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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                            ------------------------
                                   FORM 10-K
                            ------------------------
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
   SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999
                                       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 NO. 1-10397
                            ------------------------

                         AMERIQUEST TECHNOLOGIES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                            <C>
                   DELAWARE                                      33-0244136
(STATE OR OTHER JURISDICTION OF INCORPORATION     (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
               OR ORGANIZATION)
              2465 MARYLAND ROAD                                   19090
          WILLOW GROVE, PENNSYLVANIA                             (ZIP CODE)
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>

                                 (215) 658-8900
               REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b)OF THE ACT:

                          COMMON STOCK, $.01 PAR VALUE
                              TITLE OF EACH CLASS

        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 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 the 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]

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of December 21, 1999 is approximately $6,525,000. For purposes
of making this calculation only, the Registrant has defined "affiliates" as
including all officers, directors and beneficial owners of more than 10% of the
outstanding Common Stock of the Registrant.

     There were 67,841,906 shares of the Registrant's Common Stock outstanding
as of December 21, 1999.

     The following document is incorporated by reference into Part III, Items
10, 11, 12, and 13 of this Annual Report on Form 10-K: the registrant's
definitive proxy statement for its 2000 Annual Meeting of Stockholders to be
filed within 120 days after the end of the fiscal year covered by this Annual
Report on Form 10-K.
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                                     PART I

FOREWORD

     THE INFORMATION SET FORTH IN THIS ANNUAL REPORT IS BASED PRIMARILY ON
HISTORICAL INFORMATION. THIS ANNUAL REPORT ALSO CONTAINS SOME FORWARD-LOOKING
STATEMENTS RELATING TO FUTURE GROWTH PLANS AND OTHER MATTERS. TO THE EXTENT THAT
THIS ANNUAL REPORT INCLUDES FORWARD-LOOKING STATEMENTS, SUCH STATEMENTS INVOLVE
UNCERTAINTY AND RISK, AND ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS. A LIST OF THOSE FACTORS WHICH
MANAGEMENT BELIEVES COULD ADVERSELY AFFECT THE ACTUAL RESULTS IS SET FORTH IN A
SECTION IMMEDIATELY FOLLOWING THE DESCRIPTION OF AMERIQUEST'S BUSINESS IN ITEM 1
UNDER THE CAPTION "SPECIAL FACTORS TO BE CONSIDERED."

ITEM 1.  BUSINESS.

THE COMPANY

     AmeriQuest Technologies, Inc., a Delaware corporation ("AmeriQuest" or the
"Company"), markets and sells products and services providing business
information solutions for value-added resellers ("VARs") and systems
integrators. AmeriQuest's strategy is to emphasize the sale of complete
solutions for its clients and to provide a high level of value-added services,
including consultation on component selection, system assembly, configuration,
testing, logistics, start-up, installation and technical support services.
AmeriQuest markets, sells and supports a variety of products ranging from
individual components to complete systems that have been fully configured,
assembled and tested prior to delivery to the ultimate customer. AmeriQuest also
provides a variety of programs and seminars designed to enhance its clients'
technical, marketing, logistical and financial capabilities.

     AmeriQuest currently markets and sells mid-range Unix and NT server
systems, networking systems, storage sub-systems, printers and related products
to VARs and systems integrators throughout the United States. Mid-range
computers and servers range in price from $5,000 to $800,000. AmeriQuest focuses
its marketing efforts on the products of a limited number of key vendors in
order to become one of the leading distributors for each of its principal
vendors. This enables AmeriQuest to develop product-specific technical expertise
that enhances its value-added support services. AmeriQuest attempts to minimize
competition among vendors' products while maintaining some overlap to provide
protection against product shortages or discontinuations.

     AmeriQuest historically conducted its business through its subsidiaries,
but in April, 1997, AmeriQuest decided to focus its resources on building the
Advanced Systems Group in Pennsylvania and to close or sell all of the other
divisions. This reorganization was materially completed in November, 1997.
Following the reorganization, the Company became a more focused technical
distributor of services and computer products providing value added solutions
rather than a fulfillment distributor that relies on broad product lines and
high volumes of commodity products.

     The Company maintains its principal executive offices at 2465 Maryland
Road, Willow Grove, Pennsylvania 19090, and its telephone number is (215)
658-8900.

  CONTROL OF AMERIQUEST -- ACQUISITION OF COMPUTER 2000 AG MAJORITY STOCK
  HOLDINGS BY SENIOR MANAGEMENT

     On July 20, 1998, Listen Group Partners, LLC, a group headed by
AmeriQuest's senior management, Alex Kramer (CEO) and Jon Jensen (CFO and COO),
acquired the 36,349,878 shares of AmeriQuest Common Stock owned by Computer
2000, Inc., a wholly-owned subsidiary of Computer 2000 AG (collectively referred
to herein as "Computer 2000"), representing approximately 54% of total
outstanding shares of AmeriQuest Common Stock following the redemption of
certain Computer 2000 shares in connection with the transaction. The transaction
was approved by the outside directors and by the full Board of Directors of
AmeriQuest. In taking over majority control of AmeriQuest from Computer 2000,
AmeriQuest's management arranged for a new $10 million asset-backed bank credit
line for AmeriQuest. The Board

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of Directors of the Company also agreed to reserve 6.7 million shares of Common
Stock for future issuance to AmeriQuest employees as incentive compensation
pursuant to terms to be approved by outside directors of the Board.

STRATEGY

     The Company's current business focus is to increase the emphasis of
providing value-added services such as engineering design and system
configuration, installation capability, and marketing, financial and technical
support, to its VAR and systems integrator client base, which improves its
margins as compared to the margins of those distributors who provide for sale of
equipment only. In addition, AmeriQuest will continue second tier product
distribution in areas which minimize direct competition with the Company's
largest competitors and to concentrate on selling higher-margin mid-range
computer and client server systems, networking products and storage systems
along with complementary and related individual computer components, and
maintenance and leasing services. AmeriQuest has negotiated agreements with
several vendors that allow the Company to serve as the "silent partner" of the
Company's resellers by being able to sell products directly to the reseller's
end users when the reseller cannot do so itself or desires AmeriQuest to do so.

     Although management believes that this strategy, when coupled with planned
increases in revenue, will return AmeriQuest to profitability, there are
numerous risks and uncertainties, including those described elsewhere in this
Annual Report, and no assurance can be given that the Company's strategy will
succeed or that the Company will become operationally profitable. Management
will periodically review the need to further reduce costs should sales for any
reason not materialize in amounts sufficient to cover the existing cost
structure.

PRODUCTS

     AmeriQuest seeks to sell products from nationally-recognized vendors that
provide all the components most VARs and systems integrators require to fully
configure their business information solutions. The following is a description
of the major categories of products currently offered by AmeriQuest and the
principal vendors of those products:

          CLIENT SERVERS AND PERSONAL COMPUTERS -- AmeriQuest offers a broad and
     diverse group of server, notebook, and desktop products manufactured by
     Acer, Compaq, Hewlett Packard, IBM and Unisys.

          COMMUNICATIONS AND NETWORKS -- AmeriQuest provides local and wide area
     network ("LAN/ WAN") certified engineering services, software and
     specialized hardware products manufactured by 3Com, Cisco, D-Link, Digi
     International, Hewlett Packard, IBM, Intel, Multi-Tech Systems and Nortel.

          CAS, NAS AND SAN STORAGE -- AmeriQuest offers a broad line of channel
     attached storage products, network attached storage products and storage
     attached network products from IBM, SMS and Unisys.

          PERIPHERALS AND SUPPLIES -- AmeriQuest distributes a broad line of
     laser, ink-jet and dot matrix printers, monitors, terminals, stand-by power
     supplies, accessories and supplies manufactured by numerous companies
     including Acer, American Power, Citizen, Genicom, Hansol, Hewlett Packard,
     Imation(3M), Lexmark, Okidata and Wyse.

          OPERATING SYSTEM AND APPLICATION SOFTWARE -- AmeriQuest sells a
     variety of operating systems and LAN software products generally as part of
     its client server systems sales. AmeriQuest has also commenced the sale of
     certain application software for Unix and mid-range systems. Among the
     manufacturers of these software products are Citrix, IBM, including AIX and
     Lotus Notes, Microsoft, Novell and SCO.

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SERVICES

     AmeriQuest seeks to sell its services by providing all the elements most
VARs and systems integrators require to sell business information solutions.
Technical, marketing, logistical, and financial services are marketed and sold
as a part of the company's "Silent Partner"(TM) services. These services are
focused around Internet e-commerce solutions, high availability servers, and
thin client computing. The following is a description of the major categories of
services currently offered by AmeriQuest:

          TECHNICAL SERVICES -- AmeriQuest provides Systems Engineering and
     Integration Services to those clients who do not have the capability or
     capacity to design, configure or install business information system
     solutions with their own resources. AmeriQuest also provides an Open
     Systems Technology Center in its Willow Grove, PA facility for its clients
     to explore and test new technologies and various configurations and
     applications.

          MARKETING SERVICES -- AmeriQuest offers its VAR and systems integrator
     clients a "virtual marketing department" to generate opportunities, plans
     to sell services, and capability to provide Internet marketing tools.

          LOGISTICAL SERVICES -- AmeriQuest offers logistical services to its
     VAR and systems integrator clients by managing the entire scope of a
     project from product selection, procurement and packaging to staging of
     multiple ship point delivery and installation at its client's end-user.

          FINANCIAL SERVICES -- AmeriQuest expands the financial capabilities of
     its VAR and System Integrator clients by providing customer risk analysis;
     bonding and insurance; financial and business planning assistance; and,
     through its subsidiary, provides end-user leasing and technology upgrade
     programs. AmeriQuest also arranges for leasing and maintenance options
     offered by IBM, Hewlett Packard and Unisys for all products to clients and
     ultimate customers. By arranging for multiple financing options, including
     floor planning through a number of credit institutions, credit card
     purchases and an "assignment of proceeds" program, AmeriQuest can assist
     its clients in securing purchase orders in excess of what their normal
     credit facilities would otherwise allow.

VENDOR RELATIONS

     To maintain strong relationships with its principal vendors, AmeriQuest
focuses on marketing the products of a limited number of key vendors. AmeriQuest
selects its product lines to offer a total solution while minimizing competition
among vendors' products, but maintains overlap to provide protection against
product shortages or discontinuations. Accordingly, revenue from sale of
products of our five leading vendors; Acer , Hewlett Packard (supplied by
Pinacor), IBM (supplied by Pinacor), Okidata and Unisys, represented
approximately 21%, 21.4%, 8.2%, 14.6%, and 5%, respectively, of the Company's
revenue for the fiscal year ended September 30, 1999. The Company is focused on
increasing its share of business represented by each of Acer, HP, IBM and Unisys
and has made increases in its sales force to achieve such objective.

     AmeriQuest expanded its relationship with Unisys during fiscal 1999 by
negotiating a corporate account reseller ("CAR") agreement which allows
AmeriQuest to sell Unisys products that are not available to its resellers,
directly to end users.

     During 1999, AmeriQuest scaled back its direct relationship with IBM to
distribute IBM's networking products. The Company retained the right to sell IBM
mid-range products, including RS6000, networking products and mass storage.

     AmeriQuest, like most hardware distributors, sells products throughout the
United States on behalf of its vendors on a nonexclusive basis without
geographic restriction. AmeriQuest has distribution agreements with most of its
vendors and believes they are in the form customarily used by each vendor and
generally contain provisions which allow termination by either party upon short
notice. Most of AmeriQuest's major distribution agreements provide price
protection by giving AmeriQuest a credit, subject to specified limitations, in
the amount of any price reductions by the vendor between the time of the initial
sale to AmeriQuest and the subsequent notice of price change to AmeriQuest. Most
of the major distribution agreements also give

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AmeriQuest qualified return privileges on slow-moving inventory. AmeriQuest's
distribution agreements do not restrict AmeriQuest from selling similar products
manufactured by competitors. Any minimum purchase provisions in AmeriQuest's
distribution agreements are at levels that AmeriQuest believes do not impose
significant risk that AmeriQuest will not be able to achieve such minimum
purchase requirements.

     AmeriQuest has continued to pursue a strategy to reduce inventory of
non-core vendors and to satisfy its client's needs for non-core, supplemental or
complementary products by concentrating its procurement efforts with one or more
of the national fulfillment distributors.

