<PAGE>   1



                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                               -------------------
                                    FORM 10-K



[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the Fiscal Year Ended October 31, 1996 or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the Transition period from _____ to _____

                         Commission file number: 0-26208

                             BUSINESS RESOURCE GROUP
             (Exact name of Registrant as specified in its charter)

         California                                           77-0150337
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                              Identification No.)

                       2150 NORTH FIRST STREET, SUITE 101
                           SAN JOSE, CALIFORNIA 95131
                                 (408) 441-3700
          (Address and telephone number of principal executive offices)
                       ----------------------------------

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

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock $0.01 par value
                       ----------------------------------

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period than the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO __

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $8,160,553 as of January 8, 1997, based upon the
closing sale price on the Nasdaq National Market reported for such date. Shares
of Common Stock held by each officer and director and by each person who owns 5%
of more of the outstanding Common Stock have been excluded in that such persons
may be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.

There were 4,871,063 shares of Registrant's Common Stock issued and outstanding
as of January 8, 1997.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the annual meeting of shareholders to be
held on March 3, 1997 are incorporated by reference into Part III of this report
on Form 10-K.


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<PAGE>   2
                             INTRODUCTORY STATEMENT

         Except for the historical information contained in this Annual Report
on Form 10-K, the matters discussed herein are forward-looking statements that
are subject to certain risks and uncertainties that could cause the actual
results to differ materially from those projected. Factors that could cause
actual results to differ materially include, but are not limited to, the timely
availability, delivery and acceptance of new products and services, the impact
of competitive products and pricing, the management of growth and acquisitions,
and other risks detailed below and included from time to time in the Company's
other SEC reports and press releases, copies of which are available from the
Company upon request. Additionally, the results of operations for the year ended
October 31, 1996 are not necessarily indicative of the results to be expected in
future years. The Company assumes no obligation to update any forward-looking
statements contained herein.

         References made in this Annual Report on Form 10-K to "BRG," the
"Company" or the "Registrant" refer to Business Resource Group.

                                     PART I


ITEM 1.  BUSINESS

         Business Resource Group is a leading provider of workspace services and
products to businesses, primarily in the western United States. Since
commencement of operations in 1986 as an office furniture dealer, the Company
has added related services such as computerized space planning and design,
project management, product specification, order management, move management,
installation, cable/network installation management, computer-aided workspace
asset management services and ongoing facility management. The Company believes
that its broad scope of services allows it to offer a customer-oriented
integrated solution well suited for the needs of both large, mature companies as
well as rapidly growing businesses that want economic, comprehensive solutions
for their workspace requirements, while minimizing involvement of their in-
house staff through outsourcing to the most efficient and responsive suppliers.
The Company markets its services and products through a direct sales force,
focusing to date primarily on rapidly growing companies and on companies in the
process of significantly changing their facilities arrangements.

INDUSTRY BACKGROUND

         According to trade association estimates, manufacturers' sales of
business furnishings in the United States in 1996 were approximately $10
billion. The Company believes that a key trend in the workspace products and
services market is the shift to open area configurations which commenced in the
early 1980's. Open area configurations employ standard partitions and components
to form individual cubicle workspaces for employees in a layout customized for
the needs of each business. The emergence of the personal computer as a business
productivity tool in combination with the emphasis on competitiveness and
efficiency in business in the United States has contributed to the trend toward
these configurations. Open area configurations accomplish the following:

         -        Economize by placing more workers in a specified floor area
                  than a segregated office layout;

         -        Facilitate individual ergonomic design of employees' work
                  areas, increasing worker productivity and reducing injuries in
                  the workplace and related costs;

         -        Promote worker communication and cooperation within the office
                  workforce;


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         -        Permit quicker adjustment to workspace arrangements in
                  response to changes in the business environment; and

         -        Minimize the need for expensive and permanent hard wall tenant
                  improvements.

         Demand for open office systems has also increased as a result of the
flattening of the business organization. Increased individual requirements for
both data and communications equipment and connectivity as well as
group-oriented work practices such as consensus decision making are driving
changes in workspace configuration requirements. Rapidly growing businesses
additionally benefit from open office systems because they allow companies to
expand with less disruption and downtime. Large companies also benefit from
flexible office arrangements that make it easier for them to restructure or
downsize as they anticipate and respond to changes in their business.

         Relocations to new facilities drive demand for new office furniture
because customers find it more effective to replace furniture than to incur the
costs and work disruptions associated with moving it. The Company believes that
with or without relocation, a significant portion of the large installed base of
office furniture is replaced by new furniture every five to seven years.
Recycling old furniture through refurbishment and sale to smaller companies with
modest budgets presents a related business opportunity for providers of new
workspace products.

         Traditional Players. The Company believes that the three largest
manufacturers, Steelcase, Inc., Herman Miller, Inc. and Haworth, Inc. account
for approximately half of the manufacturers' annual sales to dealers in the
United States. The "big three" manufacturers depend on their own sales personnel
as well as captive dealer relationships to sell their products in any given
geographic area. The "big three," which have built strong brand name
recognition, are in a position to place territorial, price, sourcing and
delivery limitations on their dealers. The business of these dealers is
primarily to serve as the manufacturer representative of one of the "big three"
manufacturers whose products they sell in a limited geographic area specified by
the manufacturer. The Company believes that the geographic limitations imposed
by the "big three" manufacturers on their dealers are a primary reason for the
highly fragmented nature of the workspace products distribution industry.

         The annual revenues of each of the next eight largest office furniture
manufacturers range between approximately $180 million and $800 million. Lacking
the brand name identity of the "big three," however, these manufacturers rely
upon design intermediaries or smaller, regional multi-line dealers for their
sales. These smaller dealers have historically lacked the capital or breadth of
services to compete on large orders or to achieve significant revenue levels.

         Workspace specification in larger corporations has traditionally
involved a facilities manager and other members of senior management, influenced
by service providers such as designers, architects, real estate professionals or
other outsourced facilities management providers. Small, rapidly growing
businesses lacking in-house facilities management and unfamiliar with or
reluctant to spend money on design intermediaries have historically handled
workspace specifications in a more ad hoc manner. In either case, the
traditional furniture dealer is often left in a passive order taking and
fulfillment role.

         Changing Customer Requirements. The Company believes, based on its
experience with customers, that the desire to minimize in-house facilities
management headcount, reduce overhead and improve coordination has lead many
companies to outsource facilities related tasks where feasible, including space
planning, design and project management and fulfillment services. Furthermore,
customers' use of modular office systems has reduced the importance of
manufacturers' brand names in the purchasing decision and increased the
importance of other factors such as product functionality and layout, which have
become increasingly complex due to the need to integrate rapidly changing office


                                      -3-
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technology requirements. Together, these trends have led to the demand for a
proactive workspace services and products solution.

CUSTOMER ORIENTED INTEGRATED SOLUTION

         Business Resource Group believes that traditional approaches to the
business furnishings industry are not well suited to meet the current
requirements of growing and changing businesses. In response, the Company has
positioned itself as the representative of the customer rather than the
manufacturer and as a provider of integrated workspace solutions. Business
Resource Group has grown rapidly due to management's early recognition and
response to customer requirements for a single source solution for facilities
needs. By foregoing the captive dealer agreements required by the largest office
furniture manufacturers, the Company believes it is able to offer the customer a
much broader range of value added services and product choices than its major
competitors, all at a competitive price. The benefits to customers of the
Company's integrated solution approach include:

         -        Reduced overhead and improved coordination by having a single
                  point of contact;

         -        Improved pricing, product selection and delivery available
                  from a multi-line representative;

         -        Accelerated design and installation through early coordination
                  with a service provider; and 

         -        Superior customer communications, response and project control
                  through the implementation of highly automated systems.

                  Key elements of the customer oriented integrated solution
                  approach are:

         Services and Products Integration. Business Resource Group determined
that both large, mature companies as well as rapidly growing companies want
economic, comprehensive solutions for their workspace requirements while
minimizing involvement of their in-house staff. The Company has leveraged its
knowledge of the office furniture industry, including suppliers and business
methods, to develop an integrated approach which offers a "single source" point
of contact for modern interior workspaces. This begins with the Company's
consultative selling approach in which its sales representatives listen to the
customer's problem. A team of Business Resource Group professionals, chosen for
each account for their relevant functional capabilities, then meets with the
customer to build a partnership and reach consensus on the solution which best
suits the customer's needs. The Company is able to fashion an integrated
solution because of the wide array of services and products it can provide.
Among the Company's services that may be included in this solution are project
management, layout and design, furniture specification and selection,
purchasing, move management, installation, asset management and maintenance. The
Company has the flexibility to offer customers any of its services and products
in any combination to form the ideal integrated solution.

         Customer Representation. Unlike traditional furniture dealers, Business
Resource Group represents the customer, not the manufacturer. Since providing
only one of the "big three" contract furniture lines would restrict the customer
in variety and pricing options, the Company has formed relationships with
multiple suppliers (including seven of the remaining top ten in sales volume)
for each product segment. Using multiple suppliers, the Company is able to
obtain the best features and value for its customers. This approach also
provides for supply alternatives if a major line manufacturer cannot meet a
customer's delivery requirements. Business Resource Group purchases significant
annual volumes from over a dozen suppliers of system lines, casegoods, seating
and specialty goods.

         Advanced Support Technology. Business Resource Group has developed a
technology leadership position within its industry by utilizing computer based
design and specification software to provide space


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planning and product selection tools for the customer in real time, even before
the Company has been selected as a provider by the customer. The Company uses
customized software and systems for product specification, order management, job
costing and variance analysis, and has integrated these packages with its
computer aided design tools, allowing the Company to track the profitability of
every order. The Company also supports electronic ordering for certain products.

EXPANSION STRATEGY

         The Company's objective is to become a leading national provider of
workspace services and products. Principal elements of the Company's strategy to
achieve this objective are as follows:

         Expand Geographically Through Acquisition. The Company has in the past
expanded and plans to continue to expand its business into additional geographic
areas through acquisition of dealers in target markets similar to Northern
California's Silicon Valley, which are characterized by a large number of
technology driven, high growth companies. Because these prospective customers
need comprehensive advice and quick turnaround in addressing rapid facilities
expansion, the Company believes its methods of operation can be successfully
applied in these new markets. In addition, many of the Company's larger
customers have operations in multiple markets, including markets the Company has
targeted for expansion and as such, represent attractive business opportunities
in those markets. Since many contract furniture dealers and facilities
management firms are small and lack the breadth of services and capital
necessary to respond to the facilities outsourcing requirements of medium and
large growth oriented corporations, the Company believes that certain of these
dealers will be available and attractive acquisition candidates. In January
1996, the Company completed the acquisition of Corporate Source in Dallas,
Texas. The Company believes this acquisition, along with the September 1995
acquisition of RST & Associates ("RST"), in Phoenix and Tucson, Arizona and Las
Vegas, Nevada, represent significant steps forward in its expansion strategy.

         Continue to Broaden Its Range of Services and Products. The Company
believes that a growing number of companies want to deal with fewer vendors for
the procurement of workspace services and products. As such, the Company has a
long term strategy which includes the acquisition of service providers and
product distributors, and distribution rights for additional product lines that
complement its existing offerings, where available on reasonable terms.

         Form Strategic Alliances With Complementary Service Providers. A number
of facilities-related businesses offer services and products that are
complementary to those provided by the Company. Such services include real
estate and property management, architectural design, network cabling, and
operations and maintenance services such as janitorial and security. The market
leaders in these facilities related businesses are large and national in scope,
providing services and products to both large and small customers in many
industries. The Company believes that a long-term opportunity exists to form
strategic alliances with some of these companies on a selective basis to offer a
complete facilities related solution to large corporate customers which desire
to outsource these services. While the Company has not entered into nor is it
currently in the process of negotiating any such strategic alliances, such
alliances could involve the formation of a joint venture by the Company and its
joint venture partner for the purpose of servicing a target customer account,
contractual arrangements whereby the Company acts as a service provider on
behalf of its joint venture partner, or contractual arrangements or other
relationships whereby the Company is deemed a preferred vendor or service
provider by its joint venture partner in connection with competition for target
accounts.


