SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549

                              REPORT ON FORM 10-KSB

              [X]  Annual Report pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                    For the fiscal year ended June 30, 1998.

             [ ]  Transition Report pursuant Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

              For the transition period from ________ to ________.

                           Commission File No. 0-14731

                           COMPUTER MARKETPLACE(R), INC.
             (Exact name of registrant as specified in its charter)

                   Delaware  33-0558415  (State  of  or  other   jurisdictio(IRS
       Employer Identification No.)
         incorporation of organization)

           1171 Railroad Street
           Corona, California                         91720
           (Address of Principal                     (Zip Code)
           Executive Offices)

Registrant's telephone number, including area code:  (909) 735-2102

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

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

                    Common Stock, par value $.0001 per share
                                (Title of Class)


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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of the Regulation  S-B is not contained in this form, and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [

Issuer's revenues for its most recent fiscal year were $7,969,959.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant,  computed  by  reference  to the  closing  price of such stock as of
December 30, 1998, was approximately $883,697.50.

Number of shares  outstanding of the Issuer's  common stock,  as of December 30,
1998, was 1,352,456.

                   DOCUMENTS INCORPORATED BY REFERENCE: None.



<PAGE>



                                     PART I

Item 1.  DESCRIPTION OF BUSINESS

General

      Computer Marketplace,  Inc., a California corporation, was incorporated on
July 19,  1983,  as Quality  Associates,  Inc.  and changed its name to Computer
Marketplace,  Inc. in June 1987. In March 1993, Computer Marketplace changed its
name  to  Computer  Marketplace(R),   Inc.  ("Computer  Marketplace(R)"  or  the
"Company") and its state of incorporation from California to Delaware.  Computer
Marketplace(R)  is currently winding down its business  activities.  The company
was primarily in engaged in the wholesale  distribution of new and used computer
equipment  to  dealers,  computer  maintenance  companies,   leasing  companies,
equipment brokers, and end-users.

      In  light of the  fact  that  the  Company  has  been  unable  to  operate
profitably  since the fiscal  year ended June 1994,  the Company  believed  that
substantial  measures  needed to be taken to  address  the  Company's  financial
difficulties.   The  Board  of  Directors,   after  having  considered  numerous
alternatives,  concluded that the Company must significantly reduce its expenses
in order to decrease the Company's net losses.  Therefore,  during the Company's
fiscal year ended June 30, 1997,  the Company  embarked upon a cost cutting plan
by reducing its  workforce,  closing  unprofitable  locations and  discontinuing
under performing product lines. Specifically,  the Company (i) closed all of its
branch  offices and (ii) reduced the number of  employees  from a high of ninety
six (96) in September  1995 to twenty four (24) full-time and five (5) part-time
as of September 30, 1997.  Despite  implementing  this  business  reorganization
strategy,  the  Company  failed to regain  profitability  during the fiscal year
ended June 30, 1998. As a result,  the Company  determined to reduce further its
existing  computer  business  and  to  divest  Medical  Marketplace,  Inc.,  the
Company's  subsidiary  engaged in the sale and lease of used medical  equipment.
The  Company's  net loss  for the year  ended  June 30,  1998 was  approximately
$2,207,131 compared to a net loss of $3,347,435 during the preceding year.

      On August 27, 1998, the Company,  Medical  Marketplace,  and Medley Credit
Acceptance  Corporation  ("Medley")  entered  into a Stock  Purchase  Agreement,
pursuant  to which  Medley  agreed to  purchase  all of the  shares  of  Medical
Marketplace  owned by Computer,  which  represents  83.3% of the total number of
shares  outstanding.  Medley agreed to pay 25,000  shares of  restricted  Medley
Common Stock in exchange for the 2,500,000 shares of Medical  Marketplace  owned
by the Company so long as Medical  Marketplace  had $50,000 in net assets at the
time of the closing of the transaction.  The closing of the proposed transaction
was subject to the satisfaction of certain conditions  including the approval of
a majority of the shares of the Company's common stock outstanding. In addition,
pending the closing,  Medley  agreed to assist in the day to day  management  of
Medical  Marketplace  pursuant to the terms of an  Operating  Agreement  between
Medical  Marketplace  and Medley.  On November  20, 1998,  the Company  notified
Medley that it was terminating  both the Stock Purchase  Agreement and Operating
Agreement  effective as of November 25, 1998.  The Company is  continuing in its
search  for a  purchaser  of Medical  Marketplace.  See "The  Medical  Equipment
Business - The Medley Credit Transaction".


      In March of 1994, Computer Marketplace(R) formed Medical Marketplace, Inc.
("Medical  Marketplace")  as a wholly  owned  subsidiary  to engage in worldwide
distribution  of used  medical  equipment  to health care  providers.  While the
Company believes that Medical  Marketplace may become  profitable in the future,
the Company does not have sufficient  capital,  or access to sufficient capital,
to properly fund the Medical Marketplace operations in the future.

                                        1

<PAGE>





      In January 1994, Computer Marketplace(R) formed a wholly owned subsidiary,
Superior Solutions,  Inc. ("SSI"), to purchase certain assets and assume certain
obligations of Synergy Solutions,  Inc. and International  Associated  Marketing
Corporation,  both located in Livonia,  Michigan.  These  companies were engaged
principally in the  development,  installation and maintenance of local and wide
area networks, were Novell Platinum Authorized Resellers,  and were also selling
computer  hardware.  On July 1, 1996, the employees of SSI began  operating as a
sales and  networking  branch of  Computer  Marketplace(R)  and in June 1997 the
Company discontinued the operations of SSI because the business failed to become
profitable.

      The Company's executive office is located at 1171 Railroad Street, Corona,
California. It's telephone number is (909) 735-2102.

The Computer Equipment Business

      Computer  Marketplace(R)  purchased  computer  equipment from a variety of
sources and suppliers and sold or rented the equipment  nationwide and in Europe
to companies  ranging in size from small companies to Fortune 500  corporations.
Computer  Marketplace's  operations and primary  selling  efforts were conducted
from its principal office in Corona, California.

      During the past fiscal  year,  the Company has  significantly  reduced the
size and scope of its computer  business.  The Company  believes that because of
significant changes in the computer industry, the market is more competitive and
opportunities  to engage  in  certain  business  are no  longer  available.  The
increase in the importance and dominance of personal  computers (with relatively
low sales  prices)  and the  reduced  usage of  mid-sized  computer  systems has
severely  reduced the  Company's  business in the RISC 6000 and AS400  mid-range
systems.  Further,  the Company has seen major OEM manufacturers  (such as, IBM,
and Digital  Equipment  Corporation)  enter into the reselling  business.  It is
extremely  difficult  for the  Company to  compete  successfully  against  these
competitors which possess  considerably greater resources than the Company. As a
consequence,  the Company is actively pursuing acquiring an alternative business
and/or assets which may be developed into a business.

The Computer Industry

      The  computer  industry  has been  characterized  by rapid and  continuous
technological  advances  permitting  cost  reductions,   increases  in  computer
processing capacity and broadened user applications. Users frequently upgrade or
replace their equipment in order to take advantage of technological  advances or
to increase  data  processing  capacity.  As a result,  the  equipment  which is
replaced by different or newer models becomes available to the secondary market,
total  sales  revenue  for the  secondary  computer  market,  both  leasing  and
"buy-sells" combined, exceeds $25 billion annually.

Computer Products

      The Company repurchased and sold computers,  features, parts, peripherals,
which include hard disk drives,  memory,  plug-in boards,  modems,  monitors and
printers,  and other related  computer  equipment.  Sales of computer  equipment
constituted a  significant  source of revenue for the Company  accounting  for a
substantial percentage of the Company's revenues in fiscal years 1998 and 1997.

                                        2

<PAGE>



Computer Products Sales and Marketing

      The  Company's  sales and marketing  personnel  made calls to existing and
potential customers and the sales team solicited new business by personal visits
and advertising in trade magazines.  In addition,  the Company also marketed its
products on the Internet and on its web site.  The Company  also  advertised  in
various trade  publications.  The Company's  customers consisted of companies of
all  sizes,  ranging  from  small  companies  to  Fortune  500  corporations.  A
substantial  portion of the Company's  transactions  were with repeat customers,
such as computer maintenance companies, as well as computer parts suppliers.

Computer Products Distribution Operations

      The  Company  conducts  its  operations  from its main  office  located in
Corona,  California.  It also developed relationships with stocking distributors
and numerous independent  refurbishing and warehouse  facilities  throughout the
United States to handle  distribution,  engineering  and  warehousing.  By using
stocking distributors, the Company directly benefited by minimizing the costs of
freight, engineering and distribution.

Computer Equipment Warranty Policy

      The  Company,  like  other  competing  distributors,  did  not  grant  any
warranties  on the  used  products  it sold.  However,  most of the new and used
computer   equipment  which  the  Company  sold  is  covered  under  either  the
manufacturer's warranty or the manufacturer's  maintenance programs. Some of the
new  and  used  computer  equipment  which  the  Company  sold  is  still  under
manufacturer's  warranty.  Before any returned  merchandise  was accepted by the
Company for processing under the original manufacturer's  warranty, the customer
was required to call the Company and obtain a return  merchandise  authorization
number.  This  procedure  allowed  the  Company  to verify the  availability  of
manufacturer's warranties on a case-by-case basis.

Computer Products Suppliers

      The  Company has  established  distributor  arrangements  with a number of
manufacturers of computer equipment which provide generally that the Company may
sell certain  products within a designated  territory and with a targeted amount
of value-added  service. In addition,  the Company has an established network of
dealers and retail customers that provide products. The Company is not dependent
upon any supplier or dealer.

Computer Products Competition

      The Company competed  directly with hundreds of other companies which buy,
sell or lease new and used IBM,  SUN,  Hewlett  Packard,  Digital  Equipment and
Motorola   equipment   as  well  as   equipment   produced  by  other   computer
manufacturers.   In  addition,  the  Company  also  competed  with  hundreds  of
competitors in the area of providing value added services to its customers.  The
Company's principal competitors included IBM, Comdisco, Inc., Sun Data, Inc. and
El Camino Resources, Inc. The Company does not believe that a significant amount
of used equipment is sold  independently by owner-users of the equipment.  While
the aforementioned companies are listed as competitors, they were also customers
of the Company.  The majority of the competing  companies subscribe to either of
two  national  databases:  "CDLANET"  and/or  "ATC  Network"  nationally.  These
databases  provided the Company with access to inventory listings from competing
companies,  similar to the  multiple-listing  services to which most real estate
companies subscribe.

                                        3

<PAGE>






The Medical Equipment Business

      In March of 1994, Computer Marketplace(R) formed Medical Marketplace, Inc.
("Medical  Marketplace")  as a wholly  owned  subsidiary  to engage in worldwide
distribution  of used  medical  equipment  to health care  providers.  While the
Company believes that Medical  Marketplace may become  profitable in the future,
the Company does not have sufficient  capital,  or access to sufficient capital,
to  properly  fund the Medical  Marketplace  operations  in the future.  Medical
Marketplace  buys and  resells a wide  variety  of medical  equipment  including
Magnetic  Resonance  Imaging ("MRI"),  Computed  Tomography  Scanners ("CT") and
Ultrasound equipment.  In addition,  Medical Marketplace provides customers with
consulting  services  related to  equipment  acquisition,  equipment  layout and
facility  design.  Medical  Marketplace  also has a small rental  program  which
provides new  equipment  and contract  service with mobile MRI and CT equipment.
Medical Marketplace conducts its primary  distribution  operations from its main
office in Corona, California, which is shared with the Company.

