<PAGE>   1
 
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                       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, 1998
 
                                       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)
 
<TABLE>
<S>                                              <C>
                 CALIFORNIA                                       77-0150337
       (STATE OR OTHER JURISDICTION OF               (I.R.S. EMPLOYER IDENTIFICATION NO.)
       INCORPORATION OR ORGANIZATION)
</TABLE>
 
                       2150 NORTH FIRST STREET, SUITE 101
                           SAN JOSE, CALIFORNIA 95131
                                 (408) 325-3200
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
                            ------------------------
 
        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.  YES [X]
 
    The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $3,040,298 as of December 31, 1998, 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%
or 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 5,042,878 shares of Registrant's Common Stock outstanding as of
December 31, 1998.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
    PORTIONS OF THE PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE
HELD ON MARCH 4, 1999 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 within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
and are subject to certain risks and uncertainties that could cause the actual
results to differ materially from those projected. Such forward-looking
statements include, without limitation, statements relating to the Company's
future revenue, gross margins, operating expenses, management's plans and
objectives for the Company's future operations and the sufficiency of financial
resources to support future operations and expenditures. 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
continued strength of sales to Cisco Systems, Inc. (one of the Company's
principal customers), 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 reports filed with the
Securities and Exchange Commission ("SEC") and press releases, copies of which
are available from the Company upon request. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date hereof. The Company undertakes no obligation to publicly release the
results of any revisions to these forward-looking statements which may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
 
     References made in this Annual Report on Form 10-K to "BRG," the "Company"
or the "Registrant" refer to Business Resource Group.
 
                                        2
<PAGE>   3
 
                                     PART I
 
ITEM 1. BUSINESS
 
     Business Resource Group, a California corporation was organized in 1986 and
is a leading provider of workspace services and products to businesses,
primarily located in the Western United States. Between July 1989 and June 25,
1995, the Company was an S Corporation pursuant to the Internal Revenue Code of
1986, as amended. Effective June 25, 1995, in conjunction with the Company's
initial public offering of its common stock, the Company terminated its S
Corporation status and became a C Corporation.
 
     The Company markets a full range of new office workstation products,
refurbished office systems furniture and related services such as facilities
management outsourcing and consulting services, computer-aided facilities
management, computerized space planning and design, project management, move
management, installation, product specification and order management. The
Company believes that its broad scope of services allows it to offer a
customer-oriented, single source solution that provides for effective management
of workspace requirements for growing and changing businesses, while minimizing
the involvement of their in-house staff through outsourcing.
 
INDUSTRY BACKGROUND
 
     According to The Business and Institutional Furniture Manufacturer's
Association ("BIFMA"), the United States office furniture trade association,
estimated office furniture manufacturers' shipments of product in the United
States in 1998 were approximately $12.0 billion. The Company believes that
on-going changes in corporate organizational structures, technology and work
processes are driving growth in office furniture products and services. These
changes are driven by several significant factors including continued corporate
reengineering, restructuring and reorganizing, corporate relocations, new office
technology and concerns about ergonomic standards. Management also believes
recent market trends towards outsourcing in order to focus on core business
strengths have influenced the growth of the office furniture manufacturing and
service industry.
 
     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 led 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 increased the importance of product functionality and layout, which have
become increasingly complex due to the need to integrate rapidly changing office
technology requirements. The Company believes that such trends have led to the
demand for a proactive workspace services and products solution.
 
CUSTOMER ORIENTED INTEGRATED SOLUTION
 
     The Company 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 and as a single source provider of a full
range of integrated workspace solutions. The Company has grown due to
management's recognition and response to customer requirements for a single
source solution for facilities needs.
 
     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 approach incorporates a consultative selling approach in which the
Company's sales representatives listen to the customer's needs. A team of BRG
professionals chosen for each account then meets with the customer to build a
partnership and reach consensus on the solution which best suits the customers
needs. The Company believes it is able to fashion an integrated solution because
of the wide array of services and products it can provide. The Company believes
it is able to offer customers a much broader range of value-added services and
product choices than its major competitors.
 
                                        3
<PAGE>   4
 
The Company believes the benefits to customers of the Company's integrated
solution approach include:
 
     - Reduced overhead and more efficient coordination by having a single point
       of contact;
 
     - More favorable 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.
 
SERVICES AND PRODUCTS
 
     The Company provides integrated workspace solutions for customers from the
suite of services and products its offers:
 
  Workspace Product-Related Services
 
     A substantial portion of the Company's services are initiated prior to
delivery of workspace products, including overall project management,
computerized space planning and design, product specification and order
management. The Company believes that the superior quality of its services
differentiates its services from its competitors' and contributes to the
Company's ability to win initial orders. The Company believes that its
pre-installation services allow a close and efficient partnership with
customers, moving them from needs identification and analysis to the development
and selection of the solutions which best fit their needs. Once the customer and
the Company have identified the workspace products best suited to the customer's
needs, the Company provides additional services to implement set-up and
maintenance of these products in the customer's facility and provides
coordination and management services both during and after the move.
 
  Workspace Management Services
 
     The Company, through its Workspace Management Services group, provides the
following service offerings designed to help companies manage their facilities'
resources more effectively without adding headcount:
 
     Facilities Strategic 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, lease reviews and facilities
alternatives.
 
     Facilities Planning 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.
 
     Facilities Automation Services. The Company, on a contract, outsourced or
data center basis, provides efficient access to facilities information
throughout organizations by automating and standardizing processes and data. The
Company's internet and desktop based solutions are designed to incorporate
cutting-edge technology and enable centralized data control, standardization,
reporting and analysis throughout all areas of facilities management, such as
physical space, people, properties, leases, assets, maintenance,
telecommunications and utilities.
 
     Design Management. The Company manages a design team on behalf of its
customers, which it believes ensures that the customer's design requirements are
met while staying within time frame commitments and budget constraints.
 
     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.
 
                                        4
<PAGE>   5
 
  Workspace Products
 
     The Company offers a broad range of office furniture products and
accessories that supports the Company's strategy of providing a single source
for quality workspace management. The Company's five basic product categories
are new office furniture systems; seating; storage and filing cabinets; desks
and casegoods; and refurbished office furniture systems.
 
SALES AND MARKETING
 
     The Company markets its products and services through a direct sales force
consisting of approximately 40 salespeople, operating out of the Company's
offices in San Jose, San Francisco and San Diego, California; Phoenix, Arizona;
and Dallas, Texas.
 
CUSTOMERS
 
     The Company's client base includes companies in 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 $1.0 billion in sales, to emerging companies, which are often thinly
staffed and which the Company believes are, therefore, receptive to the
Company's comprehensive solution strategy.
 
     The Company's largest customer is Cisco Systems which accounted for
approximately 44%, 30% and 37% of net revenues during fiscal years 1998, 1997
and 1996 respectively. No other single customer accounted for more than 10% of
revenues in fiscal 1998, 1997 or 1996.
 
RAW MATERIALS AND SUPPLIERS
 
     There was no material change during fiscal 1998 in the source and
availability of workspace products. None of the products currently offered by
the Company are obtained on a sole-source basis from any vendor, and materials
are considered to be widely available. The Company does not anticipate that the
availability of materials will be a significant factor in the Company's
business. During the fiscal year ended October 31, 1998, the Company purchased
approximately 43% of its total workspace products purchases from one supplier.
 
COMPETITION
 
     The office workspace products marketplace is highly competitive and
fragmented with a significant number of companies providing products and
services. In the United States there are five primary manufacturers of office
furniture products: Haworth, Inc., Herman Miller, Inc., HON Industries, Inc.,
Knoll, Inc. and Steelcase, Inc. The Company currently represents HON Industries,
Inc. and Knoll, Inc., in addition to other significant furniture manufacturers
such as Teknion, Corp. and Kimball International, Inc. All of these
manufacturers typically market their products through independent distribution
companies who are responsible for providing on-going service to their customers.
Typically these independent distribution companies are small, privately-held
organizations that vary in size, product offering and breadth of service
offering.
 
     The Company believes that while product design, quality and price play a
part in a customer's purchasing decision, the primary purchasing decision is
based upon the independent distributors overall service capabilities.
Independent distributors compete on the basis of: (i) project management
capabilities, (ii) strategic facilities consulting capabilities, (iii)
innovative use of technology tools, (iv) on-time delivery and installation and
(v) price. The Company believes its comprehensive range of products and
services, ability to utilize trained company employees in the delivery of its
full range of comprehensive services, use of current technology to provide
higher level solutions and overall financial strength, provides a competitive
advantage. 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. There can be no
assurance that other manufacturers and independent distributors will not price
their products and services, or offer other terms, to
 
                                        5
<PAGE>   6
 
be more competitive with the Company's products and services, or that such
actions, if taken, would not have a material adverse affect on the Company or
its results of operations.
 