                                      -5-
<PAGE>   6
SERVICES AND PRODUCTS

         Business Resource Group provides integrated workspace solutions for
customers from the suite of services and products it offers. A substantial
portion of these services are initiated prior to delivery of workspace products,
including overall project management, computerized space planning and design,
product specification and order management. These services are key
differentiators which contribute significantly to the Company's ability to win
initial orders. The Company's pre-installation services build a close and
efficient partnership with customers, moving them from needs identification and
analysis through to the development and selection of the solutions which best
fit their needs. The Company generally bundles these services into overall
product pricing. Once the customer has identified the workspace products best
suited to its needs, the Company often provides additional services at specified
prices to implement setup and maintenance of these products in the customer's
facility and provides coordination and management services both during and after
the move. These services, covering all stages of a project from planning through
execution, enable the Company to provide comprehensive, turnkey solutions to its
customers. Customers' recognition of the value of this suite of services and
products is evident in the high level of repeat business which the Company
receives from its client base. Services provided by the Company are as follows:

         Pre Installation Services

                  Space Planning and Design. Space planning is the first task
for a workspace project. The Company's use of automated tools, such as the
AutoCAD computer software program used in space planning, provide it substantial
productivity gains while offering easily modifiable space configurations.

                  Product Specification. After completing the space planning
phase, the Company works with the customer to choose specific products. Using
information generated from the computerized space plan, product specification
can be executed quickly and accurately with applications software programs such
as AutoCAD or CAP Spex.

                  Order Management. Order management is necessary to fulfill the
customer's specific requirements for workspace products on a timely basis. Order
management includes product procurement, product tracking, updating the customer
about order status and coordinating the ultimate delivery. The Company makes
purchases of workspace products based solely on customer orders and generally
coordinates the direct shipment of such products to the customer's facilities.
The Company's inventory consists primarily of inventory in transit.

                  Project Management Services. Focusing on product
specification, installation management, change order management and quality
control, the Company's project managers add significant value in managing the
customer's entire workspace project.

Products

                  Modular Systems. The Company's modular system products, which
include office partitions and modular furniture, provide a flexible solution for
defining work environments within an open interior building space without the
need for costly tenant improvements to the building interior. Modular systems
provide the ability to define individual employee workspaces and functional
relationships while integrating electrical, voice and data requirements for the
individual workstation. While requiring value added installation services to be
functional, modular systems allow for different arrangements of components
(overhead shelves, cabinets, lateral files, work surfaces and pedestals) to meet
varying needs of customers. With many fabric and finish selections, modular
system lines provide visual appeal as well as effective workspace utilization
and productivity. The leading providers of these


                                      -6-
<PAGE>   7
products to the Company include Teknion Inc., Kimball Office Furniture Co.
("Kimball"), Allsteel, The Hon Company and The Knoll Group, Inc. ("Knoll"). A
typical modular system installation at a customer facility ranges from $1,500 to
$4,000 per workspace, depending on the number of workspaces as well as the
products and features specified.

                  Casegoods. Casegoods include desks, bookcases, filing
cabinets, credenzas and tables. Available in both wood and metal, casegoods are
generally used in private offices, conference rooms and other interior spaces
divided by physical walls. Casegoods complement the solution for most work
environments that include both open and private space. The leading providers of
these products to the Company include Kimball, Creative Wood Products, Inc. and
National Office Furniture Company. A casegoods installation at a customer
facility can range from $800 to $10,000 per office.

                  Seating. Variations in seating have proliferated to satisfy a
diversity of settings and ergonomic requirements. These variations include
adjustable seating used at a standard workstation or desk, which allows the user
to adjust the configuration for personal preference. Non- adjustable seating is
a less expensive alternative that can be used in cafeterias, conference rooms
and lobbies. The leading providers of these products to the Company include
Office Master, Inc., United Chair Company and HAG, Inc. Customer pricing
typically ranges from $50 to $600 per chair.

                  Specialty Furniture Products. The Company's specialty products
include white boards, ergonomic devices used in conjunction with other furniture
products (such as wrist rests, foot rests and adjustable keyboards) and custom
manufactured products.

                  Refurbished Furniture. The Company's customer oriented
integrated solution approach to its business frequently leads its customers to
rely on the Company for most aspects of a facilities relocation including
disposition of the existing furniture in the customer's prior facility. The
Company purchases selected products on favorable terms which it considers both
standard and reusable, refurbishes them when necessary and resells them to
smaller businesses with modest workspace budgets.

         Product Implementation Services

         Once a workspace has been planned and products have been specified and
ordered, Business Resource Group provides separately billed services to
implement the customer's plan.

                  Installation and Maintenance. Installation is a process by
which a modular system is converted from unconnected and unconfigured pieces to
a true workspace solution. The Company's product installers normally follow a
specific process which begins with a field study to verify space-related issues
that affect installation, such as the location and size of doors, elevators,
stairwells and other building specifications. Upon verification of installation
drawings and receipt of workspace products at the customer's facility either
directly from the manufacturer or from a Company rented warehouse, the
installation is completed. The Company provides substantial training to its
installation staff concerning applicable safety procedures in order to minimize
the risk of injury or property damage as well as general business education on
subjects pertinent to these employees. As the final step in meeting a customer's
relocation or move requirement, installation plays a very important role. The
cost of typical installation services ranges from $120 to $300 per modular
station, or approximately eight percent of the sales price.

         Workspace Management Services

         In June 1996 the Company reorganized its Workspace Management Services
("WMS") group in response to the service requirements from existing customers
and the corporate trend towards outsourcing


                                      -7-
<PAGE>   8
and resourcing of facility services. As a result the Company provides the
following six service offerings to help companies manage their facilities'
resources more effectively without adding headcount:

                  Workspace Planning. The Company provides a systematic needs
analysis based on a customer's current facility and their future growth plans.
The resulting analysis will often yield a strategic facility plan which allows
for facility programming, site selection, and lease reviews. The plan may also
call for the use of other WMS services in order to optimize the customer's
facilities alternatives.

                  Design Management. The Company manages a design team on behalf
of its customer, ensuring that the customer's design requirements are met while
staying within timeframe commitments and budget constraints.

                  Construction Management. The Company coordinates, on behalf of
its customer, the activities of the landowner, real estate broker, architect,
and construction trades to meet the customer's building construction
requirements. This service also offers bid process management, permit process
coordination, build-to-suit project management and overall cost and schedule
control.

                  Move Management. The Company coordinates all components of a
customer's move to a new location including the development of a master move
plan, communication to employees, the coordination of all vendor activities, and
the management of building activation. This service is provided with minimal
involvement or downtime to the customer's employees or disruption to ongoing
business activities.

                  Workspace Outsourcing. The Company fulfills a customer's short
or long term staffing requirements by providing experienced facility
professionals for specific temporary assignments. This service offers the
customer operational and financial flexibility in meeting staffing requirements
by allowing the customer to focus fixed resources on its core competencies.

                  Computer-Aided Facility Management. The Company provides
"system-solutions" for a customer's facilities department. Many of the solutions
offer an efficient mechanism to capture and verify facility and asset
information and then provides reporting and financial planning tools by
incorporating this information in a visually-oriented database software program
offered by the Company. This service offers current business process mapping,
business process re-engineering, software selection, and system implementation.

         The Company bills its customers on an hourly basis for such services,
with typical projects ranging from $5,000 to $50,000 in aggregate billings.

SALES AND MARKETING

         Sales Organization. Business Resource Group markets its products and
services through a direct sales force which consisted of 43 individuals as of
October 31, 1996, operating out of the Company's offices in San Jose and San
Francisco, California, Tempe and Tucson, Arizona, Las Vegas, Nevada, Dallas and
San Antonio, Texas and Denver, Colorado. As of October 31, 1996, the Company
also employed 22 customer service representatives to support the direct sales
force. The Company's sales resources are targeted at various management levels
within target accounts. The Company's customer service representatives are
account focused, and teams generally consisting of the sales representative,
customer service representative, project manager and installers are created
around each new account that the Company obtains.


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<PAGE>   9
         Sales Approach. The Company's sales strategy and approach begins with
the identification of target accounts by its direct sales staff. The Company's
salespersons maintain a contact network of real estate brokers, venture
capitalists, attorneys, bankers, phone system resellers, independent facilities
managers and other persons in a position to influence office furniture and
facilities management outsourcing decisions. After identifying target accounts,
the Company's sales personnel contact the appropriate decision makers at various
management levels (such as in-house facilities managers, purchasing agents or
chief financial officers) seeking to position the Company as the service
provider of choice by showcasing its account team and often preparing a space
plan at no charge to the prospective customer. The final stage in the sales
process is the preparation of a price quotation, over which each of the
Company's sales representatives has considerable pricing discretion within
guidelines set by the Company's management.

         Sales and Sales Support Compensation: The Company recognizes that its
long term growth and profitability is based upon three critical elements; the
expansion of its customer base, the retention of its existing customers and the
effective management of key strategic relationships within its customer base.
The growth of the customer base is directly attributable to the talent, size,
and motivation of the Company's sales force. To accomplish this the Company
offers compensation which can be exclusively commission based or a combination
of base salary plus commissions, either of which are intended to offer a better
than industry standard compensation package and a market advantage in attracting
and retaining top sales personnel. The retention of existing customers and the
management of key strategic relationships is a function of the Company's ability
to provide responsive, innovative high quality support to its customers. The
Company has significantly expanded its professional staff in Project Management,
Installation, and Customer Service, to ensure a qualified team is available to
provide such support. The Company offers competitive salaries to its sales
support personnel, often coupled with incentive programs based on the attainment
of functional performance objectives and high customer satisfaction ratings.

         Marketing. In addition to its networking efforts with persons in a
position to influence workspace products and facilities management purchase
decisions, the Company markets its services and products over the Internet and
through industry conferences and trade shows, cooperative and stand-alone
advertising, educational seminars (including space planning and asset management
seminars coordinated through the Company's WMS group), direct mail and other
customary public relations methods. The Company's San Jose corporate
headquarters, the San Francisco facility, the Company's Southwest regional
headquarters in Phoenix, the Company's Texas regional headquarters in Dallas and
the San Antonio facility also function as working showrooms.

CUSTOMERS

         Business Resource Group has developed a diverse and extensive client
base, including companies in the networking and communications, software,
electronics, financial services, life sciences and health care industries, as
well as service providers of various types. The Company's customers also vary
widely in size, ranging from large enterprises with over $1 billion in sales, to
emerging companies, which are often thinly staffed and are therefore receptive
to comprehensive solution providers such as the Company.

         The Company provided services and sold products to approximately 1,000
customers during the fiscal year ended October 31, 1996. Fifty customers
accounted for approximately 76% of the Company's net revenues during fiscal
1996. Cisco Systems and National Semiconductor accounted for approximately 37%
and 5% of net revenues for the fiscal year ended October 31, 1996, respectively.
Cisco Systems and National Semiconductor each contributed 18% for the fiscal
year ended October 31, 1995. Historically, the Company has had substantial
recurring sales from current customers. Over 60% of the Company's net


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revenues during the fiscal year ended October 31, 1996 were derived from
customers which were also customers during fiscal 1995.

VENDORS

         Business Resource Group purchases its workspace products from a variety
of suppliers. The table below summarizes principal product lines the Company
purchases from its suppliers.

<TABLE>
<CAPTION>

                                                                            Product Lines
                                                   -----------------------------------------------------
                                                   Modular
                     Vendor                        Systems         Casegoods       Seating     Specialty
                     ------                        -------         ---------       -------     ---------
<S>                                                 <C>               <C>            <C>          <C>
         Allsteel, Inc.                              /x/               /x/            /x/
         Arcadia Furniture Corporation                                 /x/            /x/
         Creative Wood Products, Inc.                                  /x/            /x/
         Eagan Visual West, Inc.                                                                    /x/
         Eck Adams Corp.                                                              /x/
         Formline Systems                                              /x/                          /x/
         Global Wholesalers West, Inc.                                                /x/
         The Gunlocke Company                        /x/               /x/            /x/
         Hag, Inc.                                                                    /x/
         Harpers Furniture                           /x/               /x/            /x/
         The Hon Company                             /x/               /x/            /x/
         Kimball Office Furniture Co.                /x/               /x/            /x/           /x/
         The Knoll Group, Inc.                       /x/               /x/            /x/
         Krueger International, Inc.                 /x/
         National Office Furniture Co.                                 /x/            /x/
         Office Master, Inc.                                                          /x/
         SIS Human Factors Technology, Inc.                                                         /x/
         TAB Products Co.                            /x/               /x/
         Teknion, Inc.                               /x/               /x/            /x/
         Trendway, Inc.                              /x/
         United Chair Co.                                                             /x/
</TABLE>


         None of the products currently offered by the Company is obtained on a
sole source basis from any vendor or dealer. During the fiscal year ended
October 31, 1996, the Company purchased approximately $21 million, $4 million
and $4 million, respectively, from Teknion Inc., Kimball Office Furniture Co.,
and Allsteel Inc.. The Company also subcontracts for delivery, freight services
and a small percentage of its installation services. Delivery and freight
activities do not constitute a material portion of the Company's business.

