U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A

               /X/ ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For
                    the fiscal year ended: DECEMBER 31, 2000

              / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                 OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE
               REQUIRED) For transition period from _____ to _____

                         Commission File Number: 0-12374

                                  EQUITEX, INC.
                 (Name of small business issuer in its charter)

DELAWARE                                                              84-0905189
(State or other jurisdiction of                                 (I.R.S. Employer
incorporation or organization)                            Identification Number)


              7315 EAST PEAKVIEW AVENUE, ENGLEWOOD, COLORADO 80111
               (Address of principal executive offices)(Zip Code)

                    Issuer's telephone number: (303) 796-8940

                Securities registered under Section 12 (b) of the
                                 Exchange Act:
                                      NONE

                Securities registered under Section 12 (g) of the
                                 Exchange Act:
                          COMMON STOCK, $.02 PAR VALUE
                                (Title of Class)

--------------------------------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Exchange during the past 12 months
(or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
Days: Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained in this form, 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-KSB or any
amendment to this Form 10-KSB: /X/

The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $34,478,670 based on the last sale price of the Registrant's
common stock on March 26, 2001, ($5.50 per share) as reported by the Nasdaq
Stock Market.

The issuer had 7,071,618 shares of common stock outstanding as of March 26,
2001.

Documents incorporated by reference: YES
<PAGE>

                                  EQUITEX, INC.
                                      INDEX


                                                                        PAGE
                                                                        ----
PART II.

Item 6.  Selected Financial Data                                         1

Item 7.  Management's Discussion and Analysis of
           Financial Condition and Results of
           Operations                                                    2

         Signatures                                                     10

PART IV.

Item 14. Financial statements                                           11



<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.

The following tables contain selected financial data of the Registrant for the
previous five years. As a result of the Registrant's change in accounting method
from that of an investment company to that of an operating company following the
Registrant's decertification as a BDC on January 4, 1999, as described more
fully in Part I Item 1. Business, the following information is being presented
in two separate tables. For the years ended December 31, 2000 and 1999, a table
reflecting the Registrant's consolidated selected financial data as an operating
company is being furnished. The selected financial data presented in the second
table represents the Registrant's operations as an investment company for each
of the fiscal years ended December 31, 1998, 1997 and 1996, respectively.


--------------------------------------------- ---------------- -----------------
                                                   2000              1999
--------------------------------------------- ---------------- -----------------
Revenues                                           $2,869,291        $2,340,175
--------------------------------------------- ---------------- -----------------
Net loss                                          (12,499,401)       (7,716,559)
--------------------------------------------- ---------------- -----------------
Net loss applicable to common stockholders        (13,749,401)      (10,985,572)
--------------------------------------------- ---------------- -----------------
Basic & diluted net loss per common share              ($1.93)           ($1.64)
--------------------------------------------- ---------------- -----------------
Total assets                                       $9,431,627       $41,744,937
--------------------------------------------- ---------------- -----------------
Total long-term liabilities                            79,627                 0
--------------------------------------------- ---------------- -----------------
Redeemable preferred stock                          1,536,000                 0
--------------------------------------------- ---------------- -----------------
Cash dividends                                              0                 0
--------------------------------------------- ---------------- -----------------

<TABLE>
<CAPTION>
--------------------------------------------- ---------------- ----------------- ----------------
                                                   1998              1997             1996
--------------------------------------------- ---------------- ----------------- ----------------
<S>                                              <C>               <C>              <C>
Revenues                                             $447,840          $378,391         $632,765
--------------------------------------------- ---------------- ----------------- ----------------
Realized gain from sales of investments             1,108,340         1,003,951        1,226,190
--------------------------------------------- ---------------- ----------------- ----------------
Net investment (loss) and realized gain on           (925,245)         (401,649)          639,874
investments after income taxes
--------------------------------------------- ---------------- ----------------- ----------------
Increase (decrease) in unrealized                  (1,056,054)       (3,521,718)      (5,206,732)
appreciation on investments net of deferred
income taxes
--------------------------------------------- ---------------- ----------------- ----------------
Net increase (decrease) in net assets             $(1,981,299)      $(3,923,367)     $(4,566,858)
resulting from operations
--------------------------------------------- ---------------- ----------------- ----------------
Net increase (decrease) in net assets                  $(0.45)           $(1.25)          $(1.42)
resulting from operation per share
--------------------------------------------- ---------------- ----------------- ----------------
Total assets                                       $5,859,075        $5,038,425      $10,478,003
--------------------------------------------- ---------------- ----------------- ----------------
Total long-term liabilities                                 0                 0                0
--------------------------------------------- ---------------- ----------------- ----------------
Cash dividends                                              0                 0                0
--------------------------------------------- ---------------- ----------------- ----------------
</TABLE>

                                        1
<PAGE>

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


The following discussion and analysis of the Registrant's financial condition
and results of operations should be read in conjunction with the consolidated
financial statements and notes thereto for the years ended December 31, 2000,
1999 and 1998. As a result of the Registrant's change from a BDC to an operating
company as of January 4, 1999 effective January 1, 1999, the Registrant is
presenting its financial statements as an operating company for the years ended
December 31, 2000 and 1999, and as an investment company for the year ended
December 31, 1998. Accordingly, the consolidated balance sheets, consolidated
statement of operations and consolidated statement of cash flows for the years
ended December 31, 2000 and 1999 are presented for the Registrant as an
operating company. These statements include the accounts of the Registrant, its
wholly owned subsidiary FTC and majority owned subsidiaries nMortgage and
Triumph (four retail locations) for the entire year ended December 31, 2000, as
well as its wholly-owned subsidiary Meridian Services for the fourth quarter of
2000. Also included in the December 31, 2000 consolidated financial statements
are the results of the Registrant's 13.6% ownership interest in VP Sports which
is accounted for on an equity basis and the results of FBMS through June 28,
2000. The 1999 statements include the Registrant, FTC and Triumph (five retail
locations) as well as the accounts of majority owned subsidiary nMortgage and
the Registrant's 35.7% investment in VP Sports for September through December
1999 following the Registrant's acquisition of FBMS, and VP Sports' acquisition
of Victoria Precision both in August 1999. The financial statements for the year
ended December 31, 1998 continue to be presented in the investment company
format as audited in those years.

(a)Liquidity and Capital Resources.

As a result of the Registrant's change from a BDC to an operating company in
1999, the amount and sources of the Registrant's liquidity changed
significantly. Prior to 1999 while operating as a BDC, the Registrant relied
primarily on sales of portfolio securities as well as fees charged to investees
for various services to fund its operations. During 1999 and 2000, as the
Registrant continued to restructure its business, the Registrant relied
primarily on private placements of equity securities to fund its operations and
acquisitions as it sought to become an operating company. However, as in past
years, during 1999 and 2000, the Registrant continued to divest certain of its
portfolio securities to generate additional income.

At December 31, 2000, the Registrant had a cash position on a consolidated basis
of $337,234. Cash flows provided by operating activities in 2000 increased to
$14,390,665 from cash used in operating activities of $(4,259,338) in 1999. The
operations and rescission of First Bankers Mortgage Services, Inc. ("FBMS")
contributed significantly to this change, which is not indicative of the
Registrant's expectations in either the short or long-term. A significant
portion of this change was the decrease in mortgage loans held for sale and
decrease in accounts payable and accrued liabilities aggregating $17,928,881,
which was related to the restructuring and subsequent rescission of FBMS. The
Registrant does not expect this trend to continue in the future as the
Registrant's mortgage operations utilize the table funding method for loans and
no longer carry warehouse lines of credit, thus minimizing mortgage loans held
for sale. Also of note were the loss on FBMS rescission and unusual gain on
subsidiary stock transaction which are non-recurring items not expected to
affect future cash flow. On a short-term basis, until such time as the
acquisitions of Key Financial Systems and Nova Financial transactions are
complete, the Registrant anticipates negative liquidity from operations.
However, the Registrant expects the operations of Key Financial Systems and Nova
Financial will positively affect the long-term liquidity prospects for the
Registrant given their historical operating profitability.

Cash flows used in investing activities was $(3,130,877) in 2000 as compared to
$(4,901,137) in 1999. The significantly higher capital expenditures in 1999 were
the result of cash paid for the acquisition of FBMS and the issuances of loans

                                        2
<PAGE>

and notes receivable that did not occur in 2000. These were offset by purchases
of furniture, fixtures and equipment related to the acquisition of the Meridian
Residential Group. Cash flows from investing activities will be significantly
affected by the proposed acquisitions of Key Financial Systems and Nova
Financial Systems should those acquisitions be completed during 2001.

Cash flows used in financing activities were $(11,706,160) in 2000 versus cash
provided by financing activities of $9,911,591 in 1999. Warehouse loans and
other notes payable of $(16,655,458) significantly affected the Registrant's
financing activities during 2000. This is a non-recurring item related to the
FBMS mortgage lending activities and as a result of the rescission, is not
expected to affect future periods. As in previous periods, the Registrant
financed its acquisitions and provided additional cash for operations through
the sale of equity securities in both years 2000 and 1999. The Registrant
expects this trend to continue in the short-term as the Registrant works to
complete the acquisitions of Key Financial Systems and Nova Financial Systems in
which the agreements require approximately $5,000,000 in cash. The Registrant
presently anticipates this will be financed through a private placement of
equity securities. Sales of equity securities could also continue in the
long-term as certain of the Registrant's options, warrants and preferred
securities that are convertible into common stock may not be converted during
the year 2001, thus carrying-over for possible conversion in the year 2002.

For the year 2001, the Registrant, prior to consolidation of any subsidiaries,
anticipates that its liquidity and capital resources are sufficient to fund its
operations as it works toward completing its acquisitions of Key Financial
Services and Nova Financial Services. In the short-term, over the next twelve
months, the Registrant believes it will be able to meet its liquidity needs
through one or more of the following: the sale of certain portfolio securities
remaining from the Registrant's BDC operations; the sale of equity securities
which may cause further dilution to the Registrant's stockholders; and possibly
through borrowings from related and/or third parties.

Ordinarily, all of the Registrant's subsidiaries operate on a stand-alone basis
and each is individually responsible for its own liquidity. However, the
Registrant may need to assist its subsidiaries from time-to-time should
liquidity issues arise. Should additional liquidity be necessary to fund the
operations of its subsidiaries or to complete any merger or acquisition, the
Registrant believes it has sources available, including the sales of certain
investments or the private placement of equity securities, to cover its needs.

On August 23, 1999, the Registrant acquired FBMS a mortgage banking company
headquartered in Ft. Lauderdale, Florida in exchange for 250 shares of the
Registrant's Series E Convertible Preferred Stock. In September 1999, the
Registrant transferred all outstanding shares of FBMS to its then wholly owned
subsidiary, nMortgage, Inc. On August 15, 2000, the Registrant reached an
agreement to rescind the acquisition of FBMS, effective June 28, 2000. Under the
terms of the agreement, all assets and liabilities of FBMS were returned to the
previous owner effective June 28, 2000. As a result of the rescission, nMortgage
retained certain technological rights which were developed after August 23, 1999
and funded by the Registrant's investment. These technological rights are valued
at approximately $2.1 million, net of accumulated depreciation, at December 31,
2000. Also as part of the agreement and rescission, the Registrant has agreed to
issue up to 50 additional shares of its Series E Convertible Preferred Stock
related to performance conditions under the terms of the acquisition that were
satisfied prior to the rescission, bringing the total Series E shares
outstanding to 300. As a result of the rescission, the Registrant divested
itself of the assets, liabilities and operations of FBMS as of June 28, 2000 and
the Registrant's investment in FBMS was written-off as of June 28, 2000
resulting in a loss of $3,979,000.

On September 7, 2000, effective September 27, 2000, Equitex acquired by merger
all of the issued and outstanding common stock of the Meridian Residential
Group, Inc. ("Meridian Residential") through its wholly-owned subsidiary,
GR.com, Inc., in exchange for 425,000 shares of the Registrant's Series F
Convertible Preferred Stock. GR.com, Inc. recently changed its name to Meridian

                                        3
<PAGE>

Services, Inc. ("Meridian Services"). In connection with the Meridian
Residential acquisition, nMortgage acquired from Meridian Capital Group, LLC,
the proprietary business model, website, trademarks, corporate names and all
related intellectual property rights related to Meridian Capital Group's
GreatRate.com business, including the names GreatRate.com and
GreatRateMortgage.com for a cash purchase price of $850,000. The Registrant
issued 1,300 shares of its Series G Convertible Preferred Stock for net proceeds
of $1,240,000 to fund the acquisition of GreatRate.com. The remaining funds were
utilized for working capital needs.

Prior to the rescission, additional capital expenditures were incurred during
the first half of 2000 as nMortgage completed its information technology in
connection with its Internet-based product offerings. Following the closing of
the Meridian Residential transaction, Meridian Services is now handling the
mortgage lending activities of nMortgage which plans to move forward with its
business plan and continue to roll out its business to consumer and business to
business mortgage programs in conjunction with Meridian Services. Meridian
Services is presently relying primarily on origination and other loan related
fees from lenders to whom it brokers mortgage loans. As nMortgage and Meridian
Services continue to develop the business to business Internet solutions, it is
anticipated additional fees will be recognized from fee-based programs for
private labeling third party Websites. This should generate additional
loan-related as well as service-related fees. nMortgage and Meridian Services
are currently cash flow positive and the Registrant anticipates both companies'
liquidity and capital resources will be sufficient to fund their operations
during 2001.

Triumph relies primarily on cash flows from operations for its working capital.
In addition, during 1999 and 2000, Triumph received a cash infusion from the
sale of an investment purchased from an officer of Triumph considerably below
market value. This capital infusion provided additional cash of approximately
$270,000 to operate its business and was considered a contribution of capital.
In an effort to streamline its operations and lower its operating overhead,
during 2000 and in the first quarter of 2001, Triumph closed its two independent
retail operations leaving only its two GNC retail stores. As a result of
Triumph's continuing losses, the Registrant may need to assist Triumph with its
liquidity and capital resources needs during 2001 to help fund its operations.

During 2000, the Registrant participated with other third parties in making
certain loans to VP Sports to assist both of its subsidiaries, Victoria
Precision and Torpedo Sports, with liquidity needs during peak manufacturing
periods. These loans were secured by certain of the assets of VP Sports'
subsidiaries. It is anticipated the Registrant may make further advances to VP
Sports and its subsidiaries during 2001 as additional peak liquidity and capital
resource needs arise.

On June 29, 2000, the Registrant announced that it had executed a definitive
agreement for the acquisitions of Key Financial Systems, Inc. ("Key") and Nova
Financial Systems, Inc. ("Nova") based in Clearwater, Florida. Key is a three
year old financial services call center organization that markets and services
credit card programs and provides customer service support for online
applications. Under the agreement, Key and Nova's current stockholders will
receive a combination of cash and stock of the Registrant as described further
in Part 1 above. The Registrant presently believes that it will have sources of
cash available to complete the Key and Nova acquisitions through the private
offering of equity securities of the Registrant or through the exercise of
certain outstanding warrants and options of the Registrant.

For most of 1999, FTC relied exclusively on the Registrant for operating funds
as the company continued to develop its business plan. During 2000, the
Registrant ceased funding the operations of FTC and the company relied on
internal sources of funds generated through cash flows from certain consulting
services for its liquidity and capital resources. During 2000, FTC embarked on
two initiatives to further its business plan and generate operating funds.
Neither initiative was successful and at December 31, 2000, FTC had only limited
operations. FTC's lease expired and the company currently operates from the home
of its president. While future capital infusions by the Registrant may be

                                        4
<PAGE>

necessary, it is anticipated the amounts can be absorbed by the Registrant given
the relatively low overhead requirements at FTC. Given the present staffing at
FTC and the past lack of success, the Registrant isn't anticipating significant
revenues from FTC in 2001.

(b) Results of operations.

Because of the fundamental change in the Registrant's operations and financial
presentation for 1999 and beyond, the comparison to prior years is difficult. As
a result, the discussion and analysis of the Registrant's results of operations
contain year over year financial comparisons for the years ended December 31,
2000 and 1999, while any comparisons to 1998 have been analyzed with a view
toward the Registrant's current and future business operations. The Registrant's
operations are divided into segments consisting of: financial services which
includes the operations of FBMS, nMortgage and Meridian Services; sporting
goods/product related which includes the operations of Triumph and VP Sports;
and corporate activities which includes the Registrant prior to consolidation.

REVENUES: Consolidated revenues for the year ended December 31, 2000 were
$2,869,291 as compared to $2,340,175 for the Registrant and its subsidiaries for
the year ended December 31, 1999. Revenues for the Registrant as a BDC were
$447,840 in the year ended December 31, 1998.

                             NET REVENUES BY SEGMENT

                                           2000                  1999
                                           ----                  ----
                                              Percent               Percent
Segment                             Amount    of Total    Amount    of Total
Financial services                $2,487,922      87%   $1,547,754      66%
Sporting goods/product related       376,394      13%      738,456      32%
Corporate activities                   4,975       -%       53,965       2%
                                  ----------  -------   ----------  -------
                                  $2,869,291     100%    2,340,175     100%
                                  ----------  -------   ----------  -------

Financial Services Segment
--------------------------
Financial services sales increased by $940,168 or approximately 61%. The
increase included the effect of the acquisition of the Meridian Residential
Group which was acquired in September 2000, and which had revenues of $880,083.
Excluding this acquisition, revenues would have increased by approximately 4%
for the financial services segment. nMortgage revenues increased by $60,564 in
2000 over 1999 as a result of increased consulting services performed. During
2000, nMortgage continued to implement changes in its operations, most notably
the rescission of FBMS and the corresponding loss of mortgage origination
revenue. During the second quarter of 2000, nMortgage transitioned from
warehouse funding to table funding a majority of its mortgage loans. As a result
of this change, nMortgage consolidated its operations and decreased its
operating overhead resulting in certain write-offs and severance costs during
the first six months of the year. Given these operational changes, nMortgage
experienced an overall decrease in loan originations during the period both in
the quarter ended June 30, 2000 as it changed its loan funding method, and in
the quarter ended September 30, 2000 as it ceased operations following the FBMS
rescission. The Registrant anticipates a further increase in consulting services
for 2001.

The Registrant's subsidiary FTC continued its attempts to develop its business
plan during 2000. These activities generated $63,800 in consulting fee revenue
for the year. FTC's other operating initiatives proved unsuccessful. As a
result, FTC had only limited operations at year-end. FTC closed its office
thereby reducing its overhead to negligible levels. The Registrant presently
anticipates FTC will generate little or no operating revenue for the year 2001.

FBMS revenues of $1,433,475 in 2000 (through June 28, 2000) were comprised of
secondary marketing of $871,134, loan production and processing of $293,065 and
interest and dividend income of $269,276. For FBMS 1999 (from August 1999 when

                                        5
<PAGE>

FBMS was acquired) revenues of $1,497,754 consisted of secondary marketing of
$395,034, loan production and processing of $302,811 and interest income of
$799,909.

