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

                                   FORM 10-KSB
================================================================================
       /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, 1998

       / /      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)

--------------------------------------------------------------------------------
Check  whether the Issuer (1) 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 / /

Check 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/

Issuer's revenues for its most recent fiscal year:  $447,840

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant  was  $86,676,429  based on the last sale  price of the  Registrant's
common  stock on April 9, 1999,  ($17.875  per share) as  reported by the Nasdaq
Stock Market.

The issuer had 6,028,715 shares of common stock outstanding as of April 9, 1999.

Documents incorporated by reference: NONE

Transitional Small Business Disclosure Format:  Yes / /  No /X/

<PAGE>

                                  EQUITEX, INC.
                                   FORM 10-KSB

THIS REPORT MAY CONTAIN  CERTAIN  "FORWARD-LOOKING"  STATEMENTS  AS SUCH TERM IS
DEFINED  IN THE  PRIVATE  SECURITIES  LITIGATION  REFORM  ACT OF  1995 OR BY THE
SECURITIES AND EXCHANGE COMMISSION IN ITS RULES, REGULATIONS AND RELEASES, WHICH
REPRESENT THE  REGISTRANT'S  EXPECTATIONS OR BELIEFS,  INCLUDING BUT NOT LIMITED
TO, STATEMENTS  CONCERNING THE REGISTRANT'S  OPERATIONS,  ECONOMIC  PERFORMANCE,
FINANCIAL CONDITION, GROWTH AND ACQUISITION STRATEGIES,  INVESTMENTS, AND FUTURE
OPERATIONAL  PLANS. FOR THIS PURPOSE,  ANY STATEMENTS  CONTAINED HEREIN THAT ARE
NOT  STATEMENTS  OF  HISTORICAL  FACT  MAY  BE  DEEMED  TO  BE   FORWARD-LOOKING
STATEMENTS.  WITHOUT  LIMITING THE  GENERALITY OF THE  FOREGOING,  WORDS SUCH AS
"MAY", "WILL", "EXPECT", "BELIEVE", "ANTICIPATE", "INTENT", "COULD", "ESTIMATE",
"MIGHT", OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATIONS THEREOF OR COMPARABLE
TERMINOLOGY  ARE  INTENDED  TO  IDENTIFY   FORWARD-LOOKING   STATEMENTS.   THESE
STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES,  CERTAIN
OF WHICH ARE BEYOND THE  REGISTRANT'S  CONTROL,  AND ACTUAL  RESULTS  MAY DIFFER
MATERIALLY  DEPENDING ON A VARIETY OF IMPORTANT FACTORS,  INCLUDING  UNCERTAINTY
RELATED TO  ACQUISITIONS,  GOVERNMENTAL  REGULATION,  MANAGING  AND  MAINTAINING
GROWTH,  THE  VALUE  OF THE  REGISTRANT'S  INVESTMENTS,  THE  OPERATIONS  OF THE
REGISTRANT'S INVESTEE COMPANIES, VOLATILITY OF STOCK PRICE AND ANY OTHER FACTORS
DISCUSSED IN THIS AND OTHER REGISTRANT  FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION.
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

(a) Business Development

     (1) The Registrant was organized under the laws of the State of Delaware in
1983 and elected to become a business  development company and be subject to the
applicable  provisions of the Investment  Company Act in 1984.  Until January 4,
1999,  Equitex,  Inc.  (the  "Registrant")  was a business  development  company
("BDC") which is a form of closed-end,  non-diversified investment company under
the Investment  Company Act of 1940 (the  "Investment  Company Act"). A business
development   company  generally  must  maintain  70%  of  its  assets  in  new,
financially  troubled  or  otherwise  qualified  companies,  known  as  investee
companies,  and offers  significant  managerial  assistance  to such  companies.
Business development  companies are not subject to the full extent of regulation
under the  Investment  Company Act.  (See Item 1 (b) (8)  "Regulation - Business
Development  Companies"  below).  The  Registrant  primarily  was engaged in the
business of investing  in and  providing  managerial  assistance  to  developing
companies which, in its opinion,  would have a significant potential for growth.
The  Registrant's   investment   objective  was  to  achieve  long-term  capital
appreciation,  rather than current  income,  on its  investments.  On January 4,
1999, the Registrant withdrew its election to be treated as a BDC subject to the
Investment  Company  Act.  The  Company  has elected to be treated for a maximum
period of one year as a "transient  investment  company" as that term is defined
in Rule 3a-2 under the Investment Company Act of 1940.

     On  December  12,  1996,  the  Registrant  announced  that it  intended  to
implement a  withdrawal  of its election as a BDC under the  Investment  Company
Act. The  Registrant  prepared a detailed  plan which  addressed  the  corporate
governance  issues  and  process  which  must be  followed  for  decertification
including the legal,  accounting,  securities  listing and other effects of such
withdrawal  on  the  Registrant.  At a  meeting  held  on  April  3,  1998,  the
Registrant's  stockholders authorized the Registrant to change the nature of its
business and withdraw  its election as a BDC under the  Investment  Company Act.

                                      -1-
<PAGE>

The  withdrawal  would become  effective  only upon the  Securities and Exchange
Commission's receipt of the Registrant's notice of election of withdrawal within
a period of one year from the date of vote. On January 4, 1999,  the  Registrant
filed its  withdrawal and elected to be treated for a maximum period of one year
as a "transient investment company" as that term is defined under the Investment
Company Act.  Following the  withdrawal,  the Registrant is no longer subject to
the  regulatory  provisions  of the  Investment  Company  Act for BDCs,  such as
insurance,  custody,  composition  of the  board,  affiliated  transactions  and
compensation  arrangements.  Despite the Registrant's withdrawal of its election
as a BDC, the Registrant  continues to be subject to the reporting  requirements
of the Securities  Exchange Act of 1934, as amended (the "Exchange Act").  Under
the Exchange  Act, the  Registrant  continues to file  periodic  reports on Form
10-KSB and Form 10-QSB,  as well as reports on Form 8-K and proxy statements and
any other reports required under the Exchange Act.

     The  Registrant's  Board of  Directors  adopted  a plan  which  began  with
stockholder approval for the Registrant to withdraw as a BDC, with the intent of
becoming an operating company.  On August 13, 1998, the Registrant  acquired all
of the  outstanding  stock of First  TeleServices  Corp. in exchange for 625,000
shares of the  Registrant=s  common stock. As a result of the  transaction,  FTC
became a wholly owned  subsidiary of the Company.  FTC is a fee-based  financial
services  organization  consisting of a database  marketing  division,  consumer
finance division, an inbound/outbound  calling center, and an operations center.
FTC has developed strategic alliances with a number of nationwide  organizations
to outsource the products and services it offers.

     In the  fourth  quarter  of  1998,  the  Registrant  acquired  9.9%  of the
outstanding common stock of First TeleBanc Corp. ("FTB"), a bank holding company
which operates  through its wholly owned  subsidiary,  Boca Raton First National
Bank, in Boca Raton,  Florida. FTB intends to focus as a `direct to the consumer
bank' on a  national  level.  It will  use the  Internet,  including  electronic
payment  processing,  to  facilitate  e-commerce  transactions,  and call center
technology to deliver its products and services to its customers 24 hours a day,
7 days a week.  On April 9, 1999,  the  Registrant  signed a letter of intent to
merge FTB with and into the Registrant. Consummation of the merger is subject to
certain conditions and adjustments.

     As an  operating  company,  the nature of the  Registrant's  business  will
change  from  investing  in a  portfolio  of  securities  to  achieve  gains  on
appreciation and dividend income, to becoming actively engaged in the management
of a business or businesses for the generation of income from those  operations.
Thus,  withdrawal  of  the  Registrant's  election  as a BDC  will  result  in a
significant  change  in the  Registrant's  method of  accounting  from the value
method of accounting  required of  investment  companies to either fair value or
historical cost accounting,  depending on the  classification  of the investment
and the  Registrant's  intent with  respect to the period it intends to hold the
investment.

     Over the past  several  years as a BDC,  the  Registrant  concentrated  its
efforts in acquiring interests in more mature investee companies, in some cases,
through  asset-based  financing  transactions.  In that regard,  the  Registrant
devoted more of its time to providing managerial  assistance to fewer companies,
most of which time over the past  several  years was  devoted to  investees  RDM
Sports Group, Inc. and IntraNet Solutions, Inc., which constituted a significant
portion  of  the  Registrant's  investment  portfolio.   The  President  of  the
Registrant  was  President  and a director of RDM Sports Group from 1987 to June
1997 and was director of IntraNet  Solutions and its  predecessor  from February
1991 to October 1997.

     During the fourth quarter of 1997, the Registrant received 2,000,000 shares
of common stock of VP Sports,  Inc. ("VP Sports") in payment for the transfer of
a letter of intent for the acquisition of an unrelated  company  involved in the
sporting  goods  business as well as merger and  acquisition  advisory  services
rendered  to VP  Sports.  The total  value for the  transfer  and  services  was
$250,000 which  represents the  Registrant's  cost basis for the shares.  During

                                       -2-
<PAGE>

1998,  VP Sports  executed  a letter of intent  for the  acquisition  of a North
American  manufacturing  company.  No  definitive  agreement has been reached to
date,  however,  VP has received a financing  commitment for asset based lending
and is completing with that lender a final due diligence review.  While there is
no  assurance  the  acquisition  will be  completed,  VP  anticipates  signing a
definitive agreement during the first half of 1999.

     During 1998, the Registrant  received  1,500,000 shares of the common stock
of Triumph  Sports,  Inc.  ("Triumph")  in  payment  of merger  and  acquisition
advisory services totaling  $375,000.  During 1997,  Triumph was unsuccessful in
its  attempt to acquire a golf  accessory  manufacturer.  During  1998,  Triumph
acquired and currently  operates four health food,  nutritional  and  supplement
related retail  outlets in the South Florida area.  Triumph became an authorized
franchisee of General  Nutrition  Centers  ("GNC") which stores  comprise two of
those  operated.  As of the date of this report,  Triumph is negotiating for the
purchase of an additional GNC location,  the success of which acquisition cannot
be assured.

     In November  1997,  the  Registrant was notified by the Nasdaq Stock Market
that the  Registrant  failed to meet the minimum  maintenance  requirements  for
continued   listing  on  the  Nasdaq  National  Market.  As  a  result  of  this
notification  and  subsequent  review  by Nasdaq of  materials  provided  by the
Registrant, on February 19, 1998 a hearing was held to consider the Registrant's
plan  for  continued   compliance  with  the  maintenance   requirements  and  a
determination  was made to move trading of the Registrant's  common stock to the
Nasdaq SmallCap Market effective March 13, 1998. The  Registrant's  common stock
continues to trade on the Nasdaq Stock Market  SmallCap  Market under the symbol
EQTX.

     (a)(2)(3)  During the year ended  December 31, 1998, the Registrant has not
been involved in any bankruptcy,  receivership or similar  proceedings;  has not
undergone material reclassification,  merger or consolidation;  has not acquired
or disposed of any  material  amount of assets  otherwise  than in the  ordinary
course of business;  and has not  experienced any material change in its mode of
conducting  business.  However,  on  January  4, 1999,  the  Registrant  filed a
withdrawal  of its  election  as a  business  development  company  to become an
operating   company.   [See  Item  1(a)(1)  above  for  an  explanation  of  the
Registrant's withdrawal on January 4, 1999 of its election as a BDC]

(b) Business of Issuer

     (1)(2)(3)(4) As a result of the Registrant's  decertification as a business
development  company,  the  Registrant is now a holding  company which  operates
through its wholly owned subsidiary,  FTC. FTC is a fee-based financial services
organization  consisting  of a database  marketing  division,  consumer  finance
division, an inbound/outbound  calling center, and an operations center. FTC has
developed  strategic  alliances  with a number of  nationwide  organizations  to
outsource the products and services it offers.

     FTC only recently began operations and has not yet generated  income.  As a
marketing arm for financial institutions, FTC will perform as a consumer finance
company,  offering a broad  array of  financial  products  and  services  to the
sub-prime  market.  These  products  will  be  developed  and  serviced  through
correspondent  relationships  with companies  specializing  in those  particular
products which include:

         *        debt transfer servicing
         *        balance transfer servicing
         *        secured credit cards
         *        sub-prime mortgage loans
         *        sub-prime auto loans
         *        prepaid calling cards
         *        prepaid residential long distance service
         *        prepaid cellular service
         *        insurance products
         *        other selected products and services

                                      -3-
<PAGE>

     The calling center is the engine that drives the product  delivery  system;
eventually handling tens of thousands of inbound and outbound calls monthly. The
inbound  calls will be the result of various  targeted  media  programs  and the
by-product of FTC's customer  base,  which is anticipated to grow to hundreds of
thousands of consumers.  The outbound  calls will be the result of cross selling
large data bases of customers a variety of products  and  services  offered on a
brokered basis through the Registrant's strategic alliances. Through interactive
voice response technology,  the latest call center software and hardware,  and a
well-trained  staff  of  customer  service  representatives,  telemarketers  and
telebankers,  FTC will be able to turn these calls into revenue while  operating
at the  highest  level  of  efficiency.  The call  center  functions  have  been
outsourced to The  Scribers,  Inc. in Lansing,  Michigan,  an  experienced  call
center services company.

     Initially,  FTC will  offer  secured  credit  cards to large  data bases of
customers through its debt transfer servicing program. ADebt transfer servicing@
is a term used in the  collection  industry which means using a new loan account
number to service  and  collect  debt  purchased  in the  secondary  market.  As
customers   continue   to  make   payments  on  their  new   accounts,   thereby
rehabilitating  their  credit,  the  Registrant  will begin cross  selling other
financial  and  telecommunications  products on a fee basis  without the risk of
extending  credit. A debt transfer  servicing  agreement has already been signed
with a Midwest  financial  services  firm that has a large network of collection
agencies. In addition,  FTC recently entered into a joint venture agreement with
a  southeastern  financial  services  company  which has acquired a portfolio of
13,000 accounts representing receivables in excess of $100 million.

     FTC believes that it differs from other financial services organizations in
that it understands and will  specialize in handling the sub-prime  consumer and
offer that consumer only those  products and services they need.  The Registrant
will target those  financial  institutions  which recognize the potential in the
sub-prime market and have relationships with strategic alliances already working
with this market.

     (5) The Registrant does not require raw materials.