EMPLOYEES
 
     As of October 31, 1998, The Company had approximately 300 full-time
employees. None of the Company's employees are represented by a collective
bargaining agreement. From time to time, installation 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. The Company believes its relationship with its
employees is good.
 
ITEM 2. PROPERTIES
 
     The Company 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 facilities serve as the Company's principal offices and also function
as a working showroom for products offered by the Company. The Company also
leases sales offices, which function as working showrooms, in San Francisco,
California; Phoenix, Arizona and Dallas, Texas. In San Francisco, the sales
office leases approximately 6,800 square feet under an operating lease which
runs through December 2003; in Phoenix, the sales office leases approximately
4,200 square feet of space under an operating lease which runs through December
2003; and in Dallas, the sales office leases approximately 11,900 square feet of
space under an operating lease which runs through March 2002. The Company
maintains a distribution center, in Dallas, Texas under an operating lease for
approximately 21,000 square feet of space running through October 2002. The
Company also leases approximately 25,000 square feet of office and warehouse
space in San Diego, California to accommodate its subsidiary under an operating
lease which expires in October 2000. The Company leases approximately 3,400
square feet of office space in San Antonio, Texas under an operating lease with
a term running through November 2001. The Company has entered into a sublet
agreement to lease the existing San Antonio facility to a company at the same
lease rate and for the same term as the Company has in its operating lease. The
Company believes that its existing facilities will generally be sufficient for
its needs for the foreseeable future.
 
ITEM 3. LEGAL PROCEEDINGS
 
     The Company is not a party to any lawsuit or proceeding which, in the
opinion of management, is likely to have a material adverse affect on the
Company. The Company may from time to time become a party to various legal
proceedings arising in the normal course of its business.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     Not applicable.
 
                                        6
<PAGE>   7
 
                                    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>
                                                              HIGH    LOW
                                                              ----    ---
<S>                                                           <C>     <C>
FISCAL 1998
  Fourth Quarter ended October 31, 1998.....................  3 1/4   1 1/8
  Third Quarter ended July 31, 1998.........................  3 3/8   2 3/16
  Second Quarter ended April 30, 1998.......................  3 3/4   3 1/16
  First Quarter ended January 31, 1998......................  3 3/4    3
</TABLE>
 
<TABLE>
<CAPTION>
                                                              HIGH    LOW
                                                              ----    ---
<S>                                                           <C>     <C>
FISCAL 1997
  Fourth Quarter ended October 31, 1997.....................  4 3/4   3 5/8
  Third Quarter ended July 31, 1997.........................  5 1/8   3 3/8
  Second Quarter ended April 30, 1997.......................  5 1/2   4 11/16
  First Quarter ended January 31, 1997......................  5 1/2   3 5/8
</TABLE>
 
     The Company estimates it had approximately 461 shareholders as of December
31, 1998, 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.
 
                                        7
<PAGE>   8
 
ITEM 6. SELECTED FINANCIAL DATA
 
                             SUMMARY FINANCIAL DATA
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                         YEAR ENDED OCTOBER 31,
                                           ---------------------------------------------------
                                            1998       1997       1996       1995       1994
                                           -------    -------    -------    -------    -------
<S>                                        <C>        <C>        <C>        <C>        <C>
STATEMENTS OF INCOME DATA:
Net revenues:
  Workspace products...................    $76,373    $58,303    $67,834    $33,940    $32,197
  Workspace services...................     17,132     14,127     10,155      6,119      4,258
  Vendor commissions...................         60        271        291        569        657
                                           -------    -------    -------    -------    -------
          Total net revenues...........     93,565     72,701     78,280     40,628     37,112
                                           -------    -------    -------    -------    -------
Cost of net revenues:
  Workspace products...................     60,623     47,100     55,051     26,605     25,044
  Workspace services...................     12,611     10,330      7,320      4,179      3,131
                                           -------    -------    -------    -------    -------
          Total cost of net revenues...     73,234     57,430     62,371     30,784     28,175
                                           -------    -------    -------    -------    -------
Gross profit...........................     20,331     15,271     15,909      9,844      8,937
Selling, general and administrative
  expenses.............................     17,498     16,622     12,870      8,143      6,425
                                           -------    -------    -------    -------    -------
Income/(loss) from operations..........      2,833     (1,351)     3,039      1,701      2,512
Other income/(expense).................       (264)        66        124          7        (77)
                                           -------    -------    -------    -------    -------
Income/(loss) before income taxes......      2,569     (1,285)     3,163      1,708      2,435
Income taxes...........................      1,066       (523)     1,309        122         70
                                           -------    -------    -------    -------    -------
Net income/(loss)......................    $ 1,503    $  (762)   $ 1,854    $ 1,586    $ 2,365
                                           =======    =======    =======    =======    =======
Net income/(loss) per share
  Basic................................    $  0.30    $ (0.16)   $  0.38
                                           =======    =======    =======
  Diluted..............................    $  0.30    $ (0.16)   $  0.38
                                           =======    =======    =======
Pro forma(1):
  Historical income before income
     taxes.............................                                       1,708
  Pro forma income taxes...............                                         709
                                                                            -------
Pro forma net income...................                                     $   999
                                                                            =======
Pro forma net income per share(1):
  Basic................................                                     $  0.26
                                                                            =======
  Diluted..............................                                     $  0.26
                                                                            =======
</TABLE>
 
---------------
(1) Pro Forma Net Income and Net Income Per Basic and Diluted 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. Therefore, no provision
    for federal income taxes has been included in the summary financial data 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% 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.
 
                                        8
<PAGE>   9
 
     The pro forma information presented with the summary financial data reflect
a provision for income taxes at an effective rate of 41% for fiscal 1995. 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 for all of fiscal 1995.
 
<TABLE>
<CAPTION>
                                                               OCTOBER 31,
                                            --------------------------------------------------
                                             1998       1997       1996       1995       1994
                                            -------    -------    -------    -------    ------
                                                              (IN THOUSANDS)
<S>                                         <C>        <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Working capital...........................  $ 9,075    $ 9,279    $10,063    $ 9,470    $2,784
Total assets..............................   27,978     20,760     22,560     16,053     7,640
Long-term obligations.....................      733         --         --        120       123
Shareholders' equity......................   14,396     12,452     13,002     11,020     3,296
</TABLE>
 
                                        9
<PAGE>   10
 
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
 
     Most of the Company's net revenues are derived from billings for workspace
products, including new office furniture systems, seating, storage and filing
cabinets, desks and casegoods, and refurbished office furniture systems. The
Company's experience is that its success in generating these revenues is
dependent upon providing a full range of related services
 
     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 approach incorporates a consultative selling approach in which the
Company's sales representatives listen to the customer's needs. A team of BRG
professionals chosen for each account then meets with the customer to build a
partnership and reach consensus on the solution which best suits the customers
needs. The Company believes it is able to fashion an integrated solution because
of the wide array of services and products it can provide. The Company believes
it is able to offer customers a much broader range of value-added services and
product choices than its major competitors.
 
RESULTS OF OPERATIONS
 
  Net Revenues
 
     Net revenues increased $20.9 million, or 29%, to $93.6 million in fiscal
1998 from $72.7 million in fiscal 1997. The increase in net revenues was
attributable to increased revenues of $18.6 million from Cisco Systems and $2.3
million from other customers. Fiscal 1998 product revenues of $76.4 million
increased $18.1 million, or 31%, over fiscal 1997 product revenues of $58.3
million, primarily due to the increased Cisco Systems business. Services
revenues in fiscal 1998 were $17.1 million, an increase of $3.0 million, or 21%,
as compared to services revenues of $14.1 million in fiscal 1997. The increase
in services revenues was attributable to increased product related services as a
result of higher product sales, in addition to increased services revenues from
facilities planning and automation services.
 
     Net revenues decreased 7% to $72.7 million in fiscal 1997 from $78.3
million in fiscal 1996. The decrease was attributable to a decrease of $7.3
million in revenues from Cisco Systems. Fiscal 1997 product revenues of $58.3
million decreased $9.5 million, or 14%, from fiscal 1996 product revenues of
$67.8 million, primarily due to the decrease in revenues from Cisco Systems.
Services revenues in fiscal 1997 were $14.1 million, an increase of $3.9
million, or 38%, as compared to services revenues of $10.2 million in fiscal
1997. The increase in services revenues was attributable to both product related
services ($2.3 million) and facilities planning and automation services ($1.6
million).
 
  Gross Profit
 
     Gross profit as a percentage of net revenues increased to 21.7% in fiscal
1998 from 21.0% in fiscal 1997. The improved overall gross profit is the result
of new product margins improving from 19.6% in fiscal 1997 to 19.9% in fiscal
1998 and a change in sales mix with the introduction of refurbished products
which generally sell at higher gross margins, which were partially offset by a
slight decline in services gross margins during the year.
 