With the merger of GR.com and Meridian Residential complete, the combined
companies now operating as Meridian Services sought an agreement with a
financial institution allowing them to operate in a greater number of
jurisdictions. During March 2001, Meridian Services entered into an agreement
with a financial institution through which it will effectively be operating in
all fifty states. The financial institution, utilizing its national charter and
its private labeled Meridian-serviced Website, will be able to close loans in
all fifty states. Meridian Services will purchase these closed loans to
effectively be operating in all fifty states. The loans Meridian Services will
be purchasing will be pre-sold by Meridian Services to third party investors.

As a result of these changes, the Registrant anticipates revenues from its
mortgage operations will increase significantly in 2001 as Meridian Services
continues to offer residential mortgage loans over the Internet utilizing
nMortgage's Website GreatRate.com. Additional revenues will be generated through
Meridian Services' agreement with the financial institution. In addition,
nMortgage and Meridian will continue development of the business to business
Internet solutions generating further revenues with a fully interactive
customized Website system that connects the financial institution clients and
their customers directly to Meridian Services. In the first quarter of 2001,
Meridian Services has signed two agreements under this program.

Sporting Goods Segment
----------------------
Triumph sales decreased by $362,062 in 2000 compared to 1999. The decrease is
attributable to a sale of one of the Registrant's retail locations in January
2000; this location accounted for sales of $293,859 in 1999. Additionally,
another store was closed in November 2000, and the Company plans on closing one
more location at the end of the first quarter 2001, further reducing overhead
costs. For the remainder of 2001, the Company plans on operating its two GNC
franchised stores, which accounted for sales of $185,768 in 2000. Additionally,
as a result of losses incurred in both 1999 and 2000, Triumph has replaced its
senior management in charge of store operations and instituted tighter inventory
and sales audit controls while installing point-of-sale computer systems to aid
in inventory tracking. These initiatives will allow Triumph to concentrate its
efforts on the two remaining GNC franchised stores and focus on a return to
profitability.

Corporate Segment
-----------------
The Registrant's revenues for the years ended December 31, 2000 and 1999 on a
stand-alone basis consisted primarily of interest income related to certain
short-term loans to non-affiliated entities. Revenues decreased approximately
91% to of $4,975 as compared to $53,965 in 1999. As a holding company, the
Registrant has no significant sources of revenue other than those of its
operating subsidiaries. During both 1999 and 2000, the Registrant partially
funded its operations from the sales of certain investments, which is considered
other income not revenue. For the year 2001, the Registrant anticipates it will
continue to divest certain of its investments to cover its operating overhead as
it continues to work toward completion of its contemplated acquisition and
merger transactions.

COST OF PRODUCT SALES: The Registrant's cost of product sales for 2000 were
$233,228 compared to $488,767 in 1999. The dollar decrease of $255,539 was
caused by the Registrant selling one of its retail operations in January 2000.
As a percentage of product sales the 2000 costs were approximately 62% compared
to 66% in 1999.

LOAN PRODUCTION AND PROCESSING: The Registrant's loan production and processing
costs for 2000 relating to the operations of FBMS through June 28, 2000, were
$739,735 compared to $728,501 for 1999.

                                        6
<PAGE>

INTEREST EXPENSE, MORTGAGE BANKING OPERATIONS: The Registrant's interest expense
relating to mortgage banking operations were $588,488 for the year ended
December 31, 2000 compared to $785,193 for the year ended December 31, 1999.
This interest is all related to FBMS warehouse lines of credit through June 28,
2000 in the year 2000 and from August 23 to December 31, 1999 in the year 1999.

SELLING, GENERAL AND ADMINISTRATIVE: The Registrant's selling, general and
administrative expenses for 2000 were $161,668 for officer's bonus and
$8,432,810 for other, compared to 1999 expenses of $883,164 for officer's bonus
and $6,250,365 for other. The officer's bonus decreased in 2000 compared to 1999
as the market value (the basis of the bonus) increased substantially more in
1999 than in 2000 (see Part III Item II Compensation). Other selling, general
and administrative expenses are summarized by company as follows.

             SELLING, GENERAL AND ADMINISTRATIVE EXPENSE BY SEGMENT

Segment                                          2000           1999
-------                                          ----           ----
Financial services                            $6,049,567     $4,118,100
Sporting Goods/product related                   543,393        592,616
Corporate activities                           1,839,850      1,539,649
                                              ----------     ----------
                                              $8,432,810     $6,250,365
                                              ----------     ----------

Financial Services Segment
--------------------------
Financial services other selling, general and administrative expenses increased
by $1,931,467 or by 47% for 2000 compared to 1999. The increase included the
effect of the acquisition of Meridian in September 2000 which had selling,
general and administrative expenses of $848,550.

FBMS other selling, general and administrative expenses were $2,503,956 in 2000
compared to $3,087,220 in 1999. A majority of the 1999 expense was incurred
during the fourth quarter as FBMS was acquired in late August 1999. This
compares to the 2000 expense which was incurred during the entire year with a
majority of the expense occurring during the first six months. This reduction
was due to FBMS continuing to implement changes in its operations from warehouse
funding to table funding, thereby decreasing its operating overhead during the
first half of 2000.

nMortgage's other selling, general and administrative expenses were $2,220,308
in 2000 compared to $628,839 in 1999. The main reasons for the increase of
$1,591,469 was an increase in amortization of $829,007 and operating expenses of
$393,977 for professional fees $219,508, employee related expenses of $141,635
and other of $32,839 all incurred by nMortgage subsequent to the rescission of
FBMS on June 28, 2000. The increase also includes a non-recurring expense of
$368,750 for preferred stock to be issued in connection with the rescission of
FBMS.

FTC recorded $476,753 and $402,061 in selling, general and administrative
expense during 2000 and 1999, respectively, $300,000 of which was the write-down
of a note receivable in 2000.

Sporting Goods Segment
----------------------
Triumph's other selling, general and administrative expenses were $543,393 and
$592,616 during 2000 and 1999, respectively. These amounts are attributable to
the operation of the company's retail stores during 2000 and 1999, respectively,
and experienced little change.

Corporate Segment
-----------------
The Registrant's other selling, general and administrative expenses on a stand
alone basis accounted for $1,839,850 in the year 2000 as compared to $1,539,649

                                        7
<PAGE>

in the year 1999. These amounts relate to operation of the holding company
during both periods most notably legal and accounting expense which increased
slightly for the year 2000 due in part to the Registrant's merger and
acquisition activities.

LOSS ON FBMS RESCISSION: The Registrant's subsidiary, nMortgage, in connection
with the June 28, 2000 FBMS rescission and divestiture recorded a loss of
$3,979,000 in 2000.

IMPAIRMENT LOSSES: At December 31, 2000, management's assessment of website
development costs for impairment indicated that the carrying value of $2,083,000
had been impaired. As a result, the Registrant recorded a charge of $353,000
during 2000. The Company also recorded a $454,250 impairment charge in 2000
related to the closings of two of its subsidiaries retail outlets. One outlet
closed in November 2000 and the second closing will occur by March 31, 2001.

OTHER INCOME (EXPENSES): For the year ended December 31, 2000, other income
(expense) included a net investment loss of $87,087, equity in losses of
affiliates of $364,415, interest expense of $148,261, interest income of
$113,229 and other income of $73,478 from Triumph's sale of the assets of a
retail store in the first quarter. Other income (expense) in 1999 includes net
investment loss of $571,267, equity in loss of affiliates of $418,209, and
interest expense totaling $10,357 and interest income of $79,089.

During 2000 the Registrant and Triumph recorded unrealized holding losses on
trading securities of $104,109 that was offset by realized gains from investment
sales by the Registrant of $36,246 and realized losses from investment sales of
$19,224 for Triumph. During 1999, the Registrant recorded investment income of
$797,516 from the sales of investments. At December 31, 1999, the Registrant
recorded a realized loss of $1,368,783 on trading securities resulting in the
investment loss, net of $571,267.

Equity in net losses of affiliates corresponds to the Registrant's 13.6%
ownership interest in VP Sports which is accounted for on an equity basis. VP
Sports and its subsidiaries loss for 2000 was $1,684,684. The equity in losses
of affiliates attributable to the loss was $364,415. The equity in losses
attributable to the decrease in the Registrant's ownership of VP Sports from
35.7% January 1, 2000 to 13.6% at December 31, 2000 was $743,483 and is recorded
as a reduction in additional paid-in capital.

NET LOSS: Net loss for the year ended December 31, 2000 was $12,499,401 as
compared to $7,716,559 for the year ended December 31, 1999. As a BDC, the
Registrant recorded net investment loss and net realized gain on investments
after income taxes of $(925,245) and net decrease in net assets resulting from
operations of $1,981,299 for the year ended December 31, 1998.

                               NET LOSS BY SEGMENT

Segment                                          2000             1999
-------                                          ----             ----
Financial services                           $(9,426,786)     $(3,945,667)
Sporting Goods/product related                (1,352,170)        (800,997)
Corporate activities                          (1,720,445)      (2,969,895)
                                            ------------      -----------
                                            $(12,499,401)     $(7,716,559)
                                            ------------      -----------

                                        8
<PAGE>

Financial Services Segment
--------------------------
Financial services loss increased by $5,481,119. This was primarily due to the
rescission of FBMS which accounted for $3,979,043 of the loss. FTC lost $526,580
and nMortgage lost $6,192,186. These losses were offset by income of $44,970 for
Meridian Services.

Sporting Goods Segment
----------------------
Triumph lost $987,755 in 2000 compared to $387,800 in 1999. The increased loss
was due to the closing of two stores and the related impairment charges of
$454,250. The Registrant recorded net losses in its equity investment in VP
Sports of $364,415 and $413,197 in 2000 and 1999, respectively.

Corporate Segment
-----------------
The Registrant had a loss of $1,720,445 in 2000 compared to a loss of $2,969,895
in 1999.

NET LOSS APPLICABLE TO COMMON STOCKHOLDERS: Net loss applicable to common
stockholders was $13,749,401 for the year ended December 31, 2000 and
$10,985,572 for the year ended December 31, 1999. This amount gives effect to
the amortization of the discount on the preferred stock of the Registrant if the
preferred stockholders had converted their shares to common stock at year end as
well as deemed preferred stock dividends. This amount does not reflect an actual
loss at year end over and above the net loss figure presented above.

OTHER ISSUES

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. This statement, as
amended by SFAS No. 137, is effective for fiscal years beginning after June 15,
2000. Currently, the Company does not have any derivative financial instruments
and does not participate in hedging activities. Therefore, management believes
that SFAS No. 133 will not have an impact on its financial position or results
of operations.

In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial
Statements. SAB No. 101, as amended by SAB No. 101A and SAB No. 101B, is
effective no later than the fourth fiscal quarter of fiscal years beginning
after December 15, 1999. SAB No. 101 provides the Staff's views in applying
generally accepted accounting principles to selected revenue recognition issues.
The Company believes that it complies with the accounting and disclosure
described in SAB No. 101; therefore, management believes that SAB No. 101 will
not impact the Company's financial statements.

                                        9
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.



Date: May 15, 2001                     EQUITEX, INC.
                                       (Registrant)


                                       By /S/ HENRY FONG
                                          --------------------------------------
                                          Henry Fong, President


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



Date: May 15, 2001                        /S/ HENRY FONG
                                          --------------------------------------
                                          Henry Fong, President,
                                          Treasurer and Director
                                          (Principal Executive, Financial,
                                          and Accounting Officer)

Date: May 15, 2001                        /S/ RUSSELL L. CASEMENT
                                          --------------------------------------
                                          Russell L. Casement, Director

Date: May 15, 2001                        /S/ AARON A. GRUNFELD
                                          --------------------------------------
                                          Aaron A. Grunfeld, Director


                                       10
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

                                       11

<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>

                                                                                           Page
                                                                                           ----
<S>                                                                                 <C>
Independent auditors' report - Gelfond Hochstadt Pangburn, P.C.                             F-1

Report of Independent Certified Public Accountants - Davis & Co., CPAs, P.C.                F-2

Financial statements:

  Consolidated balance sheet - December 31, 2000 (as restated)                              F-3

  Consolidated balance sheet - December 31, 1999                                            F-4

  Consolidated statements of operations - years ended December 31, 2000
   (as restated) and 1999                                                                   F-5

  Statement of operations - year ended December 31, 1998                                    F-6

  Statement of changes in stockholders' equity - year ended December 31, 1998         F-7 - F-8

  Consolidated statements of changes in stockholders' equity - years ended
   December 31, 2000 (as restated) and 1999                                          F-9 - F-12

  Consolidated statements of cash flows - years ended December 31, 2000
   (as restated) and 1999                                                           F-13 - F-14

  Statement of cash flows - year ended December 31, 1998                                   F-15

  Notes to consolidated financial statements                                        F-16 - F-44
</TABLE>


<PAGE>


                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------


Board of Directors
Equitex, Inc.

We have audited the accompanying consolidated balance sheets of Equitex, Inc.
and subsidiaries as of December 31, 2000 and 1999, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the years in the two-year period then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Equitex, Inc. and
subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the two-year period
then ended in conformity with generally accepted accounting principles.

Our audits referred to above included an audit of the 2000 and 1999 financial
statement schedule listed under Item 14-2. In our opinion, this 2000 and 1999
financial statement schedule presents fairly, in all material respects, in
relation to the 2000 and 1999 financial statements taken as a whole, the
information required to be stated therein.

As discussed in Note 21, the Company restated its 2000 consolidated financial
statements to account for the reduction of certain minority interest as a
capital transaction instead of as an unusual gain.

GELFOND HOCHSTADT PANGBURN, P.C.

Denver, Colorado
March 30, 2001, except
for Notes 16, 20, and
21, as to which the
date is May 15, 2001



                                      F-1
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
               --------------------------------------------------

To the Board of Directors
Equitex, Inc.

We have audited the accompanying  statement of operations,  statement of changes
in  stockholders'  equity,  and cash flows for the year ended December 31, 1998.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audit.

We conducted our audit in accordance with 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 audit provides a reasonable basis for our opinion.

In our opinion,  the 1998 financial statements referred to above present fairly,
in all material respects, the results of Equitex, Inc.'s operations and its cash
flows for the year ended December 31, 1998 in conformity with generally accepted
accounting principles.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements taken as a whole. The schedule on S-1 is presented for the purpose of
complying  with the  Securities  and  Exchange  Commission's  rules and is not a
required  part  of the  basic  financial  statements.  This  schedule  has  been
subjected to the auditing procedures applied in our audit of the basic financial
statements and, in our opinion,  fairly states in all material respects the 1998
financial  data  required  to be set  forth  therein  in  relation  to the basic
financial statements taken as a whole.




                                       Davis & Co., CPAs, P.C.
                                       Certified Public Accountants


Englewood, Colorado
March 27, 1999

                                      F-2
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 2000
                             (as restated, Note 21)

                                     ASSETS

<TABLE>
<S>                                                                                          <C>
Current assets:
    Cash and cash equivalents                                                                $    337,234
    Related party receivables, current portion (Note 5)                                           900,150
    Other receivables, net (Note 5)                                                               477,613
    Inventories                                                                                    70,084
    Marketable securities (Note 6)                                                                238,216
                                                                                             ------------
            Total current assets                                                                2,023,297
                                                                                             ------------

Equity investments (Note 6)                                                                       365,000
Other investments (Note 6)                                                                        867,471
Related party receivables, net of current portion (Note 5)                                         83,407
Other receivables (Note 5)                                                                        361,007
Furniture, fixtures and equipment, net  (Note 8)                                                  261,071
Intangible and other assets, net (Note 9)                                                       5,470,374
                                                                                             ------------
                                                                                                7,408,330
                                                                                             ------------

                                                                                             $  9,431,627
                                                                                             ============
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Notes and advances payable, related parties (Note 10)                                  $  1,877,631
      Accounts payable                                                                            377,763
      Accrued liabilities:
        Related parties (Note 13)                                                                 719,837
        Others                                                                                    162,259
                                                                                             ------------
           Total current liabilities                                                            3,137,490
                                                                                             ------------

Notes and advances payable, others (Note 10)                                                       79,627
                                                                                             ------------
           Total liabilities                                                                    3,217,117
                                                                                             ------------

Minority interest (Note 16)                                                                       631,070
                                                                                             ------------

Commitments and contingencies (Notes 10, 11, 17 and 18)

Series G, 6% redeemable convertible preferred stock; stated value $1,000 per share;
  1,300 shares issued and outstanding; liquidation preference, $1,690,000 (Note 17)             1,536,000
                                                                                             ------------

Stockholders' equity (Note 18):
      Preferred stock; 2,000,000 shares authorized:
        Series D convertible preferred stock, 6%, stated
        value $1,000 per share; 1,200 shares issued
         and outstanding; liquidation preference $1,585,000                                     1,200,000
        Series E convertible preferred stock, stated value $1,000 per share;
         250 shares issued and outstanding                                                        250,000
        Series F convertible preferred stock, 460,000 shares issued and outstanding,
         liquidation preference $3,864,000                                                      2,990,000
      Common stock, par value $.02; 7,500,000 shares authorized; 7,140,293
        shares issued; 7,071,618 shares outstanding                                               142,806
      Additional paid-in capital                                                               23,629,547
      Accumulated deficit                                                                     (23,695,981)
      Series E convertible preferred stock to be issued (50 preferred shares)                     368,750
      Receivable from Series E preferred stockholder                                             (553,645)
      Less treasury stock at cost (68,675 common shares)                                         (284,037)
                                                                                             ------------
           Total stockholders' equity                                                           4,047,440
                                                                                             ------------
                                                                                             $  9,431,627
                                                                                             ============
</TABLE>
                 See notes to consolidated financial statements.
                                      F-3
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 1999

                                     ASSETS
<TABLE>
<S>                                                                                <C>
Cash and cash equivalents                                                          $    783,606
Mortgage loans held for sale, net (Notes 2 and 15)                                   14,787,080
Receivables, net:
      Related parties (Note 5)                                                        1,203,810
      Other                                                                             504,571
Inventories                                                                             167,346
Investments (Note 6):
      Marketable securities                                                             902,537
      Equity investments                                                              1,707,898
      Other investments                                                                 865,000
Furniture, fixtures and equipment, net (Note 8)                                       1,058,032
Goodwill and other assets, net (Note 9)                                              19,765,057
                                                                                   ------------
                                                                                   $ 41,744,937
                                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
      Warehouse loans                                                              $ 18,582,351
      Accounts payable                                                                1,584,926
      Accrued liabilities:
        Related parties (Note 13)                                                       454,235
        Others                                                                        2,773,989
      Notes and advances payable (Note 10):
        Related parties                                                                 832,000
        Others                                                                        1,941,954
                                                                                   ------------
           Total liabilities                                                         26,169,455
                                                                                   ------------