     (6) The Registrant's  business is dependent upon the alliance  partnerships
it maintains  with other  organizations  for referral of debt  portfolios  which
generate  new  customers.   Because  the  Registrant=s  business  is  ultimately
dependent  upon the quantity  and quality of these  alliance  partnerships,  the
Registrant  must  actively  seek  out new  partnerships  while  maintaining  and
evaluating its current relationships.  If any of these alliance partners fail to
deliver quality products or services on a timely basis, and if the Registrant is
unable to develop alternative sources as required, dissatisfied clients may turn
to other  sources to provide  the  products or  services  they desire  which may
adversely affect the Registrant's business.

     (7) The Registrant  holds no patents or trademarks,  and has no interest in
any franchises, concessions, royalty agreements or labor contracts.

     (8)(9) The Registrant is not subject to any  governmental  approval for its
products  and  services.  Because the  Registrant  is  dependent  upon  alliance
partnerships,  the  Company  can provide no  assurance  that future  regulatory,
judicial,  legislative or political considerations will permit these partners to
offer their  products and  services,  that  regulators or third parties will not
raise material issues regarding the compliance of these partners with applicable
laws  or  regulations,  or  that  these  regulatory,  judicial,  legislative  or
political  decisions  will not have an  adverse  effect on the  ability of these
alliance partners to provide the products and/or services.

     (10) The Registrant has incurred no research and development  costs in each
of the last two fiscal years and does not  anticipate any such  expenditures  in
the near future.

     (11)  The  Registrant  is  not  subject  to any  federal,  state  or  local
provisions  which have been  enacted  or adopted  regulating  the  discharge  of
materials into the  environment  or otherwise  relating to the protection of the
environment.

                                      -4-
<PAGE>

     (12)The Registrant currently employs four persons all of whom are full-time
employees. In addition, FTC employs two full-time employees.


ITEM 2. DESCRIPTION OF PROPERTY.

(a) Description of Principal Plants and other Property

     The Registrant's  principal office is located at 7315 East Peakview Avenue,
Englewood,  Colorado  80111.  The  Registrant  leases this space,  consisting of
approximately  1,800 square feet,  for $2,500 per month,  from a partnership  in
which the Registrant's  president is the partner.  The Registrant believes these
terms  to be no less  favorable  than  those  which  could  be  obtained  from a
non-affiliated  party for similar  facilities in the same area.  The  Registrant
also  leases at the market  rate for such  facilities  in the area an  executive
office in Palm Beach  Gardens,  Florida where it shares  secretarial  and office
facilities with several other lessees.

(b) Investment Policies

     The  Registrant  currently  does not  invest in real  estate,  real  estate
mortgages,  or  securities  of  persons  who  primarily  engage  in real  estate
activities.  Although the  Registrant  does not currently  make  investments  as
described  above, and currently has no intention to make such investments in the
near future,  it is limited in making such investments only as described in Item
1.(b)  "Regulation - Business  Development  Companies".  (c) Description of Real
Estate and Operating Data

     The Registrant does not own real property,  the book value of which amounts
to ten percent or more of the total assets of the Registrant.

ITEM 3. LEGAL PROCEEDINGS.

     The Registrant is a plaintiff in a declaratory  judgement action,  EQUITEX,
INC. AND HENRY FONG V. BERTRAND T. UNGAR,  Case No. 98 CV 2437 (District  Court,
Arapahoe  County,  Colorado),   commenced  in  July  1998,  asserting  that  the
Registrant has no obligation to Mr. Ungar for indemnification and defense claims
which  Ungar  had  previously  asserted  against  the  Registrant.  Ungar  filed
counter-claims  which  alleged  that while  acting as an attorney  and  business
advisor for Equitex, he had incurred tort liabilities to third parties, and that
Registrant,  as his client,  owed him a fiduciary duty and other alleged duties,
and  therefore  should  indemnify  and reimburse him for his losses and costs of
defense in the actions  with third  parties,  an amount  allegedly  in excess of
$1,000,000. The Registrant is vigorously pursuing its claims and will defend the
counterclaims.

     The registrant is a defendant in the cases of  THEOHAROUS,  ET AL. V. HENRY
FONG,  EQUITEX,  INC.,  CHARLES E. SANDERS AND METROMEDIA  INTERNATIONAL  GROUP,
INC.,  Civil  Action No.  1-98-CV-2366  (U.S.  District  Court for the  Northern
District of Georgia),  and LESLIE SCHUETTE, ET AL. V. HENRY FONG, EQUITEX, INC.,
CHARLES E. SANDERS AND METROMEDIA  INTERNATIONAL  GROUP,  INC., Civil Action No.
1-98-CV-2366 (U.S.  District Court for the Northern District of Georgia).  These
alleged  class  actions on behalf of a purported  class of  stockholders  of RDM
Sports Group,  Inc. ("RDM") were filed on August 19, 1998, and October 19, 1998,
respectively.  Both cases  assert  that  during  1996 and 1997,  the  defendants
(including the Registrant)  made numerous  allegedly false statements and overly
optimistic  predictions regarding the business and financial condition of RDM in
the press releases and public filings of RDM, with knowledge of their falsehood,
thereby misleading RDM stockholders.  The complaints allege that the defendants,
(including the Registrant)  violated  Section 10 (b) of the Securities  Exchange
Act and SEC Rule 10b-5, and that the individual  defendants  violated Section 20
(a) of the  Exchange  Act, and seek  unspecified  compensatory  damages,  costs,
expenses and  attorney  fees.  Registrant  did not prepare or review the alleged
false statements or predictions. Registrant was not a controlling stockholder of
RDM after December 1994, when Metromedia  International Group, Inc. acquired 40%
of  RDM's  common  stock,  while  the  Registrant  held  just  over 10% of RDM"s
outstanding stock. The Registrant intends to seek dismissal of both cases and to
vigorously defend these actions.
     
                                      -5-
<PAGE>

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

     On  December  4,  1998,  the  Registrant  held  an  Annual  Meeting  of its
Stockholders.  The  stockholders  re-elected  each  of  the  Registrant's  three
directors to serve until the next Annual Meeting of  Stockholders  and the votes
were cast as follows:
                                        For                 Withhold Authority
                                        ---                 ------------------
  Henry Fong                         3,457,146                    67,056
  Russell L. Casement                3,461,444                    62,758
  Aaron Grunfeld                     3,461,444                    62,758

     Additionally,  the following two proposals were presented and voted upon at
the meeting and the votes were cast as follows:

     To ratify the  appointment of Davis & Co.,  CPA's,  P.C. as the independent
auditor of the Registrant for the year ending December 31, 1998.

                        For            Against        Abstain        Non-Voted
                        ---            -------        -------        ---------
  Shares voted       3,446,317         53,260          4,625            -0-

     To approve the issuance of warrants,  options or other  securities that may
be changed into common stock of the Company.

                        For            Against        Abstain        Non-Voted
                        ---            -------        -------        ---------
  Shares voted       2,128,266        1,001,925        18,255         375,756


                                     PART II

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

(a)      Market Information

     The principal  market in which the  Registrant's  Common Stock is traded is
the over-the-counter market.

     The  Registrant's  Common Stock trades on the Nasdaq Stock Market under the
symbol EQTX.  The table below states the quarterly high and low last sale prices
for the  Registrant's  Common Stock as reported by The Nasdaq Stock Market,  and
represent actual high and low last sale prices.

                                                     Last Sale
         Quarter ended                       High                  Low
         ----------------------------------------------------------------
         1997
         ----
         March 31, 1997                      $3.00                 $1.88
         June 30, 1997                       $2.13                 $1.50
         September 30, 1997                  $1.88                 $0.69
         December 31, 1997                   $1.56                 $0.69

         1998
         March 31, 1998                      $3.57                 $0.81
         June 30, 1998                       $5.31                 $3.00
         September 30, 1998                  $7.13                 $4.50
         December 31, 1998                   $7.50                 $6.50

                                      -6-
<PAGE>

(b) Holders

     The number of record holders of the  Registrant's  Common Stock as of April
9, 1999, was 2,460 according to the  Registrant's  transfer  agent.  This figure
excludes  an  indeterminate  number of  shareholders  whose  shares  are held in
"street" or "nominee" name.

(c) Dividends

     The Registrant has not declared or paid cash dividends on its Common Stock,
nor does it anticipate paying any cash dividends in the foreseeable  future. The
Registrant  currently  intends to retain any future  earnings to fund operations
and for the continued  development of its business.  While a BDC, the Registrant
made  an  in-kind  distribution  of  its  larger  investment  positions  to  its
stockholders.  Any further in-kind  distribution  will be made only when, in the
judgment of the Registrant's  Board of Directors,  it is in the best interest of
the  Registrant's  stockholders to do so. It is possible that the Registrant may
make an in-kind distribution of securities which have appreciated or depreciated
from the  time of  purchase  depending  upon the  particular  distribution.  The
Registrant  has  not  established  a  policy  as to the  frequency  or  size  of
distributions and indeed there can be no assurance that any future distributions
will be made. To date, only one such distribution has been approved by the Board
of Directors and was distributed in April 1988.

(d) Recent Sales of Unregistered Securities

     On November 20, 1997, the Registrant  commenced a private  placement  under
which  600,000  shares of its Common  Stock  were sold to a group of  accredited
investors for $0.75 per share.  No  underwriting  discounts or commissions  were
paid.  The Company  relied upon Section 4(2) of the  Securities  Act of 1933 and
Rule 506 of Regulation D promulgated under the Act.

     On March 13, 1998, the Registrant commenced a private placement under which
499,200 shares of its Common Stock were sold to a group of accredited  investors
for $1.16 per share.  No  underwriting  discounts or commissions  were paid. The
Company  relied upon Section 4(2) of the  Securities Act of 1933 and Rule 506 of
Regulation D promulgated under the Act.

     On June 29, 1998, the Registrant  commenced a private placement under which
750,000 shares of its Common Stock were sold to a group of accredited  investors
for $0.75 per share.  No  underwriting  discounts or commissions  were paid. The
Company  relied upon Section 4(2) of the  Securities Act of 1933 and Rule 506 of
Regulation D promulgated under the Act.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.

(a) Plan of Operation

     Not applicable

(b) Management's  Discussion and Analysis of Financial  Condition and Results of
Operations

     This Report may contain certain  "forward-looking"  statements as such term
is defined in the  Private  Securities  Litigation  Reform Act of 1995 or by the
Securities and Exchange Commission in its rules, regulations and releases, which
represent the  Registrant's  expectations or beliefs,  including but not limited
to, statements  concerning the Registrant's  operations,  economic  performance,
financial condition, growth and acquisition strategies,  investments, and future
operational  plans. For this purpose,  any statements  contained herein that are
not  statements  of  historical  fact  may  be  deemed  to  be   forward-looking
statements.  Without  limiting the  generality of the  foregoing,  words such as
"may", "will", "expect", "believe", "anticipate", "intent", "could", "estimate",
"might", or "continue" or the negative or other variations thereof or comparable

                                      -7-
<PAGE>

terminology  are  intended  to  identify   forward-looking   statements.   These
statements by their nature involve substantial risks and uncertainties,  certain
of which are beyond the  Registrant's  control,  and actual  results  may differ
materially  depending on a variety of important factors,  including  uncertainty
related to  acquisitions,  governmental  regulation,  managing  and  maintaining
growth,  the  value  of the  Registrant's  investments,  the  operations  of the
Registrant's investee companies, volatility of stock price and any other factors
discussed in this and other Registrant  filings with the Securities and Exchange
Commission.

     RESULTS OF  OPERATIONS.  Revenues for the year ended December 31, 1998 were
$447,840, an increase of 18% as compared to $378,391 for the year ended December
31, 1997. This increase is primarily the result of an increase in consulting and
transaction  fees related to the  Registrant's  receipt of stock in lieu of fees
from Triumph Sports. In the past, as a BDC, the Registrant  received  consulting
fees on both a monthly contract basis as well as on a per transaction basis when
assisting  investees with acquisitions,  refinancing or restructuring.  With the
Registrant's  decertification  as a BDC and the resulting change to an operating
company,  the  Registrant  will  rely on the  operations  of its  subsidiary  or
subsidiaries  to  generate a  majority  of its  revenues.  As the  Company  only
recently decertified as a BDC to become an operating company, the timing, nature
and  amount  of these  revenues  cannot  be  predicted.  The  Registrant  cannot
accurately predict  anticipated  revenues for the fiscal year ended December 31,
1999 as a result.

     The  realized  gain  on  investments  before  income  taxes  for  1998  was
$1,108,340  as compared to a gain of $1,003,951 in 1997. A majority of the sales
of investments in both 1998 and 1997 were IntraNet Solutions common stock. While
the  restrictions  as to  resale  on most of the  Registrant's  publicly  traded
investments have  diminished,  the opportunity for the sale of large portions of
the investments cannot be predicted. However, the Registrant currently has fewer
positions in its portfolio  which are valued  utilizing the public market method
and presently  believes there is sufficient  market liquidity for the Registrant
to conduct an orderly  sale of any position  over a  relatively  short period of
time.

     Expenses for 1998 were  $2,418,245  as compared to  $1,813,926  in 1997, an
increase  of 33%. A  significant  portion of the  increase  in  expenses  can be
attributed to an officer's bonus and legal and accounting fees. During 1998, the
Registrant changed the nature of the President's compensation with a majority of
his annual  bonus tied to  increases  in the  market  value of the  Registrant's
common  stock.  The  market  value  of  the   Registrant's   common  stock  rose
significantly  during  1998  and is  continuing  to do so in  1999.  Legal  fees
increased  primarily  as  a  result  of  costs  involved  with  researching  and
implementing  the  Registrant's  plan for  withdrawal  as a BDC. The  Registrant
currently  believes that expenses for the year ending  December 31, 1999 will be
higher than those of 1998,  the amount of which is  difficult  to  predict.  The
Registrant  anticipates higher expenses relating to the Registrant's  withdrawal
as a BDC coupled with the legal,  accounting and other expenses  relating to the
proposed  acquisition of FTB. Should the market value of the Registrant's common
stock continue to rise  significantly,  expenses  relating to an officer's bonus
could also increase without a change in his compensation structure.