     Gross profit as a percentage of net revenues increased to 21.0% in fiscal
1997 from 20.3% in fiscal 1996. This increase was mainly due to a slight
increase in product margins, a shift in revenue mix to higher margin service
revenue, which were partially offset by a slight decrease in service margins.
 
                                       10
<PAGE>   11
 
  Selling, General and Administrative Expenses
 
     Selling, general and administrative expenses for fiscal 1998 were $17.5
million, an increase of approximately $900,000 over the $16.6 million reported
in fiscal 1997. The increase in selling, general and administrative expense was
primarily attributable to incremental expenses as a result of the acquisition of
OFN, Inc. in May 1998. As a percentage of revenue, selling, general and
administrative expenses were 18.7% of revenues in fiscal 1998, as compared to
22.9% in fiscal 1997.
 
     Selling, general and administrative expenses increased 29% to $16.6 million
in fiscal 1997 from $12.9 million in fiscal 1996, while increasing as a
percentage of net revenues to 22.9% in fiscal 1997 from 16.4% in fiscal 1996.
The increase in selling, general and administrative expenses was primarily the
result of the steps taken to realign operations in Texas, Arizona, and San Jose,
California.
 
  Other Income (expense) -- net
 
     Other income (expense) for fiscal 1998 consisted of interest expense of
$319,000 as compared to interest income of $66,000 in fiscal 1997. The increase
in interest expense is the result of increased use of the Company's bank line of
credit as a result of the acquisition of OFN, Inc. and increased in-transit
inventories during the year. The gain on sale of assets was primarily the result
of the sale of certain assets from the Company's former San Antonio operations.
 
     Interest income, net of interest and other expense totaled $66,000 for the
twelve months ended October 31, 1997 versus $124,000 for the same period of
fiscal 1996. The decrease in net interest income was due to lower average cash
balances during the twelve month period.
 
  Income Taxes
 
     Income tax expense, as percentage of pre-tax income, was 41.5% for the year
ended October 31, 1998, compared to a income tax benefit of 40.7% for the year
ended October 31, 1997.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Working capital at October 31, 1998 was $9.1 million, a decrease from the
working capital of $9.3 million reported at October 31, 1997. The current ratio
of 1.7 at October 31, 1998 decreased from the current ratio of 2.1 at October
31, 1997. During fiscal 1998 net cash used by operating activities was $313,000,
an increased use of cash from the $476,000 in net cash provided by operating
activities in fiscal 1997. Accounts receivable at October 31, 1998 was $10.7
million, a decrease of $3.1 million from accounts receivable of $13.8 million
reported at October 31, 1997. The decreased accounts receivable is primarily a
result of increased accounts receivable collection efforts. Inventories at
October 31, 1998 were $8.3 million, an increase of $6.9 million over the $1.4
million in inventories reported at October 31, 1997. The increased inventories
were the result of an increase in in-transit inventories at October 31, 1998 by
approximately $6.2 million, representing payments made to vendors on product
that is either in-transit to customers or awaiting installation at the
customer's facility. In addition, inventories increased as a result of
incremental inventories of approximately $700,000 in refurbished product
associated with OFN, Inc. Other assets at October 31, 1998 were $3.1 million, an
increase of $2.2 million from the $900,000 reported at October 31, 1997. The
increase in other assets was primarily due to goodwill acquired with the
acquisition of OFN, Inc. Accounts payable at October 31, 1998 were $3.4 million,
a decrease of approximately $600,000 from accounts payable of $4.0 million
reported at October 31, 1997. Accrued liabilities at October 31, 1998 were $5.1
million, an increase of $900,000 from accrued liabilities of $4.2 million at
October 31, 1997. The increase in accrued liabilities is primarily attributable
to increased fiscal 1998 management incentive plan accruals and year end fringe
benefit accruals.
 
     During fiscal 1998, the Company invested approximately $1.6 million in
property and equipment which primarily represented investments in management
information systems. At October 31, 1998 the Company had an outstanding capital
expenditure commitment of approximately $350,000 in connection with the
implementation of its new SAP management information system. Capital
expenditures for fiscal 1999, which
 
                                       11
<PAGE>   12
 
will consist primarily of investments in management information systems and
showroom furniture replacements, are expected to be in the range of $1.0 million
to $1.5 million.
 
     The Company has a $15.0 million credit facility with a bank which expires
in August 1999, with an option on an additional $1.0 million term loan. The
Company maintains an irrevocable stand-by letter of credit in the amount of $3.0
million against this facility. At October 31, 1998, the Company had bank
borrowings of $3.8 million under such credit facility.
 
     The Company believes its 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
for the foreseeable future.
 
YEAR 2000
 
     The year 2000 issue is primarily the result of computer programs using a
two-digit format, as opposed to four digits, to indicate the year. Such computer
systems will be unable to interpret dates beyond the year 1999, which could
cause a system failure or other computer errors, leading to a disruption in the
operation of such systems. The Company's overall goal is to be prepared for the
year 2000, meaning that critical systems, devices, applications or business
relationships have been evaluated and are expected to be suitable for continued
use into and beyond year 2000, or contingency plans are in place. The Company
began to assess its business computer systems, such as general ledger, order
entry, inventory control, distribution and customer billing, to address the need
to improve access to information and the year 2000 issue in 1996. In May 1998,
after an extensive review of systems the Company selected an enterprise resource
planning system from SAP America, Inc. ("SAP"), a system capable of
accommodating the year 2000. This new enterprise resource planning system is
expected to be in production during the first half of fiscal 1999. The Company
is reviewing the readiness of third parties which provide goods or services to
the Company to determine whether a year 2000 related event will impede the
ability of such suppliers to continue to provide such goods and services as the
year 2000 is reached.
 
     Costs: The Company does not expect the costs associated with its year 2000
efforts to be material. The Company estimates that the total cost of replacing
its information systems and achieving year 2000 readiness for its internal
systems and equipment will range from $1.5 to $2.0 million, of which $900,000
has been incurred by the end of fiscal 1998. Based on its current estimates and
information currently available, the Company does not anticipate that the costs
associated with this project will have a material adverse affect on the
Company's consolidated financial position, results of operations or cash flows
in future periods. The Company's aggregate cost estimate does not include time
and costs that may be incurred by the Company as a result of the failure of any
third parties, including suppliers, to be prepared for the year 2000 or costs to
implement any contingency plans.
 
     Risks/Contingency Plans: Based on assessment efforts to date, the Company
does not believe that the year 2000 issue will have a material adverse effect on
its financial condition or results of operations. The Company believes that the
distribution and service nature of the Company's operations and its large
supplier base should mitigate any adverse impact. The Company's beliefs and
expectations, however, are based on certain assumptions and expectations that
ultimately may prove to be inaccurate. Because the Company has not begun systems
integration testing with respect to its SAP implementation, it accordingly has
not fully assessed the risks from potential year 2000 failures and therefore,
has not yet developed year 2000 contingency plans. The Company will develop such
plans if the results of systems implementation testing identify a business
function at risk. As a normal course of business, potential sources of risk
include the inability of principal suppliers to be year 2000 ready, which could
result in delays in product deliveries from such suppliers. The Company's
contingency plans will include, among other things, manual workarounds,
temporary replacement products and extra staffing as required to complete
deliveries.
 
     The preceding year 2000 discussion contains various forward-looking
statements which represent the Company's beliefs or expectations regarding
future events. When used in the year 2000 discussion, the words "believes,"
"expects," "estimates" and similar expressions are intended to identify
forward-looking statements. Forward-looking statements include, but are not
limited to, the Company's expectations as to when it
 
                                       12
<PAGE>   13
 
will complete the implementation and testing phases of its year 2000 program as
well as its year 2000 contingency plans; its estimated cost of achieving year
2000 readiness; and the Company's belief that its internal systems and equipment
will be year 2000 compliant in a timely manner. All forward-looking statements
involve a number of risks and uncertainties that could cause the actual results
to differ materially from the projected results. Factors that may cause these
differences include, but are not limited to, the availability of qualified
personnel and other information technology resources; the ability to identify
and remediate all date sensitive lines of computer code or to replace embedded
computer chips in affected systems or equipment; and the actions of governmental
agencies or other third parties with respect to year 2000 problems.
 
BUSINESS ENVIRONMENT AND RISK FACTORS
 
     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 from period to period depending on such factors
as the timing of 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 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.
 
     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 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.
 
     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 strong in recent
years, there can be no assurance that it will continue to be strong or that it
will not decline in the future.
 
                                       13
<PAGE>   14
 
     The Company has made acquisitions during 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.
 