Minority interest (Note 16)                                                           6,473,070
                                                                                   ------------

Commitments and contingencies (Notes 10, 11 and 18)

Stockholders' equity (Note 18):
      Preferred stock; 2,000,000 shares authorized:
        Series D convertible preferred stock, 6%, stated
        value $1,000 per share; 1,200 shares issued
         and outstanding; liquidation preference $1,585,000                           1,200,000
        Series E convertible preferred stock, stated value $1,000
         per share; 250 shares issued and outstanding                                   250,000
      Common stock, par value $.02; 7,500,000 shares authorized; 7,140,293
        shares issued; 7,106,943 shares outstanding                                     142,806
      Additional paid-in capital                                                     18,820,223
      Accumulated deficit                                                           (11,196,580)
      Less treasury stock at cost (33,350 shares)                                      (114,037)
                                                                                   ------------
           Total stockholders' equity                                                 9,102,412
                                                                                   ------------
                                                                                   $ 41,744,937
                                                                                   ============
</TABLE>
                 See notes to consolidated financial statements.
                                      F-4
<PAGE>

                         EQUITEX, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                                2000            1999
                                                                            ------------    ------------
                                                                            (as restated,
                                                                               Note 21)
<S>                                                                         <C>             <C>
Revenues:
      Product sales                                                         $    376,394    $    738,456
      Loan production and processing revenues                                  1,173,148         302,811
      Secondary marketing revenues, net                                          871,134         395,034
      Interest and dividend income, mortgage banking operations                  269,276         799,909
      Other                                                                      179,339         103,965
                                                                            ------------    ------------
                                                                               2,869,291       2,340,175
                                                                            ------------    ------------
Expenses:
      Cost of product sales                                                      233,228         488,767
      Loan production and processing                                             739,735         728,501
      Interest expense, mortgage banking operations                              588,488         785,193
      Selling, general and administrative:
        Officer's bonus (Note 13)                                                161,668         883,164
        Other, includes FBMS selling, general and administrative (Note 3)      8,432,810       6,250,365
      Loss on FBMS rescission (Note 3)                                         3,979,000
      Impairment losses (Notes 6 and 7)                                          807,250
                                                                            ------------    ------------
                                                                              14,942,179       9,135,990
                                                                            ------------    ------------
Loss from operations                                                         (12,072,888)     (6,795,815)
                                                                            ------------    ------------
Other income (expenses):
      Investment losses, net (Note 6)                                            (87,087)       (571,267)
      Equity in losses of affiliates (Note 6)                                   (364,415)       (418,209)
      Interest income:
        Related parties                                                          108,276          79,089
        Other                                                                      4,953
      Interest expense:
        Related parties                                                         (130,574)        (10,357)
        Other                                                                    (17,687)
      Other                                                                       73,478
                                                                            ------------    ------------
                                                                                (413,056)       (920,744)
                                                                            ------------    ------------
Loss before income taxes                                                     (12,485,944)     (7,716,559)

Provision for income taxes                                                        13,457
                                                                            ------------    ------------
Net loss                                                                     (12,499,401)     (7,716,559)

Beneficial conversion features (Note 17)                                        (700,000)     (3,217,713)
Accretion of redemption value on Series G preferred stock (Note 17)             (453,000)
Deemed preferred stock dividends                                                 (97,000)        (51,300)
                                                                            ------------    ------------
Net loss applicable to common stockholders                                  $(13,749,401)   $(10,985,572)
                                                                            ============    ============
Basic and diluted net loss per common share                                 $      (1.93)   $      (1.64)
                                                                            ============    ============
Weighted average number of common shares outstanding                           7,106,749       6,718,170
                                                                            ============    ============
</TABLE>
                 See notes to consolidated financial statements.
                                       F-5
<PAGE>

                         EQUITEX, INC. AND SUBSIDIARIES

                             STATEMENT OF OPERATIONS

                          YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S>                                                                        <C>
Revenues:
      Interest and dividends                                               $    70,445
      Consulting and transaction fees                                          375,000
      Administrative fees                                                        2,371
      Miscellaneous                                                                 24
                                                                           -----------
                                                                               447,840
                                                                           -----------
Expenses:
      Salaries and consulting fees                                             300,613
      Officers' bonus                                                        1,208,042
      Office rent                                                               31,188
      Advertising and promotion                                                 48,612
      Legal and accounting                                                     276,359
      Loss on indemnity agreement
      Other general and administrative                                         266,129
      Interest                                                                 101,002
      Bad debt expense                                                         (34,435)
      Depreciation and amortization                                             12,833
      Employee benefits                                                        207,902
                                                                           -----------
                                                                             2,418,245
                                                                           -----------
Net investment loss                                                         (1,970,405)
                                                                           -----------
Net realized gain on investments and net unrealized gain on investments:
      Proceeds from sales of investments                                     1,712,802
      Less: cost of investments sold                                          (604,462)
                                                                           -----------
        Realized gain from sales of investments before income taxes          1,108,340
                                                                           -----------
      Net investment (loss) and realized gain on
        investments before income taxes                                       (862,065)
      Less: income tax benefit, deferred                                       (63,180)
                                                                           -----------
      Net investment (loss) and realized gain
        on investments after income taxes                                     (925,245)
Decrease in unrealized appreciation of investments                          (1,056,054)
Less: income tax benefit applicable to decrease
  in unrealized appreciation of investments                                    431,361
Add: allowance for income tax benefit                                         (431,361)
                                                                           -----------
                                                                            (1,056,054)
                                                                           -----------
Net decrease in net assets resulting from operations                       $(1,981,299)
                                                                           ===========
Decrease in net assets per share - primary                                 $      (.45)
                                                                           ===========
Weighted average number of common shares                                     4,416,988
                                                                           ===========
</TABLE>
                 See notes to consolidated financial statements.
                                      F-6
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                          YEAR ENDED DECEMBER 31, 1998


<TABLE>
<CAPTION>
                                                  Common stock
                                            --------------------------
                                                                                        Additional
                                                                           Treasury       paid-in
                                              Shares         Amount         stock         capital       Deficit
                                            -----------    -----------   -----------    -----------   -----------
<S>               <C>                         <C>          <C>           <C>            <C>           <C>
Balances, January 1, 1998                     3,494,465    $    69,889   $  (114,037)   $ 4,644,275   $  (118,874)

Common stock sold to officer at
$1.16 per share                                  10,000            200                       11,400

Common stock sold to outside
directors at $1.16 per share                    139,200          2,784                      158,688

Common stock sold to officers
pursuant to option conversions at:
   $3.00 per share                               74,000          1,480                      220,520
   $3.19 per share                               29,000            580                       91,930

Common stock sold to others at :
   $ .75 per share                              330,000          6,600                      240,900
   $1.16 per share                              350,000          7,000                      399,000
   $3.25 per share                              366,000          7,320                    1,182,180

Common stock issued in exchange
for First TeleServices Corporation              625,000         12,500                      553,139

Commissions/fees paid
on 1998 private placement sales                                                            (133,408)

Net investment loss

Net realized gain on investments

Unrealized loss on investments
                                            -----------    -----------   -----------    -----------   -----------

Balances, December 31, 1998                   5,417,665        108,353      (114,037)     7,368,624      (118,874)
                                            -----------    -----------   -----------    -----------   -----------
</TABLE>
                                  (Continued)
                                      F-7
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

            STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)

                          YEAR ENDED DECEMBER 31, 1998


<TABLE>
<CAPTION>
                                                           Accumulated
                                       Accumulated          realized           Accumulated
                                           net            net gains from      unrealized net         Total
                                        investment            sales          appreciation on      stockholders'
                                           loss           of investments       investments           equity
                                     ----------------    ----------------    ----------------    ----------------
<S>                                  <C>                 <C>                 <C>                 <C>
Balances, January 1, 1998            $    (13,431,269)   $     12,125,185    $        364,747    $      3,539,916

Common stock sold to officer at
$1.16 per share                                                                                            11,600

Common stock sold to outside
directors at $1.16 per share                                                                              161,472

Common stock sold to officers
pursuant to option conversions at:
   $3.00 per share                                                                                        222,000
   $3.19 per share                                                                                         92,510

Common stock sold to
others at :
   $ .75 per share                                                                                        247,500
   $1.16 per share                                                                                        406,000
   $3.25 per share                                                                                      1,189,500

Common stock issued in exchange
for First TeleServices Corporation                                                                        565,639

Commissions/fees paid
on 1998 private placement sales                                                                          (133,408)

Net investment loss                        (2,266,786)                                                 (2,266,786)

Net realized gain on
investments                                                     1,108,340                               1,108,340

Unrealized loss on
investments                                                                        (1,056,054)         (1,056,054)
                                     ----------------    ----------------    ----------------    ----------------
Balances, December 31, 1998               (15,698,055)         13,233,525            (691,307)          4,088,229
                                     ----------------    ----------------    ----------------    ----------------
</TABLE>
                                  (Continued)
                                       F-8
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                     YEARS ENDED DECEMBER 31, 2000 AND 1999
                             (as restated, Note 21)
<TABLE>
<CAPTION>
                                     Convertible preferred
                                            stock                     Common stock
                                     ----------------------    ------------------------                  Additional
                                                                                           Treasury        paid-in
                                      Shares       Amount        Shares        Amount        stock         capital       Deficit
                                     --------    ----------    ----------    ----------   -----------    -----------   ------------
<S>                                  <C>         <C>           <C>           <C>          <C>            <C>           <C>
Balances, January 1, 1999                   -             -     5,417,665    $  108,353   $  (114,037)   $ 7,368,624   $   (118,874)

Cumulative effect of accounting
change                                                                                                                   (3,361,147)

Reclassification adjustment on
unrealized loss on investments

Issuance of Series A preferred
stock (net of offering costs)             900             9                                                  769,991

Issuance of Series B preferred
stock (net of offering costs)             600             6                                                  521,994

Issuance of Series C preferred
stock (net of offering costs)             600             6                                                  509,994

Private placement of common
stock (net of offering costs)                                     350,312         7,006                      936,984

Conversion of Series A, B and C
preferred stock to common stock        (2,100)          (21)      320,528         6,411                       (6,390)

Conversion of note payable and
accrued interest to common stock                                   48,688           974                      157,262

Exercises of stock options
issued to employees                                               665,600        13,312                    2,081,234

Exercises of warrants                                             337,500         6,750                    2,606,925

Issuance of warrants for services                                                                            150,000

Issuance of Series D preferred
stock (net of offering costs)           1,200     1,200,000                                                 (180,000)

Issuance of Series E preferred
stock                                     250       250,000                                                2,281,000

Subsidiary stock transactions                                                                              1,622,605

Net loss                                                                                                                 (7,716,559)
                                     --------    ----------    ----------    ----------   -----------    -----------   ------------
Balances, December 31, 1999             1,450     1,450,000     7,140,293       142,806      (114,037)    18,820,223    (11,196,580)
                                     --------    ----------    ----------    ----------   -----------    -----------   ------------
</TABLE>
                                   (Continued)
                                       F-9
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)

                     YEARS ENDED DECEMBER 31, 2000 AND 1999
                             (as restated, Note 21)

<TABLE>
<CAPTION>
                                                            Accumulated
                                          Accumulated         realized        Accumulated       Receivable
                                              net          net gains from    unrealized net    from Series E       Total
                                           investment          sales        appreciation on      preferred      stockholders'
                                              loss         of investments     investments       stockholder        equity
                                         --------------    --------------    --------------    --------------   --------------
<S>                                      <C>               <C>               <C>               <C>              <C>
Balances, January 1, 1999                $  (15,698,055)   $   13,233,525    $     (691,307)                -   $    4,088,229

Cumulative effect of accounting
change                                       15,698,055       (13,233,525)                                            (896,617)

Reclassification adjustment on
unrealized loss on investments                                                      691,307                            691,307

Issuance of Series A preferred stock
(net of offering costs)                                                                                                770,000

Issuance of Series B preferred stock
(net of offering costs)                                                                                                522,000

Issuance of Series C preferred stock
(net of offering costs)                                                                                                510,000

Private placement of common stock
(net of offering costs)                                                                                                943,990

Conversion of Series A, B and C
preferred stock to common stock

Conversion of note payable and
accrued interest in common stock                                                                                       158,236

Exercises of stock options issued to
employees                                                                                                            2,094,546

Exercises of warrants                                                                                                2,613,675

Issuance of warrants for services                                                                                      150,000

Issuance of Series D preferred
stock, (net of offering costs)                                                                                       1,020,000

Issuance of Series E preferred stock                                                                                 2,531,000

Subsidiary stock transactions                                                                                        1,622,605

Net loss                                                                                                            (7,716,559)
                                         --------------    --------------    --------------    --------------   --------------
Balances, December 31, 1999                        --                --                --                --          9,102,412
                                         --------------    --------------    --------------    --------------   --------------
</TABLE>
                                   (Continued)
                                      F-10
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)

                     YEARS ENDED DECEMBER 31, 2000 AND 1999
                             (as restated, Note 21)

<TABLE>
<CAPTION>
                                     Convertible preferred
                                            stock                     Common stock
                                     ----------------------    ------------------------                  Additional
                                                                                           Treasury        paid-in
                                      Shares       Amount        Shares        Amount        stock         capital       Deficit
                                     --------    ----------    ----------    ----------   -----------    -----------   ------------
<S>                                  <C>         <C>           <C>           <C>          <C>            <C>           <C>
Subsidiary equity transaction                                                                                382,807

Conversion of subsidiary preferred
stock to subsidiary common stock                                                                           5,132,000

Common stock of subsidiary
to be issued                                                                                                  62,000

Equity investee stock issuances
and related decrease in
proportionate share of
equity investment                                                                                           (743,483)

Series E preferred stock
to be issued

Receivable from stockholder

Issuance of Series F preferred
stock                                 460,000     2,990,000

Purchase of 35,325 previously
issued shares of the Company's
common stock in exchange for the
issuance of Series A preferred
stock of Meridian Services,
Inc.                                                                                         (170,000)

Issuance of warrants for
services
                                                                                                             272,000

Offering costs in connection
with Series G redeemable
preferred stock issuance                                                                                     (60,000)

Issuance of warrants to
Series G preferred
stockholders                                                                                                 242,000

Deemed dividends on Series G
redeemable preferred stock                                                                                   (25,000)

Accretion of Series G
redeemable preferred stock                                                                                  (453,000)

Net loss                                                                                                                (12,499,401)
                                     --------    ----------    ----------    ----------   -----------    -----------   ------------
Balances, December 31, 2000           461,450    $4,440,000     7,140,293    $  142,806   $  (284,037)   $23,629,547   $(23,695,981)
                                     ========    ==========    ==========    ==========   ===========    ===========   ============
</TABLE>
                                   (Continued)
                                      F-11
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)

                     YEARS ENDED DECEMBER 31, 2000 AND 1999
                             (as restated, Note 21)

<TABLE>
<CAPTION>
                                                            Accumulated
                                          Accumulated         realized                          Receivable
                                              net          net gains from       Series E       from Series E       Total
                                           investment          sales        Preferred Stock      preferred      stockholders'
                                              loss         of investments     to be Issued      stockholder        equity
                                         --------------    --------------    --------------    --------------   --------------
<S>                                      <C>               <C>               <C>               <C>              <C>
Subsidiary equity transaction                                                                                          382,807

Conversion of subsidiary preferred
stock to subsidiary common stock                                                                                     5,132,000

Common stock of subsidiary
to be issued                                                                                                            62,000

Equity investee stock issuances
and related decrease in
proportionate share of
equity investment                                                                                                     (743,483)

Series E preferred stock to be
issued                                                                              368,750                            368,750

Receivable from stockholder                                                                          (553,645)        (553,645)

Issuance of Series F preferred
stock                                                                                                                2,990,000

Purchase of 35,325 previously
issued shares of the Company's
common stock in exchange for the
issuance of Series A preferred
stock of Meridian Services,
Inc.                                                                                                                  (170,000)

Issuance of warrants for services                                                                                      272,000

Offering costs in connection with
Series G redeemable preferred stock
issuance                                                                                                               (60,000)

Issuance of warrants to Series G
preferred stockholders                                                                                                 242,000

Deemed dividends on Series G
redeemable preferred stock                                                                                             (25,000)

Accretion of Series G redeemable
preferred stock                                                                                                       (453,000)

Net loss                                                                                                           (12,499,401)
                                         --------------    --------------    --------------    --------------   --------------
Balances, December 31, 2000                        --                --      $      368,750    $     (553,645)  $    4,047,440
                                         ==============    ==============    ==============    ==============   ==============
</TABLE>
                 See notes to consolidated financial statements.
                                      F-12

<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
                                                              2000            1999
                                                          ------------    ------------
                                                          (as restated,
                                                             Note 21)
<S>                                                       <C>             <C>
Cash flows used in operating activities:
Net loss                                                  $(12,499,401)   $ (7,716,559)
                                                          ------------    ------------
Adjustments to reconcile net loss to net cash
  used in by operating activities:
   Loss on FBMS rescission                                   3,979,000
   Impairment losses                                           807,250
   Gain on sale of subsidiary assets                           (76,620)
   Depreciation and amortization                             1,787,220         838,359
   Warrants issued for services                                702,750         150,000
   Provision for bad debts on notes receivable                 300,000          19,248
   Investment loss, net                                         87,087         571,267
   Equity in losses of affiliates                              364,415         418,209
Changes in assets and liabilities, net of business
  acquisitions and FBMS recission:
   Decrease in investments in trading securities               958,395         852,128
   Decrease in receivables                                     121,214          40,500
   Decrease in mortgage loans held for sale                 13,828,929       3,545,354
   Decrease (increase) in inventories                           29,200        (109,797)
   (Increase) decrease in other assets                         (98,726)      1,093,098
   Decrease in accounts payable and accrued liabilities      4,099,952      (3,961,145)
                                                          ------------    ------------

   Total adjustments                                        26,890,066       3,457,221
                                                          ------------    ------------

Net cash provided by (used in) operating activities         14,390,665      (4,259,338)
                                                          ------------    ------------

Cash flows from investing activities:
   Purchase of other investments                                (2,471)       (410,000)
   Cash acquired (paid) on business acquisitions               256,000      (2,327,500)
   Purchase of intellectual property rights                   (850,000)
   Purchases of furniture, fixtures and equipment           (2,534,406)       (278,025)
   Repayment of loans and notes receivable                                   1,017,630
   Issuance of loans and notes receivable                                   (2,903,242)
                                                          ------------    ------------

Net cash used in investing activities                       (3,130,877)     (4,901,137)
                                                          ------------    ------------

