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

                                   FORM 10-KSB

(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
         For the fiscal year ended December 31, 1996


[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [No Fee Required]
        For the transition period from------------to-------------

                         Commission file number 0-15927

                               COMPUTER POWER INC.

                 (Name of small business issuer in its charter)

New Jersey                                                      22-1981869
(State or other jurisdiction of                              (I.R.S. Employer
 Incorporation organization)                                 Identification No.)

124 West Main Street, High Bridge, NJ                           08829
(Address of principal executive offices)                      (Zip Code)

Issuer's telephone number:  908-638-8000

Securities registered pursuant to Section 12 (b) of the Exchange act:

         Title of each class                Name of exchange on which
                                            registered
         None                               None

                   Name of each exchange on which registered

         None

      Securities registered pursuant to Section 12(g) of the Exchange Act:
                     Common Stock, par value $.01 per share
                                (Title of Class)

<PAGE>



Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act 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 there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure  will be contained,
to the best of  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. [ ]

State issuer's revenues for its most recent fiscal year:  $10,838,816

The aggregate market value of the voting stock held by  non-affiliates  computed
by  reference  to the price at which the stock was sold,  or the average bid and
asked prices of such stock as of March 27, 1997: $279,275.

The  number of shares  outstanding  of each of the  issuer's  classes  of common
equity, as of March 27, 1997: 2,578,300 shares of Common Stock.

Transitional Small Business Disclosure Format (check one)

Yes_______        No    X


<PAGE>


                                                      Part I
Item 1.  Business

General

Computer Power Inc. (the  "Company",  or  "Registrant")  designs,  manufactures,
markets  and  services  products in three  distinct  market  categories:  Energy
efficient lighting,  Power protection systems, and Emergency lighting.  In order
to serve these markets,  the Company is organized into two business  units.  The
Astralite  business  unit is focused on the energy  efficient  lighting  market,
while the Power Protection business unit is concentrated on the power protection
market and emergency lighting market.

ENERGY EFFICIENT LIGHTING

 The  lighting  retrofit  market  has been  growing at a rapid  rate,  driven by
demands  for energy  conservation  and  related  pollution  reductions  and cost
savings from numerous sources  including the Federal  Government,  utility power
companies and consumers.  Numerous  enterprises,  including both Fortune 500 and
small start-up companies, continue to enter the marketplace with various product
offerings,  ranging from energy efficient lamp  replacements to lighting dimmers
and  controls.  Furthermore,   utility-sponsored  energy  management  firms  and
contractors  (DSMs and ESCOs) have  entered the  marketplace  offering  complete
turnkey  services to reduce energy  consumption  in commercial , industrial  and
public  facilities.  Most  recently  the  Environmental  Protection  Agency  has
launched several major campaigns to promote energy efficient  lighting products.
Utility  power  companies  also  continue  to  promote  lighting   retrofit  and
conservation with various rebates and cash incentives.

Capitalizing on the growing demand for energy  efficient  lighting  products and
the  development of more powerful  solid-state  Light Emitting  Diodes (LEDs) in
1993 the Registrant,  under the brand name  AstraLite,  developed a 1.8-watt LED
illuminating  light  source  to  retrofit  the high  energy  consuming  standard
incandescent  lamps used in Exit Signs.  Since 1993,  Astralite has expanded its
product  line to include  both LED retrofit  kits and  complete  LED-based  exit
signs.

LEDs,  first  developed  in the  1960's,  produce  light  by the  excitation  of
electrons  in  a  P-N  junction  and  use  the  same  manufacturing  process  as
semiconductors.  Since that time LED  technology has increased in brightness and
useful life making them a viable  alternative to  incandescent  applications  in
color specific applications such as Exit Signs and Traffic Signals.

The key benefits of LEDs when used in Exit Signs is their 98% energy savings and
extremely long life as compared to the  incandescent  lamp.  Required by code in
public buildings, there are an estimated 40-100 million Exit Signs in use today.
The EPA  estimates  that over $1  billion  per year in energy  savings  could be
realized if the nation converts to this new solid-state lighting technology.



                                       2

<PAGE>


POWER PROTECTION SYSTEMS

Power  protection  systems  condition and supply  electrical power to computers,
electronic  equipment  and  lighting  systems  when  utility  power  fails or is
contaminated.  These systems serve as a temporary bridge between the termination
of utility power and the commencement of power from generators,  the restoration
of utility  power,  or  provide  time for an orderly  computer  system  shutdown
without damage or loss of data. Products are automatically activated and provide
electrical power to the protected  equipment for periods of time ranging from 10
minutes to 8 hours.

The Company  concentrates  on three niches of the power  protection  market:  1)
Emergency Lighting,  2) Custom Products,  and 3) Standard Products.  The Company
maintains a broad product line from 280VA single-phase up to 100 KVA three-phase
systems,  and  maintains a patent,  which expires in the year 2000 for an energy
efficient unit.

All power  protection  systems  contain a battery,  battery  charger,  DC(direct
current) to AC(alternating  current) inverter, and an output transformer.  These
components are housed in metal cabinets with meter panels, environmental filters
and air louvers.  The complete unit can be mounted on the floor,  wall, table or
desk.

The Company's  main focus is the emergency  lighting  market,  where it offers a
line of power  protection  devices(  Lighting  Inverters)  which backup lighting
fixtures. Required by Fire Code, all public buildings must provide for a minimum
of 90 minutes of emergency  lighting.  This can be a accomplished via generator,
battery powered unit lights, or Inverters.

The   Company's   power   protection   equipment   can  be  divided   into  four
sub-categories:  1) Double  conversion,  on-line  uninterruptible  power systems
(UPS), 2) Ferroresonant, on-line uninterruptible systems (UPS), 3) Fast transfer
backup power systems, and 4) Standard transfer backup power systems.

The most  significant  difference  among the four categories of power protection
systems  is the  market  they  serve and the speed at which  auxiliary  power is
supplied when utility power fails. The  responsiveness of the system in terms of
supplying power determines the specific use or application of the system.

Double conversion,  on-line systems  continuously supply perfect sine wave power
to the protected  load. No interruption in power occurs during the transfer from
utility  power to emergency  power,  completely  protecting  the load from power
disturbances or outages. Ferroresonant on-line systems also supply uninterrupted
power,  but unlike  double  conversion  systems,  there is a slight  voltage and
frequency  modulation  during  the  transfer.  Fast  transfer  systems  are used
primarily for emergency lighting  applications  involving HID lights. HID lights
require this type of system to continue uninterrupted  illumination upon loss of
utility power. In the case of standard  transfer  systems there is a delay of 50
to  100  milliseconds  which  is  compatible  with  powering   incandescent  and
fluorescent emergency lighting.

As  a  result  of  the   differences   in   transfer   speed   and   modulation,
double-conversion  and  Ferroresonant  on-line UPS systems are generally used to
supply  auxiliary  power  and  line  conditioning  to  computers  and  sensitive
electronics  in which any loss of power  might  damage  the  equipment  or cause
errors and data losses. Backup power systems, having the slowest transfer speed,
are used primarily for emergency lighting systems in which the momentary loss of
power does not effect the equipment or its  performance in any  meaningful  way.
Both  double   conversion  and   Ferroresonant   on-line  systems  provide  line
conditioning  to filter and regulate  utility  power to clean sine wave.  Backup
power systems generally offer little or no line conditioning.

PRODUCT PRICES AND REVENUES

The retail product price ranges are as follows:  (a) energy  efficient  lighting
from $40 to $120; (b) power protection  systems from $119 to more than $100,000;
(c) line  conditioning  equipment from $1,000 to $25,000;  (d) battery  chargers
from  $1650 to  $5000;  and (e)  emergency  lighting  equipment  from  $2,000 to
$90,000.

MANUFACTURING AND SUPPLY

The Company's  manufacturing  operations,  are conducted at its High Bridge, New
Jersey  facility.  Manufacturing  includes an order  specific  customized  order
processing system for power protection  products,  and large quantity orders for
Astralite products. Production is scheduled on an historical sales basis as well
as for specific customer orders. To a limited extent,  the Registrant  purchases
fully  assembled  UPS  systems  from two  sources  for resale in its  world-wide
distribution  network.  Subassemblies  for the solid-state  light emitting diode
retrofit kits are manufactured  outside the United States with final assembly at
High Bridge.

The Company is a highly integrated manufacturer of power protection products and
accordingly,  except for batteries,  produces nearly all major components of its
products  from raw  materials.  The Company also custom  designs and  fabricates
components such as chassis,  transformers,  cable  connections,  printed circuit
boards,  cabinets  and  other  devices.  It  assembles,  inspects  and tests its
products at various  stages of assembly and each  finished  product  undergoes a
complete test prior to shipment.

