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, 1996

           / /      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:  $632,765

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant  was  $6,023,320  based on the last  sale  price of the  Registrant's
common  stock on March 26,  1997,  ($2.25 per share) as reported by the National
Association of Securities Dealers Automated Quotation System/National Market
System.

The issuer had  3,191,115  shares of common  stock  outstanding  as of March 26,
1997.

Documents incorporated by reference: NONE

Transitional Small Business Disclosure Format:  Yes / /  No /X/
<PAGE>

                                  EQUITEX, INC.
                                   FORM 10-KSB

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

(a) Business Development

     (1) Equitex,  Inc. (the  "Registrant")  is a business  development  company
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 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 is 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 is to
achieve  long-term  capital  appreciation,  rather than current  income,  on its
investments.  There is no assurance that the Company's investment objective will
be achieved.

     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. The Registrant has
three investee companies to which it currently provides  management  assistance.
An  investee  company  is a company in which the  Registrant  has  invested  and
generally is a new, financially troubled or otherwise qualified company.

     On  December  12,  1996,  the  Registrant  announced  that it  intended  to
implement a withdrawal of its election as a Business Development Company ("BDC")
under the Investment Company Act. The Registrant's Board of Directors instructed
its  management  to prepare a detailed  plan which will  address  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.  While the  Registrant is currently  working on a
detailed withdrawal plan,  management of Registrant believes any such withdrawal
would  require  the   decertification   to  take  place  concurrently  with  the
acquisition  of an  operating  company.  As of the  filing  of the  report,  the
Registrant  has been unable to  identify a suitable  acquisition  candidate  and
continues to work on the plan for decertification.(See Item 1.(b)(8) "Regulation
- Business Development Companies" below).

     With its acquisition of Roadmaster Industries, Inc. in 1987, the Registrant
began  concentrating its efforts in acquiring  interests in more mature investee
companies,  in some cases, through asset-based financing  transactions.  In that
regard,  the  Registrant  has devoted more of its time to  providing  managerial
assistance to fewer  companies,  most of which time over the past four years has
been devoted to current  investees  RDM Sports  Group,  Inc.  (f/k/a  Roadmaster
Industries,  Inc.) and IntraNet  Solutions,  Inc.  (f/k/a  MacGregor  Sports and
Fitness,  Inc.),  which  constitute a  significant  portion of the  Registrant's
investment  portfolio.  The  President  of the  Registrant  is  President  and a
director of RDM Sports Group and is a director of IntraNet Solutions.

                                        1

<PAGE>

     The  Registrant's  largest  investee  company  is RDM  Sports  Group,  Inc.
("RDM"),  the  value  of  which  comprised  58% of the  Registrant's  investment
portfolio at December 31, 1996. RDM is a leading  producer of fitness  equipment
and is a leading producer and distributor of toys and team sports equipment. The
trademarks and brand names under which RDM currently sells its products  include
Flexible Flyer,  Vitamaster,  MacGregor,  DP, Hutch, Reach and Forster. On March
11, 1996,  RDM announced  that it had completed the sale of its  Nelson/Weather-
Rite camping division to Brunswick Corporation (NYSE: BC) for cash consideration
of $120  million and used the net proceeds  from the sale to reduce  outstanding
bank indebtedness. On September 6, 1996, RDM announced that it had completed the
sale of its bicycle  division,  including  the Flexible  Flyer line of sleds and
wagons,  to Brunswick for cash  consideration of approximately  $200 million and
used  the  net  proceeds  to  reduce  outstanding  indebtedness,  including  the
repayment of approximately $90 million of 11 3/4% Senior Subordinated Notes, and
make funds available for reinvestment in RDM's remaining toy and fitness-related
businesses,  or for general  corporate  purposes.  RDM is listed on the New York
Stock Exchange where it is traded under the symbol "RDM". A significant  portion
of the Registrant's time is spent working with RDM.

     On July  31,  1996,  MacGregor  Sports  and  Fitness,  Inc.  and  Technical
Publishing  Solutions,  Inc.  completed a merger through a tax-free  exchange of
common  stock and the  surviving  entity was renamed  IntraNet  Solutions,  Inc.
("IntraNet").  IntraNet  provides  integrated  solutions for the  management and
distribution  of business  critical  information  contained in  documents  using
proprietary   and  standard   internet   technologies.   Concurrent   with  this
transaction,  the Registrant  converted all of its outstanding debt,  consulting
fees and interest due totaling  $688,756 into 309,782 shares of MacGregor Sports
and  Fitness  common  stock.  Prior  to the  merger,  1,000  shares  of  Class C
Convertible Preferred stock owned by the Registrant were automatically converted
into  1,000,000  shares of  MacGregor  Sports  and  Fitness  common  stock.  The
Registrant  received the Class C  Convertible  Preferred  shares on May 10, 1995
when the Registrant elected to convert $1,000,000  principal amount of loans due
the Registrant by MacGregor Sports and Fitness into the Class C Preferred stock.
At the time the Class C Preferred shares were converted to common stock, $70,000
in dividends  had  accumulated  which amount was  subsequently  paid with 26,515
shares of common  stock.  Following the merger and a subsequent 4 for 1 reverse-
split  declared by IntraNet on October 15, 1996,  the  Registrant  owned 645,085
shares of IntraNet common stock, or approximately  9% of the outstanding  shares
at  December  31,  1996,  which  comprised  32% of the  Registrant's  investment
portfolio as of that date.

     On January 2, 1996,  a reverse  stock split  approved  by the  Registrant's
stockholders  on December 18, 1995 became  effective and every two shares of the
Registrant's  $0.01 par value common stock were exchanged for one share of newly
created $0.02 par value common stock (1 for 2 reverse stock split). As a result,
the  Registrant's   authorized  shares  of  common  stock  were  decreased  from
15,000,000  to  7,500,000;  the  Registrant's  issued  shares from  6,448,930 to
3,224,465;  and outstanding shares from 6,435,230 to 3,217,615. The Registrant's
preferred  stock  remained  unchanged  with  2,000,000  $0.01 par  value  shares
authorized and no shares issued or outstanding.  All share amounts and per share
figures in this report for years prior to 1996 have been restated to reflect the
1 for 2 reverse split.

                                        2

<PAGE>

     (a)(2)(3)  During the year ended  December 31, 1996, 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.

(b) Business of Issuer

     (1)(2)(3)  The  Registrant  is  a  closed-end,  non-diversified  investment
company  under the  Investment  Company Act and has elected to become a business
development company under that act. The Registrant's  investment objective is to
achieve  long-term  capital  appreciation,  rather than current  income,  on its
investments. There can be no assurance that this objective will be realized. The
Registrant's  investment decisions are made by its management in accordance with
policies  approved by its board of  directors.  The  Registrant  does not have a
registered  investment  advisor.  In addition,  the Registrant  does not operate
pursuant  to a written  investment  advisory  agreement  that  must be  approved
periodically by shareholders.  The Registrant relies solely upon its management,
particularly  its officers on a day to day basis,  and also on the experience of
its directors, in making investment decisions.

     In  accordance  with  this  objective,  the  Registrant  consults  with its
investees with respect to obtaining capital and offers managerial  assistance to
selected businesses that, in the opinion of the Registrant's management,  have a
significant potential for growth.

     In  addition  to  acquiring  investment  positions  in new  and  developing
companies,   the   Registrant   also  invests  in  more  mature   privately  and
publicly-held companies which the Registrant believes could be further developed
or revitalized, some of which may be experiencing financial difficulties.

     The Registrant  plans to take advantage of other  opportunities to maintain
and create  independent  companies with a significant  potential for growth. The
Registrant's  priorities  for the future will be to (1)  maximize  the value and
liquidity  of its present  investees,  (2)  increase  its cash flow,  sources of
income tax benefits  and  intermediate  term value  through the  acquisition  of
securities or assets of more established companies,  (3) make new investments in
more mature companies,  and (4) to a lesser degree, make a few small higher risk
investments in new and developing companies.

     The  Registrant has no fixed policy as to the business or industry group in
which it may invest or as to the amount or type of  securities or assets that it
may  acquire.  During  the  Registrant's  first  several  years  as  a  business
development  company,  the  Registrant  made  investments  primarily  in new and
developing  companies whose securities had no established public market. Most of
these companies were unable to obtain  significant  capital on reasonable  terms
from conventional sources. However, the Registrant, over the past several years,
has been seeking out and evaluating  investments in more mature  companies.  The
Registrant  endeavors to assist its investee  companies and management  teams in
devising realistic business strategies and obtaining necessary financing.

     The  Registrant  does  not  currently  intend  to pay cash  dividends.  The
Registrant  may  elect  to make  in-kind  distributions of its larger investment

                                        3

<PAGE>

positions  to  its   stockholders   when  its  Board  of  Directors  deems  such
distributions appropriate.  Only one such distribution has been made to date and
there are no current plans for such a distribution.

     The Registrant believes that the key to achieving its objectives is finding
and  supporting  business  executives  who  have  the  ability,  entrepreneurial
motivation  and  experience  required  to  build  independent  companies  with a
significant potential for growth. In the Registrant's view, it is more difficult
to locate and attract capable  executives  than to identify,  select and finance
promising investment opportunities.  The Registrant believes that its ability to
attract  capable  executives  is  enhanced  by its  policy  and  reputation  for
maintaining  the  independence of its investee  companies,  supporting them when
appropriate  in  contracts,  arranging  or  supplying  necessary  financing  and
assisting  the   investee's   management   in  obtaining  a  meaningful   equity
participation in the investee.

     Business  development is by nature a high-risk  activity that can result in
substantial  losses.  The  companies  in which the  Registrant  invests and will
invest,  especially in the early stages of an  investment,  often lack effective
management,  face operating problems and incur substantial losses.  However, the
Registrant,  at this time,  is seeking out and  evaluating  investments  in more
mature companies.  Potential investees include established  businesses which may
be  experiencing  severe  financial  or  operating  difficulties  or may, in the
opinion  of  management,  be  ineffectively  managed or have the  potential  for
substantial growth or reorganization into separate independent companies.

     The Registrant attempts to reduce the level of its investment risks through
one or more of the following:

     (i) carefully investigating potential investees;

     (ii) financing only what it believes to be practical business opportunities
as contrasted with research projects;

     (iii) selecting effective, entrepreneurial management for its investees;

     (iv) providing active managerial assistance and support to investees;

     (v)  obtaining,  alone or with  others,  actual or  working  control of its
investees;

     (vi)  supporting  the  investees  in  obtaining   necessary  financing  and
arranging  major  contracts,  joint ventures or mergers and  acquisitions  where
feasible; and

     (vii)   maintaining   sufficient   capital   resources  to  make  follow-on
investments where necessary, appropriate and feasible.