Cash flows from financing activities:
   Common stock issued for cash                                              5,652,211
   Proceeds from Series G preferred stock                    1,240,000       2,822,000
   Issuance of notes payable                                 2,082,298         758,897
   Warehouse loans and other notes payable                 (16,655,458)     (2,826,517)
   Proceeds from subsidiary stock transactions               1,627,000       3,505,000
                                                          ------------    ------------

Net cash (used in) provided by financing activities        (11,706,160)      9,911,591
                                                          ------------    ------------
</TABLE>
                                   (Continued)
                                      F-13
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                     YEARS ENDED DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                        2000            1999
                                                                    ------------    ------------
                                                                    (as restated,
                                                                      Note 21)
<S>                                                                 <C>             <C>
Change in cash and cash equivalents                                     (446,372)        751,116
Cash and cash equivalents, beginning of year                             783,606          32,490
                                                                    ------------    ------------

Cash and cash equivalents, end of year                              $    337,234    $    783,606
                                                                    ============    ============

Supplemental disclosure of cash flow information:

   Cash paid for interest                                           $    539,719    $  2,939,873
                                                                    ============    ============

Supplemental disclosure of non-cash
 investing and financing activities:

   Common stock issued in satisfaction of
     note payable and accrued interest                              $       --      $    158,236
                                                                    ============    ============

   Conversion of subsidiary preferred stock to common stock         $  5,132,000    $  1,802,000
                                                                    ============    ============

   Amortization of discount on preferred stock                      $    700,000    $  3,217,713
                                                                    ============    ============

   Subsidiary stock transactions                                    $    396,300    $  1,622,605
                                                                    ============    ============
   Receivable from Series E preferred stockholder                   $    553,645
                                                                    ============

   Purchase of The Meridian Residential Group, Inc. (Note 4):
      Fair value of assets acquired                                 $    130,000
      Intangible assets                                                2,648,000
      Liabilities assumed                                                (45,000)
      Fair value of Series F Preferred Stock exchanged                (2,990,000)
                                                                    ------------
        Cash acquired                                               $   (256,000)
                                                                    ============
   Sale of Triumph retail store:
      Equipment                                                     $     38,500
      Intangible assets                                                   84,800
      Inventory                                                           68,142
      Note receivable issued in exchange                                (268,062)
                                                                    ------------
        Gain on sale of subsidiary assets                           $    (76,620)
                                                                    ============
   Purchase (rescission) of FBMS:
      Fair value of assets acquired (divested)                      $ (4,561,000)   $ 12,392,600
      Intangible assets recorded (impaired)                          (15,330,000)     18,900,000
      Liabilities (assumed) divested                                  12,922,000     (29,541,600)
      Preferred stock of subsidiary                                    2,990,000
      Fair value of Series E preferred stock exchanged                                (2,531,000)
                                                                    ------------    ------------
        Loss on rescission (2000) cash acquired (1999)              $ (3,979,000)   $   (780,000)
                                                                    ============    ============

   Subsidiary purchase of Victoria Precision, Inc.:
      Fair value of assets acquired                                                 $  5,769,500
      Intangible assets                                                                3,166,000
      Liabilities assumed                                                             (4,969,000)
      Fair value of assets exchanged                                                    (859,000)
                                                                                    ------------
        Cash paid                                                                   $  3,107,500
                                                                                    ============
</TABLE>
                 See notes to consolidated financial statements.
                                      F-14
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

                             STATEMENT OF CASH FLOWS

                          YEAR ENDED DECEMBER 31, 1998

Cash flows used in operating activities:
Net loss                                                     $(1,981,299)
Adjustments to reconcile net loss to net cash
  used in operating activities:
      Depreciation and amortization                               12,833
      Provision for bad debts on notes receivable                (40,193)
      Realized gain on sale of investments                    (1,108,340)
      Unrealized loss on investments                           1,056,054
Proceeds from sales of investments                             1,712,802
Purchases of investments                                      (1,388,626)
Issuance of notes receivable                                    (943,365)
Collections of notes receivable                                  177,083
Changes in assets and liabilities:
   Increase in interest receivable                               (26,433)
   Decrease in accounts receivable - broker                       50,943
   Increase in other assets                                      (23,119)
   Increase in trade receivables                                   2,668
   Decrease in accounts payable and other accrued expenses       (45,059)
   Increase in accounts payable to brokers                         5,758
   Increase in deferred income taxes                              63,180
   Increase in bonus due to officer                              376,909
                                                             -----------
Net cash used in operating activities                         (2,098,204)
                                                             -----------
Cash flows from investing activities:
   Purchase of fixed assets                                      (10,396)
                                                             -----------
Net cash used in investing activities                            (10,396)
                                                             -----------

Cash flows from financing activities:
   Common stock issued for cash                                2,197,174
   Issuance of notes payable - officer                           165,000
   Issuance of notes payable - other                             250,000
   Repayment of notes payable                                   (480,271)
                                                             -----------
Net cash provided by financing activities                      2,131,903
                                                             -----------

Change in cash and cash equivalents                               23,303
Cash and cash equivalents, beginning of period                     9,187
                                                             -----------

Cash and cash equivalents, end of period                     $    32,490
                                                             ===========
Supplemental disclosures of cash flow information:
   Interest paid                                             $    95,677
                                                             ===========
   Interest received                                         $    42,217
                                                             ===========

Supplemental disclosure of non-cash investing activities:

   On August 13,  1998,  the Company  acquired all of the  outstanding  stock of
      First  TeleServices  Corporation  in exchange  for  625,000  shares of the
      Company's common stock, valued at $565,639.

                 See notes to consolidated financial statements.
                                      F-15
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    YEARS ENDED DECEMBER 2000, 1999 AND 1998


1.    ORGANIZATION, RECENT TRANSACTIONS AND PLAN OF RESTRUCTURING:

      BUSINESS HISTORY AND BASIS OF PRESENTATION

      Equitex, Inc. (the "Company"), a Delaware Corporation, was incorporated on
        January 19, 1983. On July 30, 1984, the Company elected to become a
        Business Development Company ("BDC"), as defined in the Small Business
        Investment Incentive Act of 1980, an amendment to the Investment Company
        Act of 1940. This change resulted in the Company becoming a specialized
        type of investment company.

      On January 4, 1999, the Company withdrew its election to be treated as a
        BDC subject to the Investment Company Act. Subsequent to this
        withdrawal, the Company is required to present its financial statements
        consistent with those of a regular operating company as opposed to a
        BDC. Because the Company was a BDC during the year ended December 31,
        1998, those financial statements reflect the BDC format.

      In connection with the Company's January 4, 1999 withdrawal of its
        election to be treated as a BDC, effective January 1, 1999, the Company
        adopted Statement of Financial Accounting Standards ("SFAS") No. 115,
        ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES,
        Accounting Principles Board ("APB") Opinion No. 18, THE EQUITY METHOD OF
        ACCOUNTING FOR INVESTMENTS IN COMMON STOCK, and SFAS No. 94,
        CONSOLIDATION OF ALL MAJORITY-OWNED SUBSIDIARIES. The cumulative effect
        of the accounting change was a decrease in stockholders' equity of
        $896,617. There was no effect on the 1999 consolidated statement of
        operations. These standards were not applicable to the Company in prior
        years, operating as a BDC.

      SFAS No. 115 requires that certain debt and equity securities be carried
        at market value and requires management to re-evaluate the appropriate
        classification of securities at each balance sheet date based on its
        intent to trade or hold the securities. APB No. 18 requires the use of
        the equity method of accounting for investments in which the investor
        has the ability to exercise significant influence over operating and
        financial policies of the investee enterprise. That ability is presumed
        to exist for investments of 20% or more and is presumed not to exist for
        investments of less than 20%. SFAS No. 94 provides that consolidated
        financial statements generally shall include enterprises in which the
        parent has a controlling financial interest.

      As discussed below, in connection with the Company's August 1999
        acquisition of a mortgage banking company, the Company presented an
        unclassified balance sheet from the date of acquisition through December
        31, 1999. In June 2000, the Company entered into a rescission agreement
        and divested itself of the mortgage banking subsidiary and through
        December 31, 2000, entered into acquisitions and other transactions in
        which a classified balance sheet was considered by management to
        represent a better presentation of the Company's financial position at
        December 31, 2000. In addition, certain 1999 balances have been
        reclassified to conform to the 2000 presentation.

      RECENT TRANSACTIONS AND PLAN OF RESTRUCTURING:

      The Company incurred significant operating losses in 2000 and 1999 and has
        a working capital deficiency and an accumulated deficit at December 31,
        2000. The Company has also experienced difficulty and uncertainty in
        meeting its liquidity needs. The Company has entered into recent
        transactions and has developed plans and strategies to address these
        matters, including the following:

               A. Effective June 28, 2000, the Company entered into a rescission
                  agreement with the previous owner of First Bankers Mortgage
                  Services, Inc. ("FBMS"), whereby all of the assets and
                  liabilities of FBMS as of June 28, 2000, were returned to the
                  previous owner of FBMS, (Note 3).

                                      F-16
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


1.    ORGANIZATION, RECENT TRANSACTIONS AND PLAN OF RESTRUCTURING (CONTINUED):

      RECENT TRANSACTIONS AND PLAN OF RESTRUCTURING (CONTINUED):

               B. Under an agreement signed September 7, 2000, the Company
                  acquired all of the issued and outstanding common stock of The
                  Meridian Residential Group, Inc. The Company also acquired
                  intellectual property rights related to the Meridian
                  GreatRate.com business from Meridian Capital Group, LLC, a
                  company affiliated with The Meridian Residential Group, Inc.
                  through common ownership, for $850,000 (Note 4).

               C. In September 2000, the Company issued 1,300 shares of Series
                  G, 6% redeemable convertible preferred stock for $1,000 per
                  share (Note 17).

               D. On June 29, 2000, the Company signed a definitive agreement
                  with Key Financial Systems, Inc. ("Key") and Nova Financial
                  Systems, Inc. ("Nova"), companies under common control with a
                  nearly identical ownership structure, to acquire all of the
                  outstanding capital stock of Key and Nova in exchange for the
                  greater of 7,140,000 shares of Equitex common stock or 50% of
                  the Company's post-acquisition common stock outstanding and $5
                  million cash. Key and Nova are both financial services
                  companies which specialize in selling credit card programs
                  designed for high credit risk clients. Prior to and as a
                  condition of the Company's acquisition of Key and Nova, the
                  Company intends to complete the following transactions:

                     1.  The Company intends to increase the number of
                         authorized shares of the Company's common stock from
                         7,500,000 shares to 50,000,000 shares, subject to
                         stockholder approval (Note 18).

                     2.  The Company intends to distribute all of its assets
                         (which primarily consist of its investments in
                         subsidiaries) to Equitex 2000, Inc. ("E2000"), a
                         newly-formed subsidiary of the Company. E2000 also is
                         to assume all liabilities of the Company. The
                         outstanding common shares of E2000 are then to be
                         distributed to the stockholders of the Company based on
                         proportional ownership of the shares held by the
                         Company's stockholders in a spin-off transaction. As a
                         result of this transaction, the Company will be a
                         publicly-traded, non-operating entity immediately prior
                         to the date of the Company's acquisition of Key and
                         Nova. The Company plans to record the acquisition of
                         Key and Nova as an acquisition of Equitex, Inc. and a
                         recapitalization of Key and Nova.

                     3.  In order to finance the Company's acquisition of Key
                         and Nova, the Company may issue a new series of
                         preferred stock for net proceeds of $5,000,000, net of
                         $500,000 of anticipated issue costs.

      PRINCIPLES OF CONSOLIDATION:

      The consolidated financial statements as of December 31, 2000 and 1999,
        include the accounts of Equitex, Inc., and the following significant
        subsidiaries; all significant intercompany accounts and transactions
        have been eliminated in consolidation:

                                      F-17
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


1.    ORGANIZATION, RECENT TRANSACTIONS AND PLAN OF RESTRUCTURING (CONTINUED):

      PRINCIPLES OF CONSOLIDATION (CONTINUED):

        FINANCIAL SERVICES SEGMENT:

                  MERIDIAN SERVICES, INC. ("Meridian", previously The Meridian
                  Residential Group, Inc.); a New York corporation, acquired on
                  September 27, 2000, originally incorporated in February 1996
                  to operate as a mortgage brokerage company; wholly-owned by
                  the Company at December 31, 2000.

                  FBMS; a Florida mortgage banking corporation incorporated in
                  1990, acquired by the Company on August 23, 1999, and
                  wholly-owned through June 28, 2000 (Note 3). FBMS was engaged
                  in the origination and sale of residential mortgages,
                  conventional mortgage products, and FHA and VA assisted
                  mortgages under the U.S. HUD lending program. Mortgages were
                  originated through retail branches and wholesale lending
                  centers located principally in Florida.

                  NMORTGAGE, INC. ("nMortgage"); a Delaware corporation formed
                  in September 1999. During the year ended December 31, 2000,
                  due to the conversion of nMortgage preferred stock to common
                  stock, the Company's ownership interest in nMortgage's voting
                  common stock decreased from 100% to 69% (Note 16).

                  FIRST TELESERVICES CORPORATION ("FTC"); a Florida corporation
                  incorporated in 1997, acquired by the Company in August 1998
                  (Note 6). FTC, wholly-owned by the Company, is a consumer
                  finance company offering financial products and services to
                  the sub-prime market.

        SPORTING GOODS/PRODUCT RELATED SEGMENT:

                  TRIUMPH SPORTS GROUP, INC. ("Triumph"); a Florida corporation
                  formed in January 1998 for the purpose of acquiring operating
                  entities in the non-manufacturing licensed and supplemental
                  segments of the sporting goods and leisure-time industry.
                  Between February and June of 1998, the Company acquired an 88%
                  ownership interest in Triumph. Through December 31, 1999,
                  Triumph owned and operated five retail vitamin/health
                  supplement centers in south Florida. Triumph sold one center
                  in January 2000. Triumph discontinued operations of one center
                  in November 2000 and a second center in March 2001 (Note 6).

                  VP SPORTS, INC. ("VP Sports"); a Delaware corporation formed
                  in December 1997 for the purpose of acquiring an operating
                  entity in the sporting goods/recreation industry. Effective
                  July 27, 1999, VP Sports acquired all of the outstanding
                  common stock of Victoria Precision Inc. ("Victoria
                  Precision"), a Canadian bicycle manufacturer. As a result of a
                  private placement of VP Sports' common stock and other stock
                  issuances, the Company's ownership interest in VP Sports was
                  reduced from approximately 88% at December 31, 1998 to
                  approximately 35.7% at December 31, 1999. In March 2000, VP
                  Sports acquired all of the outstanding common stock of Torpedo
                  Sports Inc. ("Torpedo"), a Canadian manufacturer of children's
                  winter toy products. In 2000, due to additional stock
                  issuances by VP Sports, the Company's ownership percentage
                  decreased to approximately 13.6% at December 31, 2000 (Note
                  6).

                                      F-18
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


1.    ORGANIZATION, RECENT TRANSACTIONS AND PLAN OF RESTRUCTURING (CONTINUED):

      PRINCIPLES OF CONSOLIDATION (CONTINUED):

      Minority interest at December 31, 2000, represents issued and outstanding
        preferred stock of nMortgage and Meridian. Minority interest at December
        31, 1999, represents preferred stock of FBMS and nMortgage (Note 16).
        During the years ended December 31, 2000 and 1999, net losses incurred
        by the Company's majority-owned subsidiaries exceeded the minority
        interest in the common equity (deficiency) of the subsidiaries. As a
        result, the excess of losses applicable to the minority interest have
        been charged to the Company, and no minority interest is reflected in
        the Company's 2000 or 1999 statements of operations.

2.    SIGNIFICANT ACCOUNTING POLICIES:

      USE OF ACCOUNTING ESTIMATES IN FINANCIAL STATEMENT PREPARATION:

      The preparation of financial statements in conformity with generally
        accepted accounting principles requires management to make estimates and
        assumptions that affect the reported amounts of assets and liabilities
        and disclosure of contingent assets and liabilities at the date of the
        financial statements and the reported amounts of revenues and expenses
        during the reporting periods. Actual results could differ from those
        estimates, and it is reasonably possible that significant changes could
        occur in the near term.

      CASH AND CASH EQUIVALENTS:

      For purposes of the statements of cash flows, the Company considers all
        highly liquid investments with an original maturity date of three months
        or less to be cash equivalents.

      INVENTORIES:

      Inventories consist primarily of vitamin and health supplement products
        held for sale by Triumph and are valued at the lower of cost (first-in,
        first-out) or market value.

      MORTGAGE LOANS (FBMS):

      Through June 28, 2000, mortgage loans originated and intended for sale in
        the secondary market were carried at the lower of cost or estimated fair
        value in the aggregate. Net unrealized losses, if any, were recognized
        through a valuation allowance by charges to income. Gain or loss on
        sales of loans was recognized at the time of the sale. Origination fees
        and loan origination costs on such loans were recognized when the
        mortgage was sold, which was normally within 30 days of the origination
        of the loan. Interest earned on these mortgages was recognized as income
        from the time the mortgage was closed to the time the mortgage was sold.

      Through June 28, 2000, the Company funded mortgage loans to customers.
        Loans that management had the intent and ability to hold for the
        foreseeable future or until maturity or pay-off generally were reported
        at their outstanding unpaid principal balances adjusted for charge-offs,
        an allowance for loan losses, and any deferred fees or costs on
        originated loans. Interest income was accrued on the unpaid principal
        balance. Loan origination fees, net of certain direct origination costs,
        were deferred and recognized as an adjustment to the related loan yield
        using the interest method. Through June 28, 2000, the inventory of
        mortgage loans consisted primarily of first trust deed mortgages on
        residential properties located throughout the United States. As of
        December 31, 1999, the Company had mortgage loans held for sale of
        $14,787,080, which were net of an allowance for loan losses of
        $1,386,000. All mortgage loans were pledged as collateral for the
        warehouse loans through June 28, 2000.

                                      F-19
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


2.    SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

      MORTGAGE LOANS (FBMS) (CONTINUED):

      The accrual of interest on mortgage and commercial loans was discontinued
        at the time the loan was 90 days delinquent unless the credit was
        well-secured and in process of collection. Loans were placed on
        non-accrual or charged-off status at an earlier date if collection of
        principal or interest was considered doubtful. All interest accrued but
        not collected for loans that were placed on non-accrual or charged-off
        status was reversed against interest income. The interest on these loans
        was accounted for on the cash-basis or cost-recovery method, until
        qualifying for return to accrual status. Loans were returned to accrual
        status when all the principal and interest amounts contractually due
        were brought current and future payments were reasonably assured.

