<PAGE>
 
                    U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                  FORM 10-KSB


[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For The fiscal year ended May 31, 1997

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934


                          Commission File No. 0-16250

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


          CALIFORNIA                                            95-3627099
---------------------------------                          --------------------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)

23263 MADERO, SUITE C
MISSION VIEJO, CALIFORNIA                                          92691
---------------------------------------                    ---------------------
(Address of principal executive offices)                         (Zip Code)

Issuer's telephone number: (714) 855-3235

Securities registered pursuant to Section 12(b) of the Act:   NONE

Securities registered pursuant to Section 12(g) of the Act:   COMMON STOCK


     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 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.   X
                                       ----

     The issuer's revenues for its most recent fiscal year were $2,495,320.

     The aggregate market value of voting stock held by nonaffiliates of the
registrant was $432,232 on August 1, 1997.

     On August 1, 1997, there were 1,418,400 shares of the issuer's Common Stock
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE


     Portions of the issuer's Definitive Proxy Statement to be filed for its
Annual Meeting of Shareholders to be held on October 10, 1997, are incorporated
herein by reference into Part III hereof, to the extent indicated herein.


     Transitional Small Business Disclosure Format   Yes        No  X
                                                         ----      ----
<PAGE>
 
                                     PART I
                                     ------

ITEM 1.   DESCRIPTION OF BUSINESS.
-------   ----------------------- 

HISTORY
-------

     Dynatem, Inc. (the "Company" or "Dynatem") was incorporated on May 15,
1981, under the laws of the State of California.  It was organized to design,
manufacture and market microcomputers and microcomputer-based systems and
software for industrial applications such as factory automation, sensor
monitoring, process control, robots, data acquisition, networking and displays.
The Company commenced manufacturing and marketing operations in May 1981 and has
conducted such operations continuously from such date.  As part of such
operations, the Company was, until October 1984, an authorized dealer of certain
products manufactured by Rockwell International Corporation  ("Rockwell") which
included the "AIM 65," "AIM 65/40" and "RM 65" families of single board
microcomputers, peripherals and software.  In order to broaden the product line
manufactured by the Company and reduce the cost of sales, in October 1984 the
Company entered into an agreement with Rockwell pursuant to which the Company
received an exclusive United States and Canadian license and a non-exclusive
worldwide license elsewhere, with some exclusions, to manufacture the "AIM 65,"
"AIM 65/40" and "RM 65" families of single board microcomputers, peripherals and
software.

     The Company currently designs, manufactures, distributes and markets more
than 100 products including microcomputers, microcomputer systems, microcomputer
modules, software and peripherals and markets such products and other licensed
products individually or as components of a system.

MARKET
------

     The Company markets its products on a worldwide basis and its customers
include many Fortune 100 corporations.  Included among the export markets are
the United Kingdom, Germany, and Japan.  For the year ended May 31, 1997, export
sales accounted for 32% of the Company's net sales.

     For the last two fiscal years the export net sales and the percentage to
total net sales were:

<TABLE>
<CAPTION>
YEAR            AMOUNT     % OF TOTAL NET SALES
----            --------   ---------------------
<S>             <C>        <C>
1997            $777,780           32%
 
1996            $851,538           32%
</TABLE>

                                       2
<PAGE>
 
PRODUCTS
--------

     The Company's products generally consist of modular single board
microcomputers known as Central Processing Unit (CPU) boards, peripheral systems
and software.  The products are intended for use by manufacturing companies
seeking to increase efficiency and productivity through factory automation,
sensor monitoring, process control and other electronic implementations.  The
Company provides warranties ranging from 90 days to one year on all products
sold.

     VME.  The Company's principal product group is based on the VMEbus
     ---                                                               
specification.  These products are used as embedded controllers for
telecommunications, industrial controls, robotics, aerospace, and a wide variety
of military applications.

     In the Spring of 1990,  Dynatem reached an agreement with OR Industrial
Computers GmbH in Germany ("OR"), whereby Dynatem would distribute the OR
products in North America.  The relationship with OR was terminated in spring of
1997. The Company has since established a similar distributorship relationship
with another German VMEbus manufacturer, Microsys Electronics GmbH ("Microsys").

     The products manufactured by Microsys are consistently compatible with the
Dynatem line because, like the Dynatem VMEbus products, the Microsys products
are 100% CMOS and extremely low in power consumption and well suited to extended
temperature range systems.

     The addition of the Microsys line to the Dynatem line should have the
effect of augmenting the Dynatem range of products.  It also increases the range
of hardware to meet virtually every customer's system requirements in connection
with the products designed and manufactured here.  This is extremely important
because customers prefer buying all of the modules in their system from one
vendor who takes responsibility for guaranteeing that all modules function well
together.

     New offerings from Microsys include a number of "IP Modules", which support
a popular "mezzanine bus" used in the VMEbus market.  Through the use of these
IP modules, customers are able to customize the system I/O by adding piggyback
modules on VMEbus carrier boards.  Microsys builds both intelligent VMEbus IP
carriers as well as IP modules themselves.  Other interesting products from
Microsys include VMEbus board computers based on such current processors as the
68060 and the QUICC 860, both from Motorola.

     Among the most exciting new product offering is Dynatem's own PC compatible
VMEbus module based upon the Pentium processor and using the most current PC
compatible components.  With this design, the Company is able to produce a very
high performance, highly reliable processor module at a very low cost, by
leveraging off the economies of scale inherent to components used in desktop
PCs. Through part screening, testing and careful

                                       3
<PAGE>
 
design, the same components found in state-of-the-art desktop computers can be
used in high-end multiprocessor systems or in rugged environments.  With recent
software and hardware improvements, these architectures, previously not suitable
for use in time-critical multitasking applications, can now support true real-
time environments where "deterministic" tasks need to be scheduled to the micro-
second.