Medley Credit Transaction

      On August 27, 1998, the Company,  Medical  Marketplace,  and Medley Credit
Acceptance  Corporation  ("Medley")  entered  into a Stock  Purchase  Agreement,
pursuant  to which  Medley  agreed to  purchase  all of the  shares  of  Medical
Marketplace  owned by Computer,  which  represents  83.3% of the total number of
shares  outstanding.  Medley agreed to pay 25,000  shares of  restricted  Medley
Common Stock in exchange for the 2,500,000 shares of Medical  Marketplace  owned
by the Company so long as Medical  Marketplace  had $50,000 in net assets at the
time of the closing of the transaction.  The closing of the proposed transaction
was subject to the satisfaction of certain conditions  including the approval of
a majority of the shares of the Company's common stock outstanding. In addition,
pending the closing,  Medley  agreed to assist in the day to day  management  of
Medical  Marketplace  pursuant to the terms of an  Operating  Agreement  between
Medical  Marketplace  and Medley.  On November  20, 1998,  the Company  notified
Medley that it was terminating  both the Stock Purchase  Agreement and Operating
Agreement  effective as of November 25, 1998.  The Company is  continuing in its
search for a purchaser of Medical Marketplace.

Used Medical Equipment Industry

      The used medical equipment industry is relatively young as compared to the
more established  computer  industry.  Sales of used medical equipment have been
slowed due to a lack of  acceptance of used  equipment by health care  providers
stemming in part from the uncertainty of the equipment's operating condition and
more generous cost  reimbursement  formulas  given to providers by  governmental
agencies and  insurance  companies.  Medical  Marketplace  believes  that recent
growth in the  domestic  market  stems  from the  uncertainty  caused by various
proposals on the domestic  health care reform program,  and as a result,  health
care  providers  are  attempting  to  minimize  their  capital  expenditures  by
purchasing  lower-cost used equipment.  In addition,  foreign-based  health care
providers are undergoing  significant  expansion and have found used equipment a
cost-effective alternative to new equipment.

      Medical Marketplace  believes that there are no dominant providers of used
equipment in the industry.  In addition,  Medical Marketplace believes that many
of the equipment  suppliers operate on a cash basis and only a few companies can
deal in larger transaction sizes of greater than $100,000. The association which
provides a forum for used equipment is relatively  new,  unlike the  association
established for the computer business.

                                        4

<PAGE>





Medical Equipment Rental Program

      Medical  Marketplace  has  a  small  rental  program  which  provides  new
equipment  providers  and  contract  service  providers  with  mobile MRI and CT
equipment.  This  service  allows  these  customers  to  meet  their  short-term
equipment  needs.  Rentals  are for  approximately  one month,  however,  weekly
rentals can also occur.

Medical Equipment Warranty Policy

      Medical Marketplace,  like other competing  resellers,  does not grant any
warranties  on the used  products it sells.  However,  most of the used  medical
equipment  which  Medical   Marketplace   sells  is  covered  under  either  the
manufacturer's  warranty  or  the  manufacturer's  or  third  party  maintenance
programs.

Medical Equipment Suppliers

      Medical Marketplace has established relationships with a small but growing
number of equipment  brokers and leasing  companies across the United States. In
addition,  Medical  Marketplace  by expanding its sales force is able to procure
equipment directly from the end-user.  Generally, Medical Marketplace physically
inspects all major equipment before committing to purchase the item.

Medical Equipment Distribution Operations

      Medical Marketplace conducts its primary distribution  operations from its
main office in Corona,  California.  This  facility is shared with the Company's
computer  business.  Physically large pieces of medical  equipment such as MRI's
and CT's are often transported by Medical  Marketplace from their last installed
location  directly to the customer's  site.  This allows Medical  Marketplace to
minimize storage and transportation costs in the transaction.

Medical Equipment Sales and Marketing 

   Medical Marketplace had a total sales force at December 30, 1998 of three (3)
people. In addition,  Medical  Marketplace  attends various industry trade shows
and advertises on the Internet and in selected national and international  trade
publications.  Medical Marketplace has prospected for sales to foreign countries
and anticipates doing additional business abroad.

   Medical  Marketplace  intends to increase  the number of  domestically  based
outside sales representatives. This expansion will enable Medical Marketplace to
call on a far greater  number of  end-users  which will  increase  the number of
opportunities  to  provide  equipment  and to  purchase  equipment  at the  most
favorable   prices.   Medical   Marketplace  has  generally  focused  on  larger
transaction  sizes (i.e.  greater than  $50,000).  Due to the complex  technical
nature of the  equipment,  the  potential  need for the  customer to prepare the
equipment site,  including obtaining government permits and the significant sale
prices  involved  in a  transaction,  a  transaction  can  take  up to a year to
complete,  although  most  transactions  are  completed  in four months or less.
Consequently,  Medical  Marketplace's  revenue  and  operating  results can vary
materially from month to month.

                                        5

<PAGE>





Medical Equipment Competition

   Medical  Marketplace  competes  directly with the new medical equipment OEM's
such as GE Medical Systems, Picker, Toshiba, Philip's and Siemens. Many of these
new  equipment  OEM's  have  used  equipment  divisions.  In  addition,  Medical
Marketplace  competes  with a growing  number of  equipment  brokers and leasing
companies such as Comdisco,  Finova,  Access  Medical and Remed Par.  Certain of
Medical Marketplace's competitors have substantially greater financial resources
and larger staffs than Medical  Marketplace.  Medical Marketplace  believes that
certain  of its  competitors  can match the  technical  ability  of the  Medical
Marketplace employees in the Imaging, X-ray and Ultrasound technologies and only
certain  competitors have the financial strength to inventory  expensive MRI, CT
or Ultrasound equipment.

Medical Equipment Leasing Business

   In January 1997, Medical Marketplace incorporated New Millenium Leasing, Inc.
("New Millennium") as a wholly owned subsidiary.  New Millennium was formed as a
captive leasing company to finance the sales generated by Medical  Marketplace's
sales force.  New Millennium was formed to accomplish two goals.  First, to help
increase Medical  Marketplace's  overall equipment sales by providing additional
resources not previously  available to it. And second,  it will add  significant
additional  revenue and income by capturing most or all of the financing profits
previously earned by the leasing companies and banks that Medical  Marketplace's
customers were  utilizing.  Since the leases may be sold and/or  discounted on a
non recourse basis,  these  additional  revenues may be earned with little or no
financial risk to the Medical Marketplace.

Government Regulation

   Neither the Company nor Medical  Marketplace has been materially  affected by
government regulations applicable to either its computer products or its medical
equipment business, respectively.

Patents, Trademarks, Licenses and Franchises

   The Company has been granted by the United States Patent and Trademark Office
(i) a trademark for the AcceleRAIDer(R),  on October 6, 1992, (ii) a servicemark
for Computer  Marketplace(R),  on November 3, 1992, and (iii) a servicemark  for
Medical Marketplace, Inc. on August 20, 1996.

   The  Company  does  not own  any  other  patents,  trademarks,  licenses,  or
franchises which would be considered significant to the Company's business.

                                        6

<PAGE>





Credit Facilities

   In  September  1995,  the Company  entered into a revolving  credit  facility
agreement  ("Credit  Facility") with a financing  company.  This Credit Facility
replaced the then outstanding  $2,000,000 revolving credit line with a bank. The
Credit  Facility  allowed the Company to borrow up to  $2,500,000  and  required
interest at a rate of 2.25% above the lender's  "reference  rate" (as  defined).
The Credit Facility was  collateralized  by  substantially  all of the Company's
assets, except for real property.  The Credit Facility was to terminate in April
1998. In April,  1998, the Company borrowed $200,000 from an individual  lender.
In connection  with the loan,  the Company  executed a 12%  promissory  note due
October 31, 1998 in the principal amount of $200,000 (the "Note").  In addition,
the  Company  pledged  substantially  all of its  assets as  collateral  for its
obligations  under the Note. The proceeds of the loan were used to repay in full
the  Company's  obligations  under the Credit  Facility.  In October  1998,  the
Company repaid the Note by transferring the Company's  ownership interest in its
real property  investments in Corona and Mariposa  California to the lender.  In
addition,  to repaying all of its  obligations  under the Note, the Company also
received $30,000 in cash in consideration  for transferring the real property to
the Lender.  Shortly  following the  repayment of the Note,  the lender sold the
former Company properties to the Kiley Children's Trust, a trust established for
the benefit of the children of L. Wayne and Nancy Kiley, the Company's  Chairman
of the Board,  President and Chief Executive Officer and Secretary and Director,
respectively. See "Properties".

Employees

   As a result of  management's  focus to reduce  costs  and  capitalize  on the
efficiencies gained by administrative improvements, as of December 30, 1998, the
Company and Medical Marketplace  employed six (6) full-time persons. The Company
has  experienced  no work  stoppages and considers its employee  relations to be
satisfactory. The Company's employees are not represented by a labor union.

Properties

   On April 23, 1987, L. Wayne Kiley and Nancy Kiley,  the  Company's  President
and Secretary, respectively,  purchased a fifty percent (50%) undivided interest
in the land and 5,000  square-foot  building at 205 East Fifth  Street,  Corona,
California,   which  had,  until   February   1994,   served  as  the  Company's
headquarters, and subsequently was used as an interim sales office and temporary
headquarters for Medical Marketplace until October,  1995. On June 30, 1987, the
Kiley's  deeded their fifty percent  (50%)  interest in the land and building to
the Company in exchange for 952,623  shares of common stock of the Company.  The
other fifty  percent  (50%)  interest in the land and building was owned by Jack
Mooney,  an unrelated third party, who, in June, 1997, sold such interest to the
Company in exchange for the  cancellation  of certain  indebtedness.  In October
1998, the Company  transferred the property as consideration for cancellation of
outstanding indebtedness in the aggregate principal amount of $200,000.
See "Credit Facilities."

   On October 27,  1993,  the Company  purchased,  at a trustee  sale,  a 68,457
square-foot building in Corona,  California,  for approximately $1,757,000.  The
building,  which currently has over 12,000 square feet of office space, was used
as the  Company's  headquarters.  On May 12,  1997,  the Company  entered into a
Standard Offer,  Agreement and Escrow  Instructions  for Purchase of Real Estate
whereby  the  Company  agreed  to sell  its  headquarters  facility  in  Corona,
California for the purchase price of two million five hundred  thousand  dollars
($2,500,000).  This  transaction  closed in June 1997.  The Company  also closed
certain satellite locations in Michigan and Mariposa, California during the year
ended June 1997.

                                        7

<PAGE>





   On January 21, 1994,  the Company  purchased a two-story,  6,300  square-foot
office building located in Mariposa,  California, for $215,000. In October 1998,
the Company  transferred the property as partial  consideration for cancellation
of outstanding indebtedness in the aggregate principal amount of $200,000.

   On  December  1,  1997,  the  Company  entered  into  a  lease  with  Quality
Associates,  Inc.,  a company  owned  and  controlled  by L.  Wayne  Kiley,  the
Company's  Chairman of the Board,  Chief  Executive  Officer and President.  The
lease is for the Company's  executive  offices located at 1171 Railroad  Street,
Corona,  CA 91720,  and for  warehouse  space located at 340 North Grant Street,
Corona, CA, each for a three year term ending October 31, 2000. The office space
and the  warehouse  space  require  the  payment of $9,000 and $4,000 in monthly
rent, respectively. Maintenance of the premises is at the Company's expense. The
Company has failed to pay rent since  September  1998 and is as of December  30,
1998 in arrears in the aggregate amount of $40,500.