ITEM 7.a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
     The Company is exposed to interest rate risk primarily through its
borrowing activities. The Company has not used derivative financial instruments
to hedge such risks. There is inherent roll-over risk for borrowings as they
mature and are renewed at current market rates. The extent of this risk is not
quantifiable or predictable because of the variability of future interest rates
and business financing requirements. If market rates were to increase
immediately by 10 percent from levels at October 31, 1998, the fair value of the
Company's borrowings would not be materially affected as borrowings are
primarily subject to variable interest rates.
 
                                       14
<PAGE>   15
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Independent Auditors' Report................................   16
Consolidated Financial Statements:
  Consolidated Balance Sheets at October 31, 1998 and
     1997...................................................   17
  Consolidated Statements of Operations for the Years Ended
     October 31, 1998, 1997 and 1996........................   18
  Consolidated Statements of Shareholders' Equity for the
     Years Ended October 31, 1998, 1997 and 1996............   19
  Consolidated Statements of Cash Flows for the Years Ended
     October 31, 1998, 1997 and 1996........................   20
  Notes to Consolidated Financial Statements for the Years
     Ended October 31, 1998, 1997 and 1996..................   21
</TABLE>
 
                                       15
<PAGE>   16
 
                          INDEPENDENT AUDITORS' REPORT
 
To the Board of Directors and Shareholders of Business Resource Group:
 
     We have audited the accompanying consolidated balance sheets of Business
Resource Group and subsidiary (collectively the "Company") as of October 31,
1998 and 1997, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended October 31, 1998. Our audits also included the financial statement
schedule listed at Item 14(a)(2). These consolidated financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
 
     In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at October 31, 1998
and 1997, and the results of its operations and its cash flows for each of the
three years in the period ended October 31, 1998 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
 
DELOITTE & TOUCHE LLP
San Jose, California
December 8, 1998
 
                                       16
<PAGE>   17
 
                     BUSINESS RESOURCE GROUP AND SUBSIDIARY
 
                          CONSOLIDATED BALANCE SHEETS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                 OCTOBER 31,
                                                              ------------------
                                                               1998       1997
                                                              -------    -------
<S>                                                           <C>        <C>
Current assets:
  Cash and equivalents......................................  $   412    $   274
  Accounts receivable, less allowance for doubtful accounts
     of $400 in 1998 and $90 in 1997........................   10,662     13,764
  Inventory.................................................    8,279      1,398
  Prepaids and other current assets.........................    2,411      2,076
                                                              -------    -------
          Total current assets..............................   21,764     17,512
Property and equipment -- net...............................    3,107      2,346
Other assets................................................    3,107        902
                                                              -------    -------
                                                              $27,978    $20,760
                                                              =======    =======
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
  Line of credit............................................  $ 3,858    $    --
  Accounts payable..........................................    3,369      3,997
  Accrued liabilities.......................................    4,789      4,236
  Income taxes payable......................................      337         --
  Current portion of long-term debt.........................      336         --
                                                              -------    -------
          Total current liabilities.........................   12,689      8,233
Long-term debt..............................................      733         --
Deferred income tax liability...............................      160         75
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:
     5,023,778 shares in 1998 and 4,913,712 shares in
      1997..................................................       50         49
  Additional paid-in capital................................   11,337     10,897
  Retained earnings.........................................    3,009      1,506
                                                              -------    -------
          Total shareholders' equity........................   14,396     12,452
                                                              -------    -------
                                                              $27,978    $20,760
                                                              =======    =======
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       17
<PAGE>   18
 
                     BUSINESS RESOURCE GROUP AND SUBSIDIARY
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED OCTOBER 31,
                                                              -----------------------------
                                                               1998       1997       1996
                                                              -------    -------    -------
<S>                                                           <C>        <C>        <C>
Net revenues:
  Workspace products........................................  $76,373    $58,303    $67,834
  Workspace services........................................   17,132     14,127     10,155
  Vendor commissions........................................       60        271        291
                                                              -------    -------    -------
          Total net revenues................................   93,565     72,701     78,280
                                                              -------    -------    -------
Cost of net revenues:
  Workspace products........................................   60,623     47,100     55,051
  Workspace services........................................   12,611     10,330      7,320
                                                              -------    -------    -------
          Total cost of net revenues........................   73,234     57,430     62,371
                                                              -------    -------    -------
Gross profit................................................   20,331     15,271     15,909
Selling, general and administrative expenses................   17,498     16,622     12,870
                                                              -------    -------    -------
Income/(loss) from operations...............................    2,833     (1,351)     3,039
Other income/(expense):
  Interest income/(expense).................................     (319)        66        124
  Gain on sale of assets....................................       55         --         --
                                                              -------    -------    -------
          Total other income/(expense)......................     (264)        66        124
                                                              -------    -------    -------
Income/(loss) before income taxes...........................    2,569     (1,285)     3,163
Income taxes................................................    1,066       (523)     1,309
                                                              -------    -------    -------
Net income/(loss)...........................................  $ 1,503    $  (762)   $ 1,854
                                                              =======    =======    =======
Net income/(loss) per share
  Basic.....................................................  $  0.30    $ (0.16)   $  0.38
                                                              =======    =======    =======
  Diluted...................................................  $  0.30    $ (0.16)   $  0.38
                                                              =======    =======    =======
Shares used in computation
  Basic.....................................................    4,963      4,902      4,844
                                                              =======    =======    =======
  Diluted...................................................    4,965      4,902      4,886
                                                              =======    =======    =======
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       18
<PAGE>   19
 
                     BUSINESS RESOURCE GROUP AND SUBSIDIARY
 
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                              COMMON STOCK        ADDITIONAL
                                           -------------------     PAID-IN      RETAINED
                                            SHARES      AMOUNT     CAPITAL      EARNINGS     TOTAL
                                           ---------    ------    ----------    --------    -------
<S>                                        <C>          <C>       <C>           <C>         <C>
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
  Employee stock purchase program......       54,848      --           212           --         212
  Net loss.............................           --      --            --         (762)       (762)
                                           ---------     ---       -------       ------     -------
Balances, October 31, 1997.............    4,913,712      49        10,897        1,506      12,452
  Employee stock purchase program......       10,066      --            24           --          24
  Issuance of warrants.................           --      --           167           --         167
  Issuance of common stock in
     connection with acquisition.......      100,000       1           249           --         250
  Net income...........................           --      --            --        1,503       1,503
                                           ---------     ---       -------       ------     -------
Balances, October 31, 1998.............    5,023,778     $50       $11,337       $3,009     $14,396
                                           =========     ===       =======       ======     =======
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       19
<PAGE>   20
 
                     BUSINESS RESOURCE GROUP AND SUBSIDIARY
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED OCTOBER 31,
                                                              -----------------------------
                                                               1998       1997       1996
                                                              -------    -------    -------
<S>                                                           <C>        <C>        <C>
Cash flows from operating activities:
  Net income (loss).........................................  $ 1,503    $  (762)   $ 1,854
Adjustments to reconcile to net cash provided (used) by
  operating activities:
     Depreciation and amortization..........................    1,060        766        455
     Gain on sale of property and equipment.................      (55)        --         --
     Warrants issued for services...........................      167         --         --
     Deferred income taxes..................................     (211)      (292)       (15)
     Changes in operating assets and liabilities
       (net of effect of acquisitions):
          Accounts receivable -- net........................    3,554      2,358     (8,533)
          Inventory.........................................   (6,391)      (424)       (52)
          Prepaids and other current assets.................      (12)      (449)      (318)
          Accounts payable..................................     (704)    (1,938)     3,583
          Accrued liabilities...............................      776      1,216        958
                                                              -------    -------    -------
          Net cash provided (used) by operating
            activities......................................     (313)       475     (2,068)
                                                              -------    -------    -------
Cash flows from investing activities:
  Purchase of property and equipment........................   (1,562)      (928)    (1,549)
  Proceeds from sales of property and equipment.............       55         --         --
  Cash paid for acquisitions................................   (1,926)        --       (300)
  Other assets..............................................        2        (20)      (101)
                                                              -------    -------    -------
          Net cash used by investing activities.............   (3,431)      (948)    (1,950)
                                                              -------    -------    -------
Cash flows from financing activities:
  Bank overdraft increase (decrease)........................      819       (476)      (175)
  Repayment of notes payable and capital lease
     obligations............................................       --         --       (250)
  Issuance of common stock..................................       24        212        128
  Borrowings on line of credit -- net.......................    3,039         --         --
                                                              -------    -------    -------
          Net cash provided (used) by financing
            activities......................................    3,882       (264)      (297)
                                                              -------    -------    -------
Increase (decrease) in cash and equivalents.................      138       (737)    (4,315)
Cash and equivalents balances:
  Beginning of period.......................................      274      1,011      5,326
                                                              -------    -------    -------
  End of period.............................................  $   412    $   274    $ 1,011
                                                              =======    =======    =======
Supplemental disclosures of cash flow information --
  cash paid during the period for:
     Interest...............................................  $   319    $    --    $    39
                                                              =======    =======    =======
     Income taxes...........................................  $   200    $   470    $ 1,250
                                                              =======    =======    =======
Noncash investing and financing transactions:
  Sale of distribution rights for note receivable...........  $    --    $    --    $   177
                                                              =======    =======    =======
Acquisitions:
  Tangible assets acquired..................................  $ 1,030    $    --    $   333
  Intangible assets acquired................................    2,407         --        255
  Liabilities assumed.......................................     (192)        --       (288)
  Notes payable issued......................................   (1,069)        --         --
  Common stock issued.......................................     (250)        --         --
                                                              -------    -------    -------
          Cash paid for acquisitions........................  $ 1,926    $    --    $   300
                                                              =======    =======    =======
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       20
<PAGE>   21
 