The Company  generally  purchases  materials  and supplies  according to written
purchase  orders.  Blanket  purchase  orders are limited usually to larger usage
items at fixed prices for delivery  and payment on specific  dates  ranging from
two months to one year.

                                       3

<PAGE>


MAINTENANCE AND SERVICE

The Registrant offers warranties on all its products, including parts and labor,
that range from one year to twenty-five  years prorated,  depending upon product
type.  Products  sold by the Company but  manufactured  by others are covered by
Company and original  manufacturer's  standard warranty and service  agreements.
For  1994,  1995  and  1996  the  Registrant  had  field  service   expenses  of
approximately $506,000, $502,000 and $589,000, respectively.

The Registrant  performs  service on products through its factory service center
at its New Jersey  factory  or at  customer  locations.  These  services  may be
performed  pursuant  to a written  service  contract or upon  specific  order at
various  rates.  Service on its products sold abroad are usually  handled by its
foreign distributors.

SALES AND MARKETING

The Company markets its Astralite  products  directly  through a select group of
500 lighting and electrical  distributors  who focus on energy  conservation and
long-life  lighting.  Marketing  efforts  are  directed  to plant  and  facility
managers, and energy managers responsible for industrial, commercial, and public
buildings such as schools,  hospitals,  and shopping malls.  Astralite maintains
sales offices in York, PA, Chicago, IL, Houston,  TX, and San Francisco,  CA. In
addition,   certain   Astralite   products   are  sold  to  original   equipment
manufacturers.

Astralite  products  are usually  discounted  to  distributors  from 20% to 37%,
depending on the product and quantity  sold.  No one  distributor  accounted for
more than 3% of the Company's net sales for 1996.

The  Company  markets  and sells its power  protection  and  emergency  lighting
products  in  the  United   States  and  abroad   through  a  network  of  sales
representatives, distributors, and exporters to end-users and original equipment
manufacturers.  For domestic  power  protection and emergency  lighting  product
sales, the Company utilizes electrical wholesale  distributors and approximately
40 sales representative companies. In the overseas market, the Company relies on
approximately  15  distributor/representative  companies  and  approximately  10
exporters to sell its products. In addition, the Registrant makes sales directly
to  individual  end-users  and  original  equipment   manufacturers  on  certain
products. No one distributor,  representative or original equipment manufacturer
accounted for more than 8% of the Company's net sales for 1996.

The Registrant's relationship with its sales representatives is usually governed
by a written contract,  terminable on 30 days notice.  The contract provides for
exclusive  territorial and product  representation  and  commissions  payable to
representatives  on  their  sales  from  3% up to 20%  depending  on  terms  and
conditions.  The sales representatives do not purchase for their own account and
generally will represent other manufacturers but not on competing products.  The
top 10 representatives accounted for an estimated 18% of the Company's net sales
for 1996.

                                       4

<PAGE>


CUSTOMERS

The Registrant  sells its products to numerous  customers,  ranging in size from
small companies to large Fortune 500 corporations.  Its customers are end-users,
original equipment manufacturers,  system integrators, and distributors. Many of
the Company's  customers are repeat purchasers.  None of the Company's customers
represent  more than 7% of  revenues  in 1995 and 8% of  revenues  in 1996.  The
Company's Astralite and UPS businesses are generally not seasonal,  however, the
emergency   lighting  business   (approximately  30%  of  net  sales)  parallels
construction industry cycles.

INTERNATIONAL OPERATIONS

The  Registrant's  international  activities  are an  important  portion  of its
business.  Approximately  4%, 8% and 6% of its net sales for 1994, 1995 and 1996
respectively,  are attributable to sales of its products outside the continental
United States.

BACKLOG

As of December 31, 1996 the Registrant's backlog was approximately $1,715,000 as
compared with a backlog of approximately  $1,660,000 as of December 31, 1995. No
single  customer  represents  more than 16% and 28% of such  total  backlog  for
December 31, 1996 and December 31, 1995, respectively. Backlog figures generally
include written  purchase orders and are for products only and not for services.
Most orders are generally  subject to cancellation.  However,  in certain cases,
particularly  in  regard to  orders  for  custom  products,  there  are  penalty
provisions for cancellations.

ENGINEERING

The  Registrant  maintains  an  engineering  staff whose  functions  include the
improvement  of existing  products,  modification  of products to meet  customer
needs  and  the  engineering,  research  and  development  of new  products  and
applications.  There are presently nine individuals employed at the Registrant's
High Bridge,  New Jersey  location.  Engineering  and  research and  development
expenses were approximately  $328,000 in 1994 and $438,000 in 1995, and $290,000
in 1996.

The Registrant  intends to continue its research and development  activities and
considers  these  efforts  vital  to  its  future  business  and  prospects.  It
anticipates  significant expansion of such efforts primarily directed toward the
development of new energy savings products and applications,  the improvement of
existing  products,  and cost  reductions.  New energy savings  products include
retrofit products for a variety of applications.

COMPETITION

In all its product lines,  the Company faces intense  competition  from numerous
domestic and foreign  manufacturers  of varying sizes,  including large Japanese
and European  companies.  In the Registrant's  opinion,  companies with which it
competes  are  American  Power  Conversion,  Sola,  Exide,  Deltec,  Best Energy
Systems, Dualite, Lithonia, ProLight and many other companies.

The degree of competition  and the  particular  competitor may vary depending on
the product line/model and application involved.  Accordingly,  the Company will
compete with certain  companies in the sales of its products for  computers  and
personal computers and with others in the emergency lighting or energy efficient
retrofit fields. For all its products,  the Registrant generally competes on the
basis of price, product performance, features and delivery schedules. Service is
ordinarily not a factor.  the Company  generally  endeavors to position and sell
its  products  at equal  prices  to its  competitors.  Many of its  competitors,
however, are owned by larger companies and have greater financial, technical and
marketing resources than the Registrant.

GOVERNMENT REGULATION

The Registrant has not  experienced  and does not anticipate any material effect
of existing or probable government regulations on its business.

                                       5

<PAGE>


Item 2.  Property and Facilities

The  Registrant  leases  from  Roger  Love (a  director  and  consultant  to the
Registrant)  and Doris Love a building of  approximately  60,000  square feet in
High Bridge,  New Jersey for its manufacturing  facilities and executive offices
expiring  December 31, 1999. Annual rent over the remaining term of the lease is
$237,000 per year. The Registrant is also  responsible for local property taxes,
insurance premiums, and other related expenses. At the end of the lease term the
Registrant has the option to either  purchase the building or to renew the lease
for an additional ten (10) years at no increase in rent.

Item 3.  Legal Proceedings

To the best of its knowledge,  there are no material  legal  proceeding to which
the Registrant is a party or to which its property is subject.

Item 4.  Submission of Matters to a Vote of Shareholders

No matters  were  submitted  during  1996.  However,  on  January  6, 1997,  the
Registrant submitted four proposals to its shareholders.  These proposals,  each
of which was approved by the shareholders,  were the election of directors,  the
approval of the 1996 Stock Option Plan,  the  amendment  to the  certificate  of
incorporation  to increase the authorized  shares to 12,000,000  from 5,000,000,
and the appointment of Arthur Andersen, LLP as independent auditors.

                                       6

<PAGE>


                                     Part II

Item 5.  Market  for the  Registrant's  Common  Equity and  Related  Stockholder
Matters.

The principal market for the Registrant's shares of Common Stock, par value $.01
per share, is the  over-the-counter  market.  The  Registrant's  Common Stock is
quoted on the NASD NON-NASDAQ OTC Bulletin Board with the symbol CUWR.

The high and low closing bid and asking prices concerning such securities,  on a
quarterly  basis, as furnished by the National  Quotation  Bureau for the period
beginning January 1, 1995 are as follows:

Common Stock (CUWR)

   CALENDAR PERIOD                  HIGH BID  LOW BID      HIGH ASK      LOW ASK

01/01/95 to 03/31/95                 1 1/2       1/8         1 7/8         9/16
04/01/95 to 06/30/95                 1 1/2       3/16        2 1/4         9/16
07/01/95 to 09/30/95                 1 1/8       3/8         1 15/16       7/8
10/01/95 to 12/31/95                 1 1/8       1/8         1 5/8         3/4
01/01/96 to 03/31/96                 9/16        11/16       1 1/4         11/16
04/01/96 to 06/30/96                 1 1/8       9/16        1 3/16        11/16
07/01/96 to 09/30/96                 11/16       9/16        1 1/16        7/8
10/01/96 to 12/31/96                 9/16        1/4         1 1/16        7/16

Quotations  represent  prices between  dealers,  do not include retail mark-ups,
markdowns or commissions and do not necessarily represent actual transactions.