   On March 18, 1998, the Company entered into a Sublease  Agreement with Sierra
Del Oro,  LLC,  pursuant to which the Company  sublet a portion of the Company's
executive  offices on a  month-to-month  basis for rental  payments  of $600 per
month.

   On March 1, 1998, the Company entered into a Sublease Agreement with Alliance
Logistics,  Inc. pursuant to which the Company sublet a portion of the warehouse
space  located  at 340 No.  Grant  Street,  Corona,  CA for a one year  term for
monthly rent payments of $2,000 per month.

Legal Proceedings

     In Motorola v. Computer  Marketplace,  Inc.,  Motorola has alleged that the
Company  failed to pay for certain  equipment.  Motorola  is  claiming  that the
Company  owes it $17,000.  The  Company  denies the  allegations  and intends to
vigorously defend against Motorola's claims

   Except as set forth above,  the Company is not a party to any material  legal
proceedings  nor are any  material  legal  proceedings  threatened  against  the
Company.

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

None.

                                        8

<PAGE>






                                     PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

   The Company's  securities  commenced  trading on The Nasdaq  SmallCap  Market
system upon the  effectiveness of the Company's  Initial Public Offering on June
22, 1993. As of that date, the Company's  Common Stock, the Class A Warrants and
the Class B Warrants  began  trading  under the  symbols  "MKPL" and "MKPLW" and
"MKPLZ",  respectively.  The Common Stock is presently  quoted and traded on the
OTC Bulletin Board as a result of the Company's failure to satisfy the continued
listing  requirements of The Nasdaq  SmallCap Market in July,  1998. The Class A
Warrants and Class B Warrants were delisted from The Nasdaq  SmallCap  Market as
of the close of  business on  December  18,  1996 and expired in June 1998.  The
Company also has Class D Warrants  which were  registered for trading on the OTC
Bulletin  Board under the symbol  "MKPLH"  (although  through  November  1998 no
trading in such securities has occurred).  As of September 30, 1998,  there were
approximately   26  holders  of  record  of  the  Company's   common  stock  and
approximately 1,100 beneficial owners.

   In March  1997,  the  Company's  Board of  Directors  approved a  one-for-six
reverse  stock split with  respect to the  outstanding  shares of the  Company's
common stock which was  subsequently  approved by the Company's  stockholders on
April 4,  1997 and  became  effective  on April  17,  1997.  All price per share
references contained herein reflect the consummation of the reverse stock split,
except as otherwise noted.

   The following  table  indicates the high and low bid prices for the Company's
Common  Stock,  the Class A Warrants  and the Class B  Warrants  for each of the
quarters  in the period from July 1, 1997,  through  June 30,  1998,  based upon
information  supplied by the Nasdaq  system and the OTC Bulletin  Board.  Prices
represent  quotations  between dealers  without  adjustments for retail markups,
markdowns or commissions, and may not represent actual transactions.

                For the Period from July 1, 1997 to June 30, 1998
                                Quoted Bid Price


1998              1st Quarter     2nd Quarter*    3rd Quarter*   4th Quarter*
                (ended 9/30/97) (ended 12/31/97) (ended 3/31/98)(ended 6/30/98)

Common Stock:
      High            1.06          1.53              1.00           1.56
      Low             1.00          1.00              1.00           1.50

                                        9

<PAGE>






1997            1st Quarter     2nd Quarter*     3rd Quarter*     4th Quarter*
----         (ended 9/30/96) (ended 12/31/96)   (ended 3/31/97) (ended 6/30/97)


Common Stock:
      High            5/8           5-1/2             3/16         1-1/4
      Low             11/32         1/8               1/8          1
Class A Warrants
      High            1/8           1/16
      Low             1/16          1/32
Class B Warrants
      High            3/32          1/32
      Low             1/32          1/32


* The Class A and Class B Warrants were delisted from The Nasdaq SmallCap Market
on December 18, 1996.

      On  September  30,  1998,  the  closing  bid price of the Common  Stock as
reported on OTC Bulletin Board was $.88.

      Computer  Marketplace has no dividend  policy,  and does not intend to pay
any dividends in the foreseeable future.

Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

YEAR ENDED JUNE 30, 1998 COMPARED TO YEAR ENDED JUNE 30, 1997

Total  revenues  for the year ended June 30,  1998 were  $7,969,959  compared to
$23,770,908  for the year ended June 30,  1997.  This  represents  a decrease of
$15,850,949  or 66% The decrease is a result of the Company's  efforts to reduce
its computer brokerage business.

Revenues from product sales for the year ended June 30, 1998 totaled  $5,725,882
a $16,466,949 or 74% decrease  compared to  $22,192,831  for the year ended June
30, 1997.  Revenues  from rental,  service and other for the year ended June 30,
1998, were $2,244,077 a $666,000 or 42% increase  compared to $1,578,077 for the
year ended June 30, 1997.  The  increase in rental  revenue  reflects  increased
leasing activity by New Millennium Leasing, a subsidiary of Medical Marketplace.

Revenues from computer  product sales and rentals were  $3,555,832  for the year
ended June 30, 1998 and  $16,959,846 for the year ended June 30, 1997. The sales
decrease  results in part from price  reductions in new computer  hardware which
negatively impacts selling prices and sales of used computer hardware.  The most
significant  factor  resulting  in this  decrease  in sales  is that all  branch
offices of the Company  were  closed down during the year ending June 30,  1997.
The sales associated with these offices diminished  substantially.  In addition,
the sales staff at the main facility in Corona,  California,  was  significantly
reduced as a result of the  Company's  desire to reduce it's expenses and reduce
its computer brokerage business.

                                       10

<PAGE>





Medical  product  sales and rentals  contributed  $4,414,128 in revenues for the
year ended June 30,  1998,  compared to  $6,811,000  for the year ended June 30,
1997. The current periods  results  represents a $2,396,872 or a 35% decrease in
revenues.  The  decrease  in medical  product  sales is  attributed  directly to
Medical Marketplace's inability to fund new purchases.

Total aggregate cost of revenues for the year ended June 30, 1998, and 1997 were
$6,883,256 or 86% of revenues and $21,077,229 or 89% of revenues, respectively.

Cost of revenues for computer  products  were  $3,000,797 or 84% of revenues and
$15,542,705  or 92% of  revenues  for the year  ended  June 30,  1998,  and 1997
respectively.  The 8%  decrease  in cost of  revenues  primarily  has to do with
market  fluctuations  and  management  does not view this 8%  differential  as a
trend.

Cost of revenues for medical  products  were  $3,882,459  or 88% of revenues and
$5,534,524  or 81% of  revenues  for the  year  ended  June 30,  1998,  and 1997
respectively, a 7% increase in cost of revenues as a percentage of sales.

Total selling,  general and  administrative (SG & A) expenses for the year ended
June 30, 1998, and 1997 were $3,238,976 or 41% of revenues and $5,862,084 or 25%
of revenues,  respectively.  The  aggregate  decrease in SG&A  expenses from the
prior period was $2,623,108.

SG&A expenses attributed to computer products were $2,074,585 or 58% of revenues
and  $4,873,827  or 29% of revenues for the year ended June 30,  1998,  and 1997
respectively.  The increase in SG&A  expenses as a percentage of revenues is due
primarily to the sales  volume  decrease  previously  mentioned.  The  aggregate
decrease  in  SG&A  expenses  from  the  prior  year  was  $2,799,242,  directly
reflecting the extent of personnel cut backs in the fiscal year.

SG&A expenses  attributed to medical products were $1,269,080 or 29% of revenues
and  $988,257  or 15% of  revenues  for the year ended June 30,  1998,  and 1997
respectively.  The increase in SG&A  expenses as a percentage of revenues is due
primarily to the increase in personnel expense from an expanded sales force.

Total  operating  loss was $2,256,961 and $3,168,405 for the year ended June 30,
1998,  and 1997  respectively.  This $911,444  favorable  change was a result of
reduced expenses and the business conditions described herein.

Operating loss for computer  products was $1,519,550 and $3,456,686 for the year
ended June 30, 1998, and 1997 respectively.  This $1,937,136 favorable change is
a result of reduced  expenses and reflects the  Company's  efforts to reduce its
computer brokerage business.

Operating  income  (loss) for medical  products and rentals was  $(737,411)  and
$288,281 for the year ended June 30, 1998, and 1997  respectively.  The $449,130
unfavorable  change reflects the expense related to the Company's expanded sales
and finance staff.

                                       11

<PAGE>





Interest  expense  for the year ended June 30,  1998 was  $132,638,  compared to
$395,555  for the year ended June 30,  1997.  The decrease of $262,917 or 66% is
due to the  repayment of the mortgage  payable  associated  with the sale of the
Company's  headquarters  facility  in the year  ended  June 30,  1997 and to the
repayment of the Company's previous credit facility in April of 1998.

The Company's  consolidated  net loss was  $2,207,131 or $1.63 per share for the
year  ended June 30,  1998,  versus  $3,347,435  or $2.48 per share for the year
ended  June 30,  1997.  The net loss was a  result  of the  business  conditions
described herein.

During the Year ended June 30, 1998,  the Company  negotiated  payment  terms of
certain accounts  payable,  resulting in a gain of $98,226.  There was no income
tax effect on this transaction.

Variability of  Periodic Results and Seasonality

Results  from any one period  cannot be used to predict  the  results  for other
fiscal periods.  Revenues fluctuate from period to period,  however,  management
does not see any seasonality or predictability to these fluctuations.

Liquidity and Capital Resources

The  Company  has  historically  financed  its growth  and cash needs  primarily
through  borrowings  and cash  generated  from  operations.  The funds  received
through the initial public offering in June 1993, in the amount of approximately
$6.6 million enabled the Company to eliminate most of its long term debt at that
time. The Company had negative working capital of ($1,387,161) at June 30, 1998.
Working capital at June 30, 1997 was $1,455,083.

During  the year  ended  June  30,  1998,  the  Company  used the June 30,  1997
available  cash  and  cash   equivalents  of   approximately   $1,500,000,   the
availability of borrowing under the Company's new revolving  credit facility and
vendor extended credit in order to fund the operations of the Company.

New  Millennium  Leasing,  Inc.  ("NMLI"),  was formed as a  subsidiary  of
Medical  Marketplace,  in early 1997.  The primary  focus of NMLI was to provide
leasing  for  a  majority  of  the  sales  generated  by  its  parent,   Medical
Marketplace,  Inc. ("MMP").  In so doing, NMLI hopes to add incremental  revenue
and net income by  discounting  those leases on a non recourse  basis to lenders
who buy leases in this manner.

NMLI only writes  leases whose net present  value exceeds the sales price of the
equipment.  However,  in certain  circumstances,  the lease also  allows NMLI to
retain the residual value of the equipment. This residual value becomes an asset
on the balance sheet and is taken into income over the term of the lease.

The  stated  goal  of  NMLI  is to  both  increase  the  profitability  of  each
transaction entered into by Medical Marketplace and through leasing, to generate
new transactions that MMP would not have previously been able to generate due to
the lack of a lease financing.

