PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Effective January 27, 2000, the Company’s Common Stock was listed on the American Stock Exchange (“AMEX”) under the symbol WEX. Prior to being listed on AMEX, the Company’s Common Stock was traded on the Nasdaq SmallCap Market under the symbol WLET. The following table sets forth the high and the low bid quotations, as reported by the Nasdaq SmallCap Market through January 27, 2000 and as reported by AMEX thereafter. The bid quotations represent interdealer prices and do not include retail markets mark-ups, mark-downs or commissions and may not necessarily represent actual transactions.

On March 7, 2001, the fair market value of the Company’s Common Stock was $1.50, based on the closing sale price quoted by AMEX on that date. As of December 31, 2000, the Company had approximately 477 shareholders of record.

The Company has never paid cash dividends on its Common Stock. The Board of Directors presently intends to retain earnings for use in the Company’s business and does not anticipate paying cash dividends on Common Stock in the foreseeable future. Any future determinations as to the payment of dividends will depend on the financial condition of the Company and such other factors as are deemed relevant by the Board of Directors.

ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

RESULTS OF OPERATIONS – 2000 vs. 1999

Net Sales: Net sales decreased 1.8% to $19,500,336 for the year ended December 31, 2000, compared to sales of $19,863,703 for 1999. The reduction in net sales for 2000 from 1999 is attributed to decreased sales to OEM customers, offset in part by increased sales of the Company’s proprietary products, including sales of the new DC motor controllers and the SatSource™ GPS antenna product line.

Major OEM customers have given the Company purchase orders and forecasts for delivery in 2001 having an aggregate value in excess of $11 million. These orders and forecasts are at various stages of completion. The Company also has several smaller agreements with various OEM customers to be fulfilled in 2001.

The Company has continued to position itself as a full service designer and manufacturer of custom controls and assemblies for OEM customers. The loss of any major OEM customer would likely have an adverse effect on the Company’s short-term, and potentially long-term, results.

Gross Profits: Gross profit was $2,940,925 or 15.1% of net sales for the year ended December 31, 2000, compared to $3,885,982 or 19.6% of net sales for the same period in 1999. As a percentage of net sales, gross profits decreased 4.5% for the year ended December 31, 2000 compared to 1999. The decline in gross profit is primarily attributed to increased salaries and wage expenses and the related employee benefits incurred to support the originally anticipated increase in sales for the year. Since these sales did not occur in 2000, the predominately fixed overhead was absorbed by fewer sales thereby creating lower profit margins. Gross profit was also impacted by increased raw material cost, write off of obsolete inventory, increased depreciation expense, and labor inefficiencies associated with set up and tear down on smaller production runs caused by key component shortages. The Company also experienced some manufacturing difficulties, due to materials and workmanship, which caused rework at various stages of production. In addition, the decline in gross profit margins on OEM customers is partially attributed to the introduction of new products and re-pricing with reduced profit margins, necessary to remain competitive. To a lesser degree, the Company also experienced slightly decreased profit margins on the security/industrial product line, partially due to a volume rebate program initiated in 2000 to its largest distributor.

Operating Expenses: General and administrative expense was $1,412,967 or 7.2% of net sales for the year ended December 31, 2000, compared to $1,344,714 or 6.7% of net sales for the same period in 1999. The increased general and administrative expenses are attributable, in part, to increased professional fees, group insurance, 401(k) expenses, telephone expense, public relations, board of director expenses and additional compensation expense related to the addition of a Vice President of Financial Operations during the third quarter of 2000. The increased expenses are partially offset by reductions in bonuses, travel, sales and use tax, and supplies expense.

Marketing and customer relations expense was $589,647 or 3.0% of net sales for the year ended December 31, 2000, compared to $405,914 or 2.0% of net sales for the same period in 1999. The increase in marketing and customer relations expense for 2000 is attributed to the additional customer service staffing, and costs associated with increased trade show attendance and the redesign and production of promotional materials.

The Company continues to direct marketing efforts to secure new OEM customers, as well as to promote the new DC motor controller product line and the SatSource GPS antenna product line. The Company continues to promote its proprietary security/industrial products, as well as working to develop and maintain long-term business partnerships with OEM customers.

The Company continues to upgrade its website in order to aid in the achievement of marketing efforts worldwide. The Company has been researching the addition of e-commerce capabilities to the website in 2000, and plans to add on-line order entry to its existing on-line product review in 2001.