The number of shareholders of record on March 20, 1997 was 130.

The  Registrant has not paid any cash dividends on its Common Stock and does not
intend to do so in the near future.

Item 6. Management's Discussion and Analysis

REVENUES

Net sales from continuing  operations  totaled  $10,839,000 in 1996 which is 17%
below the 1995 sales  performance.  The  decline in 1996 sales  compared  to1995
resulted from increased  competition and reduced utility rebate incentives which
impacted the Astralite  retrofit  business,  and increased  competition  for UPS
products.  Beginning in the fourth  quarter,  management  took steps to increase
investment in engineering for new product  development  and to strengthen  sales
and marketing  support for  distributors  to meet  competitive  initiatives.  In
September  1996,  a new  Astralite  product  sales office was opened in Houston,
Texas, and another office was opened in San Francisco, California during January
1997.

COST OF SALES

Cost of sales for 1996 of $9,600,000  included  $1,150,000 of charges related to
inventory adjustments recorded during the second and third quarters of the year.
After removing the effects of inventory  adjustments,  cost of sales  represents
about 77% of sales compared to 72% in 1995.

OPERATING AND OTHER EXPENSES

Selling expenses for 1996 were approximately $1,589,000, or about $362,000 below
1995. This represented about 14.5% of net sales for 1996, and 14.9% of net sales
for 1995.  During the first half of 1996, the Company  reduced its  distribution
and promotion expenses which resulted in an overall cost reduction for the year.
As noted above, the Company began reinvesting in sales and marketing  activities
during the fourth quarter of the year.

                                       7

<PAGE>

General  and  administrative  expenses  were  approximately  $1,137,000  in 1996
compared  to about  $1,033,000  in 1995.  Administrative  expenses  during  1996
included  additional  expenses  for the  replacement  of certain key  management
positions.

Interest expense for 1996 of approximately $404,000 was about 7% higher than the
1995 expense of  $379,000.  The  outstanding  debt levels for 1996 and 1995 were
substantial equivalent. Interest for 1996 included approximately $15,000 of cost
associated with the rescheduling of debt service.

LIQUIDITY AND CAPITAL RESOURCES

At December  31,1996 the Company's  investment in Assets was about $3,300,000 or
$2,340,000  less  than  the  $5,640,000  reported  at  December  31,  1995.  The
significant  components  of the  decrease  are (1) a reduction  in  inventory of
$1,150,000  related to an  adjustment  of the carrying  value  recognized in the
second and third quarters of the year; (2) a decrease in accounts  receivable of
$1,097,000 (before reserves) related to a lower level of fourth quarter sales in
1996 compared to 1995  ($610,000) and to a reduction in the number of days sales
outstanding  ($487,000);  and (3) a  reduction  in other  long  term  assets  of
$136,000 based upon the adoption of Statement of Financial  Accounting Standards
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to be Disposed  Of." The  significant  components  of the decrease in the
Company's  Liabilities and Stockholders'  Equity of $2,340,000 was comprised of:
(1) a loss for the year of $1,892,000;  (2) a net reduction in debt of $265,000;
and (3) a reduction in accounts payable and deferred income of $183,000. The net
reduction in the Company's debt included  repayments totaling $751,000 ($603,000
on  revolving  credit and  inventory  loans),  partially  offset by additions of
$486,000 ($420,000 from related parties).

The Company  anticipates  that borrowings  available to it through its revolving
credit facility along with  restructured  debt service payments  negotiated with
unsecured debtholders,  and the issuance of notes to related parties during 1997
should be sufficient to cover  operating cash  requirements  for the foreseeable
future.

                                       8

<PAGE>

During the fourth quarter of 1996, the Company  implemented  programs to improve
profitability and cash flow through better  management of inventory,  purchasing
practices and manpower  utilization.  In addition,  the Company's  plan for 1997
includes four specific  profit  improvement  programs.  These  programs  include
investing in additional sales resources, establishing a cell manufacturing plan,
focusing on new  product  introductions,  and  establishing  teams to  implement
practices to lower  manufacturing  costs. Based on this plan, which was approved
by the Board of Directors,  the Company  obtained a commitment for an additional
$280,000 of financing from related parties of which $270,000 was received during
the first quarter of 1997.

Item 7.

Financial Statements

The information called for by this item appears at the end of this Form 10-KSB.

Item 8.

Changes In and  Disagreements  With  Accountants  On  Accounting  and  Financial
Disclosure

None

                                       9

<PAGE>


Item 9.

Directors and Executive Officers, Promoters and Control Persons, Compliance with
Section 16(a) of the Exchange Act

Certain  information  about  directors,  officers and other key personnel of the
Registrant is contained in the following table:
<TABLE>
<CAPTION>

Name                                         Title                                             Age
----                                         -----                                             ---
 .
<S>                                          <C>                                                 <C>
Lindsay Gillette                             Chairman of the Board                               38

Hiro Hiranandani1                            President & CEO                                     59

Peter Gillette2                              Director                                            36

Richard Hobday                               Director                                            66

Roger Love                                   Director                                            64

Kenneth Rind2                                Director                                            61

Clarence Wilcox2                             Director                                            66

Thomas Marren                                Vice President and CFO, Secretary                   51

Leslie Listwa                                Vice President and GM Astralite                     39

Richard Johnson                              Vice President MIS and Controller                   50
</TABLE>

(1) Mr.  Hiranandani's  employment  as  President,  Chief  Executive  Officer is
subject to an employment agreement.  The term of this agreement is June 28, 1996
through December 31, 1998.

(2)  Member of the Audit Committee

All directors hold office until the next annual meeting of shareholders or until
their successors are elected and qualify.  Executive  officers hold office until
their successors are chosen and qualify, subject to earlier removal by the Board
of Directors.

Lindsay  Gillette  has been a Director  since  1994.  He was  elected  Chairman,
President and Chief Executive Officer in 1994 and became Chairman in June, 1996.
Mr. Gillette has also been a Managing Director of Computers and Controls Ltd., a
Trinidad & Tobago  corporation  since 1982.  Mr.  Gillette is also a Director of
Cableview Limited, Body Works Fitness & Aerobics Limited,  Favorite Foods, Ltd.,
National Maintenance Training & Security Company Ltd., and NIHERST. Mr. Gillette
is a  graduate  of  McMaster  University  with  a  bachelor's  degree  in  Civil
Engineering.

Hiro Hiranandani became President, Chief Executive Officer and a Director of the
Company  in June of  1996.  From  1977 to 1994,  Mr.  Hiranandani  held  various
management  positions with Pitney Bowes,  Inc. He most recently was President of
Worldwide  Mailing Systems  operations of Pitney Bowes. Mr.  Hiranandani holds a
bachelor's degree in electrical  engineering from the University of Missouri,  a
master's degree in electrical engineering from Purdue University, and a master's
degree in business administration from the University of Bridgeport.  He is also
Director of Smart Serv on line, Inc.

Peter  Gillette has been a Director of the Company  since 1994. He also has been
Technical  Director of Computers  and Controls  Ltd.,  since 1983.  He is also a
Director of Cableview  Limited,  Body Works Fitness & Aerobics Limited,  Pelinja
Holdings  Limited,  Chaguaramas  Development  Authority,  Tourism and Industrial
Company and Trinidad & Tobago Free Trade Zones.  Mr. Gillette holds a bachelor's
degree in civil engineering from Cornell University.

                                       10

<PAGE>

Richard  Hobday has been a Director of the Company since December 1996. He is an
independent consultant. In 1988, he retired as a partner with Arthur Young & Co.
(Ernest  & Young)  accountants.  Mr.  Hobday  is a  Director  of Ready Mix (West
Indies) Ltd., Trinidad Contractors Ltd., and Los Cuevos Resorts Ltd.

Roger  Love was a founder of the  Company  in 1967.  He has served as a Director
from  1972 to the  present.  From  1972 to 1994 Mr.  Love was  President  of the
Company. He currently is a consultant, including a consultant to the Company.