                                       12

<PAGE>





During the year ended June 30, 1998, the Company significantly reduced the sized
and scope of its  computer  business.  The  Company  believes  that  because  of
significant change in the computer industry,  the market is more competitive and
opportunities  to engage  in  certain  business  are no  longer  available.  The
decrease  in the  usage  of  mid-sized  computer  systems  and the  increase  in
importance of personal  computers has severely reduced the Company's business in
the RISC 6000 and AS400 market.  Further,  the emergence of major manufacturers,
(such as,  IBM,  and DEC) into the  reselling  business,  has made it  extremely
difficult  for the  Company to compete  successfully.  Note 14 to the  Company's
Financial  Statements  prepared in conformity with generally accepted accounting
principles,  by the  Company's  independent  auditors,  Moore,  Stephens,  P.C.,
expresses the auditors  uncertainty  as to whether the Company can continue as a
going concern.  As a result, the Company is presently in the process of reducing
its  computer  business.  As a  consequence,  the Company is  actively  pursuing
acquiring an  alternative  business  and/or assets which may be developed into a
business.

On August  27,  1998,  the  Company,  Medical  Marketplace,  and  Medley  Credit
Acceptance  Corporation  ("Medley")  entered  into a Stock  Purchase  Agreement,
pursuant  to which  Medley  agreed to  purchase  all of the  shares  of  Medical
Marketplace  owned by Computer,  which  represents  83.3% of the total number of
shares  outstanding.  Medley agreed to pay 25,000  shares of  restricted  Medley
Common Stock in exchange for the 2,500,000 shares of Medical  Marketplace  owned
by the Company so long as Medical  Marketplace  had $50,000 in net assets at the
time of the closing of the transaction.  The closing of the proposed transaction
was subject to the satisfaction of certain conditions  including the approval of
a majority of the shares of the Company's common stock outstanding. In addition,
pending the closing,  Medley  agreed to assist in the day to day  management  of
Medical  Marketplace  pursuant to the terms of an  Operating  Agreement  between
Medical  Marketplace  and Medley.  On November  20, 1998,  the Company  notified
Medley that it was terminating  both the Stock Purchase  Agreement and Operating
Agreement  effective as of November 25, 1998.  The Company is  continuing in its
search  for a  purchaser  of Medical  Marketplace.  See "The  Medical  Equipment
Business - The Medley Credit Transaction".

During  1998 the  Company  repaid  the  outstanding  obligations  under a credit
facility,  Coast Business  Credit,  from the proceeds of a $200,000 loan from an
individual lender. In exchange for the loan, the Company issued a 12% promissory
note in the  aggregate  principal  amount of $200,000 due October 31,  1998.  On
October 8, 1998 the Company repaid the note by delivering title to the Company's
properties located in Corona and Mariposa,  California,  valued at $230,000.  In
addition,  the Company  received a cash payment of  $30,000.00  from the lender.
Shortly thereafter,  the lender sold the property to the Kiley Children's Trust,
a trust  established for the benefit of the children of L. Wayne Kiley and Nancy
Kiley.

The  Company  has  addressed  the Year 2000  issue by  converting  its  existing
accounting and sales  software to a new software that is in compliance  with the
Year 2000  requirements.  The new software took effect July 1, 1998 and its cost
was fully  absorbed  in the year ending June 30,  1998.  It is believed  that no
third party  relationship  would cause any  material  impact on the Company as a
result of the Year 2000 problem.

                                       13

<PAGE>





Item 7.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

   See  financial  statements  following  Item 13 of this Annual  Report on Form
10-KSB.

Item 8.  CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None.

                                    PART III

      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

   The  following  persons  are the  executive  officers  and  directors  of the
Company:

 Name                        Age         Position

L. Wayne Kiley                55   President, Chief Executive Officer, Director
                                   (Chief Accounting Officer) and President of
                                   Medical Marketplace
Nancy Kiley                   40   Secretary and Director
J. R. Achten                  55   Director
Thomas E. Evans, Jr.          58   Director
Thomas Mason(1)               38   Vice President
Brian Hintergardt             40   President of Medical Marketplace

(1) Mr. Mason resigned in May 1998.

      All Directors  hold office until the next annual  meeting of  stockholders
and the election and  qualification  of their  successors.  Officers are elected
annually  by  the  Board  of  Directors  and,  subject  to  existing  employment
agreements, serve at the discretion of the Board.

      Outside Directors shall receive $10,000 per year as compensation for their
services.  Directors  who are also  officers  of the  Company do not receive any
compensation for serving on the Board of Directors. All Directors are reimbursed
by the Company for any expenses incurred in attending Directors' meetings.

Background of Executive Officers and Directors

L. Wayne Kiley has been the President and Chief Executive Officer of the Company
since March 2, 1984,  and a director since June 19, 1983. Mr. Kiley was also the
President of Medical  Marketplace  from its inception  through August 1998. From
1978 to 1983,  he was a  self-employed  independent  real  estate  developer  in
Tucson, Arizona. From 1970 to 1978, he was the owner of the Business Exchange in
Santa Ana, California.  He graduated in 1969 from Michigan State University with
a Bachelor of Arts degree in Political Science.

                                       14

<PAGE>





Nancy Kiley has served as Secretary  and director of the Company  since March 2,
1984,  and is the wife of L. Wayne  Kiley,  the  Company's  President  and Chief
Executive Officer.

J. R. Achten has been a director of the Company since May 1993.  Mr. Achten
has been President and Chief Executive Officer of Millennium Enterprises,  Inc.,
located in Laguna Niguel, California,  since 1987. Millennium Enterprises,  Inc.
is in the  business of real estate  sales and  development,  as well as computer
sales.  Mr.  Achten  attended  Long Beach  State  College and  graduated  with a
Bachelor of Arts degree in Economics.

Thomas E. Evans,  Jr. has been a director  since  February 1994. Mr. Evans,
since July 1995, has been the  President,  Orange County  Division,  of Fidelity
National Title Insurance Company.  Since 1993, he served as Vice President,  and
prior to that, held various senior  management  positions with that same company
since 1980. Mr. Evans is a member of the American Land Title  Association and is
President of California  Land Title  Association.  Mr. Evans served from 1984 to
1992 as a director of Fidelity National Financial,  Inc., which is listed on the
New York Stock Exchange.

Thomas Mason was a Vice  President of the Company  from  September  1997 through
May, 1998. Mr. Mason was a sales  representative  with the Company since October
1992.  From 1979 to October  1992,  Mr.  Mason was a sales  representative  with
Argonaut Computer.

Brian Hintergardt has been Executive Vice President of Medical  Marketplace from
March 1994 to August 1998 and since that time he has served as the  President of
Medical  Marketplace.  From  1987  until  1993,  Mr.  Hintergardt  was the Chief
Executive  Officer,  Administrator  and  Engineer of Coalinga  Regional  Medical
Center.  Mr.  Hintergardt  has  an  engineering  degree  from  California  State
Polytechnical University.

There are no family  relationships  among any of such  persons,  except  that L.
Wayne Kiley, the Company's  President and Chief Executive Officer, is married to
Nancy Kiley, the Company's Secretary.

      All directors  hold office until the next annual  meeting of  stockholders
and the election and  qualification  of their  successors.  Officers are elected
annually  by  the  Board  of  Directors  and,  subject  to  existing  employment
agreements, serve at the discretion of the Board.

                                       15

<PAGE>



Compliance with Section 16(a) of The Securities Exchange Act of 1934

      Section  16(a)  of the  Securities  Exchange  Act  of  1934  requires  the
Company's  directors and executive  officers,  and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities,  to file
with the Securities and Exchange Commission ("SEC") initial reports of ownership
and reports of changes in ownership of common stock and other equity  securities
of  the  Company.  Officers,  directors  and  greater  than  ten  percent  (10%)
stockholders  are required by SEC  regulation to furnish the Company with copies
of all Section 16(a) forms they file.

      To the  Company's  knowledge,  based solely on its review of the copies of
such reports  furnished to the Company  during the year ended June 30, 1998, all
Section 16(a) filing  requirements  applicable  to its  officers,  directors and
greater than ten percent (10%) beneficial owners were satisfied.

Item 10.  EXECUTIVE COMPENSATION


The following table shows all the cash  compensation  paid by the Company to the
Chief Executive Officer and two of the Company's officers who received in excess
of $100,000 in annual  salary and bonus  during the fiscal  years ended June 30,
1998, 1997, and 1996:


                   Annual               Compensation
               Compensation             Awards
(a)            (b)                   (c)                 (d)          (g)
                     (i)
                                                        Number
                                                        of
Name and Principal Position  Year      Salary    Bonus  Options  Compensation

L. Wayne Kiley, President    1998     $269,228   $  --     ----       ----
Chief Executive Officer and  1997     $306,977   $  --   661,667     $4,476
Director                     1996     $303,814$  $  --   195,833     $1,313

Thomas Mason                 1998     $178,800   $  --     ----      $   --
Vice President               1997     $211,976   $  --   143,000     $   --
                             1996     $233,916   $  --    30,000     $   --

Brian Hintergardt            1998     $120,168   $  --        --         --
Executive Vice President     1997     $119,033   $  --    33,333     $4,033
Medical Marketplace          1996     $ 74,054   $  --    60,000     $   --


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

   The Company  adopted a profit sharing plan in January 1991. The plan provided
for voluntary  employee  contributions  and  discretionary  contributions by the
Company.  The plan was intended to qualify as a defined  contribution plan under
the  Internal  Revenue  Code of 1986.  The amounts  earned under the plan by the
named  individuals in the Executive  Compensation  table are reflected under the
column headed "All Other Compensation".

                                      16

<PAGE>





      In January  1995,  the Company  adopted a new  combined  401(k) and profit
sharing plan (the "Plan")  which  replaced the prior plans.  The new Plan covers
substantially all of the Company's eligible employees. The new Plan is available
to all  employees  with  more  than one (1) year of  service  or,  to  employees
employed by the Company on February 1, 1995. Company contributions to the profit
sharing  component of the Plan will be at the discretion of management.  Company
contributions  to the 401(K) component of the Plan will be based on a percentage
of employee contributions as determined by management.  The charge to operations
related to the Plan for the years ended June 30,  1998 and 1997,  was $3,766 and
$17,359, respectively.

      In February 1995, the stockholders  approved the Company's 1994 Stock Plan
which  allows for the  issuance of stock  options,  restricted  stock,  deferred
stock,  bonus shares performance  awards,  dividend  equivalent rights,  limited
stock  appreciation  rights and other  stock-based  awards,  or any  combination
thereof.  The  maximum  number of shares of Common  Stock with  respect to which
awards may be granted is initially 166,667 shares.

      In May 1994,  the Board of Directors of the Company  approved the issuance
of up to 300,000  options to certain  employees and  consultants  of the Company
(the "Options").  The Options vested  immediately upon the grant thereof and are
exercisable  at $14.40 per share (or 80% of the fair market value on the date of
grant) at any time prior to May 10,  1997.  The Company  granted  133,333 of the
available  Options during fiscal year 1994. The remaining  166,667  Options were
granted  in July 1994 to L.  Wayne  Kiley,  the  President  and Chief  Executive
Officer of the Company.