     From time-to-time, the demand for certain products sold by AmeriQuest
exceeds the supply available from the vendor. AmeriQuest believes that its
ability to compete has not been adversely affected to a material extent by these
periodic shortages, although sales may be adversely affected for an interim
period. In order to limit the impact of such shortages, AmeriQuest generally
attempts to include comparable products from more than one vendor in its product
line and to have arrangements with one or more of the large national fulfillment
distributors to purchase products in short supply.

SALES AND MARKETING

     The Company sells to more than 1,700 computer resellers. The Company's
clients include VARs, corporate resellers, systems integrators, and consultants.
AmeriQuest estimates that a majority of its sales are to VARs and systems
integrators. The Company's smaller clients often do not have the resources to
establish a large number of direct purchasing relationships or to stock
significant product inventories. Consequently, they tend to purchase a high
percentage of their products from distributors. Larger resellers often establish
direct relationships with manufacturers for their more popular products, but
utilize distributors for slower-moving products and for fill-in orders of
fast-moving products which may not be available on a timely basis from
manufacturers. AmeriQuest has chosen to satisfy its client's needs for
supplemental and complementary products by concentrating the Company's
procurement efforts with one of the large, national fulfillment distributors. No
client has accounted for more than ten percent of AmeriQuest's net sales during
the 1999, 1998, or 1997 fiscal years. Sales by AmeriQuest are not seasonal to
any material extent.

     Since the change in control in July, 1998, management of the Company has
been able to fill vacancies in the sales staff. During the cost and overhead
reduction period that lasted from April, 1997 to June of 1998, the sales force
had declined to 12 people. On February 1, 1999 a very experienced executive,
Michael J. McCarthy, was recruited to serve as the Vice President of Sales and
Marketing. Under his leadership, the sales staff has been increased to 25
currently, with training and selection of such staff oriented toward the market,
service and product focus earlier described.

     Compensation for sales personnel is largely based on the gross profits
generated from sales. All of AmeriQuest's sales personnel receive technical
training and are responsible for developing new accounts and serving established
accounts. AmeriQuest places some emphasis on telemarketing, but most of the
Company's new sales personnel operate in the field.

OPERATIONS AND CUSTOMER SERVICES

     Through the Company's business as a provider of services and quality
products for business information solutions, clients are offered a single source
of supply, prompt delivery, financing programs, engineering services, marketing
assistance, logistical support, customer leasing and maintenance and client
support.

     CUSTOMER ORDER ENTRY.  Client orders are generally made by a toll-free
telephone call with a sales representative in AmeriQuest's sales offices, and
the order is entered into AmeriQuest's computer system. The sales representative
has access to available information on inventory and client credit status and,
upon reviewing this data, can enter the order immediately. Shipment is usually
made the same day, except on orders that require assembly and testing or
purchase from a vendor. Clients may also pick up their orders at the designated
warehouse. All orders are handled on a prepayment, C.O.D. or credit basis
depending on the client's creditworthiness and previous payment history. In
addition, AmeriQuest assists some resellers in obtaining equipment financing
through leasing or third-party floor planning programs from Deutsche Financial

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Services, IBM Credit Corporation, AT&T Capital, Leasetech (Unisys), the FINOVA
Group, Inc. and Transamerica Inventory Finance. Because of AmeriQuest's prompt
delivery times, it does not generally maintain a substantial order backlog.

     PROMPT DELIVERY.  In most geographic areas serviced by the Company, orders
received by 5:00 p.m. local time are typically shipped the same day, provided
the required inventory is in stock. AmeriQuest typically delivers products
directly from its vendors, or its Willow Grove, Pennsylvania or Atlanta, Georgia
warehouses via United Parcel Service and other common carriers, with customers
in key commercial regions of the United States receiving orders within one to
two business days of shipment. AmeriQuest also will provide overnight air
handling if requested and paid for by the client. These services allow clients
to minimize inventory investment yet provide responsive service to their
customers. AmeriQuest is also able to provide a fulfillment service so that
orders are shipped directly to a client's customer, thereby reducing the need
for clients to maintain inventories of certain products.

     CUSTOMER SUPPORT.  The Company currently offers clients a single source for
competitively priced hardware and software products from numerous vendors. By
purchasing from the Company, the client only needs to comply with a single set
of ordering, billing and product return procedures. The Company also provides
training and product information to its clients.

     AmeriQuest permits the return of products within certain time limits and
under certain conditions subject to a restocking charge, provided that the
products are unused. Products that are defective upon arrival are handled on a
manufacturers' warranty return basis without any restocking charge.

     AmeriQuest offers its clients warranty return rights that reflect those
that are offered by each manufacturer's individual warranty program. This
pass-through of manufacturers' warranties is one of the value-added services
that AmeriQuest provides.

COMPETITION

     Competition in the technical, as opposed to fulfillment only, distribution
of services and mid-range computer systems is limited, but intense. Principal
national distributors in the technical distribution of mid-range, Unix and NT
server systems, networking systems, storage sub-systems, printers and related
products with which the Company competes include Western Micro, Jones Business
Systems, and Westcon. Many of the technical distributors have greater financial
resources than the Company. Additionally it is reasonable to expect that the
large broad-line fulfillment distributors such as Ingram Micro Inc., Merisel,
Inc., Pinacor and Tech Data Corporation, which have substantially greater
financial resources than AmeriQuest, may enter the market in pursuit of the
greater gross profit margins of technical distribution.

     Competition is primarily based upon availability of product, price,
technical support and other support services. AmeriQuest believes that it is
generally competitive with respect to each of these factors and that its
principal, competitive advantages are its personal sales relationships,
technical strengths and other support services offerrings, and speed and
accuracy of delivery.

YEAR 2000 COMPLIANCE

     Many currently installed computer systems and software programs are coded
to accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries, or be
otherwise modified, to distinguish 21st century dates from 20th century dates.
As a result, computer systems and/or software used by many companies and
governmental agencies may need to be upgraded to comply with such Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities.

     State of Readiness.  To date, AmeriQuest has made an assessment of the Year
2000 readiness of mission critical third party software and hardware used by the
Company. The Company has taken steps to upgrade such software and hardware used
by the Company known to it not to be Year 2000 compliant or where the
manufacturer of such software or hardware has provided upgrades to the Company.
In addition, AmeriQuest has performed a Year 2000 simulation on all such
software and hardware. The Company has similarly tested
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all mission critical software and hardware with respect to leap year
calculations. The Company believes that, based on upgrades performed to date
and/or upgrades provided by the manufacturer, all mission critical software and
hardware used by the Company is either Year 2000 compliant or the Company has
taken steps to upgrade or replace such systems so that they are Year 2000
compliant.

     Costs.  To date, AmeriQuest has not incurred any material expenditures in
connection with identifying or evaluating Year 2000 compliance issues. Most of
its expenses have related to, and are expected to continue to relate to, the
operating costs associated with time spent by employees in the evaluation
process and Year 2000 compliance matters generally. Although the Company does
not anticipate that any such expenses incurred in the future will be material,
such expenses, if higher than anticipated, could have a material adverse effect
on the Company's business, results of operations and financial condition.

     Risks.  Except where plans have been made to upgrade or replace software
and hardware that is not Year 2000 compliant, AmeriQuest is not currently aware
of any Year 2000 compliance problems relating to third party software, hardware
and services used by the Company that would have a material adverse effect on
the Company's business, results of operations or financial condition. There can
be no assurance that the Company will not discover Year 2000 compliance problems
in third party software, hardware and services used by the Company which will
need to be addressed or replaced, any of which could be time consuming and
expensive. The failure of the Company to identify, address and/or replace any
such third party software, hardware or services used by the Company on a timely
basis, if at all, that are not Year 2000 compliant could result in lost
revenues, increased operating costs and other business interruptions, any of
which could have a material adverse effect on the Company's business, results of
operations or financial condition.

     The Company has not ascertained the Year 2000 compliance of hardware or
software which may have been sold by the Company in the past. AmeriQuest is also
not currently aware of any specific Year 2000 compliance problems relating to
third party software and hardware currently sold by the Company to its clients
which is supplied to the Company by its vendors. The Year 2000 compliance of
software and hardware supplied to the Company by its vendors is outside the
Company's control. The Company makes available to its clients the warranties
offered by manufacturers whose products it sells. While the Company believes
that ultimate responsibility for claims arising from the Year 2000 compliance of
the software and hardware it sells should be borne by the products'
manufacturers, there can be no assurance that the Company will not have
liability for any such claims and any related liability could have a material
adverse effect on the Company's business, results of operations or financial
condition.

     In addition, there can be no assurance that other third parties outside the
Company's control, including, without limitation, governmental agencies,
financial institutions, public utilities, other service providers with which the
Company does business and others, will be Year 2000 compliant. The failure of
any such entity to be Year 2000 compliant could result in systematic failures
beyond the control of the Company which could have a material adverse effect on
the Company's business, results of operations and financial condition.

     Contingency Plans.  The Company has established a formal contingency plan
for dealing with a failure by the Company and its vendors or others to achieve
Year 2000 compliance.

EMPLOYEES

     As of September 30, 1999, AmeriQuest had 75 full-time employees sales
(increased to 78 currently), including 21 persons employed in sales (23
currently), 10 persons employed in sales support (12 currently) and 5 persons
employed in marketing functions. None of AmeriQuest's employees are covered by a
collective bargaining agreement. AmeriQuest considers its relations with its
employees to be good.

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                        SPECIAL FACTORS TO BE CONSIDERED

     In addition to the other information in this Annual Report on Form 10-K,
the following factors should be carefully considered:

CONTINUED OPERATING LOSSES

     While the Company had a loss of $1,909,000 during the fiscal year ended
September 30, 1999, the Company experienced significantly greater losses during
previous fiscal years other than fiscal 1998, and there is no assurance that the
Company will become profitable in the future. The Company had net income of
$747,000 during the fiscal year ended September 30, 1998, but such income
included a reversal of prior year restructuring accruals of $1,376,000.
Additionally, the Company recorded a significant benefit due to the reversal of
other previously established reserves. During the year ended September 30, 1997,
the Company had operating losses of $41.3 million which included restructuring,
asset impairment and relocation costs of $26.4 million associated with the close
down of the unprofitable distribution businesses. The Company recorded a net
loss of $33.6 million during fiscal 1996 (including lease termination and moving
costs of $6.4 million). The fiscal 1995 net loss of $67.6 million included the
write-off of approximately $23.8 million of intangible assets and the
liquidation of inventory associated with the termination of the Company's
entertainment software business. In addition, the fiscal 1995 loss included
costs associated with the integration of the significant acquisitions which took
place during that fiscal year.

     Although the Company has significantly reduced its operating losses as a
result of the restructuring, in the event that operating losses were to continue
at significant levels, it is likely that the Company would need to raise
additional capital to cover those losses. There is no assurance that such
additional capital would be available, or if available, could be secured on
terms favorable to the Company.

MARKET CONSIDERATIONS

     The price of the Company's Common Stock has been subject to significant
price fluctuations, and there can be no assurance that the price of the
Company's Common Stock will stabilize. In addition, the trading volume for the
Company's Common Stock has generally been relatively small. A large increase in
share trading volume in a short period of time could cause a significant change
in share trading prices.

NEED TO INCREASE SALES VOLUME

     As a distributor, the Company has historically operated on small gross
margins. Further, the Company incurs operating expenses to maintain a sufficient
level of inventory, facilities, sales staff and support personnel necessary to
support sales of products. Although the Company continues to explore possible
cost reduction measures, it believes that further significant reductions in its
operating expenses will be difficult to achieve without also reducing the sales
volumes currently being generated from operations. As a result of these and
other factors, the Company must achieve substantially greater sales volumes at
satisfactory margins to achieve sustained operating profitability, and there can
be no assurance that this will happen. It has only been since the change in
control in mid-July of 1998, that management of the Company has been able to
fill vacancies in the sales staff. During the cost and overhead reduction period
that lasted from April, 1997 to June of 1998, the sales force had declined to 12
people. The staff has been increased to 23 currently with internal plans to
bring the level to 25.

     In addition, the Company has begun a migration from exclusively being a
distributor of micro, mini- and mid-range computers and related products to also
selling value added services, such as engineering design and system
configuration, installation capability, marketing, financial and technical
support.

     While the Company's management is attempting to increase sales and its
share of business represented by services and such manufacturers as Acer,
Hewlett Packard, IBM and Unisys, there can be no assurance that sales will
increase or that any increases will be of sufficient magnitude or will occur
soon enough to permit the Company to achieve profitability without additional
business or financial restructuring.