     SOFTWARE.  The Company offers to its customers software that it has
     --------                                                           
developed, and software which the Company purchases from other suppliers.  The
Company believes that there are alternative sources of supply for such software.
Since all of the modules offered are part of highly integrated real-time
systems, it is essential that all boards work well together.  For this reason,
the Company is required to provide drivers for all the boards which enable them
to implement any of the standard real-time operating systems.  The Company
therefore distributes, sells and supports real-time operating systems that have
been modified to work with the Dynatem and Microsys products.  This is a value-
added service which ties the Company more closely to the customer base.

OPERATIONS
----------

     The Company's products are manufactured either at the Company's facility in
Mission Viejo, California, or by outside assembly contractors.  They are
produced from the Company's designs with standard and semi-custom components.

     Most of the devices and components used in the Company's products are
available from several sources.  Although no assurance can be given as to the
future, the Company believes that the loss of one or more of its current
suppliers would not have a material adverse effect upon its business.

MARKETING
---------

     The Company's marketing and sales department consists of marketing, sales,
customer service, engineering and engineering application support.  The Company
has in recent years expanded its use of advertising in major trade publications,
coupling it with wide distribution of marketing brochures.  In addition, the
Company participates in over 20 regional trade shows during the year throughout
the United States and Canada.

     There are over 200 VMEbus vendors worldwide.  Depending on the application,
at least one or more of these companies are in direct competition with us.
Details of unique characteristics of the Company's offerings are more fully
described in "Products" above.

     Marketing of the Company and the Company's products is accomplished through
direct marketing and telemarketing efforts.  Direct marketing efforts are
generated by responding to inquiries generated through press releases, trade
publications, advertising, current customer lists and other similar leads.
Telemarketing is utilized to inform current and potential

                                       4
<PAGE>
 
customers of new products and technical product changes, as well as allow the
Company to evaluate the market and customer needs.  Implementation of a World
Wide Web site has been accomplished over the past six months.  It has become an
effective means of attracting new customers throughout the world.

RESEARCH AND DEVELOPMENT
------------------------

     The Company believes that its future growth greatly depends on its ability
to be an innovator in the development and application of new and existing
hardware and software technology. Expenditures for Company-sponsored research
and development for the fiscal years ended May 31, 1997 and 1996, were $198,477
and $169,121, respectively.  In the last fiscal year the Company continued
pursuing two exciting product areas. The Pentium Single Board Computer described
earlier has been the major development area; traffic control systems is the
second.  CalTrans has specified the use of the 3U VMEbus into its new generation
of traffic controllers named the Model 2070.  The Company has taken advantage of
its 3U VMEbus experience to develop a Motorola 68360 based Single Board Computer
("SBC") in compliance with the CalTrans specification.  It is anticipated that
thousands of 2070 controllers will ultimately be implemented and, since there
are a limited number of other manufacturer's developing similar SBC's, the
Company believes it will receive a portion of this business.

EMPLOYEES
---------

     At present the Company employs 14 people, 9 of whom are working full-time
schedules in the sales, engineering, financial and manufacturing departments.
Neither the Company nor its employees are parties to a collective bargaining
agreement.  The Company believes that its employee relations are very good.

COMPETITION
-----------

     Competition within the industry is based primarily upon product line
breadth, product performance, price and customer service.  The Company competes
with over 250 manufacturers of VMEbus products in North America and Europe.  One
advantage the Company believes it has is its ability to offer a "one-stop-shop"
approach which provides full support normally not provided by the Company's
competitors.  As part of this approach, the Company provides high quality
products, pricing that is competitive, and technical support which includes,
when needed, customization, special products and/or writing of special software
programs.  In addition, the Company provides customers with most products
required for specific applications including, but not limited to, special power
supplies, special enclosures, cables and other requisite hardware.  This
approach is not customary with larger competitors who would normally limit
themselves to sales of standard products.  However, most of these manufacturers
have certain other competitive advantages over the Company, including greater
financial and technological resources, earlier access to customers, established
client service programs and client loyalty.

                                       5
<PAGE>
 
ITEM 2.   DESCRIPTION OF PROPERTY.
-------   ----------------------- 

     The Company's executive offices and manufacturing plant are located in an
approximately 6,357 square foot facility in Mission Viejo, California.  The
facility is leased from an unaffiliated party for a term expiring in January,
2001, and is currently adequate to meet the Company's needs.

ITEM 3.   LEGAL PROCEEDINGS.
-------   ----------------- 

     Not applicable

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

     Not applicable
                                    PART II
                                    -------

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
-------   -------------------------------------------------------- 

     There is no public trading market for the Company's Common Stock.  Set
forth below are the high and low bid quotations of the Company's Common Stock
for the periods indicated, as reported by a licensed marketmaker who continues
to make a market in the Common Stock.  Such quotations represent inter-dealer
quotations without adjustment for retail mark-up, mark-down or commissions, and
may not represent actual transactions.  Trading in the Company's Common Stock is
limited in volume and may not be a reliable indicator of its market value.

<TABLE>
<CAPTION>
 
                          Fiscal year ended May 31,
                             1997          1996
                         ------------   ------------
                         High    Low    High    Low
                         -----   ----   -----   ----
     <S>                 <C>     <C>    <C>     <C>
 
     First Quarter       13/32    1/4   13/32    1/4
     Second Quarter        3/8   7/32   13/32    1/4
     Third Quarter       11/16   7/32     1/4    1/8
     Fourth Quarter      11/16   7/32     1/4    1/4
</TABLE>

     As of August 1, 1997, there were approximately 154 shareholders of record
     of the Company's Common Stock.