Research and development expense was $1,045,773 or 5.4% of net sales for the year ended December 31, 2000, compared to $835,577 or 4.2% of net sales for 1999. The increased research and development expense was primarily due to the addition of technical staff in the areas of design engineering, drafting and printed circuit board layout, as well as increased depreciation expense related to the purchase of additional test and development equipment. The Company believes these investments will help expand the Company’s engineering capabilities in order to meet the needs of existing and new OEM customers, and will aid with the development of new proprietary products.

Interest Expense: Interest expense was $485,816 or 2.5% of net sales for the year ended December 31, 2000, compared to $413,216 or 2.1% of net sales for 1999. The increase in interest is primarily attributed to increased borrowing and increased interest rates on the revolving line of credit, offset in part by reduced levels of debt outstanding associated with capital equipment leases and other long-term debt for the majority of the year.

Net Income: The Company reported a net loss of $309,523 or an $0.11 loss per diluted share for the year ended December 31, 2000, compared to net income of $680,919 or $0.23 per diluted share for 1999. The net loss for the year is primarily attributed to the reduction of gross profits and increased costs throughout the organization incurred in building an infrastructure to support anticipated increases in sales.

RESULTS OF OPERATIONS – 1999 vs. 1998

Net Sales: Net sales increased 9.3% to $19,863,703 for the year ended December 31, 1999, compared to $18,175,509 for 1998. The growth in net sales is attributed to both increased sales to new and existing OEM customers as well as increased sales of security/industrial products for 1999 over 1998.

The Company has continued to position itself as a full service designer and manufacturing of custom controls and assemblies for OEM customers.

Gross Profits: Gross profit was $3,885,982 or 19.6% of net sales for the year ended December 31 1999, compared to $3,920,360 or 21.6% of net sales for the same period in 1998. As a percentage of net sales, gross profit declined 2% for the year ended December 31, 1999 compared to 1998. The decline in gross profit is primarily attributed to the sales mix and sales levels during 1999, as they relate to the fixed manufacturing costs. Some of the increased fixed costs relate to indirect costs incurred for Y2K readiness, additional staffing in the manufacturing area needed to support increased production levels, as well as additional costs associated with the purchase of manufacturing and test equipment to increase the speed and reliability of in-process and final product testing: as well as direct and indirect costs associated with ISO 9001 registration achieved 1999. To a lesser degree, the Company also experienced some loss of efficiencies due to the introduction of new people and processes related to new customer products.

Operating Expenses: General and administrative expense was $1,344,714 or 6.7% of net sales for the year ended December 31, 1999, compared to $1,449,376 or 8.0% of net sales for the same period in 1998. The decline in general and administrative expense as a percentage of net sales is primarily attributed to reduced bonus allowances, reduced bad debt expense and public relations expense, offset in part by increased costs associated with Y2K readiness, additional expenses associated with completion of a 5,000 square foot addition to the current facility, increased professional fees, increased staff expenses needed to support the growth of the organization, and to aid in ISO 9001 registration and continued monitoring to ensure compliance with certification requirements.

Marketing and customer relations expense was $405,914 or 2.0% of net sales for the year ended December 31, 1999, compared to $297,964 or 1.6% of net sales for the same period in 1998. The increase in marketing and customer relations expense for 1999 was primarily due to the addition of sales and customer relations personnel and other marketing expenses necessary to introduce two new proprietary product lines. The two new product lines have not yet advanced to the stage of full-scale production. The costs associated with Y2K readiness and ISO 9001 registration also had an impact on the marketing and customer relations expense during 1999.

The new product lines include a line of direct current (DC) motor controls and a line of global positioning system (GPS) antennas. In addition to the introduction of the new proprietary product lines, and continued marketing efforts to promote its other proprietary security/industrial products, the Company continues to work to develop long-term business partnerships with OEM customers.

The Company continues to upgrade its website in order to aid in the achievement of marketing efforts worldwide. The Company plans to add e-commerce capabilities to the website in 2000.

Research and development expense was $835,577 or 4.2% of net sales for the year ended December 31, 1999, compared to $694,421 or 3.8% of net sales for 1998. The increase in research and development expense was primarily attributed to increases related to the addition of technical staff needed to maintain and expand its engineering capabilities, as well as the addition of test and development equipment, which resulted in increased depreciation expense. The costs associated with Y2K readiness and ISO 9001 registration also had an impact on the research and development expense during 1999.

Interest Expense: Interest expense was $413,216 or 2.1% of net sales for the year ended December 31, 1999, compared to $534,127 or 2.9% of net sales for 1998. The reduction in interest is primarily attributed to reduced levels of debt outstanding on the working capital line of credit for 1999 compared to 1998. The interest rate on the line of credit was reduced from one-half of one percent over the prime rate to the prime rate in late 1998, which had an impact on the interest expense as well.