      ALLOWANCE FOR LOAN LOSSES (FBMS):

      The allowance for loan losses was evaluated on a regular basis by
        management and was based upon management's periodic review of the
        collectibility of the loans in light of historical experience, the
        nature and volume of the loan portfolio, adverse situations that may
        have affected the borrower's ability to repay, estimated value of any
        underlying collateral and prevailing economic conditions. This
        evaluation is inherently subjective as it requires estimates that are
        susceptible to significant revision as more information becomes
        available. Loan losses were charged against the allowance when
        management believed the uncollectibility of a loan balance was
        confirmed. Subsequent recoveries, if any, were credited to the
        allowance.

      A loan was considered impaired when, based on current information and
        events, it was probable that the Company would be unable to collect the
        scheduled payments of principal or interest when due according to the
        contractual terms of the loan agreement. Factors considered by
        management in determining impairment included payment status, collateral
        value, and the probability of collecting scheduled principal and
        interest payments when due. Loans that experienced insignificant payment
        delays and payment shortfalls generally were not classified as impaired.
        Management determined the significance of payment delays and payment
        shortfalls on a case-by-case basis, taking into consideration all of the
        circumstances surrounding the loan and the borrower, including the
        length of the delay, the reasons for the delay, the borrower's prior
        payment record, and the amount of the shortfall in relation to the
        principal and interest owed. Impairment was measured on a loan by loan
        basis for commercial and construction loans by either the present value
        of expected future cash flows discounted at the loan's effective
        interest rate, the loan's obtainable market price, or the fair value of
        the collateral if the loan was collateral dependent.

      INVESTMENT VALUATION IN 1998 AS A BDC:

      Investments held by the Company in 1998 consisted of holdings of
        securities in and receivables of publicly and privately-held companies.
        The Company had representation on the boards of directors of four of its
        investee companies during 1998, and several investments were in
        companies in which there was either direct or indirect ownership or
        control of 5% or more of the outstanding voting shares. Through December
        31, 1998, as a BDC, the Company utilized the fair value method adopted
        in 1984, which provided for the Company's Board of Directors to be
        responsible for the valuation of the Company's investments, including
        notes receivable and interest receivable. Fair value is the value, which
        could reasonably be expected to be realized in a current arms-length
        sale. Investments through December 31, 1998 were carried at fair value
        using the following four basic methods of valuation:


                                      F-20
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


2.    SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

      INVESTMENT VALUATION IN 1998 AS A BDC (CONTINUED):

                1.   Cost - The cost method is based on the original cost to the
                     Company adjusted for amortization of original issue
                     discounts, accrued interest for certain capitalized
                     expenditures of the corporation, and other adjustments as
                     determined to be appropriate by the Board of Directors in
                     good faith taking into consideration such factors as
                     available financial information of the investee, the nature
                     of and duration of any restriction as to resale, and other
                     factors which influence the market in which a security is
                     purchased and sold. Such method is applied in the early
                     stages of an investee's development until significant
                     positive or adverse events subsequent to the date of the
                     original investment require a change to another method.

                2.   Private market - The private market method uses actual or
                     proposed third party transactions in the investee's
                     securities as a basis of valuation, utilizing actual firm
                     offers as well as historical transactions, provided that
                     any offer used is seriously considered and well documented
                     by the investee, and adjusted (if applicable) by the Board
                     of Directors in good faith taking into consideration such
                     factors as available financial information of the investee,
                     the nature and duration of any restrictions as to resale,
                     and other factors which influence the market in which a
                     security is purchased and sold.

                3.   Public market - The public market method is the preferred
                     method of valuation when there is an established public
                     market for the investee's securities. In determining
                     whether the public market method is sufficiently
                     established for valuation purposes, the Company examines
                     the trading volume, the number of shareholders and the
                     number of market makers in the investee's securities, along
                     with the trend in trading volume as compared to the
                     Company's proportionate share of the investee's securities.
                     Investments in unrestricted securities that are traded in
                     the over-the-counter market are generally valued at the
                     high bid price on the last day of the year. If the security
                     is restricted as to resale or has significant escrow
                     provisions or other significant restrictions, appropriate
                     adjustments are determined in good faith by the Board of
                     Directors taking into consideration such factors as
                     available financial information of the investee, the nature
                     and duration of restrictions on the ultimate disposition of
                     securities, and other factors which influence the market in
                     which security is purchased and sold.

                4.   Appraisal - The appraisal method is used to value an
                     investment position after analysis of the best available
                     outside information where there is not established public
                     or private market in the investee's securities.

      Purchases and sales of securities transactions are accounted for on the
        trade date which is the date the securities are purchased or sold. The
        cost of securities sold is reported on the first-in first-out cost basis
        for financial statement purposes.

                                      F-21
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


2.    SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

      FURNITURE, FIXTURES, EQUIPMENT AND DEPRECIATION:

      Furniture, fixtures and equipment are stated at cost, and depreciation is
        provided by use of the straight-line method over the estimated useful
        lives of the assets. The cost of leasehold improvements is depreciated
        over the estimated useful lives of the assets or the length of the
        respective leases, whichever period is shorter. Estimated useful lives
        of furniture, fixtures and equipment are as follows:

                  Vehicles                                     5 years
                  Office equipment and furniture               3 to 7 years
                  Computer hardware and software               3 to 5 years
                  Leasehold improvements                       7 years

      WEBSITE DEVELOPMENT COSTS AND AMORTIZATION:

      Website development costs related to the development of major interactive
        mortgage banking systems are capitalized and amortized over the
        estimated useful life of the related project, not to exceed three years.

      INTANGIBLE ASSETS AND AMORTIZATION:

      Goodwill represents the cost of the Company's investments in subsidiaries
        in excess of the net tangible assets acquired and is amortized on the
        straight-line method over fifteen years. Intellectual property rights,
        which consist of the Meridian intellectual property, are being amortized
        over three years.

      Tradename and franchise rights are related to Triumph. Franchise rights
        represent the initial fees paid by Triumph to operate its locations as
        General Nutrition Centers. The franchise operating agreement gives the
        Company the right to operate a General Nutrition Center for a specified
        term at a given location. In exchange, the Company is obligated to pay
        the franchisor a periodic payment of royalties based on a percentage of
        sales and to operate its centers to a certain level of minimum
        standards. Amortization of franchise rights is computed using the
        straight-line method over the life of the related agreement, which is
        ten years.

      Foreclosed assets acquired through, or in lieu of, loan foreclosure were
        held for sale by FBMS and were initially recorded at fair value at the
        date of foreclosure, establishing a new cost basis.

      SUBSIDIARY EQUITY TRANSACTIONS

      The Company recognizes in its consolidated financial statements, increases
        or decreases in its additional paid in capital resulting from the sales
        of previously issued stock by its subsidiaries which have the effect of
        reducing the parent's percentage equity holding.

      IMPAIRMENT OF LONG-LIVED ASSETS:

      The Company reviews long-lived assets, including goodwill and identifiable
        intangibles for impairment whenever events or changes in circumstances
        indicate that the carrying amount of an asset may not be recoverable.
        Recoverability of assets to be held and used is measured by a comparison
        of the carrying amount of an asset to future undiscounted cash flows
        expected to be generated by the asset. If such assets are considered to
        be impaired, the impairment to be recognized is measured by the amount
        by which the carrying amount of the assets exceeds the fair value of the
        assets. In connection with the June 28, 2000, FBMS rescission, the
        Company recorded a loss of $3,979,000 in 2000 (Note 3). In addition,
        during the fourth quarter of 2000, the Company recorded a $353,000
        impairment charge related to web-site development costs (Note 9) and an
        $454,250 impairment charge related to the closings of two Triumph retail
        stores and related to impairment of goodwill (Note 7). Based on
        management's review, the Company does not believe that any other
        impairment has occurred as of December 31, 2000.

                                      F-22
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


2.    SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

      REVENUE RECOGNITION:

      Revenue from Meridian loan origination fees is recognized upon the
        completion and closing of a mortgage. Revenue from product sales which
        represent retail sales of vitamin/health supplement products, are
        recognized at the time of the sales transaction with the customer.

      COMPREHENSIVE INCOME:

      SFAS No. 130, REPORTING COMPREHENSIVE INCOME, establishes requirements for
        disclosure of comprehensive income, which includes certain items
        previously not included in the statements of operations, including
        unrealized gains and losses on certain investments in debt and equity
        securities, among others. In 2000 and 1999, net loss and comprehensive
        loss were the same. In 1998, SFAS No. 130 had no effect on the Company
        since it was following the fair value accounting guidelines required for
        BDC's.

      RECENTLY ISSUED ACCOUNTING STANDARDS:

      In June 1998, the Financial Accounting Standards Board issued SFAS No.
        133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This
        statement, as amended, is effective for fiscal years beginning after
        June 15, 2000. Currently, the Company does not have any derivative
        financial instruments and does not participate in hedging activities.
        Therefore, management believes that SFAS No. 133 will not have an impact
        on its financial position or results of operations.

      In December 1999, the staff of the Securities and Exchange Commission
        issued Staff Accounting Bulletin ("SAB") No. 101, REVENUE RECOGNITION IN
        FINANCIAL STATEMENTS. SAB No. 101, as amended by SAB No. 101A and SAB
        No. 101B, is effective no later than the fourth fiscal quarter of fiscal
        years beginning after December 15, 1999. SAB No. 101 provides the
        Staff's views in applying generally accepted accounting principles to
        selected revenue recognition issues. The Company believes that it
        complies with the accounting and disclosure described in SAB No. 101;
        therefore, management believes that SAB No. 101 will not impact the
        Company's financial statements.

      STOCK-BASED COMPENSATION:

      SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION defines a fair-value
        based method of accounting for stock-based employee compensation plans
        and transactions in which an entity issues its equity instruments to
        acquire goods or services from non-employees, and encourages but does
        not require companies to record compensation cost for stock-based
        employee compensation plans at fair value. The Company has chosen to
        continue to account for stock-based compensation using the intrinsic
        value method prescribed in Accounting Principles Board Opinion No. 25,
        Accounting for Stock Issued to Employees (APB No. 25") and related
        interpretations. Accordingly, compensation cost for stock options is
        measured as the excess, if any, of the quoted market price of the
        Company's stock at the date of the grant over the amount an employee
        must pay to acquire the stock.

                                      F-23
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


2.    SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

      NET LOSS PER SHARE (NET ASSETS PER SHARE IN 1998):

      In 1999, in connection with the Company's withdrawal as a BDC, the Company
        adopted the provisions of SFAS No. 128, EARNINGS PER SHARE. SFAS No. 128
        requires dual presentation of basic and diluted earnings per share (EPS)
        for all entities with complex capital structures and requires a
        reconciliation of the numerator and denominator of the basic EPS
        computation to the numerator and denominator of the diluted EPS
        computation. Basic EPS excludes dilution; diluted EPS reflects the
        potential dilution that could occur if securities or other contracts to
        issue common stock were exercised or converted into common stock or
        resulted in the issuance of common stock that then shared in the
        earnings of the entity.

      Basic loss per share is computed by dividing net loss applicable to common
        shareholders by the weighted-average number of common shares outstanding
        for the year. In arriving at net loss applicable to common shareholders,
        amortization of the beneficial conversion features and accretion to
        redemption value related to the preferred stock and dividends on the
        preferred stock (Notes 17 and 18) increased this amount. Diluted loss
        per share reflects the potential dilution that could occur if dilutive
        securities and other contracts to issue common stock were exercised or
        converted into common stock or resulted in the issuance of common stock
        that then shared in the earnings of the Company, unless the effect is to
        reduce a loss or increase earnings per share. The Company had no
        potential common stock instruments which would result in diluted loss
        per share in 2000, 1999 and 1998. At December 31, 2000, 1999 and 1998
        the total number of common shares issuable under the exercise of
        outstanding options and warrants and upon the conversion of convertible
        preferred stock was 4,115,324, 1,370,281 and 749,000 respectively.

      In 1998, in accordance with the fair value accounting method used by
        regulated investment companies, primary net assets (total stockholders'
        equity) per share at December 31, 1998 was $.74, based on weighted
        average shares outstanding of 5,384,315, and fully diluted net assets
        per share was $.65, based on weighted average shares outstanding of
        6,156,015.

3.    RESCISSION OF AUGUST 23, 1999 FBMS AGREEMENT AND PLAN OF REORGANIZATION,
      AND DIVESTITURE OF FBMS:

      On August 23, 1999, the Company acquired all of the outstanding common
        stock of FBMS in exchange for 250 shares of the Company's Series E
        Convertible Preferred Stock, valued at approximately $2,531,000. The
        transaction was accounted for as a purchase. The total purchase price
        was allocated to the assets and liabilities acquired based on their
        estimated fair values, including goodwill of approximately $18,900,000,
        which has been amortized by use of the straight line method over ten
        years.

      Effective June 28, 2000, the Company entered into a rescission agreement
        with the previous owner of FBMS, in which the Company and the previous
        owner agreed to rescind the terms of the August 23, 1999 FBMS Agreement
        and Plan of Reorganization. Under the terms of the rescission
        agreement, all assets and liabilities of FBMS as of June 28, 2000, were
        returned to the previous owner of FBMS.

      Pursuant to the terms of the settlement relating to the rescission
        agreement, the parties agreed that nMortgage retain certain
        technological rights related to the development of an interactive
        website developed subsequent to August 23, 1999, utilizing resources
        acquired through the FBMS acquisition (Note 9). Also as part of the
        settlement, the Company agreed to issue up 50 additional shares of
        Series E preferred stock related to certain performance conditions
        concerning the original acquisition that were satisfied prior to
        rescission to fund the resolution of certain claims (Note 17). The 50
        additional shares of Series E preferred stock are convertible into
        50,000 shares of common stock and are valued at $368,750, which was
        based on the quoted market price of the underlying shares of common
        stock at the date of rescission, and which was recorded as expense by
        the Company.

                                      F-24
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


3.    RESCISSION OF AUGUST 23, 1999 FBMS AGREEMENT AND PLAN OF REORGANIZATION,
      AND DIVESTITURE OF FBMS (CONTINUED):

      In connection with the rescission agreement, the Company divested itself
        of the assets, liabilities, and operations of FBMS as of June 28, 2000,
        and as a result, recorded a loss of $3,979,000, which represents the
        write off of the Company's investment in FBMS, including remaining
        goodwill as of the date of the rescission. The operating results of FBMS
        have been included in the consolidated financial statements from the
        date of acquisition through the date of rescission.

      The following pro forma information has been prepared assuming the
        rescission of FBMS had taken place at the beginning of the respective
        periods. The pro forma information includes adjustments to remove the
        operating results of FBMS, related amortization of goodwill arising from
        the acquisition of FMBS, and the loss on the FBMS rescission.

      The pro forma financial information is not necessarily indicative of the
        results of operations as they would have been had the transaction been
        effected on the assumed date.

<TABLE>
<CAPTION>
                                                            Years ended December 31,
                                                              2000             1999
                                                          ------------     ------------
         <S>                                            <C>              <C>
         Revenues                                       $  1,436,000     $    842,000
         Net loss                                       $ (5,336,000)    $ (4,040,000)
         Net loss applicable to common shareholders     $ (6,178,000)    $ (7,927,000)
         Basic and diluted loss per common share        $       (.87)    $      (1.18)
         Shares used in per share calculation              7,106,749        6,718,170
</TABLE>

4.    BUSINESS ACQUISITIONS:

      ACQUISITION OF MERIDIAN:

      Under an agreement signed September 7, 2000, the Company, through a
        newly-formed subsidiary GR.com, Inc., acquired all of the issued and
        outstanding common stock of The Meridian Residential Group, Inc. ("MRG")
        in exchange for 425,000 shares of Series F participating, convertible
        preferred stock, valued at approximately $2,762,000. The acquisition was
        completed on September 27, 2000. The Company also issued 35,000 shares
        of Series F preferred stock, valued at $228,000 as additional
        consideration for costs of the acquisition. The value of the Series F
        Preferred Stock was based upon the quoted market price of the Company's
        common stock ($6.50 per share) underlying the Series F Preferred Stock
        on September 7, 2000 (the date the agreement was signed). MRG was merged
        into GR.com, Inc. and GR.com Inc. subsequently changed its name to
        Meridian Services, Inc. In addition, E2000 is to issue additional shares
        of common stock to the MRG shareholders having a market value, at the
        time of issuance, equal to 20% of the annual increase in pre-tax net
        earnings compared to the immediately preceding year of the MRG business
        for each of the five years subsequent to closing, commencing with the
        year ended December 31, 2000, subject to certain limitations, as
        defined.

      The transaction was accounted for as a purchase, and the results of
        operations of Meridian are included in the Company's 2000 consolidated
        statements of operations from the date of acquisition. The total
        purchase price was allocated to the assets and liabilities acquired
        based on their estimated fair values, including goodwill of
        approximately $2,648,000, which is being amortized by the use of the
        straight-line method over fifteen years.

                                      F-25
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


4.    BUSINESS ACQUISITIONS (CONTINUED):

      ACQUISITION OF MERIDIAN (CONTINUED):

      The Company, through its subsidiary nMortgage, Inc., also acquired the
        proprietary business model, website, trademarks, corporate names and all
        intellectual property rights related to the Meridian GreatRate.com
        business, including the names GreatRate.com and GreatRate Mortgage.com
        from Meridian Capital Group, LLC, a company affiliated with MRG through
        common ownership, for $850,000 cash. The intellectual property rights
        are being amortized by use of the straight-line method over a three-year
        period.

      The following unaudited pro forma financial information for the years
        ended December 31, 2000 and 1999, give effect to the above acquisitions
        as if they had occurred at the beginning of each respective period.

<TABLE>
<CAPTION>
                                                          Years ended December 31,
                                                         2000                  1999
                                                     -------------        -------------
        <S>                                          <C>                  <C>
        Revenue                                      $   4,654,000        $   4,585,000
        Net loss                                     $ (12,826,000)       $  (8,153,000)
        Net loss applicable to common shareholders   $ (14,076,000)       $ (11,422,000)
        Basic and diluted loss per common share      $       (1.98)       $       (1.70)
        Shares used in per share calculation             7,106,749            6,718,170
</TABLE>

      The following unaudited pro forma financial information for the years
        ended December 31, 2000 and 1999, give effect to the Meridian
        acquisition and the FBMS rescission and divestiture as if they had
        occurred at the beginning of each respective period.

<TABLE>
<CAPTION>
                                                          Years ended December 31,
                                                         2000                  1999
                                                     -------------        -------------
        <S>                                          <C>                  <C>
        Revenue                                      $   3,231,000        $   3,087,000
        Net loss                                     $  (5,254,000)       $  (4,476,000)
        Net loss applicable to common shareholders   $  (6,923,000)       $ (10,804,000)
        Basic and diluted loss per common share      $        (.97)       $       (1.61)
        Shares used in per share calculation             7,106,749            6,718,170
</TABLE>


      The unaudited pro forma financial information above does not purport to
        represent the results which would actually have been obtained if the
        acquisitions had been in effect during the periods covered or any future
        results which may in fact be realized.