     The Registrant's net investment loss and realized gain on investments after
taxes for the year ended  December 31, 1998 was a loss of $(925,245) as compared
to a loss of $(401,649) in 1997. The Registrant's increased net realized loss is
directly  related  to higher  expenses  and lower  realized  gain on the sale of
investments.  At December  31,  1998,  unrealized  appreciation  of  investments
decreased $(1,056,054) as compared to a decrease of $(5,773,305) at December 31,
1997.  With the  exception of the addition of Triumph  Sports  during 1998,  the
Registrant  made  no  significant  investments  in  new  investee  companies  in
anticipation  of  decertifying  as a BDC to become  an  operating  company.  The
resulting  lack  of  new  investments  caused  the  value  of  the  Registrant's
investment  portfolio to remain at levels  similar to 1997 following the loss of
nearly  all the  value  of the  Registrant's  investment  in RDM  Sports  due to
bankruptcy.  The net  decrease  in net  assets  resulting  from  operations  was
$(1,981,299) for 1998 as compared to a decrease of $(3,923,367) for 1997.

     In July of 1984, the Registrant  elected to become a BDC. Utilizing the "at
value"  method  of  evaluating  fair  value  as  described  in  Note  1  of  the
Registrant's  financial  statements,  the Registrant's assets as of December 31,
1998 were $5,859,075 with a net asset value of $4,088,229.  Comparatively, as of
December 31, 1997, the Registrant's  assets were valued at $5,038,425 and it had

                                      -8-
<PAGE>

net assets of $3,539,916.  At a special meeting of stockholders held on April 3,
1998,  the  Registrant's   stockholders  approved  a  proposal  authorizing  the
Registrant  to change the nature of its  business and withdraw its election as a
BDC under the Investment  Company Act. On January 4, 1999, the Registrant  filed
for withdrawal. [See Part I. Item 1(a) Business Development].

     LIQUIDITY AND CAPITAL RESOURCES. Of the Registrant's current liabilities of
$1,770,846  at December 31, 1998,  the  Registrant  had no amounts due to banks.
This  compares to total  liabilities  of  $1,498,509  at December 31, 1997.  The
Registrant is not  obligated to discharge a  significant  portion of its current
liabilities in the near future;  however,  the Registrant  intends to extinguish
these liabilities as cash flow permits.

     In connection with its investments while operating as a BDC, the Registrant
was  required,  from time to time,  to make loans to its  investees  in order to
protect  its  investments.  As a result  of these  loans as well as other  notes
receivable,  the Registrant  carried notes receivable of $1,225,232 and $418,210
at years ended  December  31, 1998 and 1997,  respectively.  The majority of the
increase in notes  receivable at year end 1998 as compared to 1997 is the result
of the Registrant  covering  portions of expenses and start-up costs for two new
investees  during  each of the past  two  years,  as well as  loans  made to the
Registrant's  wholly owned subsidiary  during 1998. As these companies  complete
mergers or acquisitions,  or raise capital through private or public  offerings,
these notes may be repaid or otherwise extinguished although no assurance can be
given at this time that such repayments will take place.

     The Registrant's cash position increased by $23,303 at December 31, 1998 as
compared  to a decrease of  $(44,608)  at December  31,  1997.  Net cash used by
operating activities was $(2,098,204) for 1998 as compared to $(672,835) used in
1997.  No single use of cash for operating  activities  accounted for the change
from 1997 to 1998.  Cash flows from investing  activities used $(10,396) for the
purchase  of fixed  assets in 1998  compared  to  $(1,872) in 1997 due mainly to
upgrading  and  purchasing  new computer  equipment.  Cash flows from  financing
activities  provided $2,131,903 as compared to $630,099 used during 1997. During
1997, the Registrant  completed one private offering of the Registrant's  common
stock and began two others. As a result, the Registrant  received  $2,002,174 in
proceeds providing the significant  increase in cash from financing  activities.
[See also Part III, Item 12. Certain  Relationships and Related Transactions and
Part IV, Item 13. Financial Statements].

     As a BDC, the Registrant's  sources of income to defray operating  overhead
were derived from consulting  fees,  transaction fees gained from the Registrant
assisting both existing and new investees in structuring and completing mergers,
acquisitions or asset-based financing transactions,  administrative fees through
which the  Registrant  directly  apportions a certain  amounts of its  operating
overhead to investees as warranted to help defray  operating costs, and sales of
the  Registrant's  investments.  During 1998, the Registrant also utilized funds
received from the private  placement of the  Registrant's  common  stock.  As an
operating company,  the Registrant will be dependent primarily on the operations
of its subsidiaries to defray operating  overhead.  The Registrant's  sources of
income  were  sufficient  to cover  its  operating  overhead  during  1998.  The
Registrant  believes that its sources of income will also be sufficient to cover
its operating expenses for 1999.

     The  Registrant's  liquidity  has  primarily  been affected by the business
success,  securities prices and  marketability of its investee  companies and by
the amount  and timing of any new or  incremental  investments  it makes.  As an
operating company, the Registrant will be reliant on cash flows from operations.
The  Registrant  believes that its present  liquidity and capital  resources are
adequate to finance  anticipated  needs arising from or relating to its business
in 1999 due to  funds  received  from  private  placements  of both  common  and
convertible  preferred  stock.  Although the  Registrant's  ability to liquidate
portions of its portfolio  companies  have increased as the  restrictions  as to
resale  end,  the  Registrant  generally  has  been a  long-term  holder  if its
investments  and  therefore  does  not  necessarily   liquidate  them  upon  the
expiration of these restrictions.  In addition,  with the Registrant's change to
an operating company and resulting  proposed  acquisition of FTB, the company is

                                      -9-
<PAGE>

contemplating  spinning off certain of its non-financial  services assets to its
stockholders through the creation of a new publicly traded company. As a result,
the  Registrant  currently  does not  anticipate it will  liquidate  significant
portions of its portfolio in the near future.

     As of  December  31,  1998,  the  Registrant  had  made no  other  material
commitments  for  capital   expenditures  or  loans  to  investees  however  the
Registrant  may be required to make such  expenditures  or loans during 1999 the
amount of which is unknown at this time.   It is possible the  Registrant   will
continue to sell certain of its  investments,  resulting in additional  realized
gains,  during the remainder of the current year. At the discretion of the Board
of Directors,  the Registrant also may sell certain of its investments resulting
in a realized loss in order to prevent further losses from occurring.

YEAR 2000 READINESS

     The  inability  of  computers,   software  and  other  equipment  utilizing
microprocessors  to  recognize  and  properly  process  date field  containing a
two-digit  year is commonly  referred  to as the "Year 2000  Issue." As the year
2000  approaches,  such systems may recognize a date using "00" as the year 1900
rather than the year 2000 and be unable to accurately process certain date-based
information.  This  error  could  potentially  result  in a  system  failure  or
miscalculation causing disruptions of operations, including, among other things,
a  temporary  inability  to process  transactions  or engage in  similar  normal
business activities.

         The  Registrant  has reviewed its computer  system in order to evaluate
necessary modifications for the Year 2000 readiness. In addition, The Registrant
is in the process of  communicating  with  others with whom it does  significant
business to determine  their Year 2000 readiness  status and the extent to which
the Company  could be affected  by any third party Year 2000  readiness  issues.
Although the Registrant  has not received  responses from all third parties with
which it does  business,  The  Registrant  does not  anticipate  that it will be
materially affected by any third party Year 2000 readiness issues.  However, the
systems of the Registrant or those of other companies on which the  Registrant=s
systems  rely may not be timely  converted.  A failure  to  convert  by  another
company, or a conversion that is incompatible with the Company's systems,  could
have a material adverse effect on the Registrant.

         The  anticipated  costs  and  timeliness  of  completion  of Year  2000
modifications are based on management's best estimates, which were derived using
numerous assumptions relating to future events,  including,  without limitation,
the continued  availability  of certain  resources and third party  modification
plans. However, these estimates and assumptions may turn out to be inaccurate.


ITEM 7. FINANCIAL STATEMENTS.

     The financial statements are listed under Item 13.

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

     There have been no changes in or disagreements  with accountants during the
most recent two fiscal years.

                                      -10-
<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT.

     (a) Identification of Directors and Executive Officers

                                                              Length of
Name                   Age    Offices held                    Service
----                   ---    ------------                    --------- 
Henry Fong              63    President, Treasurer,           Since Inception
                              Principal Executive,
                              Financial and Accounting
                              Officer and Director

Thomas B. Olson         33    Secretary                       Since 1988

Russell L. Casement     55    Director                        Since 1989

Aaron A. Grunfeld       52    Director                        Since 1991

     The directors of the  Registrant  are elected to hold office until the next
annual meeting of the stockholders  and until their  respective  successors have
been elected and qualified.  Officers of the Registrant are elected by the Board
of  Directors  and hold  office  until  their  successors  are duly  elected and
qualified.

     No  arrangement  exists  between any of the above  officers  and  directors
pursuant  to which  any one of those  persons  was  elected  to such  office  or
position.

     The Registrant has appointed an audit committee currently consisting of Dr.
Casement as chairman and Mr.  Grunfeld and a  compensation  committee  currently
consisting of Mr. Grunfeld as chairman and Dr. Casement.

     HENRY FONG.  Mr. Fong has been the  President,  Treasurer and a director of
the Registrant since inception. From 1987 to June 1997, Mr. Fong was chairman of
the  board  and  chief  executive  officer  of RDM  Sports  Group,  Inc.  (f/k/a
Roadmaster Industries,  Inc.) a publicly-held investee of the Registrant and was
its  president  and  treasurer  from  1987 to  1996.  Subsequent  to Mr.  Fong's
departure  from RDM, the company  filed on August 29, 1997 Chapter 11 bankruptcy
petitions for the company and all of its subsidiaries  with the U.S.  Bankruptcy
Court for the Northern District of Georgia.  From July 1996 to October 1997, Mr.
Fong was a director  of  IntraNet  Solutions,  Inc.,  a  publicly-held  investee
company which provides internet/intranet solutions to Fortune 1000 companies and
was  the  chairman  of the  board  and  treasurer  of its  predecessor  company,
MacGregor  Sports and Fitness,  Inc.  from February 1991 until the two companies
merged in July  1996.  From  January  1993 to January  20,  1999,  Mr.  Fong was
chairman  of the board and Chief  Executive  Officer of  California  Pro Sports,
Inc., a publicly-traded  manufacturer and distributor of in-line skates,  hockey
equipment and related accessories.  From 1959 to 1982 Mr. Fong served in various
accounting,  finance and  budgeting  positions  with the  Department  of the Air
Force. During the period from 1972 to 1981 he was assigned to senior supervisory
positions at the Department of the Air Force  headquarters  in the Pentagon.  In
1978,  he was  selected  to  participate  in the Federal  Executive  Development
Program and in 1981, he was appointed to the Senior Executive  Service.  In 1970
and 1971, he attended the Woodrow Wilson School,  Princeton University and was a
Princeton Fellow in Public Affairs.  Mr. Fong received the Air Force Meritorious
Civilian  Service Award in 1982. Mr. Fong is a certified public  accountant.  In
March 1994,  Mr. Fong was one of twelve CEOs selected as Silver Award winners in
FINANCIAL WORLD magazine's corporate American "Dream Team."

                                      -11-
<PAGE>

     THOMAS B. OLSON.  Mr.  Olson has been  Secretary  of the  Registrant  since
January 1988. Since February 1990, Mr. Olson has been a director,  and since May
1994  secretary,  of Immune  Response,  Inc. a  publicly  held  investee  of the
Registrant  formerly engaged in laboratory  medical testing and related research
activities but which now is seeking other business opportunities.  Mr. Olson has
attended Arizona State University and the University of Colorado at Denver.

     RUSSELL L.  CASEMENT.  Dr.  Casement has been a director of the  Registrant
since February 1989. In 1994, Dr. Casement became the President of ProMark, Inc.
a privately-held  investee of the Registrant which currently is inactive.  Since
1969, Dr.  Casement has been the president of his own private  dental  practice,
Russell  Casement,  D.D.S.,  P.C., in Denver,  Colorado.  Dr.  Casement earned a
Doctor of Dental  Science  degree  from  Northwestern  University  in 1967.  Dr.
Casement is a member of the American  Dental  Association,  the Colorado  Dental
Association and the Metro Denver Dental Association.

     AARON A. GRUNFELD. Mr. Grunfeld has been a director of the Registrant since
November 1991. Mr. Grunfeld has been engaged in the practice of law for the past
27 years and has been of  counsel  to the firm of Resch,  Polster,  Alpert,  and
Berger,  LLP, Los Angeles,  California  since November 1995.  From April 1990 to
November  1995,  Mr.  Grunfeld was a member of the firm of Spensley Horn Jubas &
Lubitz,  Los Angeles,  California.  Mr.  Grunfeld  received an A.B. in Political
Science from UCLA in 1968 and a J.D. from  Columbia  University in 1971. He is a
member of the California Bar Association.

(b) Significant Employees

     JOHN CAHILL.  Mr. Cahill has been  President of the FTC since June 1, 1998.
From 1992 to April 1998 Mr. Cahill was Senior Vice  President of First Data Card
Services  Group.  Mr.  Cahill  has  over  twenty  year  experience  in the  bank
card/credit Card industry.

(c) Family Relationships

     Not applicable

(d) Involvement in Certain Legal Proceedings

     Not applicable

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section  16(a)  of the  Securities  Exchange  Act of  1934  ("Section  16")
requires the Registrant's officers,  directors and persons who own more than ten
percent of the Registrant's voting securities to file reports of their ownership
and changes in such ownership with the Securities and Exchange  Commission  (the
"Commission"). Commission regulations also require that such persons provide the
Registrant  with copies of all Section 16 reports  they file.  Based solely upon
its  review  of  such   reports   received   by  the   Registrant,   or  written
representations  from  certain  persons  that they were not required to file any
reports  under  Section 16, the  Registrant  believes  that,  during  1998,  its
officers and directors have complied with all Section 16 filing requirements.

ITEM 10. EXECUTIVE COMPENSATION.