      In June 1996, the Board of Directors of the Company  approved the issuance
of new  non-qualified  stock  options to those  employees  and  consultants  who
currently held the Options.  These replacement options required the cancellation
of the prior options, vested immediately and were exercisable at $6.00 per share
at any time prior to June 11,  2000.  A total of 280,500  options were issued at
$6.00 per share. In December 1996, the Company's Compensation Committee approved
the issuance to certain employees, officers and directors options to purchase an
aggregate  of  1,000,000  shares of Common Stock (the  "December  Options").  In
exchange for the issuance of these options,  certain option holders  surrendered
for cancellation an aggregate of 242,500 options issued in June 1996 for 722,500
of the December Options. These options vest immediately and are exercisable over
a four (4) year  period at $1.00 per share.  Of the  options  issued,  there are
presently options exercisable for a total 968,500 shares of Common Stock

      On January 3, 1996, the Company's Board of Directors approved the issuance
of 158,083  non-qualified  stock options to  substantially  all employees of the
Company, its subsidiaries, and the non-employee directors, to purchase shares of
the  Company's  common  stock at an  exercise  price equal to 100% of the market
value of the  Company's  common  stock on the date of grant.  The stock  options
require future  employment or services to the Company and vest one third each on
January 3, 1997, January 3, 1998, and January 3, 1999,  respectively.  The stock
options must be exercised by January 3, 2006. Of the options  issued,  there are
presently options exercisable for a total of 46,500 shares of Common Stock.

      As of December 1996, the Company's subsidiary,  Medical Marketplace, Inc.,
issued to certain employees of, and a consultant to, Medical Marketplace options
to purchase an aggregate of 1,000,000 shares of Medical Marketplace common stock
at an exercise  price of $.80 per share.  Such  options vest over a two (2) year
period commencing in December 1997;  provided  however,  that in the event of an
initial public offering of Medical Marketplace such options vest immediately.

                                      17

<PAGE>





Employment Agreements

      On October 16, 1992, the Company entered into an employment  agreement for
a five (5) year term (the  "Employment  Term")  including an additional  one (1)
year  renewal  term with L. Wayne  Kiley as the  President  and Chief  Executive
Officer of the Company.  Pursuant to such employment agreement, Mr. Kiley was to
receive an annual  salary of $275,000 per annum with an annual ten percent (10%)
increase,  effective on the agreement  anniversary  date, so long as the Company
was  profitable for the preceding  fiscal year.  The  employment  agreement also
provided for the use by Mr. Kiley of a Company car, disability insurance and for
bonuses  and  other  incentive  compensation  as the Board of  Directors  deemed
appropriate,  based upon the Company's operating performance or other reasonable
criteria.  In  addition,  Mr.  Kiley had the option (the  "Original  Option") to
purchase up to eighteen  percent (18%) of the Company's common stock, so long as
the Company  achieves  certain earnings before the payment of interest and taxes
("EBIT"),  such  targets  commenced  with EBIT of  $1,250,000  during any of the
Company's  fiscal years occurring during the Employment Term. The purchase price
for the shares of common stock  purchased  pursuant to the  Original  Option was
equal to $1.60 per share,  which was eighty percent (80%) of the per share price
offered to the public in connection with the Company's initial public offering.

      In October 1996,  the Company  amended its  employment  agreement  with L.
Wayne Kiley, the Company's Chairman of the Board,  President and Chief Executive
Officer.  Pursuant to such amendment,  (i) the employment agreement's expiration
date of October 16, 1997 was extended to October 16, 1999,  (ii) in exchange for
termination of the Original Option,  Mr. Kiley was granted the right to purchase
a number of shares of Common  Stock for a period of four (4)  years,  at a price
equal to seventy  five percent  (75%) of the closing bid price of the  Company's
shares of Common  Stock on the date of grant  equal to 2.5%,  3% and 3.5% of the
shares outstanding, should the Company report annual earnings before the payment
of interest and taxes of $625,000, $875,000 and $1,000,000,  respectively, (iii)
Mr.  Kiley will be paid a cash bonus  equal to 5% of any profit  realized by the
Company  from the sale of assets  outside the ordinary  course of business,  and
(iv) an insurance  policy  covering the life of Mr.  Kiley  whereby Mr.  Kiley's
estate will be paid  $2,000,000 in exchange for the  redemption of the shares of
the Company's  capital  stock  beneficially  owned by Mr.  Kiley.  The Agreement
contains other customary terms and conditions  including  termination for cause,
non-competition  on  confidentiality  provisions.  The  Company  has  failed  to
maintain  the  insurance  policy on Mr.  Kiley.  In  March,  1998,  the  Company
suspended salary payments to Mr. Kiley under his Employment Agreement because of
insufficient  capital. As of December 31, 1998, the Company has recorded a total
of $201,500 in accrued and unpaid salary to Mr. Kiley.

                                      18

<PAGE>





Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

      The following  table sets forth certain  information,  as of September 30,
1998, with respect to the beneficial  ownership of the outstanding  Common Stock
by (i) any holder of more than five  percent (5%) of the  outstanding  shares of
the Company's Common Stock; (ii) each of the Company's named executive  officers
and  directors;  and (iii) the  directors  and named  executive  officers of the
Company as a group:

                                                                Approximate
Name and Address              Amount and Nature of                   Percent
of Beneficial Owner (1)       Beneficial Ownership                   of Class
-- ---------- ----- ---       ---------- ---------                   -- -----

L. Wayne Kiley (2)               1,023,637(3)                     50.3%

Nancy Kiley (2)                    343,072(4)                     25.4%

Kiley Children's Trust (5)          83,333                         6.2%

J. R. Achten                       113,889(6)                      8.4%

Brian Hintergardt                   36,111(7)                      2.9%

Thomas E. Evans, Jr.                10,556(8)                       .8%

Thomas Mason                        143,556(9)                     9.6%

Victoria Holdings, Inc.(10)       1,400,000(11)                   59.5%
6700 North Andrews Avenue
Ft. Lauderdale, FL  333094

Directors and Executive            1,233,860                      54.6%
Officers as a Group
(7 persons) (3)(4)(6)(7)(8)

(1) Unless otherwise indicated, the address of the beneficial owner is: c/o
Computer Marketplace(R), Inc., 1171 Railroad Street, Corona, California, 91720.

(2) L. Wayne Kiley and Nancy Kiley are the joint owners of 249,183 shares of the
common  stock.  The  children  of  L.  Wayne  Kiley  and  Nancy  Kiley  are  the
beneficiaries of the Kiley Children's Trust,  which trust holds 83,333 shares of
common  stock.  In  addition,  L.  Wayne  Kiley and Nancy  Kiley  formed and are
directors of a charitable  organization  called Operation  Frontline which holds
10,000 shares of common stock.  The Kiley's disclaim  beneficial  ownership with
respect to the shares of common  stock  held by the Kiley  Children's  Trust and
Operation Frontline.

                                      19

<PAGE>





(3)  Includes  (a) 83,333  shares of Common  Stock held by the Kiley  Children's
Trust,  (b) 10,000  shares of Common  Stock  held by  Operation  Frontline,  (c)
options issued in January 1996  exercisable for 29,166 shares of Common Stock at
$1.6875 per share, two-thirds of which vested on January 3, 1998 and (d) options
issued as of December  1996  exercisable  for 661,667  shares of Common Stock at
$1.00 per share.  Mr. Kiley disclaims the beneficial  ownership of the Company's
securities held individually by his wife, Nancy Kiley.

(4)  Includes  (a) 83,333  shares of Common  Stock held by the Kiley  Children's
Trust,  (b) 10,000 shares of Common Stock held by Operation  Frontline,  and (c)
options  issued in January  1996  exercisable  for 833 shares of Common Stock at
$1.6875 per share,  two-thirds  of which  vested on January 3, 1998.  Ms.  Kiley
disclaims the beneficial ownership of the Company's securities held individually
by her husband, L. Wayne Kiley.

(5) The Kiley  Children's Trust was formed by L. Wayne Kiley and Nancy Kiley for
the benefit of their children.

(6)  Includes  (a) 83,333  shares of common  stock held by the Kiley  Children's
Trust of which Mr. Achten is the sole trustee, (b) 10,000 shares of common stock
held by  Operation  Frontline  of which Mr.  Achten is a  director,  (c) options
issued in January  1996  exercisable  for 833 shares of Common  Stock at $1.6875
two-thirds  of which  vested on January 3, 1998,  and (d)  options  issued as of
December 1996  exercisable for 20,000 shares of Common Stock at $1.00 per share.
Mr. Achten disclaims  beneficial  ownership with respect to the shares of common
stock held by the Kiley Children's Trust and Operation Frontline.

(7) Includes (a) options issued in January 1996  exercisable for 8,333 shares of
Common Stock at $1.6875 per share, two-thirds of which vested on January 3, 1998
and (b) options  issued as of December  1996  exercisable  for 30,000  shares of
Common Stock at $1.00 per share.

(8) Includes (a) options  issued in January 1996  exercisable  for 833 shares of
Common  Stock at $1.6875  per share,  two-thirds  of which  vested on January 3,
1998, and (b) options issued as of December 1996  exercisable  for 10,000 shares
of Common Stock at $1.00 per share.

(9) Includes (a) options issued in January 1996  exercisable for 1,667 shares of
Common  Stock at  $1.6875  per share and (b)  options  issued in  December  1996
exercisable for 143,000 shares at $1.00 per share.

(10) Victoria  Holdings,  Inc. is beneficially  owned by Elliot Loewenstern
and Richard Bronson

(11) Includes (i) options issued as of December 1996  exercisable  for 1,000,000
shares of Common  Stock at $1.00 per share  pursuant to a  Consulting  Agreement
with  the  Company,  (ii)  200,000  shares  of  Common  Stock  held  by  Shelley
Loewenstern  and  Elliot  Loewenstern,  as tenants  by the  entirety,  and (iii)
200,000 held by The Richard Bronson Trust. See "Certain Transactions."

                                      20

<PAGE>





Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      In  December  1996,  the  Company  entered  into a three  year  consulting
agreement with Victoria Holdings,  Inc. ("Victoria  Holdings"),  an affiliate of
Biltmore Securities,  Inc.  ("Biltmore").  Pursuant to the consulting agreement,
Victoria  Holdings  agreed to assist the  Company in  identifying  new  business
partners suitable for the Company and in structuring,  negotiating and financing
such  transactions.  Pursuant  to the  terms of the  consulting  agreement,  the
Company issued to Victoria Holdings options (the "Victoria Holdings Options") to
purchase  1,000,000  shares of Common  Stock at an  exercise  price of $1.00 per
share. In addition, the Company agreed to issue 1,000,000 shares of Common Stock
to Victoria  Holdings  (the  "Victoria  Fee Shares")  upon  consummation  by the
Company of (i) an  acquisition  of a company (or  companies)  introduced  to the
Company by Victoria  Holdings  with net assets of at least  $2,500,000 or (ii) a
divestiture of the Company's assets, or a sale of a controlling  interest in the
Company's  capital stock,  to a purchaser  introduced to the Company by Victoria
Holdings  resulting in net proceeds to the Company in excess of  $2,000,000.  In
December 1998, the Company  notified  Victoria  Holdings that it was terminating
the Consulting Agreement.

      On  December  1, 1997,  the  Company  entered  into a lease  with  Quality
Associates,  Inc.,  a company  owned  and  controlled  by L.  Wayne  Kiley,  the
Company's  Chairman of the Board,  Chief  Executive  Officer and President.  The
lease is for the Company's  executive  offices located at 1171 Railroad  Street,
Corona,  CA 91720,  and for  warehouse  space located at 340 North Grant Street,
Corona, CA, each for a three year term ending October 31, 2000. The office space
and the  warehouse  space  require  the  payment of $9,000 and $4,000 in monthly
rent, respectively. Maintenance of the premises is at the Company's expense. The
Company has failed to pay rent since  September  1998 and is as of December  30,
1998 in arrears in the aggregate amount of $40,500.