     The Company has never paid cash dividends on its Common Stock and the Board
of Directors intends to continue this policy for the foreseeable future.  Future
dividend policy will depend upon the Company's earnings, capital requirements,
financial condition and other factors considered relevant by the Company's Board
of Directors.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
-------   --------------------------------------------------------- 

RESULTS OF OPERATIONS
---------------------

     Net sales for the Company's fiscal year ended May 31, 1997, decreased 7% to
$2,490,919 over net sales of $2,683,188 in fiscal year 1996. For fiscal year May
31, 1997, net sales of OR products

                                       6
<PAGE>
 
decreased 23% to $1,374,227 over net sales of $1,790,758 for fiscal year 1996.
Dynatem manufactured products sales increased 25% to $1,116,692 this fiscal year
from $892,430 in fiscal year 1996. Export sales amounted to $777,780
representing 32% of total net sales for the fiscal year ended May 31, 1997. The
Company has been notified by OR that as of April 30, 1997, Dynatem will no
longer be a distributor of OR products.  This could materially affect the net
sales of Dynatem in the near future since the ongoing arrangement proposed by OR
is that of a representative or finder.  The Company has since established a
distributor relationship with another German VMEbus manufacturer, Microsys
Electronics GmbH.

     Gross profit as a percentage of sales increased from 31% to 37% for this
fiscal year due to a lower cost of sales.  One factor in this lower cost of
sales was a greater strength in the exchange rate of the U.S. Dollar against the
DeutschMark, and secondly, the Company realizes higher margins on domestic sales
of its own products than sales of OR products.

     The Company's cost of sales totalled $1,569,654, a 16% decline over fiscal
year 1996. Taken as a percentage of net sales, cost of sales were 63% and 69%
for fiscal years 1997 and 1996, respectively. The decrease is due primarily on
the reasons mentioned above, as well as the factors in relation to the Company's
product sales mix.
 
     Selling, general and administrative expenses were $656,986 for fiscal year
1997 compared to $635,338 for fiscal year 1996, a 3% increase. This change is
attributable to expenditures incurred in the Company's marketing campaign,
including advertising, trade shows and travel. The Company's management will
continue to review these types of expenditures to fuel future growth of sales.
In this connection, management intends to utilize commissioned sales
representatives.

     Research and development costs were $198,477 in fiscal year 1997 in
comparison to $169,121 in fiscal year 1996, a 17% increase. The increase is
attributable to the development of the new PC compatible VMEbus module based
upon the Pentium processor. The Company will continue to expand its employment
of in-house design engineers in order to optimize the scheduling and completion
of its new products on a more timely basis, as well as to obtain more
competitive costs.

      At May 31, 1997, the Company had net operating loss carryforwards of
approximately $1,545,308 and $12,780 for federal and state income tax reporting
purposes, respectively, which, if not used, will expire through 2006.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     As of May 31, 1997, the Company's working capital was $990,295 and its
current ratio was 7.9 to 1.  Management believes that the Company's existing
working capital and cash flows from operations will be sufficient to meet its
working capital needs during fiscal 1998. The Company may consider additional
sources

                                       7
<PAGE>
 
of capital should the need arise.

FUTURE TRENDS
-------------

     As a result of the new relationship established with Microsys, the Company
is now promoting these products and expects a significant growth in sales of
Microsys products over the next year.  It will take an indeterminate period of
time, however, before the sales of Microsys will compensate for the loss of
sales as a result of the termination of the relationship with OR.  There is
always the possibility that the Microsys sales will not, at some future period,
compensate for such loss of sales.

     The Company's new PC compatible VMEbus module is now being designed into
several fairly large programs and it is being well received by the VMEbus
market.  The key to success with this type of product is to offer strong
software support. The Company has put great effort into being a first to the
market with error-free versions of several popular realtime operating systems.
As the PC Compatible market changes, the Company will attempt to achieve market
leadership by offering new products based upon the latest PC compatible
technology, in a timely manner.

     The Company is now in the process of using alternative methods of
manufacturing, by using outside vendor facilities on several contractual bases.

                                       8
<PAGE>
 
ITEM 7.   FINANCIAL STATEMENTS.
-------   -------------------- 



                                     INDEX

<TABLE>
<S>                                                                  <C> 
Independent Auditors' Report......................................           F-1

Balance Sheet as of May 31, 1997..................................           F-2
 
Statements of Income For The Years Ended May 31, 1997 
 and 1996.........................................................           F-3
 
Statements of Shareholders' Equity For The Years Ended 
 May 31, 1997 and 1996............................................           F-4
 
Statements of Cash Flows For The Years Ended May 31, 1997 
 and 1996.........................................................           F-5
 
Notes to Financial Statements For The Years Ended 
 May 31, 1997 and 1996............................................   F-6 to F-17
</TABLE>

                                       9
<PAGE>
 
                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------


The Board of Directors
Dynatem, Inc.


We have audited the accompanying balance sheet of Dynatem, Inc. (a California
corporation) as of May 31, 1997, and the related statements of income,
shareholders' equity and cash flows for each of the years in the two-year period
then ended.  These financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dynatem, Inc. as of May 31,
1997, and the results of its operations and its cash flows for each of the years
in the two-year period then ended in conformity with generally accepted
accounting principles.



                                             CORBIN & WERTZ

Irvine, California
July 18, 1997

                                      F-1
<PAGE>
                                 DYNATEM, INC.
 