                                       -8-
<PAGE>   9

NEED TO MAINTAIN VENDOR BASE

     The Company principally provides computer products manufactured by Acer,
Hewlett Packard, IBM, Okidata and Unisys. Accordingly, the Company's
relationships with these and its other existing vendors are critical to its
ability to purchase on a favorable basis the products that it resells. In
addition, from time-to-time the Company may need to initiate relationships with
additional vendors without jeopardizing the Company's existing vendor
relationships. The Company is also dependent upon its vendors' willingness or
ability to make timely shipment of the products ordered by the Company. The
failure of vendors to make shipments on a timely basis could cause a material
disruption of the Company's sales. In the past, the Company has at times
experienced delays in its ability to fill client orders, due to the inability of
certain suppliers to meet their volume and schedule requirements and/or due to
the Company's shortage of cash resources. Delays in shipments from suppliers can
cause fluctuations in the Company's short-term results and contribute to order
cancellations.

RAPID CHANGES IN TECHNOLOGY AND MARKETS

     The computer industry in general, and the specific markets in which the
Company competes, are characterized by rapidly changing technology, often
resulting in short product life cycles, rapid price declines, inventory
imbalances when compared with market demands, and significant shifts in market
dynamics. The Company believes its success is highly dependent upon its ability
to react to technological changes and shifts in market demand by continuing to
provide cost-competitive products that respond to current market needs. As a
value-added wholesale distributor, the Company is particularly vulnerable to
changes caused by technological innovation. The introduction of new products and
the phase out of old products requires the Company to carefully manage its
inventory to minimize inventory obsolescence. The Company has experienced
significant losses due to inventory obsolescence in the past and losses due to
selling products acquired as vendor surpluses. The Company believes it has
instituted the necessary inventory and purchasing safeguards to prevent these
difficulties in the future. Should the Company fail to provide new products on a
timely basis that respond to industry demands, the Company's operating results
would be adversely affected.

COMPETITION

     The Company competes in an industry characterized by intense competition.
Principal national distributors in the technical distribution of mid-range, Unix
and NT server systems, networking systems, storage sub-systems, printers and
related products with which the Company competes include Western Micro, Jones
Business Systems, and Westcon, who have greater financial and technical
resources than the Company.. Additionally it is reasonable to expect that the
large broad-line distributors such as Ingram Micro Inc., Merisel, Inc. and Tech
Data Corporation, which have substantially greater financial resources than
AmeriQuest, may enter the market in pursuit of the greater gross profit margins
of technical distribution. Competition in the computer products distribution
industry is based primarily on price, product availability, and technical
support services provided, and to a lesser extent on speed of delivery,
convenience and the level of marketing. As technological changes occur, the
Company's products have had shorter and shorter product life cycles, and new
competing products are introduced by other vendors and resellers. Moreover, the
manner in which computer products are distributed and sold is changing, and new
methods of distribution and sale may emerge or expand. These factors, among
others, will likely cause continued competitive pressures on the Company in the
future.

MANAGEMENT FOCUS ON COMPLETION OF RESTRUCTURING AND CHANGE IN CONTROL

     Because of the restructuring during Fiscal 1997 and 1998 and the managerial
disruption caused by the Computer 2000 merger with Tech Data and the related and
resultant change in control of AmeriQuest, the Company was unable until the end
of July, 1998 to focus management attention and marketing expenditures on
increasing its market share and returning the Company to recapturing and
sustaining the growth apparent in the market niche the Company has chosen.
During fiscal 1999 the Company completed its reorganization of the sales and
marketing function. If the Company's sales for any reason in the near future do
not materialize in

                                       -9-
<PAGE>   10

amounts sufficient to cover the existing cost structure, management may again
have to consider restructuring alternatives.

DEPENDENCE UPON KEY PERSONNEL

     The Company's success depends to a significant degree upon the continued
contributions of its key management, marketing, product development and
operational personnel and the Company's ability to retain and continue to
attract highly skilled personnel. Competition for employees in the computer
industry is intense, and there can be no assurance that the Company will be able
to attract and retain qualified employees. The Company has previously made a
number of management changes, and has had substantial layoffs and other employee
departures. If the Company continues to experience financial difficulties, it
may become increasingly difficult for it to hire new employees and retain
current employees. The Company does not carry any key person life insurance with
respect to any of its personnel.

FORWARD-LOOKING INFORMATION

     Future operating results may be impacted by a number of factors that could
cause actual results to differ materially from those stated herein, which
reflect management's current expectations. These factors include worldwide
economic and political conditions, industry specific factors, the Company's
ability to maintain access to external financing sources, the Company's ability
to increase revenue, the Company's ability to manage expense levels, the
Company's ability to retain key vendors, the continued financial strength of the
Company's clients, and the Company's ability to accurately anticipate customer
demand and manage inventories.

     This Annual Report on Form 10-K contains certain forward-looking statements
that are based on current expectations. In light of the important factors that
can materially affect results, including those set forth above and elsewhere in
this Annual Report on Form 10-K, the inclusion of forward-looking information
herein should not be regarded as a representation by the Company or any other
person that the objectives or plans of the Company will be achieved. The Company
may encounter competitive, technological, financial, legal and business
challenges making it more difficult than expected to continue as a value-added
wholesale distributor; competitive conditions within the computer industry may
change adversely; demand for the products distributed by the Company may weaken;
the Company may be unable to retain existing key vendors and existing key
management personnel; inventory risks may rise due to shifts in market demand;
the Company's forecasts may not accurately anticipate market demand; and there
may be other material adverse changes in the Company's operations or business.
Certain important presumptions affecting the forward-looking statements made
herein include, but are not limited to, (i) timely identifying and delivering
new products as well as enhancing existing products and services, (ii)
identifying new clients, and marketing the Company's services and products to
those clients, (iii) maintaining good relationships with key vendors and (iv)
accurately forecasting cash needs. Assumptions relating to budgeting, marketing,
advertising, product mix and other management decisions are subjective in many
respects and thus susceptible to interpretations and periodic revisions based on
actual experience and business developments, the impact of which may cause the
Company to alter its marketing, cash expenditures or other budgets, which may in
turn affect the Company's financial position and results of operations.

ITEM 2.  PROPERTIES.

     AmeriQuest's principal offices are located in leased facilities in Willow
Grove, Pennsylvania, which consists of approximately 17,500 square feet of
office space and 25,000 square feet of warehouse space on a single level.

                                      -10-
<PAGE>   11

     The following table sets forth information regarding the principal and
regional offices of AmeriQuest:

<TABLE>
<CAPTION>
                                          SQUARE FEET   LEASE EXPIRATION   YEAR OPENED
                                          -----------   ----------------   -----------
<S>                                       <C>           <C>                <C>
LOCATION
Willow Grove, PA........................    42,500           8/31/03          1998
Atlanta, GA.............................     6,000           9/30/00          1997
Maple Shade, NJ.........................     1,400           8/31/00          1997
St. Louis, MO...........................     1,400          11/30/00          1997
SUBLEASED
Anaheim, CA.............................    62,298           2/29/00          1995
</TABLE>

ITEM 3.  LEGAL PROCEEDINGS.

     In fiscal 1998, the Company settled two law suits: Kenfil Inc. vs. RLI
Insurance Company and Leading Edge Products, Inc. vs. AmeriQuest. Total amounts
due for the settlements were $920,000. At September 30, 1997, the Company had
reserves in excess of the settlement amounts of approximately $1.3 million,
which were taken into income during fiscal 1998 as an offset to selling, general
and administrative expense in the accompanying consolidated statement of
operations.

     AmeriQuest is both a plaintiff and defendant from time-to-time in lawsuits
incidental to its business. AmeriQuest management believes that none of such
current proceedings individually, or in the aggregate, will have a material
adverse effect on AmeriQuest's financial position and results of operations.

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

     The Company did not submit any matters to a vote of security holders during
the fourth quarter of fiscal 1999.

                                      -11-
<PAGE>   12

                                    PART II

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

     The following table sets forth the market prices for the shares of Common
Stock of AmeriQuest. The prices reflect the high and low closing prices quoted
on the New York Stock Exchange for each calendar quarter since September 30,
1997 through March 9, 1998, when the Company was de-listed. The prices reflect
the high and low closing prices reported on NASDAQ OTC Bulletin Board for each
calendar quarter since March 10, 1998.

                                   AMERIQUEST

<TABLE>
<CAPTION>
                                                              HIGH     LOW
                                                              -----   -----
<S>                                                           <C>     <C>
1997
Fourth Quarter..............................................  5/16    7/32
1998
First Quarter...............................................  13/64   3/64
Second Quarter..............................................  19/64   5/64
Third Quarter...............................................  15/64   5/64
Fourth Quarter..............................................   1/8    1/16
1999
First Quarter...............................................  1/16    1/16
Second Quarter..............................................  11/64   1/16
Third Quarter...............................................   1/8    5/64
Fourth Quarter..............................................   1/4    5/64
</TABLE>

     On December 21, 1999, the stock of AmeriQuest closed at 3/16 (or
approximately $0.19) per share. As of that date AmeriQuest had approximately
1,000 stockholders of record.

     The Company did not declare any dividends on its Common Stock in 1999 and
does not intend to declare dividends on its Common Stock in the foreseeable
future.

ITEM 6.  SELECTED FINANCIAL DATA.

     The following selected consolidated financial data has been derived from
and should be read in conjunction with the audited consolidated financial
statements of AmeriQuest, and the notes thereto, and with "Management's
Discussion and Analysis of Results of Operations and Financial Condition",
included elsewhere herein and incorporated herein by this reference (dollars in
thousands, except share data).
<TABLE>
<CAPTION>
                            YEAR ENDED         YEAR ENDED         YEAR ENDED         YEAR ENDED        QUARTER ENDED
                           SEPTEMBER 30,      SEPTEMBER 30,      SEPTEMBER 30,      SEPTEMBER 30,      SEPTEMBER 30,
                               1999               1998               1997               1996               1995
                           -------------      -------------      -------------      -------------      -------------
<S>                        <C>                <C>                <C>                <C>                <C>
Net sales................   $    56,865        $    60,466        $   218,877        $   424,708        $   100,723
Net income (loss)........        (1,909)(1)          747(2)           (41,311)(2)        (33,609)(2)         (7,041)
Net Income (loss) per
  share..................         (0.03)(4)          (0.01)(4)          (0.63)             (0.76)             (0.30)
Total assets.............        14,168             12,955             26,079            116,372            115,531
Long-term obligations....             0                  0                  0              3,122              6,686(3)
Stockholders' equity
  (deficit)..............         7,169              9,018            (23,392)           (11,206)            17,565

<CAPTION>
                            YEAR ENDED
                             JUNE 30,
                               1995
                           -------------
<S>                        <C>
Net sales................   $  416,571
Net income (loss)........      (67,566)
Net Income (loss) per
  share..................        (3.76)
Total assets.............      128,008
Long-term obligations....       24,515
Stockholders' equity
  (deficit)..............      (25,709)
</TABLE>

---------------
(1) While the Company had net income of $747,000, such income included a
    reversal of prior year restructuring accruals of $1,376,000. Additionally,
    the Company recorded a significant benefit due to the reversal of other
    previously established reserves (See Notes 3 5, 7 and 10 to Notes to
    Consolidated Financial Statements).

(2) The losses in 1997 were due principally to restructuring, asset impairment
    and relocation costs of $26.4 million associated with the close down of the
    unprofitable distribution businesses. The losses in

                                      -12-
<PAGE>   13

    1996 included lease termination costs and moving costs of $6.4 million. The
    losses in 1995 were due principally to abandonment of U.S. software
    operations and the cost of integrating prior acquisitions and the write-down
    of assets.

(3) For the year ended June 30, 1995 includes the $18 million advance from
    Computer 2000 related to its equity investment and $5.8 million associated
    with the issuance of 6.8 million shares of the Company's common stock
    required to complete a merger.

(4) Net income (loss) per share includes a deduction for dividends on Preferred
    Stock to arrive at net income (loss) available to Common Stockholders.