Kenneth  Rind has been a Director  since  1995.  Dr.  Rind is Chairman of Oxford
Venture Corporation,  an independent venture capital management company which he
co-founded  in 1981.  From  1976 to 1981,  Dr.  Rind  was a  principal  at Xerox
Development   Corporation  responsible  for  acquisitions  and  venture  capital
investments.  From 1970 to 1976, he was  Vice-President  of Corporate Finance at
Oppenheimer & Co., and managed its venture capital and high technology corporate
finance  activities.  He is a Director  of Medical  Sterilization,  Inc.,  Alpha
Technologies Group, Inc., Vasomedical, Inc., and VTX Electronics Corporation and
several private  companies.  Dr. Rind received a bachelor's  degree in chemistry
from Cornell  University  and a doctorate  in nuclear  chemistry  from  Columbia
University.

Clarence  Wilcox has been a Director of the Company since 1994. He also has been
Chairman and Managing Director of Wilcox  Enterprises  Limited since 1978. Since
1993 he has been Chairman and Managing Director of Guymar Caribbean Limited. Mr.
Wilcox is a Deputy Chairman and Director of GTM Life Insurance Co. of Trinidad &
Tobago,  and a Director of General Packaging Limited and Ready Mix (west Indies)
Ltd.

Thomas Marren joined the Company in September 1996. Prior to joining the Company
Mr.  Marren  held  various   financial   positions  at  Engelhard   Corporation,
Allied-Signal  and Deloitte  Haskins and Sells  (Deloitte & Touche).  He holds a
bachelor's  degree in  accounting  from  Upsala  College,  a master's  degree in
business  administration  from Monmouth  University,  and is a member of the New
Jersey Society of Certified Public Accountants.

Leslie Listwa joined the Company in 1991 as Director of Sales and Marketing.  He
was  instrumental  in the start-up of the Astralite  operations  and assumed his
present  position in July of 1996.  Prior to joining the Company Mr. Listwa held
various  key  engineering  and  marketing  positions  at RCA  Americom,  Dranetz
Technologies,  and Ariel  Corporation.  Mr. Listwa holds a bachelor's  degree in
electrical  engineering from Pratt Institute,  and a master's degree in business
administration from Pace University.

                                       11
<PAGE>

Richard Johnson joined the Company in October 1996. Prior to joining the Company
Mr. Johnson held various financial positions at Metallurgical Industries,  Inc.,
and Metem  Corporation.  Mr. Johnson holds a bachelor's degree in marketing from
Syracuse University,  a master's degree in business administration from Farleigh
Dickinson University,  and a juris doctor from Seton Hall University Law School.
Mr.  Johnson is also a member of the New  Jersey  Society  of  Certified  Public
Accountants.

Lindsay Gillette and Peter Gillette are brothers.  No person who was a director,
officer,  of  beneficial  owner of more than ten  percent of any class of equity
securities of the Registrant failed to file on a timely basis,  reports required
by Section 16 (a) during the fiscal year ended December 31, 1996.


                    BALANCE OF PAGE INTENTIONALLY LEFT BLANK

                                       12

<PAGE>


Item 10. Executive Compensation

The annual and  long-term  compensation  for  services  performed in all Company
related  capacities for the fiscal years ended December 31, 1994, 1995, and 1996
of those  persons who were,  at  December  31,  1996,  the  President  and Chief
Executive Officer, and other Officers of the Company follows:

                           SUMMARY COMPENSATION TABLE
                               Annual Compensation

Name and                                    Salary7             Bonus
Position                        Year       ($'s)                ($'s)

Hiro Hiranandani1                1996        $ 49,418
President & CEO

Leslie Listwa2                   1996        $ 80,066         $  5,655
VP & GM Astralite                1995        $ 80,000         $ 27,000

Bradley Kies2,3                  1996        $  90,021          $5,000
VP Operations                    1995        $ 80,000

Louis Massad3                    1996        $104,500
VP Finance                       1995        $ 75,500
                                 1994        $ 72,500

Lindsay Gillette4                1995        $ 46,646
President & CEO                  1995        $ 93,670         $ 49,150
                                 1994        $ 10,000

Thomas Marren5                   1996        $ 18,750
VP & CFO

Richard Johnson6                 1996        $ 17,250
VP MIS & Controller

--------
(1) Appointed President & CEO June 28, 1996.
(2) Beginning January 1, 1995.
(3) Resigned effective December 31, 1996
(4) Resigned as President & CEO June 28, 1996. Remained Chairman of the Board of
    Directors.
(5) Started September 16, 1996, replaced Mr. Massad.
(6) Started October 1, 1996
(7) Salary for Mr. Kies and Mr. Massad included accumulated vacation pay.


                                       13

<PAGE>


Stock Option Plan

Under the Registrant's pre-1996 incentive stock option plan, options to purchase
a maximum of 500,000 shares of the Registrant's Common Stock could be granted to
officers and other key employees.  The plan terminated on April 1, 1996, and was
replaced by the 1996 plan (the  "Plan")  which was approved by  Shareholders  on
January 6, 1997. The terms and condition of both plans are essentially the same,
with  options  granted  under the Plan  intended to qualify as  incentive  stock
options as defined in Section  422A of the  Internal  Revenue  Code of 1954,  as
amended by the Tax Reform Act of 1986.

As of December 31, 1996,  233,000  shares of the pre-1996 stock option plan were
outstanding, with 148,000 shares of authorized but unissued shares set aside for
earned shares. On January 6, 1997, 195,000 shares were issued under the Plan.

The Plan is  administered  by the Board of Directors  which approves the persons
that are to receive  options,  the number of shares that may be purchased  under
each option,  and the exercise price. In the event an option holder  voluntarily
terminates  employment,  any unexercised options terminate immediately except in
cases where the  termination  was not for cause,  the option holder dies, or the
option holder is disabled.  The maximum terms of any option is ten years and the
option  price  per  share  may not be less  than  the fair  market  value of the
Registrant's shares on the date the option is granted.  However, options granted
to  persons  owning  more than 10% of the  voting  shares may not have a term in
excess  of five  years  and the  option  price may not be less than 110% of fair
market value.

The aggregate fair market value of the shares of the  Registrant's  Common Stock
(determined  at the time the option is granted) with respect to which  incentive
stock  options are  exercisable  for the first time by such option holder during
any calendar year (under all such Plans) may not exceed $100,000. Options may be
granted within ten years from the effective date of the Plan.

Options granted under the Plan are not transferable other than by will or by the
laws of descent and  distribution.  Options granted under the Plan are protected
by antidilution  provisions  increasing the number of shares issuable thereunder
and reducing the exercise price of such options,  under certain conditions.  The
Plan will  terminate on January 5, 2007, or on such earlier date as the Board of
Directors may determine.  Any options  outstanding at the termination  date will
remain  outstanding  until it expires or is exercised in full,  whichever occurs
first.

Option Grants in the Last Fiscal Year

There were no grants of stock options pursuant to the  Registrant's  Plan during
the fiscal year ended  December  31,  1996.  Stock  appreciation  rights are not
granted under the Plan.


                                       14
<PAGE>


                    Aggregated Option Fiscal Year End Values
                        (There were no exercises in 1996)

(a)                         (b)                                 (c)
                  Number of unexercised Options  Value of unexercised In-the-
                  at Year-end(#) Exercisable/      Money Options at Year-end(#)
Name                       unexercisable            Exercisable/unexercisable

Leslie Listwa              20,000/0                                 0/0
Leslie Listwa              24,000/36,000                            0/0
Bradley Kies               16,000/0                                 0/0

Long-term incentive plan awards

The  Registrant  does  not  have a  long-term  incentive  plan,  other  than the
Incentive Stock Option Plan.

Item 11. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth as of March 20, 1997, those persons including any
"group" who is known to the Registrant to be beneficial owners of more than five
percent (5%) of the  Company's  common  stock as well as the stock  ownership of
directors and executive officers.  The Company's common stock is the only equity
or voting security outstanding.

Name and Address of     Amount and Nature of       Percent of
Beneficial Owner        Beneficial Ownership1        Class

Roger Love2                    461,1992            17.7%
124 W. Main St 
High Bridge, NJ 08829

Mantilla Ltd.                  490,0003            18.8%
P.O. Box 173, Road Town
Tortola, B.V.I 

RMC Ltd.                       510,0003            19.6%
Tumpuna Road
Guanapo, Trinidad, WI

Leslie Listwa                    40,000             1.5%
124 W. Main Street
High Bridge, NJ 08829

All directors and officers
as a group3                     501,199            21.9%

(1) Except as otherwise set forth herein, all shares are beneficially owned, and
the sole voting and investment power is held by the persons named. Does not give
effect to common stock reserved under the  Registrant's  Incentive  Stock Option
Plan. (2) Roger Love has deposited his shares in a voting trust,  the trustee of
which is Mr. Lindsay Gillette,  a director of the Company. (3) Lindsay Gillette,
Chairman  of the  Board  and  Peter  Gillette,  a  director,  may be  considered
affiliates  of  Mantilla,  Ltd.  and Lindsay  Gillette an affiliate of Ready Mix
(West Indies), Ltd.

