Exhibit
                      16.1 to Current Report on Form 8-K, filed April 4, 2001m
                      File No. 0-4\5888, incorporated herein by reference).

     21.1*            Subsidiaries (Exhibit 21.1 to Waxman Industries, Inc.'s
                      Form S-4 filed June 20, 1994, incorporated herein by
                      reference).

     23.1             Consent of Meaden & Moore, Ltd.

     27.1             Financial Data Schedule


* Incorporated herein by reference as indicated.

     (b)      REPORTS ON FORM 8-K

                  None



50
<PAGE>   51



                                   SIGNATURES

         Pursuant to the requirements of Section 13 of 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.

                             WAXMAN INDUSTRIES, INC.
                             -----------------------


August 27, 2001               By: /s/  Armond Waxman
                                  ---------------------------------
                                  Armond Waxman
                                  President,
                                  Co-Chief Executive Officer
                                  and Director

         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.


August 27, 2001                   /s/  Melvin Waxman
                                  ---------------------------------
                                  Melvin Waxman
                                  Chairman of the Board,
                                  Co-Chief Executive Officer
                                  and Director


August 27, 2001                   /s/  Armond Waxman
                                  ---------------------------------
                                  Armond Waxman
                                  President,
                                  Co-Chief Executive Officer
                                  and Director


August 27, 2001                   /s/  Mark W. Wester
                                  ---------------------------------
                                  Mark W. Wester
                                  Chief Financial Officer
                                  and Vice President
                                  (principal accounting officer)


August 27, 2001                   /s/  Judy Robins
                                  ---------------------------------
                                  Judy Robins, Director


August 27, 2001                   /s/  Irving Z. Friedman
                                  ---------------------------------
                                  Irving Z. Friedman, Director


August 27, 2001                   /s/  Laurence S. Waxman
                                  ---------------------------------
                                  Laurence S. Waxman, Director


August 27, 2001                   /s/  John S. Peters
                                  ---------------------------------
                                  John S. Peters, Director




51