Investment Policies
-------------------

     The  Registrant  has  elected to be  regulated  as a  business  development
company  and is  subject  to the  provisions  of  Sections  55 through 65 of the
Investment Company Act and also is subject to those provisions of the Investment


                                        4

<PAGE>

Company Act made applicable to business  development  companies by Section 59 of
the  Investment   Company  Act.  In  accordance  with  those   provisions,   the
Registrant's investment policies are defined and subject to certain limitations.
Furthermore,  under Section 58 of the Investment Company Act, the Registrant may
not withdraw  its election to be so regulated  without the consent of a majority
of its  stockholders.  If the  Registrant  were to withdraw  its  election to be
regulated as a BDC, it may be subject to full regulation under of the Investment
Company Act as if it were a closed-end  investment  company.  [See Item 1.(b)(8)
"Regulation - Business Development Companies."]

     The  Registrant has no fixed policy as to the business or industry group in
which it may invest or as to the amount or type of  securities or assets that it
may  acquire.  However,  the  Registrant,  at  this  time,  is  seeking  out and
evaluating investments in more mature companies.  The Registrant has in the past
and may  continue  to invest  in assets  that are not  qualifying  assets  under
Section 55 of the Investment  Company Act;  however,  no such additional  assets
have been  identified,  and the Registrant does not intend to fall below the 70%
requirement as set forth in Section 55 [See Item 1. Business (a)].

     The Registrant  endeavors to achieve its objectives in accordance  with the
following general policies:

     (i) The Registrant acquires securities through negotiated private placement
transactions  directly  from the  investee  company,  its  affiliates,  or third
parties, or through open market transactions.

     (ii) The Registrant  attempts to acquire,  if possible and consistent  with
the  Registrant's  capital  resources,  a large or  controlling  interest in its
investees through purchases of equity securities,  including warrants,  options,
and other rights to acquire such securities combined, if appropriate,  with debt
securities,   including  demand  notes,   term  loans  and  guarantees  or  debt
instruments or preferred stock  convertible  into, or with warrants to purchase,
equity securities.

     (iii) The Registrant may make  additional or "follow-on"  investments in or
loans to its investees  when  appropriate to sustain the investees or to enhance
or protect the Registrant's existing investment.

     (iv) The  Registrant  determines  the  length  of time it will  retain  its
investment by evaluating  the facts and  circumstances  of each investee and its
relationship   with  such  investee.   The  Registrant   generally  retains  its
investments for a relatively long period,  sometimes many years, with the result
that its rate of portfolio  turnover is low.  Investments are retained until, in
the opinion of the Registrant, the investee company has a demonstrated record of
successful operations and there is a meaningful public market for its securities
which reflects the investment value the Registrant  sought (or such a market can
be readily  established) or until the Registrant  decides that its investment is
not likely to result in future long-term capital appreciation.

Valuation - Policy Guidelines
-----------------------------

     The Registrant's Board of Directors is responsible for the valuation of the
Registrant's   assets  in   accordance  with   its  approved  guidelines.    The

                                        5

<PAGE>




Registrant's  Board of Directors is  responsible  for (1)  recommending  overall
valuation guidelines and (2) the valuation of specific investments.

     There is a range of values which are  reasonable  for an  investment at any
particular  time.  Fair  value is  generally  defined  as the price at which the
investment  in question  could change  hands,  assuming that both parties to the
transaction  are  under  no  unusual  pressure  to buy or  sell  and  both  have
reasonable  knowledge  of all the relevant  facts.  To increase  objectivity  in
valuing the securities,  the Registrant uses external  measures of value such as
public  markets  or  significant  third-party  transactions  whenever  possible.
Neither a long-term  work-out value nor an immediate  liquidation value is used,
and no increment  of value is included  for changes  which may take place in the
future. Two of the Registrant's  largest investee  companies,  RDM and IntraNet,
represent  89.9% of the total value of the  Registrant's  investment  portfolio.
Each is valued by the public market method, the Registrant's preferred method of
valuation.  RDM is  subject to lending  arrangements  and has bonds  outstanding
under which it has incurred  substantial  indebtedness  secured by substantially
all of such company's assets. As a result of its highly leveraged position,  RDM
has incurred  substantial interest expense and any event which causes diminished
cash flow may  adversely  affect its  ability to repay its loans.  IntraNet is a
company in the early stages of  development  which has yet to show a profit as a
publicly-traded  company,  a situation  management of the company predicts could
continue for the near term.  The  Registrant  may be required to make  follow-on
investments or assist such companies in obtaining  additional  financing or face
impairment  of  its  investments  in  such  companies.  Certain  members  of the
Registrant's  Board of  Directors  hold minor  equity  positions  in some of the
Registrant's investee companies and certain members of the Board hold officer or
director  positions with some of the Registrant's  investee  companies.  No such
equity position exceeds 5% of the investee company's outstanding securities.

     Valuations  assume  that  in  the  ordinary  course  of  its  business  the
Registrant  will eventually sell its position in the public market or distribute
its larger positions to its stockholders. Accordingly, no premiums are placed on
investments to reflect the ability of the Registrant to sell block  positions or
control of companies, either by itself or in conjunction with other investors.

     The Registrant uses four basic methods of valuation for its investments and
there are variations  within each of these methods.  The  Registrant's  Board of
Directors has determined  that the  Registrant's  four basic  valuation  methods
constitute fair value. As an investee  evolves,  its progress  usually  requires
changes in the  Registrant's  method of valuing the investee's  securities.  The
Registrant's  investment is separated  into its  component  parts (such as debt,
preferred  stock,  common  stock or  warrants),  and each  component  is  valued
separately  to arrive at total  value.  The Company  believes  that a mixture of
valuation  methods  is often  essential  to  represent  fairly  the value of the
Registrant's  investment position in an investee. For example, one method may be
appropriate  for the equity  securities of a company while another method may be
appropriate for the senior securities of the same company.

     The Cost Method  values an  investment  based on its  original  cost to the
Company,  adjusted for the  amortization  of original  issue  discount,  accrued
interest and certain  capitalized  expenditures  of the Company.  While the cost
method is  the simplest  method of  valuation, it is  often the most  unreliable

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<PAGE>

because it is applied in the early stages of an  investee's  development  and is
often not directly  tied to  objective  measurements.  The original  cost may be
adjusted  by the Board of  Directors  in good faith  taking  into  account  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 or sold. All  investments are carried at
cost until significant  positive or adverse events subsequent to the date of the
original  investment call for a change to another method.  Some examples of such
events  are:  (1) a  major  recapitalization;  (2) a  major  refinancing;  (3) a
significant third-party transaction;  (4) the development of a meaningful public
market for the  investee's  common stock;  and (5) material  positive or adverse
changes in the investee's business.

     The Appraisal  Method is used to value an investment  position based upon a
careful  analysis of the best  available  outside  information  when there is no
established  public or private  market in the investee  company's own securities
and it is no longer  appropriate  to use the Cost Method.  Comparisons  are made
using factors (such as earnings,  sales or net worth) that  influence the market
value of similar  public  companies  or that are used in the  pricing of private
transactions of comparable  companies.  Major discounts,  usually 50%, are taken
when  private  companies  are  appraised  by  comparing  them to similar  public
companies.  Liquidation  value  may be  used  when  an  investee  is  performing
substantially  below plan and it's  continuation  as an  operating  entity is in
doubt.  Senior  securities  are  discounted  at a rate  to  yield  15% to 40% to
projected  maturity.  Depending  on the  relative  uncertainty  of the timing of
ultimate collection,  15% is used for relatively predictable positions,  and 40%
for less  predictable  positions.  Under the Appraisal  Method,  the differences
among  companies  in  terms  of the  source  and type of  revenues,  quality  of
earnings, and capital structure, are carefully considered.

     An appraisal  value can be defined as the price at which the  investment in
question could change hands,  assuming that both parties to the  transaction are
under no unusual  pressure to buy or sell and both have reasonable  knowledge of
all the  relevant  facts.  In the case of  start-up  companies  where the entire
assets  may  consist of only one or more of the  following:  a  marketing  plan,
management  or  a  pilot   operation,   an  evaluation  may  be  established  by
capitalizing  the amount of the investment that could reasonably be obtained for
a predetermined percentage of the company. Valuations under the Appraisal Method
are  considered to be more  subjective  than the Cost,  Public Market or Private
Market Methods.

     The  Private  Market  Method  uses  third-party   transactions  (actual  or
proposed) in the investee's  securities as the basis for valuation.  This method
is  considered  to be an  objective  measure of value since it depends  upon the
judgment of a sophisticated,  independent investor.  Actual firm offers are used
as well as historical  transactions,  provided that any offer used was seriously
considered  and well  documented  and adjusted (if  applicable)  by the Board of
Directors in good faith taking into account 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 or sold.

     The Public Market Method is the preferred method of valuation when there is
an established public  market for the investee's common stock, since that market

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<PAGE>

provides the most  objective  basis for valuation.  In  determining  whether the
public market is sufficiently established for valuation purposes, the Registrant
examines  the  trading  volumes,  the number of  shareholders  and the number of
market  makers.  Under  the  Public  Market  Method,  as well as under the other
valuation  methods,  the  Registrant  discounts  investment  positions  that are
subject  to  significant  legal,   contractual  or  practical  restrictions  and
appropriate  adjustments  may be made by the Board of  Directors  in good  faith
taking into account such other 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 or sold.
When an investee's common stock is valued under the Public Market Method, common
stock equivalents such as presently  exercisable  warrants or options are valued
based on the  difference  between the exercise price and the market value of the
underlying common stock.  Although the Registrant  believes that a public market
could be created  for the  options  and  warrants  of certain of its  investees,
thereby  possibly  increasing  the value of these rights  above their  arbitrage
value, the Registrant does not reflect this possibility in its valuation.

Managerial Assistance
---------------------

     The  Registrant  believes  that  providing  managerial  assistance  to  its
investees is critical to its business development activities.  "Making available
significant managerial assistance" as defined in the Investment Company Act with
respect to a business  development  company such as the Registrant means (a) any
arrangement  whereby a business  development  company,  through  its  directors,
officers,  employees or general partners,  offers to provide,  and, if accepted,
does so provide,  significant  guidance and counsel  concerning the  management,
operations,  or business  objectives and policies of a portfolio company; or (b)
the exercise by a business  development company of a controlling  influence over
the  management or policies of a portfolio  company by the business  development
company  acting  individually  or as a part of a  group  acting  together  which
controls such  portfolio  company.  The Registrant is required by the Investment
Company Act to make significant  managerial  assistance  available at least with
respect to investee  companies that the Registrant  treats as qualifying  assets
for  purposes  of the 70% test.  The  nature,  timing and  amount of  managerial
assistance  provided  by the  Registrant  vary  depending  upon  the  particular
requirements of each investee company.