Net Income: The Company reported net income of $680,919 or $0.23 per diluted share for the year ended December 31, 1999, compared to net income of $855,595 or $0.29 per diluted share for 1998. In 1998, the Company used its remaining net operating loss tax credit carry forwards, and as a result, incurred substantially more income tax expense for 1999 compared to 1998. Other contributing factors to the decline in net income for 1999 were a reduction of gross profits, offset in part by a decline in other income and expense compared to 1998.

LIQUIDITY AND CAPITAL RESOURCES

Cash used by operating activities, primarily to fund the build up of inventory and accounts receivable, was $1,501,570 in 2000, compared to cash provided by operating activities of $1,497,408 in 1999. Increased borrowing on the revolving line of credit was used to fund operating activities, purchase equipment and reduce debt on long term borrowings and capital leases.

The current ratio on December 31, 2000 was 1.3 to 1, compared to 1.7 to 1 on December 31, 1999. Working capital equaled $2,074,820 on December 31, 2000, compared to $2,501,493 on December 31, 1999. The decrease in working capital primarily reflects increases in the revolving line of credit balances, accounts payable, and is offset in part by increases in accounts receivable, inventory levels and income taxes receivable at year end.

The Company has a $4,500,000 revolving line-of-credit agreement with Wells Fargo Bank, through August 2001. Interest on advances is at the bank’s reference rate (9.5 percent at December 31, 2000) and is due monthly. Advances outstanding on the revolving line-of-credit agreement at December 31, 2000 and 1999, were $3,924,501 and $1,518,501, respectively. Advances are due on demand, are secured by substantially all assets of the Company, and are subject to a defined borrowing base equal to 80 percent of qualified accounts receivable and 60 percent of eligible inventory plus 25 percent of work in process. In addition, the agreement contains certain reporting and operating covenants. The Company was in violation of certain covenants at December 31, 2000, which were subsequently waived by the bank.

CAUTIONARY STATEMENTS

Certain statements contained in this Annual Report on Form 10-KSB and other written and oral statements made from time to time by the Company do not relate strictly to historical or current facts. As such, they are considered “forward-looking statements” which provide current expectations or forecasts of future events. Such statements can be identified by the use of terminology such as “anticipate,” “believe,” “estimate,” “expect, “ “intend,” “may,” “could,” “possible,” “plan,” “project,” “should,” “will,” “forecast” and similar words or expressions. The Company’s forward-looking statements generally relate to the Company’s growth strategies, financial results, product development and sales efforts. One must carefully consider forward-looking statements and understand that such statements involve a variety of risks and uncertainties, known and unknown, and may be affected by inaccurate assumptions, including, among others, those discussed below. Consequently, no forward-looking statement can be guaranteed and actual results may vary materially. As provided for under the Private Securities Litigation Reform Act of 1995, the Company wishes to caution investors that the following important factors, among others, in some cases have affected and in the future could affect the Company’s actual results of operations and cause such results to differ materially from those anticipated in forward-looking statements made in this document and elsewhere by or on behalf of the Company.

The Company derives a significant portion of its revenues from a small number of major OEM customers which are not subject to any long-term contracts with the Company. If any major customer should for any reason decrease the volume of their business or stop doing business with the Company, the Company’s business would be adversely affected. Some of the Company’s key customers are not large, well-established companies, and the business of each customer is subject to various risks such as market acceptance of new products and continuing availability of financing. To the extent that the Company’s customers encounter difficulties, or the Company is unable to meet the demands of its OEM customers, the Company could be adversely affected.

The Company’s ability to increase revenues and profits is dependent upon its ability to retain existing customers and obtain new customers. The Company competes for new customers with numerous independent contract design and manufacturing firms in the United States and abroad, many of whom have greater financial resources and more established reputations. The Company’s ability to compete successfully in this industry depends, in part, upon the price at which the Company is willing to manufacture a proposed product and the quality of the Company’s design and manufacturing services. There is no assurance that the Company will be able to continue to obtain contracts from existing and new customers on financially advantageous terms, and the failure to do so could prevent the Company from achieving the growth it anticipates.

The operations and success of the Company depend, in part, upon the experience and knowledge of W. Kirk Hankins, the Company’s Chief Executive Officer and Lorin E. Krueger, the Company’s President and Chief Operating Officer. The loss of either Mr. Hankins or Mr. Krueger would have a temporary material adverse effect on the Company.

ITEM 7. FINANCIAL STATEMENTS

The following financial statements are at the pages set forth below:

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

None.