      With respect to each of the foregoing  transactions,  the Company believes
that the  terms of such  transactions  were as fair to the  Company  as could be
obtained from an unrelated third party. Future transactions with affiliates will
be on terms no less favorable than could be obtained from  unaffiliated  parties
and will be  approved  by a majority  of the  independent  and/or  disinterested
members of the board of directors.




                                      21

<PAGE>



                                     PART IV


Item 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a) (1) Financial Statements

      The financial  statements  listed in the  accompanying  index to financial
statements are filed as part of this annual report.

(a) (2) Financial Statement Schedules

      All  schedules  are  omitted  because  they  are  not  applicable  or  the
information  required is included in the consolidated  financial  statements and
notes thereto.

(a) (3) Exhibits

The following is a list of exhibits filed as part of this Annual  Report.  Where
so indicated by footnote,  the exhibits have either been previously  filed,  and
are hereby incorporated by reference:

Exhibit
Number

 3.01 Certificate of Incorporation of the Company.  (1)

 3.02 By-Laws of the Company.  (1)

 3.03 Certificate of Amendment of Certificate of Incorporation.  (1)

 4.01 Certificate for shares of Common Stock.  (1)

 4.02 Form of Underwriter's Unit Purchase Option.  (1)

10.01 Loan and Security  Agreement  dated  September  14, 1995, by Computer
Marketplace,  Inc., Superior Solutions,  Inc. and Medical Marketplace,  Inc., in
favor of CoastFed Business Credit Corporation. (2)

10.02 Accounts  Collateral  Security Agreement dated September 14, 1995, by
Computer  Marketplace,  Inc., Superior Solutions,  Inc. and Medical Marketplace,
Inc., in favor of CoastFed Business Credit Corporation. (2)

10.03 Inventory  Collateral  Security Agreement dated September 14,1995, by
Computer  Marketplace,  Inc., Superior Solutions,  Inc. and Medical Marketplace,
Inc., in favor of CoastFed Business Credit Corporation. (2)

10.04 Joint and  Several  Borrower  Rider  dated  September  14,  1995,  by
Computer  Marketplace,  Inc., Superior Solutions,  Inc. and Medical Marketplace,
Inc., in favor of CoastFed Business Credit Corporation. (2)

10.05 Amended Employment Agreement between the Company and L. Wayne Kiley. (3)

10.06 Consulting Agreement between the Company and Victoria Holdings, Inc. (3)

                                      22

<PAGE>





10.7 Option to  Purchase  Common  Stock of the  Company  issued to Victoria
Holdings, Inc. (3)

21.01 Subsidiaries of the Registrant

---------------
(1) Previously filed with the Securities and Exchange  Commission as Exhibits to
the  Registrant's  Registration.  Statement of Form SB-2,  File No.  33-60346LA,
dated June 22, 1993, and incorporated herein by reference.

(2)  Incorporated  herein by reference to the Form 10-KSB of the  Registrant for
the year ended June 30, 1995.

(3) Incorporated herein by reference to the Registration  Statement on Form SB-2
of the Registrant dated June 11, 1997.

(b)   Reports on Form 8-K

         March 12, 1998 - Item 5 April 2, 1998 - Item 5 July 22, 1998 - Item 5

                                      23

<PAGE>



SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
executed on this 21 day of January 1999.

                               COMPUTER MARKETPLACE, INC.


                                By:  /s/ L. Wayne Kiley
                                       L. Wayne Kiley
                       President, Chief Executive Officer,
                     (Chief Accounting Officer) and Director

In  accordance  with the Exchange  Act, this report has been signed below by the
following persons on behalf of the registrant in the capacities and on the dates
indicated.

Signature                           Title                   Date

/s/ L. Wayne Kiley              President,               January 21, 1999
---------------------------
L. Wayne Kiley                  Chief Executive
                                Officer (Chief Accounting
                                Officer) and Director

/s/ Nancy Kiley                 Secretary and Director   January 21, 1999
---------------------------
Nancy Kiley


/s/ J.R. Achten                 Director                 January 21, 1999
J. R. Achten


/s/ Thomas E. Evans, Jr.        Director                 January 21, 1999
---------------------------
Thomas E. Evans, Jr.


                                       24

<PAGE>




                                                                  Exhibit 21.01


                   Subsidiaries of Computer Marketplace, Inc.




Medical Marketplace, Inc. a Delaware corporation.

Superior Solutions, Inc., a Delaware corporation

New Millenium Leasing, Inc., a Delaware corporation and indirect subsidiary

                                       25

<PAGE>




INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------


                                                                         Pages


Report of Independent Auditors....................................F-1...

Consolidated Balance Sheet as of June 30, 1998....................F-2...F-3

Consolidated Statements of Operations for the years ended
June 30, 1998 and 1997............................................F-4...

Consolidated Statements of Stockholders' Equity for the years ended
June 30, 1998 and 1997............................................F-5...

Consolidated Statements of Cash Flows for the years ended June 30,
1998 and 1997.....................................................F-6...F-7

Notes to Consolidated Financial Statements........................F-8...F-20



                        .   .   .   .   .   .   .   .   .



<PAGE>




                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
  Computer Marketplace(R), Inc.



     We have audited the  accompanying  consolidated  balance  sheet of Computer
Marketplace(R), Inc., and its subsidiaries, as of June 30, 1998, and the related
consolidated statements of operations,  stockholders' equity, and cash flows for
each  of the  two  fiscal  years  in the  period  ended  June  30,  1998.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

            We  conducted  our  audits in  accordance  with  generally  accepted
auditing  standards.  Those standards require that we plan and perform the audit
to  obtain  reasonable  assurance  about  whether  the  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,  the consolidated  financial  statements referred to
above present  fairly,  in all material  respects,  the  consolidated  financial
position of Computer  Marketplace(R),  Inc. and its  subsidiaries as of June 30,
1998, and the consolidated  results of their operations and their cash flows for
each of the two fiscal years in the period ended June 30,  1998,  in  conformity
with generally accepted accounting principles.

            The accompanying  financial  statements have been prepared  assuming
that the Company will  continue as a going  concern.  As discussed in Note 14 to
the  financial  statements,  the  Company  has  suffered  recurring  losses from
operations,  has a significant working capital  deficiency,  and has encountered
difficulties in paying its creditors on a timely basis.  These  conditions raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's plans in regard to these matters are also described in Note 14. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.





                                          MOORE STEPHENS, P. C.
                                      Certified Public Accountants.


Cranford, New Jersey
September 18, 1998


                                       F-1

<PAGE>




                                                                      Exhibit A

COMPUTER MARKETPLACE(R), INC., AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1998.
------------------------------------------------------------------------------



<TABLE>

Assets:
Current Assets:
<S>                                                                     <C>        
  Cash and Cash Equivalents                                             $    36,580
  Accounts Receivable [Less Allowance for Doubtful Accounts of $112,472]    421,602
  Inventory [Net of Valuation Allowance of $50,000]                         285,412
  Property Held for Sale                                                    381,845
  Other Current Assets                                                       22,088
                                                                        -----------

  Total Current Assets                                                    1,147,527

Property and Equipment - Net                                                969,570
                                                                        -----------

Other Assets:
  Residual Value of Equipment                                             1,165,000
  Others                                                                    122,641

  Total Other Assets                                                      1,287,641

  Total Assets                                                          $ 3,404,738
                                                                        ===========

</TABLE>


See Notes to Consolidated Financial Statements.

                                        F-2

<PAGE>




                                                                    Exhibit A -
                                                                    Sheet #2

COMPUTER MARKETPLACE(R), INC., AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1998.
------------------------------------------------------------------------------


<TABLE>

Liabilities and Stockholders' Equity:
Current Liabilities:
<S>                                                                     <C>        
  Notes Payable                                                         $ 1,437,090
  Accounts Payable                                                          610,015
  Accrued Payroll and Payroll Related Liabilities                           178,901
  Customer Deposits                                                         196,255
  Other Current Liabilities                                                 112,427
                                                                        -----------

  Total Current Liabilities                                               2,534,688

Long-Term Debt                                                              532,301

Minority Interest in Net Assets of Subsidiary                                    --
                                                                        -----------

Commitments and Contingencies                                                    --

Stockholders' Equity:
  Preferred Stock - $.0001 Par Value, 1,000,000 Shares
   Authorized, No Shares Issued and Outstanding                                  --

  Common Stock - $.0001 Par Value, 50,000,000 Shares
   Authorized, 1,352,424 Shares Issued and Outstanding                          135

  Deferred Compensation                                                    (274,372)

  Capital in Excess of Par Value                                          8,785,100

  Accumulated Deficit                                                    (8,173,114)

  Total Stockholders' Equity                                                337,749

  Total Liabilities and Stockholders' Equity                            $ 3,404,738
                                                                        ===========
</TABLE>



See Notes to Consolidated Financial Statements.


                                        F-3

<PAGE>



                                                                      Exhibit B

COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------------------------------------

<TABLE>

                                                                  Years ended
                                                                   June 30,
                                                             1 9 9 8       1 9 9 7
                                                             -------       -------

Revenues:
<S>                                                        <C>          <C>        
  Product Sales                                            $5,725,882   $22,192,831
  Rental, Service and Other                                 2,244,077     1,578,077
                                                           ----------   -----------

  Total Revenues                                            7,969,959    23,770,908
                                                           ----------   -----------

Cost and Expenses:
  Cost of Revenues - Product Sales                          5,394,503    19,501,048
  Cost of Revenues, Rental, Service and Other               1,488,753     1,576,181
  Selling, General and Administrative                       3,238,976     5,862,084
  Writedown of Property Held for Sale                         104,688            --
                                                           ----------   -----------

  Total Cost and Expenses                                  10,226,920    26,939,313
                                                           ----------   -----------

Operating Loss                                             (2,256,961)   (3,168,405)
                                                           ----------   -----------

Other Income [Expense]:
  Interest Expense                                           (132,638)     (395,555)
  Interest Income                                              24,246         5,994
  [Loss] Gain on Sale of Assets                               (81,028)      168,904
  Miscellaneous Income                                         22,586        38,202
                                                           ----------   -----------

  Other [Expense] - Net                                      (166,834)     (182,455)
                                                           ----------   -----------

  Loss Before Income Taxes, Minority Interest in
   Subsidiary and Extraordinary Item                       (2,423,795)   (3,350,860)

Provision for Income Taxes                                         --            --

Minority Interest in Loss of Subsidiary                       118,439         3,425
                                                           ----------   -----------

  Loss Before Extraordinary Item                           (2,305,356)   (3,347,435)

Extraordinary Item:
  Gain from Restructuring of Debt - Net of Income
      Taxes of$-0-                                             98,225            --
                                                           ----------   -----------

  Net Loss                                                 $(2,207,131) $(3,347,435)
                                                           ===========  ===========

Loss Per Share:
  Loss Before Extraordinary Item                           $    (1.70)  $     (2.48)
  Extraordinary Item                                              .07            --
                                                           ----------   -----------

  Net Loss Per Share                                            (1.63)        (2.48)
                                                           ==========   ===========

  Weighted Average Common Shares Outstanding                1,352,424     1,352,424
                                                           ==========   ===========

</TABLE>

See Notes to Consolidated Financial Statements.