                                 BALANCE SHEET

                                  May 31, 1997



<TABLE>
<S>                                                            <C>        
                            ASSETS
 
Current assets:
  Cash and cash equivalents                                    $   561,511
  Accounts receivable, less allowance                                     
   for doubtful accounts of $6,825                                 285,412
  Inventories (Note 2)                                             264,700
  Prepaid expenses and other                                        21,386
                                                               -----------    
                                                                          
     Total current assets                                        1,133,009
                                                                          
Notes receivable (Note 8)                                           10,886
Property and equipment, net (Notes 1 and 3)                         17,321
Other assets (Note 4)                                               35,406
                                                               -----------    
                                                                          
                                                               $ 1,196,622
                                                               =========== 

      LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
  Accounts payable                                             $    76,807   
  Accrued expenses (Note 6)                                         65,907   
                                                               -----------    
                                                                               
     Total current liabilities                                     142,714   
                                                               -----------    
                                                                               
Commitments and contingencies (Note 6)                                         
                                                                               
Shareholders' equity (Note 7):                                                 
  Common stock, no par value, authorized                                       
   50,000,000 shares; issued and outstanding                                   
   1,418,400 shares                                              2,383,385   
  Accumulated deficit                                           (1,329,477)  
                                                               -----------    
                                                                               
     Total shareholders' equity                                  1,053,908   
                                                               -----------    
                                                               $ 1,196,622   
                                                               ===========    
</TABLE> 

                  The accompanying notes are an integral part
                         of these financial statements

                                      F-2
<PAGE>
 
                                 DYNATEM, INC.

                              STATEMENTS OF INCOME

                   For The Years Ended May 31, 1997 and 1996

<TABLE>
<CAPTION>
 
                                                 1997         1996
                                              ----------   ----------
<S>                                           <C>          <C>
 
Net sales                                     $2,490,919   $2,683,188
Cost of sales (Note 6)                         1,569,654    1,858,944
                                              ----------   ----------
 
     Gross profit                                921,265      824,244
                                              ----------   ----------
 
Operating expenses:
  Selling, general and administrative
   (Notes 6 and 8)                               656,986      635,338
  Research and development                       198,477      169,121
                                              ----------   ----------
 
     Total operating expenses                    855,463      804,459
                                              ----------   ----------
 
     Operating income                             65,802       19,785
 
Other income, net                                 23,411       16,963
                                              ----------   ----------
 
Income before provision for income taxes          89,213       36,748
 
Income taxes (Note 5)                                800          800
                                              ----------   ----------
 
Net income                                    $   88,413   $   35,948
                                              ==========   ==========
 
Net income per common share                         $.06         $.03
                                              ==========   ==========
 
Weighted average number of shares
outstanding (Note 1)                           1,462,894    1,418,400
                                              ==========   ==========
</TABLE>

                  The accompanying notes are an integral part
                         of these financial statements

                                      F-3
<PAGE>
 
                                 DYNATEM, INC.

                       STATEMENTS OF SHAREHOLDERS' EQUITY

                   For The Years Ended May 31, 1997 and 1996


<TABLE>
<CAPTION>

                                                                            
                          Common Stock                                Total 
                   ----------------------------     Accumulated   Shareholders'
                      Shares          Amount           Deficit        Equity
                   ------------   -------------     ------------  ------------
<S>                <C>            <C>               <C>           <C>
Balances at
 June 1, 1995       1,418,400       $2,383,385      $(1,453,838)    $  929,547
 
Net income                ---              ---           35,948         35,948
                    ---------       ----------      -----------     ----------
 
Balances at
 May 31, 1996       1,418,400        2,383,385       (1,417,890)       965,495
 
Net income                ---              ---           88,413         88,413
                    ---------       ----------      -----------     ----------
 
Balances at
 May 31, 1997       1,418,400       $2,383,385      $(1,329,477)    $1,053,908
                    =========       ==========      ===========     ==========
</TABLE>

                  The accompanying notes are an integral part
                         of these financial statements

                                      F-4
<PAGE>
 
                                 DYNATEM, INC.

                            STATEMENTS OF CASH FLOWS

                   For The Years Ended May 31, 1997 and 1996

<TABLE>
<CAPTION>
 
                                                  1997         1996
                                               ----------   ----------
<S>                                            <C>          <C>
 
Cash flows from operating activities:
  Net income                                    $ 88,413     $ 35,948
  Adjustments to reconcile net income
   to net cash provided by operating
   activities:
    Depreciation and amortization                 78,460       44,462
    Provision for doubtful accounts               (5,818)      (4,000)
    Gain on sale of property and
     equipment                                      (600)         ---
    Changes in current assets and
     liabilities:
      Accounts receivable                         (4,306)     (26,005)
      Inventories                                  1,599       (7,648)
      Prepaid expenses and other                  (1,406)     (10,181)
      Accounts payable                           (83,885)      32,883
      Accrued expenses                             4,338       14,188
                                                --------     --------
 
Net cash provided by operating activities         76,795       79,647
                                                --------     --------
 
Cash flows from investing activities:
  Purchases of property and equipment             (7,099)      (2,387)
  Proceeds from sale of property
   and equipment                                     600          ---
  Note receivable issued to officer               (2,500)         ---
  Collections on note receivable from
   officer                                         2,349        3,250
  Other assets                                   (41,552)     (45,203)
                                                --------     --------
 
Net cash used in investing activities            (48,202)     (44,340)
                                                --------     --------
 
Net increase in cash                              28,593       35,307
 
Cash and cash equivalents, beginning
 of year                                         532,918      497,611
                                                --------     --------
 
Cash and cash equivalents, end of
 year                                           $561,511     $532,918
                                                ========     ========
 
Supplemental disclosures of cash flow
 information -
  Cash paid for:
    Interest                                    $    ---     $    ---
                                                ========     ========
    Income taxes                                $    800     $    800
                                                ========     ========
</TABLE>

                  The accompanying notes are an integral part
                         of these financial statements

                                      F-5
<PAGE>
 
                                 DYNATEM, INC.