      ACQUISITIONS OF FTC AND TRIUMPH:

      In August 1998, the Company acquired all of FTC's outstanding common stock
        in exchange for 625,000 shares of the Company's common stock valued at
        $565,639. The Board of Directors used the Board appraisal method of
        valuation for this investment through December 31, 1998, and recorded
        FTC at $565,639, which was the net asset value of FTC's underlying
        assets and liabilities at the acquisition date. From the date of the
        acquisition through December 31, 1998, the Company loaned $160,000 to
        FTC for working capital purposes.

      In February and June 1998, the Company acquired a total of 1,500,000
        shares of Triumph common stock in exchange for consulting services
        valued at $375,000, which represented an ownership interest of
        approximately 88% at December 31, 1998. The Company's president was also
        the president and a director of Triumph. Through December 31 1998, the
        investment was valued using the cost valuation method because no more
        recent common stock sales had occurred. During 1998, the Company loaned
        $561,569, to Triumph, which was used by Triumph primarily to acquire
        four retail vitamin/health supplement centers in south Florida. Triumph
        repaid $64,478 of these notes and $39,939 of interest during 1998,
        resulting in balances due the Company at December 31, 1998 of $899,018
        and $23,088 for note principal and accrued interest, respectively. Both
        of these investments were accounted for and presented as investments in
        controlled companies as of and for the year ended December 31, 1998. At
        December 31, 1998, the fair value of these investments was $940,639.
        Effective January 1, 1999, in connection with the Company's change from
        a BDC to an operating company, the Company began consolidating FTC and
        Triumph pursuant to SFAS No. 94.

                                      F-26
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


5.    RECEIVABLES:

      Receivables at December 31, 2000 and 1999 consist of the following:
<TABLE>
<CAPTION>
                                                                         2000            1999
                                                                      -----------    -----------
     RELATED PARTIES:
<S>                                                                   <C>            <C>
       Notes receivable from officers and directors of the
         Company; interest rates ranging from 8% to 10%; notes
         collateralized in part by shares of the Company's common
         stock; original maturities through March 2001, now due on
         demand                                                       $   130,895    $   569,000

       Notes receivable from affiliate; interest rates ranging
         from 8% to 10%; unsecured; due on demand                         477,081        300,000

       Advances receivable from affiliates; non-interest bearing;
         unsecured; due on demand                                         328,950        317,177

       Note receivable from employee; interest at 8.25%;
         unsecured; due in October 2001                                     7,600          8,800

       Interest receivable                                                 39,031          8,833
                                                                      -----------    -----------
                                                                          983,557      1,203,810
                                                                      -----------    -----------
       OTHER:

       Receivables,  non-interest bearing; unsecured                      216,177        167,390

       Notes receivable; interest at 15%; collateralized by real
         estate; due in September 2001 (Note 6)                           250,000           --

       Notes receivable; interest rates ranging from 8% to 12%;
         unsecured; maturing at various dates through December
         x2000x                                                           385,940        125,017

       Mortgage loans receivable from FBMS customers; interest
         rates ranging from 7.25% to 13.75%, maturing at various
         dates through 2030; collateralized by real estate                   --          374,500

       Interest receivable                                                 26,766           --
                                                                      -----------    -----------
                                                                          878,883        666,907
       Less allowance for uncollectible receivables                       (40,263)      (162,336)
                                                                      -----------    -----------
                                                                          838,620        504,571
                                                                      -----------    -----------
                                                                      $ 1,822,177    $ 1,708,381
                                                                      ===========    ===========
</TABLE>

                              F-27
<PAGE>
                         EQUITEX, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


6.    INVESTMENTS:

      At December 31, 2000 and 1999, the company's investments consist of the
       following:

<TABLE>
<CAPTION>
                  Investment type                                 Investment balance
                  ------------------------------               -------------------------
                                                                  2000           1999
                                                               -------------------------
                  <S>                                          <C>           <C>
                  Marketable securities (trading securities):
                    Intranet Solutions, Inc. [A]               $ 165,750     $   786,250
                    Other                                         72,466         116,287
                                                               ---------     -----------
                                                                 238,216         902,537
                                                               =========     ===========

                  Equity investments:
                    VP Sports [B]                              $ 365,000     $ 1,472,898
                    Net 1 Capital, LLC [C]                             -         235,000
                                                               ---------     -----------
                                                               $ 365,000     $ 1,707,898
                                                               =========     ===========

                  Other investments (cost basis investments):
                    First TeleBanc Corporation [D]             $ 800,000     $   800,000
                    Other                                         67,471          65,000
                                                               ---------     -----------
                                                               $ 867,471     $   865,000
                                                               =========     ===========
</TABLE>

                  [A] On January 1, 1998, the Company owned 473,250 shares of
                      common stock of Intranet Solutions, Inc. ("Intranet").
                      During 1998, the Company sold 284,665 shares of IntraNet
                      for proceeds of $1,240,613, which was used to provide
                      working capital, and which resulted in an ownership
                      position of 188,585 shares (less than 5%) at December 31,
                      1998. These shares were valued using the public market
                      valuation method at December 31, 1998. In addition, the
                      Company paid the remaining balance of a 150,000 payable to
                      IntraNet in January 1998.

                      Effective January 1, 1999, the Company classified its
                      investment in IntraNet as a trading security pursuant to
                      SFAS No. 115. As of December 31, 2000 and 1999, the market
                      value of the IntraNet investment based on quoted market
                      prices was $165,750 and $786,250, and the cost of the
                      IntraNet investment was $34,318 and $216,159, respectively
                      (an unrealized gain of $131,432 and $570,091). During 2000
                      and 1999, the Company realized gains on the sales of
                      IntraNet securities of $21,107 and $638,764, respectively.
                      At March 30, 2001, the market value of the IntraNet
                      investment, based on the quoted market price per share,
                      was approximately $78,000 .

                  [B] At December 31, 1998, the Company's investment in VP
                      Sports' common shares was valued using the private market
                      valuation method. The valuation reflected the price at
                      which the most recent common stock sales occurred in 1998.
                      The Company's president is also the president and a
                      director of VP Sports. During 1998, the Company loaned
                      $103,131 to VP Sports for working capital purposes, of
                      which $38,865 was repaid in 1998.

                                      F-28
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


6.    INVESTMENTS (CONTINUED):

                      Effective January 1, 1999, the Company began consolidating
                      VP Sports. In connection with a private placement of VP
                      Sports' common stock, the Company's ownership interest in
                      VP Sports was reduced from approximately 88% at January 1,
                      1999 to approximately 35.7% at December 31, 1999. Due to
                      the change in ownership percentage, the Company changed
                      its method of accounting for its investment in VP Sports
                      in 1999 from consolidation to the equity method of
                      accounting. During 1999, a receivable of $64,266 at
                      December 31, 1998 was repaid. Effective July 27, 1999, the
                      Company, through its majority-owned subsidiary VP Sports
                      and VP Sports' wholly-owned subsidiary, 9066-8609 Quebec
                      Inc., a Canadian corporation, acquired all of the
                      outstanding common shares of Victoria Precision, also a
                      Canadian corporation, as well as the future rights to a
                      four-year international consulting and non-compete
                      agreement. The transaction was accounted for as a
                      purchase. Total consideration of approximately $3,966,600
                      ($6,000,000 CDN) was required. The purchase price for the
                      common stock was $2,000,000 CDN and was allocated to the
                      assets and liabilities acquired based on their estimated
                      fair values, including intangible assets of approximately
                      $3,166,000, which are being amortized by the use of the
                      straight-line method over four to ten years. In order to
                      finance the 1999 acquisition, VP Sports completed a
                      $4,500,000 private placement of 36 units; each unit
                      consisting of 100 shares of $1,000 per share, 8%
                      convertible preferred stock, 12,500 shares of VP Sports
                      common shares, and warrants to purchase 287,500 shares of
                      VP Sports common stock at $.10 per share.

                      In March 2000, VP Sports acquired all of the outstanding
                      common stock of Torpedo Sports, Inc. for $420,000. The
                      transaction was accounted for as a purchase, and the
                      purchase price was allocated to the assets and liabilities
                      acquired based on their estimated fair values.

                      During 2000, the Company's ownership interest in VP Sports
                      decreased to approximately 13.6% as of December 31, 2000
                      due to issuances of common stock by VP Sports. The
                      Company's ownership interest in the underlying assets of
                      VP Sports decreased by $743,483 which has been recorded as
                      a decrease to the investment and additional paid-in
                      capital The Company continues to account for its
                      investment in VP Sports under the equity method of
                      accounting due to the Company's ability to exercise
                      significant influence over operating and financial
                      policies of VP Sports.

                  [C] In March 1999, FTC entered into a joint-venture agreement
                      with Net 1 Capital, LLC ("Net 1 Capital"), a Florida
                      Limited Liability Company, formed for the purpose of
                      acquiring pre-existing portfolios of consumer debt and
                      servicing and/or marketing these portfolios. The Company
                      invested $250,000 for a 50% interest in Net 1 Capital. The
                      Company also loaned Net 1 Capital $317,629, which was
                      repaid in 1999. The Company accounted for Net 1 Capital
                      under the equity method of accounting through December 31,
                      2000. In March 2001, the Company entered into an agreement
                      with the joint venture partner to exchange its investment
                      to the joint venture partner in exchange for a $250,000
                      note receivable.

                  [D] During 1998, the Company and FTC acquired a 9% interest
                      in First TeleBanc Corporation ("FTB"), a closely-held
                      Florida corporation, for $625,000. On December 30, 1998,
                      First TeleBanc acquired all of the outstanding common
                      stock of Boca Raton First National Bank. During 1999, the
                      Company acquired an additional interest in FTB for
                      $175,000. At December 31, 2000 and 1999, the Company's
                      ownership interest in FTB is 7.2% and 8.1%, respectively.
                      During 2000 and 1999, the Company accounted for its
                      investment in First TeleBanc at cost.

                                      F-29
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


6.    INVESTMENTS (CONTINUED):

      The  Company's  equity in the net  losses of its  equity  investments  was
        $364,415  and $418,209 for the years ended December 31, 2000 and 1999.
        Summarized   unaudited   combined   financial   information   for  these
        investments as of and for the years ended December 31, 2000 and 1999, is
        as follows:

                                                      2000              1999
                                                  ------------     ------------

                Current assets                    $ 12,218,138     $  6,834,574
                Non-current assets                   5,784,223        7,552,862
                                                  ------------     ------------
                  Total assets                    $ 18,002,361     $ 14,387,436
                                                  ============     ============

                Current liabilities               $ 12,264,499     $  6,070,949
                Non-current liabilities              2,620,083        2,144,775
                                                  ------------     ------------
                Total liabilities                   14,884,582        8,215,724
                Total equity                         3,117,779        6,171,712
                                                  ------------     ------------
                  Total liabilities and equity    $ 18,002,361     $ 14,387,436
                                                  ============     ============

                Revenues                          $ 19,604,490     $  4,142,540
                Gross profit                      $  3,492,809     $    611,100
                Operating losses                  $ (1,064,279)    $ (1,134,212)
                Net loss                          $ (1,684,681)    $ (1,026,292)

      INVESTMENT IN RDM SPORTS GROUP (FORMERLY ROADMASTER INDUSTRIES):

      During 1998, the Company valued its investment in RDM using the public
        market valuation method. In addition, the Company recorded
        administrative fees from RDM totaling $25,893. Effective January 1,
        1999, the Company classified its investment in RDM as an available for
        sale security pursuant to SFAS No. 115, and during 1999, in connection
        with the Company's evaluation of investments for impairment, management
        determined that the decline in the value of its investment in RDM was
        other than temporary. As a result, the Company adjusted the unrealized
        loss on this investment of $1,201,355 (which represented 4,979,437
        shares of RDM common stock), previously recorded as a component of
        stockholders' equity, to a realized loss, and fully reserved a note
        receivable from Hutch Sports USA (an RDM subsidiary) which had a
        carrying value of $56,475 at January 1, 1998. These adjustments resulted
        in a $1,257,830 charge to the 1999 statement of operations. The Company
        owns 4,979,437 shares of RDM common stock at December 31, 2000, valued
        at $0.

      OTHER INVESTMENTS:

      During 1999, the Company determined that two cost-basis investments which
        totaled $70,000 at December 31, 1998 were impaired, and were written off
        in the 1999 statement of operations.

      Other trading securities at December 31, 2000 and 1999 are recorded at
        estimated fair value, based on quoted market prices, of $72,466 and
        $116,287, respectively, which is $206,260 and $38,517 less than cost.
        During 1999, the Company realized gains of $158,752 from the sales of
        certain other trading securities held by the Company. At March 30, 2001,
        the aggregate market value of the other trading securities had not
        materially changed.

                                      F-30
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


7.    TRIUMPH OPERATIONS:

      Effective January 1, 2000, Triumph sold the assets of one of its five
        retail stores in exchange for a $268,000 note receivable. In connection
        with this transaction, Triumph recorded a gain on the sale of
        approximately $76,600, which is included in other income in the
        accompanying statement of operations. In November 2000 and March 2001,
        the Company terminated operations at two other retail stores. In
        connection with these store closings, the Company recorded an $88,900
        impairment loss in 2000.  During the fourth quarter of 2000, in
        connection with the store closings and an evaluation of future
        undiscounted cash flows, the Company concluded that an impairment
        charge of $365,350 was necessary to write off the carrying amount of
        goodwill related to the Triumph operations.

8.    FURNITURE, FIXTURES AND EQUIPMENT:

      Furniture, fixtures, and equipment consist of the following at December
      31, 2000 and 1999:

                                                2000            1999
                                            -----------    -------------
           Vehicles                         $   121,575     $     30,542
           Office equipment and furniture       234,304        1,410,699
           Computer hardware and software             -          430,082
           Leasehold improvements               197,494           76,759
                                            -----------     ------------
                                                553,373        1,948,082
           Less accumulated depreciation       (292,302)        (890,050)
                                            -----------     ------------
                                            $   261,071     $  1,058,032
                                            ===========     ============

9.    INTANGIBLE AND OTHER ASSETS:

      Intangible and other assets consist of the following at December 31, 2000
      and 1999:

                                               2000               1999
                                           ------------     -------------
           Goodwill                        $  2,729,717     $  19,072,300
           Website development costs          1,730,000                 -
           Intellectual property rights         850,000                 -
           Tradename and franchise rights        67,326           172,800
           Deposits                             213,377           454,094
           Other                                 22,655           227,872
           Foreclosed assets of FBMS                  -           299,400
           Restricted cash of FBMS                    -           210,169
                                           ------------     -------------
                                              5,613,075        20,436,635
           Less accumulated amortization       (142,701)         (671,578)
                                           ------------     --------------
                                           $  5,470,374     $  19,765,057
                                           ============     =============

      Subsequent to the August 23, 1999 acquisition of FBMS, the Company,
        utilizing resources acquired through the FBMS acquisition, incurred
        costs in the development of an interactive mortgage-banking website.
        Through December 31, 1999, website development primarily consisted of
        planning-stage activities and was expensed as incurred pursuant to
        criteria outlined in Emerging Issues Task Force ("EITF") Issue No. 00-2.
        Beginning in January 2000 and continuing through early June 2000, FBMS
        incurred additional costs of website development, including costs
        approximating $2,500,000 related to website application and
        infrastructure development, and graphics and content development, which
        were capitalized pursuant to EITF Issue 00-2 and SOP 98-1. These website
        development costs are now being utilized by the Company and are being
        amortized over a three-year term.

                                      F-31
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


9.    INTANGIBLE AND OTHER ASSETS (CONTINUED):

      At December 31, 2000, management's assessment of website development costs
        for impairment indicated that the carrying value of $2,083,000 had been
        impaired. Management's assessment included an evaluation of undiscounted
        future cash flows and the results of an external appraisal. As a result,
        the carrying value of the website development costs was reduced by
        $353,000.

      Deposits include a contract deposit receivable whereby the Company is the
        plaintiff in an action in which it is seeking to recover $300,000
        deposited into an escrow account pending the receipt of required
        documentation. The defendant has not delivered the required documents.
        This deposit has been recorded at an estimated net realizable value of
        $150,000 at December 31, 2000 and 1999.

10.   NOTES AND ADVANCES PAYABLE:

      At December 31, 2000 and 1999,  notes and advances  payable consist of the
following:

<TABLE>
<CAPTION>
                                                                         2000         1999
                                                                      ----------   ----------
        RELATED PARTIES:
         <S>                                                          <C>          <C>
         Notes payable to affiliates; interest rates ranging from
             8%-10%; unsecured; due on demand                         $1,326,792   $  542,000

         Advances payable to affiliate, non-interest bearing, due
             on demand                                                       500      240,000

         Notes payable to officer/director; interest rates ranging
             from 8%-12% unsecured; due on demand                        533,000       50,000
                                                                      ----------   ----------
                                                                       1,860,292      832,000
                                                                      ----------   ----------
        OTHERS:

         Note payable to bank by FBMS; interest at 18%; unsecured;
             balance originally due November 1999; due on demand
             through date of FBMS rescission                                --        477,000

         Notes payable to individuals by FBMS; interest rates
             ranging from 8% to 18%, unsecured; notes matured at
             various dates through August 2000; at December 31,
             1999, $454,473 of the notes payable were in default            --        723,160

         Note payable to bank by FBMS; interest at 1.5% over bank's
             prime rate (10% at December 31, 1999) loan was
             collateralized by property and equipment                       --        250,000

         Capital lease obligations of FBMS, maturities at various
             dates through October 2002                                     --        398,391

          Other                                                           96,966       93,403
                                                                      ----------   ----------
                                                                          96,966    1,941,954
                                                                      ----------   ----------
                                                                       1,957,258   $2,773,954
                                                                                   ==========
        Less current notes and advances payable                        1,877,631
                                                                      ----------

      Long-term notes and advances payable                             $  79,627
                                                                       =========
</TABLE>

                                      F-32
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


10.   NOTES AND ADVANCES PAYABLE (CONTINUED):

      Notes and advances payable are due as follows:

                  Year ending
                 December 31,
                 ------------
                     2001                  $        1,877,631
                     2002                              18,453
                     2003                              21,157
                     2004                              24,256
                     2005                              15,761
                                           ------------------
                                           $        1,957,258
                                           ==================

11.   COMMITMENTS AND CONTINGENCIES:

      LEASES:

      The Company leases its Florida corporate facilities under a non-cancelable
        operating lease which expires in February 2004. The Company also leases
        office space in New York under a non-cancelable operating lease which
        expires in August 2005. Future minimum lease payments under these
        operating leases are as follows:

                  Year ending
                 December 31,
                 ------------
                     2001                  $          101,000
                     2002                              99,000
                     2003                              90,000
                     2004                              66,000
                     2005                              25,000
                                           ------------------
                                           $          381,000
                                           ==================

      In addition, the Company leases office space in Colorado on a
        month-to-month basis for $2,500 per month from Beacon Investments, a
        corporation in which the Company's president is the sole shareholder
        Total rent expense for the years ended December 31, 2000, 1999, and 1998
        was approximately $297,000, $272,000 and $30,000, respectively.