                                        F-4

<PAGE>




                                                                      Exhibit C

COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
------------------------------------------------------------------------------

<TABLE>


                                                Capital in                              Total
                              Common Stock      Excess of   Accumulated   Deferred   Stockholders'
                             Shares    Amount   Par Value     Deficit   Compensation   Equity

<S>            <C> <C>      <C>        <C>      <C>         <C>           <C>       <C>        
Balance - June 30, 1996     1,352,424  $   135  $6,907,269  $(2,618,548)  $     --  $ 4,288,856

  Net Loss                         --       --          --   (3,347,435)        --   (3,347,435)

  Issuance of Warrants
   [Private Placement
   Offering of Subsidiary          --       --     274,031           --         --      274,031

  Sale of Subsidiary Stock         --       --     553,857           --         --      553,857

  Issuance of Options [To
   Non-employees]                  --       --     599,728           --   (548,728)      51,000

  Amortization of
   Deferred Compensation           --       --          --           --     91,452       91,452

  Issuance of Options
   [To Employees]                  --       --     468,000           --         --      468,000

  Additional Offering
   Costs in Connection
   With Private Placement
   Offering                        --       --     (17,785)          --         --      (17,785)
                            ---------  -------   ---------    ---------   --------   ----------

Balance - June 30, 1997     1,352,424      135   8,785,100   (5,965,983)  (457,276)   2,361,976

  Amortization of
   Deferred
   Compensation                    --       --          --           --    182,904      182,904

  Net Loss                         --       --          --   (2,207,131)        --   (2,207,131)
                           ----------  -------  ----------  -----------  ---------   ----------

Balance - June 30, 1998     1,352,424  $   135  $8,785,100  $(8,173,114) $(274,372)  $  337,749
                           ==========  =======  ==========  ===========  =========   ==========

</TABLE>




See Notes to Consolidated Financial Statements.

                                        F-5

<PAGE>




                                                                      Exhibit D

COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------
<TABLE>


                                                                  Years ended
                                                                   June 30,
                                                             1 9 9 8       1 9 9 7
                                                             -------       -------

Operating Activities:
<S>                                                        <C>          <C>         
  Net Loss                                                 $(2,207,131) $(3,347,435)
  Adjustments to Reconcile Net Loss to Net Cash
   [Used for] Provided by Operating Activities:
   Depreciation and Amortization                              442,097       393,356
   Provisions for Losses on Accounts Receivable                38,758       184,134
   Provisions for Losses on Inventory                         (31,680)      245,867
   Write Down of Property Held for Sale                       104,689            --
   Loss [Gain] on Sale of Property and Equipment              106,029      (168,904)
   Minority Interest in Consolidated Subsidiary              (118,439)       (3,425)
   Compensation Expense Due to Options Issued                      --       519,000
   Residual Assets                                           (375,000)       20,000
   Gain on Restructuring of Debt                              (98,225)           --

  Changes in Assets and Liabilities:
   Accounts Receivable                                      1,244,125     1,166,376
   Inventory                                                  214,091     2,176,980
   Other Current Assets                                        19,404       342,156
   Accounts Payable                                          (518,797)     (718,878)
   Accrued Payroll and Related Liabilities                     23,856      (140,148)
   Other Current Liabilities                                   49,225        (4,090)
                                                           ----------   -----------

  Net Cash - Operating Activities                           (1,106,998)     664,989
                                                           -----------  -----------

Investing Activities:
  Decrease in Loans/Notes Receivable - Related Parties             --        45,744
  Purchases of Property and Equipment                        (202,700)      (11,317)
  Proceeds from Sale of Property and Equipment                     --     2,345,926
  Other                                                       (84,441)      (37,700)
                                                           ----------   -----------

  Net Cash - Investing Activities                            (287,141)    2,342,653
                                                           ----------   -----------

Financing Activities:
  Net Decrease in Line of Credit                             (443,388)   (1,731,453)
  Principal Payments on Long-term Debt                       (225,889)   (1,302,085)
  Net Proceeds to the Company from Sale of Common
   Stock of Subsidiary                                             --       894,181
  Proceeds from Long-term Debt                                599,456        19,549
  Offering Costs                                                   --        17,785
                                                           ----------   -----------

  Net Cash - Financing Activities                             (69,821)   (2,102,023)
                                                           ----------   -----------

  [Decrease] Increase in Cash and Cash Equivalents         (1,463,960)      905,619

Cash and Cash Equivalents - Beginning of Years               1,500,540      594,921
                                                           -----------  -----------

  Cash and Cash Equivalents - End of Years                 $   36,580   $ 1,500,540
                                                           ==========   ===========
See Notes to Consolidated Financial Statements.
</TABLE>


                                        F-6

<PAGE>




                                                                    Exhibit D -
                                                                     Sheet #2
COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
------------------------------------------------------------------------------

<TABLE>


                                                                  Years ended
                                                                   June 30,
                                                             1 9 9 8       1 9 9 7
                                                             -------       -------

Supplemental Disclosures of Cash Flow Information:
<S>                                                        <C>          <C>       
  Cash Paid for Interest                                   $  110,567   $  367,100
  Cash Paid for Income Taxes                               $       --   $        --

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
  Reclassification of Accounts Payable to Other Liabilities to Reflect
   Negotiated Payment Terms                                $  248,226   $        --

  Note Receivable and Related Debt Exchanged For Increased
   Ownership in Building - Net                             $       --   $   150,000

  Effect of Recording Minority Interest on Paid in Capital $       --   $   121,863

  Transfer of Inventory Items to/from Rental Equipment     $   24,600   $   236,584

  Increase in Debt Used to Purchase Fixed Assets           $  448,602   $        --




See Notes to Consolidated Financial Statements.

</TABLE>

                                        F-7

<PAGE>




COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------



[1] Organization and Business

Computer  Marketplace,  a California  corporation,  was incorporated on July 19,
1983, as Quality Associates,  Inc. and changed its name to Computer  Marketplace
in June 1987. In March 1993,  Computer  Marketplace changed its name to Computer
Marketplace(R),  Inc.  ["Computer  Marketplace"]  and its state of incorporation
from California to Delaware.  Computer  Marketplace is currently  engaged in the
national  wholesale  distribution of new and used computer equipment to dealers,
computer  maintenance  companies,  leasing  companies,  equipment  brokers,  and
end-users.  Computer Marketplace  purchases computer equipment from a variety of
sources and suppliers and sells or rents the equipment  nationwide and in Europe
to companies  ranging in size from small companies to Fortune 500  corporations.
The computer industry is highly competitive and may be affected by rapid changes
in technology and customer spending habits.  The Company owns  approximately 83%
of the shares of common stock of its subsidiary,  Medical  Marketplace.  Medical
Marketplace  engages in  worldwide  distribution  of used  medical  equipment to
health care providers.

[2] Summary of Significant Accounting Policies

Sale of Stock by a Subsidiary - Changes in the Company's  proportionate share of
subsidiary equity are accounted for as equity transactions [See Note 9].

Basis of  Consolidation - The  accompanying  consolidated  financial  statements
include the accounts of Computer  Marketplace and various  subsidiaries in which
Computer   Marketplace  holds  a  majority  ownership  interest.   All  material
intercompany balances and transactions have been eliminated.

Revenue  Recognition - The Company records product sales revenue when goods have
been shipped and rental  revenue  ratably over the term of the rental.  Revenues
arising from the sales of lease receivable are recorded at the time of the sale.

Cash and Cash Equivalents - The Company considers all highly liquid  instruments
with a  maturity  of  three  [3]  months  or  less  when  purchased  to be  cash
equivalents. There are no cash equivalents at June 30, 1998.

Inventory - Inventory,  which  consists  primarily of previously  owned finished
goods, is stated at the lower of cost or net realizable value. Cost is generally
determined by specific identification.

Property and Equipment and  Depreciation  - Property and equipment are stated at
cost. Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets, which range from 3 to 7 years.

Property Held for Sale - Property  held for sale,  which is held in the computer
products  segment  of the  company,  is stated at fair  value less cost to sell,
which is the lower of carrying value or fair value less cost to sell.

Impairment - Certain  long-term  assets of the Company,  including  property and
equipment,  are reviewed  whenever events or changes in  circumstances  indicate
that their carrying value has become impaired,  pursuant to guidance established
in the Statement of Financial  Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of."
Management  considers  these assets to be impaired if the carrying value exceeds
the  discounted  future  projected  cash  flows  from  related  operations.   If
impairment is deemed to exist, these assets will be written down to the lower of
projected discounted cash flows from related operations or management's estimate
of fair value.  Management  also  re-evaluates  the periods of  amortization  to
determine whether subsequent events and circumstances  warrant revised estimates
of the useful lives of these assets.



                                       F-8

<PAGE>




COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
------------------------------------------------------------------------------



[2] Summary of Significant Accounting Policies [Continued]

Net Loss Per  Share of  Common  Stock - Net loss per  share of  common  stock is
computed on the basis of the weighted average share of common stock  outstanding
plus  potential  common shares arising from the effect of dilutive stock options
and warrants  using the treasury  stock method.  For fiscal years 1998 and 1997,
the per share  results were  computed  without  consideration  for  contingently
issuable shares  underlying  stock options and warrants as the effect on the per
share results would be anti-dilutive.

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

Advertising  Costs - Advertising  costs are expensed when incurred.  Advertising
costs  amounted  to $23,712  and  $77,265  for the years ended June 30, 1998 and
1997, respectively.

Stock Options Issued to Employees - The Company  adopted SFAS No. 123 on July 1,
1996 for  financial  note  disclosure  purposes  and will  continue to apply the
intrinsic value method of Accounting Principles Board ["APB"] Opinion No. 25 for
financial reporting purposes.

[3]  Property and Equipment

Property and equipment consists of the following as of June 30, 1998:

Machinery and Equipment                         $    271,089
Furniture and Fixtures                                69,838
Automobiles and Trucks                                49,781
Long-Term Rental Equipment                           988,007
                                                ------------

Total                                              1,378,715
Less: Accumulated Depreciation                       409,145

  Property and Equipment - Net                  $    969,570
  ----------------------------                  ============

Depreciation expense for the years ended June 30, 1998 and 1997 was $249,719 and
$237,912, respectively.

Property  Held for Sale - Property  held for sale  consists of a facility at 205
East 5th Street,  Corona,  California  and one at 5081  Highway  140,  Mariposa,
California.  At June 30, 1998, the estimated  fair value of these  properties is
$381,845.  In the year ended June  30,1998,  the value of these assets have been
written down by $104,689 from aggregate  carrying value of $486,534.  Management
plans to use these assets as repayment of the $200,000 promissory note discussed
in Note 4.

In  June  1997,  the  Company  sold  its  main  facility  for  net  proceeds  of
approximately  $2,300,000,  which resulted in a gain of approximately  $260,000.
The Company used approximately $1,250,000 of the proceeds to pay off the related
mortgage payable.