                         NOTES TO FINANCIAL STATEMENTS

                   For The Years Ended May 31, 1997 and 1996


NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------------------

General
-------

Dynatem, Inc. (the "Company"), was incorporated on May 15, 1981, under the laws
of the state of California.  The Company designs, manufactures, distributes and
markets modular single board microcomputers and microcomputer-based systems and
software.  These systems are used for industrial applications including factory
automation, process control, robotics, data acquisition and networking.  The
Company sells products to customers throughout the United States and in many
foreign countries.

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.  Such
estimates also effect the reported amounts of revenues and expenses during the
reported period.  The Company's significant estimates include allowances for
accounts receivable and inventory, as well as warranties on its products.
Actual results could materially differ from these estimates.

Concentrations of Credit Risk
-----------------------------

At May 31, 1997, the Company holds cash with financial institutions in excess of
amounts insured by federal agencies.

Two vendors accounted for 53% and 18% of accounts payable at May 31, 1997.

Three customers accounted for 24%, 12%, and 10%, respectively, of accounts
receivable at May 31, 1997.  There was no one customer whose sales were in
excess of 10% of total net sales for the year ended May 31, 1997.  Two customers
accounted for 25% and 12%, respectively, of net sales for the year ended May 31,
1996, which are included in the net sales of distributed products noted below.

Export sales represented 32% of net sales for each of the years ended May 31,
1997 and 1996.

                                      F-6
<PAGE>
 
                                 DYNATEM, INC.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                   For The Years Ended May 31, 1997 and 1996



NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
--------------------------------------------------------------------------

The Company distributes products for an international vendor (the "International
Vendor") that is also a competitor.  Approximately 55% and 67% of net sales for
the years ended May 31, 1997 and 1996, respectively, represented distribution of
the International Vendor's products.  The International Vendor accounted for 74%
and 80% of cost of sales for the years ended May 31, 1997 and 1996,
respectively.  Effective April 30, 1997, the Company's distributor relationship
with this International Vendor was terminated.  As a result, the Company is no
longer an exclusive North American distributor for this vendor's products.

Risks and Uncertainties
-----------------------

As discussed above, the Company's distributor relationship with the
International Vendor was terminated on April 30, 1997.  The Company has replaced
this vendor with another international vendor (the "Replacement Vendor").
Management believes the Replacement Vendor will mitigate any potential adverse
effects which may arise from the termination of the International Vendor
relationship.  However, there can be no assurances that the Replacement Vendor
will in fact effectively replace the sales lost from a discontinuation of the
International Vendor relationship, and as a result, the loss of such
relationship could have a materially adverse effect on the Company's future
operations.

Cash Equivalents
----------------

For the purposes of the statements of cash flows, the Company considers highly
liquid instruments with original maturities of three months or less to be cash
equivalents.

Inventories
-----------

Inventories are stated at the lower of cost or market (estimated net realizable
value).  Cost is determined using the first-in, first-out ("FIFO") method.  Such
net realizable value is based on forecasts for sales of its products in the
ensuing years.  The industry in which the Company operates is characterized by
rapid technological advancement and change.  Should demand for the Company's
products prove to be significantly less than anticipated, and the reserve
established for such purpose proves to be inadequate, the value of such products
could be less than the amount reflected on the accompanying balance sheet.
Management provides an allowance for excess and obsolete inventory which it
believes is adequate to cover such uncertainty.

                                      F-7
<PAGE>
 
                                 DYNATEM, INC.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                   For The Years Ended May 31, 1997 and 1996



NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
--------------------------------------------------------------------------

Property and Equipment
----------------------

Property and equipment are stated at cost.  Major betterments are capitalized
while routine repairs and maintenance are charged to expense when incurred.
Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of the assets or the remaining term of the leases, if
lesser.  Useful lives range from three to five years.

Depreciation expense for the years ending May 31, 1997 and 1996 totaled $14,697
and $17,721, respectively.

Income Taxes
------------

The Company accounts for income taxes using the asset and liability approach
under Statement of Financial Accounting Standards Statement No. 109 ("SFAS No.
109").  Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.  Under SFAS No. 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.  A
valuation allowance is provided for certain deferred tax assets if it is more
likely than not that the Company will not realize tax assets through future
operations.

Warranties
----------

The Company provides warranties ranging from ninety days to one year on all
products sold.  Estimated future costs of warranties are provided at the time of
sale.

Research and Development Costs
------------------------------

Research and development costs are expensed as incurred.

                                      F-8
<PAGE>
 
                                 DYNATEM, INC.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                   For The Years Ended May 31, 1997 and 1996



NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
--------------------------------------------------------------------------

Other Assets
------------

Certain costs incurred subsequent to establishing technological feasibility to
produce a finished product, including purchased software and other outside costs
(see Note 4), are capitalized.  The annual amortization of these costs is
computed at the lesser of the straight-line basis over the estimated product
life, not to exceed five years, or based on units sold divided by the total
estimated units to be sold.  The Company capitalized $41,560 and $44,628 for the
years ended May 31, 1997 and 1996, respectively.  Amortization expense for each
of the years ended May 31, 1997 and 1996 was $63,763 and $26,741, respectively.

Revenue Recognition
-------------------

Revenues from product sales are recognized at the time the product is shipped.

Foreign Currency Transactions
-----------------------------

The Company obtains certain products from offshore facilities in Germany.
Foreign currency transaction gains or losses are included in cost of sales in
the period in which the exchange rate changes or the underlying transaction
settles.  Included in cost of sales on the accompanying statements of income are
foreign currency gains of $111,838 and $41,094 for the years ending May 31, 1997
and 1996, respectively.