         While the Company's strategy is to maintain multiple sources of supply
for each of its workspace product lines, the Company is dependent upon these
suppliers for timely delivery and product quality once orders are placed. The
Company has, from time to time, experienced delays in product delivery from a
number of suppliers. These delays have adversely affected the timing of customer
deliveries and installations. Delays by suppliers have also resulted in
increased costs to the Company and in certain


                                      -10-
<PAGE>   11
cases lost revenues. Almost all of the Company's purchases from its vendors are
made on a purchase order basis, and liabilities of such vendors to the Company
for late deliveries are therefore principally based on the terms and conditions
set forth in the applicable purchase order and the supplier's confirming
document (if any). The Company customarily enters into negotiations with its
vendors for price adjustments and late fees as may be appropriate in the event
of late deliveries. Future delays in delivery by suppliers or poor product
quality could have a material adverse effect on the Company's ability to meet
customer requirements and thereby adversely affect revenues or increase costs.

OPERATIONS

         The Company's operations include ongoing order processing and
coordination with its vendors through a software system developed by principals
of the Company through an entity controlled by them at that time, but which is
now independently owned. Order processing is performed in each of the Company's
regional offices and such personnel are also responsible for customer service
support to the sales representatives. The Company carries out its accounting and
credit & collection function from its San Jose headquarters, maintaining
receivables of more than 90 days at a level around five percent. Accounting
functions include general ledger, accounts payable, accounts receivable and
payroll. Responsibility for the Company's technology hardware and software
upgrades and purchases is shared by Directors of System Administration and
Applications Development. Training in sales, project management, customer
service and installation services is carried out in both the Company's regional
offices and its San Jose headquarters.

COMPETITION

         Workspace products and services are provided by a large number of
companies. The office workspace products marketplace is highly fragmented in the
metropolitan areas of the United States. For example, at least 25 traditional
furniture dealers compete with the Company in the San Francisco Bay Area
marketplace alone. The Company believes that its largest local competitor is
Lindsay Ferrari, formed as a result of the 1994 merger of Lindsay's and Rucker
Fuller, both local Steelcase dealers. The Company believes its comprehensive
range of products and services is a competitive advantage relative to these
companies. Its recent addition of workspace management services further
differentiates it from traditional furniture dealers. In the workspace
management services market, the Company competes with numerous, primarily small
companies, depending on the type of service or location.

         The workspace products manufacturing industry is dominated by
Steelcase, Herman Miller, Inc. and Haworth, Inc., each of which distributes
their products directly and through captive dealers. The Company is not an
authorized dealer for these manufacturers. There can be no assurance that these
manufacturers will not price their products or services or offer other terms to
become more competitive or to allow their dealers to become more competitive or
that such actions would not have a material adverse effect on the Company or its
results of operations.

         The Company believes that the primary competitive factors in its
targeted market are customer responsiveness, breadth of services and products
offered, quality and price. To remain competitive, the Company must continue to
offer a broad range of services and products to meet the needs of its customers,
maintain quality levels, offer flexible delivery schedules, deliver finished
products on a reliable basis and compete favorably on the basis of price.


                                      -11-
<PAGE>   12
FACTORS AFFECTING FINANCIAL RESULTS AND STOCK PRICE

         The Company's future results of operations may be adversely affected by
various factors, including those discussed below. The Company's revenues and
operating results may fluctuate substantially from period to period depending on
such factors as the timing of significant customer orders, the timing of revenue
and cost recognition, variations in contract service and product mix, changes in
customer buying patterns, changes in vendor lead times and trends in the economy
of the geographic region in which the Company operates. Any unfavorable changes
in these or other factors could have a material adverse effect on the Company's
business and results of operations. Given the variability of these factors, the
Company expects that quarter to quarter performance may fluctuate for the
foreseeable future and that results in any single quarter may therefore not be
indicative of future results.

         A large portion of the Company's net revenues for any period are
frequently dependent on a few large customer projects involving relocation,
including a move to a new facility or an upgrade of an existing facility. At the
conclusion of a major project, that customer may not have an immediate need for
additional services or products on the same scale. The Company does not enter
into long term or volume purchase contracts with its customers, and customers
may discontinue further purchases of the Company's services or products at any
time without notice. There can be no assurance that any of the Company's
customers will expand their operations, relocate their offices or facilities or
otherwise require the Company's services or products in the future. To maintain
or increase existing levels of revenues and profits, the Company must identify
and book major projects within its existing base of customers or with new
customers. There can be no assurance that any of the Company's current customers
will engage the Company for major projects in the future or that the Company
will be able to obtain additional new customers.

         The market for workspace services and products is influenced by
economic conditions, including consumer behavior and consumer confidence, the
level of discretionary spending, interest rates and credit availability.
Purchases of these services and products are often discretionary and tend to be
deferred in times of economic stress. During economic downturns, the furniture
industry tends to experience longer and deeper periods of recession than the
general economy. Although the economy in the United States, and in particular
that of the San Francisco Bay Area, the Southwest and Texas, has been expanding
in recent years, there can be no assurance that it will continue to expand or
that it will not decline in the future.

          The Company has made acquisitions during the current and prior fiscal
years and may continue to make acquisitions in the future. The expansion of
corporate operations in addition to managing acquired operations in new
geographic areas entails numerous operational and financial risks, including
difficulties in assimilating acquired operations, diversion of management's
attention to other business concerns, amortization of acquired intangible
assets, potential loss of employees or customers of acquired operations and
difficulties in developing a local market for the Company's services and
products. There can be no assurance that the Company will be able to achieve
growth, or effectively manage any such growth, and failure to do so could have a
material adverse effect on the Company's operating results.

         The Company will require significant capital for the expansion of its
existing business, expansion into other geographic markets and acquisition of
other businesses, each of which are key elements of the Company's strategy.
There are no assurances that this capital will be available or available on
terms which will not have a material adverse effect on the Company or its
financial results.

         The market price of the Company's common stock may be subject to
significant fluctuations. These fluctuations may be due to factors specific to
the Company, such as quarterly fluctuations in the


                                      -12-
<PAGE>   13
Company's financial results, changes in analyst's estimates of future results,
litigation, changes in investors' perceptions of the Company or the announcement
of new products by the Company or its competitors. In addition, such
fluctuations may be due to or exacerbated by conditions in the financial markets
generally.

EMPLOYEES

         As of October 31, 1996, Business Resource Group had approximately 251
employees of whom 101 were in installation, 45 were in marketing and sales, 28
were in design and customer service, 31 were in finance and administration, and
46 were in project management. Of these employees, 169 were located in the
Company's principal offices in San Jose, California, 12 were located in the San
Francisco, California office, 30 were located in the Southwest regional offices
in Tempe and Tucson, Arizona and Las Vegas, Nevada, 37 were located in the Texas
offices in Dallas, San Antonio and Austin, and 3 were located in Denver,
Colorado. The Company believes its relationship with its employees is good.

         The success of the Company depends to a significant extent upon the
continued services of the Company's management. The Company has benefited from
important contributions made by Brian McNay, Jeffrey Tuttle, Charles J. Winter
and others. Mr. McNay and Mr. Tuttle have each made significant contributions to
the Company's sales to date, accounting for approximately 34% and 6% of the
Company's sales in the fiscal year ended October 31, 1996. In addition, as an
executive officer since 1987, Mr. Winter has played a significant role in the
management, operation and strategic direction of the Company. The loss of the
services of any of these individuals could have a material adverse effect on the
Company.

         None of the Company's employees is represented by a labor union. From
time to time, installations of workspace products require the use of union labor
to comply with the requirements of the customer or the work rules for the job
location. In these situations, the Company subcontracts the installation to
other parties that employ union labor. To date, the Company has not experienced
difficulties obtaining subcontract installation services where required.

ITEM 2.  PROPERTIES
         Business Resource Group currently leases approximately 21,000 square
feet of office space at 2150 North First Street in San Jose, California. The
Company leases most of this space under an operating lease which runs through
August 2001. The San Jose office serves as the Company's principal offices and
also functions as a working showroom for products offered by the Company. The
Company leases approximately 5,500 square feet of office and showroom space in
San Francisco, California. The Company leases this space under an operating
lease which runs through October 1997. The Company leases approximately 16,000
square feet of space in Tempe, Arizona, where its Southwest regional
headquarters is located. The Company leases this space under an operating lease
which runs through November 1997 with a renewal option, if exercised, which
would extend the term of the lease through November 2000. In addition, within
the Southwest region, the Company leases approximately 5,000 square feet in Las
Vegas, Nevada and 1,000 square feet in Tucson, Arizona. Both the Las Vegas and
Tucson leases are operating leases with terms running through April 1997 and
November 1997, respectively. The Company leases approximately 7,000 square feet
of space in Dallas, Texas, where its Texas regional headquarters is located. The
Company leases this space under an operating lease which runs through September
1998, with a renewal option, if exercised, which would extend the term of the
lease through September 2001. In addition, within the Texas region, the Company
leases approximately 3,400 square feet in San Antonio under an operating lease
with a term running through November 2001 and maintains a single executive suite
in Austin, presently on a month-to-month rental basis. The Company may expand
its office space in San Jose and Dallas to accommodate its growing sales, sales


                                      -13-
<PAGE>   14
support and Workspace Management Services organizations. Otherwise, the Company
believes that its existing facilities will generally be sufficient for its
operational purposes within the Company's existing regions through the end of
fiscal year 1997. The Company believes that additional space sufficient to meet
its anticipated needs is available on reasonable terms.

ITEM 3.  LEGAL PROCEEDINGS

         Business Resource Group is not currently subject to any material legal
proceedings. The Company may from time to time become a party to various legal
proceedings arising in the normal course of its business. These actions could
include product liability, employee related issues and disputes with vendors or
customers.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         Not applicable.

                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
         MATTERS

         The Company's Common Stock has been traded on the Nasdaq National
Market under the symbol BRGP since the effective date of the Company's initial
public offering on June 27, 1995. The price per share reflected in the table
below represents the range of low and high closing sale prices for the Company's
Common Stock as reported in the Nasdaq National Market for the quarters
indicated.

<TABLE>
<CAPTION>

           FISCAL 1996                                                  HIGH                    LOW
                                                                        ----                    ---
<S>                                                                     <C>                    <C>
                    Fourth Quarter ended October 31, 1996               4 5/8                   3 5/8
                    Third Quarter ended July 31, 1996                   6 1/4                   4
                    Second Quarter ended April 30, 1996                 5 5/8                   3 1/2
                    First Quarter ended January 31, 1996                5 3/8                   3 1/16
</TABLE>

<TABLE>
<CAPTION>

           FISCAL 1995                                                  HIGH                    LOW
           -----------                                                  ----                    ---
<S>                                                                     <C>                    <C>
                    Fourth Quarter ended October 31, 1995               10 1/2                  4
                    Third Quarter ended July 31, 1995*                   9 1/2                  7
</TABLE>

         * Price information reflects the period from June 27 to July 31, 1995.
         Registrant's stock was not actively traded on any national exchange
         until June 27, 1995.

         The Company estimates it had approximately 400 shareholders as of
October 31, 1996, including beneficial owners included in securities position
listings as described in Rule 17Ad- 8.

         The Company has never paid a cash dividend on its capital stock.
Covenants in the Company's revolving line of credit facility prohibit the
Company from paying dividends without prior approval by the lender. The Company
currently anticipates that it will retain all available funds for use in the
operation and expansion of its business, and does not anticipate paying any cash
dividends in the foreseeable future.