      CONSULTING AND EMPLOYMENT AGREEMENTS:

      In connection with the acquisition of Meridian, the Company entered into
        consulting and employment agreements which requires nMortgage to issue
        to the consultant/employee common shares of nMortgage equal to 2% of the
        issued and outstanding common shares of nMortgage on a fully diluted
        basis. The Company has recognized $62,000 of expense related to the
        issuance of these shares through December 31, 2000. The employment
        agreement also required nMortgage to grant to the employee options to
        purchase up to 150,000 shares of nMortgage common stock at $1.00 per
        share, the estimated fair value of the nMortgage common stock at the
        date of grant.

                                      F-33
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


11.   COMMITMENTS AND CONTINGENCIES (CONTINUED):

      CONSULTING AND EMPLOYMENT AGREEMENTS (CONTINUED):

      In September 2000, the Company entered into a consulting agreement for
        services to be performed subsequent to December 31, 2000, in which, upon
        the satisfaction of various performance criteria, the Company is to
        issue 75,000 shares of common stock and warrants to purchase and
        additional 75,000 shares of common stock at an exercise price equal to
        80% of the average closing bid price of the Company's common stock ten
        days prior to issuance. At the date of commitment, the total
        compensation cost was calculated to be approximately $750,000, which is
        to be recognized subsequent to year-end as the performance criteria are
        satisfied.

      LITIGATION:

      On August 18, 2000, William G. Hays, Jr., liquidating agent for RDM Sports
        Group, Inc., and related debtors, filed an adversary proceeding against
        the Registrant, Smith Gambrell and Russell, LLP, David J. Harris, P.C.
        and David J. Harris, in the United States Bankruptcy Court for the
        Northern District of Georgia, Newnan Division, Adversary Proceeding No.
        00-1065. The liquidating agent alleges that the Registrant breached its
        October 29, 1987 consulting agreement with RDM, breached fiduciary
        duties allegedly owed to RDM, and that the Registrant is liable for
        civil conspiracy and acting in concert with directors of RDM. The
        liquidating agent is seeking unspecified compensatory and punitive
        damages, along with attorney's fees, costs and interest. On April 2,
        2001, the court granted the Registrant's motion to enforce the
        arbitration clause contained in the consulting agreement. The Registrant
        intends to vigorously defend this matter. Because this matter is in the
        preliminary stages and no arbitration date has been set, it is too early
        to predict the outcome of this matter.

      The Company is involved in various other claims and legal actions arising
        in the ordinary course of business. In the opinion of management, the
        ultimate disposition of these matters will not have a material adverse
        impact either individually or in the aggregate on consolidated results
        of operations, financial position or cash flows of the Company.

12.   INCOME TAXES:

      The Company recognizes deferred tax liabilities and assets for the
        expected future tax consequences of events that have been recognized in
        the financial statements or tax returns. Under this method, deferred tax
        liabilities and assets are determined based on the difference between
        the financial statement carrying amounts and tax bases of assets and
        liabilities using enacted tax rates in effect in the years in which the
        differences are expected to reverse.

      The difference between the expected tax benefit computed at the federal
        statutory income tax rate of 34% and the effective tax rate for the
        years ended December 31, 2000 and 1999 was due primarily to the tax
        effect of the valuation allowance and due to state income taxes. The
        provision for income taxes in 2000 represents New York State income
        taxes, and the provision for income taxes in 1998 represents deferred
        income tax expense.

      The following is a summary of the Company's deferred tax assets and
        liabilities at December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                  2000             1999
                                                              ------------     ------------
           <S>                                                <C>              <C>
           Deferred tax assets:
              Accrued items not currently deductible          $    209,000     $    281,260
              Tax benefit of unrealized loss on investments         25,000          465,390
              Allowance for loan losses                            115,000          592,690
              Intangible assets                                     28,000
              Net operating loss carryforwards                   6,887,000        2,531,000
                                                              ------------     ------------
           Total deferred tax assets                             7,264,000        3,870,340
           Valuation allowance                                  (7,264,000)      (3,870,340)
                                                              ------------     ------------
           Net deferred tax asset (liability)                 $          -     $          -
                                                              ============     ============
</TABLE>

      Net operating loss carryforwards of approximately $19,400,000 are
        available to offset future taxable income, if any, through 2020. The net
        operating loss carryforwards may be subject to certain limitations due
        to business acquisitions and other transactions. A valuation allowance
        has been provided to reduce the deferred tax assets, as realization of
        the assets is not assured.

                                      F-34
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


13.   RELATED PARTY TRANSACTIONS:

      REVENUE CONCENTRATIONS, 1998:
                                  Controlled  Affiliated     Other      Total
                                   ---------  ----------  ----------  ---------

      Interest and other income    $  68,043  $       10  $    2,416  $  70,469
      Consulting/transaction fees    375,000                            375,000
      Administrative fees                          2,371                  2,371
                                   ---------  ----------  ----------  ---------

                                   $ 443,043  $    2,381  $    2,416  $ 447,840
                                   =========  ==========  ==========  =========

      During 1998, one investee company accounted for 96% of the Company's total
        revenues of $447,840.

      BONUSES TO OFFICERS:

      In August 1998, the Company's Board of Directors approved a bonus
        arrangement with the Company's president. The bonus arrangement,
        effective January 1, 1998, provides for an annual bonus to be calculated
        quarterly based on a combination of 1% of the Company's assets and 5% of
        the increase in the market value of the Company's common stock each
        quarter. The unpaid portion of these bonuses was $614,522 and $452,854
        at December 31, 2000 and 1999, respectively.

      DIRECTORS' FEES:

      During the years ended December 31, 2000, 1999, and 1998 the Company paid
        $12,000, $13,000 and $12,500 to each of its two outside directors for
        their attendance at meetings held each year.

14.   BENEFIT PLANS:

      OFFICER RETIREMENT PLAN:

      As part of the Company president's total compensation package, the Company
        purchased a whole life insurance policy on April 1, 1992, in order to
        provide for the president's retirement. The Company pays an annual
        premium on behalf of the president and also reimburses the president
        each year for the personal income tax on this additional compensation.
        Should the president die prior to age sixty-five, the policy pays a
        $2,600,000 death benefit to his beneficiary. Upon retirement, provided
        the president is at least sixty-five, the cash surrender value and death
        benefit rider become the president's property. For each of the years in
        the three-year period ended December 31, 2000, the Company paid $105,414
        per year in premiums and $59,586 per year of additional compensation to
        the president for related income taxes.

      EMPLOYEE BENEFIT PLAN (FBMS):

      The Company's former subsidiary, FBMS, had a defined contribution
        retirement plan covering all full-time employees of FBMS who had three
        months of service and were at least twenty-one years of age. For the
        period ended December 31, 1999, FBMS's matching contribution equaled 50%
        of the portion of the participant's contribution which did not exceed 2%
        of the participant's compensation. FBMS incurred contribution expense of
        $21,200 for the period ended December 31, 1999.

                                      F-35
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


15.   FAIR VALUE OF FINANCIAL INSTRUMENTS:

      The fair value of a financial instrument is the current amount that would
        be exchanged between willing parties, other than in a forced
        liquidation. Fair value is best determined based upon quoted market
        prices. However, in many instances, there are no quoted market prices
        for the Company's various financial instruments. In cases where quoted
        market prices are not available, fair values are based on estimates
        using present value or other valuation techniques. Those techniques are
        significantly affected by the assumptions used, including the discount
        rate and estimates of future cash flows. Accordingly, the fair value
        estimates may not be realized in an immediate settlement of the
        instrument. SFAS No. 107 excludes certain financial instruments and all
        nonfinancial instruments from its disclosure requirements. Accordingly,
        the aggregate fair value amounts presented may not necessarily represent
        the underlying fair value of the Company.

      The following methods and assumptions were used by the Company in
        estimating fair value disclosures for financial instruments:

      MORTGAGE LOANS HELD FOR SALE:

      Through June 28, 2000, the fair value of mortgage loans held for sale was
        based on commitments on hand from investors or prevailing market prices.
        For variable-rate loans that re-price frequently and with no significant
        change in credit risk, fair values were based on carrying values. Fair
        values for certain mortgage loans were based on quoted market prices of
        similar loans sold (adjusted for differences in loan characteristics).
        Fair values for non-performing loans were estimated using discounted
        cash flow analyses or underlying collateral values, where applicable.
        The fair value of mortgage loans held for sale at December 31, 1999 was
        $14,923,000 (carrying value of $14,787,080).

      RECEIVABLES:

      The fair values of notes and advances receivable from non-related parties
        approximates their carrying values because of the short maturities of
        these instruments. The fair values of notes and advances receivable from
        related parties are not practicable to estimate, based upon the related
        party nature of the underlying transactions.

      WAREHOUSE AND OTHER NOTES AND ADVANCES PAYABLE:

      The fair values of warehouse notes payable and notes and advances payable
        to non-related parties approximates their carrying values because of the
        short maturities of the notes. The fair values of notes and advances
        payable to related parties are not practicable to estimate, based upon
        the related party nature of the underlying transactions.

      OTHER FINANCIAL INSTRUMENTS:

      The fair value of other financial instruments (cash and cash equivalents,
        accounts receivables, accounts payable and accrued expenses) approximate
        their carrying amounts because of the short maturities of these
        instruments.

16.   SUBSIDIARY STOCK TRANSACTIONS:

      During the year ended December 31, 1999, nMortgage issued 3,505,000 shares
        of Series A Preferred Stock for cash of $3,505,000 and issued 40,000
        shares of Series B Preferred stock in exchange for payables of $461,070.
        These preferred stock balances are presented as minority interest in the
        December 31, 1999, consolidated balance sheet. Also included in minority
        interest at December 31, 1999, is $2,507,000 of FBMS preferred stock.

                                      F-36
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


16.   SUBSIDIARY STOCK TRANSACTIONS (CONTINUED):

      During the first quarter of 2000, nMortgage issued an additional 1,627,000
        shares of Series A preferred stock for cash of $1,627,000. In November
        2000, all of the nMortgage Series A preferred stock was converted to
        nMortgage common stock. As a result of this transaction, minority
        interest was reduced by $5,132,000 and additional paid in capital was
        increased (Note 21).

      In December 2000, Meridian purchased 35,325 shares of Equitex common stock
        from an entity related through common ownership in exchange for Meridian
        preferred stock. As a result of this transaction, the Company recorded
        an increase in minority interest and in treasury stock of $170,000,
        which was the quoted market value of the Equitex common stock at the
        date of the transaction.

      In connection with the nMortgage preferred stock issuances in 2000, the
        Company issued warrants to purchase 100,000 shares of Equitex common
        stock at a weighted average exercise price of $5.50 per share. The
        warrants were valued at $183,000 utilizing the Black-Scholes option
        pricing method, and were accounted for as costs of the subsidiary stock
        issuance. These warrants expire in April 2004.

      In 1999, in connection with VP Sports' private placement of common stock,
        the Company's underlying equity in its investment in VP Sports increased
        by $1,622,605, which was accounted for as an increase to additional
        paid-in capital.

17.   SERIES G REDEEMABLE CONVERTIBLE PREFERRED STOCK:

      In September 2000, the Company issued 1,300 shares of 6%, Series G
        convertible preferred stock (the "Series G Preferred Stock") along with
        warrants to purchase 130,000 shares of common stock for $1,000 per
        share, which is the stated value per share (total proceeds of $1,300,000
        less issue costs of $60,000). The Series G Preferred Stock is
        convertible, together with any accrued but unpaid dividends, at any time
        into shares of the Company's common stock at a conversion price per
        share equal to the lesser of $6.50 or 65% of the average closing bid
        price of the Company's common stock as specified in the agreement. The
        warrants were valued at $242,000 utilizing the Black-Scholes option
        pricing model, and therefore $242,000 of the total proceeds was
        allocated to the warrants, resulting in an imputed interest rate of
        7.4%.

      Because the Series G Preferred Stock contained an immediate beneficial
        conversion feature, both additional paid-in capital and the accumulated
        deficit were increased by $700,000 in 2000, the amount of the discount
        resulting from the beneficial conversion feature. The holder of the
        Series G Preferred Stock is entitled to cumulative dividends at 6% per
        annum plus a 4% dividend default rate, payable quarterly commencing
        September 30, 2000. Dividends are payable in cash or, at the Company's
        option, in shares of the Company's common stock. Cumulative dividends at
        December 31, 2000 are $25,000. All outstanding shares of Series G
        Preferred Stock automatically convert into common stock on August 31,
        2003. The Series G Preferred Stock is redeemable at the Company's option
        at any time at a redemption price equal to $1,350 per share plus any
        accrued but unpaid dividends. Through December 31, 2000, the Company
        recorded a $478,000 accretion to the Series G Preferred Stock balance so
        that the carrying value of the Series G Preferred Stock will equal the
        redemption amount at the mandatory redemption date.

      The Company was required to redeem the Series G Preferred Stock if the
        Company's shareholders had not approved an increase in the number of
        shares of authorized common stock from 7,500,000 to 50,000,000 effective
        on or before March 4, 2001, or if a registration statement relating to
        the resale of certain shares of the Company's common stock underlying
        the Series G Preferred Stock and not been declared effective on or
        before 180 days of its filing. These events did not occur before March
        4, 2001. However, the Series G investor has agreed to extend the
        redemption date to May 15, 2001. Due to the terms and conditions of the
        Series G Preferred Stock, which may require mandatory redemption, the
        Series G Preferred Stock is not included in stockholders' equity at
        December 31, 2000.

                                      F-37
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


18.   STOCKHOLDERS' EQUITY:

      AUTHORIZED CAPITAL:

      The Company's authorized capital consists of, among other classes of
        securities, 7,500,000 common shares. As of December 31, 2000, there are
        7,140,293 common shares issued and 7,071,618 shares outstanding. In
        addition, the Company has outstanding certain classes of securities
        which are convertible into common shares which would, if converted,
        cause the Company to exceed its authorized common shares. This is
        prohibited by the laws of the State of Delaware and therefore, until the
        Company is able to convene a Special Meeting of the Shareholders
        pursuant to the proxy solicitation requirements of Section 14 of the
        Securities Exchange Act of 1934, and the laws of the State of Delaware,
        it cannot permit such conversions, which means the Company is or will be
        in default of certain terms and conditions of such instruments. The
        securities affected consist of the following at December 31, 2000:

                (1)    1,200 shares of Series D preferred shares convertible
                       into 414,629 common shares,
                (2)    300 shares of Series E preferred shares convertible
                       into 300,000 common shares,
                (3)    460 shares of Series F preferred shares convertible
                       into 525,715 common shares,
                (4)    1,300 shares of Series G preferred shares convertible
                       into 423,580 common shares,
                (5)    Warrants convertible into 670,000 common shares, and
                (6)    Options convertible into 1,786,400 common shares.

       The Company has filed preliminary proxy solicitation materials to
       convene a Special Meeting of Shareholders to among other things,
       increase its authorized shares in an amount sufficient to permit the
       conversion of its authorized and/or outstanding convertible
       securities.

      SERIES A, B, AND C CONVERTIBLE PREFERRED STOCK:

      In January and February 1999, the Company issued a total of 2,100 shares
        of 6%, Series A, B, and C convertible preferred stock for $1,000 cash
        per share, which was the stated value per share. Each series of
        preferred stock was convertible into common stock at any time by the
        holders at a conversion price equal to 65% of the average closing bid
        price of the Company's common stock as specified in the agreements.

      Because this preferred stock contained an immediate beneficial conversion
        feature, both additional paid-in capital and the accumulated deficit
        were increased by $1,333,098, the amount of the discount due to this
        beneficial conversion feature. The holders were entitled to receive a
        cumulative annual dividend of $60 per share, payable quarterly, and had
        preference to any other dividends which might have been paid by the
        Company. The dividend was payable either in cash or in shares of the
        Company's common stock, at the Company's option. The preferred
        stockholders also received warrants to purchase a total of 250,000
        shares of the Company's common stock at 120% of the market price as of
        the grant date. In addition, the placement agent was issued 20,000
        shares of the Company's common stock, valued at $200,000, in exchange
        for services in connection with the preferred stock sales.

      In April 1999, all 2,100 shares of the Series A, B and C convertible
        preferred stock, plus accrued dividends on those shares, were converted
        into 320,528 shares of the Company's common stock, at an average
        conversion price of $6.63 per share.

                                      F-38
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


18.   STOCKHOLDERS' EQUITY (CONTINUED):

      SERIES D CONVERTIBLE PREFERRED STOCK:

      In May 1999, the Company reached an agreement with an accredited investor
        to sell up to 3,500 shares of Series D, 6% convertible preferred stock
        (the "Series D Preferred Stock") for $1,000 cash per share, which is the
        stated value per share. In August 1999, the Company sold 1,200 shares of
        the Series D Preferred Stock for $1,200,000. The balance of $2,300,000
        for the remaining 2,300 shares of Series D Preferred Stock was held in
        escrow through September 2000, pending authorization by the Company's
        stockholders of a sufficient number of shares of the Company's common
        stock to cover those shares underlying the Series D Preferred Stock. In
        September 2000, under a mutual agreement with the investor the escrow
        proceeds were released to the investor and no additional Series D
        Preferred Stock was issued.

      The Series D Preferred Stock contains a liquidation preference equal to
        the sum of the stated value of each share plus an amount equal to 30% of
        the stated value plus the aggregate of all accrued and unpaid dividends
        on each share of Series D Preferred Stock until the most recent dividend
        payment date or date of liquidation, dissolution or winding up of the
        Company.

      The Series D Preferred Stock is convertible into common stock at any time
        at a conversion price per share of common stock equal to 65% of the
        average closing bid price of the Company's common stock as specified in
        the agreement. Because this preferred stock contained an immediate
        beneficial conversion feature, both additional paid-in capital and the
        accumulated deficit were increased by $1,884,615, the amount of discount
        resulting from the beneficial conversion feature. The holder is entitled
        to receive a cumulative annual dividend of $60 per share, payable
        quarterly, and has preference to any other dividends which might be paid
        by the Company. The dividend is payable either in cash or in shares of
        the Company's common stock, at the discretion of the Company. Cumulative
        dividends on the Series D Preferred Stock at December 31, 2000 is
        $97,000.