Stock-Based Compensation
------------------------

During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," which defines a fair value based method of accounting for stock-
based compensation.  However, SFAS 123 allows an entity to continue to measure
compensation cost related to stock and stock options issued to employees using
the intrinsic method of accounting prescribed by Accounting Principles Board
Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees."  Entities
electing to remain with the accounting method of APB 25 must make pro forma
disclosures of net income and earnings per share, as if the fair value method of
accounting defined in SFAS 123 had been applied.  In 1996, the Company adopted
the provisions of SFAS 123 which relate to non-employee stock-based
compensation, and has elected to account for its stock-based compensation to
employees under APB 25.

                                      F-9
<PAGE>
 
                                 DYNATEM, INC.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                   For The Years Ended May 31, 1997 and 1996



NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
--------------------------------------------------------------------------

Earnings Per Share
------------------

Earnings per share is computed by dividing net income for the year by the
weighted average number of shares of common stock and common stock equivalents
outstanding during the year.  The effect of common stock equivalents are
excluded from the calculation if they would be antidilutive.

Common stock equivalents were deemed to be antidilutive for the year ended May
31, 1996 and were thus excluded from the calculation of the weighted average
number of shares of common stock and common stock equivalents for such period.
All of the options outstanding during the year ended May 31, 1997 (see Note 7)
were determined to have a dilutive effect on earnings per share.  The options,
based on an application of the Treasury Stock method, increased the weighted
average number of shares of common stock and common stock equivalents by 44,494
shares for such period.

New Disclosure Standard
-----------------------

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128).  SFAS No. 128
is primarily a disclosure standard which requires public companies to present
basic earnings per share ("EPS") and, if applicable, diluted EPS, instead of
primary and fully diluted EPS.  SFAS No. 128 is effective for fiscal years
ending after December 15, 1997.  The effect of adopting SFAS No. 128 has not
been determined by management.

NOTE 2 - INVENTORIES
--------------------

A summary of inventories at May 31, 1997 is as follows:

<TABLE>
<S>                                     <C>
Finished goods                          $ 55,786
Work-in-process                           46,071
Raw materials and component parts        162,843
                                        --------
 
                                        $264,700
                                        ========
</TABLE>

                                      F-10
<PAGE>
 
                                 DYNATEM, INC.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                   For The Years Ended May 31, 1997 and 1996



NOTE 3 - PROPERTY AND EQUIPMENT
-------------------------------

A summary of property and equipment at May 31, 1997 is as follows:

<TABLE>
<S>                                                                           <C>
Machinery and equipment                                                       $ 396,414
Product tooling                                                                 226,277
Leasehold Improvements                                                            5,000
Furniture and fixtures                                                           44,587
                                                                              ---------
                                                                                672,278
 
Less: accumulated depreciation and amortization                                (654,957)
                                                                              ---------
 
                                                                              $  17,321
                                                                              =========
</TABLE> 
 
NOTE 4 - OTHER ASSETS
---------------------
 
A summary of other assets at May 31, 1997 is as follows:

<TABLE>
<S>                                                                           <C>
Capitalized software costs                                                    $   5,946
Prepaid inventory (Note 6)                                                       24,304
Deposit                                                                           5,156
                                                                              ---------
                                                                              $  35,406
                                                                              =========
</TABLE> 
 
NOTE 5 - INCOME TAXES
---------------------
 
Income tax expense for the years ended May 31, 1997 and 1996 consists of the 
following:

<TABLE>
<CAPTION> 
                                                                   1997         1996
                                                                ----------    ---------
<S>                                                              <C>          <C>
 
Current:
  U.S. federal                                                   $     ---    $    ---
  State                                                                800         800
                                                                 ---------    --------
 
                                                                 $     800    $    800
                                                                 =========    ========
</TABLE>

No deferred income tax expense was charged to the accompanying statements of
income for the years presented.

                                      F-11
<PAGE>
 
                                 DYNATEM, INC.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                   For The Years Ended May 31, 1997 and 1996



NOTE 5 - INCOME TAXES, continued
--------------------------------

Income tax expense differs from the amounts computed by applying a U.S. federal
income tax rate of 34% to pretax income as a result of the following for the
years ended May 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                            1997        1996
                                          ---------   ---------
<S>                                       <C>          <C>
 
Computed "expected" tax expense
 at a U.S. federal rate of 34%            $  30,332    $  12,494
 
Increase (reduction) in income taxes
 resulting from:
 
  State income taxes, net of federal
   tax benefit                                5,476        2,256
 
  Change in the valuation allowance
   for deferred tax assets, net of
   effects of expired net operating
   loss carryforwards                       (29,209)     (14,795)
 
  Other                                      (5,799)         845
                                          ---------    ---------
 
                                          $     800    $     800
                                          =========    =========
 
</TABLE>

The tax effect of temporary differences that give rise to significant portions
of the deferred tax assets at May 31, 1997 are presented below.  Deferred tax
liabilities at May 31, 1997 are not significant:

<TABLE>
<S>                                                 <C>
Deferred tax assets:
 
  Accounts receivable, principally due to
   allowance for doubtful accounts                  $  2,739
 
  Inventories, principally due to additional
   costs inventoried for tax purposes pursuant
   to the Tax Reform Act of 1986 and allowance
   for inventory obsolescence                         41,024
 
  Compensated absences, principally due to
   accrual for financial reporting purposes            7,376
</TABLE>

                                      F-12
<PAGE>
 
                                 DYNATEM, INC.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                   For The Years Ended May 31, 1997 and 1996



NOTE 5 - INCOME TAXES, continued
--------------------------------
<TABLE>
<S>                                                  <C>
  State net operating loss carryforwards                   784
 
  Federal net operating loss carryforwards             525,405
 
  Research and development credit carryforwards         73,863
 
  Other                                                  2,611
                                                     ---------
 
     Total gross deferred tax assets                   653,802
 
     Less valuation allowance                         (653,802)
                                                     ---------
     Net deferred tax assets                         $     ---
                                                     =========
</TABLE>

At May 31, 1997, the Company had net operating loss carryforwards of $1,545,308
and $12,780 for Federal and state tax reporting purposes, respectively, which,
if not utilized to offset future taxable income, will expire through 2006.