     The Registrant may be involved with its investees in recruiting management,
product  planning,  marketing and  advertising  and the development of financial
plans,  operating  strategies  and  corporate  goals.  In this  connection,  the
Registrant may assist clients in developing and utilizing accounting  procedures
to efficiently and accurately record transactions in books of account which will
facilitate  asset and cost  control  and the ready  determination  of results of
operations.  The  Registrant  also seeks  capital for its  investees  from other
potential investors and occasionally subordinates its own investment to those of
other investors. The Registrant introduces its investees to potential suppliers,
customers and joint venture  partners and assists its investees in  establishing
relationships  with commercial and investment  bankers and other  professionals,
including  management  consultants,  recruiters,  legal counsel and  independent
accountants.  The Registrant also assists with joint ventures,  acquisitions and
mergers.

                                        8

<PAGE>

     In  connection  with  its  managerial  assistance,  the  Registrant  may be
represented  by one or  more  of its  officers  or  directors  on the  board  of
directors of an investee.  As an  investment  matures and the investee  develops
management depth and experience, the Registrant's role will become progressively
less active.  However,  when the  Registrant  owns or on a pro forma basis could
acquire a substantial proportion of a more mature investee company's equity, the
Registrant  remains  active in and will  frequently  initiate  planning of major
transactions by the investee.  The Registrant's  goal is to assist each investee
company in establishing its own independent and effective board of directors and
management.

     (4)  Although  the  Registrant  does not  directly  compete with any single
company,  individual or  organization,  the Registrant is subject to substantial
competition  from business  development  companies,  venture capital firms,  new
product   development    companies,    marketing   companies   and   diversified
manufacturers,   most  of  whom  are  larger  than  the   Registrant   and  have
significantly  larger net worths and financial and personnel  resources than the
Registrant.  In addition, the Registrant competes with companies and individuals
engaged in the business of providing management consulting services.

     (5) The Registrant does not require raw materials.

     (6) The Registrant's business is not dependent upon a single customer, or a
few  customers,  the  loss of any one or more of  which  would  have a  material
adverse effect on the Registrant.

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

     (8)(9)  Regulation - Business  Development  Companies.  The  following is a
summary  description  of the  Investment  Company  Act as  applied  to  business
development  companies.  This  description  is  qualified  in  its  entirety  by
reference to the full text of the  Investment  Company Act and the rules adopted
thereunder by the SEC.

     The Small Business Investment Incentive Act of 1980 modified the provisions
of the  Investment  Company Act that are  applicable  to a company,  such as the
Registrant,  which elects to be treated as a "business development company." The
Registrant elected to be treated as a business  development  company on July 30,
1984. The Registrant may not withdraw its election  without first  obtaining the
approval of a majority of its outstanding voting securities.

     A  business  development  company  must  be  operated  for the  purpose  of
investing in the securities of certain  present and former  "eligible  portfolio
companies" and certain  bankrupt or insolvent  companies and must make available
significant  managerial  assistance  to  its  investee  companies.  An  eligible
portfolio company generally is a United States company that is not an investment
company  (except  for  wholly-owned   SBIC's  licensed  by  the  Small  Business
Administration)  and (1) does not have a class  of  securities  included  in the
Federal Reserve Board's over-the-counter margin list, (2) is actively controlled
by the  business  development  company  and  has an  affiliate  of the  business
development company on its board of directors,  or (3) meets such other criteria
as may be established by the SEC. Control,  under the Investment Company Act, is
presumed to exist where the business development company owns 25% or more of the


                                        9

<PAGE>

outstanding voting securities of the investee.

     The  Investment  Company Act  prohibits or restricts  the  Registrant  from
investing in certain  types of  companies,  such as brokerage  firms,  insurance
companies,  investment  banking firms and investment  companies.  Moreover,  the
Investment Company Act limits the type of assets that the Registrant may acquire
to "qualifying  assets" and certain assets necessary for its operations (such as
office furniture,  equipment and facilities) if, at the time of the acquisition,
less than 70% of the value of the  Registrant's  assets  consists of  qualifying
assets.  The  effect  of the  regulation  is to  require  that at least 70% of a
business  development  company's  assets be  maintained  in  qualifying  assets.
Qualifying  assets  include:  (1)  securities  of companies  that were  eligible
portfolio  companies at the time the Registrant  acquired their securities;  (2)
securities of bankrupt or insolvent  companies  that are not otherwise  eligible
portfolio  companies;  (3)  securities  acquired  as  follow-on  investments  in
companies that were eligible at the time of the Registrant's initial acquisition
of their securities but are no longer eligible, provided that the Registrant has
maintained a substantial  portion of its initial  investment in those companies;
(4) securities received in exchange for or distributed on or with respect to any
of the forgoing;  and (5) cash items,  government  securities  and  high-quality
short-term  debt. The  Investment  Company Act also places  restrictions  on the
nature of the transactions in which,  and the persons from whom,  securities can
be purchased  in order for the  securities  to be  considered  to be  qualifying
assets.  The Registrant  believes that, as of December 31, 1996, at least 90% of
its assets would be considered qualifying assets.

     The Registrant is permitted by the Investment  Company Act, under specified
conditions,  to issue  multiple  classes  of senior  debt and a single  class of
preferred stock if its asset coverage, as defined in the Investment Company Act,
is at least 200% after the  issuance  of the debt or the  preferred  stock.  The
Registrant  currently has no policy regarding issuing multiple classes of senior
debt or a class of preferred stock.

     The Registrant may issue in limited amounts,  warrants,  options and rights
to purchase its securities to its directors, officers and employees (and provide
loans to those persons for the exercise thereof) in connection with an executive
compensation  plan if certain  conditions are met. These conditions  include the
authorization of such issuance by a majority of the  Registrant's  voting shares
and the  approval  of a  majority  of the  independent  members  of the Board of
Directors and a majority of the directors who have no financial  interest in the
transaction.  The issuance of options,  warrants or rights to directors  who are
not also officers requires the prior approval of the SEC.

     The  Registrant  may  sell its  securities  at a price  that is  below  the
prevailing net asset value per share only upon the approval of the policy by the
holders of a majority  of its voting  securities,  including  a majority  of the
voting securities held by non-affiliated  persons, at its last annual meeting or
within  one year prior to the  transaction.  In  addition,  the  Registrant  may
repurchase  its Common  Stock,  subject to the  restrictions  of the  Investment
Company  Act.  The  Registrant  at this time does not  contemplate  selling  its
securities at a price below prevailing net asset value per share or repurchasing
its Common Stock.

                                       10

<PAGE>

     In accordance with the Investment Company Act, a majority of the members of
the  Registrant's  Board of Directors  must not be  "interested  persons" of the
Registrant  as that term is defined in the  Investment  Company Act.  Generally,
"interested  persons" of the Registrant  include all  affiliated  persons of the
Registrant and members of their immediate  families,  any "interested person" of
an underwriter or of an "investment  advisor" to the Registrant,  any person who
has acted as legal counsel to the Registrant  within the last two years,  or any
broker or dealer, or affiliate of a broker or dealer.

     Most of the  transactions  involving the  Registrant and its affiliates (as
well as affiliates of those affiliates) which were prohibited  without the prior
approval of the SEC under the  Investment  Company Act prior to its amendment by
the Small Business Investment  Incentive Act now require the prior approval of a
majority  of  the  Registrant's  independent  directors  and a  majority  of the
directors having no financial  interest in the  transactions.  The effect of the
amendment is that the Registrant may engage in certain  affiliated  transactions
that would be  prohibited  absent prior SEC  approval in the case of  investment
companies which are not business development  companies.  However,  transactions
involving certain closely  affiliated  persons of the Registrant,  including its
directors,  officers and employees, still require the prior approval of the SEC.
In general,  "affiliated  persons" of a person include: (a) any person who owns,
controls or holds with power to vote, more than five percent of the Registrant's
outstanding Common Stock (b) any director,  executive officer or general partner
of that  person,  (c)  any  person  who  directly  or  indirectly  controls,  is
controlled by, or is under common control with, that person,  and (d) any person
five  percent or more of whose  outstanding  voting  securities  are directly or
indirectly  owned,  controlled or held with power to vote, by such other person.
Such  persons  generally  must  obtain the prior  approval  of a majority of the
Registrant's  independent directors and, in some situations,  the prior approval
of the SEC, before engaging in certain transactions  involving the Registrant or
any company  controlled by the Registrant.  The Investment Company Act generally
does  not  restrict   transactions  between  the  Registrant  and  its  investee
companies.

     Finally,  notwithstanding  restrictions  imposed under  federal  securities
laws, it is anticipated that the Registrant will acquire  securities of investee
companies  pursuant to stock purchase  agreements or other  agreements  that may
further limit the Registrant's  ability to distribute,  or sell or transfer such
securities;  and, as a practical  matter,  even if such transfers are legally or
contractually permissible, there may be no market, or a very limited market, for
the securities and economic conditions may make the price and terms of a sale or
transfer unattractive.

     The Registrant  currently is considering  the withdrawal of its election to
be treated as a business  development  company.  Although the  Registrant is not
subject to many of the  provisions  of the  Investment  Company Act, it is still
difficult to take certain  action  without a lengthy SEC review  process  and/or
requiring  shareholder  approval.  In  addition,  the  Registrant's   investment
objectives  have  changed  since the election was made in 1984 and, as a result,
the  Registrant  increasingly  devotes  substantial  amounts  of time and effort
working  with  its  primary  investee,  RDM,  a  large  operating  company.  The
Registrant  is  presently   exploring  its  alternatives  should  it  choose  to
withdrawal its election, however, its investigation is in the preliminary stages
and there can be no assurance that it will choose to do so.

                                       11

<PAGE>

Other Securities Law Considerations
-----------------------------------

     In addition to the  above-described  provisions of the  Investment  Company
Act, there are a number of other provisions of the federal securities laws which
affect the Registrant's  operations.  For example,  restrictions  imposed by the
federal  securities laws, in addition to possible  contractual  provisions,  may
affect  adversely the ability of the Registrant to sell or otherwise  distribute
its portfolio securities.