                                      -14-
<PAGE>   15
ITEM 6.  SELECTED CONDENSED FINANCIAL DATA

                             SUMMARY FINANCIAL DATA
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


STATEMENTS OF INCOME DATA:

<TABLE>
<CAPTION>


                                                                  YEAR ENDED OCTOBER 31,
                                           ------------------------------------------------------------------
                                             1996          1995          1994            1993          1992
                                           -------       -------       --------        -------       --------
                                                       (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                        <C>           <C>           <C>             <C>           <C>
Net revenues:
   Workspace products ..............       $67,834       $33,940       $ 32,197        $18,604       $ 12,934
   Workspace services ..............        10,155         6,119          4,258          2,453          1,606
   Vendor commissions ..............           291           569            657             32            124
                                           -------       -------       --------        -------       --------

       Total net revenues ..........        78,280        40,628         37,112         21,089         14,664
                                           -------       -------       --------        -------       --------

Cost of net revenues:
   Workspace products ..............        55,051        26,605         25,044         14,604          9,726
   Workspace services ..............         7,320         4,179          3,131          1,887          1,384
                                           -------       -------       --------        -------       --------
       Total cost of net revenues ..        62,371        30,784         28,175         16,491         11,110
                                           -------       -------       --------        -------       --------

Gross profit .......................        15,909         9,844          8,937          4,598          3,554
Selling, general and
   administrative expenses .........        12,870         8,143          6,425          3,825          2,944
                                           -------       -------       --------        -------       --------
Income from operations .............         3,039         1,701          2,512            773            610
Interest income (expense) - net ....           124             7            (77)             1             (2)
                                           -------       -------       --------        -------       --------

Income before income taxes .........         3,163         1,708          2,435            774            608
Provision for income taxes .........         1,309           122             70             20             13
                                           -------       -------       --------        -------       --------
Net income .........................       $ 1,854       $ 1,586       $  2,365        $   754       $    595
                                           =======       =======       ========        =======       ========


Net income per common
   and common equivalent share .....       $   .38
                                           =======

Shares used in computation .........         4,886
                                           =======

Pro forma (1):
   Historical income before
       income taxes ................                       1,708          2,435
   Pro forma income taxes ..........                         709          1,009
                                                         -------        -------
Pro forma net income ...............                     $   999        $ 1,426
                                                         =======        =======

Pro forma net income per common
   and common equivalent share .....                     $   .26       $   .42
                                                         =======       =======

Pro forma shares used in
   computation......................                       3,834         3,406
                                                         =======       =======
</TABLE>


(1) See Note 2 to Financial Statements for a discussion of pro forma amounts.


                                      -15-
<PAGE>   16
BALANCE SHEET DATA:

<TABLE>
<CAPTION>

                                                     OCTOBER 31,
                             ---------------------------------------------------------
                             1996           1995         1994         1993        1992
                             ----           ----         ----         ----        ----
                                                      (IN THOUSANDS)
<S>                         <C>           <C>           <C>          <C>          <C>
Working capital .......     $10,063       $ 9,470       $2,784       $1,160       $  890
Total assets ..........      22,560        16,053        7,640        4,496        2,295
Long-term obligations..          --           120          123           --           --
Shareholders' equity...      13,002        11,020        3,296        1,444        1,124
</TABLE>


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

         The following discussion should be read in conjunction with the
Financial Statements and Notes thereto included elsewhere in this Annual Report
on Form 10-K.

OVERVIEW

         Business Resource Group is a provider of workspace services and
products. Most of the Company's net revenues are derived from billings for
workspace products, including modular systems, casegoods, seating, filing
systems and specialty furniture products. The Company's experience is that its
success in generating these revenues is dependent upon the provision of related
services, such as project management, space planning and design, product
specification and order management. The price of these services is frequently
included in product billing to its customers as part of its integrated workspace
solution. Approximately thirteen percent of the Company's net revenues are
derived from separately billed workspace services, including installation and
maintenance, delivery and Workspace Management Services. A very small percentage
of the Company's net revenues are derived from commissions on product sales
which certain of the Company's vendors bill directly.

         The Company's net revenues and operating results fluctuate
substantially from period to period depending on such factors as the timing of
significant customer orders, the timing of revenue and cost recognition,
variations in contract service and product mix, the ability of the Company's
suppliers to manufacture and deliver products on a timely basis, changes in
customer buying patterns and trends in the economy of the geographic region in
which the Company operates. Any unfavorable changes in these or other factors
could have a material adverse effect on the Company's business and results of
operations.

         Between July 1989 and June 25, 1995, the Company was an S Corporation
pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), and
therefore was not subject to federal and most state income taxes. In lieu of
corporate income taxes, the shareholders of the Company were taxed on their
proportionate share of the Company's taxable income. Subsequent to June 25,
1995, the Company terminated its S Corporation status and became subject to
federal and state income taxes. See Note 2 to financial statements.


                                      -16-
<PAGE>   17
RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain income
statement data as a percentage of net revenues:

<TABLE>
<CAPTION>

                                                          YEAR ENDED OCTOBER 31,
                                                   ----------------------------------
                                                     1996          1995          1994
                                                   ------        ------        ------
<S>                                                  <C>           <C>           <C>
         Net revenues:
             Workspace products ............         86.6%         83.5%         86.7%
             Workspace services ............         13.0          15.1          11.5
             Vendor commissions ............           .4           1.4           1.8
                                                   ------        ------        ------
                  Total net revenues .......        100.0         100.0         100.0
                                                   ------        ------        ------
         Cost of net revenues:
             Workspace products ............         70.3          65.5          67.5
             Workspace services ............          9.4          10.3           8.4
                                                   ------        ------        ------
                  Total cost of net
                    revenues................         79.7          75.8          75.9
                                                   ------        ------        ------

         Gross profit ......................         20.3          24.2          24.1
         Selling, general and
             administrative expenses .......         16.4          20.0          17.3
                                                   ------        ------        ------
         Income from operations ............          3.9           4.2           6.8
         Interest income (expense) - net ...          0.1           0.0          (0.2)
                                                   ------        ------        ------

         Income before income taxes ........          4.0           4.2           6.6
         Provision for income taxes ........          1.6           0.3           0.2
                                                   ------        ------        ------
         Net income ........................          2.4%          3.9%          6.4%
                                                   ======        ======        ======
         Pro forma:
             Historical income before
                  income taxes .............                        4.2%          6.6%
             Pro forma income taxes ........                        1.7           2.8
                                                                 ------        ------
         Pro forma net income ..............                        2.5%          3.8%
                                                                 ======        ======
</TABLE>

YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994.

Net Revenues

         Net revenues increased 93% to $78.3 million in fiscal 1996 from $40.6
million in fiscal 1995. The increase was primarily attributable to new large
project business from both new and existing customers and revenues generated by
the Company's southwestern United States and Texas regional business units
acquired in September 1995 and January 1996, respectively. In the Company's San
Jose/San Francisco region approximately $52.4 million in revenue, out of a total
of approximately $66.7 million, was earned from 42 customers, each of which
contributed at least $200,000 in annual revenue, up from approximately $27.3
million in revenue, out of a total of approximately $40.4 million, from 28
customers in 1995. The southwestern United States and Texas regions contributed
approximately $11.6 million in fiscal 1996, up from $260,000 in 1995.



                                      -17-
<PAGE>   18
         Net revenues increased 9% to $40.6 million in fiscal 1995 from $37.1
million in fiscal 1994. The increase was primarily attributable to an increase
in sales to the Company's top 10 customers of approximately $2.4 million and
first time revenues from new businesses of approximately $1.5 million. The
Company's new offerings of TAB products and certain facilities management
services contributed first time revenues of approximately $1.0 million,
including commissions, and $300,000, respectively. The Company's new operations
in Arizona and Nevada, which were established as a result of the RST
acquisition, contributed $260,000 in revenue.

         Vendor commissions decreased $278,000 to $291,000 in fiscal 1996 from
$569,000 in fiscal 1995 as most vendors discontinued their policies of billing
customers directly and only paying a commission to the Company. Additionally,
during the third quarter of fiscal 1996, the Company discontinued its Records
Management business in order to streamline its operations and focus on its
Workspace Products and Workspace Management Services businesses. Vendor
commissions from TAB, for sales of records management products, totalled
approximately $224,000 and $245,000 in fiscal 1996 and 1995, respectively.

         Vendor commissions decreased $88,000 to $569,000 in fiscal 1995 from
$657,000 in fiscal 1994 primarily the result of vendors agreeing with the
Company's requests to change their policies and sell their products directly to
the Company. This decrease was partially offset by increased vendor commissions
from TAB whose policy it is to bill and collect amounts from customers directly
and pay a commission to the Company.

         Gross Profit

         Gross profit increased 62% to $15.9 million in fiscal 1996 from $9.8
million in fiscal 1995, primarily the result of the 93% increase in revenue.
Gross profit as a percentage of net revenues decreased to 20% in fiscal 1996
from 24% in fiscal 1995. Product margins decreased 2% to 19% in fiscal 1996, the
result of a shift in product mix from higher margin projects to higher volume,
lower margin projects and the impact of the Company's decision to accept certain
low margin projects which the Company felt were important to its competitive
positioning and its ability to penetrate certain markets. Service margins also
decreased as a percentage of revenue to 28% from 33% in fiscal 1995, the result
of a service mix shift to lower margin volume-related services, start-up costs
in the Company's Workspace Management Services business, underabsorption of
overhead in the Company's developing regional installation businesses and the
use of outside contract installation companies in certain out-of-state
locations.

         Gross profit increased 10% to $9.8 million in fiscal 1995 from $8.9
million in fiscal 1994, while it remained constant as a percentage of net
revenues at 24%. Slightly lower product margins, down 1% to 22%, on the higher
volume product offerings were offset by higher margins, up 5% to 32%, on the
Company's lower volume service offerings.

         Gross profit has varied and is expected to continue to vary as a result
of such factors as the mix of workspace products and services sold, the
percentage of sales to new customers relative to repeat customers and the
percentage of total net revenues generated through large customer orders
relative to small customer orders.


                                      -18-
<PAGE>   19
Selling, General and Administrative Expenses

         Selling, general and administrative expenses increased 58% to $12.9
million in fiscal 1996 from $8.1 million in fiscal 1995, while decreasing as a
percentage of net revenues to 16% in fiscal 1996 from 20% in fiscal 1995. The
increase in selling, general and administrative expenses was primarily the
result of increased revenue and related commissions, expanded operations in
Arizona, Nevada and Texas, and a continuing effort to build the infrastructure
necessary to run a larger business. The decrease in these expenses as a
percentage of net revenues reflected allocation of administrative costs over a
larger sales volume.

         Selling, general and administrative expenses increased 27% to $8.1
million in fiscal 1995 from $6.4 million in fiscal 1994, while increasing as a
percentage of net revenues to 20% in fiscal 1995 from 17% in fiscal 1994. The
increase in selling, general and administrative expenses was primarily the
result of expanded operations and an effort to build infrastructure to support
the growth of the business. The increase in these expenses as a percentage of
net revenues also reflected lower year-on-year revenues during the Company's
fiscal fourth quarter of 1995.

Interest and Other Income (Expense)

         Interest income, net of interest and other expense totaled $124,000 for
the twelve months ended October 31, 1996 versus $7,000 for the same period of
fiscal 1995. The increase in net interest income was due to higher cash balances
as a result of the Company's initial public offering of its common stock in June
1995.

         Interest income, net of interest expense totaled $7,000 for the twelve
months ended October 31, 1995 versus interest expense, net of interest income of
$77,000 for the same period of fiscal 1994. The shift from net interest expense
to net interest income was due to higher cash balances as a result of the
Company's initial public offering of its common stock in June 1995. A portion of
the proceeds of such initial public offering was used to pay down the Company's
outstanding balances on its line of credit.

Income Taxes

         The Company was a C Corporation for tax purposes for all of fiscal 1996
and an S Corporation for approximately eight of the twelve months of fiscal 1995
and for the entire fiscal year 1994. As a result, the Company's effective tax
rates were 41%, 7% and 3% for the twelve month periods ended October 31, 1996,
1995 and 1994, respectively. The Company has used a tax rate of 41% for the 1995
and 1994 pro forma information.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has funded its working capital requirements principally
through operating activities, a public offering of its common stock in June 1995
and short-term borrowings available under a bank revolving line of credit.
Working capital requirements included the financing of increases in accounts
receivable due to sales growth and the timing difference between when the
Company paid its vendors and when it collected its customer receivables. Such
timing difference was the result of the Company's practice to take advantage of
available vendor purchase discounts.

         Working capital at October 31, 1996 was $10.1 million, up from $9.5
million at October 31, 1995.