      SERIES E CONVERTIBLE PREFERRED STOCK AND RECEIVABLE FROM SERIES E
        PREFERRED STOCKHOLDER:

      In connection with the FBMS acquisition, the Company issued 250 shares of
        Series E Convertible Preferred Stock (the "Series E Preferred Stock")
        valued at approximately $2,531,000, and contingent consideration
        consisting of up to 750 shares of Series E Preferred Stock, as specified
        in the acquisition agreement. In conjunction with the agreement and FBMS
        rescission agreement, the Company agreed to issue an additional 50
        shares of Series E Preferred Stock to the owner relating to certain
        performance conditions pursuant to the FBMS acquisition that were
        satisfied prior to rescission. The 50 additional shares of Series E
        preferred stock are convertible into 50,000 shares of common stock and
        are valued at $368,750, which was based on the quoted market price of
        the underlying shares of common stock at the date of rescission, and
        which was recorded as expense by the Company.

      The holder of the Series E Preferred Stock is not entitled to dividends,
        does not have a liquidation preference and does not have voting rights.
        The Series E Preferred stock, is convertible into 250,000 shares of the
        Company's common stock upon the approval of an increase in the
        authorized shares of common stock from 7,500,000 shares to 50,000,000
        shares, or the subsequent merger of the Company with or into another
        company, or the sale of substantially all the Company's assets.

      In 2000, certain FBMS obligations totaling $553,645 most of which were
        guaranteed by the Company were paid on behalf of the Company by the
        Company's president or by the Company's subsidiary, nMortgage. The
        Company recorded a payable to the president as well as a receivable from
        the of the previous owner of FBMS, who is also the Series E Preferred
        Stockholder. Due to the uncertainty regarding the ultimate realization
        of the receivable, the balance is classified as a reduction to
        stockholders' equity at December 31, 2000.

                                      F-39
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


18.   STOCKHOLDERS' EQUITY (CONTINUED):

      SERIES F CONVERTIBLE PREFERRED STOCK:

      In connection with the Company's acquisition of Meridian in September
        2000, the Company issued a total of 460,000 shares of Series F
        convertible preferred stock (the "Series F Preferred Stock"), valued at
        $6.50 per share, which was the quoted market price of the Company's
        common stock on September 7, 2000 (the date the agreement was signed).
        The Series F Preferred Stock includes a stated value of $8.00 per share
        and contains a liquidation preference in the amount of 105% of the
        stated value. Series F Preferred Stockholders are entitled to dividends
        in the amount declared with respect to the Company's common stock. The
        Series F Preferred Stock may be converted into shares of the Company's
        common stock at any time following the date of issuance until forty-two
        months following the issue date, at a conversion price per share of
        common stock equal to $7.00 per share. Forty-two months after issue, the
        Series F Preferred Stock outstanding is subject to mandatory conversion
        into shares of the Company's common stock, utilizing the stated value
        per share.

      COMMON STOCK:

      During 1999, the Company sold 330,312 shares of common stock in a private
        placement for cash of $3.25 per share. In addition, a note holder
        exchanged a note and accrued interest totaling $158,236 for 48,688
        shares of the Company's common stock in the same private placement. In
        addition, employees and officers of the Company exercised options to
        purchase 665,600 shares of common stock for $2,094,546. An additional
        337,500 shares were issued pursuant to warrant exercises for $2,613,675.

      In March 1998, the Company's Board of Directors authorized a private
        placement offering of up to 500,000 shares of the Company's common stock
        at $1.16 per share. As of the private placement closing on May 21, 1998,
        499,200 shares had been sold. In June 1998, the Company's Board of
        Directors authorized an additional private placement of up to 750,000
        shares of the Company's common stock at $3.25 per share. All 750,000
        shares under this placement were sold during 1998 and 1999.

      During 1998, the Company sold to an officer of the Company, 10,000 shares
        of common stock at $1.16 per share. Another 139,200 shares were sold to
        outside directors at $1.16 per share. Common stock sales to unrelated
        individuals during 1998 were as follows:

                Share price                        Number sold
                -----------                        -----------
                $ .75                                  330,000
                $1.16                                  350,000
                $3.25                                  371,000

      OTHER EQUITY TRANSACTIONS:

      During the year ended December 31, 2000, an officer/shareholder of the
        Company sold marketable securities to Triumph for $10,000. The
        difference between the cost and market value of these securities at the
        date of the sale totaled $382,807 and was recorded as an increase to
        additional paid-in capital.

                                      F-40
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


18.   STOCKHOLDERS' EQUITY (CONTINUED):

      STOCK OPTIONS AND WARRANTS:

      In 1993, the Company adopted two stock option plans: the 1993 Stock option
        Plan (the "Option Plan") and the 1993 Stock Option Plan for Non-Employee
        Directors (the "Directors' Plan"). In January 1999, the Company's Board
        of Directors adopted an incentive stock option plan covering up to
        1,000,000 shares of the Company's common stock. During 1999, the Company
        granted incentive stock options for 29,000 shares and 8,000 shares to
        the Company's officers and employees, respectively. In addition,
        non-statutory stock options for 472,000 and 491,000 shares were granted
        to officers and directors, respectively. All options were granted at a
        price of $6.75 per share which represents the market value of the
        Company's common stock at the grant date.

      In April 2000, the Company's Board of Directors increased the incentive
        stock option plan to cover up to 1,700,000 shares of the Company's
        common stock. During 2000, the Company granted incentive stock options
        for 511,000 shares and 21,000 shares to the Company's officers and
        employees, respectively. In addition, non-statutory stock options for
        168,000 shares were granted to directors. All options were granted at a
        price of $5.50 per share which represents the market value of the
        Company's common stock at the grant date.

      In 2000, 1999 and 1998, the Board of Directors granted the following stock
        options to officers, directors and employees of the Company:

                                                       Number      Option
                 Option type         Grantee         of shares     price
                 -------------      ---------       -----------   --------

         2000:   Incentive          Officers            511,000   $   5.50
                 Incentive          Employees            21,000   $   5.50
                 Non-qualified      Directors           168,000   $   5.50
                                                    -----------
                                                        700,000
                                                    ===========

         1999:   Incentive          Officers             29,000   $   6.75
                 Incentive          Employees             8,000   $   6.75
                 Non-qualified      Officers            472,000   $   6.75
                 Non-qualified      Directors           491,000   $   6.75
                                                    -----------
                                                      1,000,000
                                                    ===========

         1998:   Incentive          Officer              62,000   $   3.19
                 Non-qualified      Officers            447,655   $   3.19
                 Non-qualified      Employees            28,800   $   3.19
                                                    -----------
                                                        538,455
                                                    ===========

                                      F-41
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


18.   STOCKHOLDERS' EQUITY (CONTINUED):

      STOCK OPTIONS AND WARRANTS (CONTINUED):

      A summary of the status of the Company's stock options outstanding and
        exercisable and weighted average exercise prices is as follows:

<TABLE>
<CAPTION>
                                1993 Plans              1999 Plan                  Total
                           --------------------- --------------------- -------------------
                                        Weighted              Weighted            Weighted
                                        average               average             average
                                        exercise              exercise            exercise
                             Shares      price     Shares      price     Shares    Price
                           ----------    -----   ----------    -----   ---------   -----

       <S>                 <C>           <C>     <C>           <C>     <C>         <C>
       January 1,1998         311,545     3.00                           311,545    3.00
        Granted               538,455     3.19                           538,455    3.19
        Exercised             (98,000)    3.05                           (98,000)   3.05
        Canceled/expired
                           ----------    -----   ----------    -----   ---------   -----

       December 31, 1998      752,000     3.13                           752,000    3.13
        Granted                                   1,000,000    $6.75   1,000,000    6.75
        Exercised            (665,600)    3.10                          (665,600)   3.10
        Canceled/expired
                           ----------    -----   ----------    -----   ---------   -----

       December 31, 1999       86,400     3.19    1,000,000    6.75    1,086,400    6.46
        Granted                                     700,000    5.50      700,000    5.50
        Exercised
        Canceled/expired
                           ----------    -----   ----------    -----   ---------   -----

       December 31, 2000       86,400    $3.19    1,700,000    $6.24   1,786,400   $6.08
                           ==========    =====   ==========    =====   =========   =====
</TABLE>

      Options exercisable at December 31, 2000 expire from 2004 through 2005.
        Had compensation cost for the Company's stock-based compensation plans
        been determined based on the fair value at the grant dates consistent
        with the provisions of SFAS No. 123, the Company's net loss and net loss
        per common share would have increased to the pro forma amounts indicated
        below:

<TABLE>
<CAPTION>
                                                           2000              1999             1998
                                                       -------------     ------------     -----------
           <S>                                         <C>               <C>              <C>
           Net loss applicable to common stockholders
             (decrease in net assets), as reported     $(13,749,401)     $(10,985,572)    $(1,981,299)
           Net loss applicable to common stockholders
             (decrease in net assets), pro forma       $(15,751,000)     $(14,417,000)    $(2,724,000)
           Net loss (decrease in net assets) per
             share, as reported                        $      (1.93)     $     (1.64)     $     (.45)
           Net loss (decrease in net assets) per
             share, pro forma                          $      (2.21)     $     (2.15)     $     (.62)
</TABLE>

      The fair value of each option granted during 2000, 1999, and 1998 was
        estimated on the date of grant using the Black-Scholes option-pricing
        model. The following assumptions were utilized:

                                               2000        1999        1998
                                              -------     -------     -------

             Expected dividend yield             0           0           0
             Expected stock price volatility    56%         71%         83%
             Risk-free interest rate           5.1%         6%         6.5%
             Expected life of options         3 years     3 years     5 years

                                      F-42
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


18.   STOCKHOLDERS' EQUITY (CONTINUED):

      STOCK OPTIONS AND WARRANTS (CONTINUED):

      In 2000, the Company issued warrants and options to purchase up to 135,000
        shares of the Company's common stock to outside consultants. The
        warrants and options are exercisable immediately at exercise prices of
        between $5.50 and $6.36 per share. The Company valued these warrants and
        options, which expire through April 2004, at $272,000 utilizing the
        Black-Scholes option pricing model. This amount has been recorded as
        expense in 2000.

      In connection with the Company's private placements of common and
        preferred stock in 1999, the Company issued warrants to purchase 397,500
        shares of the Company's common stock at a weighted average exercise
        price of $7.99 per share. During 1999, 337,500 of these warrants were
        exercised. The remaining 60,000 warrants outstanding at December 31,
        2000 expire in February 2002. In 1999, an additional warrant to purchase
        50,000 shares of the Company's common stock at $3.75 per share was
        granted to an unrelated entity for services valued at $150,000.

19.   OPERATING SEGMENTS:

      In 1999, the Company adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF
        AN ENTERPRISE AND RELATED INFORMATION, which establishes reporting and
        disclosure standards for an enterprise's operating segments. Operating
        segments are defined as components of an enterprise for which separate
        financial information is available and regularly reviewed by the
        Company's senior management.

      Beginning in 1999, in connection with the Company's acquisitions, the
        Company has three reportable segments: the accounting policies of the
        segments are the same as those described in the summary of significant
        accounting policies. The Company evaluates performance based on
        operating earnings of the respective business units. As of and during
        the years ended December 31, 2000 and 1999, the segment results were as
        follows:

<TABLE>
<CAPTION>
           2000
           ----
                                                         Sporting goods/     Corporate activities
                                             Financial       product      --------------------------
                                             services        related      Investments       Other          Total
                                            -----------    -----------    -----------    -----------    -----------
           <S>                              <C>            <C>            <C>            <C>            <C>
           Revenues                         $ 2,487,922    $   376,394                   $     4,975    $ 2,869,291
           Segment loss                      (9,426,786)    (1,352,170)   $   (17,164)   $(1,703,281)   (12,499,401)
           Total assets                       2,953,885        908,811      1,470,687      4,098,244      9,431,627
           Capital expenditures               2,512,014         11,266                       876,230      3,399,510
           Depreciation and  amortization     1,460,184        161,373                       165,663      1,787,220
           Impairment losses                    353,000        454,250                                      807,250
           Loss on FBMS rescission            3,979,000                                                   3,979,000

           1999
           ----
                                                         Sporting goods/     Corporate activities
                                             Financial       product      --------------------------
                                             services        related      Investments       Other          Total
                                            -----------    -----------    -----------    -----------    -----------
           Revenues                         $ 1,547,754    $   738,456                   $    53,965    $ 2,340,175
           Segment loss                      (3,945,667)      (800,997)   $  (571,257)    (2,398,638)    (7,716,559)
           Total assets                      35,998,614      1,211,539      2,915,435      1,619,349     41,744,937
           Capital expenditures                 135,329        122,335                        20,361        278,025
           Depreciation and  amortization       737,629         87,954                        12,776        838,359
</TABLE>

                                      F-43
<PAGE>
                  EQUITEX, INC. AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

           YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


20.   SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):

      Selected unaudited quarterly financial data for the year ended 2000 is
        summarized below:

<TABLE>
<CAPTION>
                                                                        2000 Quarters Ended
                                                       -------------------------------------------------------
                                                          First         Second        Third        Fourth
                                                         Quarter       Quarter       Quarter     Quarter (b)
                                                       -------------------------------------------------------
        <S>                                             <C>           <C>           <C>           <C>
        Revenues                                        $ 1,457,293   $   321,427   $   197,413   $   893,158
        Loss from operations (a)                         (1,850,592)   (5,756,864)   (1,072,209)   (3,393,223)
        Net loss                                         (1,909,215)   (6,974,844)   (1,496,448)   (2,118,894)
        Net loss applicable to
         common shareholders                             (1,926,915)   (6,993,044)   (2,219,948)   (2,609,494)
        Basic income (loss) per common share                  (0.27)        (0.98)        (0.31)        (0.37)
</TABLE>

        (a)In June 2000, the Company entered into a rescission agreement with
            FBMS, and as a result, recorded a loss of $3,979,000 in the second
            quarter of 2000. The operating results of FBMS have been included in
            the consolidated financial statements from the date of acquisition
            through the date of rescission.

        (b)In the fourth quarter of 2000, the Company recorded impairment
            charges of $807,250.


21.   RESTATEMENT OF 2000 CONSOLIDATED FINANCIAL STATEMENTS:

      Subsequent to the original issuance of the Company's December 31, 2000
        consolidated financial statements, and based upon a further evaluation
        of the factors utilized in determining the accounting for the reduction
        of minority interest attributable to nMortgage Series A preferred
        shareholders, the Company determined that the reduction in minority
        interest of $5,132,000 should represent an increase to additional
        paid-in capital instead of as an unusual gain as originally reported.
        The Company's 2000 consolidated financial statements have been restated
        to increase its net loss by $5,132,000 ($.72 per share) and increase
        capital in excess of par value by an equal amount.



                                      F-44
<PAGE>

                                  EQUITEX, INC.
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                                   SCHEDULE II


<TABLE>
<CAPTION>
                               Column A     Column B       Column C         Column D       Column E

                                                           Charged
                                Balance      Charged       to other                         Balance
                               beginning    to costs/      accounts-                        at end
                               of period    expenses       describe        Deductions      of period
                              -----------   --------    ---------------    -----------    -------------
For the year ended
December 31, 2000:
<S>                           <C>           <C>         <C>                <C>            <C>
Allowance for
 uncollectible accounts:
   Mortgage loans held
       for sale               $ 1,386,000          -    $(1,386,000)(a)              -              -
   Mortgage loans
      receivable                   57,500          -        (57,500)(a)                             -
   Notes receivable                56,575          -                  -    $   (56,575)             -
   Interest receivable                 65          -                  -            (65)             -
   Accounts receivable             48,596          -                  -         (8,333)     $    40,263

For the year ended
December 31, 1999:

Allowance for
 uncollectible accounts:
   Mortgage loans held
       for sale               $ 1,386,000          -                 -               -      $ 1,386,000
   Mortgage loans
      receivable                   57,500          -                 -               -           57,500
   Notes receivable                   100   $ 45,601    $    10,874(b)               -           56,575
   Interest receivable              1,830          -                 -     $    (1,765)              65
   Accounts receivable             57,705          -                 -          (9,109)          48,596

For the year ended
December 31, 1998:

Allowance for uncollectible
 accounts:
   Notes receivable           $    40,293          -                 -         (40,193)             100
   Interest receivable                 35   $  1,795                 -               -            1,830
   Accounts receivable             53,742      3,936                 -               -           57,705

</TABLE>

(a)     Amount was returned to the previous owner of FBMS under the terms of the
        rescission agreement.

(b)     Amount was reclassified between the allowance for uncollectible interest
        and accounts receivable.

                                      S-1
<PAGE>

                                  EQUITEX, INC.
                        UNAUDITED PRO FORMA CONSOLIDATED
                              FINANCIAL INFORMATION

The following unaudited pro forma consolidated statement of operations presents
the pro forma consolidated operations of Equitex, Inc. for the year ended
December 31, 1998. Because the Company withdrew its election to be a BDC on
January 4, 1999, this unaudited pro forma information reflects the 1998
financial information as if the Company was an operating company rather than a
BDC for all of 1998. As a result of being an operating company, the 1998 pro
forma unaudited financial information is presented on a consolidated basis and
includes the accounts of Equitex, Inc., its wholly-owned subsidiary First
Teleservices Corporation, which was acquired in August 1998 and two
majority-owned subsidiaries, VP Sports, Inc. and Triumph Sports, Inc., which
were formed in December 1997 and January 1998, respectively. Pro forma
adjustments were made for revaluing certain investments from fair market value
to cost, consolidating three entities versus carrying them as investments at
fair value, eliminating all intercompany receivables, payables, income and
expense, and recording gains and losses on trading securities.

                                  EQUITEX, INC.
                   PRO FORMA CONDENSED STATEMENT OF OPERATIONS
                    YEAR ENDED DECEMBER 31, 1998 (UNAUDITED)
                            (As if operating company)


      Sales, consulting and other fees                        $    574,425
      Interest and dividend income                                   7,052
      Gain (loss) on trading securities                            105,367
                                                              ------------
                                                                   686,844
                                                              ------------
      Cost of goods sold                                           201,898
      Advertising and promotion                                     54,088
      Interest                                                     112,040
      Bad debt expense                                             (34,435)
      Depreciation and amortization                                 37,512
      General and administrative                                 3,178,710
                                                              ------------

                                                                 3,549,813
                                                              ------------
      Loss before minority interest and taxes                   (2,862,969)
      Minority interest in income (loss)                            34,571
                                                              ------------

      Loss before income taxes                                  (2,828,398)
      Provision for income taxes - deferred                        (63,180)
                                                              ------------

      Net loss                                                  (2,891,578)

      Other comprehensive income, net of tax
         Unrealized holding gains on securities arising
          during period                                             2,732
                                                              ------------

      Comprehensive loss                                      $ (2,888,846)
                                                              ============

      Basic and diluted net loss per common share             $      (.65)
                                                              ============

      Weighted average number of common shares outstanding       4,416,988
                                                              ============