(a) General

     Henry Fong,  the  President of the  Registrant  and the only officer of the
Registrant whose total compensation  exceeded $100,000 for the fiscal year ended
December 31, 1998, received an annual salary of $183,013. In January,  1998, the
Compensation  Committee  of the  Registrant's  board of  directors  retained  an
independent  consultant to review the President's  compensation.  As a result of
that  review,   a  new   compensation   arrangement  was  instituted   based  on

                                      -12-
<PAGE>

recommendations  made by the independent  consultant.  In addition to Mr. Fong's
annual salary, beginning January 1, 1998, Mr. Fong is to receive an annual bonus
equaling 1% of the Registrant's total assets combined with 5% of the increase in
the market value of the Company's common stock calculated quarterly from January
1 to December 31 of any fiscal  year.  During the year ended  December 31, 1998,
this bonus totaled $1,208,042.  This new compensation  arrangement  replaces the
previous bonus of 3% of the Registrant's  total assets at year end which totaled
$151,153 for the year ended December 31, 1997.

     On April 1, 1992,  the  Registrant  obtained a life  insurance  policy with
retirement  benefits for Mr. Fong which pays his  beneficiary  $2,600,000 in the
event of Mr. Fong's death or provides for retirement  benefits for Mr. Fong upon
his retirement at or after age 65 utilizing the cash value of the policy at that
time. This benefit is being provided to Mr. Fong in consideration of his sixteen
years of  service to the  Registrant  and in  anticipation  of his  serving  the
Registrant until  retirement.  The Registrant has no other retirement or pension
plan for Mr.  Fong.  The annual  premium on this policy is $105,414 per year for
seven  years  until  March  30,  1999,  and  may  be  considered   other  future
compensation  to Mr. Fong.  For the year ended  December 31, 1998,  $105,414 was
paid  toward the  policy  and an  additional  $59,586  was paid to Mr.  Fong for
deferred  income taxes on the policy.  Concurrently,  the Registrant  obtained a
Key-man Life Insurance policy which pays the Registrant  $3,000,000 in the event
of Mr. Fong's death. The Registrant paid $20,223 on this policy in 1998 which is
not considered compensation to Mr. Fong.

(b) Summary Compensation Table

     The following table sets forth information  regarding  compensation paid to
the officers of the Registrant  during the years ended  December 31, 1998,  1997
and 1996:

<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE
                           --------------------------

                                          Annual Compensation              ($$)Long-Term
                                   -----------------------------------      Compensation
                                                                               Awards
                                                                           -------------
(a)                     (b)          (c)          (d)          (e)               (g)              (i)
                                                              Other                               All
Name &                                                       Annual                              Other
Principal                          Salary        Bonus    Compensation         Options       Compensation
Position               Year          ($)          ($)          ($)            & SARs(#)           ($)     
----------------------------------------------------------------------------------------------------------


<S>                    <C>         <C>         <C>             <C>             <C>              <C>
Henry Fong             1998        183,013     1,208,042       -0-             469,655          165,000  (1)
President,
Treasurer
Principal
Executive
Officer and
Accounting
Officer

Henry Fong             1997        183,013      151,153        -0-               -0-            165,000   (1)

Henry Fong             1996        183,013      314,328        -0-               -0-            165,000   (1)
</TABLE>
-----------------

(1)  Includes  payments  and tax  liability  on the life  insurance  policy  as
     explained more fully in "Item 10 (a) General" above.

                                      -13-
<PAGE>

(c) Option/SAR Grants Table

<TABLE>
<CAPTION>
                     Option/SAR Grants in Last Fiscal Year
                     -------------------------------------
                                                                                Grant Date
                         Individual Grants                                        Value
(a)                     (b)             (c)            (d)           (e)           (f)
                      Number
                        of
                    Securities      % of Total
                      Under-         Options/
                       Lying           SARs
                     Options/       Granted to      Exercise                      Grant
                       SARs          Employees       or Base                       Date
                      Granted        in Fiscal        Price       Expiration      Present
Name                    (#)            Year          ($/Sh)          Date         Value($)
------------------------------------------------------------------------------------------
<S>                   <C>              <C>           <C>           <C>           <C>      
Henry Fong            469,655          87%           $3.19         6/2/2003      1,498,200
</TABLE>

(d) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table

               Aggregated Option/SAR Exercises in Last Fiscal Year
                          and FY-End Option/SAR Values
               ---------------------------------------------------

   (a)              (b)           (c)               (d)                (e)
                                                 Number of
                                                 Securities         Value of
                                                 Underlying        Unexercised
                                                 Unexercised       In-the-Money
                                                Options/SARs       Options/SARs
                  Shares                        at FY-End (#)      at FY-End (#)
                Acquired on       Value         Exercisable/       Exercisable/
Name            Exercise (#)   Realized ($)     Unexercisable      Unexercisable
--------------------------------------------------------------------------------
Henry Fong        100,000        508,250         576,200/-0-      $2,143,541/-0-

(e) Long Term Incentive Plans - - Awards in Last Fiscal Year.

     The Registrant has no long term incentive  plans, and consequently has made
no such awards.

(f) Compensation of Directors

     (1) Standard Arrangements

     Each  independent  member of the Registrant's  Board of Directors,  Messrs.
Russell L.  Casement  and Aaron A.  Grunfeld,  receive  $10,000 per year payable
monthly and $500 for each Board of Director's  meeting attended either in person
or by  telephone.  For the year ended  December 31, 1998,  Messrs.  Casement and
Grunfeld  each  received a total of $12,500.  Members of the Board of  Directors
also receive reimbursement for expenses incurred in attending board meetings.

                                      -14-
<PAGE>

     (2) Other Arrangements

     1993 Stock Option Plan for Non-Employee Directors

     The  Registrant  has  adopted the 1993 Stock  Option Plan for  Non-Employee
Directors (the  "Directors'  Plan")  reserving an aggregate of 250,000 shares of
Common  Stock for  issuance  pursuant  to the  exercise  of stock  options  (the
"Options") which may be granted to non-employee directors of the Registrant.  On
July 5, 1995,  an order was issued by the  Securities  and  Exchange  Commission
authorizing  the  Directors'  Plan  and  the  options  granted  thereunder.  The
Directors'  Plan is for a ten-year term  commencing July 5, 1995 (the "Effective
Date"). Each non-employee director automatically,  as of the Effective Date, was
granted an option to purchase  50,000 shares of common stock at $3.00 per share.
Thereafter,  each  director  who first  becomes a  non-employee  director  shall
automatically,  as of the date 90 days  following the date such person becomes a
non-employee  director, be granted an option to purchase 50,000 shares of common
stock. No additional  options can be granted under the Directors' Plan except to
an individual  who first  becomes a  non-employee  director  after the Effective
Date. No discretionary grants can be made under the Directors' Plan.

     On June 2,  1998,  the  Registrant's  board  of  directors  authorized  the
granting of 75,000 options to purchase common stock of the Registrant to each of
the  Registrant's  two independent  directors at $3.19 per share for a period of
five  years.  The  grant of these  options  was  contingent  upon the  Company's
successful  withdrawal as a business development company. On January 4, 1999 the
Registrant filed for withdrawal as a business  development  company [see Part I,
Item 1 (a) Business for a  description  of the  Registrant's  withdrawal  of its
election  as  a  business  development   company].   On  January  5,  1999,  the
Registrant's  board of directors adopted a new stock option plan, the 1999 Stock
Option Plan. On January 5, 1999, the Registrant's two independent directors each
received options to purchase 158,700 shares of the Registrant's  common stock at
an exercise price of $6.75 per share expiring on January 5, 2004.  These options
were  granted  in lieu of the  75,000  options  at $3.19 per  share,  which were
cancelled. In addition, each director received 86,800 options to purchase 86,800
shares of the Registrant's  common stock at an exercise price of $6.75 per share
under the 1999 Plan.

(g) Employment Contracts and Termination of Employment and Change-in-Control
     Arrangements

     On April 1, 1992,  the Registrant  obtained a life insurance  policy on the
Registrant's  President,  Henry Fong, which policy provides for a payment to Mr.
Fong's  beneficiary  of  $2,600,000  in the event of his  death or a  retirement
benefit to Mr. Fong  consisting  of the cash value of the policy upon Mr. Fong's
retirement  from the  Registrant at or after age 65 [See-Item 11. (a) "General."
above].  The  Registrant  has no other  compensation  plan or  arrangement  with
respect  to any  executive  officer  which plan or  arrangement  results or will
result  from  the  resignation,  retirement  or any  other  termination  of such
individual's  employment  with the  Registrant.  The  Registrant  has no plan or
arrangement  with respect to any such persons which will result from a change in
control  of the  Registrant  or a change  in the  individual's  responsibilities
following a change in control.

(h) Report on Repricing of Options/SARs

     Not applicable

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

(a) (b) Security Ownership of Certain Beneficial Owners and Security Ownership
        of Management.

     The  following  table  contains  information  at March 31, 1999,  as to the
beneficial  ownership of shares of the Registrant's  Common Stock by each person
who, to the knowledge of the Registrant at that date,  was the beneficial  owner
of five percent or more of the outstanding  shares of the class, each person who
is a director or executive  officer of the Registrant and all persons as a group
who  are  executive  officers  and  directors  of the  Registrant  and as to the
percentage of outstanding shares so held by them at April 9, 1999.

                                      -15-
<PAGE>
<TABLE>

Name and address                         Amount and Nature of
of beneficial owner                     Beneficial Ownership (1)      Percent of Class
-------------------                     ------------------------      ----------------
<S>                                         <C>                             <C>  
Henry Fong                                  1,574,384  (2)(3)               22.3%
7315 East Peakview Avenue
Englewood, Colorado 80111

Wayne W. Mills                                475,000                        7.9%
5020 Blake Road South
Edina, Minnesota 55436

Russell L. Casement                           506,900  (4)                   8.0%
1355 S. Colorado Blvd., Suite 320
Denver, Colorado 80222

Aaron A. Grunfeld                             334,700  (5)                   5.3%
10390 Santa Monica Blvd, Fourth Floor
Los Angeles, California 90025

All officers and directors                  2,484,284  (2)(3)(6)(7)         32.2%
as a group (four persons)
</TABLE>

(1)  The beneficial owners exercise sole voting and investment power.

(2)  Includes 576,200 shares  underlying  options granted under the Registrant's
     1993 Stock Option Plan and 469,700 shares underlying  options granted under
     the Registrant's 1999 Stock Option Plan.

(3)  Includes  479,544  shares  owned by a  corporation  in which Mr. Fong is an
     officer  and  director;  and  48,940  owned by a  partnership  in which the
     reporting person is a general partner.

(4)  Includes 36,400 shares  underlying  options granted under the  Registrant's
     1993 Stock  Option  Plan for  Non-Employee  Directors  and  245,500  shares
     underlying  options granted under the Registrant's  1999 Stock Option Plan.
     [See also Item 10.(f)(2) "Other Arrangements"]

(5)  Includes 50,000 shares  underlying  options granted under the  Registrant's
     1993 Stock  Option  Plan for  Non-Employee  Directors  and  245,500  shares
     underlying  options granted under the Registrant's  1999 Stock Option Plan.
     [See also Item 10.(f)(2) "Other Arrangements"]

(6)  Includes 86,400 shares  underlying  options granted under the  Registrant's
     1993 Stock  Option  Plan for  Non-Employee  Directors  and  491,000  shares
     underlying options granted under the Registrant's 1999 Stock Option Plan.

(7)  Includes 25,000 shares  underlying  options granted under the  Registrant's
     1993 Stock Option Plan and 31,300 shares  underlying  options granted under
     the Registrant's 1999 Stock Option Plan.

     The Registrant  does not know of any  arrangements,  the operation of which
may, at a subsequent date, result in a change in control of the Registrant.

                                      -16-
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

(a) Transactions with Management and Others.

     The Registrant  currently leases  approximately 1,800 square feet of office
space in Greenwood Executive Park, 6400 South Quebec, Englewood, Colorado from a
partnership in which its President is the sole partner,  on terms  comparable to
the existing market for similar facilities.

     During the year ended December 1, 1997, the  Registrant's  President loaned
the Registrant a total of $531,000. Of this amount,  $353,401 was repaid leaving
a principal  balance due at December 31, 1997 of $177,599 plus accrued interest.
These  uncollateralized loans were due on demand and carried an interest rate of
8% per annum.  All of the remaining  balance was repaid during the first quarter
of 1998.  During  1998,  a company  in which the  Registrant's  President  is an
officer and director  loaned the  Registrant a total of $165,000 which is due on
demand and bears  interest at 8% per annum.  Of that amount,  $22,672 was repaid
during 1998 leaving a principal balance due at December 31, 1998 of $142,328.

     In addition,  a related  entity  loaned the  Registrant  $100,000 in August
1997. This loan carried an interest rate of 12% per annum, was due on demand and
was  collateralized  by  25,000  shares  of the  Registrant's  investment  in an
investee company's common stock. The Registrant paid $30,000 in principal due on
this note during 1998 leaving a principal balance due of $70,000 at December 31,
1998. As of the filing of this report, all principal and interest due under this
note has been repaid.

     During 1998,  the  Registrant  made loans  totaling  $160,000 to its wholly
owned subsidiary,  FTC.  Additional loans totaling $325,000 were advanced during
the first quarter of 1999. All of these loans bear interest at 10% per annum and
are due on demand.

     During 1998, the Registrant loaned VP Sports a total of $89,000.  All loans
are due on demand and bear interest at the rate of 10% per annum. As of December
31,  1998,  $24,734  of these  loans  had been  repaid  leaving  an  outstanding
principal balance at year end of $64,266.  During the first quarter of 1999, the
Registrant loaned VP an additional $70,000 under terms identical to the previous
loans.

     During  1997 and 1998,  the  Registrant  loaned  Triumph  Sports a total of
$963,087  in  various  separate  loans.  On  December  8, 1997,  the  Registrant
forfeited  41,835 shares of IntraNet  common stock which had a fair market value
on that date of $6.50 per share or $271,928.  A note for this amount is included
in the above  referenced  total.  These shares were pledged by the Registrant on
behalf of Triumph Sports relating to an acquisition  which  subsequently was not
completed.  All notes  are due on demand  and bear  interest  at 10% per  annum.
During 1998,  $60,068 in principal  was repaid on these notes  leaving a balance
due at year end of  $899,018.  Additional  loans  totaling  $85,000 were made to
Triumph during the first quarter of 1999 and a principal  payment of $51,500 was
received during the quarter.

     During 1998, a director of the Registrant purchased 39,200 shares of common
stock of the Registrant  pursuant to a private  placement at $1.16 per share. In
payment of the shares, the director executed a note payable to the Registrant in
the amount of $45,472,  which was due on December 15, 1998 and carried  interest
at 8% per annum. The due date on this note was subsequently extended to February
15,  1999.  All  principal  and  interest due was paid on this note prior to the
extended expiration date.