                                      -19-
<PAGE>   20
         During the twelve months ended October 31, 1996, net cash used by
operating activities was $2.1 million, representing net income of $1.9 million
and increases in accounts payable of $3.6 million and accrued liabilities of
$1.0 million, offset by increases in accounts receivable of $8.5 million,
prepaids and other current assets of $318,000 and inventory of $52,000. Accounts
receivable increased as a result of the timing of such revenue during the
quarter ended October 31, 1996, reflecting in particular a relatively large
percentage of sales during the final month of the quarter. Accounts payable
increased as a result of the increased revenue in the fourth quarter of fiscal
1996 versus 1995. Accrued liabilities increased primarily as a result of
increased sales commissions and sales tax. Net cash used by investing activities
was $1.9 million, primarily represented by the purchase of property and
equipment for $1.5 million and payments of $300,000 in connection with the
acquisition of certain assets of Corporate Source. Net cash used by financing
activities was $297,000, representing repayments of notes payable and capital
lease obligations of $250,000 and the change in bank overdrafts of $175,000,
partially offset by the issuance of common stock under the Company's employee
stock purchase plan of $128,000.

         The Company presently believes existing cash, together with cash
generated from operations and the Company's available borrowing capacity, will
provide sufficient funds to meet the Company's anticipated working capital
requirements and its planned expansion/acquisition strategy for the foreseeable
future. There can be no assurance, however, that the Company's actual needs will
not exceed anticipated levels.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                              PAGE

<S>                                                                                             <C>
Independent Auditors' Report ..............................................................     21

Financial Statements:

   Balance Sheets at October 31, 1996 and 1995 ............................................     22

   Statements of Income for the Years Ended October 31, 1996, 1995 and 1994 ...............     23

   Statements of Shareholders' Equity for the Years Ended October 31, 1996, 1995 and 1994..     24

   Statements of Cash Flows for the Years Ended October 31, 1996, 1995 and 1994 ...........     25

   Notes to Financial Statements for the Years Ended October 31, 1996, 1995 and 1994 ......     26
</TABLE>


                                      -20-
<PAGE>   21
                          INDEPENDENT AUDITORS' REPORT

   To the Board of Directors and Shareholders of
         Business Resource Group:

   We have audited the accompanying balance sheets of Business Resource Group
   (the Company) as of October 31, 1996 and 1995, and the related statements of
   income, shareholders' equity and cash flows for each of the three years in
   the period ended October 31, 1996. Our audits also included the financial
   statement schedule listed at Item 14 (a) (2). These financial statements and
   financial statement schedule are the responsibility of the Company's
   management. Our responsibility is to express an opinion on these financial
   statements and financial statement schedule 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, such financial statements present fairly, in all material
   respects, the financial position of the Company at October 31, 1996 and 1995,
   and the results of its operations and its cash flows for each of the three
   years in the period ended October 31, 1996 in conformity with generally
   accepted accounting principles. Also, in our opinion, such financial
   statement schedule, when considered in relation to the basic financial
   statements taken as a whole, presents fairly, in all material respects, the
   information set forth therein.






   /s/  Deloitte & Touche LLP




   San Jose, California

   December 10, 1996


                                      -21-
<PAGE>   22
                            BUSINESS RESOURCE GROUP
                                 BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)

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

Current assets:
    Cash and equivalents .................................................       $ 1,011       $ 5,326
    Accounts receivable, less allowance for doubtful accounts
       of $57 in 1996 and $125 in 1995 ...................................        16,122         7,168

    Inventory ............................................................           974           929
    Prepaids and other current assets ....................................         1,387           941
                                                                                 -------       -------
       Total current assets ..............................................        19,494        14,364

Property and equipment - net .............................................         2,017           733
Other assets .............................................................         1,049           956
                                                                                 -------      --------
                                                                                 $22,560       $16,053
                                                                                 =======       =======

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Bank overdraft .......................................................       $   476       $   651
    Accounts payable .....................................................         5,935         2,096
    Accrued liabilities ..................................................         2,908         1,905
    Current portion of notes payable and capital lease obligations .......           112           242
                                                                                 -------       -------
       Total current liabilities .........................................         9,431         4,894

Notes payable and capital lease obligations ..............................            --           120
Deferred income tax liability ............................................           127            19

Shareholders' equity:
    Preferred stock, par value $0.01 per share; 2,000,000 shares
       authorized; no shares outstanding .................................            --            --
    Common stock, par value $0.01 per share; 50,000,000 shares authorized;
       outstanding:
       4,858,864 shares in 1996 and 4,820,743 shares in 1995 .............            49            48
    Additional paid-in capital ...........................................        10,685        10,558
    Retained earnings ....................................................         2,268           414
                                                                                 -------       -------
       Total shareholders' equity ........................................        13,002        11,020
                                                                                 -------       -------
                                                                                 $22,560       $16,053
                                                                                 =======       =======
</TABLE>


                       See notes to financial statements.


                                      -22-
<PAGE>   23
                            BUSINESS RESOURCE GROUP
                              STATEMENTS OF INCOME
                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                   YEAR ENDED OCTOBER 31,
                                           -----------------------------------
                                             1996          1995          1994
                                           -------       -------       -------
<S>                                        <C>           <C>           <C>
  Net revenues:
      Workspace products .............     $67,834       $33,940       $32,197
      Workspace services .............      10,155         6,119         4,258
      Vendor commissions .............         291           569           657
                                           -------       -------       -------
          Total net revenues .........      78,280        40,628        37,112
                                           -------       -------       -------

  Cost of net revenues:
      Workspace products .............      55,051        26,605        25,044
      Workspace services .............       7,320         4,179         3,131
                                           -------       -------       -------
          Total cost of net revenues..      62,371        30,784        28,175
                                           -------       -------       -------

Gross profit .........................      15,909         9,844         8,937
Selling, general and
    administrative expenses ..........      12,870         8,143         6,425
                                           -------        ------       -------
Income from operations ...............       3,039         1,701         2,512
Interest income (expense) - net ......         124             7           (77)
                                           -------        ------       -------

Income before income taxes ...........       3,163         1,708         2,435
Provision for income taxes (Note 2)...       1,309           122            70
                                           -------        ------       -------
Net income ...........................     $ 1,854        $1,586       $ 2,365
                                           =======        ======       =======

Net income per common and common
    equivalent share .................     $  0.38
                                           =======
Shares used in computation ...........       4,886
                                           =======

Pro forma (Note 2):
    Historical income before
        income taxes .................                  $ 1,708       $ 2,435
    Pro forma income taxes ...........                      709         1,009
                                                         ------       -------
Pro forma net income .................                  $   999       $ 1,426
                                                         ======       =======

Pro forma net income per common and
       common equivalent share .......                   $ 0.26       $  0.42
                                                         ======       =======
Pro forma shares used in computation..                    3,834         3,406
                                                         ======       =======
</TABLE>


                       See notes to financial statements.


                                      -23-
<PAGE>   24
BUSINESS RESOURCE GROUP
STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                       ADDITIONAL
                                                  COMMON STOCK          PAID-IN      RETAINED
                                              SHARES      AMOUNT       CAPITAL       EARNINGS         TOTAL
                                             ---------       ---       -------       -------        --------
<S>                <C>                       <C>             <C>       <C>           <C>            <C>
Balances, November 1, 1993 ...........       2,978,760       $30       $     2       $ 1,412        $  1,444

   Issuance of common stock
     (including $220 recorded as stock
     compensation) ...................          91,464         1           273            --             274
   Distributions to S Corporation
     shareholders ....................              --        --            --          (787)           (787)
   Net income ........................              --        --            --         2,365           2,365
                                             ---------       ---       -------       -------        --------

Balances, October 31, 1994 ...........       3,070,224        31           275         2,990           3,296
   Distributions to S Corporation
     shareholders ....................              --        --            --        (4,162)         (4,162)
   Issuance of common stock
     (including $67 recorded as
     stock compensation) .............          15,244        --            76            --              76
   Initial public offering, net of
     issuance costs of $1,926 ........       1,725,000        17        10,132            --          10,149
   Issuance of common stock in
     connection with acquisition .....          10,275        --            75            --              75
   Net income ........................              --        --            --         1,586           1,586
                                             ---------       ---       -------       -------        --------

Balances, October 31, 1995 ...........       4,820,743        48        10,558           414          11,020

   Employee stock purchase program ...          38,121         1           127            --             128
   Net income ........................              --        --            --         1,854           1,854
                                             ---------       ---       -------       -------        --------

Balances, October 31, 1996 ...........       4,858,864       $49       $10,685       $ 2,268        $ 13,002
                                             =========       ===       =======       =======        ========
</TABLE>


                       See notes to financial statements.


                                      -24-
<PAGE>   25
                            BUSINESS RESOURCE GROUP
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                      YEAR ENDED OCTOBER 31,
                                                                                 1996         1995         1994
                                                                             ----------   ----------    -------
<S>                                                                                       <C>            <C>             <C>
  Cash flows from operating activities:
    Net income ....................................................................       $ 1,854        $  1,586        $ 2,365
     Adjustments to reconcile net income to net cash provided (used) by
       operating activities:
       Depreciation and amortization ..............................................           455             257             94
       Loss on disposal of fixed assets ...........................................            --              11             14
       Stock compensation .........................................................            --              67            220
       Deferred income taxes ......................................................           (15)           (132)            --
       Changes in operating assets and liabilities (net of effect of acquisitions):
         Accounts receivable - net ................................................        (8,533)         (1,197)        (1,734)
         Inventory ................................................................           (52)            243           (779)
         Prepaids and other current assets ........................................          (318)           (374)          (200)
         Accounts payable .........................................................         3,583             228            (82)
         Accrued liabilities ......................................................           958              81            809
                                                                                          -------        --------        -------
           Net cash provided (used) by operating activities .......................        (2,068)            770            707
                                                                                          -------        --------        -------
  Cash flows from investing activities:
    Purchase of property and equipment ............................................        (1,549)           (451)          (168)
    Cash paid for acquisitions ....................................................          (300)           (375)            --
    Other assets ..................................................................          (101)            (14)            (3)
    Proceeds from sale of equipment ...............................................            --              --              8
                                                                                          -------        --------        -------
           Net cash used  by investing activities .................................        (1,950)           (840)          (163)
                                                                                          -------        --------        -------
  Cash flows from financing activities:
    Bank overdraft ................................................................          (175)            651             --
    Repayment of capital lease obligations ........................................          (120)            (21)           (16)
    Repayment of notes payable ....................................................          (130)           (247)            --
    Issuance of common stock ......................................................           128          10,158             54
    Distributions to shareholders .................................................            --          (4,162)          (787)
    Borrowings on line of credit - net ............................................            --          (1,175)           285
                                                                                          -------        --------        -------
           Net cash provided (used) by financing activities .......................          (297)          5,204           (464)
                                                                                          -------        --------        -------
  Increase (decrease) in cash and equivalents .....................................        (4,315)          5,134             80

  Cash and equivalents  balances:
    Beginning of period ...........................................................         5,326             192            112
                                                                                          -------        --------        -------
    End of period .................................................................       $ 1,011        $  5,326        $   192
                                                                                          =======        ========        =======

  Supplemental disclosures of cash flow information - cash paid during the
    period for:
    Interest ......................................................................       $    39        $    131        $    70
                                                                                          =======        ========        =======
    Income taxes ..................................................................       $ 1,250        $    340        $    38
                                                                                          =======        ========        =======
  Noncash investing and financing transactions:
    Sale of distribution rights for note receivable (Note 10) .....................       $   177        $     --        $    --
                                                                                          =======        ========        =======
    Notes payable issued for distribution .........................................       $    --        $     --        $   226
                                                                                          =======        ========        =======
    Property acquired under capital leases ........................................       $    --        $     --        $    70
                                                                                          =======        ========        =======

  Acquisitions:
    Tangible assets acquired ......................................................       $   333        $    820        $    --
    Intangible assets acquired ....................................................           255             781             --
    Liabilities assumed ...........................................................          (288)           (801)            --
    Notes payable issued ..........................................................            --            (350)            --
    Common stock issued ...........................................................            --             (75)            --
                                                                                          -------        --------        -------
Cash paid for acquisitions ........................................................       $   300        $    375        $    --
                                                                                          =======        ========        =======
</TABLE>


                       See notes to financial statements.



                                      -25-
<PAGE>   26
                             BUSINESS RESOURCE GROUP

                          NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994





1.    ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES


      ORGANIZATION - Business Resource Group, a California corporation (the
      Company), provides workspace products and services.