                     BUSINESS RESOURCE GROUP AND SUBSIDIARY
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
 
 1. SIGNIFICANT ACCOUNTING POLICIES
 
     NATURE OF BUSINESS -- Business Resource Group markets a full range of new
office workstation products, refurbished office systems furniture and related
services such as facilities management outsourcing and consulting services,
computer-aided facilities management, computerized space planning and design,
project management, move management, installation, product specification and
order management.
 
     PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of Business Resource Group and its wholly-owned subsidiary
(collectively the "Company"). Intercompany transactions have been eliminated in
consolidation.
 
     ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses for the periods presented. Such management estimates include the
allowance for doubtful accounts, inventory reserves and certain accruals. Actual
results could differ from those estimates.
 
     CONCENTRATIONS OF CREDIT RISK -- Financial instruments which potentially
subject the Company to concentration of credit risk principally consist of cash,
cash equivalents and trade accounts receivable. The Company places its cash and
cash equivalents with what it believes are high credit quality financial
institutions. The Company sells its products and services primarily to companies
in California, Arizona and Texas. The Company maintains reserves for potential
credit losses.
 
     FAIR VALUE OF FINANCIAL INSTRUMENTS -- The Company believes that the
carrying amount for cash and cash equivalents, accounts receivable, accounts
payable, and long-term debt approximated fair values at the date of the
financial statements.
 
     CASH AND CASH EQUIVALENTS -- are highly liquid investments purchased with a
maturity of three months or less.
 
     INVENTORIES -- are valued at the lower of cost or market and consist
primarily of in transit products shipped directly to customers by suppliers.
 
     PROPERTY AND EQUIPMENT -- are stated at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of three to seven
years for equipment. Leasehold improvements are amortized over the shorter of
their estimated useful lives or the term of the lease.
 
     OTHER ASSETS -- Goodwill represents the excess of the purchase price over
the estimated fair value of net assets of acquired businesses. Goodwill is being
amortized on a straight-line basis over periods not exceeding twenty years.
Goodwill amortization amounted to $215,000, $167,000, and $187,000 in fiscal
years 1998, 1997 and 1996, respectively. The Company evaluates its long-lived
assets for impairment whenever events or changes in circumstances indicate that
the carrying value of an asset may not be recoverable. Impairments are
recognized when the net book value of assets exceeds the future undiscounted
cash flows attributable to such assets.
 
     REVENUE RECOGNITION -- Revenues from workspace product sales and vendor
commissions are recognized at the start of installation of products at the
customers facility. Service revenues are recognized upon customer acceptance of
the project.
 
     STOCK BASED COMPENSATION -- The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board No. 25, Accounting for Stock Issued to Employees.
 
                                       21
<PAGE>   22
                     BUSINESS RESOURCE GROUP AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
 
     INCOME TAXES -- Deferred income taxes are provided for temporary
differences between financial statements and income tax reporting.
 
     EARNINGS PER SHARE (EPS) -- Earnings per share are computed as basic EPS
using the average number of common shares outstanding and diluted EPS using the
average number of common and diluted common equivalent shares outstanding, in
accordance with SFAS 128 (see Note 13).
 
     RECENTLY ISSUED ACCOUNTING STANDARDS -- In June 1997, the Financial
Accounting Standards Board ("FASB") adopted Statements of Financial Accounting
Standards ("SFAS") 130, (Reporting Comprehensive Income), which requires that an
enterprise report, by major components and as a single total, the change in its
net assets during the period from non-owner sources; and SFAS 131, (Disclosures
about Segments of an Enterprise and Related Information), which establishes
annual and interim reporting standards for an enterprise's operating segments
and related disclosures about its products, services, geographic areas and major
customers. Adoption of these statements will not impact the Company's financial
position, results of operations or cash flows, and any effect will be limited to
the form and content of its disclosures. Both statements are effective for the
fiscal year beginning November 1, 1998.
 
     In June 1998, Statement of Financial Accounting Standards No. 133 (SFAS
133), "Accounting for Derivative Instruments and Hedging Activities," was issued
which defines derivatives, requires all derivatives be carried at fair value,
and provides for hedging accounting when certain conditions are met. This
statement is effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. Although the Company has not fully assessed the implications of
this new statement, the Company does not believe adoption of this statement will
have a material impact on the Company's financial statements.
 
 2. INVENTORIES (in thousands)
 
<TABLE>
<CAPTION>
                                                              1998      1997
                                                             ------    ------
<S>                                                          <C>       <C>
New furniture in-transit...................................  $7,517    $1,398
Refurbished................................................     762        --
                                                             ------    ------
Total inventories..........................................  $8,279    $1,398
                                                             ======    ======
</TABLE>
 
 3. PROPERTY AND EQUIPMENT (in thousands)
 
<TABLE>
<CAPTION>
                                                            1998       1997
                                                           -------    -------
<S>                                                        <C>        <C>
Computer equipment.......................................  $ 3,581    $ 2,251
Office furniture and equipment...........................    1,412      1,177
Leasehold improvements...................................      146        146
                                                           -------    -------
                                                             5,139      3,574
Accumulated depreciation and amortization................   (2,032)    (1,228)
                                                           -------    -------
          Total property and equipment -- net............  $ 3,107    $ 2,346
                                                           =======    =======
</TABLE>
 
 4. LONG-TERM DEBT AND LINE OF CREDIT (in thousands)
 
<TABLE>
<CAPTION>
                                                              1998      1997
                                                             ------    ------
<S>                                                          <C>       <C>
Unsecured term loans.......................................  $1,069    $   --
Less current portion.......................................    (336)       --
                                                             ------    ------
Long-term debt.............................................  $  733    $   --
                                                             ======    ======
</TABLE>
 
     The Company has $1,069,000 of unsecured term loans outstanding, bearing
interest at the rate of 6% per annum with principal payments through fiscal
2001.
 
                                       22
<PAGE>   23
                     BUSINESS RESOURCE GROUP AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
 
     The Company has a $15,000,000 revolving line of credit with an option on an
additional $1.0 million term loan with a bank, which expires in August 1999. The
line bears interest at prime (8.00% at October 31, 1998) and is secured by
substantially all of the Company's assets. The line of credit contains
restrictions with respect to certain payments (including dividends), additional
debt, and the maintenance of minimum quick assets and stockholders equity. The
Company currently maintains an irrevocable stand-by letter of credit in the
amount of $3.0 million against this facility.
 
     Required principal payments of long-term debt are payable as follows: Year
ending October 31, 1999 -- $336,000; 2000 -- $356,000; 2001 -- $377,000;
2002 -- $0; and 2003 -- $0.
 
 5. ACCRUED LIABILITIES (in thousands)
 
<TABLE>
<CAPTION>
                                                               OCTOBER 31,
                                                             ----------------
                                                              1998      1997
                                                             ------    ------
<S>                                                          <C>       <C>
Customer deposits..........................................  $1,867    $2,201
Sales taxes payable........................................     284       546
Commissions payable........................................     667       512
Other liabilities..........................................   1,971       977
                                                             ------    ------
          Total accrued liabilities........................  $4,789    $4,236
                                                             ======    ======
</TABLE>
 
 6. COMMITMENTS AND CONTINGENCIES
 
     The Company is obligated under leases of certain office and warehouse
facilities expiring at various dates through 2003. Future minimum lease payments
under these lease agreements at October 31, 1998 are as follows (in thousands):
 
<TABLE>
<CAPTION>
                        YEARS ENDING
                        OCTOBER 31,
                        ------------
<S>                                                           <C>
  1999......................................................  $1,204
  2000......................................................   1,109
  2001......................................................   1,018
  2002......................................................     995
  2003......................................................     995
                                                              ------
Total future minimum payments...............................  $5,321
                                                              ======
</TABLE>
 
     Total rent charged to expense amounted to $955,000, $803,000 and $636,000
for the years ended October 31, 1998, 1997 and 1996, respectively.
 