                                       15
<PAGE>

Item 12. Certain Relationships and Related Transactions

The Company  owns a 20% interest in Retrofit,  Ltd.  ("Retrofit"),  of Trinidad,
West Indies. Retrofit was established to manufacture components for the Company.
In 1996, it began  manufacturing LED sub-assemblies for the Company's  Astralite
business  unit.  The  Company's  entire  investment  in Retrofit  consisted of a
license of its patented LED retrofit  technology.  This investment is carried at
no value. The majority  interest in Retrofit is owned by certain related parties
including Messrs Lindsay Gillette and Peter Gillette,  directors of the Company.
During  1996,  the Company  purchased  approximately  $310,000 of material  from
Retrofit.

The Company leases its principal office and manufacturing  facilities from Roger
Love and Doris Love under a written lease agreement  expiring December 31, 1999.
The Company has the option to purchase  the building on December 31, 1999 at the
then fair market  value by payment of 15% cash and the  balance  payable on a 30
year mortgage  bearing interest at the 30 year treasury bond rate. If the option
is not exercised,  the Company is obligated to renew the lease for an additional
10 year term without  rent  escalation.  The annual  rental is $237,000 per year
with the Company being  responsible  for property  taxes,  insurance,  and other
related expenses.  During 1995 and 1996, the Company recorded $237,000 as rental
expense per year.

As of December 31, 1996,  the Company owed Roger Love $20,925 under a consulting
and non-competition arrangement with the Company that expires December 1997. The
terms of the  arrangement  call for the payment of $25,000 for services of up to
50 business days during the last year of the agreement.

On June 28, 1996, Mr Hiro Hiranandani,  a director of the Company, and a company
controlled  by Messrs  Lindsay  Gillette  and Peter  Gillette,  directors of the
Company,  loaned the Company  $300,000 in exchange  for term notes,  due July 1,
1999,  bearing  interest at 9-1/2% per annum,  payable  quarterly.  In addition,
these investors received a total of 300,000 stock subscription warrants, with an
exercise price of $1.00 per share, exercisable from July 1, 1998 through July 1,
2000. Further, as part of the compensation  package for Mr Hiranandani,  the new
President and Chief Executive Officer,  377,999 stock subscription warrants were
issued at prices  ranging  from $.33 to $.40 per share,  with  exercise  periods
ranging from June 1, 1996 through June 1, 2006. The Board of Directors  repriced
these stock subscription warrants to $.25 per share on February 13, 1997.

On June 28, 1996, a director, through an affiliated entity, restructured several
notes payable into a $415,000  note payable in three years  bearing  interest at
9-1/2% per annum. The entity also received 100,000 stock  subscription  warrants
with an exercise  price of $1.00 per share  exercisable  beginning  July 1, 1998
through July 1, 2001. The Board of Directors  repriced these stock  subscription
warrants to $.25 per share on February 13, 1997.

As of December  31, 1996,  the Company had  outstanding  principal  and interest
payable  under its various note  agreements  with  related  parties and entities
totaling $871,000 and stock subscription warrants outstanding as discussed above
totaling 777,999. In addition,  the Company owed Retrofit $181,000 for materials
purchased in the ordinary course of business.

During the first quarter of 1997, the Company obtained additional financing from
a related party and a related entity totaling  $280,000.  The debt is payable on
February 1, 1998 and if the Company is unable to repay the  obligation  when due
it is  automatically  extended  for a period of one year and stock  subscription
warrants  will be issued.  The stock  subscription  warrants will have terms and
conditions  equivalent  to the  currently  outstanding  obligations  and will be
priced at the then existing market value.

                                       16
<PAGE>

                                    PART IV.

Item 13. Exhibit and Reports on Form 8-K:

a) None.
b) The following documents are filed as a part of this report:
         1. and 2. Financial Statements:


Index to Consolidated Financial Statements

* Report of Independent Public Accountant.
Consolidated Balance Sheets as of December 31, 1996 and 1995.
Consolidated  Statements  of Operations  for the years ended  December 31, 1996,
1995, and 1994.  Consolidated  Statements of  Shareholders  Equity for the years
ended December 31, 1996, 1995, and 1994.  Consolidated  Statements of Cash flows
for the years ended December 31, 1996, 1995, and 1994.

* Notes to Consolidated Financial Statements.

3. Exhibits:  The following list of exhibits are  incorporated by reference from
the  Registrant's  Registration  Statements  on Form S-1 and S-8 filed under the
Securities Act of 1933, as amended,  it  Registration  Statement filed under the
Securities  Exchange Act of 1934, as amended,  on Form 8-A and its Annual Report
on Form 10-K  dated  December  31,  1986.

1.1-Form of Underwriting Agreement

1.2-Form of Underwriter's  Selling Agreement

3.1-Articles of Incorporation, as amended

3.2-By-Laws of Registrant, as amended

4.1-Specimen Common Stock Certificate of Registrant

4.2-Specimen Common Purchase Warrant

4.3-Form  of   Underwriter's   Unit  Purchase  Option  between   Registrant  and
Underwriter

4.4-Form of Warrant Agreement between Registrant and Warrant Agent, as amended

5.0-Opinion of Rapaport and Cascone

10.1-Form of Authorized Sales  Representative  Agreement between  Registrant and
its representatives

10.2-Form of Distributor Sales Agreement between Registrant and its distributors

10.3-Joint Venture Agreement between Registrant and Data Power Dear, C.A.

10.4-Joint  Venture  Agreement between  Registrant and Brig. T.S. Grewal,  dated
October 16, 1985

10.5-Joint  Venture Agreement between Registrant and Crotan  Electronics,  Ltd.,
dated November 5, 1986

10.6-Exchange  of Stock between  Registrant and Roger Love and Doris Love, dated
April 28, 1983

10.7-Real Estate Lease between and among the Registrant and Roger Love and Doris
Love, dated September 1, 1983

                                       17
<PAGE>


10.8-Real Estate Lease between and among the Registrant and Roger Love and Doris
Love, dated January 1, 1985, and amendment

10.9-Real Estate Lease between Registrant and Jacques J. Hibbert, dated December
10, 1982

10.10-Promissory Note of Registrant issued to Roger Love, dated April 1, 1986

10.11-Promissory Note of Registrant issued to Doris Love, dated April 1, 1986

10.12-Loan  Agreement between Registrant and Horizon Bank, N.A., dated March 28,
1986 and amendment dated May 1, 1986

10.13-Mortgage  between and among New Jersey Economic Development  Authority and
the Hunterdon County National Bank, dated July 1, 1978

10.14-Promissory  Note of Roger Love and Doris Love to Horizon Bank, N.A., dated
March 28, 1986

10.15-Installment Sales Contract between and among Roger Love and Doris Love and
the New Jersey Economic Development Authority, dated July 1, 1978

10.16-Assignment  of Sales Contract to Horizon Bank,  N.A., dated March 28, 1986

10.17-Employment  Agreement  between  Registrant and Roger Love,  dated March 1,
1976

10.18- Employment Agreement between Registrant and J. Robert Hoeffler, dated May
1, 1986

10.19-Incentive  Stock Option Plan of the  Registrant,  as amended,  and Form of
Option Agreement

10.20-Supply  Agreement  between the Registrant and Superior  Electric  Company,
dated August 1, 1986

                                       18

<PAGE>

The  following  list  of  exhibits  are   incorporated  by  reference  from  the
Registrant's Form 10-K for the fiscal year ended December 31, 1990:

2-Contract of Acquisition of Siltron Illumination, Inc.

99.1-Commitment letter of Chemical Bank, dated March 28, 1990

The  following  list  of  exhibits  are   incorporated  by  reference  from  the
Registrant's Form 10-KSB for the fiscal year ended December 31, 1992:

10.21-Employment Agreement of Roger Love, dated January 1, 1992 

10.22-Employment   Agreement   of  Louis   Massad.   dated   January   1,   1992

10.23-Consulting   Agreement   of  Albert   Lange,   dated   February  24,  1992
22.0-Subsidiaries of the Registrant.

The  following  list  of  exhibits  are   incorporated  by  reference  from  the
Registrant's Form 10-KSB for the fiscal year ended December 31, 1993:

99.2-Commitment letter of Chemical Bank, dated March 29, 1993.