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

SIGNIFICANT EVENTS

     On July 20, 1998, Listen Group Partners, LLC, a group headed by
AmeriQuest's senior management, Alex Kramer (CEO) and Jon Jensen (CFO and COO),
acquired the 36,349,878 shares of AmeriQuest common stock owned by Computer
2000. In taking over majority control of AmeriQuest from Computer 2000,
AmeriQuest's management arranged for a new $10 million asset-backed bank credit
line for AmeriQuest, in part to release Computer 2000 from its guarantee of
IBMCC, obtained the release of Computer 2000 and its affiliates from all other
guarantees of AmeriQuest obligations, and agreed to pay certain transaction
costs totaling approximately $220,000. As part of the transaction, Computer 2000
contributed to the capital of AmeriQuest approximately $28 million in
intercompany debt obligations and an additional $3 million in cash. Computer
2000 further agreed to the redemption by AmeriQuest of all of the outstanding
AmeriQuest preferred stock, convertible into approximately 42 million common
shares, and to the cancellation of all outstanding dividends, interest and
AmeriQuest options and warrants held by Computer 2000. As a result of the
transaction, the number of outstanding shares of AmeriQuest, on a fully diluted
basis, was reduced from approximately 118 million to approximately 67 million.

     The Listen Group transaction completed a reorganization which began in
April, 1997.

     On April 9, 1997, the Board approved a wide-ranging restructuring plan
encompassing head-count reductions and facility closures with the goal of
focusing on and strengthening the activities of its Advanced Systems Group
("ASG"), which had the highest gross margins of its distribution businesses, at
that time. The Company announced that projected losses for the year ending
September 30, 1997 could be in the range of approximately $45,000,000, partly as
the result of the planned restructuring. The restructuring measures were
necessitated by the fact that revenues for the quarter ended March 31, 1997 were
substantially below expectations, primarily due to the inability of the Company
to compete effectively in the standard distribution of computer products.
Management also continued the investigation of possible other dispositions.

     On May 6, 1997, AmeriQuest issued 300,000 shares of its Series H Cumulative
Convertible Preferred Stock (convertible into 41,958,042 shares of AmeriQuest
Common Stock) -- to Computer 2000 Inc. in consideration of the payment by
Computer 2000 Inc. of $30,000,000. This infusion fulfilled a previously
announced commitment from Computer 2000 Inc. to make such an investment.

     On June 19, 1997, CMS Enhancements Inc. sold substantially all of its
assets to CMS Peripherals Inc., a company formed by the former managing director
of CMS Enhancements Inc., Mr. Ken Burke. CMS Enhancements Inc., as part of the
transaction has changed its name to AAG Inc. AmeriQuest Technologies Inc. also
signed a non-competition agreement with CMS Peripherals with a term of five
years prohibiting use of the former name of the subsidiary and assembly or
manufacture of disk drives.

     On September 30, 1997, Computer 2000 AG paid AmeriQuest's outstanding lines
of credit in the amount of $27.7 million (formerly guaranteed by Computer 2000
AG) and converted the loans to a non-interest bearing intercompany demand loan,
deferring demand of payment through September 30, 1998, but subordinated to the
Company's working capital lender.

     On October 20, 1997, AmeriQuest/Kenfil Inc. sold its wholly-owned
subsidiaries Kenfil Distribution (Far East) Limited, a Hong Kong corporation and
Kenfil Distribution (M) Sdn. Bhd., a Malaysian

                                      -13-
<PAGE>   14

corporation, to Regentland Holdings Ltd. for proceeds of $2,939,062 pursuant to
a Stock Purchase Agreement. The purchase price was equivalent to repayment of a
loan and the net book value of the assets sold plus a premium of $450,000, and
was paid by issuance of a dividend from Kenfil Distribution (Far East) Limited
to AmeriQuest/Kenfil Inc. in the amount of $1,717,106, the loan repayment of
$771,956 from Kenfil Distribution (Far East) Limited to AmeriQuest/Kenfil Inc.,
and the payment of $450,000 from Regentland Holdings Ltd. Regentland Holdings
Ltd. was formed by Mr. Simon Yip, the former Chief Executive Officer of Kenfil
Distribution (Far East) Limited to accommodate his purchase of such entities.

ANNUAL OPERATING RESULTS

     The following table presents the Company's yearly results of operations as
a percent of sales:

<TABLE>
<CAPTION>
                                                  YEAR ENDED      YEAR ENDED      YEAR ENDED
                                                 SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,
                                                     1999            1998            1997
                                                 -------------   -------------   -------------
<S>                                              <C>             <C>             <C>
Sales..........................................      100.0%          100.0%          100.0%
Gross Profit...................................        8.6            10.1             7.2
Selling, general and administrative............       11.8            10.7            16.1
Intangible write-off...........................         --              --             4.1
Restructuring..................................         --            (2.3)            4.3
Interest.......................................        0.2             0.5             1.6
Net Income (Loss)..............................       (3.4)            1.2           (18.9)
</TABLE>

NET SALES

     During the fiscal year ended September 30, 1999 sales decreased 6% compared
to the twelve months ended September 30, 1998. However, included in sales for
fiscal 1998 were shipments to other IBM distributors of approximately $7,850,000
of IBM RS6000 product that represented liquidation of inventory that took place
as AmeriQuest exited the IBM two tier distributor program. Sales attributable to
the Company's ongoing business during fiscal 1998 were thus $52,616,000
representing an increase of 8%, or $4,249,000 over fiscal 1998. This increase
resulted from the Company's decision to focus on business information solution
selling during fiscal 1999.

     During the fiscal year ended September 30, 1998 sales decreased 72%
compared to the twelve months ended September 30, 1997. Sales decreases were
mainly attributable to the Company's decision to focus on the activities of its
Advanced Systems Group in April of 1997 and sell or close all other divisions
during the preceding fiscal year. Sales attributable to the Company's ongoing
business during fiscal 1997 were $52,050,000. Accordingly, sales during the year
ended September 30, 1998, as adjusted, increased by 1% over the prior year
despite both the Company's decision to terminate its 2nd tier IBM distribution
of Unix products, and its inability to hire and replace sales staff or recruit
additional resellers until the period following the change in control to the
senior management of the Company.

     The Company has relationships with several key vendors as primary suppliers
of computer products to the Company. For the years ended September 30, 1999,
1998 and 1997, sales derived from products from three, two and two vendors
accounted for 65%, 54% and 23%, respectively, of the Company's sales.

COST OF SALES AND GROSS PROFIT

     Cost of sales includes primarily the cost of merchandise, freight expenses
and provisions for inventory losses and is reduced by vendor volume rebates and
other items. Gross profit (sales less cost of sales) decreased to 8.6% of sales
for the fiscal year ended September 30, 1999 compared to 10.1% for the fiscal
year ended September 30, 1998. The desired transition of the Company's sales
force towards "solution" and services selling with its higher margins, while
beginning to show quarterly improvement, has not yet increased sufficiently to
offset either the lower margins of increasing revenue of low-end server, desktop
and peripheral products or the loss of the margin associated with the IBM 2nd
tier RS6000 program in the first half of fiscal

                                      -14-
<PAGE>   15

1998. In addition, the Company recorded in fiscal 1999 and 1998 cost of sales
benefits of approximately $400,000 related to reversal of certain previously
established cost of sales reserves.

     Gross profit increased to 10.1% of sales for the fiscal year ended
September 30, 1998 compared to 7.2% for the fiscal year ended September 30,
1997. The improvement was primarily attributable to the closing of the lower
margin standard distribution businesses and continuation of the higher margin
Advanced Systems division revenue and related higher margin. The detrimental
effect on gross profit of approximately $1,300,000 caused by the liquidation of
inventory purchased in fiscal 1998 was offset by favorable settlements of
approximately $1,300,000 of previously established vendor debit loss reserves.
In addition, in fiscal 1998 the Company recorded a benefit of approximately
$380,000 related to previously established other cost of sales accruals.

     The Company receives funds under incentive programs based upon volume sales
or purchase of the vendors products. The incentive funds reduce the cost of the
products sold. Incentive programs resulted in $0.5 million, $0.3 million and
$2.4 million for the years ended September 30, 1999, September 30, 1998 and
September 30, 1997, respectively.

     AmeriQuest anticipates that it will continue to experience pressure on
gross selling margins of open source hardware product revenues due to severe
industry competition. Although AmeriQuest expects that it will be able to
improve sales product mix toward those products and services generating higher
margins and reduce operating expenses as a percent of sales, no assurance can be
given as to whether such improvement in fact will occur or as to the actual
amount of any such improvement. To the extent gross margins decline and the
Company is not successful in reducing selling, general and administrative
expenses as a percentage of sales, the Company will continue to experience
negative operating results.

OPERATING EXPENSES

     For the fiscal years ended September 30, 1999, 1998 and 1997, operating
expenses, exclusive of restructuring and the write-off of intangibles were
approximately 11.8%, 10.7%, and 16.1% of sales, respectively. Selling, general
and administrative expenses increased during fiscal 1999 as the Company expanded
and rebuilt its sales force with a focus on consultative selling and providing
services and quality products for business information solutions to VARs and
systems integrators. In addition, the Company recorded a benefit of
approximately $600,000 in fiscal 1999 resulting from the reversal of previously
established accruals. AmeriQuest's strategy is to emphasize the sale of complete
solutions for its clients and to provide a high level of value-added services,
including consultation on component selection, system assembly, configuration,
testing and technical support services.

     During the year ended September 30, 1998, the Company settled two lawsuits
favorably and reversed $1.3 million of reserves in excess of settlement amounts
which served to offset certain general and administrative costs incurred during
the fiscal year that related to the withdrawal from business with certain
clients and vendors and residual expenses resulting from closing of the
Company's other divisions in fiscal 1997 and 1998. The Company also recorded the
benefit of approximately $400,000 in fiscal 1998 resulting from the reversal of
previously established accruals. Operating expenses also declined during fiscal
1998, compared to fiscal 1997, as a result of the closing of the lower margin
standard distribution businesses.

     During the year ended September 30, 1997, the Company incurred significant
operating and personnel costs to close down the unprofitable distribution
businesses. During the 1997 fiscal year the Company recorded a $9.3 million
charge to expense the restructuring of the Company's sales and administrative
staffing and planned closing of rented facilities.

     Operating expenses are reduced by advertising revenues and market
development funds received from vendors as subsidy for or incentive to market
their products. Funds received during the fiscal years ended September 30, 1999,
September 30, 1998 and September 30, 1997 totaled $0.3 million, $0.6 million and
$2.0 million, respectively.

                                      -15-
<PAGE>   16

INTANGIBLE WRITE-OFF

     During the year ended September 30, 1997, the Company recorded an
intangible write-off of approximately $9 million (See Note 4 to Notes to
Consolidated Financial Statements).

RESTRUCTURING

     During the year ended September 30, 1998, the company completed its
restructuring plan. Costs incurred to complete the restructuring plan were
charged against the related, previously established restructuring accruals.
Certain estimates made of the costs to complete the restructuring plan exceeded
the actual costs incurred. When the Company determined that the estimated costs
exceeded the actual costs, the remaining accruals were reversed into income.
During the year ended September 30, 1998, the Company reversed approximately
$1.4 million into income (See Note 3 to Notes to Consolidated Financial
Statements). During the year ended September 30, 1997, the company recorded a
restructuring cost of approximately $9.3 million.

INTEREST EXPENSE

     Interest expense, net, decreased from $0.3 million for the year ended
September 30, 1998 to $0.1 million for the year ended September 30, 1999 due to
the elimination of debt associated with the change in control on July 20, 1998.
Borrowings on the bank credit line did not occur until April, 1999 as revenue
increases were achieved.

     Net interest expense decreased from $3.5 million for the year ended
September 30, 1997 to $0.3 million for the year ended September 30, 1998 due to
(i) replacement of bank loans by intercompany loans from Computer 2000 without
interest and (ii) the equity infusion of $3,000,000 from Computer 2000 on July
20, 1998. See "Liquidity and Capital Resources".

INCOME TAXES

     In the period October 1, 1996 to September 30, 1999, no income tax expense
was recorded due to losses or the availability of tax-loss carryforwards. Due to
the acquisition by Listen Group Partners, LLC of the Company's stock held by
Computer 2000 (see Note 2 to the Notes to Consolidated Financial Statements),
there was a change in ownership as defined by section 382 of the Internal
Revenue Code ("Section 382 Limitations"). The Section 382 Limitations limits the
Company's ability to utilize its net operating loss carryforwards created prior
to the ownership change. The Company has calculated that the net operating loss
carryforwards available to offset future taxable income is $17.4 million (see
Note 9 to the Notes to Consolidated Financial Statements). The Company had not
benefited from these net operating carryforwards as of September 30, 1999.