 7. EMPLOYEE BENEFIT PLAN
 
     The Company has a 401(k) Plan (tax deferred savings plan) which covers
substantially all full-time employees. The plan requires that the Company make
cash contributions equal to 25% of contributions made by participating
employees. In fiscal 1998, 1997 and 1996, the Company contributed $107,000,
$93,000, and $71,000 to the plan.
 
                                       23
<PAGE>   24
                     BUSINESS RESOURCE GROUP AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
 
 8. INCOME TAXES
 
     The provisions for income taxes consisted of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                     YEAR ENDED OCTOBER 31,
                                                    -------------------------
                                                     1998     1997      1996
                                                    ------    -----    ------
<S>                                                 <C>       <C>      <C>
Current:
  Federal.........................................  $1,035    $(229)   $1,043
  State...........................................     242       (2)      281
                                                    ------    -----    ------
                                                     1,277     (231)    1,324
                                                    ------    -----    ------
Deferred:
  Federal.........................................    (195)    (207)      (25)
  State...........................................     (16)     (85)       10
                                                    ------    -----    ------
                                                      (211)    (292)      (15)
                                                    ------    -----    ------
          Total...................................  $1,066    $(523)   $1,309
                                                    ======    =====    ======
</TABLE>
 
     The components of the actual deferred tax assets and liabilities at October
31, 1998 and 1997 were as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                               OCTOBER 31,
                                                              --------------
                                                              1998     1997
                                                              -----    -----
<S>                                                           <C>      <C>
Deferred tax assets:
  Accruals recognized in different periods for tax
     purposes...............................................  $ 810    $ 477
  Amortization of intangibles...............................    104      138
  Deferred tax liabilities -- accelerated depreciation......   (264)    (176)
                                                              -----    -----
Net deferred tax assets.....................................  $ 650    $ 439
                                                              =====    =====
</TABLE>
 
     Current deferred income tax assets of $767,000 and $514,000 at October 31,
1998 and 1997, respectively, are included in prepaids and other current assets.
 
     The following is a reconciliation of the effective income tax rates, for
financial statement purposes:
 
<TABLE>
<CAPTION>
                                                         YEAR ENDED OCTOBER 31,
                                                        ------------------------
                                                        1998      1997     1996
                                                        -----    ------    -----
<S>                                                     <C>      <C>       <C>
Tax computed at federal statutory rate................  34.0%    (35.0)%   35.0%
State income taxes, net of federal effect.............   5.8      (6.1)     6.1
Other.................................................   1.7       0.4      0.3
                                                        ----     -----     ----
Effective income tax rate.............................  41.5%    (40.7)%   41.4%
                                                        ====     =====     ====
</TABLE>
 
 9.  MAJOR CUSTOMERS AND VENDORS
 
     One customer represented 44%, 30%, and 37% of net revenues for the years
ended October 31, 1998, 1997 and 1996, respectively.
 
     One vendor represented 43%, 24% and 35% of total purchases for the years
ended October 31, 1998, 1997 and 1996, respectively.
 
10. 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
 
                                       24
<PAGE>   25
                     BUSINESS RESOURCE GROUP AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
 
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). The Company also issued a warrant in fiscal
1997 to purchase 60,000 shares of common stock, at an exercise price per share
of $5.50 per share, to an advisor. Such warrant is exercisable at any time from
April 1997 until it expires in April 2002. As of October 31, 1998, no warrants
had been exercised.
 
11. STOCK OPTION PLANS AND STOCK PURCHASE PLANS
 
     Under the 1995 Stock Option Plan (the 1995 Plan), the Company may grant
stock options at an exercise price of not less than 100% of fair market value on
the date of the grant and non-statutory 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 for new employees 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. Generally, stock options
granted for existing employees become exercisable at a rate of 1/48 of the total
shares granted each month after the date of the grant. During fiscal 1998 and
1997, the Company increased the number of shares of common stock reserved for
issuance under the 1995 Stock Option Plan (the 1995 Plan) from 1,700,000 to
2,200,000 and from 1,200,000 to 1,700,000, respectively.
 
     In March, 1998 the Company canceled stock options to purchase 361,992
shares of the Company's common stock price at prices ranging from $3.375 to
$7.000 and exchanged them for options to purchase 361,992 shares of the
Company's common stock at the then current market value of $3.187 per share with
new vesting periods. The vesting for exchanged options was 50% of the shares on
the one year anniversary of the date of grant and 1/24 of the total number of
shares granted each month thereafter.
 
     Under the 1995 Directors' Stock Option Plan (the Directors' Plan)
non-employee directors of the Company receive an initial grant of non-statutory
stock options on the date they join the Board and automatic annual grants of
non-statutory stock options issued on the first day of each fiscal year to all
non-employee directors of the Company who have served at least three months as
of such grant date. Options are granted under the Directors' Plan at an exercise
price equal to the fair market value on the grant date. Initial grants become
exercisable ratably over four years and automatic grants become exercisable four
years after the date of grants. A total of 175,000 shares of common stock have
been reserved for issuance under the Directors' Plan.
 
     Option activity under the plans is as follows:
 
<TABLE>
<CAPTION>
                                             1998                   1997                   1996
                                     --------------------    -------------------    -------------------
                                                 WEIGHTED               WEIGHTED               WEIGHTED
                                                 AVERAGE                AVERAGE                AVERAGE
                                                 EXERCISE               EXERCISE               EXERCISE
                                      OPTIONS     PRICE      OPTIONS     PRICE      OPTIONS     PRICE
                                     ---------   --------    --------   --------    --------   --------
<S>                                  <C>         <C>         <C>        <C>         <C>        <C>
Outstanding -- beginning of year...    737,863    $4.75       865,844    $5.12       546,805    $5.98
Granted............................  1,177,086    $3.10       295,742    $4.24       475,250    $4.24
Exercised..........................         --       --       (34,051)   $4.00            --       --
Canceled...........................   (643,573)   $4.70      (389,672)   $5.43      (156,211)   $5.47
Outstanding -- end of year.........  1,271,436    $3.28       737,863    $4.65       865,844    $5.12
Exercisable at end of year.........    293,695    $3.53       243,315    $4.89       249,732    $5.57
</TABLE>
 
                                       25
<PAGE>   26
                     BUSINESS RESOURCE GROUP AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
 
     Weighted-average fair value of options granted during the year was $3.10
per share in 1998, $3.06 per share in 1997 and $3.07 per share in 1996.
 
     Outstanding and Exercisable By Price Range as of October 31, 1998:
 
<TABLE>
<CAPTION>
                               OPTIONS OUTSTANDING                        OPTIONS EXERCISABLE
                               -------------------                    ----------------------------
                                    WEIGHTED
                                     AVERAGE            WEIGHTED                       WEIGHTED
   RANGE OF        NUMBER           REMAINING           AVERAGE         NUMBER         AVERAGE
EXERCISE PRICE   OUTSTANDING    CONTRACTUAL LIFE     EXERCISE PRICE   EXERCISABLE   EXERCISE PRICE
---------------  -----------   -------------------   --------------   -----------   --------------
<S>              <C>           <C>                   <C>              <C>           <C>
$2.625 - $5.000   1,211,436          4.3 yrs             $3.141         258,695         $3.151
$5.001 - $7.000      60,000          7.1 yrs             $6.042          35,000         $6.304
                  ---------          -------             ------         -------         ------
$2.625 - $7.000   1,271,436          4.4 yrs             $3.278         293,695         $3.526
</TABLE>
 
     Under the 1995 Employee Stock Purchase Plan (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. A total of 200,000 shares of common stock have been
reserved for issuance under the Purchase Plan. There were 10,066 and 20,797
shares issued under the Employee Stock Purchase Plan in fiscal 1998 and 1997,
respectively.
 
ADDITIONAL STOCK PLAN INFORMATION
 
     As discussed in the Statement of Accounting Policies, the Company continues
to account for its stock-based awards using the intrinsic value method in
accordance with Accounting Principles Board No. 25, Accounting for Stock Issued
to Employees and its related interpretations. Accordingly, no compensation cost
has been recognized in the financial statements for its stock plans.
 
     Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, (SFAS 123) requires the disclosure of pro forma net
income (loss) and net income (loss) per share had the Company used the fair
value method to account for its stock-based compensation awards granted
subsequent to October 31, 1995. Under SFAS 123, the fair value of stock-based
awards to employees is calculated through the use of option pricing models. The
Black-Scholes model used by the Company to calculate option values for purposes
of this note, as well as other currently accepted option valuation models, were
developed to estimate the fair value of stock options that are freely tradable
and fully transferable and that have no vesting restrictions. These models also
require highly subjective assumptions, including future stock price volatility
and expected term until exercise, which greatly affect the calculated values.
Accordingly, management believes that this model does not necessarily provide a
reliable measure of the fair value of the Company's option awards.
 