17.1-Letter of  Resignation  of Albert Lange from the Board of Directors,  dated
September 18, 1993.

99.3-Notice of Default, dated December 16, 1993.

                                       19

<PAGE>

The  following  list  of  exhibits  are   incorporated  by  reference  from  the
Registrant's Form 10-KSB for the fiscal year ended December 31, 1995:

10.24-$300,000 Convertible Debenture.

10.25-$700,000 Subordinated Note.

10.26-Consolidation and Modification of Lease Agreement.

10.27-Consulting and Non-Competitive Agreement with Roger Love.

10.28-Capitalization Agreement with Ready Mix (West Indies), Ltd.

The   following   list  of   exhibits   are  filed  as  part  of  this   report:

10.29-Resignation of Lindsay Gillette;

10.30-Employment Agreement of Hiro R. Hiranandani dated June 28, 1996;

10.31-Resignation Letter of Louis Massad;

10.32-Warrants issued by Registrant to Kenneth Rind;

10.33-Debt Restructuring Agreement between Registrant and Roger Love;

10.34-Debt Restructuring Agreement between Registrant and Doris Love;

10.35-Debt  Restructuring  Agreement  between  Registrant  and  Ready  Mix (West
Indies), Ltd. - Convertible Debenture;

                                       20

<PAGE>

10.36-Debt  Restructuring  Agreement  between  Registrant  and  Ready  Mix (West
Indies), Ltd. - Subordinated Note;

10.37-Debt Restructuring Agreement between Registrant and SouthernTech, Ltd.;

10.38-Debt Restructuring Agreement between Registrant and SouthernTech, Ltd.;

10.39-Warrants issued by Registrant to SouthernTech, Ltd.;

10.40-Promissory  Note between  Registrant  and Darby & Darby;

10.41-Promissory Note between Registrant and Hiro R. Hiranandani;

10.42-Promissory Note between Registrant and SouthernTech, Ltd.;

10.43-Extension  of Warrants  previously  issued by  Registrant  to  Rosenthal &
Rosenthal;

10.44-Warrants issued by Registrant to Hiro R. Hiranandani;

10.45-Warrants issued by Registrant to Albert Roth;

10.46-Lease  Modification  Agreement between Registrant and Roger Love and Doris
Love;

10.47-NOT USED;

10.48-Debt Restructuring Agreement between Registrant and Hiro Hiranandani;

10.49-Promissory Note between Registrant and SouthernTech, Ltd.

                                       21

<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.

                                          COMPUTER POWER, INC.


                                            By:/s/ Hiro R. Hiranandani
                                             -----------------------------
                                            Hiro R. Hiranandani, President

Dated: March 27, 1997

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 date indicated:

March 27, 1997
By:/s/ Hiro R. Hiranandani
---------------------------------
Hiro R. Hiranandani, President (CEO) and Director

/s/ Thomas E. Marren, Jr.
---------------------------------
Thomas E. Marren, Jr., Vice President and Chief Financial Officer, Secretary

/s/ Lindsay Gillette
---------------------------------
Lindsay Gillette, Chairman of the Board of Directors

/s/ Peter Gillette                              /s/  Clarence Wilcox
---------------------------------           ----------------------------------
Peter Gillette, Director                             Clarence Wilcox, Director

/s/ Roger Love                                    /s/   Kenneth Rind
---------------------------------           ----------------------------------
Roger Love, Director                                    Kenneth Rind, Director

/s/ Richard Hobday
---------------------------------
Richard Hobday, Director

                                       22

<PAGE>

                       Computer Power Inc. And Subsidiary


            Consolidated Financial Statements As Of December 31, 1996


                                  Together With


                    Report Of Independent Public Accountants


                                       23

<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS





To Computer Power Inc.:


We have audited the  accompanying  consolidated  balance sheet of Computer Power
Inc. (a New Jersey  corporation) and subsidiary as of December 31, 1996, and the
related consolidated statements of operations,  changes in shareholders' deficit
and cash flows for each of the two years in the period ended  December 31, 1996.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Computer Power Inc.
as of December  31,  1996,  and the results of their  operations  and their cash
flows  for each of the two  years  in the  period  ended  December  31,  1996 in
conformity with generally accepted accounting principles.


                                                        /s/ Arthur Andersen LLP
                                                       ------------------------
                                                            ARTHUR ANDERSEN LLP


Roseland, New Jersey
March 26, 1997

                                       24

<PAGE>


                       COMPUTER POWER INC. AND SUBSIDIARY


                 CONSOLIDATED BALANCE SHEET -- DECEMBER 31, 1996

                                     ASSETS
<TABLE>
<CAPTION>


CURRENT ASSETS:
<S>                                                                                        <C>    
   Cash                                                                                    $68,519
   Accounts receivable, less allowance of $253,956 for
     doubtful accounts in 1996 (Note 2)                                                  1,354,890
   Inventories (Notes 1 and 2)                                                           1,538,358
   Prepaid expenses and other current assets                                                75,385
                                                                                   ----------------

                Total current assets                                                     3,037,152
                                                                                   ----------------

PROPERTY AND EQUIPMENT, at cost (Note 1):
   Machinery, equipment, vehicles and furniture                                          1,070,377
   Leasehold improvements                                                                  333,274
                                                                                   ----------------

                                                                                         1,403,651

   Less-Accumulated depreciation and amortization                                       (1,140,168)
                                                                                   ----------------

                                                                                           263,483
                                                                                   ----------------

                                                                                        $3,300,635
                                                                                   ================
                                         LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES AND DEFERRED REVENUE:
   Notes and other debt payable (Note 2)                                                  $874,240
   Current maturities of long-term debt (Note 2)                                           257,146
   Accounts payable                                                                      1,110,224
   Accrued liabilities                                                                     888,048
   Deferred revenue                                                                        372,683
                                                                                   ----------------

                Total current liabilities and deferred revenue                           3,502,341
                                                                                   ----------------

LONG-TERM DEBT (Note 2)                                                                  1,732,854
                                                                                   ----------------

COMMITMENTS AND CONTINGENCIES (Note 5)

SHAREHOLDERS' DEFICIT (Notes 2 and 4):
   Preferred stock, par value $.01 per share; 2,000,000 shares authorized;  none
   issued 0 Common stock, par value $.01 per share; 5,000,000 shares authorized;
     2,602,700 shares outstanding                                                           26,027
   Capital in excess of par value                                                        3,757,119
   Accumulated deficit                                                                  (5,643,018)
   Treasury stock, 24,400 shares, at cost                                                  (74,688)
                                                                                   ----------------

                                                                                        (1,934,560)
                                                                                   ----------------

                                                                                        $3,300,635
                                                                                   ================
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of this balance sheet.


                                       25

<PAGE>




                       COMPUTER POWER INC. AND SUBSIDIARY


                      CONSOLIDATED STATEMENTS OF OPERATIONS

                 FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995


<TABLE>
<CAPTION>


                                                                1996                 1995
                                                           ----------------    -----------------
<S>                                                            <C>                 <C>        
NET SALES                                                $ 10,838,816                $13,063,017

COST OF SALES                                               9,600,397                  9,394,524
                                                         ------------                -----------

                Gross profit                                1,238,419                  3,668,493
                                                         ------------                -----------

OPERATING AND OTHER EXPENSES (Notes 2, 5 and 6):
     Selling expenses                                       1,589,243                  1,950,986
     General and administrative expenses                    1,137,294                  1,033,393
     Interest expense, net                                    403,533                    378,776
                                                         ------------                -----------

                                                            3,130,070                  3,363,155
                                                         ------------                -----------

                Net (loss) income                        ($ 1,891,651)               $   305,338
                                                         ============                ===========

NET (LOSS) INCOME PER SHARE (Note 1)                     ($       .73)               $       .12
                                                         ============                ===========

WEIGHTED AVERAGE SHARES OUTSTANDING (Note 1)                2,578,300                  2,490,966
                                                         ============                ===========
</TABLE>




The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                       26

<PAGE>




                       COMPUTER POWER INC. AND SUBSIDIARY


           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT

                 FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
                                                   Capital in                                                     Total
                                   Common          Excess of           Accumulated         Treasury           Shareholders'
                                   Stock           Par Value             Deficit            Stock                Deficit
                                -------------    ---------------     ----------------    -------------      ------------------

<S>                                <C>             <C>                <C>                 <C>                    <C>       
BALANCE, December 31, 1994         $25,097         $3,797,349         ($4,056,705)        ($151,188)             ($385,447)

   Exercise of stock
     options (Note 4)                  680             26,520                   0                 0                 27,200
   Reissuance of treasury
     stock (25,000 shares)             250            (66,750)                  0            76,500                 10,000
   Net income -- 1995                    0                  0             305,338                 0                305,338
                                 ------------     -------------      ---------------     -------------       ---------------
BALANCE, December 31, 1995          26,027          3,757,119          (3,751,367)          (74,688)               (42,909)
   Net loss -- 1996                      0                  0          (1,891,651)                0             (1,891,651)
                                 ------------     -------------      ---------------     -------------       ---------------
BALANCE, December 31, 1996         $26,027         $3,757,119         ($5,643,018)         ($74,688)           ($1,934,560)
                                 ============     =============      ===============     =============       ===============
</TABLE>


The accompanying notes to consolidated financial statements are an integral part
of these statements.