     Most if not all securities which the Registrant acquires as venture capital
investments will be "restricted securities" within the meaning of the Securities
Act of 1933  ("Securities  Act") and will not be permitted to be resold  without
compliance  with the Securities  Act. Thus, the Registrant will not be permitted
to resell portfolio securities unless a registration statement has been declared
effective by the SEC with respect to such  securities or the  Registrant is able
to rely on an available exemption from such registration  requirements.  In most
cases the  Registrant  will  endeavor  to  obtain  from its  investee  companies
"registration  rights"  pursuant to which the Registrant would be able to demand
that an investee  company register the securities owned by the Registrant at the
expense  of the  investee  company.  Even if the  investee  company  bears  this
expense,  however, the registration of the securities owned by the Registrant is
likely to be a time-consuming process, and the Registrant always bears the risk,
because of these delays,  that it will be unable to resell such  securities,  or
that it will not be able to obtain an attractive price for the securities.

     Sometimes the Registrant  will not register  portfolio  securities for sale
but will seek to rely  upon an  exemption  from  registration.  The most  likely
exemption  available to the  Registrant  is section 4(1) of the  Securities  Act
which, in effect exempts sales of securities not involving a distribution of the
securities.  This exemption will likely be available to permit a private sale of
portfolio  securities,  and, in some cases,  a public sale, if the provisions of
Rule 144 under the Securities Act are  satisfied.  Among other things,  Rule 144
requires  that  securities  be sold in  "broker  transactions,"  and  imposes  a
two-year  holding  period  (one-year  after  April  1997)  prior  to the sale of
restricted securities.

     (10)  During  the  last two  years  the  Registrant  spent  no  amounts  on
Registrant-sponsored or customer-sponsored research and development activities.

     (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.

     (12) The  Registrant  currently  employs  five  persons,  four of which are
full-time employees.

                                       12

<PAGE>

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 and his wife are sole partners. 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.

(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 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 currently is not a party to any pending legal proceeding.


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

     On  December  16,  1996,  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:

<TABLE>
<CAPTION>
                                    For              Withhold Authority
                                 ---------           ------------------
    <S>                          <C>                     <C>
    Henry Fong                   1,460,166               1,087,117
    Russell L. Casement          1,463,705               1,083,578
    Aaron Grunfeld               1,463,925               1,083,358
</TABLE>

     Additionally,  the  following  proposal was 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, 1996.

<TABLE>
<CAPTION>
                            For         Against       Abstain        Non-Voted
                         ---------      -------       -------        ---------
    <S>                  <C>            <C>           <C>               <C>
    Shares Voted         2,487,846      31,982        27,455            -0-
</TABLE>

                                       13

<PAGE>

                                     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 National Market tier of
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.

<TABLE>
<CAPTION>
                                                        Last Sale
        Quarter ended                             High             Low
        -------------                             ----             ----
        <S>                                       <C>              <C>
        1995
        ----
        March 31, 1995                            $4.44            $2.82
        June 30, 1995                             $3.00            $2.50
        September 30, 1995                        $3.75            $2.50
        December 31, 1995                         $4.00            $2.56

        1996
        ----
        March 31, 1996                            $2.75            $2.31
        June 30, 1996                             $4.00            $2.13
        September 30, 1996                        $3.69            $3.00
        December 31, 1996                         $3.13            $1.66
</TABLE>

(b) Holders

     The number of record holders of the  Registrant's  Common Stock as of March
26, 1997, was 2,762 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  does  not  currently  intend  to pay cash  dividends.  The
Registrant  may elect to make  in-kind  distributions  of its larger  investment
positions to its  stockholders  when the  Registrant's  Board of Directors deems
such distributions  appropriate.  Because the Registrant does not intend to make
cash  distributions,  shareholders  would  need to sell  securities  distributed
in-kind,  when  and if  distributed,  in  order to  realize  a  return  on their
investment.

     An 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. The Board of Directors will review,  among other things,
the  investment  quality and  marketability  of the  securities  considered  for
distribution;  the impact of a distribution of the investee's  securities on its
customers, joint venture associates, other investors, financial institutions and
management;  tax  consequences  and the market  effects of an initial or broader
distribution  of  such  securities.    Securities  of  the  Registrant's  larger

                                       14

<PAGE>

investment  positions in more mature investee  companies with established public
markets are most likely to be considered for  distribution.  It is possible that
the  Registrant  may  make  an  in-kind  distribution  of  securities  that  are
substantially  illiquid irrespective of the distributee  stockholders' rights to
sell such securities.  Any such in-kind  distribution would require  shareholder
approval  only  if  the  distribution   represents   substantially  all  of  the
Registrant's  assets.  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.


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

     RESULTS OF  OPERATIONS.  Revenues for the year ended December 31, 1996 were
$632,765,  up 105% as compared to $308,190 for the year ended December 31, 1995.
The  increase  in  revenues  for 1996 over 1995 is  primarily  the result of the
Registrant receiving transaction fees and interest due from MacGregor Sports and
Fitness  through  a  conversion  of debt to equity  [See also Part 1 Item  1(a).
Business Development].  The Registrant received $144,000 in consulting fees from
RDM during 1995 which made up a majority of the  consulting  fee revenue  during
that year.  That  contract  expired in January 1996 and the  Registrant  did not
receive  such fees in 1996,  nor will it in 1997.  The  Registrant  may  receive
consulting fees on both a monthly contract basis as well as on a per transaction
basis when assisting investees with acquisitions,  refinancing or restructuring,
however, the timing,  nature and amount of these fees cannot be predicted.  With
the  expiration  of the RDM  contract  and the  absence of any  current  monthly
consulting  contracts,  the Registrant currently believes revenues for 1997 will
be lower as compared to 1996.

     The  realized  gain  on  investments  before  income  taxes  for  1996  was
$1,226,190  as  compared  to a gain of $31,232 in 1995.  Proceeds  from sales of
investments  was  significantly  higher  in 1996 than 1995 and the cost of those
investments  was  significantly  lower as a percentage  of the gain  producing a
higher  realized  gain  before  income  taxes  than in 1995.  During  1996,  the
Registrant  sold 497,000 shares of common stock and 87,000 warrants of MacGregor
Sports and Fitness accumulated  through open-market  purchases from 1992 through
1995 resulting in the  significantly  higher  realized gain for 1996.  While the
restrictions as to resale on many of the  Registrant's  investments  continue to
diminish,  the  opportunity  for the sale of large  portions of the  investments
cannot be predicted.

     Expenses for 1996 were  $1,152,910  as compared to  $1,499,869  in 1995,  a
decrease of 23%. While the Registrant's expenses were  slightly lower in several

                                       15

<PAGE>

categories,  the  decrease in  officer's  bonus  accounts  for a majority of the
decrease for 1996. The Registrant  currently believes that expenses for the year
ending December 31, 1997 will continue at levels similar to those of 1996.

     The Registrant's net investment loss and realized gain on investments after
taxes for the year ended December 31, 1996 was a gain of $639,874 as compared to
a loss of $1,038,298 in 1995. The Registrant's net realized gain for 1996 is the
direct result of sales of MacGregor Sports and Fitness common stock as explained
above.

     At December 31, 1996,  unrealized  appreciation  of  investments  decreased
$8,535,628  as compared to a decrease of  $1,043,785  at December 31, 1995.  The
significantly higher decrease in 1996 over 1995 can be attributed to the roughly
50% decrease in the market values of the Registrant's two largest investees, RDM
and IntraNet,  which together  accounted for 90% of the  Registrant's  portfolio
value at year end 1996.  As there is no way to predict  the future  value of the
Registrant's investment portfolio,  the Registrant cannot predict future changes
in the  unrealized  value of its  investments.  The net  increase  in net assets
resulting  from  operations  decreased  $4,566,858  for  1996 as  compared  to a
decrease of $1,775,008 for 1995.

     With the acquisition of RDM in 1987, the Registrant began  concentrating on
investments  in  more  mature  investee  companies.  Due  to  this  change,  the
Registrant's  net asset value and cash flows have  fluctuated as a result of the
market  fluctuations  of its  two  largest  investees,  RDM  and  IntraNet.  The
Registrant must increase the number of its investments in more mature  companies
in order to reduce its susceptibility to the market fluctuations of its investee
companies  that have  occurred  over the past few  years.  During  the past four
years,  the  Registrant  has been  concentrating  its efforts on  assisting  its
existing  portfolio   companies  and  therefore  has  not  made  any  major  new
investments.  Until such time as more of these mature investments are added, the
Registrant will continue to be susceptible to market fluctuations.

     In July of 1984, the Registrant  elected to become a BDC. Utilizing the "at
value"  method of  evaluating  fair value as  described  in  "Valuation - Policy
Guidelines",  the  Registrant's  assets as of December 31, 1996 were $10,478,003
with a net asset value of  $7,260,783.  Comparatively,  as of December 31, 1995,
the  Registrant's  assets  were valued at  $19,056,458  and it had net assets of
$11,916,832.

     LIQUIDITY AND CAPITAL RESOURCES. Of the Registrant's current liabilities of
$3,217,220 at December 31, 1996, the Registrant had no amounts due to banks.  Of
those  current  liabilities,  71%  or  $2,274,650,  is  deferred  income  taxes,
primarily for the Registrant's unrealized  appreciation on investments,  leaving
$942,570 in other  liabilities [See also Part IV Item 13 Financial  Statements].
This  compares to total  liabilities  of  $7,139,626,  deferred  income taxes of
$5,498,778  and other  liabilities  of  $1,640,848  at December  31,  1995.  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 to make other investments as cash flow permits.

     In connection with its investments,  the Registrant is required,  from time
to time, to make loans to its investees in order to protect its investments.  As
a result of these loans, the Registrant carried notes  receivable of $20,250 and

                                       16

<PAGE>

$126,195 at years ended December 31, 1996 and 1995,  respectively.  The decrease
in notes  receivable  at year end 1996 as  compared to 1995 is the result of the
Registrant converting notes receivable in MacGregor Sports and Fitness to equity
during 1996. [See also Part I, Item 1. Business Development].

     The Registrant's  cash position  decreased by $122,957 at December 31, 1996
as compared to an increase of $158,709 at December  31,  1995.  Net cash used by
operating  activities  was $14,175 for 1996 as compared to $167,738  provided by
operating  activities in 1995.  No one use of cash used in operating  activities
accounted  for the change from 1995 to 1996;  however,  the  Registrant  spent a
significant  amount  of cash  for the  purchase  of new  investments  in 1996 as
compared to 1995 and utilized  cash to decrease the amounts due to an officer of
the  Registrant.  Cash  flows from  investing  activities  used  $19,591 in 1996
compared to $4,151 in 1995 due to the  purchase of a new company  vehicle.  Cash
flows from financing  activities  used $89,191 as compared to $4,878 used during
1995.  The cash used by financing  activities in 1996 was from  purchases of the
Registrant's  common stock for treasury.  [See also Part IV, Item 13.  Financial
Statements].