                                      -17-
<PAGE>

     Effective  October 29, 1997, the Registrant  entered into an agreement with
an  investee  company,  IntraNet  Solutions,  Inc.  ("IntraNet").   Because  the
Registrant had entered into a prior  indemnification  agreement with IntraNet in
July 1996,  it agreed to  purchase a certain  note  receivable  in the amount of
$564,755 which IntraNet had from an RDM subsidiary,  Hutch Sports USA ("Hutch").
Hutch had filed  bankruptcy on August 29, 1997. The Registrant  paid $414,755 of
the purchase amount to IntraNet on October 29, 1997. The balance of $150,000 was
due on demand but no later than  December 31, 1997  carried an interest  rate of
8.75% per annum, was secured by an officer's pledging of a common stock purchase
warrant relating to 62,550 shares of IntraNet and was also personally guaranteed
by the  Registrant's  President.  This note was  repaid  on  January  23,  1998.
Furthermore,  the  Registrant's  President  agreed to  resign  from the Board of
IntraNet, both IntraNet and the Registrant agreed to terminate effective October
29, 1997 the  indemnification  agreement  under which the  Registrant's  maximum
exposure  was  $2,000,000,  and agreed to mutually  release  each other from any
claims relating to this agreement and certain other items.

     The  Registrant  has placed  members of its Board and its  officers  on the
boards of directors of certain  investee  companies and other companies in which
it has obtained an equity  interest or to which it has made loans or guarantees.
In  most   instances,   the  board   representation   was  subsequent  to  these
acquisitions,  loans or  guarantees.  The  Registrant may be considered to be in
control of certain of its investee companies.

(b) Information which May be Excluded

     Not applicable

(c) Parents of Registrant

     Not applicable

(d) Transactions with Promoters

     Not applicable

                                      -18-
<PAGE>

                                     PART IV

ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.

(a) The  following  documents  are  filed as a part of this  report  immediately
following the signature page.

1. Financial Statements and Supplementary Data.                             Page
                                                                            ----
     Report of Independent Certified Public Accountants......................F-1
     Statements of Assets and Liabilities  at
       December 31, 1997, and 1996...........................................F-3
     Schedule of Investments at December 31, 1998 and December 31, 1997......F-5
     Statements of Changes in Stockholders' Equity for the
       Years Ended December 31, 1998 and 1997...............................F-11
     Statements of Operations for the Years Ended
       December 31, 1998 and 1997...........................................F-15
     Statements of Cash Flows for the Years Ended
       December 31, 1998 and 1997...........................................F-17
     Notes to Financial Statements..........................................F-19

2. Financial Statements Schedules.

     Schedule II - Valuation and Qualifying Accounts and Reserves............S-1

3. Exhibits.

     3.1       Articles of Incorporation (1)
     3.2       Bylaws (1)
     10.1      1993 Stock Option Plan (2)
     10.2      1993 Stock Option Plan for Non-Employee Directors (2)
     10.3      Custody   Agreement   between  Colorado  National  Bank  and  the
               Registrant (2)
     10.4      1999 Stock Option Plan. FILED HEREWITH.
     21        List of Subsidiaries. FILED HEREWITH.

(1)  Incorporated  by reference  from the like numbered  exhibits filed with the
     Registrant's  Registration  Statement on Form S-18, No. 2-82104-D effective
     April 11, 1983.

(2)  Incorporated  by reference  form the like numbered  exhibits filed with the
     Registrant's  Annual  Report on Form 10-K for the year ended  December  31,
     1993.

(b) Reports on Form 8-K.

    No reports on Form 8-K were filed during the period covered by this report.

                                      -19-
<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: April 14, 1999                   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: April 14, 1999                   /S/ HENRY FONG
                                       -----------------------------------------
                                       Henry Fong, President,
                                       Treasurer and Director
                                       (Principal Executive, Financial,
                                       and Accounting Officer)





Date: April 14, 1999                   /S/ RUSSELL L. CASEMENT
                                       -----------------------------------------
                                       Russell L. Casement, Director





Date: April 14, 1999                    /S/ AARON A. GRUNFELD
                                       -----------------------------------------
                                       Aaron A. Grunfeld, Director

                                      -20-
<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS




To the Board of Directors
Equitex, Inc.

We have audited the accompanying statements of assets and liabilities and
schedule of investments of Equitex, Inc. as of December 31, 1998 and 1997 and
the related statements of changes in stockholders' equity, operations and cash
flows for the years 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 audits 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 1998 and 1997 financial statements referred to above present
fairly, in all material respects, the financial position of Equitex, Inc. at
December 31, 1998 and 1997 and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.

As explained more fully in Note 1b., the financial statements at December 31,
1998 and 1997 include securities and receivables, valued at $2,799,145 (68.2% of
net assets) and $1,468,214 (41.5% of net assets), respectively, whose values
have been estimated by the Board of Directors in the absence of readily
attainable market values. We have reviewed the procedures used by the Board of
Directors in arriving at its estimate of value of such securities and
receivables and have inspected underlying documentation, and, in the
circumstances, we believe the procedures are reasonable and the documentation
appropriate. However, because of the inherent uncertainty of valuation of
restricted securities and receivables, those estimated values may differ
significantly from the values that would have been used had a ready market for
the restricted securities and receivables existed, and had the precise
recoverability of the receivables been determinable; and the differences could
be material.

                                                                     (Continued)
                                       F-1
<PAGE>

Report of Independent Certified Public Accountants
Page Two


Our audits were 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
and 1997 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.
                      Statements of Assets and Liabilities

                                                            DECEMBER 31,
                                                        1998           1997
                                                        ----           ----
ASSETS

Investments, at fair value:

 Securities (cost of $4,917,848 and
   $3,568,045 in 1998 and 1997, respectively) .... $  4,226,541   $  4,165,993
 Notes receivable, net of allowance
   for uncollectible accounts of $100 and
   $40,293 in 1998 and 1997, respectively ........    1,225,232        418,210
 Accrued interest receivable, net of
   allowance for uncollectible interest
   of $1,830 and $35 in 1998 and 1997,
   respectively ..................................       32,134          5,701
 Trade receivables, net of allowance
   for uncollectible accounts of $57,705
   and $53,742 in 1998 and 1997, respectively ....      108,286        110,954
                                                   ------------   ------------
                                                      5,592,193      4,700,858

Cash .............................................       32,490          9,187

Accounts receivable - brokers ....................       22,798         73,741

Contract deposit receivable, net of
   allowance for uncollectibility of $150,000 ....      150,000        150,000

Income taxes refundable ..........................        2,150          2,150

Furniture and equipment, net of
   accumulated depreciation of $129,924
   and $117,750 in 1998 and 1997, respectively ...       26,220         29,204

Deferred income tax benefit ......................         --           63,180

Other assets .....................................       33,224         10,105
                                                   ------------   ------------
                                                   $  5,859,075   $  5,038,425
                                                   ============   ============

                                                                     (Continued)
The accompanying notes are a part of this statement.

                                       F-3
<PAGE>

                                  EQUITEX, INC.
                      Statements of Assets and Liabilities

                                                            DECEMBER 31,
                                                        1998           1997
                                                        ----           ----
LIABILITIES AND NET ASSETS

Liabilities
   Notes payable - officer ....................... $    142,328   $    177,599
   Notes payable - others ........................      220,000        250,000
   Accounts payable and other
     accrued liabilities .........................       76,290        121,349
   Accounts payable to brokers ...................      656,060        650,302
   Accrued bonus to officer ......................      676,168        299,259
                                                   ------------   ------------
                                                      1,770,846      1,498,509

Net Assets
   Preferred stock, par value $.01;
     2,000,000 shares authorized; no
     shares issued
   Common stock,  par value $.02;
     7,500,000 shares authorized; 5,417,665
     and 3,494,465 shares issued;
     5,384,315 and 3,461,115 shares
     outstanding in 1998 and 1997,
     respectively ................................      108,353         69,889
   Additional paid-in capital ....................    7,368,624      4,644,275

   Retained earnings
     Accumulated deficit prior to
       becoming a BDC ............................     (118,874)      (118,874)
     Accumulated net investment loss .............  (15,698,055)   (13,431,269)
     Accumulated net realized gains from
       sales and permanent write-downs
       of investments ............................   13,233,525     12,125,185
     Unrealized net gains (losses) on
       investments (net of deferred income
       taxes of $233,201 in 1997) ................     (691,307)       364,747
   Less: treasury stock at cost
       (33,350 shares) ...........................     (114,037)      (114,037)
                                                   ------------   ------------
                                                      4,088,229      3,539,916
                                                   ------------   ------------
                                                   $  5,859,075   $  5,038,425
                                                   ============   ============

The accompanying notes are a part of this statement.

                                       F-4
<PAGE>

                                  EQUITEX, INC.
                             Schedule of Investments
                                December 31, 1998

<TABLE>
<CAPTION>
                                                   NUMBER              COST
                                                     OF               AND/OR       FAIR
COMPANY                                         SHARES OWNED          EQUITY       VALUE
<S>                                         <C>                    <C>          <C>
CONTROLLED COMPANIES
COMMON STOCKS - PRIVATE
  MARKET METHOD OF VALUATION (a)(e)
VP Sports, Inc.
  Entity formed to seek acquisitions
  in the manufacturing segment of
  the sporting goods and leisure-
  time industry .........................         2,000,000        $  250,000   $1,000,000

COMMON STOCKS - BOARD APPRAISAL
  METHOD OF VALUATION (a)
First TeleServices Corporation
  Fee-based financial services ..........             1,000           565,639      565,639

COMMON STOCKS - COST METHOD
  OF VALUATION
Triumph Sports Group
  Entity formed to seek acquisitions
  in the non-manufacturing licensed
  and supplemental segments of the
  sporting goods and leisure-time
  industry ..............................         1,500,000           375,000      375,000
First TeleBanc Corporation
  Bank holding company ..................            40,000           400,000      350,000

AFFILIATED COMPANIES
COMMON STOCKS - PUBLIC MARKET
  METHOD OF VALUATION (c)(e)
RDM Sports Group
  Manufacturer of fitness
  equipment and juvenile products .......         4,979,437         1,088,815        8,963

OTHER - PUBLIC MARKET METHOD
  OF VALUATION
RDM Sports Group                             8% Convertible
  Manufacturer of fitness                      Subordinated
  equipment and juvenile products .......        Debentures            50,681         --
                                                                   ----------   ----------

   Sub-Total
   CONTROLLED AND AFFILIATED COMPANIES ..                           2,730,135    2,299,602
                                                                   ----------   ----------
</TABLE>

                                                                     (Continued)
The accompanying notes are a part of this statement.


                                       F-5


<PAGE>

                                  EQUITEX, INC.
                        Schedule of Investments (Page 2)
                                December 31, 1998

<TABLE>
<CAPTION>
                                                   NUMBER              COST
                                                     OF               AND/OR       FAIR
COMPANY                                         SHARES OWNED          EQUITY       VALUE
<S>                                         <C>                    <C>          <C>
UNAFFILIATED COMPANIES
COMMON STOCKS - PUBLIC MARKET
  METHOD OF VALUATION
IntraNet Solutions, Inc. (formerly
  MacGregor Sports & Fitness, Inc.)
  Document management services,
    web-based internet software,
    electronic document management
    and demand printing .................           188,585         1,053,200      919,351
Zamba (formerly Racotek)
  Medical technology ....................           275,000           961,013      532,813
NevStar Gaming Corporation
  Gaming development ....................             7,000            38,500        6,562

COMMON STOCKS - PRIVATE MARKET
  METHOD OF VALUATION (a)(e)

All Systems Go
  Software development ..................            20,000(b)         25,000       25,000

Ocean Power Technology
  Alternative energy ....................            35,714(b)         40,000       98,213
  research and development ..............           100,000              --        275,000

Gain, Inc. ..............................
  Male vascular devices .................            20,000(b)         50,000       50,000

Juice Island
  Health food stores ....................            10,000(b)         20,000       20,000

WARRANTS (f)(e)
Juice Island
  Health food stores ....................             2,500              --           --
                                                                   ----------   ----------

  Sub-total
  UNAFFILIATED COMPANIES ................                           2,187,713    1,926,939
                                                                   ----------   ----------

  Total
  ALL COMPANIES .........................                          $4,917,848   $4,226,541
                                                                   ==========   ==========
</TABLE>

                                                                     (Continued)
The accompanying notes are a part of this statement.

                                       F-6
<PAGE>

                                  EQUITEX, INC.
                        Schedule of Investments (Page 3)
                                December 31, 1998


RESTRICTIONS AS TO RESALE

(a)  Non-public company whose securities are privately owned. The Board of
     Directors determines fair value in good faith using cost information, but
     also taking into consideration the impact of such factors as available
     financial information of the investee, the nature and duration of any
     restrictions on resale, and other factors which influence the market in
     which a security is purchased and sold.

(b)  May be sold under the provisions of Rule 144 of the Securities Act of 1933
     after an initial holding period expires.

(c)  Since the Company is an affiliate, it may be affected by sales limitations
     of one percent of the investee's outstanding common stock during any
     three-month period, or four-week average trading volume during any
     three-month period.

(e)  Since certain of these securities have certain restrictions as to resale,
     the Board of Directors determines fair value in good faith using public
     market information, but also taking into consideration the impact of such
     factors as available financial information of the investee, the nature and
     duration of restrictions on the disposition of securities, and other
     factors which influence the market in which a security is purchased and
     sold.

(f)  Valued at higher of cost or fair market value of underlying stock less
     exercise price, subject to valuation adjustments as determined in good
     faith by the Board of Directors, taking into consideration the impact of
     such factors as available financial information of the investee, the nature
     and duration of any restrictions on resale, and other factors which
     influence the market in which a security is purchased and sold.


The accompanying notes are a part of this statement.