                                       27

<PAGE>




                       COMPUTER POWER INC. AND SUBSIDIARY


                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                 FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>

                                                                                           1996                 1995
                                                                                      ----------------    -----------------

CASH USED FOR OPERATING ACTIVITIES:
<S>                                                                                      <C>                     <C>     
   Net (loss) income                                                                     ($1,891,651)            $305,338
   Adjustments to reconcile net income (loss) to
   cash used for operating activities-
     Depreciation and amortization                                                            67,874               35,613
     Writedown of assets                                                                     136,000                    0
     Provision for doubtful accounts                                                          66,270              100,400
     Changes in assets and liabilities-
        Accounts receivable                                                                  992,632             (419,508)
        Inventories                                                                        1,050,723             (689,281)
        Prepaid expenses and other current assets                                            174,956               65,945
        Other noncurrent assets                                                                    0             (122,875)
        Accounts payable                                                                    (795,795)             343,892
        Accrued liabilities and deferred revenue                                             612,024              (57,100)
                                                                                      ----------------    -----------------
                Cash provided by (used for) operating activities                             413,033             (437,576)
                                                                                      ----------------    -----------------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES --
   Capital expenditures                                                                      (79,077)             (67,938)
                                                                                      ----------------    -----------------
                Cash used for investing activities                                           (79,077)             (67,938)
                                                                                      ----------------    -----------------
CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES:
   Proceeds from issuance of new debt                                                        485,558           13,861,663
   Repayments of debt                                                                       (750,995)         (13,496,599)
   Reissuance of treasury stock                                                                    0               10,000
   Exercise of stock options                                                                       0               27,200
                                                                                      ----------------    -----------------
                Cash (used for) provided by financing activities                            (265,437)             402,264
                                                                                      ----------------    -----------------
                Increase (decrease) in cash                                                   68,519             (103,250)

CASH, beginning of year                                                                            0              103,250
                                                                                      ----------------    -----------------
CASH, end of year                                                                            $68,519                   $0
                                                                                      ================    =================







SUPPLEMENTAL DISCLOSURES OF CASH FLOW
   INFORMATION:
     Interest paid                                                                          $268,968            $334,055
                                                                                      ================    =================
</TABLE>



The accompanying notes to consolidated financial statements are an integral part
of these statements.

                                       28

<PAGE>




                       COMPUTER POWER INC. AND SUBSIDIARY


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




(1)  SUMMARY OF SIGNIFICANT
     ACCOUNTING POLICIES:

       Description of Business-

         Computer  Power  Inc.  designs,  manufactures,  markets,  and  services
         products  in  three  distinct  market   categories:   energy  efficient
         lighting, power protection systems and emergency lighting.

       Principles Of Consolidation-

         The consolidated  financial statements include the accounts of Computer
         Power   Inc.   (the   Company)   and   its   wholly-owned   subsidiary,
         Uninterruptible  Power  Systems,  Inc.  All  significant   intercompany
         balances and transactions have been eliminated in consolidation.

         In addition,  the Company owns a 20% interest in Retrofit,  Ltd.  under
         the jurisdiction of Trinidad and Tobago, West Indies,  which is carried
         at no value.

       Use of Estimates-

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

       Accounting for Impairment of Long-Lived Assets-

         During  1996,  the Company  adopted SFAS No. 121,  "Accounting  for the
         Impairment  of  Long-Lived  Assets to be  Disposed  Of."  SFAS No.  121
         requires that if certain  events or changes in  circumstances  indicate
         that the carrying value of long-lived assets,  identifiable intangibles
         and  goodwill  may  not  by   recoverable,   an  entity  must  estimate
         undiscounted  future cash flows expected to result from the use or sale
         of the  asset  and  record an  impairment  for the  amount by which the
         carrying value exceeds the discounted fair value.  The adoption of this
         standard has resulted in the write-off of $136,000 in patents in 1996.

                                       29

<PAGE>


       Inventories-

         Inventories,  which include material,  labor and manufacturing overhead
         costs,  are stated at the lower of cost (first-in,  first-out basis) or
         market and consist of-

            Raw material                        $679,085
            Work in process                      557,772
            Finished goods                       301,501
                                           ---------------

                                              $1,538,358
                                           ===============

       Property and Equipment-

         Property and equipment are recorded at cost.  Depreciation  is recorded
         primarily  on a  straight-line  basis over  estimated  useful  lives as
         follows-

            Vehicles                                      3 years
            Computer equipment under capital leases       5 years
            Furniture and fixtures                        5-7 years
            Machinery and equipment                       5-10 years

         Leasehold  improvements  are  amortized  over the life of the  lease or
         their estimated useful lives, whichever is shorter.

       Deferred Revenue-

         Sales are  generally  recorded  upon  shipments of  products.  Deferred
         revenue represents goods shipped, billed and paid for by a customer who
         has the right of return  if the goods are not sold.  In such  cases the
         Company  recognizes  revenue  when that  customer  completes  its sale.
         Deferred revenue also includes customer advances.

       Net (Loss) Income Per Share-

         The  weighted  average  number of shares used in  computing  net (loss)
         income per share was 2,578,300 in 1996 and 2,490,966 in 1995. The stock
         option grants and warrants to purchase common stock discussed in Note 4
         have been excluded from this  computation  since their effect is either
         immaterial or antidilutive.

       Reclassifications-

         Certain   reclassifications   have  been  made  to  the  prior   year's
         consolidated  financial  statements  to  conform  to the  current  year
         presentation.

                                       30

<PAGE>


(2)  DEBT:
<TABLE>
<CAPTION>

       At December  31,  1996,  notes  payable and other  current  debt  include
       amounts due to related parties and other lenders as follows-

          Subordinated, unsecured notes payable to an
        <S>                                                                                               <C>    
             officer due October 31, 1997 bearing interest at 10%                                          $52,000
          Subordinated, unsecured demand note payable to
             an officer, bearing interest at 8%                                                            144,943
          Subordinated, unsecured note bearing interest at 12%,
             amortized in monthly installments of $3,998                                                    15,640
          Revolving credit agreement maturing December 31, 1997, bearing
             interest at prime (8.5% at December 31, 1996) plus 3.5%, secured by
             receivables, inventory, machinery and equipment                                               661,657
                                                                                                    ----------------

                          Total notes and other debt payable                                              $874,420
                                                                                                    ================

       Long-term debt consisted of the following at December 31, 1996-

          Term loan,  bearing interest at prime (8.5% at December 31, 1996) plus
             3.5%, secured by receivables and inventory maturing in
             monthly installments of $10,000 per month                                                    $275,000
          Subordinated, unsecured notes to a related entity bearing
             interest at 9.5%, with quarterly interest payments                                            565,000
          Subordinated, unsecured notes payable to a director due July 1, 1999,
             bearing interest at 9.5%, with quarterly interest payments                                    150,000
          Subordinated note, due to Ready Mix Ltd. (RMC) a corporation organized and existing
          under the jurisdiction of Tobago, bearing interest
             at prime (8.5% at December  31,  1996) plus 4%,  payable in monthly
             700,000 installments of $19,444 plus interest from September 1997
          Convertible  debenture,  due to RMC, bearing interest at 9.5%, payable
             in monthly installments plus interest from July 1, 1997
             until November 2000                                                                           300,000
                                                                                                    ----------------

                                                                                                         1,990,000
          Less- Current maturities                                                                         257,146
                                                                                                    ----------------

                            Long-term debt                                                              $1,732,854
                                                                                                    ================
</TABLE>

         (a)  The revolving credit agreement  provides for maximum borrowings of
              80% of  eligible  accounts  receivable,  as  defined.  The maximum
              amount,  including any amounts outstanding under the term loan, is
              $2,000,000.