     The Registrant's sources of income to defray operating overhead are 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 amount of its operating overhead to an
investee  to  help  defray  operating  costs,  and  sales  of  the  Registrant's
investments.  During 1996 the Registrant's  sources of income were sufficient to
cover its  operating  overhead and it is  anticipated  this trend will  continue
during 1997.

     The Registrant's  liquidity is affected  primarily 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.  The  Registrant
believes  that its present  liquidity  and  capital  resources  are  adequate to
finance  anticipated  needs arising from or relating to its business in the 1997
year due to its increased  ability to sell  portions of its investee  companies'
stock positions as  restrictions  on their ability to be sold end.  Although the
Registrant's  ability to  liquidate  portions of its  portfolio  companies  have
increased as the  restrictions  as to resale end, the Registrant  generally is a
long-term holder if its investments and therefore does not necessarily liquidate
them  upon  the  expiration  of these  restrictions.  As the  Registrant  cannot
forecast the types of large-scale sales which generate  significant profits, the
Registrant  had not  typically  relied  on sales of this  large  nature  for its
financing  needs.  However,  as the  Registrant  expects lower  transaction  and
consulting fees and therefore  reduced  revenue during 1997,  sales of portfolio
securities may be necessary for its financing needs.

     The Registrant's largest investee company,  RDM, is a publicly held company
which conducts most of its business through its wholly-owned  subsidiaries.  The
Registrant  owns  common  stock  and  convertible  debentures  in RDM which is a
leading  producer of fitness  equipment,  toys and team sports  equipment in the
United States.  Management of the  Registrant  devotes  significant  efforts and
resources to providing managerial assistance to RDM.

     The seasonal nature of the RDM's sales imposes fluctuating demands on their

                                       17

<PAGE>

cash flow, due to the temporary  build-up of inventories in anticipation of, and
receivables  subsequent  to, the peak  seasonal  period which  historically  has
occurred  around  November  of each year.  RDM's  subsidiaries  rely  heavily on
revolving loan borrowings for working capital.  These loans provide them with an
immediate and continued  source of liquidity.  RDM utilizes  asset-based  credit
facilities  provided  by lending  institutions  to provide  for its  fluctuating
working capital needs.

     During 1996,  RDM sold two of its  divisions to Brunswick  Corporation  for
total net proceeds of approximately  $320 million in cash. A majority of the net
proceeds were used to pay down RDM's debt including  payments on their revolving
bank debt as well as the repayment of approximately $90 million of 11.75% Senior
Subordinated  Notes.  Concurrent  with  the sale of RDM's  bicycle  division  to
Brunswick,  RDM entered  into a new bank credit  agreement  which  provides  for
borrowings  of up to $130  million  based  on  eligible  trade  receivables  and
inventory.   RDM's  bank  debt  and  convertible  debentures  carry  restrictive
covenants  which may limit  their  ability  to pay  dividends  to  shareholders,
including the Registrant.

     At September 28, 1996, the most recently  available date, RDM had net sales
through  nine  months  of $304  million  with net  income of $412  thousand.  At
September  30,  1996,  RDM's  total  assets  were  $292  million  and its  total
liabilities were $237 million with  shareholders'  equity of $55 million.  RDM's
borrowings represented 35% of its total assets at September 30, 1996.

     The Registrant's  second largest  investee company is IntraNet,  a publicly
held  company.  The  Registrant  owns common  stock in IntraNet  which  provides
document  handling,  storage and retrieval  solutions to Fortune 1000  companies
utilizing internet and intranet technologies. For the nine months ended December
31, 1996, the latest available date,  IntraNet had total revenues of $14 million
and a net loss of $1.5 million.

     As of  December  31,  1996,  the  Registrant  had  made no  other  material
commitments  for capital  expenditures  or loans to  investees.  The  Registrant
expects that it 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.


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.

                                       18

<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

<TABLE>
<CAPTION>
                                                                Length of
Name                    Age      Offices held                   Service
----                    ---      ------------                   ---------
<S>                     <C>      <C>                            <C>
Henry Fong              61       President, Treasurer,          Since Inception
                                 Principal Executive,
                                 Financial and Accounting
                                 Officer and Director

Thomas B. Olson         31       Secretary                      Since 1988

Russell L. Casement     53       Director                       Since 1989

Aaron A. Grunfeld       50       Director                       Since 1991
</TABLE>

     The directors of the  Registrant  are elected to hold office until the next
annual meeting of the shareholders  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. Mr. Fong is also 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.  Since July 1996,  Mr.  Fong has been 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.
Since January 1993, Mr. Fong has been 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

                                       19

<PAGE>

is a certified  public  accountant.  In March  1994,  Mr. Fong was one of twelve
CEO's selected as Silver Award winners in FINANCIAL WORLD  magazine's  corporate
American "Dream Team."

     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
26 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

     None

(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

                                       20

<PAGE>

any reports under Section 16, the  Registrant  believes  that,  during 1996, 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, 1996, received an annual salary of $183,013. Additionally, Mr. Fong
receives an annual  bonus which  equals 3% of the  Registrant's  total assets at
year end which bonus equaled $314,328 for the year ended December 31, 1996.

     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
fourteen 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, 1996,  $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 $14,300 on this policy in 1996 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, 1996,  1995
and 1994:

                                       21

<PAGE>

<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            1996        183,013       314,328        -0-              -0-             165,000  <F1>
President,
Treasurer
Principal
Executive
Officer and
Accounting
Officer

Henry Fong            1995        183,013       571,693        -0-              -0-             165,000  <F1>

Henry Fong            1994        183,013       669,536        -0-              -0-             165,000  <F1>
---------
<FN>
<F1>  Includes  payments  and tax  liability  on the life  insurance  policy  as
explained more fully in "Item 10 (a) General" above.
</FN>
</TABLE>


(c) Option/SAR Grants Table

     The  Registrant  made no grants of stock  options  or SARs  during the year
ended December 31, 1996.

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

<TABLE>
<CAPTION>
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
----------             ------------              ------------              -------------              -------------
<S>                         <C>                       <C>                   <C>                      <C>
Henry Fong                  -0-                       -0-                   206,545/-0-              $(245,272)/-0-
</TABLE>


(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.

                                       22

<PAGE>

(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.  Prior to June 1, 1995,  each  independent  member of the board
received $1,500 for each Board of Director's  meeting  attended either in person
or by  telephone.  For the year ended  December 31, 1996,  Messrs.  Casement and
Grunfeld  each  received a total of $12,000.  Members of the Board of  Directors
also receive reimbursement for expenses incurred in attending board meetings.

     (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.


(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

                                       23

<PAGE>

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 26, 1997,  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 March 26, 1997.

<TABLE>
<CAPTION>
Name and address                     Amount and Nature of
of beneficial owner                 Beneficial Ownership<F1>    Percent of Class
-------------------                 ------------------------    ----------------
<S>                                       <C>                        <C>
Henry Fong                                547,829   <F2>             16.1%
7315 East Peakview Avenue
Englewood, Colorado 80111

Unnamed Association                       187,500                     5.5%
of Persons
c/o Gary L. Blum, Esq.
9595 Wilshire Blvd., Suite 511
Beverly Hills, California 90212

Russell L. Casement                        75,000   <F3>              2.3%
1355 S. Colorado Blvd., Suite 320
Denver, Colorado 80222

Aaron A. Grunfeld                          59,800   <F3>              1.8%
10390 Santa Monica Blvd, Fourth Floor
Los Angeles, California 90025

All officers and directors                687,629   <F2><F3><F4>      19.6%
as a group (four persons)
----------
<FN>
<F1> The beneficial owners exercise sole voting and investment power.

<F2> Includes 206,545 shares  underlying  options granted under the Registrant's
1993 Stock Option Plan.

<F3> Includes 50,000 shares  underlying  options  granted under the Registrant's
1993 Stock Option Plan for Non-Employee Directors. [See also Item 10.(f)(2)
"Other Arrangements"]

<F4> Includes 5,000 shares  underlying  options  granted under the  Registrant's
1993 Stock Option Plan.
</FN>
</TABLE>

(c) Changes in Control.

     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.

                                       24

<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

(a) Transactions with Management and Others.

     The Registrant  currently leases approximately 1,800 square feet of9 office
space in Greenwood Executive Park, 6400 South Quebec, Englewood,  Colorado, from
a partnership  in which its president and his wife are sole  partners,  on terms
comparable to the existing market for similar facilities. [See also Part I, Item
2. Description of Property]

     During the year ended  December 31, 1995,  the President of the  Registrant
and his wife made three  separate  loans  totaling  $125,000 to the  Registrant.
These loans were due on demand and  carried an  interest  rate of 10% per annum.
The loans were repaid with  interest  prior to December 31, 1995.  No such loans
were made in 1996.

(b) Information which May be Excluded

     Not applicable

(c) Parents of Registrant

     Not applicable

(d) Transactions with Promoters

     Not applicable

                                       25

<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.
<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
    <S>                                                                    <C>
    Report of Independent Certified Public Accountants............         F-1
    Statements of Assets and Liabilities  at
     December 31, 1996, and 1995..................................         F-3
    Schedule of Investments at December 31, 1996
     and December 31, 1995........................................         F-5
    Statements of Changes in Stockholders' Equity for the
     Years Ended December 31, 1996 and 1995.......................         F-11
    Statements of Operations for the Years ended
     December 31, 1996 and 1995...................................         F-13
    Statements of Cash Flows for the Years Ended
     December 31, 1996 and 1995...................................         F-15
    Notes to Financial Statements.................................         F-17
</TABLE>

2. Financial Statements Schedules.
<TABLE>
    <S>                                                                    <C>
    Schedule II - Valuation and Qualifying Accounts and Reserves..         S-1
</TABLE>

3. Exhibits.
<TABLE>

    <S>           <C>
    3.1           Articles of Incorporation <F1>
    3.2           Bylaws <F1>
    10.5          1993 Stock Option Plan <F2>
    10.6          1993 Stock Option Plan for Non-Employee Directors <F2>
    10.7          Custody Agreement between Colorado National Bank
                  and the Registrant <F2>
----------
<FN>
<F1>  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.

<F2>  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.
</FN>
</TABLE>

(b) Reports on Form 8-K.