                                       26
<PAGE>   27
                     BUSINESS RESOURCE GROUP AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
 
     The Company's calculations were made using the Black-Scholes multiple
option-pricing model. The following weighted average assumptions were used:
expected option life of 12 months beyond each respective vesting period;
risk-free interest rates of 4.6% in fiscal 1998 and 6.0% in fiscal 1997 and
1996; expected stock volatility of 70% in fiscal 1998 and 88% in fiscal 1997 and
1996 and a dividend yield of zero. If the computed fair values of the awards had
been amortized to expense over the vesting period of the awards, pro forma net
income (loss) would have been as follows:
 
<TABLE>
<CAPTION>
                                                             1998          1997           1996
                                                          ----------    -----------    ----------
                                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                       <C>           <C>            <C>
Net income/(loss):
  As reported...........................................    $1,503        $  (762)       $1,854
  Pro forma.............................................    $1,183        $(1,241)       $1,536
Basic & Diluted income/(loss) per share:
  As reported...........................................    $ 0.30        $ (0.16)       $ 0.38
  Pro forma.............................................    $ 0.24        $ (0.25)       $ 0.31
</TABLE>
 
12. ACQUISITIONS
 
     In May 1998, the Company acquired, in a purchase transaction, certain
assets and assumed certain liabilities of OFN, Inc. in exchange for $2,093,000
in cash, the Company's promissory note in the aggregate principal amount of
$1,069,205, and 100,000 shares of the Company's Common Stock. OFN, Inc. is a San
Diego based refurbisher of office workstations.
 
     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.
 
     Results of operations include those operations 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, totaling $2,407,000 for OFN, Inc. and $335,000 for
Corporate Source, which will be amortized over twenty years and three years,
respectively.
 
     Had these acquisitions taken place at the beginning of fiscal 1997 and
1996, unaudited pro forma net revenues would have been approximately $76.1
million and $79.3 million, respectively. Pro forma net loss would have been
approximately $(529,000) and basic and diluted net loss per share would have
been approximately $(0.11) per share for fiscal 1997 and would not have changed
significantly for fiscal 1996.
 
13. PER SHARE INFORMATION
 
     Basic earnings per share is computed by dividing net income by the weighted
average common shares outstanding for the period while diluted earnings per
share also includes the dilutive effects of stock options. Basic and diluted
earnings per share for the fiscal years ended October 31, 1998, 1997 and 1996,
respectively, are calculated as follows:
 
<TABLE>
<CAPTION>
                                                               1998      1997      1996
                                                              ------    ------    ------
                                                              (IN THOUSANDS, EXCEPT PER
                                                                     SHARE DATA)
<S>                                                           <C>       <C>       <C>
Basic weighted average shares outstanding...................  4,963     4,902     4,844
Dilutive effect of options..................................      2        --        42
                                                              -----     -----     -----
Diluted weighted average shares outstanding.................  4,965     4,902     4,886
                                                              =====     =====     =====
</TABLE>
 
                                       27
<PAGE>   28
                     BUSINESS RESOURCE GROUP AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                  YEARS ENDED OCTOBER 31, 1998, 1997 AND 1996
 
14. SELECTED QUARTERLY DATA (UNAUDITED)
 
     The following presents unaudited quarterly operating results for fiscal
years ended October 31, 1998 and 1997:
 
<TABLE>
<CAPTION>
                                                   JANUARY 31,    APRIL 30,    JULY 31,    OCTOBER 31,
                                                   -----------    ---------    --------    -----------
                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                <C>            <C>          <C>         <C>
FISCAL 1998
  Net revenues...................................    $18,283       $21,810     $26,281       $27,191
  Gross profit...................................      3,799         4,729       5,850         5,953
  Net income.....................................        137           313         517           536
  Basic earnings per share.......................    $   .03       $   .06     $   .10       $   .11
  Diluted earnings per share.....................    $   .03       $   .06     $   .10       $   .11
FISCAL 1997
  Net revenues...................................    $22,312       $22,526     $12,884       $14,979
  Gross profit...................................      4,749         4,922       2,487         3,113
  Net income.....................................        509           534      (1,001)         (804)
  Basic earnings per share.......................    $   .10       $   .11     $  (.20)      $  (.16)
  Diluted earnings per share.....................    $   .10       $   .11     $  (.20)      $  (.16)
</TABLE>
 
                                       28
<PAGE>   29
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
     Not applicable.
 
                                    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 4, 1999 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,
1998, are as follows:
 
<TABLE>
<CAPTION>
                NAME                   AGE                       POSITION
                ----                   ---                       --------
<S>                                    <C>   <C>
John W. Peth.........................  50    President, Chief Executive Officer and Director
Brian D. McNay.......................  42    Executive Vice President of Sales and Director
John M. Palmer.......................  40    Vice President, Finance and Chief Financial
                                             Officer
Jeffrey Tuttle.......................  41    Executive Vice President of Marketing and
                                             Director
</TABLE>
 
     Mr. Peth has served as President and Chief Executive Officer since December
1997 and also served as Chief Financial Officer from December 1997 to February
1998 and as a director of the Company since April 1995. From July 1997 to
December 1997, Mr. Peth was a consultant to the Company. From June 1996 to March
1997, Mr. Peth served as Acting President and Chief Executive Officer of Tab
Products Co. ("TAB"), an office filing and furniture systems manufacturer and
distributor. From April 1991 until June 1997, Mr. Peth served as Executive Vice
President and Chief Operating Officer of TAB. From August 1984 to April 1991,
Mr. Peth served as the managing partner of the San Jose region of Deloitte &
Touche LLP and one of its predecessor accounting firms. Mr. Peth is also a
director of Aspect Telecommunications, Inc., a provider of call transaction
processing systems. Mr. Peth received his BA degree in Economics in 1970 from
the University of California at Santa Barbara, and an MBA from the University of
California at Los Angeles in 1972.
 
     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. Palmer has served as Vice President, Finance and Chief Financial
Officer since February 1998. From August 1994 to February 1998 Mr. Palmer served
as Vice President, Finance and Chief Financial Officer of TAB, an office filing
and furniture systems manufacturer and distributor. From September 1992 to
August 1994, he served as Vice President, Finance for Tab Products of Canada,
Limited. From January 1986 to September 1992 Mr. Palmer served as Controller of
Wright Line of Canada Ltd. He received his C.G.A. designation from the Certified
General Accountants Association of Canada in 1985.
 
     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.
 
                                       29
<PAGE>   30
 
ITEM 11. EXECUTIVE COMPENSATION
 
     Incorporated by reference from the information under the caption
"Compensation Committee Report on Executive Compensation" 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 Committee Report on Executive Compensation" and "Transactions with
Management and Others" in the Registrant's Proxy Statement.
 
                                       30
<PAGE>   31
 
                                    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 38).
 
     (3) EXHIBITS (NUMBERED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K)
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
 3.1      Amended and Restated Articles of Incorporation of
          Registrant.(1)
 3.2      Amended and restated 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 amended and forms of agreements
          thereunder.(8)
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)
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)
</TABLE>
 
                                       31
<PAGE>   32
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
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.(4)
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.(4)
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.(4)
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.(4)
10.18     Purchase Agreement between Cisco Systems, Inc., Teknion,
          Inc., Teknion International and the Registrant effective as
          of September 1, 1995.(4)
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.(5)
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.(5)
10.27     Amended and Restated Loan and Security Agreement between the
          Registrant and Silicon Valley Bank, dated July 3, 1996.(5)
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.(4)
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.(4)
10.30     Common Stock Purchase Warrant Agreement between the Company
          and Gateway Advisors dated April 21, 1997.(6)
10.31     Revolving Credit Loan and Security Agreement between the
          Company and Comerica Bank dated August 8, 1997.(7)
10.32     Severance and Mutual Release Agreement between the Company
          and Charles J. Winter dated December 17, 1997.(8)
10.33     Stand by Letter of Credit with Comerica Bank.(9)
</TABLE>
 
                                       32
<PAGE>   33
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
10.34     Amended Stand by Letter of Credit with Comerica Bank.(9)
10.35     Collateral Security Agreement with Teknion, Inc.(9)
10.36     Asset Purchase Agreement dated May 22, 1998 between the
          Registrant, OFN, Inc., BRG Acquisition Corp. and David &
          Rebecca Nagorski, Husband and Wife as Joint Tenants.(10)
10.37     Assignment and Assumption of Lease between the Registrant
          and OFN Inc., dated May 22, 1998 with respect to premises at
          8060 Arjons Drive, San Diego, California.(2)
10.38     Consulting Services Agreement between the Registrant and
          Hewlett-Packard Company dated May 1998.(2)
10.39     Commercial Lease Agreement between the Registrant and Crow
          Carrara No. 2 dated October 8, 1997 with respect to premises
          at 2015 Surveyer Boulevard, Carrollton, Texas .(2)
10.40     Retail Lease Agreement between the Registrant and Blue Jean
          Equities West dated August 11, 1998 with respect to premises
          at 1225 Battery Street, San Francisco, California.(2)
10.41     Office Lease Agreement between the Registrant and Scottsdale
          Spectrum, L.L.C. dated October 7, 1998 with respect to
          premises at 6720 North Scottsdale Road, Phoenix, Arizona.(2)
22.1      Subsidiary of Registrant.(2)
23.1      Independent Auditor's Consent.(2)
24.1      Power of Attorney (see page 37).(2)
27        Financial Data Schedule.(2)
</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) Filed herewith.
 