At May 31, 1997, the Company had available unused research and development
credits for income tax purposes of $73,863, which, if not used, will expire
through 2010.

NOTE 6 - COMMITMENTS AND CONTINGENCIES
--------------------------------------

Leases
------

In December 1995 the Company entered into a noncancellable operating lease for
its corporate and manufacturing facility.  In addition to monthly lease payments
for the facility, the Company is required to pay utilities and certain insurance
and maintenance costs. Such lease provides for annual rental increases and a
five-year renewal option based on certain terms and conditions. The lease
expires in fiscal 2001. Future annual minimum lease payments under this
noncancellable operating lease are as follows:

<TABLE>
<CAPTION>
 
                            Years Ending
                               May 31,
                            -------------
                            <S>                           <C> 
                                 1998                     $ 56,461
                                 1999                       58,721
                                 2000                       61,072
                                 2001                       36,442
                                                          --------
                                                          $212,696
                                                          ========
</TABLE>

                                      F-13
<PAGE>
 
                                 DYNATEM, INC.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                   For The Years Ended May 31, 1997 and 1996
                                        


NOTE 6 - COMMITMENTS AND CONTINGENCIES, continued
-------------------------------------------------

Total rental expense for operating leases amounted to approximately $66,359 and
$49,900 for the years ended May 31, 1997 and 1996, respectively, of which
$32,324 and $24,963 has been classified as a component of cost of sales in the
accompanying statement of income.

Royalty and Licensing Agreements
--------------------------------

The Company is a party to a royalty agreement that requires it to pay royalties
of 25% of sales of a select hardware product and 50% of sales of a select
software product, as defined.

The Company is also a party to another royalty agreement that requires it to pay
royalties of 50% of the gross profit earned by the Company on sales of certain
hardware products, as defined.

During 1997, the Company entered into two software licensing agreements.  The
licensed software will be used with various products which the Company
manufactures and distributes.  One of the agreements provided for a one-time
licensing fee which was recorded as an expense in the accompanying statement of
income for the year ended May 31, 1997.  The other agreement provides for a
fixed fee on each unit of software sold.   Licensing fees in connection with
this license have been recorded to expense in the accompanying statement of
income for the year ended May 31, 1997.

Total royalty and licensing expense which is included in selling, general, and
administrative expense in the accompanying statements of income for the above
noted royalty and licensing agreements amounted to approximately $21,350 and
$14,500 for the years ended May 31, 1997 and 1996, respectively.

Purchase Agreement
------------------

In March 1996, the Company entered into an agreement (the "Agreement") with an
unrelated product engineering and manufacturing firm (the "Firm") to design a
series of products, utilizing the Company's specifications, for sale to its
customers.  In 1997, the design of these products was completed.  Pursuant to
the terms of the Agreement, the Company has the exclusive right to sell such
products under the Company's name worldwide and it is not obligated to pay any
license or royalty fees.  This Agreement is for an initial term of one year, is
cancelable thereafter by either party with 120 days advance notice, and will
renew automatically each year unless otherwise terminated.

                                      F-14
<PAGE>
 
                                 DYNATEM, INC.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                   For The Years Ended May 31, 1997 and 1996



NOTE 6 - COMMITMENTS AND CONTINGENCIES, continued
-------------------------------------------------

As of May 31, 1997, the Company had agreed to purchase $138,000 of product from
the Firm in connection with the Agreement.  As of May 31, 1997, the product had
not been delivered.  Accordingly, the Company has not recorded a liability in
the accompanying balance sheet.

NOTE 7 - SHAREHOLDERS' EQUITY
-----------------------------

On August 31, 1993, the Company's Board of Directors adopted, and the
shareholders approved, the Dynatem, Inc. 1993 Stock Option Plan (the "Plan"),
which provides for the grant of options intended to qualify as incentive stock
options under Section 422 of the Internal Revenue Code and for the grant of
nonqualified stock options.  In connection with the Plan, 200,000 shares of the
Company's common stock have been reserved for issuance upon the exercise of
options to be granted.

Options to purchase an aggregate of 110,000 shares of the Company's common stock
were granted pursuant to the Plan to the Company's four non-employee directors
and to certain officers of the Company on October 15, 1993.  Such options were
fully exercisable at the date of grant and expire on various dates through
October 15, 2003.  The exercise price of such options ranges from $0.20 to
$0.22, which exceeded the fair market value per share of the Company's common
stock on the grant date.

On January 18, 1997, the Company granted options to purchase 55,000 shares of
the Company's common stock to certain officers and one non-employee director of
the Company.  Such options were fully exercisable at the date of grant and
expire on January 17, 2007.  The exercise price of such options was $.35 which
approximated the fair market value of the Company's stock on the date of grant.

                                      F-15
<PAGE>
 
                                 DYNATEM, INC.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                   For The Years Ended May 31, 1997 and 1996



NOTE 7 - SHAREHOLDERS' EQUITY, continued
----------------------------------------

A summary of stock option activity follows:

<TABLE>
<CAPTION>
 
                                 Shares    Option Price
                                 -------   ------------
<S>                              <C>       <C>
Outstanding at June 1, 1995      110,000       $.20-.22
   Canceled                          ---            ---
   Expired                           ---            ---
   Granted                           ---            ---
                                 -------       --------
 
Outstanding at May 31, 1996      110,000       $.20-.22
   Canceled                          ---            ---
   Expired                           ---            ---
   Granted                        55,000            .35
                                 -------       --------
 
Outstanding at May 31, 1997      165,000       $.20-.35
                                 =======       ========
</TABLE>

As of May 31, 1997, all 165,000 options are exercisable.