                                       F-7
<PAGE>

                                  EQUITEX, INC.
                             Schedule of Investments
                                December 31, 1997

<TABLE>
<CAPTION>
                                                   NUMBER              COST
                                                     OF               AND/OR       FAIR
COMPANY                                         SHARES OWNED          EQUITY       VALUE
<S>                                         <C>                    <C>          <C>
CONTROLLED COMPANIES
COMMON STOCKS - PRIVATE
  MARKET METHOD OF VALUATION (a)(e)
VP Sports, Inc. .........................
  Entity formed to seek-out
  acquisitions in the sports
  and health products industries ........         2,000,000        $  250,000   $1,000,000

AFFILIATED COMPANIES
COMMON STOCKS - PUBLIC MARKET
  METHOD OF VALUATION (c)(e)
IntraNet Solutions, Inc. (formerly
  MacGregor Sports & Fitness, Inc.)
  Document management services,
    web-based internet software,
    electronic document management
    and demand printing .................           473,250         1,410,776    2,498,529

RDM Sports Group (formerly
  Roadmaster Industries, Inc.)
  Manufacturer of fitness
  equipment and juvenile products .......         4,979,437         1,088,815        4,481

OTHER - PUBLIC MARKET METHOD
  OF VALUATION
RDM Sports Group                             8% Convertible
  Manufacturer of fitness                      Subordinated
  equipment and juvenile products .......        Debentures           150,682        1,750
                                                                   ----------   ----------

   Sub-Total
   CONTROLLED AND AFFILIATED COMPANIES ..                           2,900,273    3,504,760
                                                                   ----------   ----------

UNAFFILIATED COMPANIES
COMMON STOCKS - PUBLIC MARKET
  METHOD OF VALUATION
IVI Publishing
  Publishing technology .................            25,000           116,881       64,063
Racotek
  Medical technology ....................            75,000           377,391      110,156
NevStar Gaming Corporation
  Gaming development ....................             7,000            38,500       18,750
</TABLE>

                                                                     (Continued)
The accompanying notes are a part of this statement.

                                       F-8
<PAGE>

                                  EQUITEX, INC.
                        Schedule of Investments (Page 2)
                                December 31, 1997

<TABLE>
<CAPTION>
                                                   NUMBER              COST
                                                     OF               AND/OR       FAIR
COMPANY                                         SHARES OWNED          EQUITY       VALUE
<S>                                         <C>                    <C>          <C>
COMMON STOCKS - PRIVATE MARKET
  METHOD OF VALUATION (a)(e)

All Systems Go
  Software development ..................            20,000(b)         25,000       25,000

Ocean Power Technology
  Alternative energy
  research and development ..............            35,714(b)         40,000       98,214
                                                    100,000              --        275,000
Gain, Inc. ..............................
  Male vascular devices .................            20,000(b)         50,000       50,000

Juice Island
  Health food stores ....................            10,000(b)         20,000       20,000

WARRANTS (f)(e)
Nationsmart
  Consumer services .....................            10,000              --             50

Juice Island
  Health food stores ....................             2,500              --           --
                                                                   ----------   ----------

  Sub-total
  UNAFFILIATED COMPANIES ................                             667,772      661,233
                                                                   ----------   ----------

  Total
  ALL COMPANIES .........................                          $3,568,045   $4,165,993
                                                                   ==========   ==========
</TABLE>

                                                                     (Continued)
The accompanying notes are a part of this statement.

                                       F-9
<PAGE>

                                  EQUITEX, INC.
                        Schedule of Investments (Page 3)
                                December 31, 1997



RESTRICTIONS AS TO RESALE

(a)  Non-public company whose securities are privately owned. The Board of
     Directors determines fair value in good faith using cost information, but
     also taking into consideration the impact of such factors as available
     financial information of the investee, the nature and duration of any
     restrictions on resale, and other factors which influence the market in
     which a security is purchased and sold.

(b)  May be sold under the provisions of Rule 144 of the Securities Act of 1933
     after an initial holding period expires.

(c)  Since the Company is a greater than five percent shareholder, it may be
     affected by a sales limitation of one percent of the investee's outstanding
     common stock during any three-month period.

(e)  Since certain of these securities have certain restrictions as to resale,
     the Board of Directors determines fair value in good faith using public
     market information, but also taking into consideration the impact of such
     factors as available financial information of the investee, the nature and
     duration of restrictions on the disposition of securities, and other
     factors which influence the market in which a security is purchased and
     sold.

(f)  Valued at higher of cost or fair market value of underlying stock less
     exercise price, subject to valuation adjustments as determined in good
     faith by the Board of Directors, taking into consideration the impact of
     such factors as available financial information of the investee, the nature
     and duration of any restrictions on resale, and other factors which
     influence the market in which a security is purchased and sold.



The accompanying notes are a part of this statement.

                                      F-10
<PAGE>

                                  EQUITEX, INC.
                  Statements of Changes in Stockholders' Equity
                 For the Years Ended December 31, 1998 and 1997


<TABLE>
<CAPTION>
                                                                                           ACCUMULATED
                                                                                            (DEFICIT)
                                                                              ADDITIONAL     PRIOR TO
                                            COMMON STOCK          TREASURY      PAID-IN      BECOMING
                                        SHARES        AMOUNT        STOCK       CAPITAL        A BDC

<S>                                    <C>         <C>          <C>           <C>          <C>        
Balance at Dec. 31,
  1996 ............................    3,224,465   $   64,489   $ (114,037)   $4,447,175   $ (118,874)

Common stock sold to
  officer/director at
  $.75 per share ..................      270,000        5,400                    197,100

Net investment (loss)

Net realized gain on
  investments

Unrealized gain (loss)
  on investments
                                       ---------   ----------   ----------    ----------   ----------
Balance at Dec. 31,
  1997 ............................    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
  o/s 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                  1,812,180
</TABLE>

                                                                     (Continued)
The accompanying notes are a part of this statement.

                                      F-11
<PAGE>



                                  EQUITEX, INC.
                  Statements of Changes in Stockholders' Equity
                 For the Years Ended December 31, 1998 and 1997
                                    (Page 2)

<TABLE>
<CAPTION>
                                                                       ACCUM.
                                                                     REALIZED         ACCUM.
                                       ACCUM.        NET GAINS         UNREA-         TOTAL
                                        NET          FROM SALES      LIZED NET        STOCK-
                                       INVEST.       OF INVEST-     APPREC. ON       HOLDERS'
                                        LOSS           MENTS        INVESTMENTS       EQUITY
<S>                                <C>             <C>             <C>            <C>         
Balance at Dec. 31, 1996 .......   $(12,025,669)   $ 11,121,234    $  3,886,465   $  7,260,783

Common stock sold to
  officer/director at
  $.75 per share ...............                                                       202,500

Net investment (loss) ..........     (1,405,600)                                    (1,405,600)

Net realized gain
  on investments ...............                      1,003,951                      1,003,951

Unrealized gain (loss)
  on investments ...............                                     (3,521,718)    (3,521,718)
                                   ------------    ------------    ------------   ------------

Balance at Dec. 31,
 a1997 .........................    (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
  o/s 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
</TABLE>

                                                                     (Continued)
The accompanying notes are a part of this statement.

                                      F-12
<PAGE>



                                  EQUITEX, INC.
                  Statements of Changes in Stockholders' Equity
                 For the Years Ended December 31, 1998 and 1997
                                    (Page 3)

<TABLE>
<CAPTION>
                                                                                           ACCUMULATED
                                                                                            (DEFICIT)
                                                                              ADDITIONAL     PRIOR TO
                                            COMMON STOCK          TREASURY      PAID-IN      BECOMING
                                        SHARES        AMOUNT        STOCK       CAPITAL        A BDC

<S>                                    <C>         <C>          <C>           <C>          <C>        
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
  (loss) on
  investments

Unrealized gain
  (loss) on
  investments

Balance at Dec. 31,
  1998 ............................    5,417,665   $  108,353   $ (114,037)   $7,368,624   $ (118,874)
                                      ==========   ==========   ==========    ==========   ==========
</TABLE>

                                                                     (Continued)
The accompanying notes are a part of this statement.

                                      F-13
<PAGE>

                                  EQUITEX, INC.
                  Statements of Changes in Stockholders' Equity
                 For the Years Ended December 31, 1998 and 1997
                                    (Page 4)

<TABLE>
<CAPTION>
                                                                       ACCUM.
                                                                     REALIZED         ACCUM.
                                       ACCUM.        NET GAINS         UNREA-         TOTAL
                                        NET          FROM SALES      LIZED NET        STOCK-
                                       INVEST.       OF INVEST-     APPREC. ON       HOLDERS'
                                        LOSS           MENTS        INVESTMENTS       EQUITY
<S>                                <C>             <C>             <C>            <C>         
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
  (loss) on
  investments ..................                      1,108,340                      1,108,340

Unrealized gain
  (loss) on
  investments ..................                                     (1,056,054)    (1,056,054)
                                   ------------    ------------    ------------   ------------

Balance at Dec. 31,
 a1998 .........................   $(15,698,055)   $ 13,233,525    $   (691,307)  $  4,088,229
                                   ============    ============    ============   ============
</TABLE>


The accompanying notes are a part of this statement.

                                      F-14
<PAGE>

                                  EQUITEX, INC
                            Statements of Operations

                                                        FOR THE YEARS ENDED
                                                            DECEMBER 31,
                                                        1998           1997
                                                        ----           ----
Revenues
  Interest and dividends ......................... $     70,445   $     34,784
  Consulting and transaction fees ................      375,000        250,000
  Administrative fees ............................        2,371         26,495
  Miscellaneous ..................................           24         67,112
                                                   ------------   ------------
                                                        447,840        378,391
Expenses
  Salaries and consulting fees ...................      300,613        300,164
  Officers' bonus ................................    1,208,042        151,153
  Office rent ....................................       31,188         38,575
  Advertising and promotion ......................       48,612          2,951
  Legal and accounting ...........................      276,359         69,502
  Loss on indemnity agreement ....................         --          509,054
  Other general and administrative ...............      266,129        190,261
  Interest .......................................      101,002         87,005
  Bad debt expense ...............................      (34,435)       240,991
  Depreciation and amortization ..................       12,833         11,388
  Employee benefits ..............................      207,902        212,882
                                                   ------------   ------------
                                                     (2,418,245)     1,813,926
                                                   ------------   ------------
Net investment (loss) ............................   (1,970,405)    (1,435,535)
                                                   ------------   ------------

Net realized gain on investments and
  net unrealized gain on investments:

  Proceeds from sales of investments .............    1,712,802      1,508,629
  Less: cost of investments sold .................     (604,462)      (504,678)
                                                   ------------   ------------
    Realized gain from sales of investments ......    1,108,340      1,003,951
  Permanent write-down of investments ............        (--)           (--)
                                                   ------------   ------------


    Realized gain on investments before
       income taxes ..............................    1,108,340      1,003,951
                                                   ------------   ------------
    Net investment (loss) and realized gain
       on investments before income taxes ........     (862,065)      (431,584)

  Less: income taxes (provision) benefit
    Current ......................................         --          (56,307)
    Deferred .....................................      (63,180)        86,242
                                                   ------------   ------------
                                                        (63,180)        29,935
    Income tax benefit of
       NOL carryforward ..........................         --             --
                                                   ------------   ------------
                                                           --           29,935

                                                                     (Continued)
The accompanying notes are a part of this statement.

                                      F-15
<PAGE>



                                  EQUITEX, INC
                        Statements of Operations (Page 2)

                                                        FOR THE YEARS ENDED
                                                            DECEMBER 31,
                                                        1998           1997
                                                        ----           ----
Net investment (loss) and realized gain
  on investments after income taxes ..............     (925,245)      (401,649)

(Decrease) in unrealized
   appreciation of investments ...................   (1,056,054)    (5,773,305)
Less: income tax benefit applicable
   to (decrease) in unrealized
   appreciation of investments ...................      431,361      2,251,587
Add: allowance for income tax benefit ............     (431,361)          --
                                                   ------------   ------------
                                                     (1,056,054)    (3,521,718)
                                                   ------------   ------------

Net (decrease) in net assets
   resulting from operations ..................... $ (1,981,299)  $ (3,923,367)
                                                   ============   ============

(Decrease) in net assets per
   share - primary ............................... $       (.45)  $      (1.25)
                                                   ============   ============
Weighted average number of common shares .........    4,416,988      3,192,600
                                                   ============   ============


The accompanying notes are a part of this statement.

                                      F-16
<PAGE>

                                  EQUITEX, INC.
                            Statements of Cash Flows

                                                        FOR THE YEARS ENDED
                                                            DECEMBER 31,
                                                        1998           1997
                                                        ----           ----
Cash flows from operating activities:
  Change in net assets ........................... $ (1,981,299)  $ (3,923,367)
    Adjustments to reconcile change in net
    assets to net cash provided by
    operating activities:
      Depreciation and amortization ..............       12,833         11,388
      Provision for bad debts on notes
        receivable ...............................      (40,193)        40,193
      Realized (gain) on sale of investments .....   (1,108,340)    (1,003,951)
      Unrealized loss on investments .............    1,056,054      5,773,305
      Donation of stock of investee company ......         --            4,136
Proceeds from sales of investments ...............    1,712,802      1,508,629
Purchases of investments .........................   (1,388,626)      (309,551)
Issuance of notes receivable .....................     (943,365)      (458,402)
Collections of notes receivable ..................      177,083         20,250
Changes in assets and liabilities:
  (Increase) in interest receivable ..............      (26,433)        (3,799)
  (Increase) decrease in accounts
    receivable - broker ..........................       50,943        (68,975)
  (Increase) decrease in other assets ............      (23,119)         3,671
  (Increase) decrease in trade receivables .......        2,668        (71,331)
  (Increase) in contract deposit receivable ......         --         (150,000)
  Decrease in income taxes refundable ............         --          164,459
  Increase (decrease) in accounts payable
    and other accrued liabilities ................      (45,059)        65,908
  (Decrease) increase in accounts
    payable to brokers ...........................        5,758        (88,721)
  (Decrease) increase in deferred
    income taxes .................................       63,180     (2,337,830)
  Increase in bonus due to officer ...............      376,909        151,153
                                                   ------------   ------------

  Net cash (used) by operating
    activities ...................................   (2,098,204)      (672,835)

Cash flows from investing activities:
  Purchase of fixed assets .......................      (10,396)        (1,872)
  Proceeds from sale of fixed assets .............         --             --
                                                   ------------   ------------
Net cash (used) by investing activities ..........      (10,396)        (1,872)


                                                                     (Continued)
The accompanying notes are a part of this statement.