       The aggregate maturities of long-term debt are as follows-

         1997             $257,146
         1998              485,198
         1999            1,023,328
         2000              224,328

                                       31

<PAGE>





       During the fourth quarter of 1996 and  continuing  into 1997, the Company
       discussed  the payments of debt service with all  debtholders  except for
       the  revolving  credit  and term  loans.  The  Company  was able to defer
       certain of its debt service  payments which at the end of 1996 would have
       been due and payable in the  amounts of $26,250  principal  and  $193,254
       interest.

       During  the  first  quarter  of 1997,  the  Company  obtained  additional
       financing from a related party and a related entity totaling $280,000.

(3)  INCOME TAXES:

       A reconciliation  of the  consolidated  provision for income taxes in the
       accompanying  statements of operations to that which would be computed at
       the U. S. statutory rate is as follows-
<TABLE>
<CAPTION>
                                                                                        1996              1995
                                                                                    --------------    --------------

<S>                                                                                    <C>                <C>     
          Tax (benefit) provision at statutory rate                                    ($640,158)         $104,000
          Provision for valuation allowance or (utilization of
             tax credits                                                                 640,158          (104,000)
                                                                                    --------------    --------------

          Income tax provision recorded in the financial statements                           $0                $0
                                                                                    ==============    ==============
</TABLE>

       Deferred income taxes are provided for temporary  differences between the
       financial  reporting basis and the tax basis of the Company's  assets and
       liabilities.  The  components  of the  deferred tax asset at December 31,
       1996 are as follows-

          Reserve for slow moving inventory                  $124,000
          Allowance for doubtful accounts                     175,000
          Depreciation                                         85,000
          Accrued warranty costs                               55,000
          Accrued vacation                                      5,000
          Operating loss carryforwards                      2,114,000
                                                       ----------------

                                                            2,558,000

          Less- Valuation allowance                        (2,558,000)
                                                       ----------------

                          Net deferred tax asset                   $0
                                                       ================

       In  accordance  with SFAS 109, the Company has  evaluated  its ability to
       realize  tax  benefits  associated  with its  temporary  differences  and
       operating loss carryforwards. Based on its operating history, the Company
       has  provided a valuation  allowance of 100%  against the  estimated  tax
       benefits  associated  with the  operating  loss  carryforwards  and other
       temporary differences.

       At December 31, 1996,  the Company has operating  loss  carryforwards  of
       approximately   $5,801,000  for  income  tax  return  purposes  that  are
       available to offset future taxable income through 2009.

                                       32

<PAGE>

(4)  SHAREHOLDERS' EQUITY:

       Stock Options-

         Under  the  Company's  pre-1996  stock  option  plan,  options  for the
         purchase of up to 500,000  common  shares  could be granted to officers
         and other key employees at prices no less than the fair market value of
         the shares on the date of grant. The plan gave the Company the right to
         repurchase the options at a price equal to the  difference  between the
         exercise  price and market price of the shares at the date the employee
         elects to exercise  the  options.  All options have a term of ten years
         and are  exercisable in equal  installments  over the five-year  period
         beginning  from the date of grant.  As of December  31,  1996,  148,000
         shares of the  Company's  authorized  but  unissued  common  stock were
         reserved for the potential issuance of stock options.

         On January 6, 1997,  the Company's  stockholders  approved a 1996 stock
         option plan with the same terms and conditions as the pre-1996 plan. On
         that date 195,000 options were granted at a price of $.25 per share.

A summary of the activity in options under the stock option plan is as follows-

<TABLE>
<CAPTION>

                                                     Shares Under             Price
                                                        Option              Per Share
                                                  -------------------    -----------------
<S>                                                      <C>                   <C> 
            Outstanding at December 31, 1994
               (Exercisable 170,600 shares)              362,000               $.40
                 Issued                                   25,000                .40
                 Exercised                               (68,000)               .40
                 Expired                                 (24,000)               .40
                                                     --------------         ----------
            Outstanding at December 31, 1995
               (Exercisable 127,000 shares)              295,000                .40
                 Issued                                        0                   0
                 Expired                                 (62,000)               .40
                                                     --------------         ----------
            Outstanding at December 31, 1996
               (Exercisable 148,000 shares)              233,000               $.40
                                                     ==============         ==========
</TABLE>

       Warrants-

         Pursuant to Board of Directors'  minutes  dated June 21, 1996,  778,000
         warrants to purchase shares of the Company's  common stock were granted
         to two members of the Board of Directors at varying prices ranting from
         $.33 to $1.00.  In  addition,  at the same meeting  25,000  warrants to
         purchase  shares of the  Company's  common  stock  were  granted  to an
         outside  shareholder  for  consulting  services at an exercise price of
         $1.00.  On February  13,  1997,  all  warrants  issued  subsequent  and
         including June 1, 1996 were repriced to $.25 per share.  As of December
         31,  1996  and 1995  total  warrants  outstanding  were  1,083,000  and
         280,000,  respectively. A total of 250,000 warrants will expire in 1997
         as follows:  150,000 in November 1997 and 100,000 in December 1997. The
         warrants  granted in 1996 have  expiration  dates ranging from the year
         2001 through 2006.

                                       33

<PAGE>

         The Company maintains an Incentive Stock Option Plan (the "Plan") which
         reserves  shares of the Company's  common stock for issuance to Company
         officers, key employees and other eligible persons as determined by the
         Board of Directors,  In 1996, the Company  adopted the disclosure  only
         provisions of Statement of Financial  Accounting  Standards  (SFAS) No.
         123,  "Accounting for Stock Based  Compensation."  In 1996 and 1995, no
         options were granted but 43,000 and 91,000 previously  granted options,
         respectively, vested. In addition, the Company granted 802,999 warrants
         on June 28, 1996. These warrants become  exercisable  ratably beginning
         at the date of grant and  ending  on  various  dates  from July 1, 2001
         through July 1, 2006. Had compensation expense for the warrants and the
         options  which  vested in 1996 and 1995 under the  Company's  plan been
         determined  based  on  the  fair  value  at the  grant  date  in  1994,
         commensurate  with the  provisions  of SFAS No. 123, the  Company's net
         income and loss and earnings per share for 1996 and 1995, respectively,
         would have been reduced to the pro forma amounts indicated below-

                                        1996               1995
                                  -----------------    -------------

            Net income-
               As reported            ($1,891,000)         $305,000
               Pro forma               (2,143,000)          293,000

            Earnings per share-
               As reported              ($0.73)            $0.12
               Pro forma                 (0.83)             0.12

         The fair value of each option  grant is  estimated on the date of grant
         using  the  Black-Scholes  option  pricing  model  with  the  following
         weighted  average  assumptions for vestings in 1996 and 1995:  dividend
         yield of 0%;  expected  volatility of 88%;  risk-free  interest rate of
         7.84% and expected lives of 10 years.

         The prices of the options granted pursuant to the Plan will not be less
         than 100% of the fair market  value of the shares on the date of grant.
         No award  will be  exercisable  after 10 years  from the date of grant.
         Grants  will vest at the rate of 20% per year  starting  the year after
         the original grant date.

(5)  COMMITMENTS AND CONTINGENCIES:

       The  Company  rents its  office  and  plant  facilities  from its  former
       principal shareholders under a noncancellable operating lease expiring in
       1999.  Property taxes,  insurance and other related  expenses are paid by
       the Company.  Upon the  expiration of the lease in 1999,  the Company has
       the option to purchase the  facilities.  If the Company does not exercise
       its option, it will be obligated to renew the lease for an additional ten
       years.

       The minimum  annual  rentals under the terms of the lease were as follows
as of December 31, 1996-

           1997             $237,000
           1998              237,000
           1999              237,000

       Rental  expense  amounted  to  $237,000  and  $237,000  in 1996 and 1995,
respectively.

                                       34

<PAGE>


(6)  BENEFIT PLAN:

       The Company maintains a 401(k) plan which covers all eligible  employees.
       Participants   may  elect  to  contribute  up  to  20%  of  their  annual
       compensation,  as defined, not to exceed the applicable limitations under
       the Internal Revenue Code. The Company  provides a matching  contribution
       of  25%  of  participant  contributions,  up to a  maximum  of 8% of  the
       participant's compensation.  Total 401(k) expense was $21,000 and $28,000
       for the years ended December 31, 1996 and 1995, respectively.

(7)  SUBSEQUENT EVENTS:

       On January 6, 1997, the Company's Shareholders  authorized an increase in
       the authorized shares of common stock from 5,000,000 to 12,000,000.

                                       35