 (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 14,
     "Exhibits," of the Registrant's Form 10-K dated January 22, 1996.
 
 (5) Incorporated by reference to exhibits filed in response to Item 6,
     "Exhibits," of the Registrant's Form 10-Q dated September 13, 1996.
 
 (6) Incorporated by reference to exhibits filed in response to Item 6,
     "Exhibits," of the Registrant's Form 10-Q dated June 13, 1997.
 
 (7) Incorporated by reference to exhibits filed in response to Item 6,
     "Exhibits," of the Registrant's Form 10-Q dated September 13, 1997.
 
 (8) Incorporated by reference to exhibits filed in response to Item 14,
     "Exhibits," of the Registrant's Form 10-K dated January 26, 1998.
 
 (9) Incorporated by reference to exhibits filed in response to Item 6,
     "Exhibits," of the Registrant's Form 10-Q dated March 11, 1998.
 
(10) Incorporated by reference to exhibits filed in response to Item 7(c),
     "Exhibits," of the Registrant's Form 8-K/A dated July 31, 1998.
 
(b) Reports on Form 8-K:
 
     The Company filed a report on Form 8-K dated June 8, 1998 and a related
report on Form 8-K/A dated July 31, 1998 related to the acquisition of OFN, Inc.
 
     The Company filed a report on Form 8-K dated December 1, 1998 related to
Common Stock ownership of certain beneficial owners and management.
 
                                       33
<PAGE>   34
 
                                   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 25, 1999                    By: /s/ JOHN W. PETH
                                            ------------------------------------
                                            John W. Peth
                                            President, Chief Executive Officer
                                              and Director
 
                               POWER OF ATTORNEY
 
     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John W. Peth and John M. Palmer, 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/ JOHN W. PETH                                          President, Chief Executive    January 25, 1999
--------------------------------------------------------  Officer and Director
(John W. Peth)                                            (Principal Executive
                                                          Officer)
 
/s/ BRIAN D. MCNAY                                        Executive Vice President of   January 25, 1999
--------------------------------------------------------  Sales and Director
(Brian D. McNay)
 
/s/ JEFFREY TUTTLE                                        Executive Vice President of   January 25, 1999
--------------------------------------------------------  Marketing, Secretary and
(Jeffrey Tuttle)                                          Director
 
/s/ JOHN M. PALMER                                        Vice President, Finance and   January 25, 1999
--------------------------------------------------------  Chief Financial Officer
(John M. Palmer)                                          (Principal Financial and
                                                          Accounting Officer)
 
/s/ HARRY S. ROBBINS                                      Director                      January 25, 1999
--------------------------------------------------------
(Harry S. Robbins)
 
/s/ JACK A. BRADLEY                                       Director                      January 25, 1999
--------------------------------------------------------
(Jack A. Bradley)
</TABLE>
 
                                       34
<PAGE>   35
 
                            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(1)     PERIOD
               -----------                  ----------   ----------   ----------   -------------   ----------
<S>                                         <C>          <C>          <C>          <C>             <C>
Allowance for doubtful accounts:
  Fiscal 1996.............................     125           --          --             (68)           57
  Fiscal 1997.............................      57           33          --              --            90
  Fiscal 1998.............................      90          397          --             (87)          400
</TABLE>
 
---------------
(1) Charge off of accounts, net of recoveries.
 
                                       35
<PAGE>   36
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
                                                                        SEQUENTIALLY
EXHIBIT                                                                   NUMBERED
NUMBER                            DESCRIPTION                               PAGE
-------                           -----------                           ------------
<C>       <S>                                                           <C>
 3.1      Amended and Restated Articles of Incorporation of
          Registrant.(1)..............................................
 3.2      Amended and restated 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 amended and forms of agreements
          thereunder.(8)..............................................
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)............
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.(4)................
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.(4).....
</TABLE>
<PAGE>   37
 
<TABLE>
<CAPTION>
                                                                        SEQUENTIALLY
EXHIBIT                                                                   NUMBERED
NUMBER                            DESCRIPTION                               PAGE
-------                           -----------                           ------------
<C>       <S>                                                           <C>
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.(4).................................................
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.(4)..................................................
10.18     Purchase Agreement between Cisco Systems, Inc., Teknion,
          Inc., Teknion International and the Registrant effective as
          of September 1, 1995.(4)....................................
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.(5)....................................
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.(5)....
10.27     Amended and Restated Loan and Security Agreement between the
          Registrant and Silicon Valley Bank, dated July 3,
          1996.(5)....................................................
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.(4)............
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.(4)..........................
10.30     Common Stock Purchase Warrant Agreement between the Company
          and Gateway Advisors dated April 21, 1997.(6)...............
10.31     Revolving Credit Loan and Security Agreement between the
          Company and Comerica Bank dated August 8, 1997.(7)..........
10.32     Severance and Mutual Release Agreement between the Company
          and Charles J. Winter dated December 17, 1997.(8)...........
10.33     Stand by Letter of Credit with Comerica Bank.(9)............
10.34     Amended Stand by Letter of Credit with Comerica Bank.(9)....
</TABLE>
<PAGE>   38
 
<TABLE>
<CAPTION>
                                                                        SEQUENTIALLY
EXHIBIT                                                                   NUMBERED
NUMBER                            DESCRIPTION                               PAGE
-------                           -----------                           ------------
<C>       <S>                                                           <C>
10.35     Collateral Security Agreement with Teknion, Inc.(9).........
10.36     Asset Purchase Agreement dated May 22, 1998 between the
          Registrant, OFN, Inc., BRG Acquisition Corp. and David &
          Rebecca Nagorski, Husband and Wife as Joint Tenants.(10)....
10.37     Assignment and Assumption of Lease between the Registrant
          and OFN Inc., dated May 22, 1998 with respect to premises at
          8060 Arjons Drive, San Diego, California.(2)................
10.38     Consulting Services Agreement between the Registrant and
          Hewlett-Packard Company dated May 1998.(2)..................
10.39     Commercial Lease Agreement between the Registrant and Crow
          Carrara No. 2 dated October 8, 1997 with respect to premises
          at 2015 Surveyer Boulevard, Carrollton, Texas.(2)...........
10.40     Retail Lease Agreement between the Registrant and Blue Jean
          Equities West dated August 11, 1998 with respect to premises
          at 1225 Battery Street, San Francisco, California.(2).......
10.41     Office Lease Agreement between the Registrant and Scottsdale
          Spectrum, L.L.C. dated October 7, 1998 with respect to
          premises at 6720 North Scottsdale Road, Phoenix,
          Arizona.(2).................................................
22.1      Subsidiary of Registrant.(2)................................
23.1      Independent Auditor's Consent.(2)...........................
24.1      Power of Attorney (see page 37).(2).........................
27        Financial Data Schedule.(2).................................
</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) Filed herewith.
 
 (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 14,
     "Exhibits," of the Registrant's Form 10-K dated January 22, 1996.
 
 (5) Incorporated by reference to exhibits filed in response to Item 6,
     "Exhibits," of the Registrant's Form 10-Q dated September 13, 1996.
 
 (6) Incorporated by reference to exhibits filed in response to Item 6,
     "Exhibits," of the Registrant's Form 10-Q dated June 13, 1997.
 
 (7) Incorporated by reference to exhibits filed in response to Item 6,
     "Exhibits," of the Registrant's Form 10-Q dated September 13, 1997.
 
 (8) Incorporated by reference to exhibits filed in response to Item 14,
     "Exhibits," of the Registrant's Form 10-K dated January 26, 1998.
 
 (9) Incorporated by reference to exhibits filed in response to Item 6,
     "Exhibits," of the Registrant's Form 10-Q dated March 11, 1998.
 
(10) Incorporated by reference to exhibits filed in response to Item 7(c),
     "Exhibits," of the Registrant's Form 8-K/A dated July 31, 1998.