                                      F-17
<PAGE>

                                  EQUITEX, INC.
                        Statements of Cash Flows (Page 2)

                                                        FOR THE YEARS ENDED
                                                            DECEMBER 31,
                                                        1998           1997
                                                        ----           ----
Cash flows from financing activities:
  Common stock issued for cash ................... $  2,197,174   $    202,500
  Issuance of notes payable - officer ............      165,000        531,000
  Issuance of notes payable - other ..............      250,000        250,000
  Repayment of notes payable .....................     (480,271)      (353,401)
                                                   ------------   ------------
  Net cash provided by financing
    activities ...................................    2,131,903        630,099

Change in cash and cash equivalents ..............       23,303        (44,608)

Cash and cash equivalents,
  beginning of period ............................        9,187         53,795
                                                   ------------   ------------
Cash and cash equivalents,
  end of period .................................. $     32,490   $      9,187
                                                   ============   ============

Supplemental disclosures of cash flow information:
    Interest paid ................................ $     95,677   $     79,305
                                                   ============   ============

    Interest received ............................ $     42,217   $     30,985
                                                   ============   ============

    Income taxes paid (refunded) ................. $       --     $   (116,496)
                                                   ============   ============

Non-cash financing activities:
  Common stock issued for common
    stock of previously unrelated entity ......... $    565,639   $       --
                                                   ============   ============


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.



The accompanying notes are a part of this statement.

                                      F-18
<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements

Note 1:  SIGNIFICANT  ACCOUNTING POLICIES 
         Significant accounting policies are as follows:

a.   BUSINESS HISTORY
     Equitex, Inc. (the "Company") was incorporated under the laws of the State
of Delaware on January 19, 1983. On July 30, 1984 the Company elected to become
a "Business Development Company" (BDC), as that term is defined in the Small
Business Investment Incentive Act of 1980, which Act is an amendment to the
Investment Company Act of 1940. This change resulted in the Company becoming a
specialized type of investment company. Consistent with this change in type of
business entity, the Company changed its method of valuation of investments from
cost to fair value. On January 4, 1999, the Company withdrew its election to be
treated as a BDC subject to the Investment Company Act.

b.   INVESTMENT VALUATION
     The fair value method adopted in 1984 provides 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 arm's length
sale. Investments are carried at fair value using the following four basic
methods of valuation:

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 and duration of any restrictions as to resale, and other factors
which influence the market in which a security is purchased and sold. Such
method is to be 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 for 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

                                      F-19
<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements


Note 1:  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 a 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 no
established public or private market in the investee's securities.

c.   STATEMENT OF CASH FLOWS
     Consistent with the reporting requirements of a BDC, cash and cash
equivalents consist only of demand deposits in banks and cash on hand. Financial
statement account categories such as investments and notes receivable, which
relate to the Company's activity as a BDC, are included as operating activities
in the statement of cash flows.

d.   FURNITURE AND EQUIPMENT
     Expenditures for furniture and equipment and for renewals and betterments
which extend the originally estimated economic life of assets or convert the
assets to a new use are capitalized at cost. Expenditures for maintenance,
repairs and other renewals of items are charged to expense. When items are
disposed of, the cost and accumulated depreciation are eliminated from the
accounts and any gain or loss is included in the results of operations. The
provision for depreciation is calculated using the straight-line method over a
five or seven year life.

e.   SECURITIES TRANSACTIONS
     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.   REVENUE RECOGNITION
     Due to the uncertainty of collection, the Company recognizes all types of
consulting fee revenues from portfolio companies (except for RDM Sports Group)
as cash is received. All other types of revenues are recognized on the accrual
basis.

g.   ESTIMATES
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates. The estimate that is
particularly sensitive to future change is the determination of the fair value
of the Company's investments in and various receivables due from its investee
companies (see Note 1b., herein). Management believes that its estimates and
assumptions provide a reasonable basis for the fair presentation of the
Company's financial position and results of operations. F-20

                                      F-20
<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements


Note 1:  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

h.   CAPITAL STRUCTURE
     In February 1997, the Financial Accounting Standards Board issued SFAS No.
129, "Disclosure of Information about Capital Structure" ("SFAS No. 129"), which
requires all companies to disclose all relevant information regarding their
capital structure. The Company has adopted SFAS No. 129 in 1998. For both years
ended December 31, 1998 and 1997, there is no impact on the financial statements
or disclosures.

i.   SEGMENT REPORTING
     In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information" ("SFAS No.
131"), which amends the requirements for a public enterprise to report financial
and descriptive information about its reportable operating segments. Operating
segments, as defined in the pronouncement, are components of an enterprise about
which separate financial information is available that is evaluated regularly by
the Company in deciding how to allocate resources and in assessing performance.
The financial information is required to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. The disclosures required by SFAS No. 131 are effective
for all fiscal years beginning after December 15, 1997. The Company adopted SFAS
No. 131 in 1997. For both years ended December 31, 1998 and 1997, there is no
impact on the financial statements or disclosures.

j.   COMPREHENSIVE INCOME
     In June 1997, the Financial Accounting Standards Board issued SFAS No.
130,  "Reporting  Comprehensive  Income"  ("SFAS No.  130"),  which  establishes
standards  for the  reporting  of  comprehensive  income  for all  fiscal  years
beginning  after  December 15,  1997.  This  pronouncement  had no effect on the
Company since it is following the fair value accounting  guidelines required for
BDCs.

k.   PENSION AND OTHER POST RETIREMENT BENEFITS
     Statement of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pension and Other Post Retirement Benefits" is effective for
financial statements with fiscal years beginning after December 31, 1997.
Earlier application is permitted. The new standard revises employers'
disclosures about pension and other post retirement benefit plans but does not
change the measurement of recognition of those plans. SFAS No. 132 standardizes
the disclosure requirements for pensions and other post retirement benefits to
the extent practicable, requires additional information on change in the benefit
obligations and fair values of the plan assets that will facilitate financial
analysis, and eliminates certain disclosure previously required when no longer
useful. The Company adopted SFAS No. 132 in 1998, with no material impact on its
results of operations.

l.   DERIVATIVE  INSTRUMENTS  AND  HEDGING  ACTIVITIES  
     The FASB has recently issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133"). SFAS No. 133 established standards for recognizing all derivative
instruments including those for hedging

                                      F-21
<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements


Note 1:  SIGNIFICANT  ACCOUNTING POLICIES (CONTINUED) 

l.   DERIVATIVE  INSTRUMENTS AND HEDGING ACTIVITIES (CONTINUED) 
activities as either assets or liabilities in the statement of financial
position. The adoption of this standard during 1998 by the Company had no effect
on its financial position or results of operation.

m.   STOCK-BASED COMPENSATION
     Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"), was issued in October 1995 by the
Financial Accounting Standards Board. SFAS No. 123 provides an alternative
method of accounting for stock-based compensation arrangements, based on fair
value of the stock-based compensation utilizing various assumptions regarding
the underlying attributes of the options and stock rather than the existing
method of accounting for stock-based compensation which is provided in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB No. 25"). The Financial Accounting Standards Board encourages
entities to adopt the fair-value based method but does not require adoption of
this method. The Company will continue its current accounting policy under APB
No. 25 but has adopted the disclosure-only provisions of SFAS No. 123 for any
options and warrants issued to non-employees, directors or consultants.

     Accordingly, no compensation expense was recognized in the statement of
operations for the options granted during June 1998 to an officer,
officer/director, and employees.

     The following represents the pro-forma change in net assets and pro-forma
change in net assets per share (primary) had the Company elected to account for
these options using the fair-value based method beginning in June 1998. In
estimating the pro-forma compensation expense for the options granted during the
year ended December 31, 1998, the Company used the Black-Scholes option pricing
model, a risk-free interest rate of 6.5%, expected dividend yield of zero,
expected option lives of 5 years and expected volatility of 83%. The estimated
pro-forma results may not be representative of actual results had the Company
accounted for equity awards using the fair-value based method. 

                                                                        1998

         Net (decrease) in net assets - as reported                 $(1,981,299)
         Pro-forma net (decrease) in net assets                      (2,724,153)
         (Decrease) in net assets per share - primary
            as reported                                                    (.45)
         Pro-forma (decrease) in net assets per share -
            primary                                                        (.62)

n.   INCOME TAXES
     The Company is not entitled to the special treatment available to regulated
investment companies and is taxed as a regular corporation for Federal and state
income tax purposes. Until 1986, the Company had made no provision for income
taxes because of financial statement and tax losses. Effective January 1, 1993,
the Company adopted FASB Statement No. 109, "Accounting for Income Taxes". The
adoption of the new accounting statement had no significant effect on the tax
provision or net income for 1993.

                                      F-22
<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements


Note 1:  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

o.   RECLASSIFICATIONS
     Certain reclassifications have been made to the December 31, 1997 financial
statements to conform to the December 31, 1998 presentation.

p.   NET ASSETS PER SHARE
     In accordance with the fair value accounting method used by regulated
investment companies, net assets (total stockholders' equity) per share at
December 31, 1998 and 1997 were as follows:

                            NUMBER OF SHARES
      BASIS               1998           1997           1998           1997
                          ----           ----           ----           ----

      Primary           5,384,315      3,461,115        $.74           $1.03
                        =========      =========        ====           =====

      Fully diluted     6,156,015      3,772,660        $.65           $ .95
                        =========      =========        ====           =====

Note 2:  DETAIL OF RECEIVABLES AND SOURCES OF REVENUE

a.   RECEIVABLES
     Receivables are from the following types of companies at December 31, 1998
and 1997, respectively.

                                       PORTFOLIO COMPANIES

                               CONTROLLED   AFFILIATED    OTHER         TOTAL

1998
Notes receivable               $1,123,284    $56,575     $45,473     $1,225,332
Interest receivable                29,843      1,829       2,292         33,964
Trade receivables                 111,287     11,427      43,277        165,991
Less: allowances for
  uncollectible receivables        (5,527)    (7,685)    (46,423)       (59,635)
                               ----------    -------     -------     ----------
                               $1,258,887    $62,146     $44,619     $1,365,652
                               ==========    =======     =======     ==========
1997
Notes receivable               $  401,928    $56,575     $    --     $  458,503
Interest receivable                 3,917      1,819          --          5,736
Trade receivables                 123,283     41,413          --        164,696
Less:  allowances for
  uncollectible receivables       (52,913)   (41,157)         --        (94,070)
                               ----------    -------     -------     ----------
                               $  476,215    $58,650     $    --     $  534,865
                               ==========    =======     =======     ==========

     Included in notes, interest, and accounts receivable above are amounts
totaling $1,271,542 and $534,865 at December 31, 1998 and 1997, respectively,
which have been valued at fair value and whose collectibility cannot be
determined due to future events (such as the success of investees'
public/private offerings), the outcome of which cannot be determined at this
time.

b.   SOURCES OF REVENUES
     Sources of revenues are from the following types of companies for the year
ended December 31, 1998 and 1997, respectively.

                                      F-23
<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements


Note 2:  DETAIL OF RECEIVABLES AND SOURCES OF REVENUE (CONTINUED)

b.   SOURCES OF REVENUES (CONTINUED)

                                    PORTFOLIO COMPANIES
                          CONTROLLED    AFFILIATED      OTHER           TOTAL
1998
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
                           ========      ========       ======         ========

1997
Interest and other
  income                   $  3,917      $ 88,967       $9,012         $101,896
Consulting/transaction
  fees                      250,000            --           --          250,000
Administrative fees              --        26,176          319           26,495
                           --------      --------       ------         --------
                           $253,917      $115,143       $9,331         $378,391
                           ========      ========       ======         ========

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

Note 3:  INVESTMENTS

     Investments consist of holdings of securities in and receivables of
publicly and privately held companies. The Company has representation on the
boards of directors of four of its investee companies. Several investments are
in companies in which there is either direct or indirect ownership or control of
five percent or more of the outstanding voting shares.

a.   INVESTMENT IN RDM SPORTS GROUP (FORMERLY ROADMASTER INDUSTRIES, INC.)
     On August 29, 1997, RDM Sports Group (RDM) and all of its operating
subsidiaries filed concurrent Chapter 11 petitions with the U.S. Bankruptcy
Court. As a result of this, the fair market value of this investee company
dropped to almost zero as reflected in the Schedule of Investments, herein. The
Company has also reserved 100% of its $7,685 trade receivable from RDM at
December 31, 1998.

     During 1998 the Company was included as a alleged defendant in two class-
action lawsuits filed by shareholders of RDM Sports Group following RDM's
bankruptcy filing.  The Company intends to seek dismissal of both cases and to
vigorously defend these actions.

     During July of 1997, prior to the bankruptcy filing, the Company sold
127,600 shares of RDM on the open market for cash proceeds of $126,366.

     During 1998 and 1997, the Company recorded administrative fees from RDM
totaling $25,893 and $649, respectively. At December 31, 1998, the Company is
holding a note receivable from Hutch Sports USA (an RDM subsidiary) with a face
value of $564,755 (See Note 3 b. below). The note is recorded at an estimated
net realizable value from bankruptcy proceeds of $56,475.

                                      F-24
<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements


Note 3:  INVESTMENTS (CONTINUED)

b.  INVESTMENT IN INTRANET SOLUTIONS, INC. (FORMERLY MACGREGOR SPORTS & 
    FITNESS, INC.)
     On July 31, 1996, MacGregor Sports & Fitness, Inc. merged with Technical
Publishing Solutions, Inc. (TPSI) through a tax-free exchange of common stock.
As part of the merger agreement the Company agreed to indemnify the new entity
up to a maximum limit of $2,000,000 against any subsequent claims relating to
MacGregor (pre-merger).

     On October 31, 1997, the Company entered into an agreement with IntraNet
relative to this indemnification agreement whereby the Company agreed to
purchase a certain note receivable in the amount of $564,755 which IntraNet had
from an RDM subsidiary, Hutch Sports USA (Hutch). Hutch had filed bankruptcy on
August 29, 1997 (see Note 3a. above). The Company paid $414,755 of the purchase
amount to IntraNet during 1997. The remaining balance of $150,000 was paid on
January 21, 1998. Also, the Company's President agreed to resign from the Board
of IntraNet and both IntraNet and the Company agreed to terminate the
indemnification agreement under which the Company's maximum exposure was
$2,000,000, and agreed to mutually release each other from any claims relating
to this agreement and certain other items.