OPERATING INCOME VARIABILITY

     The annual and quarterly operating results of the domestic operations of
the Company have varied considerably due to the acquisition of distribution
companies, closure and sale of certain subsidiaries and operating units and a
reduced emphasis on manufacturing and assembly for all but mass storage assembly
products, which also ceased as of June 19, 1997. As earlier mentioned, the
Company experienced a net loss of $67.6 million in fiscal 1995, a net loss of
$33.6 million during fiscal 1996, a net loss of $41.3 million during fiscal
1997, net income of $0.7 million during fiscal 1998 and a net loss of $1.9
million during fiscal 1999. Included in the net income for fiscal 1998 is
reversal of restructuring accruals of $1.4 million and other previously
established reserves.

INFLATION

     To date AmeriQuest has not been significantly affected by inflation.
Moreover, technological changes in the electronics industry have generally
resulted in price reductions, despite increases in certain costs which may be
affected by inflation.

                                      -16-
<PAGE>   17

SEASONALITY

     Generally, the Company's sales volumes are not seasonal between quarters,
although historical monthly sales within various quarters have varied
considerably. For example, sales tend to decrease in November, primarily due to
industry attendance at Comdex, with a corresponding increase in December.

LIQUIDITY AND CAPITAL RESOURCES

     At September 30, 1999, the Company had $0.7 million in cash and had
borrowed $2.4 million against its line of credit. The Company used $2.5 million
in cash during the year ended September 30, 1999 primarily to finance capital
expenditures and the growth in sales and related accounts receivable.

     At September 30, 1998, the Company had $0.7 million in cash and had not
borrowed against its line of credit. The Company used $7.0 million in cash from
operating activities during the year ended September 30, 1998 primarily to
finance expenditures associated with the restructuring charges provided in
fiscal 1997, offset partially by reduction in inventory levels.

     At September 30, 1997, the Company had borrowed $3.1 million against lines
of credit. The Company generated $21.7 million in cash from operating activities
during the year ended September 30, 1997. Cash generated by operations in fiscal
1997 resulted primarily from collection of accounts receivable and liquidation
of inventory offset by full settlement of payment with discontinued vendors.
Sale of assets during fiscal 1997 generated an additional $3.5 million of cash.
Cash receipts were applied to reduce outstanding obligations under lines of
credit during fiscal 1997.

     Accounts receivable days increased slightly during fiscal 1999 compared to
fiscal 1998 and decreased during fiscal 1998 compared to fiscal 1997,
representing shorter payment terms extended to clients. Inventory turnover
increased in fiscal years 1999, 1998 and 1997, reflecting an intentional
reduction in stock carried in an effort to reduce obsolescence costs and
carrying costs necessary to support the restructured business.

     At September 30, 1999, the Company had a stockholders' equity of $7.2
million compared to September 30, 1998 stockholders' equity of $9.0 million. At
September 30, 1997, the Company had a stockholders' deficit of $23.4 million.
The improvement in stockholder's equity at September 30, 1998 resulted primarily
from the recapitalization associated with the change in control on July 20,
1998.

     The Company had maintained bank lines of credit guaranteed by Computer 2000
with four German banks which totaled $27.7 million of borrowings at September
30, 1997. On September 30, 1997, Computer 2000 AG paid the outstanding bank
lines of credit and converted the loans to a $27.7 million non-interest bearing
intercompany demand loan, and agreed to defer demand of payment through
September 30, 1998 and subordinate its loan to the working capital lender. See
"Certain Relationships and Related Transactions." Notwithstanding the agreement
by Computer 2000 to defer demand of payment of the loan prior to September 30,
1998, certain specified events such as, but not limited to, the merger, sale or
reorganization of the Company would have made the loan immediately due and
payable. The intercompany loan was contributed to capital as a result of the
change in control on July 20, 1998.

     The Company maintains a $10 million line of credit with Fleet Financial
("Fleet") which is secured by substantially all of the Company's assets.
Interest rates on the Fleet line are prime plus 150 basis points or libor plus
400 basis points. Borrowings under the Fleet line of credit are limited to a
contractual percentage of eligible inventories and receivables. The terms of the
line include restrictive covenants which require the maintenance of specific
levels of tangible net worth and cash flows. The Fleet line expires July 20,
2001. Borrowings under the Fleet line of credit at September 30, 1999 and
September 30, 1998 were $2,443,000 and $0 respectively. The Fleet line replaced
a line of credit with IBM Credit Corporation ("IBMCC"). Borrowings under the
IBMCC line of credit at September 30, 1997 totaled $3.1 million.

     On December 22, 1999, the Company amended its Fleet facility. The amendment
waived defaults of the minimum tangible net worth and minimum cash flow
covenants, as defined, as of September 30, 1999 and reset certain financial
covenants effective October 1, 1999.

                                      -17-
<PAGE>   18

     Management believes that the Company's existing capital resources and other
alternative sources of financing are adequate to meet its current operating
requirements through September 30, 2000 and beyond. Management believes the
Company's operating performance will meet the reset financial covenants under
the Fleet facility during fiscal 2000. Although management believes that the
Company's strategy, when coupled with planned increases in revenue, will return
AmeriQuest to profitability, there are numerous risks and uncertainties,
including those described elsewhere in this Annual Report, and no assurance can
be given that the Company's strategy will succeed or that the Company will
become operationally profitable. Management will periodically review the need to
further reduce costs should sales for any reason not materialize in amounts
sufficient to cover the existing cost structure.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     The Company does not utilize financial instruments for trading purposes and
holds no derivative financial instruments which could expose the Company to
significant market risk. The Company's primary market risk exposure with regard
to financial instruments is to changes in interest rates. Pursuant to the
Company's line of credit with Fleet, a change in either the lender's base rate
or LIBOR would affect the rate at which the Company could borrow funds
thereunder. The Company believes that the effect of any such change would be
minimal. Management estimates that had either the lenders base rate or Libor
increased by one percent, the Company's interest expense for the year ended
September 30, 1999 would have increased by approximately $6,000.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The financial statements, notes thereto, and the report of independent
public accountants thereon are included herein. Supplementary data, including
quarterly financial information, is included following the financial statements.
A list of the information so included is set forth in response to Item 14(a)
entitled "Exhibits, Financial Statement Schedules, and Reports on Form 8-K,"
which is incorporated herein by this reference.

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

     None

                                      -18-
<PAGE>   19

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     See "Election of Directors" in the proxy statement for the 1999 annual
meeting of the stockholders of the Company, which will be filed within 120 days
after the end of the fiscal year covered by this Annual Report on Form 10-K and
is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION.

     See "Executive Officers Compensation" in the proxy statement for the 1999
annual meeting of the stockholders of the Company, which will be filed within
120 days after the end of the fiscal year covered by this Annual Report on Form
10-K and is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     See "Stock Ownership" in the proxy statement for the 1999 annual meeting of
the stockholders of the Company, which will be filed within 120 days after the
end of the fiscal year covered by this Annual Report on Form 10-K and is
incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     See "Other Information -- Certain Relationships and Related Transactions"
in the proxy statement for the 1999 annual meeting of the stockholders of the
Company, which will be filed within 120 days after the end of the fiscal year
covered by this Annual Report on Form 10-K and is incorporated herein by
reference.

                                      -19-
<PAGE>   20

                                    PART IV

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

     (a) Financial Statements and Schedules

<TABLE>
<CAPTION>
                                                                     PAGE
                                                                   REFERENCE
                                                                   ---------
<S>  <C>                                                           <C>
(1)  Financial Statements included in Part II of this Report:
     Report of Independent Public Accountants....................     F-1
     Consolidated Balance Sheets.................................     F-2
     Consolidated Statements of Operations.......................     F-3
     Consolidated Statements of Stockholders' Equity (Deficit)...     F-4
     Consolidated Statements of Cash Flows.......................     F-5
     Notes to Consolidated Financial Statements..................     F-7
(2)  Financial Statement Schedules
     Schedule II -- Valuation and Qualifying Accounts and
     Reserve.....................................................    F-16
</TABLE>

     (b) Reports on Form 8-K

          None

     (c) Exhibits

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
  NO.                    TITLE OF DOCUMENT                        LOCATION OF FILING
-------                  -----------------                        ------------------
<C>       <S>                                                 <C>
  3.01*   Restated Certificate of Incorporation of
          AmeriQuest......................................    SEC File No. 1-10397
                                                              Exhibit 3.01
                                                              10-K for September 30, 1998
  3.02*   By-laws of AmeriQuest...........................    SEC File No. 33-81726

  4.01*   Reference is made to Exhibits 3.01 and 3.02, the
          Certificate of Incorporation and By-laws, which
          define the rights of security holders...........

  4.02*   Specimen Stock Certificate......................    SEC File No. 33-81726

 10.01*   Inventory and Working Capital Financing
          Agreement dated July 20, 1998 by and between
          AmeriQuest and Fleet Capital....................    SEC File No. 1-10397
                                                              8-K for July 30, 1998

 10.02*   1996 Equity Incentive Plan......................    SEC File No. 1-10397
                                                              Exhibit 10.07
                                                              10-K for September 30, 1997

 10.03*   Employment Agreement for Alexander C. Kramer,
          Jr..............................................    SEC File No. 1-10397
                                                              Exhibit 10.10
                                                              10-K for September 30, 1997
</TABLE>

                                      -20-
<PAGE>   21

<TABLE>
<CAPTION>
EXHIBIT
  NO.                    TITLE OF DOCUMENT                        LOCATION OF FILING
-------                  -----------------                        ------------------
<C>       <S>                                                 <C>
 10.04*   Employment Agreement for Jon D. Jensen..........    SEC File No. 1-10397
                                                              Exhibit 10.11
                                                              10-K for September 30, 1997

 10.05    Employment Agreement for Michael J. McCarthy....

 10.06*   Lease Agreement dated July 1, 1998 by and
          between AmeriQuest and Merion Mills
          Associates......................................    SEC File No. 1-10397
                                                              Exhibit 10.05
                                                              10-K for September 30, 1998

 10.07*   Lease Agreement dated January 25, 1995, as
          amended, by and between AmeriQuest and Anaheim
          Technology Center...............................    SEC File No. 1-10397
                                                              Exhibit 10.25
                                                              10-K for September 30, 1996

 10.08*   Sublease dated as of September 4, 1996 by and
          between AmeriQuest and Central Video, Inc.......    SEC File No. 1-10397
                                                              Exhibit 10.26
                                                              10-K for September 30, 1996

 10.09    1998 Equity Incentive Plan......................

 21.01    Subsidiaries of AmeriQuest......................

 27.01    Financial Data Schedule (for SEC use only)......
</TABLE>

---------------
* Incorporated herein by reference to the indicated filing pursuant to Rule
  12b-32 under the Securities Exchange Act of 1934, as amended, and Rule 24 of
  the Commission's Rules of Practice.

                                      -21-
<PAGE>   22

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1933, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Willow
Grove, State of Pennsylvania, on the 22nd day of December, 1999.

                                          AmeriQuest Technologies, Inc.

                                                /s/ ALEXANDER C. KRAMER
                                          --------------------------------------
                                          By: Alexander C. Kramer
                                            President

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

     Each Person, in so signing, also causes and appoints Alexander C. Kramer
and Jon D. Jensen, and each of them acting alone, as his true and lawful
attorney-in-fact, in his name, place and stead, to execute and cause to be filed
with the Securities and Exchange Commission any or all amendments to this
report.

<TABLE>
<CAPTION>
                     SIGNATURE                                  TITLE                      DATE
                     ---------                                  -----                      ----
<C>                                                  <S>                             <C>
              /s/ ALEXANDER C. KRAMER                President and a Director        December 22, 1999
---------------------------------------------------  (Principal Executive
                Alexander C. Kramer                  Officer)

                 /s/ JON D. JENSEN                   Chief Financial Officer,        December 22, 1999
---------------------------------------------------  Chief Operating Officer,
                   Jon D. Jensen                     Secretary and a Director
                                                     (Principal Financial and
                                                     Accounting Officer)

             /s/ EDWARD B. CLOUES, II                Director                        December 22, 1999
---------------------------------------------------
               Edward B. Cloues, II

               /s/ WALTER A. REIMANN                 Director                        December 22, 1999
---------------------------------------------------
                 Walter A. Reimann

               /s/ CHARLES W. SOLTIS                 Director                        December 22, 1999
---------------------------------------------------
                 Charles W. Soltis
</TABLE>

                                      -22-
<PAGE>   23

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To AmeriQuest Technologies, Inc.:

     We have audited the accompanying consolidated balance sheets of AmeriQuest
Technologies, Inc. (a Delaware corporation) and subsidiaries as of September 30,
1999 and 1998, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended September 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
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 AmeriQuest Technologies,
Inc. and subsidiaries as of September 30, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1999, in conformity with generally accepted accounting
principles.

     Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as whole. Schedule II is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

                                                /s/ ARTHUR ANDERSEN LLP

Philadelphia, Pennsylvania,
November 23, 1999 (except with
       respect to matters discussed
       in Note 8, as to which the
       date is December 22, 1999).

                                       F-1
<PAGE>   24

                 AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                  SEPTEMBER 30,
                                                              ----------------------
                                                                1999         1998
                                                              ---------    ---------
<S>                                                           <C>          <C>
ASSETS
CURRENT ASSETS
  Cash and cash equivalents.................................  $     667    $     755
  Accounts receivable, net of allowances for doubtful
     accounts of $264 and $609..............................      8,323        6,535
  Inventories...............................................      3,565        4,191
  Other current assets......................................        319          354
                                                              ---------    ---------
          Total current assets..............................     12,874       11,835
PROPERTY AND EQUIPMENT, NET.................................        961          799
OTHER ASSETS................................................        333          321
                                                              ---------    ---------
                                                              $  14,168    $  12,955
                                                              =========    =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Line of credit............................................  $   2,443    $
  Accounts payable..........................................      3,709        2,132
  Accrued expenses and other................................        847        1,805
                                                              ---------    ---------
          Total current liabilities.........................      6,999        3,937
                                                              ---------    ---------
COMMITMENTS AND CONTINGENCIES (NOTE 10)
STOCKHOLDERS' EQUITY
  Common stock, $.01 par value, 200,000,000 shares
     authorized; 67,841,906 and 66,881,906 shares issued and
     outstanding, respectively..............................        679          669
  Additional paid-in capital................................    174,433      174,383
  Accumulated deficit.......................................   (167,943)    (166,034)
                                                              ---------    ---------
          Total stockholders' equity........................      7,169        9,018
                                                              ---------    ---------
                                                              $  14,168    $  12,955
                                                              =========    =========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-2
<PAGE>   25

                 AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                  YEAR ENDED SEPTEMBER 30,
                                                              --------------------------------
                                                                1999        1998        1997
                                                              --------    --------    --------
<S>                                                           <C>         <C>         <C>
NET SALES...................................................  $56,865     $60,466     $218,877
COST OF SALES...............................................   51,990      54,323      203,199
                                                              -------     -------     --------
     Gross profit...........................................    4,875       6,143       15,678
OPERATING EXPENSES
  Selling, general and administrative.......................    6,693       6,499       35,160
  Intangibles write-off.....................................       --          --        9,036
  Restructuring costs.......................................       --      (1,376)       9,338
                                                              -------     -------     --------
       Income (loss) from operations........................   (1,818)      1,020      (37,856)
INTEREST EXPENSE, NET.......................................       91         273        3,455
                                                              -------     -------     --------
NET INCOME (LOSS)...........................................   (1,909)        747      (41,311)
DIVIDENDS ON PREFERRED STOCK................................       --      (1,575)        (875)
                                                              -------     -------     --------
NET LOSS TO COMMON STOCKHOLDERS.............................  $(1,909)    $  (828)    $(42,186)
                                                              =======     =======     ========
BASIC AND DILUTED NET LOSS PER SHARE........................  $ (0.03)    $ (0.01)    $  (0.63)
                                                              =======     =======     ========
SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS PER
  SHARE.....................................................   67,329      66,882       66,882
                                                              =======     =======     ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-3
<PAGE>   26

                 AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                               PREFERRED STOCK        COMMON STOCK       ADDITIONAL
                                             -------------------   -------------------    PAID-IN     ACCUMULATED
                                              SHARES     AMOUNT      SHARES     AMOUNT    CAPITAL       DEFICIT      TOTAL
                                             --------   --------   ----------   ------   ----------   -----------   --------
<S>                                          <C>        <C>        <C>          <C>      <C>          <C>           <C>
Balances at September 30, 1996.............        --   $     --   67,047,392    $670     $111,144     $(123,020)   $(11,206)
Correction of outstanding shares that were
authorized but never issued in connection
with settlement of debt (1)................        --         --     (165,486)     (1)           1            --           0
Sale of preferred stock....................   300,000     30,000           --      --           --            --      30,000
Accrued dividend on preferred stock........        --         --           --      --           --          (875)       (875)
Net loss...................................        --         --           --      --           --       (41,311)    (41,311)
                                             --------   --------   ----------    ----     --------     ---------    --------
Balances at September 30, 1997.............   300,000     30,000   66,881,906     669      111,145      (165,206)    (23,392)
Accrued dividend on preferred stock........        --         --           --      --           --        (1,575)     (1,575)
Contribution of cash, preferred stock,
  accrued dividends and debt by Computer
  2000 (see Note 2)........................  (300,000)   (30,000)          --      --       63,238            --      33,238
Net income.................................        --         --           --      --           --           747         747
                                             --------   --------   ----------    ----     --------     ---------    --------
Balances at September 30, 1998.............        --         --   66,881,906     669      174,383      (166,034)      9,018
Issuance of shares to executive
  management...............................        --         --      960,000      10           50            --          60
Net loss...................................        --         --           --      --           --        (1,909)     (1,909)
                                             --------   --------   ----------    ----     --------     ---------    --------
Balances at September 30, 1999.............        --   $     --   67,841,906    $679     $174,433     $(167,943)   $  7,169
                                             ========   ========   ==========    ====     ========     =========    ========
</TABLE>

---------------
(1) Correction of Outstanding Shares -- The number of outstanding shares of
    Common Stock was corrected to account for shares that were authorized but
    never issued in connection with settlement of debt, and the elimination of
    duplicate shares erroneously issued upon exercise of an employee stock
    option.

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-4
<PAGE>   27

                 AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                  YEAR ENDED SEPTEMBER 30,
                                                              --------------------------------
                                                                1999        1998        1997
                                                              --------    --------    --------
<S>                                                           <C>         <C>         <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)...........................................  $(1,909)    $   747     $(41,311)
  Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
     Depreciation and amortization..........................      301         307        2,664
     Gain on sale of division assets........................       --        (184)        (385)
     Restructuring costs....................................       --      (1,376)      13,849
  Changes in operating assets and liabilities:
     Net (increase) decrease in accounts receivable.........   (1,788)       (415)      43,625
     Decrease in inventories................................      626       2,450       29,613
     Decrease in other assets...............................       23         229        2,704
     Increase (decrease) in accounts payable and accrued
       expenses and other...................................      679      (8,757)     (29,027)
                                                              -------     -------     --------
          Net cash provided by (used in) operating
            activities......................................   (2,068)     (6,999)      21,732
                                                              -------     -------     --------
CASH FLOW FROM INVESTING ACTIVITIES:
  Proceeds from sale of division assets.....................       --         450        3,550
  Capital expenditures, net of disposals....................     (463)       (312)         (62)
                                                              -------     -------     --------
          Net cash provided by (used in) investing
            activities......................................     (463)        138        3,488
                                                              -------     -------     --------
CASH FLOW FROM FINANCING ACTIVITIES:
  Net borrowings (repayments) under lines of credit.........    2,443      (3,064)     (77,504)
  Net borrowings from Computer 2000.........................       --          --       27,664
  Contribution to capital from Computer 2000................       --       3,000           --
  Proceeds from sale of preferred and common stock..........       --          --       30,000
                                                              -------     -------     --------
          Net cash provided by (used in) financing
            activities......................................    2,443         (64)     (19,840)
                                                              -------     -------     --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........      (88)     (6,925)       5,380
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............      755       7,680        2,300
                                                              -------     -------     --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................  $   667     $   755     $  7,680
                                                              =======     =======     ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-5
<PAGE>   28

               SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
                             (DOLLARS IN THOUSANDS)

Interest:                    During the fiscal years ended September 30, 1999,
                             September 30, 1998 and September 30, 1997, the
                             Company paid cash for interest of approximately
                             $128, $499, and $3,614, respectively.

Income taxes:                During the fiscal years ended September 30, 1999,
                             September 30, 1998 and September 30, 1997, the
                             Company made no income tax payments.

Noncash investing and financing activities:

Contribution of
  non-interest Bearing demand
  loan and Preferred stock
  to capital:                During the fiscal year ended September 30, 1998,
                             Computer 2000 contributed to the capital of the
                             Company a non-interest bearing demand loan due
                             Computer 2000 and preferred stock of approximately
                             $28 million and $30 million, respectively.

Dividends on Preferred
Stock:                       During the fiscal years ended September 30, 1998
                             and 1997, the Company had accrued $1,575 and $875,
                             respectively, in dividends payable to preferred
                             stockholders. The accrued dividends of $2,450 were
                             contributed to capital on July 20, 1998.

Issuance of Common Stock:    During the fiscal year ended September 30, 1999,
                             the Company issued 960,000 shares of its common
                             stock to certain members of executive management as
                             settlement for bonuses accrued for at September 30,
                             1998.

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-6
<PAGE>   29

                 AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     Description of Business.  AmeriQuest Technologies, Inc. and subsidiaries
(the "Company" or "AmeriQuest"), a Delaware corporation, is a provider of
products and services for business information solutions to value-added
resellers ("VARs") and systems integrators.

     During fiscal 1998, the Company's senior management acquired all of the
Company's common stock held by Computer 2000, the then current majority
stockholder. Computer 2000 also contributed cash, preferred stock, accrued
dividends and obligations due Computer 2000 to the Company's equity (see Note
2).

     Restructuring Costs.  On April 9, 1997, the Board approved a wide-ranging
restructuring plan with the goal of focusing on the Company's Advanced Systems
Group ("ASG"). The plan included closure of all warehouse facilities, other than
ASG, which is based in Horsham, Pennsylvania. The restructuring has resulted in
the closure of warehouse facilities in Visalia, California, Miami, Florida,
Dallas, Texas, and Chicago, Illinois. In addition, the number of employees has
been significantly reduced and all remaining employees are in the US. The
Company also closed its corporate headquarters in Florida. The restructuring
plan was implemented, but not completed, throughout fiscal year 1997. At
September 30, 1997, the Company has accrued $3,738,000 of cost related to the
restructuring plan. The plan resulted in a substantial reduction in sales
revenue with the goal of returning the Company to profitability in future years.
Sales, for the year ended September 30, 1997, of the businesses closed were
approximately $126 million.

     The Company completed this restructuring plan during fiscal year 1998.
Costs incurred to complete the restructuring plan were charged against the
related restructuring accruals. Certain estimates made of the costs to complete
the restructuring plan exceeded the actual costs incurred. When the Company
determined that the estimated costs exceeded the actual costs, the remaining
accruals were reversed into income. During fiscal 1998, the Company reversed
$1,376,000 into income, which is recorded in restructuring costs in the
accompanying consolidated statement of operations (see Note 3). In addition,
during 1998 and 1999, the Company recorded significant benefits to its
Statements of Operations due to the reversal of previously established reserves
(See Notes 3, 5, 7 and 10).

     Basis of Presentation.  The accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization of assets
and satisfaction of liabilities in the normal course of business. Through
September 30, 1997, The Company incurred significant losses. In fiscal 1998 and
1999, excluding the reversal of previously established reserves (See Notes 3, 5,
7 and 10), the Company continued to incur losses. In addition, the Company
generated negative cash flow from operations in fiscal 1998 and 1999,
respectively. As of September 30, 1999, the Company was not in compliance with
its bank line of credit. Such non-compliance was waived by the bank and new
covenants were established effective October 1, 1999 (see Note 8). Management
believes the Company's operating performance will meet these covenants during
fiscal 2000. Following the change of ownership to the Company's senior
management in fiscal 1998, management continued to focus on reducing working
capital requirements and monitoring overall cost control programs. In addition,
the Company has begun a migration from exclusively being a distributor of micro,
mini- and mid-range computers and related products to also selling value added
services, such as engineering design and system configuration, installation
capability, marketing, financial and technical support. Management believes the
Company's existing capital resources and other alternative sources of financing
will be adequate to fund the Company's operations throughout fiscal 2000 and
beyond. If necessary, management believes it has the ability to reduce operating
expenses so the Company will have adequate cash flow to sustain operations. The
Company's future results of operations involve a number of risks and
uncertainties. Factors that could affect the Company's future operating results
and cause actual results to vary materially from expectations include, but are
not limited to, the Company's historical operating losses, the competitive
market for computers and computer related equipment, dependence on key vendors,
dependence on key personnel and risks associated with rapidly changing
technology and markets.