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

                                       26

<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:  March 26, 1997
       --------------

                                       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:  March 26, 1997                      /S/ HENRY FONG
       --------------                      -------------------------------
                                           Henry Fong, President,
                                           Treasurer and Director
                                           (Principal Executive, Financial,
                                           and Accounting Officer)





Date:  March 26, 1997                      /S/ RUSSELL L. CASEMENT
       --------------                      -------------------------------
                                           Russell L. Casement, Director





Date:  March 26, 1997                      /S/ AARON A. GRUNFELD
       --------------                      -------------------------------
                                           Aaron A. Grunfeld, Director

                                       27

<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, 1996 and 1995 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 1996 and 1995 financial statements referred to above present
fairly, in all material  respects,  the financial  position of Equitex,  Inc. at
December 31, 1996 and 1995 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,
1996 and 1995 include  securities and  receivables,  valued at $483,130 (6.7% of
net assets) and  $3,006,173  (25.2% 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 1996
and 1995  financial  data  required  to be set forth  therein in relation to the
basic financial statements taken as a whole.




                             /S/ DAVIS & CO., CPA'S, P.C.
                             Davis & Co., CPAs, P.C.
                             Certified Public Accountants


Englewood, Colorado
March 21, 1997




                                       F-2

<PAGE>

                                  EQUITEX, INC.
                      Statements of Assets and Liabilities

<TABLE>
<CAPTION>
                                                              December 31,
                                                          1996           1995
                                                          ----           ----
<S>                                                   <C>            <C>
ASSETS

Investments, at fair value:

 Securities (cost of $3,767,308 and
   $3,470,057 in 1996 and 1995, respectively) ....    $10,138,562    $18,376,939
 Notes receivable, net of allowance
   for uncollectible accounts of $100 and
   $136,545 in 1996 and 1995, respectively .......         20,250        126,195
 Accrued interest receivable, net of
   allowance for uncollectible interest of
   $35 and $120,617 in 1996 and
   1995, respectively ............................          1,902        120,031
 Trade receivables, net of allowance
   for uncollectible accounts of $2,943
   and $7,095 in 1996 and 1995, respectively .....         39,623         58,440
                                                      -----------    -----------
                                                       10,200,337     18,681,605

Cash .............................................         53,795        176,752

Accounts receivable - brokers ....................          4,766            918

Income taxes refundable ..........................        166,609        166,609

Furniture and equipment, net of
   accumulated depreciation of $106,362
   and $111,615 in 1996 and 1995, respectively ...         38,720         21,041

Other ............................................         13,776          9,533
                                                      -----------    -----------
                                                      $10,478,003    $19,056,458
                                                      ===========    ===========
</TABLE>

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

                                       F-3

<PAGE>

                                  EQUITEX, INC.
                      Statements of Assets and Liabilities

<TABLE>
<CAPTION>
                                                              December 31,
                                                          1996           1995
                                                          ----           ----
<S>                                                   <C>            <C>
LIABILITIES AND NET ASSETS

Liabilities
   Accounts payable and other
     accrued liabilities .........................    $    55,441    $   220,628
   Accounts payable to brokers ...................        739,023        889,841
   Accrued bonus to officer ......................        148,106        530,379
   Deferred income taxes .........................      2,274,650      5,498,778
                                                      -----------    -----------
                                                        3,217,220      7,139,626
Commitments and contingencies (Notes 4, 7, 8 and 9)

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;  3,224,465
     shares issued; 3,191,115 and 3,217,615
     shares outstanding in 1996 and 1995,
     respectively ................................         64,489         64,489
   Additional paid-in capital ....................      4,447,175      4,447,175

   Retained earnings
     Accumulated deficit prior to
       becoming a BDC ............................       (118,874)      (118,874)
     Accumulated net investment loss .............    (12,025,669)   (11,439,353)
     Accumulated net realized gains from
       sales and permanent write-downs
       of investments ............................     11,121,234      9,895,044
     Unrealized net gains on investments
       (net of deferred income taxes of
       $2,484,788 and $5,813,684 in 1996
       and 1995, respectively) ...................      3,886,465      9,093,197
   Less: treasury stock at cost
       (33,350 and 6,850 shares in
       1996 and 1995, respectively) ..............       (114,037)       (24,846)
                                                      -----------    -----------
                                                        7,260,783     11,916,832
                                                      -----------    -----------
                                                      $10,478,003    $19,056,458
                                                      ===========    ===========
</TABLE>

The accompanying notes are a part of this statement.

                                       F-4

<PAGE>

                                  EQUITEX, INC.
                             Schedule of Investments
                                December 31, 1996
<TABLE>
<CAPTION>
                                               NUMBER               COST
                                                 OF                AND/OR        FAIR
COMPANY                                     SHARES OWNED           EQUITY        VALUE
-------                                     ------------           ------        -----
<S>                                      <C>                   <C>           <C>
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 ...........              645,085       $  1,417,610  $  3,193,171

RDM Sports Group (formerly
  Roadmaster Industries, Inc.)
  Manufacturer of fitness
  equipment and juvenile products .            5,142,037          1,149,559     5,789,367

OTHER - PUBLIC MARKET METHOD
  OF VALUATION

RDM Sports Group                          8% Convertible
  Manufacturer of fitness                   Subordinated
  equipment and juvenile products .           Debentures            150,682       130,375
                                                               ------------  ------------

   Sub-Total
   AFFILIATED COMPANIES ...........                               2,717,851     9,112,913
                                                               ------------  ------------


UNAFFILIATED COMPANIES
COMMON STOCKS - PUBLIC MARKET
  METHOD OF VALUATION

Diametrics Medical
  Medical equipment ...............               10,000             76,883        42,500
Cambridge Holdings
  Real estate - commercial ........               87,209             34,000        54,506
IVI Publishing
  Publishing technology ...........               30,000            171,258        93,750
Meditech Pharmaceuticals, Inc.
  Antiviral products ..............              500,000             40,000        13,750
Meteor Industries
  Petroleum distributor ...........                5,120             19,502        25,920
Racotek
  Medical technology ..............               50,000            317,387       212,500
Audio King
  Consumer electronics ............               12,000             31,543        13,500
</TABLE>

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

                                       F-5

<PAGE>

                                  EQUITEX, INC.
                        Schedule of Investments (Page 2)
                                December 31, 1996
<TABLE>
<CAPTION>
                                               NUMBER               COST
                                                 OF                AND/OR        FAIR
COMPANY                                     SHARES OWNED           EQUITY        VALUE
-------                                     ------------           ------        -----
<S>                                      <C>                   <C>           <C>
UNAFFILIATED COMPANIES (CONTINUED)
COMMON STOCKS - PUBLIC MARKET
   METHOD OF VALUATION

Frontier Airlines
  Commercial air carrier ..........               10,000             92,520        32,500
LaMan Corporation
  Manufacturer - decontamination
  devices .........................               29,400             61,265        36,750
Las Vegas Discount Golf
  and Tennis
  Sporting goods retailer .........               30,000             31,600        27,188

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

All Systems Go
  Software development ............               20,000(b)          25,000        25,000
NevStar Gaming Corporation                 10,000 Series
  Gaming development ..............          A preferred             38,500        38,500
Ocean Power Technology
  Alternative energy
  research and development ........               35,714(b)          40,000        89,285
                                                 100,000               --         250,000
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 ..........                               1,049,458     1,025,649
                                                               ------------  ------------

  Total
  ALL COMPANIES ...................                            $  3,767,309  $ 10,138,562
                                                               ============  ============
</TABLE>

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

                                       F-6

<PAGE>

                                  EQUITEX, INC.
                        Schedule of Investments (Page 3)
                                December 31, 1996

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-7

<PAGE>

                                  EQUITEX, INC.
                             Schedule of Investments
                                December 31, 1995

<TABLE>
<CAPTION>
                                               NUMBER               COST
                                                 OF                AND/OR        FAIR
COMPANY                                     SHARES OWNED           EQUITY        VALUE
-------                                     ------------           ------        -----
<S>                                      <C>                   <C>           <C>
CONTROLLED COMPANIES
COMMON STOCKS,  UNITS AND WARRANTS
PUBLIC MARKET METHOD OF
VALUATION (c)(e)
MacGregor Sports & Fitness, Inc.
  Sporting goods ..................            1,180,566(c)    $     11,737  $  2,479,189
                                                 150,000(b)         150,000       354,375
                                                 513,480            532,024     1,317,181
                                            47,000 units            101,111       229,125
                                                  40,000
                                                warrants             10,404        67,500
PREFERRED STOCK - PRIVATE MARKET
  METHOD OF VALUATION (e)
MacGregor Sports & Fitness, Inc.                   1,000
  Sporting goods ..................             Series C(c)         500,000     2,100,000

AFFILIATED COMPANIES
COMMON STOCKS - PUBLIC MARKET
   METHOD OF VALUATION (c)(e)
Roadmaster Industries, Inc.
  Manufacturer of bicycles, junior
  wheel goods and fitness equipment            5,100,000(c)       1,093,702    10,901,250
                                                   5,437(b)          10,000        11,622
OTHER - PUBLIC MARKET METHOD
  OF VALUATION
Roadmaster Industries, Inc.                          Sr.
  Manufacturer of bicycles, jr              Subordinated
  wheel goods and fitness equip ...         Notes-11.75%             37,793        34,876
                                            Subordinated
                                           Debentures-8%             88,116        84,000
                                                               ------------  ------------
   Sub-Total-CONTROLLED AND
   AFFILIATED COMPANIES ...........                               2,534,887    17,579,118
                                                               ------------  ------------


UNAFFILIATED COMPANIES
COMMON STOCKS - PUBLIC MARKET
  METHOD OF VALUATION
Diametrics Medical
  Medical technology ..............               20,000            204,387        97,500
Cambridge Holdings
  Real estate .....................               87,209             34,000        29,974
Therapy Lasers
  Medical products ................                   96              1,217            12
Meditech Pharmaceuticals, Inc.
  Antiviral products ..............              500,000             40,000         5,000
Meteor Industries
  Petroleum distributor ...........               15,120             68,257        30,240
Racotek
  Medical technology ..............               10,000             63,129        52,500
Audio King
  Consumer electronics ............               25,000             65,629        62,500
</TABLE>

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

                                       F-8

<PAGE>

                                  EQUITEX, INC.
                        Schedule of Investments (Page 2)
                                December 31, 1995

<TABLE>
<CAPTION>
                                               NUMBER               COST
                                                 OF                AND/OR        FAIR
COMPANY                                     SHARES OWNED           EQUITY        VALUE
-------                                     ------------           ------        -----
<S>                                      <C>                   <C>           <C>
UNAFFILIATED COMPANIES (Continued)
COMMON STOCKS - PUBLIC MARKET
   METHOD OF VALUATION
Health Tech International
  Employee testing systems ........                  100            156,527         3,925
LaMan Corporation
  Manufacturer - decontamination                   8,500
  devices .........................                units             55,250        19,125
                                                  28,000             61,264        31,500
Boca Raton Capital
  Capital formation ...............                4,000             20,135         9,000
LaBarge, Inc.
  Manufacturing electronic
  devices/cables ..................               10,000             11,875        35,000
Skydoor, Inc.
  Entertainment ...................               50,000(b)          50,000        18,750

COMMON STOCKS - PRIVATE MARKET
  METHOD OF VALUATION (a)(e)
All Systems Go
  Software development ............               20,000(b)          25,000        25,000
NevStar Gaming Corporation                 10,000 Series
  Gaming development ..............          A preferred(b)          38,500        38,500
Ocean Power Technology
  Energy development ..............               35,714(b)          40,000        89,285
                                                 100,000               --         250,000
WARRANTS (f)(e)
Nations Mart
  Mass merchant consumer services .               10,000               --              10
                                         ---------------       ------------  ------------

  Sub-total
  UNAFFILIATED COMPANIES ..........                                 935,170       797,821
                                                               ------------  ------------

  Total
  ALL COMPANIES ...................                            $  3,470,057  $ 18,376,939
                                                               ============  ============
</TABLE>

                                                                     (Continued)

The accompanying notes are a part of this statement.