     During 1997, the Company sold and/or forfeited 171,835 shares of IntraNet
for $814,653 used to pay the above mentioned indemnity settlement and also raise
working capital, resulting in an ownership position of 473,250 shares (or 5.7%)
at December 31, 1997. During 1998, the Company sold 284,665 shares of IntraNet
for proceeds of $1,240,613 used to provide working capital, resulting in an
ownership position of 188,585 shares (less than 5%) at December 31, 1998.

c.   INVESTMENT IN VP SPORTS, INC.
     In December of 1997, the Company received 2,000,000 shares (or 88%) of the
common stock of VP Sports, Inc., a private company formed for the purpose of
seeking out and acquiring an operating entity in the sporting goods/recreation
industry. The stock was received in exchange for consulting services and an
acquisition letter of intent valued at $250,000. The Company's president is also
the President and a director of VP. During 1998 the Company loaned $103,131 to
VP for working capital purposes, of which $38,865 was repaid. In September of
1998 VP Sports, Inc. entered into an agreement to purchase a Canadian bicycle 
manufacturer.

d.   INVESTMENTS IN FIRST TELESERVICES CORPORATION/FIRST TELEBANC CORPORATION
     On August 13, 1998, the Company acquired all of the outstanding stock of
First TeleServices Corporation (FTC) in exchange for 625,000 shares of the
Company's common stock. As a result of the transaction, FTC became a
wholly-owned subsidiary of the Company.

     FTC is a fee-based financial services organization consisting of a database
marketing division, consumer finance division, an inbound/outbound calling
center, and an operations center. FTC has developed strategic

                                      F-25
<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements


Note 3:  INVESTMENTS (CONTINUED)

d.  INVESTMENTS IN FIRST  TELESERVICES  CORPORATION/FIRST  TELEBANC  CORPORATION
    (CONTINUED) 
alliances with a number of nationwide organizations to outsource the
products and services it offers.

     The Board of Directors used the Board appraisal method of valuation for
this investment and recorded FTC at $565,639, which was the net asset value of
FTC's underlying assets and liabilities at the acquisition date. Since the date
of the acquisition, the Company has loaned $160,000 to FTC for working capital
purposes.

     During 1998 the Company acquired for $300,000 a 9.9% interest in First
TeleBanc Corporation ("First TeleBanc"), a closely-held Florida corporation.
First TeleBanc was incorporated in March of 1997 for the purpose of becoming a
one-bank holding company and to acquire 100% of the outstanding stock of Boca
Raton First National Bank. The acquisition by First TeleBanc of all of the
outstanding stock of Boca Raton First National Bank was completed on December
30, 1998. As a one-bank holding company, First TeleBanc may engage in any
activity which the Board of Governors of the Federal Reserve System has
previously approved or approves subsequent to an application.

e.   INVESTMENT IN TRIUMPH SPORTS GROUP
     During the first and second quarter of 1998, the Company received 1,000,000
and 500,000 shares, respectively, of the common stock of Triumph Sports Group, a
private company formed for the purpose of seeking out and acquiring operating
entities in the non-manufacturing licensed and supplemental segments of the
sporting goods and leisure-time industry. The stock was received in exchange for
consulting services valued at $375,000. The Company's president is also the
President and a director of Triumph Sports.

     During 1997 and 1998 the Company loaned $401,927 and $561,569 to Triumph,
respectively, which has been used by Triumph primarily to acquire four retail
vitamin/health supplement centers in south Florida. $64,478 of these notes and
$39,939 of interest were repaid by Triumph 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.

Note 4:  COMMON STOCK

a.   STOCK OPTIONS
     During 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").

     Effective April 1, 1993 the Company's Board of Directors granted options to
purchase a total of 211,545 shares of common stock under the Option Plan to an
officer/director and an officer of the Company. These options are exercisable at
$3.00 per share and expire March 31, 1998. The Option Plan and the options
granted thereunder were approved by the Company's stockholders on December 28,
1993.

                                      F-26
<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements


Note 4:  COMMON STOCK (CONTINUED)

a.   STOCK OPTIONS (CONTINUED)
     Under the terms of the Directors' Plan, each non-employee director of the
Company was automatically granted as of July 5, 1995, an option to purchase
50,000 shares of common stock at an exercise price of $3.00 per share. These
options expire ten years from the date of grant. The Directors' Plan and the
options granted thereunder were also approved by the Company's stockholders on
December 28, 1993.

     In June 1998, the Board of Directors also granted the following stock
options to officers and employees of the Company:

OPTION TYPE              TO WHOM               NO. OF SHARES      OPTION PRICE

Incentive                Officer                   31,000             $3.19
Non-qualified            Officers                 478,655             $3.19
Non-qualified            Employees                 28,800             $3.19

     All of these options were issued at the closing stock price at date of
grant and all options expire five years from date of grant. During 1998 101,000
shares of the non-qualified options issued to officers and employees,
respectively, were exercised.

b.   TREASURY STOCK
     On October 21, 1992, the Board of Directors authorized the Company to
repurchase up to 500,000 shares of its own common stock in the open market.
During 1996 the Company purchased 26,500 shares of its common stock on the open
market for $89,191.

c.   REVERSE STOCK SPLIT
     The Company's stockholders approved a reverse stock split effective January
2, 1996 whereby each two shares of $.01 par value common stock were exchanged
for one share of $.02 par value common stock. Information included herein has
been adjusted to reflect this reverse split.

d.   SALE OF STOCK TO OFFICER
     During December of 1997, the Company's President purchased 270,000 shares
of common stock at $.75 each.

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

                SHARE PRICE                         NUMBER SOLD

                    $.75                               330,000
                    1.16                               350,000
                    3.19                                24,000
                    3.25                               306,000

                                      F-27
<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements

Note 4:  COMMON STOCK (CONTINUED)

d.   SALE OF STOCK TO OFFICER (CONTINUED)
     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 close of the private placement on May 21, 1998,
499,200 shares were sold.

On June 29, 1998 the Company's Board of Directors authorized an additional
private placement of up to 750,000 of the Company's common stock at $3.25 per
share. As of December 31, 1998, 306,000 shares were sold under this placement.

Note 5:  INCOME TAXES

     The provision (benefit) for income taxes for the years ended December 31,
1998 and 1997, consists of the following:

                                                     DECEMBER 31,
                                            1998                      1997
Current:
  Federal and state                        $    --                  $(56,307)
  Benefit of net operating loss
   carryback/carryforward                       --                        --
                                           -------                  --------
  Total current (provision) benefit        $    --                  $(56,307)
                                           =======                  ========

Deferred:
  Accrued unpaid bonus                     $    --                  $(48,930)
  Bad debt expense                              --                    93,948
  Other                                     63,180                    41,224
                                           -------                  --------
  Total deferred (provision) benefit       $63,180                  $ 86,242
                                           =======                  ========

     Deferred taxes reflect the tax effects of differences between the amounts
recorded as assets and liabilities for financial reporting purposes and the
amounts recorded for income tax purposes. The tax effects of significant
temporary differences giving rise to deferred tax assets and liabilities are as
follows:

                                                     DECEMBER 31,
                                            1998                      1997
Deferred tax assets:
Accrued items not currently deductible     $263,140                $203,417
Excess "tax" basis on investment                 --                  92,964
Tax benefit of unrealized loss on
   investments                              431,361                      --
Valuation allowance                        (694,501)                     --
                                           --------                --------
Total deferred tax assets                        --                 296,381
                                           --------                --------

Deferred tax liabilities:
Tax on unrealized gain on investments            --                (233,201)
                                           --------                --------
Total deferred tax liabilities                   --                (233,201)
                                           --------                --------
Net deferred tax asset (liability)         $     --                $ 63,180
                                           ========                ========

     Recognition of a deferred tax asset is allowed if future realization is
more-likely-than-not. The Company has provided a full valuation allowance for
its deferred tax assets (relative to accrued items not currently deductible and
unrealized loss on investments) because its realization is not considered
more-likely-than-not.

                                      F-28
<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements


Note 5:  INCOME TAXES (CONTINUED)

     Tax years prior to 1994 are "closed" to adjustments by the running of the
statute of limitations.

Note 6:  RELATED PARTY TRANSACTIONS

a.   OFFICE RENTAL
     The Company rents office space on a month-to-month basis for $2,500 per
month from Beacon Investments, a partnership in which the Company's President
is the sole partner.

b.   BONUSES TO OFFICERS
     In November, 1989 the Board of Directors adopted a bonus arrangement
whereby the Company's President is entitled to an annual bonus equal to 3
percent of the Company's total assets as of each year end. All bonuses are paid
out of the Company's cash flow. In August 1998 the Company's Board of Directors
approved a new bonus arrangement with the Company's president as recommended by
an outside consulting firm, with the annual bonus to be calculated quarterly
based on a combination of 1 percent of the Company's assets and 5 percent of the
increase in the market value of the Company's common stock each quarter. The new
bonus arrangement is effective January 1, 1998. The bonus accrual at December
31, 1998 has been adjusted to reflect the terms of the new bonus arrangement.
The unpaid portion of these bonuses, amounts totaling $676,168 and $299,259 have
been accrued as a "Bonus to Officer" in the December 31, 1998 and 1997 balance
sheets, respectively. During 1997 the Company's Corporate Secretary received a
bonus of $6,744.

c.   DIRECTORS' FEES
     During 1998 and 1997 the Company paid $12,500 to each of its two outside
directors for their attendance at the meetings held in each year.

d.   NOTE PAYABLE TO OFFICER
     During 1998 the Company's President loaned the Company a total of $165,000
primarily for working capital needs. Of this amount $22,672 was repaid during
the year leaving an unpaid balance of $142,328 at December 31, 1998. These
uncollaterialized loans are all due on demand and bear interest at 8% per annum.

e.   NOTE PAYABLE TO RELATED ENTITY
     A related entity loaned the Company $100,000 in August 1997 pursuant to a
note agreement, which is due on demand, pays interest at 12% per annum and is
collateralized by 25,000 common shares of IntraNet Solutions. Of this amount,
$30,000 was repaid during 1998 leaving an unpaid balance at December 31, 1998 of
$70,000.

Note 7:  CONTRACT DEPOSIT RECEIVABLE

     The Company is the plaintiff in an action whereby it is seeking to recover
$300,000 deposited into escrow pending the receipt of documentation needed
pursuant to a contractual agreement. The defendant never delivered the required
documents. This item has been recorded at an estimated net realizable value of
$150,000 under "Contract Deposit Receivable", herein.

                                      F-29
<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements


Note 8:  OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF CREDIT RISK 

     The Company is party to financial instruments with off-balance-sheet risk
in the normal course of business to meet financing needs of its portfolio
companies. These financial instruments consist primarily of financial guarantees
including pledges of the Company's investment portfolio. These instruments
involve, to varying degrees, elements of credit risk in excess of the amount
recognized in the financial statements.

     At December 31, 1998, the Company's primary concentration of credit risk
relates to its investments in certain portfolio companies, certain of which are
highly leveraged companies within the United States and which are involved in
the sporting goods and manufacturing industries. Consideration was given to the
financial position of these portfolio companies when determining the appropriate
fair values at December 31, 1998 and 1997.

Note 9:  RETIREMENT PLAN FOR OFFICER

     As part of the President's total compensation package, the Company
purchased a whole life insurance policy on April 1, 1992 in order to provide
compensation for the President's retirement. The Company pays an annual premium
of $105,413 per year for 7 years (ending March 31, 1999) 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 spouse. Upon retirement, provided the President
is at least age sixty-five, the cash surrender value and death benefit rider
become the President's property.

     For the year ended December 31, 1998, the Company paid $105,413 in premiums
and $59,586 of additional compensation to the President for related income
taxes.

Note 10: SUBSEQUENT EVENTS

     Since December 31, 1998, the Company has sold an additional 384,000 shares
of its June 29, 1998 private placement of common stock at $3.25 per share to
unrelated private investors.

     Since December 31, 1998, the Company has loaned $70,000 and $30,000 to VP
Sports, Inc. and Triumph Sports Group pursuant to note agreements which are
uncollateralized, due on demand and pay interest at 10% per annum.

     Since December 31, 1998 the Company has loaned $325,000 to First
TeleServices Corporation pursuant to note agreements which are uncollateralized,
due on demand and pay interest at 10% per annum. The Company has also loaned
$200,000 to First TeleBanc under similar terms.

     On January 5, 1999, the Registrant's two independent directors each
received options to purchase 158,700 shares of the Registrant's common stock at
an exercise price of $6.75 per share expiring on January 5, 2004.  On the same
date under the 1999 plan, the two independent directors wre granted an 
additional 86,800 options each (exercisable at $6.75 per share) and the oficers
and employes of the Company were granted a total of 509,000 options at the same
exercise price.


                                      F-30
<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements


Note 10: SUBSEQUENT EVENTS (CONTINUED)

     During the first quarter of 1999 the Company issued the following 6%
convertible preferred stock:

     SERIES                   NUMBER SHARES                 PROCEEDS

       A                           900                     $  900,000
       B                           600                        600,000
       C                           600                        600,000
                                                           ----------
                                                           $2,100,000

     The preferred stockholders may convert their stock into common shares at
65% of the current market quote on common at the date of conversion. The Company
is required to convert the preferred stock into common stock at the 3 year
anniversary date.




                                      F-31
<PAGE>


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



<TABLE>
<CAPTION>
COLUMN A                         COLUMN B         COLUMN C          COLUMN D       COLUMN E
                                                  ADDITIONS

                                  BALANCE               CHARGED                    BALANCE
                                 BEGINNING    CHARGED   TO OTHER                   AT END
                                     OF      TO COSTS/  ACCOUNTS-     DEDUC-         OF
                                   PERIOD    EXPENSES   DESCRIBE      TIONS        PERIOD


<S>                               <C>        <C>        <C>         <C>           <C>     
For the year ended
  Dec. 31, 1998:
Allowance for un-
collectible accounts
  Notes receivable ............   $ 40,293   $   --     $           $(40,193)     $    100
  Interest receivable .........         35      1,795                     --         1,830
  Accounts receivable .........     53,742      3,936                     --        57,705

For the year ended
  Dec. 31, 1997:
Allowance for un-
collectible accounts
  Notes receivable ............   $    100   $ 40,193   $             $   --      $ 40,293
  Interest receivable .........         35       --                       --            35
  Accounts receivable .........      2,943     50,799                     --        53,742
</TABLE>



The accompanying notes are a part of this schedule.

                                       S-1