                                       F-7
<PAGE>   30
                 AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Basis of Consolidation.  The consolidated financial statements include the
accounts of AmeriQuest and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.

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

     Reclassifications:  Certain amounts in the prior periods have been
reclassified to conform to the current year's presentation.

     Cash and Cash Equivalents.  The Company considers cash on deposit with
financial institutions and all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The Company
generally limits its investments in cash equivalents to certificates of deposit.

     Inventories.  Inventories consist principally of computer hardware and
software held for resale and are stated at the lower of first-in, first-out or
market. Reserves for inventory obsolescence and slow moving product are provided
based upon specified criteria, such as recent sales activity and date of
purchase. Amounts due from vendors for price protection and stock rotations are
recorded as an offset to the amounts due vendors in accounts payable. Management
assesses the realizable value of these amounts and reserves for potential
uncollectable balances.

     Property and equipment.  Property and equipment are stated at cost.
Depreciation and amortization are computed using straight-line method over
estimated useful lives as follows:

<TABLE>
<S>                                                           <C>
Equipment...................................................  5 to 7 years
Furniture and fixtures......................................       5 years
Leasehold improvements......................................    Lease term
Computer Hardware and Software..............................       3 years
Vehicles....................................................  3 to 5 years
</TABLE>

     Maintenance, repairs and minor renewals are charged directly to expense as
incurred. Additions and betterments to property and equipment are capitalized.
When assets are disposed of, the related cost and accumulated depreciation
thereon are removed from the accounts and any resulting gain or loss is included
in operations.

     Market development funds and volume incentive rebates.  In general, vendors
provide various incentive programs to the Company. The funds received under
these programs are determined based on purchases and/ or sales of the vendors'
product and the performance of certain training, advertising and other market
development activities. Revenue associated with these funds is recorded when
earned either as a reduction of selling, general and administrative expenses or
product cost, according to the specific nature of the program.

     Sales recognition.  Sales are recorded as of the date shipments are made to
customers. Sales returns and allowances are reflected as a reduction in sales
and recorded in inventory at expected net realizable value. The Company permits
the return of products within certain time limits and will exchange returned
products. Products that are defective upon arrival are handled on a warranty
return basis with the Company's vendors. The Company provides for product
warranty and return obligations at the point of sale based on estimates of
expected future costs.

     Income taxes.  The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS 109),
which requires an asset and liability approach in accounting for income taxes
payable or refundable at the date of the financial statements as a result of all
events that have been recognized in the financial statements and as measured by
the provisions of

                                       F-8
<PAGE>   31
                 AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

enacted laws. Additionally, SFAS 109 requires that deferred tax assets be
evaluated and a valuation allowance be established if it is "more likely than
not" that all or a portion of the deferred tax asset will not be realized.

     Net loss per common share and common share equivalent.  The Company adopted
Statement of Financial Accounting Standards No. 128, "Earnings per Share,"
effective the year ended September 30, 1998. This statement requires the
disclosure of both basic and diluted earnings per share as well as the
retroactive restatement of prior years' per share disclosures. Basic and
dilutive shares outstanding for the fiscal years ended September 30, 1999, 1998
and 1997 are the same, as all common stock equivalents are anti-dilutive due to
the loss to common shareholders.

     Recently issued accounting pronouncements.  The Company adopted FASB
Statement No. 131, "Disclosure About Segments of an Enterprise and Related
Information" ("SFAS 131"). This statement establishes additional standards for
segment reporting in the financial statements and is effective for fiscal years
beginning after December 15, 1997. The adoption of SFAS 131 did not have an
effect on the Company's financial statements.

     Concentration of credit risks.  Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of cash
and accounts receivable. The Company places its cash with high credit quality
financial institutions. Concentrations of credit risk with respect to accounts
receivable are not significant due to the large number of clients. At September
30, 1997, 1998 and 1999, no one client represented greater than 10% of accounts
receivable or greater than 10% of sales for the periods then ended.

     Dependence on Vendors.  The Company has relationships with several key
vendors as primary suppliers of computer products to the Company. For the years
ended September 30, 1999, 1998 and 1997, sales derived from products from three,
two and two vendors accounted for 65%, 54%, and 23%, respectively, of the
Company's sales. There can be no assurance that the Company will maintain its
relationship with these vendors, or that it will be able to find alternative
vendors capable of providing product on terms satisfactory to the Company should
its relationship with its current vendors terminate.

2. ACQUISITION OF COMPUTER 2000 AG MAJORITY STOCK HOLDINGS BY SENIOR MANAGEMENT:

     On July 2, 1998, Listen Group Partners, LLC, a group headed by AmeriQuest's
senior management, Alex Kramer (CEO) and Jon Jensen (CFO), signed an agreement
to acquire the 36,349,878 shares of AmeriQuest common stock owned by Computer
2000. The transaction was approved by the outside directors of AmeriQuest and by
the full Board of Directors of AmeriQuest.

     In taking over majority control of AmeriQuest from Computer 2000,
AmeriQuest's management arranged for a new $10 million asset-backed bank credit
line for AmeriQuest (see Note 8), in part to release Computer 2000 from its
guarantee of IBMCC, obtained the release of Computer 2000 and its affiliates
from all other guarantees of AmeriQuest obligations, and agreed to pay certain
transaction costs totaling approximately $220,000.

     As part of the transaction, completed on July 20, 1998, Computer 2000
contributed to the capital of AmeriQuest approximately $28 million in
intercompany debt obligations and an additional $3 million in cash. Computer
2000 further agreed to the redemption by AmeriQuest of all of the outstanding
AmeriQuest preferred stock, convertible into approximately 42 million common
shares, and to the cancellation of all outstanding dividends of $2,450,000,
interest of $124,000 and AmeriQuest options and warrants held by Computer 2000.

     As a result of the transaction, the number of outstanding shares of
AmeriQuest on a fully diluted basis, was reduced from approximately 118 million
to approximately 67 million. The Board of Directors of the

                                       F-9
<PAGE>   32
                 AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Company agreed to reserve 6.7 million shares of common stock for future issuance
to AmeriQuest employees as incentive compensation pursuant to terms to be
approved by outside directors of the board.

3. RESTRUCTURING COSTS AND ASSET IMPAIRMENT:

     The components of the restructuring costs and asset impairment for the year
ended September 30, 1997 were as follows (in thousands):

<TABLE>
<S>                                                           <C>
Provision for losses on inventory and vendors (included in
cost of sales)..............................................  $ 4,032
                                                              -------
Provision for losses on accounts receivable (included in
  SG&A expenses)............................................    3,945
                                                              -------
Intangible write off........................................    9,036
                                                              -------
Restructuring Costs:
          Abandonment of leasehold improvements and other
           property and equipment...........................    2,448
          Lease payments in excess of sublease income.......    1,362
          Employee severance costs..........................    2,680
          Other.............................................    2,848
                                                              -------
               Total classified as restructuring costs......    9,338
                                                              -------
          Total costs relating to restructuring and asset
           impairment for the years ended September 30,
           1997.............................................  $26,351
                                                              =======
</TABLE>

     The components of the remaining restructuring accruals as of September 30,
1997 and the 1998 activity are as follows (in thousands):

<TABLE>
<CAPTION>
                                  RESTRUCTURING                                     RESTRUCTURING
                                    ACCRUALS       CHARGED      REVERSED INTO         ACCRUALS
                                  SEPTEMBER 30,    AGAINST      INCOME DUE TO       SEPTEMBER 30,
                                      1997         ACCRUAL    CHANGE IN ESTIMATE        1998
                                  -------------    -------    ------------------    -------------
<S>                               <C>              <C>        <C>                   <C>
Lease payments in excess of
  sublease income...............     $  618        $  533           $   85               $--
Severance costs.................        448           378               70                --
Other...........................      2,672         1,451            1,221                --
                                     ------        ------           ------                --
                                     $3,738        $2,362           $1,376               $--
                                     ======        ======           ======                ==
</TABLE>

4. ACQUISITIONS AND DISPOSITIONS:

     Early in the first quarter of fiscal 1998, AmeriQuest/Kenfil Inc. sold its
wholly owned subsidiaries Kenfil Distribution (Far East) Limited, a Hong Kong
corporation and Kenfil Distribution (M) Sdn. Bhd., a Malaysian corporation
(collectively, "Kenfil Asia"). Proceeds from the sale of Kenfil Asia were
$450,000, with a gain of $184,000, which was classified as a reduction of
selling, general and administrative expenses in the accompanying Statement of
Operations.

     On June 19, 1997, CMS Enhancements Inc., a subsidiary of Ameriquest, sold
substantially all of its assets to CMS Peripherals Inc., a company formed by the
former managing director of CMS Enhancements Inc. CMS Enhancements Inc., as part
of the transaction has changed its name to AAG Inc. AmeriQuest also signed a
non-competition agreement with CMS Peripherals with a term of five years.

     The Company had previously pursued a strategy of growth through acquisition
by acquiring regional distributors with the goal of creating a national
distributor of value-added computers, subsystems and peripherals. All of the
Company's acquisitions were accounted for in accordance with the purchase method
of accounting. Intangible assets associated with these acquisitions were
primarily related to acquired distribution

                                      F-10
<PAGE>   33
                 AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

channels, associated vendor relationships and market positions. These
intangibles were being amortized over ten years. Subsequent to these
acquisitions, the Company assessed the recoverability of these intangibles in
accordance with SFAS 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of." As a result of these assessments, the
Company recorded goodwill impairment charges of approximately $9 million and
$23.8 million in fiscal 1997 and fiscal 1995, respectively. Such charges were
required due to the Company's significant operating losses ($165 million
accumulated deficit as of September 30, 1997) and expectation of future
operating performance.

5. INVENTORIES:

     Inventories consist of finished goods and are reflected net of reserves for
excess and obsolete inventory. In estimating the inventory reserves, management
relied upon its knowledge of the industry, projected sales volumes, current
inventory levels and aging of product on-hand. Because of the assumptions used,
the amounts the Company will ultimately realize could differ materially in the
near term from the net inventory balances as included in the accompanying
financial statements. Inventories do not contain any labor or overhead. The
Company's contracts with most of its vendors provide price protection and stock
return privileges to reduce to some degree the risk of loss to the Company due
to manufacturer price reductions and slow moving or obsolete inventory.

     In fiscal 1999 and 1998, the Company recorded cost of sales benefits of
approximately $400,000 and $1.7 million, respectively, related principally to
the reversal of previously established vendor debit reserves.

6. PROPERTY AND EQUIPMENT:

     Property and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                              SEPTEMBER 30,
                                                           --------------------
                                                             1999        1998
                                                           --------    --------
<S>                                                        <C>         <C>
Equipment................................................  $   270     $   202
Computer Hardware and Software...........................    1,831       1,593
Furniture and fixtures...................................      193         189
Leasehold improvements...................................      332         196
Less accumulated depreciation and amortization...........   (1,665)     (1,381)
                                                           -------     -------
                                                           $   961     $   799
                                                           =======     =======
</TABLE>

7. ACCRUED EXPENSES AND OTHER:

     Accrued expenses and other consist of approximately $377,000 of accrued
payroll and related expenses and approximately $470,000 of deferred income and
other accrued expenses at September 30, 1999. Accrued expenses and other consist
of approximately $819,000 of accrued payroll and related expenses and
approximately $986,00 of other accrued expenses at September 30, 1998. In fiscal
1999 and 1998, the Company recorded operating expense benefits of approximately
$600,000 and $400,000, respectively, related to the reversal of previously
established accruals and reserves.

8. LINES OF CREDIT:

     In connection with the purchase, in fiscal 1998, by the Company's
management of the Company's stock held by Computer 2000 (see Note 2), the
Company entered into a three year credit facility with a bank (the "Credit
Facility") to provide additional working capital for the Company. The Company
can borrow on the Credit Facility up to the lesser of $10 million or 80% of
eligible accounts receivable plus the lesser of $3.5 million or 50% of eligible
inventory, as defined. The Credit Facility bears interest at either the banks

                                      F-11
<PAGE>   34
                 AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

prime rate plus 150 basis points or libor plus 400 basis points. The Credit
Facility also provides for various covenants including a minimum tangible net
worth and minimum cash flows, as defined.