      In April 1995, the shareholders approved a restatement of the articles of
      incorporation to, among other things, authorize issuance of two-hundred
      six (206) shares of common stock in exchange for each share of common
      stock outstanding. The accompanying financial statements reflect the
      effect of the stock split for all periods presented.

      CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES - 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.
      Such management estimates include the allowance for doubtful accounts
      receivable, inventory reserves, certain accruals and the valuation
      allowance for deferred tax assets. Actual results could differ from those
      estimates.

      CONCENTRATION OF CREDIT RISK - Financial instruments which potentially
      subject the Company to concentration of credit risk consist principally of
      cash, cash equivalents and accounts receivable. Management believes the
      credit risk associated with cash and cash equivalents is minimal.
      Substantially all of the Company's business activities are located in
      Northern California, Arizona, Nevada and Texas. The Company performs
      on-going credit evaluations of its customers and requires deposits for
      sales on credit when deemed necessary. The Company maintains reserves for
      discounts and potential credit losses; actual losses resulting from
      write-offs have not been significantly different from management's
      estimates.

      CASH EQUIVALENTS are highly liquid debt investments purchased with a
      maturity of three months or less.


      INVENTORY consists primarily of goods in transit shipped directly to
      customers by suppliers and is valued at the lower of cost (specific
      identification) or market value.

      PROPERTY AND EQUIPMENT are stated at cost and are depreciated and
      amortized using the straight-line method over useful lives of three to
      seven years for equipment and over the lesser of the useful life or the
      lease term for leasehold improvements.

      OTHER ASSETS - Goodwill and customer list intangibles purchased in
      acquisitions are included in other assets and are amortized using the
      straight-line method over estimated useful lives of three to ten years.
      The Company evaluates the recoverability of goodwill on a quarterly basis
      based on estimated undiscounted future cash flows. Amortization amounted
      to $187,000 and $84,000 in fiscal 1996 and 1995, respectively, with no
      amortization in fiscal 1994.


                                      -26-
<PAGE>   27
      REVENUE RECOGNITION - Revenues from workspace product sales and vendor
      commissions are recognized upon receipt of products by the customer.
      Service revenues are recognized upon customer acceptance of the project.

      STOCK COMPENSATION - In connection with the issuance of 15,244 and 91,464
      shares of common stock during the years ended October 31, 1995 and 1994,
      respectively, the Company has recorded the difference between the deemed
      fair value for accounting purposes and amounts paid by the acquiring
      shareholders, as specified in the stock purchase agreements, as
      compensation expense in the periods which services were performed.

      INCOME TAXES - Income taxes are provided for using the asset and liability
      approach.

      SHAREHOLDER DISTRIBUTIONS - The Company made distributions to its S
      Corporation shareholders to allow payment of their federal and state
      income taxes and to distribute previously undistributed S Corporation
      earnings as of the date the Company terminated its status as an S
      Corporation.

2.    PRO FORMA NET INCOME AND NET INCOME PER COMMON AND COMMON EQUIVALENT
      SHARES

      Through June 1995, the Company was not subject to federal and most state
      income taxes since its shareholders elected that the Company be taxed as
      an S Corporation pursuant to the Internal Revenue Code. In lieu of
      corporate income taxes, the shareholders of an S Corporation are taxed on
      their proportionate share of the Company's taxable income. Therefore, no
      provision for federal income taxes has been included in these financial
      statements for fiscal 1994 and the portion of fiscal 1995 during which the
      Company was an S Corporation. Although the S Corporation election is
      recognized for California income tax purposes, the State of California
      requires S Corporations to pay a tax of 1.5% (2.5% prior to October 31,
      1994) of taxable income. Effective June 1995, in conjunction with the
      Company's initial public offering of its common stock, the Company's
      status as an S Corporation was terminated and the Company became subject
      to federal and state income taxes.

      The pro forma information presented on the statements of income and in the
      Selected Quarterly Data (Unaudited) in Note 15 reflect a provision for
      income taxes at an effective rate of 41% for fiscal 1995 and 1994. Pro
      forma financial information is provided to show what the significant
      effects on the historical financial information might have been had the
      Company been treated as a C Corporation for income tax purposes prior to
      June 1995.

3.    RECENTLY ISSUED ACCOUNTING STANDARD

      In October 1995, the Financial Accounting Standards Board issued Statement
      No. 123, "Accounting for Stock-Based Compensation". The new standard
      defines a fair value method of accounting for stock options and other
      equity instruments, such as stock purchase plans. Under this method,
      compensation cost is measured based on the fair value of the stock award
      when granted and is recognized as an expense over the service period,
      which is usually the vesting period. This standard will be effective for
      the Company beginning in fiscal 1997, and requires measurement of awards
      made beginning in fiscal 1996.

      The new standard permits companies to continue to account for equity
      transactions with employees under existing accounting rules, but requires
      disclosure in a note to the financial statements of the pro forma net
      income and earnings per share as if the Company had applied the new method
      of accounting. The Company intends to follow these disclosure requirements
      for its employee stock


                                      -27-
<PAGE>   28
      plans. As a result, adoption of the new standard will not impact reported
      earnings or earnings per share, and will have no effect on the Company's
      cash flows.

4.    PROPERTY AND EQUIPMENT

      Property and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>

                                                        1996           1995
                                                      -------        -------
<S>                                                   <C>            <C>
      Computer equipment ........................     $ 1,596        $   442
      Office furniture and equipment ............         935            632
       Leasehold improvement ....................         115             19
                                                      -------        -------
                                                        2,646          1,093
      Accumulated depreciation and amortization..        (629)          (360)
                                                      -------        -------
      Total property and equipment - net ........     $ 2,017        $   733
                                                      =======        =======
</TABLE>


5.    LINE OF CREDIT

      The Company has an $8,000,000 revolving line of credit with a bank, which
      expires in July 1997. The line bears interest at prime (8.25% at October
      31, 1996) and is collateralized by substantially all of the Company's
      assets. Among other conditions and restrictions, the Company has agreed to
      certain financial covenants including maintenance of (1) a current ratio
      of at least 1.25 to 1; (2) total debt to tangible net worth ratio, as
      defined, of no more than 2.0 to 1; (3) tangible net worth, as defined, of
      at least $8,804,500; and (4) a debt service coverage ratio, as defined, of
      not less than 1.5 to 1. In addition, the Company is prohibited from paying
      dividends on its common stock without prior approval of the lender. At
      October 31, 1996, the Company was in compliance with all covenants.

6.    ACCRUED LIABILITIES

            Accrued liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>

                                                                           OCTOBER 31,
                                                                      -------------------
                                                                        1996         1995
                                                                      ------       ------
<S>                                                                   <C>          <C>
      Accrued commissions payable:
         Shareholders .........................................       $  515       $  238
         Others ...............................................          758          441
      Sales taxes payable .....................................          693          385
      Customer deposits .......................................          327          333
      Other accrued liabilities ...............................          615          508
                                                                      ------       ------
      Total accrued liabilities ...............................       $2,908       $1,905
                                                                      ======       ======
</TABLE>

7.    NOTES PAYABLE AND LEASE OBLIGATIONS

      As part of the purchase price associated with the acquisition of RST (Note
      14) in September 1995, the Company recorded a note payable of $100,000.
      The note is payable in full during fiscal 1997.

      The Company leases equipment under capital lease agreements. At October
      31, 1996 and 1995, the cost of equipment acquired under capital leases was
      $70,000 and accumulated amortization was

                                      -28-
<PAGE>   29
      $61,000 and $34,000, respectively. The Company also leases operating
      facilities under noncancelable operating leases which contain various
      renewal options.

      Future minimum lease payments under both capital and noncancelable
      operating leases are as follows (in thousands):

<TABLE>
<CAPTION>

      YEARS ENDING                                    CAPITAL    OPERATING
      OCTOBER 31,                                     LEASES      LEASES
      -----------                                     ------      ------
<S>                                                   <C>         <C>
           1997 .................................     $ 13        $  781
           1998 .................................       --           608
           1999 .................................       --           444
           2000 .................................       --           436
           2001 .................................       --           337
                                                      ----        ------
        Total future minimum payments ...........       13        $2,606
                                                                  ======
        Less imputed interest ...................       (1)
                                                      -----
        Present value of future minimum payment..     $ 12
                                                      =====
</TABLE>

      Total rent expense for the years ended October 31, 1996, 1995 and 1994
      under operating leases was approximately $636,000, $324,000 and $209,000,
      respectively.

8.    EMPLOYEE BENEFIT PLAN

      The Company has a 401(k) plan which covers substantially all full-time
      employees. The plan operates on a calendar year. All eligible employees
      are permitted to make tax deferred contributions of up to 20% of their
      annual compensation, subject to certain Internal Revenue Service
      limitations. The Company provides matching contributions of 25% of
      employees' contributions (up to 6% of employees' cash compensation).
      Employee contributions and earnings thereon are vested immediately;
      Company contributions vest over five years. In fiscal 1996, 1995 and 1994,
      the Company contributed $71,000, $22,000 and $15,000 to the plan.

9.    INCOME TAXES

      The provision for income taxes consisted of the following (in thousands):

<TABLE>
<CAPTION>

                                                YEAR ENDED OCTOBER 31,
                                                ----------------------
                                             1996          1995       1994
                                           -------        -----       ----
<S>                                        <C>            <C>          <C>
      Current:
         Federal ...................       $ 1,043        $ 183        $--
         State .....................           281           71         70
                                           -------        -----        ---
                                             1,324          254         70
                                           -------        -----        ---
      Deferred:
         Federal ...................           (25)        (106)        --
         State .....................            10          (26)        --
                                           -------        -----        ---
                                               (15)        (132)        --
                                           -------        -----        ---
      Total........................        $ 1,309        $ 122        $70
                                           =======        =====        ===
</TABLE>



                                      -29-
<PAGE>   30
      The pro forma provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                               YEAR ENDED OCTOBER 31,
                                                 1995          1994
                                               -------        -------

<S>                                            <C>            <C>
      Current:
         Federal ...................           $   618        $   776
         State .....................               191            235
                                               -------        -------
                                                   809          1,011
                                               -------        -------
      Deferred:
         Federal ...................               (75)            (2)
         State .....................               (25)            --
                                               -------        -------
                                                  (100)            (2)
                                               -------        -------
      Total pro forma ..............           $   709        $ 1,009
                                               =======        =======
</TABLE>


      The components of the actual deferred tax assets and liabilities at
      October 31, 1996 and the pro forma and actual deferred tax assets and
      liabilities at October 31, 1995 were as follows (in thousands):

<TABLE>
<CAPTION>

                                                                             OCTOBER 31,
                                                                             -----------
                                                                          1996         1995
                                                                         -----        -----
<S>                                                                      <C>          <C>
      Deferred tax assets:
         Accruals recognized in different periods for tax purposes..     $ 274        $ 151
         Amortization of intangibles ...............................        46           24
      Deferred tax liabilities - accelerated depreciation ..........      (173)         (43)
                                                                         -----        -----


      Net deferred tax assets ......................................     $ 147        $ 132
                                                                         =====        =====
</TABLE>

      Current deferred income tax assets of $274,000 and $151,000, at October
      31, 1996 and 1995, are included in prepaids and other current assets.

      The provision for income taxes for the year ended October 31, 1996 and the
      pro forma provision for income taxes for the fiscal years ended October
      31, 1995 and 1994, differs from the amount computed by applying the
      federal statutory income tax rate to income before income taxes as
      follows:

<TABLE>
<CAPTION>

                                                          YEAR ENDED OCTOBER 31,
                                                      ----------------------------
                                                      1996        1995        1994
                                                      ----        ----        ----

<S>                                                   <C>         <C>         <C>
      Tax computed at federal statutory rate ....     35.0%       35.0%       35.0%
      State income taxes, net of federal effect..      6.1         6.1         6.1
       Other ....................................      0.3         0.4         0.3
                                                      ----        ----        ----
      Effective income tax rate .................     41.4%       41.5%       41.4%
                                                      ====        ====        ====
</TABLE>



                                      -30-
<PAGE>   31
10.   RELATED PARTY TRANSACTIONS

      In fiscal 1994, certain shareholders of the Company sold their interest in
      Silicon Business Solutions ("SBS"), a software company. The Company paid
      fees of $27,000 to SBS in fiscal 1994 for maintenance services. SBS
      received advances from the Company, $36,000 of which was forgiven in
      conjunction with the sale of the shareholders' interest. SBS was not a
      related party during fiscal 1996 and 1995.