Pro Forma Stock Option Information
----------------------------------

Pro forma information regarding net income is required by SFAS 123 and is
determined as if the Company had accounted for its employee stock options under
the fair value method pursuant to SFAS 123, rather than the method pursuant to
APB 25 as discussed in Note 1.  The fair value of these options is estimated at
the date of grant based on the Black-Scholes options pricing model (the
"Model").

The Model was developed for use in estimating the fair value of traded options
which have no vesting restrictions and are fully transferable.  In addition, the
Model requires the input of highly subjective assumptions including the expected
stock price volatility.  The Company's employee stock options have
characteristics significantly different from those of traded options; changes in
the subjective input assumptions can materially affect the fair value estimate.

The fair value of the options granted in 1997 was not significant and thus have
no pro forma impact on net income and earnings per share.

                                      F-16
<PAGE>
 
                                 DYNATEM, INC.

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED

                   For The Years Ended May 31, 1997 and 1996
                                        


NOTE 8 - RELATED PARTY TRANSACTIONS
-----------------------------------

During the years ended May 31, 1997 and 1996, the Company paid fees of $7,200
and $3,000, respectively, to a consulting firm principally owned by the Chairman
of the Board of Directors of the Company.

The notes receivable are due from an officer, bear interest at the rate of 5%
per annum and require monthly installments of principal and interest.  The notes
are due in May 2000.

                                      F-17
<PAGE>
 
ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
-------   ---------------------------------------------------------------
          FINANCIAL DISCLOSURE.
          --------------------

     Not Applicable.

                                    PART III
                                    --------

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

     Information concerning the Company's directors and executive officers and
compliance with Section 16(a) of the Exchange Act is incorporated herein by
reference to the portion of the Company's Definitive Proxy Statement, to be
filed for its 1997 Annual Meeting of Shareholders to be held on October 10,
1997, set forth under the heading "ELECTION OF DIRECTORS".

ITEM 10.  EXECUTIVE COMPENSATION.
--------  ---------------------- 

     Information concerning executive compensation is incorporated herein by
reference to the portion of the Company's Definitive Proxy Statement, to be
filed for its 1997 Annual Meeting of Shareholders to be held on October 10,
1997, set forth under the heading "ELECTION OF DIRECTORS - Compensation of
Executive Officers".

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

     Information concerning security ownership of certain beneficial owners and
management is incorporated herein by reference to the portion of the Company's
Definitive Proxy Statement, to be filed for its 1997 Annual Meeting of
Shareholders to be held on October 10, 1997, set forth under the heading
"PRINCIPAL HOLDERS OF VOTING SECURITIES".

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
--------  ---------------------------------------------- 

     Information concerning certain relationships and related transactions is
incorporated herein by reference to the portion of the Company's Definitive
Proxy Statement, to be filed for its 1997 Annual Meeting of Shareholders to be
held on October 10, 1997, set forth under the heading "ELECTION OF DIRECTORS -
Relationships with Outside Firms".

                                       10
<PAGE>
 
ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.
--------  -------------------------------- 

(a)  EXHIBITS.
     -------- 

     Reference is made to the Exhibit Index preceding the exhibits attached
hereto for a list of all exhibits filed as part of this Report.

(b)  REPORTS ON FORM 8-K.
     ------------------- 

     The Company did not file any reports on Form 8-K during the last quarter of
the Company's fiscal year ended May 31, 1996.

                                       11
<PAGE>
 
                                   SIGNATURES
                                   ----------


     In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                         DYNATEM, INC.



August 16, 1997                          By: /s/ Eileen DeSwert
                                             ---------------------------
                                             Eileen DeSwert, President
 
     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

<TABLE>
<S>                                                           <C>
 
By:  /s/ Eileen DeSwert                                       August 16, 1997
     ------------------------------
     Eileen DeSwert,
     President/Principal Executive
     Officer/Director
 
 
By:  /s/ Harry Cavanaugh                                      August 16, 1997
     ------------------------------
     Harry Cavanaugh,
     Chairman of the Board/Director
 
 
By:  /s/ Belen Ramos                                          August 16, 1997
     ------------------------------
     Belen Ramos,
     Chief Financial Officer
 
 
By:  /s/ Robert Anslow                                        August 16, 1997
     ------------------------------
     Robert Anslow,
     Director
 
 
By:  /s/ Richard Jackson                                      August 16, 1997
     ------------------------------
     Richard Jackson,
     Director


By:  /s/ Charles Spear                                        August 16, 1997
     -----------------------------               
     Charles Spear,
     Director


By:                                                           August __, 1997
     -----------------------------
     Costis Toregas
     Director
</TABLE> 

                                       12
<PAGE>
 
                                 EXHIBIT INDEX
                                 -------------

<TABLE> 
<CAPTION> 
Exhibit
Number
-------
<C>       <S> 
3(a)      Restated Articles of Incorporation of the Company

3(b)      Bylaws of the Company

10        Standard Industrial/Commercial Multi-Tenant Lease-Modified Net dated
          August 22, 1995, between Pacific Highpark Partners, as lessor and the
          Company as lessee(1)

27        Financial Data Schedule
</TABLE> 
_____________________
(1)  Incorporated herein by reference to Exhibit 10 to the Company's Quarterly
     Report on Form 10-QSB for the quarter ended August 31, 1995.

                                       13