     The Company paid a $100,000 commitment fee during fiscal 1998 and is
obligated to pay fees of 0.5% per annum of unused available borrowings and 2%
per annum on outstanding letters of credit. The Credit Facility can be utilized
for letters of credit in an aggregate amount not to exceed $5 million.
Outstanding letters of credit are a reduction of available borrowing under the
Credit Facility. As of September 30, 1999, the Company has borrowed $2.4 million
on the Credit Facility and has outstanding letters of credit of $300,000.

     On December 22, 1999, the Company amended its credit facility. The
amendment waived defaults of the minimum tangible net worth and minimum cash
flow covenants, as defined, as of September 30, 1999 and reset certain financial
covenants effective October 31, 1999.

     Prior to July, 1998, the Company had entered into various credit
arrangements with certain domestic and international financial institutions.
During fiscal 1997 and 1998, the Company was in default on these arrangements.
On September 30, 1997, Computer 2000 paid certain bank lines of credit which
totaled $27.7 million and converted the loans to a non-interest bearing demand
loan, agreed to defer payment of this loan through September 1998 and
subordinated any of the remaining loan balance to the remaining financial
institution. The loan balance to the remaining financial institution as of
September 30, 1997 was approximately $3.1 million. On July 20, 1998, Computer
2000 contributed the non-interest bearing demand loan to the capital of the
Company and also contributed $3 million, which was used to repay the then
outstanding loan to this financial institution (see Note 2).

9. INCOME TAXES:

     The Company has historically incurred significant operating losses and has
recorded a valuation allowance against its net deferred tax asset, as the
Company believed that it was more likely than not that the net deferred tax
asset would not be realized through operations. The valuation allowance recorded
against the net deferred tax asset is based on management's estimates related to
the Company's ability to realize these benefits. Appropriate adjustments will be
made to the valuation allowance if circumstances warrant in future periods. Such
adjustments may have a significant impact on the Company's financial statements.

     The tax effect of significant temporary differences consist of the
following (in thousands):

<TABLE>
<CAPTION>
                                                     YEAR ENDED SEPTEMBER 30,
                                                   ----------------------------
                                                    1999      1998       1997
                                                   -------   -------   --------
<S>                                                <C>       <C>       <C>
Inventory reserves...............................  $    68   $   282   $    498
Allowance for doubtful accounts..................      106       209        868
Other, including restructuring charge............      148       677      8,964
Net operating loss carryforwards.................    5,920     4,556     46,163
Valuation allowance..............................   (6,242)   (5,724)   (56,493)
                                                   -------   -------   --------
                                                   $    --   $    --   $     --
                                                   =======   =======   ========
</TABLE>

     Due to the acquisition by the Company's management of the Company's stock
held by Computer 2000 on July 20, 1998 (see Note 2), there was a change in
ownership as defined by section 382 of the Internal Revenue Code ("Section 382
Limitations"). The Section 382 Limitation limits the Company's ability to
utilize its net operating loss carryforwards created prior to the ownership
change. As of the date of ownership change (July 20, 1998), the Company had net
operating loss carryforwards available to offset future taxable income of up to
approximately $11.9 million. Such carryforwards may be subject to further
limitation. Subsequent to July 20, 1998, the Company has generated additional
net operating loss carryforwards of

                                      F-12
<PAGE>   35
                 AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

approximately $1.5 million and $4.0 million in fiscal 1998 and 1999,
respectively. The Company has not benefited from these net operating
carryforwards as of September 30, 1999.

     The principal elements accounting for the difference between income taxes
computed at the statutory rate and the effective rate are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                           YEAR ENDED SEPTEMBER 30,
                                                           -------------------------
                                                           1999     1998      1997
                                                           -----    ----    --------
<S>                                                        <C>      <C>     <C>
Tax expense (benefit) computed at statutory rate.........   (764)    300    $(15,492)
Intangible write-offs, amortization and other
nondeductible amounts....................................      6      46       7,992
Net operating losses not benefited.......................    758      --       7,500
Benefit of net operating losses previously reserved......     --    (346)         --
                                                           -----    ----    --------
                                                           $  --    $ --    $     --
                                                           =====    ====    ========
</TABLE>

10. COMMITMENTS AND CONTINGENCIES:

     The Company leases its corporate office, warehouse space and certain
equipment under operating leases. Future minimum rental commitments (net of
contractual sub-rental income for fiscal 2000 of $192,326) for all
non-cancelable operating leases at September 30, 1999 are as follows (in
thousands):

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
<S>                                                           <C>
2000........................................................     483,366
2001........................................................     239,938
2002........................................................     233,670
2003........................................................     200,050
2004........................................................          --
                                                              ----------
                                                              $1,157,024
                                                              ==========
</TABLE>

     Total rental expense net of sub-rental income under non-cancelable
agreements for the years ending September 30, 1999, September 30, 1998, and
September 30, 1997 was approximately $355,000, $589,000, and $4,298,000,
respectively.

     In fiscal 1998, the Company settled two law suits: Kenfil Inc. vs. RLI
Insurance Company and Leading Edge Products, Inc. vs. AmeriQuest. Total amounts
due for the settlements were $920,000. At September 30, 1997, the Company had
reserves in excess of the settlement amounts of approximately $1.3 million,
which were taken into income during fiscal 1998 as an offset to selling, general
and administrative expense in the accompanying consolidated statement of
operations.

     The Company is a party to various legal matters arising in the ordinary
course of business. Management believes that the ultimate outcome of these
matters will not have a material adverse effect on the Company's future
financial position or its results of operations.

11. STOCK OPTION PLANS:

     The Company has instituted various stock option plans, which authorize the
granting of options to key employees, directors, officers, vendors and clients
to purchase shares of the Company's common stock. All grants of options during
the years presented have been to employees or directors and were granted at the
then

                                      F-13
<PAGE>   36
                 AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

quoted market price. A summary of shares available for grant and the options
outstanding under the plans is as follows:

<TABLE>
<CAPTION>
                                                  SHARES
                                                AVAILABLE       OPTIONS         PRICE
                                                FOR GRANT     OUTSTANDING       RANGE
                                                ----------    -----------    ------------
<S>                                             <C>           <C>            <C>
Balances at September 30, 1995................     154,020     2,422,574     $0.05 - 4.50
Options exchanged in an acquisition...........    (301,978)      301,978      0.45 - 2.00
Options exercised.............................          --       (82,500)            0.05
Options cancelled.............................     447,561      (447,561)     0.45 - 4.50
                                                ----------    ----------     ------------
Balances at September 30, 1996................     299,603     2,194,491     $0.05 - 4.50
Options cancelled.............................   1,628,987    (1,628,987)     0.05 - 3.50
                                                ----------    ----------     ------------
Balances at September 30, 1997................   1,928,590       565,504     $0.45 - 4.50
Options no longer available for grant.........    (365,953)           --               --
Options cancelled.............................     437,363      (437,363)     0.45 - 4.50
Options granted...............................  (1,910,000)    1,910,000             0.08
                                                ----------    ----------     ------------
Balances at September 30, 1998................      90,000     2,038,141     $0.08 - 0.45
Increase in shares available for grant........   4,700,000            --               --
Options no longer available for grant.........    (128,141)           --               --
Options cancelled.............................     318,141      (318,141)     0.08 - 0.45
Options granted...............................    (150,000)      150,000      0.06 - 0.11
                                                ----------    ----------     ------------
Balances at September 30, 1999................   4,830,000     1,870,000     $0.06 - 0.11
                                                ==========    ==========     ============
</TABLE>

     The following table summarizes information about stock options outstanding
at September 30, 1999:

<TABLE>
<CAPTION>
                   NUMBER OF OPTIONS
                   OUTSTANDING AS OF                         WEIGHTED
     RANGE OF        SEPTEMBER 30,        REMAINING          AVERAGE         OPTIONS
  EXERCISE PRICE         1999          CONTRACTUAL LIFE   EXERCISE PRICE   EXERCISABLE
  --------------   -----------------   ----------------   --------------   -----------
  <S>              <C>                 <C>                <C>              <C>
   $       0.08        1,720,000          107 months          $0.08          688,000
           0.06           50,000          113 months           0.06           10,000
           0.11          100,000          119 months           0.11               --
   ------------        ---------                              -----          -------
   $0.06 - 0.11        1,870,000                              $0.08          698,000
   ============        =========                              =====          =======
</TABLE>

     The Company accounts for its option plan under APB Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company follows the disclosure
requirements of Financial Accounting Standards Board No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123). SFAS 123 established a fair value based
method of accounting for stock-based compensation plans. SFAS 123 requires that
an employer's financial statements include certain disclosures about stock-based
employee compensation arrangements regardless of the method used to account for
the plan. Had the Company recognized compensation cost for its stock option

                                      F-14
<PAGE>   37
                 AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

plans consistent with the provisions of SFAS 123, the following pro forma net
loss to common stockholders for each of the three years in the period ended
September 30, 1999 would have resulted:

<TABLE>
<CAPTION>
                                                                   YEAR ENDED
                                                                  SEPTEMBER 30,
                                                              ---------------------
                                                               1999          1998
                                                              -------       -------
                                                              (IN THOUSANDS, EXCEPT
                                                                 PER SHARE DATA)
<S>                                                           <C>           <C>
Net loss to common stockholders:
  As reported...............................................  $1,909        $  828
                                                              ======        ======
  As calculated in accordance with SFAS 123.................  $1,923        $  829
                                                              ======        ======
Net income/(loss) per Common Share:
  As reported...............................................  $(0.03)       $(0.01)
                                                              ======        ======
  As calculated.............................................  $(0.03)       $(0.01)
                                                              ======        ======
Shares used in calculating net income per diluted common
  share.....................................................  67,329        66,882
                                                              ======        ======
</TABLE>

     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model, with risk-free interest rates of 4.96%
to 5.99%, no expected dividend yield, an expected life of five years and a
volatility factor of 50%. As of September 30, 1999, the weighted average fair
value of the options outstanding is $0.04 per option. No options were granted in
fiscal year 1997. Accordingly, no compensation cost had been recorded or
proforma disclosures are required under the provisions of SFAS 123.

12. FOREIGN SALES INFORMATION:

     A summary of the Company's operations by geographic area is as follows (in
thousands):

<TABLE>
<CAPTION>
                                          U.S.      FAR EAST    ELIMINATIONS    CONSOLIDATED
                                        --------    --------    ------------    ------------
<S>                                     <C>         <C>         <C>             <C>
Year Ended September 30, 1999
Sales to unaffiliated clients.........  $ 56,865         --                       $ 56,865
Loss (income) from operations.........    (1,909)        --         --              (1,909)
Identifiable assets...................    14,168         --         --              14,168
Year Ended September 30, 1998
Sales to unaffiliated clients.........  $ 60,466         --         --            $ 60,466
Loss (income) from operations.........      (747)        --         --                (747)
Identifiable assets...................    12,955         --         --              12,955
Year Ended September 30, 1997
Sales to unaffiliated clients.........  $194,342    $24,535         --            $218,877
Loss (income) from operations.........    37,887        (31)        --              37,856
Identifiable assets...................    19,799      6,280         --              26,079
</TABLE>

     United States sales include export sales of $5.3 million, made principally
to Europe, Latin America, the Far East and Canada during the fiscal year ended
September 30, 1997. See Footnote 4 for disposition of the Far East operations.

                                      F-15
<PAGE>   38

                                                                     SCHEDULE II

                 AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
                                                         ADDITIONS
                                           BALANCE AT    CHARGED TO    DEDUCTIONS               BALANCE
                                           BEGINNING     COSTS AND      ACCOUNTS                AT END
                                           OF PERIOD      EXPENSE      WRITTEN-OFF    OTHER    OF PERIOD
                                           ----------    ----------    -----------    -----    ---------
<S>                                        <C>           <C>           <C>            <C>      <C>
Description
Allowance for Doubtful Accounts:
  October 1, 1996 to September 30,
     1997................................    5,811         4,970          8,625          --      2,156
  October 1, 1997 to September 30,
     1998................................    2,156            --          1,547          --        609
  October 1, 1998 to September 30,
     1999................................      609            --            137         208(2)--     264

Restructuring Accounts
  October 1, 1996 to September 30,
     1997................................       --         9,338          5,600          --      3,738
  October 1, 1997 to September 30,
     1998................................    3,738            --          2,362       1,376(1)      --
</TABLE>

---------------
(1) Reversed into income due to change in estimate. See Note 3 to Notes to
    Consolidated Financial Statements.

(2) Reversed into income due to change in estimate. See Note 7 to Notes to
    Consolidated Financial Statements.

                                      F-16