      The Company purchased products from a vendor (affiliate) during fiscal
      1995 and 1994. This affiliate was owned by certain shareholders of the
      Company. Purchases from affiliate were $277,000 and $357,000 in fiscal
      1995 and 1994, respectively. There were no accounts payable to the
      affiliate at October 31, 1996 and 1995, respectively. The assets of the
      affiliate were acquired by the Company in April 1995 for $95,000 and no
      further purchases were made from the affiliate following the acquisition.

      In fiscal 1994, the Company entered into a direct sales representative
      agreement for certain vendor products within a specified territory. In
      June 1995, an officer of the vendor was elected to the Board of Directors
      of the Company. In the year ended October 31, 1996, the Company purchased
      $1.0 million of product and earned $224,000 in commissions from the
      vendor. In the year ended October 31, 1995, the Company purchased $2.7
      million of product and earned $245,000 in commissions from the vendor. At
      October 31, 1996, the Company had no accounts receivable due from the
      vendor. In July 1996, the Company entered into an agreement with the
      vendor to relinquish its exclusive distribution rights, in exchange for a
      $177,000 note receivable, payable to the Company over twelve months,
      bearing interest at 4.625%.

11.   MAJOR CUSTOMERS AND VENDORS

      Two customers represented 37% and 5%, 18% and 18%, and 32% and 15% of net
      revenues for the years ended October 31, 1996, 1995 and 1994,
      respectively.

      Two vendors represented 35% and 7% of total purchases for the year ended
      October 31, 1996 and 13% and 17% of total purchases for the year ended
      October 31, 1995. One vendor represented 35% of total purchases for the
      year ended October 31, 1994.

12.   WARRANTS

      The Company issued warrants in fiscal year 1995 to purchase 110,000 shares
      of common stock, at an exercise price per share of 120% of the initial
      offering price ($8.40 per share), to the underwriters who managed the
      initial public offering of the Company's common stock. The warrants are
      exercisable over a period of five years beginning from the date of the
      initial public offering (June 1995).

13.   STOCK PLANS

      In April 1995, the Board of Directors adopted and the shareholders
      approved the Company's 1995 Stock Option Plan, Employee Stock Purchase
      Plan and the Directors' Stock Option Plan.


                                      -31-
<PAGE>   32
      1995 Stock Option Plan


      During fiscal 1996, the Company increased the number of shares of common
      stock reserved for issuance under the 1995 Stock Option Plan (the 1995
      Plan) from 750,000 to 1,200,000. The 1995 Plan provides for the granting
      of incentive stock options at an exercise price of not less than 100% of
      fair market value on the date of the grant and nonstatutory stock options
      at not less than 85% of the fair market value on the date of the grant.
      Stock options granted under the 1995 Plan generally become exercisable at
      the rate of 1/8 of the total shares granted six months after the date of
      the grant and 1/48 of the total number of shares granted each month
      thereafter.

      The following summarizes activity in the 1995 Plan for the years ended
      October 31, 1996 and 1995:

<TABLE>
<CAPTION>
                                                        SHARES             OUTSTANDING OPTIONS
                                                       AVAILABLE        ------------------------
                                                       FOR GRANT        SHARES             PRICE
                                                       ---------        ------             -----
<S>                                                   <C>             <C>             <C>
      Balance at November 1, 1994 .............             --              --        $          --

      Shares reserved for plan at adoption
        date...................................        750,000              --                   --
      Grants ..................................       (529,000)        529,000        $4.75 - 10.00

      Cancellations ...........................         22,567         (22,567)       $5.00 - 10.00
                                                       -------         -------
      Balance at October 31, 1995 .............        243,567         506,433        $4.75 - 10.00

      Increase in shares reserved for plan ....        450,000              --                   --
      Grants ..................................       (465,250)        465,250        $3.50 -  5.38

      Cancellations ...........................        146,589        (146,589)       $3.50 - 10.00
                                                       -------         -------
       Balance at October 31, 1996 ............        374,906         825,094        $3.50 - 10.00
                                                       =======         =======

</TABLE>

      At October 31, 1996, 242,920 options were exercisable.

      The Company's Board of Directors, subject to shareholder approval, has
      authorized a 500,000 increase in shares of common stock reserved under the
      1995 Stock Option Plan for stock option grants.

      Employee Stock Purchase Plan

      A total of 200,000 shares of common stock have been reserved for issuance
      under the 1995 Employee Stock Purchase Plan. Eligible employees may
      purchase common stock through payroll deductions of up to 10% of their
      compensation at a purchase price equal to the lower of 85% of the fair
      market value of the Company's common stock at the beginning or end of each
      six-month offering period. There were 38,121 shares issued under the
      Employee Stock Purchase Plan in fiscal 1996 and none were issued in fiscal
      1995.

      Directors' Stock Option Plan

      A total of 100,000 shares of common stock have been reserved for issuance
      under the 1995 Directors' Stock Option Plan (the Directors' Plan). The
      Directors' Plan provides for an initial grant of nonstatutory stock
      options to all nonemployee directors of the Company on the date on which


                                      -32-
<PAGE>   33
      they join the Board and automatic annual grants of nonstatutory stock
      options issued on the first day of each fiscal year to all nonemployee
      directors of the Company who have served at least three months as of such
      grant date. Options granted under the Directors' Plan are at an exercise
      price equal to the fair market value as of the grant date. Initial grants
      become exercisable ratably over four years and automatic grants become
      exercisable four years after the grants.

      The following summarized activity in the Directors' Plan for the years
      ended October 31, 1996 and 1995:

<TABLE>
<CAPTION>

                                                SHARES           OUTSTANDING OPTIONS
                                               AVAILABLE       ----------------------
                                               FOR GRANT       SHARES           PRICE
                                               ---------       ------           -----
<S>                                             <C>            <C>          <C>
            Balance at November 1, 1994...           --            --       $          --

            Shares reserved for plan .....      100,000            --                  --
            Grants .......................      (40,000)       40,000       $6.00 - 7.00
                                                 ------        ------
            Balance at October 31, 1995...       60,000        40,000       $ 6.00 - 7.00

            Grants .......................      (10,000)       10,000       $        4.75
                                                 ------        ------

             Balance at October 31, 1996..       50,000        50,000       $4.75 - 7.00
                                                 ======        ======
</TABLE>


      At October 31, 1996, 10,000 options were exercisable.

      The Company's Board of Directors, subject to shareholder approval, has
      authorized a 25,000 increase in shares of common stock reserved under the
      1995 Directors' Stock Option Plan for stock option grants.

14.   ACQUISITIONS

      In January 1996, the Company acquired, in a purchase transaction, certain
      assets and assumed certain liabilities of Corporate Source for a purchase
      price of $300,000 in cash. The acquisition agreement also provides for the
      payment of certain cash amounts if specific performance milestones are
      met. Corporate Source provided workspace products and services in Texas.

      In September 1995, the Company acquired, in a purchase transaction,
      certain assets and assumed certain liabilities of RST & Associates (RST)
      for a purchase price of $400,000 including $225,000 paid in cash, 10,275
      shares of common stock (valued at $75,000), and two contingent payments of
      $100,000 each coupled to specific performance milestones, due in the first
      fiscal quarter of 1997 and 1998, if earned. RST provided workspace
      products and services in the southwestern United States.

      In April 1995, the Company acquired, in a purchase transaction, certain
      assets and assumed certain liabilities of Landmark-Pacific Group, Inc.
      (Landmark) for a purchase price of $300,000, including $150,000 paid in
      cash and issuance of a note payable in two equal payments due April 1996
      and 1997. Approximately $21,000 of the April 1996 amount was paid in July
      1995. Landmark provides facilities management services.

      In April 1995, the Company acquired, in a purchase transaction, the net
      assets of RPS (see Note 10) for a note payable in the amount of $95,000,
      which was paid in full during fiscal 1995.


                                      -33-
<PAGE>   34
      Results of operations include those relating to the acquired companies'
      assets and liabilities from the date of acquisition. In connection with
      these acquisitions, the Company recorded intangible assets consisting
      primarily of goodwill and customer lists, totaling $278,000 for Landmark,
      $85,000 for RPS, $416,000 for RST and $335,000 for Corporate Source which
      will be amortized over periods ranging from three to 10 years.

      Had these acquisitions taken place at the beginning of fiscal 1996 and
      1995, unaudited pro forma net revenues would have been approximately $79.3
      million and $44.5 million, respectively, and pro forma net income and net
      income per common and common equivalent share would not have changed
      significantly.

15.   SELECTED QUARTERLY DATA (UNAUDITED)

      The following presents unaudited quarterly operating results for fiscal
      years ended October 31, 1996 and 1995:

      (In thousands, except per share data)

<TABLE>
<CAPTION>

                                              JANUARY 31,    APRIL 30,     JULY 31,     OCTOBER 31,
                                              -----------    ---------     --------     -----------
<S>                                            <C>           <C>           <C>           <C>
      FISCAL 1996
         Net revenues ..................       $14,503       $20,640       $21,340       $ 21,797
         Gross profit ..................         3,068         3,852         4,299          4,690
         Net income ....................           406           527           419            502

         Net income per common and
          common equivalent share ......       $   .08       $   .11       $   .09       $    .10
      FISCAL 1995
         Net revenues ..................       $ 8,166       $12,250       $12,195       $  8,017
         Gross profit ..................         2,059         2,995         2,981          1,809
         Net income (loss) .............           372           806           624           (216)

         Pro forma net income
           (loss) (1)...................           222           480           513           (216)
         Pro forma net income (loss) per
          common and common
           equivalent share (1) ........       $   .07       $   .14       $   .13       $   (.04)
</TABLE>


      (1) See Note 2 to Financial Statements

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

      Not applicable.


                                      -34-
<PAGE>   35
                                    PART III

      Certain information required by Part III is omitted from this report
because the Registrant will file a definitive proxy statement within 120 days
after the end of its fiscal year pursuant to Regulation 14A (the "Proxy
Statement") for its annual meeting of shareholders to be held March 3, 1997 and
the information included therein is incorporated herein by reference.

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      Information with respect to directors of the Company is incorporated by
reference from the information under the caption "Election of
Directors--Nominees" in the Registrant's Proxy Statement.

      The executive officers of the Company, and their ages as of October 31,
1996, are as follows:

<TABLE>
<CAPTION>
NAME                                      AGE                        POSITION
----                                      ---                        --------
<S>                                       <C>    <C>
Charles J. Winter                         38     President, Chief Executive Officer and Director
Brian D. McNay                            40     Executive Vice President of Sales and Director
Jeffrey Tuttle                            39     Executive Vice President of Marketing and
                                                 Director
P. Steven Melman                          41     Vice President of Finance and Chief Financial
                                                 Officer
Scott Lappin                              46     Vice President of Sales
</TABLE>


      Mr. Winter has served as President since April 1995, and as Chief
Executive Officer and a member of the Board of Directors since August 1988. Mr.
Winter served as the Company's Chief Financial Officer between August 1988 and
April 1995. Prior to joining the Company, he served as a senior systems analyst
at Rolm Mil Spec Computer, a division of IBM and a manufacturer of ruggedized
computers from 1984 to 1987. Mr. Winter also served as a senior systems analyst
with United Technologies, an aircraft engineering manufacturer, from 1982 to
1984. He received his BS degree in Economics with honors from the University of
California at Santa Cruz in 1980, and an MBA with honors from Boston University
in 1982.

      Mr. McNay has served as Executive Vice President of Sales since April
1995, and as a member of the Board of Directors since its inception in April
1987. Mr. McNay also served as President between April 1987 and April 1995. Mr.
McNay was also the founder and owner of Business Interiors, a sole
proprietorship sold to the Company in April 1987. In addition, Mr. McNay served
as a sales executive at various office furniture dealerships from 1979 to 1986,
including the Contract Source Center, the Contract Office Group and Design
Performance.

      Mr. Tuttle has served as Executive Vice President of Marketing since April
1995, and as a member of the Board of Directors since its inception in 1987. Mr.
Tuttle also served as Vice President of Sales between April 1987 and April 1995.
From 1978 to 1987, Mr. Tuttle served as a sales executive with KBM Office
Furniture, an office furniture dealership. He received his BS degree in
Marketing in 1980 from Santa Clara University.