                                       F-9

<PAGE>

                                  EQUITEX, INC.
                        Schedule of Investments (Page 3)
                                December 31, 1995

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 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, 1996 and 1995

<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,
  1994 ...............    6,448,930    $   64,489   $  (24,846)   $4,452,053   $ (118,874)

Legal costs of
  private placement ..                                                (4,878)

Net investment loss ..

Net realized gain
  on investments .....

Unrealized gain
  on investments .....
                         ----------    ----------   ----------    ----------   ----------
Balance at Dec. 31,
  1995 ...............    6,448,930        64,489      (24,846)    4,447,175     (118,874)

1 for 2 reverse
  stock split in
  January 1996 .......   (3,224,465)

Purchases of treasury
  stock in July and
  August 1996 ........                                 (89,191)

Net investment (loss)

Net realized gain on
  investments ........

Unrealized gain (loss)
  on investments .....
                         ----------    ----------   ----------    ----------   ----------
Balance at Dec. 31,
  1996 ..............     3,224,465    $   64,489   $ (114,037)   $4,447,175   $ (118,874)
                         ==========    ==========   ==========    ==========   ==========
</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, 1996 and 1995
                                    (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, 1994   $(10,369,823)   $  9,863,812    $  9,829,907   $ 13,696,718

Legal costs of
  private placement ....                                                        (4,878)

Net investment loss ....     (1,069,530)                                    (1,069,530)

Net realized gain
  on investments .......                          31,232                        31,232

Unrealized gain
  on investments .......                                       (736,710)      (736,710)
                           ------------    ------------    ------------   ------------
Balance at Dec. 31, 1995    (11,439,353)      9,895,044       9,093,197     11,916,832

1 for 2 reverse
   stock split in
   January 1996 ........                                                            --

Purchases of treasury
   stock in July and
   August 1996 .........                                                       (89,191)

Net investment (loss) ..       (586,316)                                      (586,316)

Net realized
   gain on
   investments .........                      1,226,190                      1,226,190

Unrealized gain (loss)
   on investments ......                                     (5,206,732)    (5,206,732)
                           ------------    ------------    ------------   ------------

Balance at Dec. 31, 1996   $(12,025,669)   $ 11,121,234    $  3,886,465   $  7,260,783
                           ============    ============    ============   ============
</TABLE>

The accompanying notes are a part of this statement.

                                      F-12


<PAGE>

                                  EQUITEX, INC
                            Statements of Operations

<TABLE>
<CAPTION>
                                                          For the years ended
                                                              December 31,
                                                          1996           1995
                                                          ----           ----
<S>                                                   <C>            <C>
Revenues
  Interest and dividends .........................    $   268,859    $    69,465
  Consulting and transaction fees ................        281,500        163,826
  Administrative fees ............................         62,198         61,331
  Miscellaneous ..................................         20,208         13,568
                                                      -----------    -----------
                                                          632,765        308,190
Expenses
  Salaries and consulting fees ...................        315,473        345,166
  Officers' bonus ................................        314,328        571,693
  Office rent ....................................         30,000         30,871
  Advertising and promotion ......................          4,084          2,629
  Other general and administrative ...............        208,527        274,189
  Interest .......................................         75,670         29,033
  Bad debt expense ...............................        (17,987)        27,093
  Depreciation and amortization ..................         10,246          9,650
  Employee benefits ..............................        212,569        209,545
                                                      -----------    -----------
                                                        1,152,910      1,499,869
                                                      -----------    -----------

Net investment (loss) ............................       (520,145)    (1,191,679)
                                                      -----------    -----------

Net realized gain on investments and
  net unrealized gain on investments:
  Proceeds from sales of investments .............      2,876,744      1,280,513
  Less: cost of investments sold .................      1,650,554      1,249,281
                                                      -----------    -----------
    Realized gain from sales of investments ......      1,226,190         31,232
  Permanent write-down of investments ............          (--)           (--)
                                                      -----------    -----------

    Realized gain on investments before
       income taxes ..............................      1,226,190         31,232
                                                      -----------    -----------
    Net investment (loss) and realized gain
       on investments before income taxes ........        706,045     (1,160,447)


  Less: income taxes (provision) benefit
    Current ......................................        (35,406)       151,079
    Deferred .....................................        (66,171)       (28,930)
                                                      -----------    -----------
                                                         (101,577)       122,149
    Income tax benefit of
       NOL carryforward ..........................         35,406           --
                                                      -----------    -----------
                                                          (66,171)       122,149
</TABLE>

                                                                     (Continued)

The accompanying notes are a part of this statement.

                                      F-13


<PAGE>



                                  EQUITEX, INC
                        Statements of Operations (Page 2)

<TABLE>
<CAPTION>
                                                          For the years ended
                                                              December 31,
                                                          1996           1995
                                                          ----           ----
<S>                                                   <C>            <C>
Net investment (loss) and realized gain
  on investments after income taxes ..............        639,874     (1,038,298)


(Decrease) in unrealized
   appreciation of investments ...................     (8,535,628)    (1,043,785)
Less income tax benefit applicable
   to (decrease) in unrealized
   appreciation of investments
      Deferred ...................................      3,328,896        307,075
                                                      -----------    -----------
                                                       (5,206,732)      (736,710)
                                                      -----------    -----------

Net (decrease) in net assets
   resulting from operations .....................    $(4,566,858)   $(1,775,008)
                                                      ===========    ===========

(Decrease) in net assets per
   share - primary ...............................    $     (1.42)   $      (.55)
                                                      ===========    ===========
Weighted average number of common shares .........      3,214,708      3,217,615
                                                      ===========    ===========

(Decrease) in net assets per
   share - fully-diluted .........................    $     (1.26)   $      (.49)
                                                      ===========    ===========
</TABLE>

The accompanying notes are a part of this statement.

                                      F-14

<PAGE>

                                  EQUITEX, INC.
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                          For the years ended
                                                              December 31,
                                                          1996           1995
                                                          ----           ----
<S>                                                   <C>            <C>
Cash flows from operating activities:
  Net change in net assets .......................    $(4,566,858)   $(1,775,008)
    Adjustments to reconcile net income to
    net cash provided by operating activities:
      Depreciation and amortization ..............         10,246          9,650
      Provision for bad debts on notes
        receivable ...............................        116,241         10,000
      Realized (gain) on sale of investments .....     (1,226,190)       (31,232)
      Unrealized loss on investments .............      8,535,628      1,043,785
      Donation of stock of investee company ......           --              398
Proceeds from sales of investments ...............      2,876,744      1,281,164
Purchases of investments .........................     (1,956,805)    (1,371,589)
Issuance of notes receivable .....................        (30,000)      (170,185)
Collections of notes receivable ..................         20,370        660,000
Changes in assets and liabilities:
  Decrease in interest receivable ................        118,129        (14,795)
  (Increase) in accounts receivable-broker .......         (3,848)           556
  (Increase) decrease in other assets ............         (4,243)         3,167
  (Increase) decrease in trade receivables .......         18,817        (29,201)
  (Increase) in income taxes refundable ..........           --          (31,978)

  (Decrease) in accounts payable and
    other accrued liabilities ....................       (165,187)      (209,627)
  (Decrease) in deferred revenue .................           --          (19,826)
  (Decrease) increase in accounts
    payable to brokers ...........................       (150,818)       889,841
  (Decrease) in deferred income taxes ............     (3,224,128)      (152,474)
  Increase (decrease) in amounts due
    to officer ...................................       (382,273)        75,092
                                                      -----------    -----------

  Net cash provided (used) by operating
    activities ...................................        (14,175)       167,738

Cash flows from investing activities:
  Purchase of equipment and vehicle ..............        (33,091)        (4,151)
  Proceeds from sale of vehicle ..................         13,500           --
                                                      -----------    -----------

Net cash (used) by investing activities ..........        (19,591)        (4,151)
</TABLE>

                                                                     (Continued)

The accompanying notes are a part of this statement.

                                      F-15

<PAGE>

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

<TABLE>
<CAPTION>
                                                          For the years ended
                                                              December 31,
                                                          1996           1995
                                                          ----           ----
<S>                                                   <C>            <C>
Cash flows from financing activities:
  Common stock re-purchased for cash .............        (89,191)          --
  Proceeds from issuance of notes payable ........           --          100,000
  Repayment of notes payable .....................           --         (100,000)
  Legal costs of private placement ...............           --           (4,878)
                                                      -----------    -----------
  Net cash (used) by financing
    activities ...................................        (89,191)        (4,878)

Increase (decrease) in cash ......................       (122,957)       158,709


Cash, beginning of period ........................        176,752         18,043
                                                      -----------    -----------
Cash, end of period ..............................    $    53,795    $   176,752
                                                      ===========    ===========


Supplemental disclosures of cash flow information:
    Interest paid ................................    $    17,526    $    23,141
                                                      ===========    ===========

    Interest received ............................    $    72,616    $    36,837
                                                      ===========    ===========

    Income taxes paid (refunded) .................    $     1,402    $  (284,773)
                                                      ===========    ===========
</TABLE>

The accompanying notes are a part of this statement.

                                      F-16

<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.

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  of  the year.  If the  security  is

                                      F-17

<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements

Note 1:  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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-18

<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements

Note 1:  SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

h.   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.

i.   RECLASSIFICATIONS
     Certain reclassifications have been made to the December 31, 1995 financial
statements to conform to the December 31, 1996 presentation.

j.   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, 1996 and 1995 were as follows:

<TABLE>
<CAPTION>
                     NUMBER OF SHARES
      BASIS          1996        1995      1996    1995
                     ----        ----      ----    ----
    <S>            <C>         <C>         <C>     <C>
    Primary .....  3,191,115   3,217,615   $2.26   $3.70
                   =========   =========   =====   =====

    Fully diluted  3,502,660   3,529,160   $2.06   $3.38
                   =========   =========   =====   =====
</TABLE>

Note 2:  DETAIL OF RECEIVABLES AND SOURCES OF REVENUE

a.   RECEIVABLES
     Receivables  are from the following types of companies at December 31, 1996
and 1995, respectively.

<TABLE>
<CAPTION>
                                          PORTFOLIO COMPANIES
                                                          LESS
                                                         THAN 5%
                             CONTROLLED   AFFILIATED      OWNED        TOTAL
                             ----------   ----------    ---------    ---------
<S>                           <C>          <C>          <C>          <C>
1996
Notes receivable ..........   $    --      $  10,250    $  10,100    $  20,350
Interest receivable .......        --          1,557          380        1,937
Trade receivables .........        --          5,881       36,685       42,566
Less: allowances for
  uncollectible receivables        --         (2,943)        (135)      (3,078)
                              ---------    ---------    ---------    ---------
                              $    --      $  14,745    $  47,030    $  61,775
                              =========    =========    =========    =========

1995
Notes receivable ..........   $ 252,020    $  10,250    $     470    $ 262,740
Interest receivable .......     240,063          532           53      240,648
Trade receivables .........       7,469       18,368       39,698       65,535
Less:  allowances for
  uncollectible receivables    (249,776)     (13,140)      (1,342)    (264,258)
                              ---------    ---------    ---------    ---------
                              $ 249,776    $  16,010    $  38,879    $ 304,665
                              =========    =========    =========    =========
</TABLE>

                                      F-19

<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements

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

a.   RECEIVABLES (CONTINUED)
     Included in notes  receivable  and  interest  receivable  above are amounts
totaling $22,288 and $492,083 at December 31, 1996 and 1995, 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, 1996 and 1995, respectively.

<TABLE>
<CAPTION>
                                        PORTFOLIO COMPANIES
                                                LESS
                                               THAN 5%
                       CONTROLLED  AFFILIATED   OWNED      OTHER      TOTAL
                       ----------  ----------  --------   --------   --------
<S>                     <C>         <C>        <C>        <C>        <C>
1996
Interest and other
  income .............   $   --     $226,786   $   --     $ 62,281   $289,067
Consulting/transaction
  fees ...............       --      281,500       --         --      281,500
Administrative fees ..       --       61,960       --          238     62,198
                         --------   --------   --------   --------   --------
                         $   --     $570,246   $   --     $ 62,519   $632,765
                         ========   ========   ========   ========   ========

1995
Interest and other
  income .............   $ 50,296   $    515   $   --     $ 32,222   $ 83,033
Administrative fees ..       --       61,276       --           55     61,331
Consulting/transaction
  fees ...............       --      163,826       --         --      163,826
                         --------   --------   --------   --------   --------
                         $ 50,296   $225,617   $   --     $ 32,277   $308,190
                         ========   ========   ========   ========   ========
</TABLE>

     During 1996 two investee companies accounted for 80% and 9%,  respectively,
of the Company's total revenues of $632,765.

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.)
     During 1995 the Company  purchased  15,000 shares of RDM on the open market
and $50,000 and $100,000 (face value) of RDM's 11 3/4% Senior Subordinated Notes
and 8% Subordinated Debentures,  respectively. During 1996 the Company purchased
36,600  shares of RDM on the open  market  and 75,000  (face  value) of RDM's 8%
subordinated debentures.

                                      F-20

<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements

Note 3:  INVESTMENTS (CONTINUED)

a.   INVESTMENT IN RDM SPORTS GROUP
     (FORMERLY ROADMASTER INDUSTRIES, INC.) (CONTINUED)
     During 1995 the Company recorded consulting fees from RDM of $144,000.  The
consulting  fee  contract  with RDM expired on January 1, 1996.  During 1996 and
1995, the Company  recorded  administrative  fees from RDM totaling  $58,828 and
$60,648, respectively.

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.
TPSI was formed in 1990 and provides integrated  solutions to large corporations
for the management and distribution of business critical  information  contained
in documents using  proprietary and standard  internet  technologies.  After the
merger the Company owned 8.6% of the combined  entity,  which was named IntraNet
Solutions, Inc.

     In May of 1996 the Company's 1,000 shares of Class C Convertible  Preferred
stock of MacGregor were automatically  converted into 1,000,000 shares of common
stock.  Concurrently,  $70,000 in accumulated  dividends on the preferred  stock
were paid to the Company by  MacGregor  with the  issuance  of 26,515  shares of
common  stock.  Immediately  prior  to the  merger  in June  1996,  the  Company
converted  accounts,  notes, and interest  receivable in the aggregate amount of
$227,540  (net of  reserves  for  uncollectibility  of  $242,363)  along  with a
previous stock  subscription  into 200,566 shares of MacGregor  common stock. In
addition,  in lieu of $281,500 of unpaid consulting fees dating back to 1991 and
$145,378 of applicable interest the Company received 109,216 shares of MacGregor
common stock. With these additional shares the Company owned 2,580,340 shares of
MacGregor common stock at the time of the merger. On October 15, 1996,  IntraNet
Solutions  declared a 1-for-4  reverse  stock split  resulting in the  Company's
December 31, 1996 ownership position in IntraNet Solutions of 645,085 shares (or
8.6%).

Note 4:  COMMON STOCK

a.   STOCK OPTIONS
     Effective  April 1, 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.

     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.

                                      F-21

<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements

Note 4:  COMMON STOCK (CONTINUED)

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 has  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  for 1995  included
herein has been adjusted to reflect this reverse split.

Note 5:  INCOME TAXES

     The provision  (benefit) for income taxes for the years ended  December 31,
1996 and 1995, consists of the following:

<TABLE>
<CAPTION>
                                                              December 31,
                                                          1996           1995
                                                          ----           ----
<S>                                                   <C>            <C>
Current:
  Federal and state ..............................    $   (35,406)   $   (15,530)
  Benefit of net operating loss
   carryback/carryforward ........................         35,406        166,609
                                                      -----------    -----------
  Total current (provision) benefit ..............    $      --      $   151,079
                                                      ===========    ===========

Deferred:
  Accrued unpaid bonus ...........................    $   (52,038)   $   (59,050)
  Bad debt expense ...............................         (7,755)        (6,113)
  Other ..........................................         (6,378)        36,233
                                                      -----------    -----------
  Total deferred (provision) benefit .............    $   (66,171)   $   (28,930)
                                                      ===========    ===========
</TABLE>

     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:

<TABLE>
<CAPTION>
                                                              December 31,
                                                          1996           1995
                                                          ----           ----
<S>                                                   <C>            <C>
Deferred tax assets:
Accrued liabilities not currently deductible .....    $   117,174    $   211,846
Excess "tax" basis on investment .................         92,964        103,060
                                                      -----------    -----------
Total deferred tax assets ........................        210,138        314,906
                                                      -----------    -----------

Deferred tax liabilities:
Tax on unrealized gain on investments ............     (2,484,788)    (5,813,684)
                                                      -----------    -----------
Total deferred tax liabilities ...................     (2,484,788)    (5,813,684)
                                                      -----------    -----------
Net deferred tax liability .......................    $(2,274,650)   $(5,498,778)
                                                      ===========    ===========
</TABLE>

     A  significant  portion of the deferred tax assets at December 31, 1996 are
expected to be  recovered  through the  carryback  of amounts  which will become
deductible when paid.

                                      F-22

<PAGE>

                                  EQUITEX, INC.
                        Notes to the Financial Statements

Note 5:  INCOME TAXES (CONTINUED)

     Tax years prior to 1992 are "closed" to  adjustments  by the running of the
statute of limitations. An agreement was finalized with the IRS Appeals Division
during 1996  regarding the  deductibility  of certain  expenses on the Company's
1992 federal income tax return.  The additional taxes incurred  relative to this
agreement were not significant.

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
and his wife are the sole partners.

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.  The unpaid  portion of these  bonuses,  amounts
totaling  $148,106 and $530,379 have been accrued as a "Bonus to Officer" in the
December 31, 1996 and 1995 balance  sheets,  respectively.  During 1996 and 1995
the  Company's  Corporate  Secretary  received  bonuses of $16,674 and  $20,992,
respectively.

c.   DIRECTORS' FEES
     During 1996 and 1995 the Company paid $12,000 and $8,833, respectively,  to
each of its two outside directors for their attendance at the four meetings held
each year.

Note 7:  CONTINGENCY

     As of December 31, 1996,  597,500  shares of the Company's RDM Sports Group
common  stock were  pledged in escrow  for a period  not to exceed  three  years
pursuant  to the  performance  guarantee  clause  in  the  merger  agreement  of
MacGregor  and TPSI.  The two  entities  merged in July 1996,  forming  IntraNet
Solutions,  Inc. The guarantee,  under which the Company's  maximum  exposure is
$2,000,000, expires July 31, 1999. See Note 3b., herein.

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 (see Note 7, herein).
These instruments involve, to varying degrees, elements of credit risk in excess
of the amount recognized in the financial statements.

     Financial  guarantees are conditional  commitments issued by the Company to
guarantee  the payment of certain  liabilities  of portfolio  companies to third
parties, and are scheduled to expire, subject to extension as follows:

                                      F-23

<PAGE>

                                  EQUITEX, INC.
                          Notes to Financial Statements

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

<TABLE>
<CAPTION>
                                            EXPIRATION               MAXIMUM
TYPE OF GUARANTEE                              DATE                CREDIT LOSS
-----------------                           ----------             -----------
<S>                                            <C>                 <C>
Guarantee of certain indebtedness
of Roadmaster under an Urban
Development Action Grant agreement
dated August 30,1983                           2003                $1,118,000
</TABLE>


     At December 31, 1996, 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, 1996 and 1995.

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, 1996, the Company paid $105,413 in premiums
and $59,586 of  additional  compensation  to the  President  for related  income
taxes.

                                      F-24

<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, 1996:
Allowance for un-
collectible accounts
  Notes receivable ..   $136,545   $   --      $         $136,445   $    100
  Interest receivable    120,617        264               120,846         35
  Accounts receivable      7,095        229                 4,381      2,943

For the year ended
  Dec. 31, 1995:
Allowance for un-
collectible accounts
  Notes receivable ..   $636,545   $ 10,000    $         $510,000   $136,545
  Interest receivable    105,690     16,344                 1,417    120,617
  Accounts receivable      6,346        749                            7,095
</TABLE>

The accompanying notes are a part of this schedule.

                                       S-1