      Mr. Melman has served as the Vice President of Finance and Chief Financial
Officer since April 1995. From September 1990 to March 1995 he served as the
Vice President, Finance &


                                      -35-
<PAGE>   36
Administration and Chief Financial Officer of Kubota Graphics Corporation, a
designer and manufacturer of 3D graphics and imaging workstations and from
February 1990 to September 1990 he served as Corporate Treasurer of Stardent
Computer, Inc., a manufacturer of graphics supercomputers. Mr. Melman received
his BS degree in Business Administration from Boston University in 1976. Mr.
Melman is a Certified Public Accountant.

      Mr. Lappin has served as Vice President of Sales since January 1996. From
March 1990 to December 1995 he served as Vice President of Sales of Northern
Telecom's Business Systems Division, a manufacturer of telephone switching
systems and from September 1988 to March 1990 he served as Vice President of
Sales of PacTel Business Systems, a distributor of communications equipment.

ITEM 11. EXECUTIVE COMPENSATION

      Incorporated by reference from the information under the captions
"Compensation of Executive Officers" and "Transactions with Management and
Others" in the Registrant's Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      Incorporated by reference from the information under the caption "Common
Stock Ownership of Certain Beneficial Owners and Management" in the Registrant's
Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Incorporated by reference from the information under the captions
"Compensation of Executive Officers" and "Transactions with Management and
Others" in the Registrant's Proxy Statement.


                                      -36-
<PAGE>   37
                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

(a)   The following documents are filed as part of this Report:

      (1)   FINANCIAL STATEMENTS

            See   index to Financial Statements at Item 8 of this report.

      (2)   FINANCIAL STATEMENT SCHEDULE

            Schedule II - Valuation and Qualifying Accounts (see page 41).

      (3)   EXHIBITS (NUMBERED IN ACCORDANCE WITH ITEM 601 OF REGULATION S K)

<TABLE>
<CAPTION>
Exhibit
Number                                      Description
------                                      -----------

<S>        <C>
   3.1     Amended and Restated Articles of Incorporation of Registrant. (1)

   3.2     Bylaws of Registrant. (1)

   4.1     Buy and Sell Agreement dated October 31, 1987, as amended on March
           15, 1988, August 17, 1994, October 27, 1994 and April 22, 1995 among
           the Registrant, Brian McNay, Charles Winter, Jeffrey Tuttle, Alison
           Lazarus and Jeffrey Bernstein. (1)

   10.1    1995 Stock Option Plan, as ammended and forms of agreements thereunder. (2)

   10.2    1995 Directors' Stock Option Plan and form of option agreement thereunder. (1)

   10.3    1995 Employee Stock Purchase Plan and form of subscription agreement thereunder. (1)

   10.4    Form of Directors' and Officers' Indemnification Agreement. (1)

   10.5    Form of Common Stock Purchase Warrant. (1)

   10.6    North First Street Plaza Lease Agreement dated May 28, 1991, as amended on December 21, 1993, between
           the Registrant and Wells Fargo Bank, N.A. (1)

   10.6A   Second Amendment to Lease between the Registrant and Wells Fargo Bank, NA, dated November 30, 1995
           with respect to premises at 2150 N. First Street, San Jose, CA 95131. (3)

   10.7    Sublease Agreement dated January 15, 1995, as amended on April 20, 1995, by and between the Registrant
           and First Franklin Financial Corporation. (1)

   10.8    Lease Agreement dated June 10, 1994 between the Registrant and Alexander M. Maisin, Trustee of the
           Alexander M. and June L. Maisin Revocable Trust. (1)

   10.9    Business Loan Agreements between the Registrant and Silicon Valley Bank, including related promissory
           notes and amendments thereto. (1)

   10.9A   Business Loan Modification Agreement between the Registrant and Silicon Valley Bank, dated January 16,
           1996. (3)

   10.9B   Business Loan Modification Agreement between the Registrant and Silicon Valley Bank, dated March 6,
           1996. (3)
</TABLE>


                                      -37-
<PAGE>   38
<TABLE>
<S>        <C>
   10.9C   Business Loan Modification Agreement between the Registrant and Silicon Valley Bank, dated March 13,
           1996. (3)

   10.10   Commercial Security Agreement dated March 15, 1988, as amended on February 25, 1993, between the
           Registrant and Silicon Valley Bank. (1)

   10.11   Direct Sales Representative Agreement dated October 5, 1994 between the Registrant and TAB Products
           Co. (1)

   10.12   Letter Agreement dated April 28, 1995 between the Registrant and Landmark Pacific Group, Inc. (1)

   10.13   Letter Agreement dated April 30, 1995 between the Registrant and Refurbished Panel Systems. (1)

   10.14   Asset Purchase Agreement dated September 27, 1995 between the Registrant and RST & Associates, Inc. (2)

   10.15   Assignment and Assumption of Lease between RST & Associates, Inc. and the Registrant dated September
           1, 1995 with respect to premises at 2010 East University, Tempe, Arizona. (2)

   10.16   Assignment and Assumption of  Lease between  RST & Associates Inc. and the Registrant dated September
           27, 1995 with respect to premises at 3957 East Speedway, Tucson, Arizona. (2)

   10.17   Assignment and Assumption of  Lease between  RST & Associates Inc. and the Registrant dated September
           27, 1995 with respect to premises at 5140 South Rogers, Las Vegas, Nevada. (2)
   10.18   Purchase Agreement between Cisco Systems, Inc., Teknion, Inc., Teknion International and the
           Registrant effective as of September 1, 1995.  (2)

   10.19   Master Lease and Lease Renewal Agreement between the Registrant and
           OMI Properties Inc., dated July 21, 1995 and February 1, 1996,
           respectively, for facilities located at 130 Andover Park East, Suite
           204, Tukwila, WA 98188. (3)

   10.20   Master Lease Agreement between the Registrant and IM Joint Venture, dated June 23, 1995, for
           facilities located at Infomart Suite 5001, 1950 Stemmons Freeway, Dallas, Texas 75207. (3)

   10.21   Asset Purchase Agreement dated January 25, 1996 between the Registrant and Darthmouth Group, Inc.
           d/b/a Corporate Source. (3)

   10.22   Assignment and Assumption of  Lease between the Registrant and Corporate Source, dated January 25,
           1996 with respect to premises at 2811 McKinney Avenue, Suite 18, Dallas, Texas 75204. (3)

   10.23   Assignment and Assumption of  Lease between the Registrant and Corporate Source, dated January 25,
           1996 with respect to premises at 1367 & 1369 Glenville Drive, Richardson,  Texas 75081. (3)

   10.24   Vehicle Lease Service Agreement between the Company and Penske Truck Leasing Co., L.P., dated January
           23, 1996. (3)

   10.25   Master Lease Agreement between the Registrant and Southwestern Bell Telephone Company Inc., dated May
           2, 1996 for facilities located at 105 Auditorium Circle, San Antonio, Texas 78209. (4)
</TABLE>


                                      -38-
<PAGE>   39
<TABLE>
<S>        <C>
   10.26   Third Amendment to Lease between the Registrant and Wells Fargo Bank, NA, dated August 5, 1996 with
           respect to premises at 2150 N. First Street, San Jose, CA 95131. (4)

   10.27   Amended and Restated Loan and Security Agreement between the Registrant and Silicon Valley Bank, dated
           July 3, 1996. (4)

   10.28   Master Lease Agreement between the Registrant and Centennial Plaza, LLC, dated October 4, 1996 for
           facilities located at Centennial Airport Plaza Building, 12200 E. Briarwood Avenue, Suite 199,
           Englewood, Colorado 80112. (5)

   10.29   Master Lease Agreement between the Registrant and Amberjack Ltd., dated December 16, 1996 for
           facilities located at 1515 E. Missouri, Phoenix, AZ 85014. (5)

   11.1    Computation of Pro Forma Net Income  Per Common and Common Equivalent Share (see page 42). (5)

   23.1    Independent Auditor's Consent. (5)

   24.1    Power of Attorney (see page 40). (5)

(b)           Reports on Form 8-K:

              None
</TABLE>

-----------------

(1)   Incorporated by reference to exhibits filed in response to Item 16(a),
      "Exhibits," of the Registrant's Registration Statement on Form S-1 and
      Amendment No. 1, Amendment No. 2 and Amendment No. 3 thereto (File No.
      33-46527), which became effective on June 27, 1995.

(2)   Incorporated by reference to exhibits filed in response to Item 14,
      "Exhibits," of the Registrant's Form 10-K dated January 22, 1996.


(3)   Incorporated by reference to exhibits filed in response to Item 6,
      "Exhibits," of the Registrant's Form 10-Q dated March 14, 1996.

(4)   Incorporated by reference to exhibits filed in response to Item 6,
      "Exhibits," of the Registrant's Form 10-Q dated September 13, 1996.

(5)   Filed herewith.


                                      -39-
<PAGE>   40
                                   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.

                                      BUSINESS RESOURCE GROUP
Date:  January 24, 1997               By:  /s/ Charles J. Winter
                                           ---------------------
                                           Charles J. Winter
                                           President and Chief Executive Officer

                                POWER OF ATTORNEY

      KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Charles J. Winter and P. Steven Melman,
his attorney-in-fact, with the power of substitution, for him in any and all
capacities, to sign any amendments to this Report on Form 10-K, and to file the
same, with exhibits thereto and other documents in connection therewith with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes may do or cause to be
done by virtue hereof.

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

<TABLE>
<CAPTION>

     Signature                                                   Title                            Date
     ---------                                                   -----                            ----
<S>                                            <C>                                        <C>

/s/ Charles J. Winter                           Director,   President,   and   Chief      January 24, 1997
---------------------------                     Executive Officer
(Charles J. Winter)

/s/ Brian D. McNay                              Executive Vice President of Sales         January 24, 1997
---------------------------                     and Director
(Brian D. McNay)

/s/ Jeffrey Tuttle                              Executive Vice President of               January 24, 1997
---------------------------                     Marketing and Director
(Jeffrey Tuttle)

/s/ P. Steven Melman                            Vice President of Finance and Chief       January 24, 1997
---------------------------                     Financial Officer (Principal
(P. Steven Melman)                              Financial and Accounting Officer)


/s/ John W. Peth                                Director                                  January 24, 1997
---------------------------
(John W. Peth)

/s/ Harry S. Robbins                            Director                                  January 24, 1997
---------------------------
(Harry S. Robbins)
</TABLE>


                                      -40-
<PAGE>   41
                             BUSINESS RESOURCE GROUP

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS )

<TABLE>
<CAPTION>
                             ADDITIONS
                             BALANCE AT       CHARGED TO      CHARGED TO                             BALANCE AT
                             BEGINNING        COSTS AND         OTHER                                  END OF
      DESCRIPTION             OF PERIOD        EXPENSES        ACCOUNTS          DEDUCTIONS             PERIOD
      -----------             ---------        --------        --------          ----------             ------
<S>                              <C>             <C>               <C>               <C>                  <C>
      Allowance for
         doubtful accounts:

      Fiscal 1994                50               --               --                   --                 50
      Fiscal 1995                50               --               75(1)                --                125
      Fiscal 1996               125               --               --               (68)(2)                57

      -----------------
</TABLE>

      (1) Purchase business combination.
      (2) Charge off of accounts, net of recoveries.


                                      -41-
<PAGE>   42
                                                                    EXHIBIT 11.1

                             BUSINESS RESOURCE GROUP

                STATEMENT OF COMPUTATION OF NET INCOME PER SHARE
                      (IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                           YEAR ENDED OCTOBER 31,
                                                              -------------------------------------------------
                                                                 1996                1995                 1994
                                                               ------               ------               -----
<S>                                                             <C>                  <C>                 <C>
     FULLY DILUTED

      Net income ...............................               $1,854
                                                               ======
      Pro forma net income .....................                                    $  999               $1,426
                                                                                    ======               ======

      Weighted average common shares
         outstanding............................                4,844                3,662               3,085
      Common equivalent shares:
         Stock options .........................                   42                   --                  58
         Supplemental shares (1) ...............                   --                  172                 263
                                                               ------               ------               -----

      Total common stock and common
         stock equivalents .....................                4,886                3,834               3,406
                                                               ======               ======               =====
      Net income per common share ..............               $  .38
                                                               ======
      Pro forma net income
         per common share ......................                                    $  .26               $ .42
                                                                                    ======               =====
</TABLE>

(1) Represents the approximate number of shares that would have to have been
sold to fund the distribution of undistributed S Corporation earnings. See Note
2 to Financial Statements.