                                       F-9

<PAGE>




COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
------------------------------------------------------------------------------



[4] Long-Term Debt

As of June 30, 1998, long-term debt consisted of the following:

Note  payable,  due October 31,  1998,  interest at 12%,  payment of interest of
$2,000 per month,  with principal due on October 31, 1998,  collateralized  by
substantially all of the Company's assets                             $ 200,000

Note payable, due January 15, 1999, payment of $4,167 per month          29,164

Note payable to a bank,  due  February  2, 1999,  interest  at 9.25%
  payment of principal  and interest of $1,391 per month,  balloon
  payment of $151,846 due February 2, 1999, collateralized by real
  estate deed of trust                                                  151,846

Debt payable, due February 10, 1999 to purchase equipment.              350,000

Debt payable, due January 1,1999 to purchase equipment                  440,000

Note payable, due September 1, 2001, interest at approximately 11.3%,
  payment of principal and interest of $3,886 per month, collateralized
  by specific equipment in fixed assets.                                136,931

Note payable, due September 1, 2001, interest at approximately 11.3%,
  payment of principal and interest of $3,886 per month, collateralized
  by specific equipment in fixed assets.                                136,931

Note payable, due September 1, 2001, interest at approximately 11.3%,
  payment of principal and interest of $2,591 per month, collateralized
  by specific equipment in fixed assets.                                 91,287

Note payable, due January 1, 2002, interest at approximately 10.5%,
  payment of principal and interest of $8,961 per month, collateralized
  by specific equipment in fixed assets.                                338,431

Note payable, due October 15, 1999, interest of 10%, payment of principal
  and interest of $5,889 per month, collateralized by specific equipment
  in fixed assets.                                                       87,876

Note payable,  due July 26, 1999,  interest of approximately  8.90%,
  payment of principal   and   interest   of  $530   per   month,
  collateralized   by  an  automobile.                                    6,925

Total Debt                                                            1,969,391
Less:  Current Portion of Debt                                        1,437,090

  Total Long-Term Debt                                              $   532,301
  --------------------                                              ===========

The prime rate at June 30, 1998, was 8.5%



                                      F-10

<PAGE>




COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4
------------------------------------------------------------------------------



[4] Long-Term Debt [Continued]

Maturities of principal due in the following years are set forth below:

Year ending
  June 30,
  1999                                                             $ 1,437,090
  2000                                                                 231,669
  2001                                                                 209,525
  2002                                                                  91,107
  Thereafter                                                                --
                                                                   -----------

  Total                                                            $ 1,969,391
  -----                                                            ===========

On April 30, 1998, the Company  executed a Promissory  Note [the "Note"] payable
to an individual  in exchange for $200,000.  Proceeds from the Note were used to
repay the outstanding  balance of the Company's  existing credit facility with a
financing company.  The Note requires the repayment of principal,  with interest
at a rate of 12% per annum, on or before October 31, 1998 and is  collateralized
by the assignment of a UCC-2 filing covering  substantially all of the Company's
assets.  Management  plans to repay this note with the property held for sale as
discussed  in Note 3 above.  Prepaid  interest of 2% of the  original  principal
balance was paid upon execution of the Note.

[5] Employment Contracts

The Company has employment contracts with most of its sales  representatives for
terms  ranging  from one [1] to three [3] years.  Commissions  are paid  monthly
based on a Company formula. As part of the contracts,  the sales representatives
agree to a restrictive covenant not-to-compete upon termination.

In October 1996,  the Company  amended its  employment  agreement  with L. Wayne
Kiley,  the  Company's  Chairman  of the Board,  President  and Chief  Executive
Officer.  Pursuant to such amendment,  (i) the employment  agreement  expiration
date of October 16, 1997 was  extended to October 16,  1999,  (ii) Mr. Kiley was
granted the right to purchase a number of shares of Common Stock for a period of
four (4) years,  at a price equal to seventy five percent  [75%] the closing bid
price of the  Company's  shares  of Common  Stock on the date of grant  equal to
2.5%, 3% and 3.5% of the shares of common stock outstanding,  should the Company
report  annual  earnings  before the payment of interest  and taxes of $625,000,
$875,000 and $1,000,000, respectively, (iii) Mr. Kiley will be paid a cash bonus
equal to 5% of any profit  realized by the Company from the sale assets  outside
the ordinary  course of business and (iv) an insurance  policy covering the life
of Mr. Kiley whereby Mr. Kiley's estate will be paid  $2,000,000 in exchange for
the redemption of the shares of the Company's capital stock  beneficially  owned
by Mr. Kiley.  The  employment  agreement  contains  other  customary  terms and
conditions including termination for cause,  non-competition and confidentiality
provisions. Mr. Kiley will receive an annual salary of $302,500; to be increased
6% annually.

[6] Fair Value Of Financial Instruments

Generally  accepted  accounting  principles require disclosing the fair value of
financial  instruments to the extent practicable for financial instruments which
are  recognized  or  unrecognized  in the balance  sheet.  The fair value of the
financial instruments disclosed herein is not necessarily  representative of the
amount  that  could be  realized  or  settled,  nor does the fair  value  amount
consider the tax consequences of realization or settlement.

                                      F-11

<PAGE>




COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
------------------------------------------------------------------------------



[6] Fair Value Of Financial Instruments [Continued]

For certain financial  instruments,  including cash and cash equivalents,  trade
receivables,  trade  payables,  and  short-term  debt, it was estimated that the
carrying amount  approximated fair value for the majority of these items because
of their short maturities.  Management  estimates that the carrying value of its
other long-term debt approximates its fair value because the applicable interest
rates  approximates  the current market rates. The fair value of one loan in the
Company's long-term debt is estimated by discounting  expected cash flows at the
rates  currently  offered  to  the  Company  for  debt  of  the  same  remaining
maturities. The fair value for this loan approximates its carrying value at June
30, 1998.

[7] Profit Sharing Plan and 401[k] Plan

In January 1995,  the Company  adopted a new combined  401[k] and profit sharing
plan [the  "Plan"]  which  replaced  the prior  plans.  The new Plan will  cover
substantially all of the Company's eligible employees. The new Plan is available
to all  employees  with  more  than one [1] year of  service  or,  to  employees
employed by the Company on February 1, 1995. Company contributions to the 401[k]
component of the Plan are based on a percentage of employee  contributions,  but
are at the discretion of management. Company contributions to the profit sharing
component  of the  plan are at the  discretion  of  management.  The  charge  to
operations related to the Company's contribution to the Plan for the years ended
June 30, 1998 and 1997, was $3,766 and $17,359, respectively.

[8] Income Taxes

Generally accepted accounting principles require the establishment of a deferred
tax  asset  for  all  deductible   temporary   differences  and  operating  loss
carryforwards.   The  deferred  tax  asset   attributable   to  operating   loss
carryforwards amounted to approximately $3,061,000 at June 30, 1998. Because the
Company does not as yet have a history of continuing profitability, any deferred
tax asset established for the operating loss carryforward would  correspondingly
require a valuation of allowance  of the same amount.  Accordingly,  no deferred
tax asset is reflected in these consolidated financial statements. The change in
the valuation  allowance during the fiscal year ended June 30, 1998 and 1997 was
approximately $1,112,000 and $1,015,000, respectively.

No  provision  for Federal  income  taxes has been made during the fiscal  years
ended June 30, 1998 and 1997, because of the Company's net loss position.

The Company's net operating loss carryforwards of approximately $8,056,000 begin
to expire as follows:

Year ended
  June 30,                                      Amount

  2008                                       $  210,000
  2010                                          922,000
  2011                                        1,085,000
  2012                                        3,803,000
  2013                                        2,209,000
                                             ----------

  Total                                      $8,229,000



                                      F-12

<PAGE>




COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
------------------------------------------------------------------------------



[9] Stockholders' Equity

Initial Public  Offering - On June 22, 1993,  the Company  completed the initial
public   offering  of  690,000   units   [including   the  90,000   underwriters
over-allotment units] at $2.00 per unit resulting in net proceeds to the Company
of  $6,594,179.  Each unit consists of one [1] share of common stock and one [1]
Class A Redeemable  Common Stock Purchase Warrant and one [1] Class B Redeemable
Common Stock  Purchase  Warrant.  Each six [6] Class A and B  Redeemable  Common
Stock Purchase  Warrant entitles the holder to purchase two [2] shares of common
stock for  $28.50 and  $33.00,  respectively,  commencing  one [1] year from the
effective  date of the offering.  In connection  with the offering,  the Company
sold to the  Underwriter,  for  nominal  consideration,  warrants to purchase an
aggregate  of  360,000  units   ["Underwriters  Unit  Purchase  Options"].   The
Underwriters  Unit  Purchase  Option is  exercisable  for a four [4] year period
commencing two [2] years after the effective date of the offering at an exercise
price of $3.30 per Unit.

Stock Split - In April 1997,  the Company  effected a one-for-six  reverse stock
split of the  outstanding  shares of common stock of the Company by changing the
8,114,542 then  outstanding  shares of common stock, par value $.0001 per share,
into  1,352,424  shares of common  stock of the  Company,  par value  $.0001 per
share.  All share data has been adjusted and  retroactively  restated to reflect
this change.

Stock  Transactions of Subsidiary - On December 31, 1996 the Company concluded a
private  placement of 500,000  Units [the  "Private  Placement"].  Each Unit was
offered at a price of $2.00 per Unit,  and  consisted of one [1] share of Common
Stock of Medical  Marketplace,  Inc., a subsidiary of the Company,  and eighteen
[18] of the Company's  Class D Redeemable  Common Stock  Purchase  Warrants [the
"Class D Warrants"].  Six [6] Class D Warrants are currently exercisable for one
[1] share of the Company's Common Stock commencing March 31, 1997 at an exercise
price of $2.50  per  share  for a one [1] year  period.  Net  proceeds  from the
Private  Placement were $894,181,  of which Computer  Marketplace  recognized an
increase in paid-in-capital of $553,857 on a consolidated  basis. The subsidiary
also issued warrants which are exercisable for the parent's common stock, valued
at $274,031.  Additional  costs relating to the private  placement were $17,785,
reducing paid-in-capital. This issuance reduced Computer Marketplace's ownership
of Medical Marketplace from 100% to 83%.

Stock Options and Other Stock-Based Awards - In May 1994, the Board of Directors
of the  Company  approved  the  issuance  of up to  300,000  options  to certain
employees  and  consultants  of the Company  [the  "Options"].  The Options vest
immediately  upon the grant thereof and are  exercisable at $14.40 per share [or
80% of the fair market  value on the date of grant] at any time prior to May 10,
1997. The Company  granted  166,667 options in July 1994 to the President of the
Company.  In June  1996 the  Board of  Directors  of the  Company  approved  the
issuance of new  non-qualified  stock options to those employees and consultants
who currently  held any of the options  exercisable  at $14.40 per share.  These
replacement  options  required  the  cancellation  of the prior  options and are
immediately  vested and are  exercisable at $6.00 per share at any time prior to
June 11, 2000. A total of 280,500 options were issued at $6.00 per share.

In February 1995, the stockholders  approved the Company's 1994 Stock Plan which
allows for the issuance of stock  options,  restricted  stock,  deferred  stock,
bonus shares  performance  awards,  dividend  equivalent  rights,  limited stock
appreciation  rights and other stock-based  awards, or any combination  thereof.
The maximum number of shares of Common Stock with respect to which awards may be
granted is initially 166,667 shares. No awards or shares have been granted under
the 1994 stock plan.



                                      F-13

<PAGE>




COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7
------------------------------------------------------------------------------



[9] Stockholders' Equity [Continued]

Stock Options and Other Stock-Based Awards [Continued] - On January 3, 1996, the
Company's  Board of Directors  approved  the  issuance of 158,083  non-qualified
stock options to substantially  all employees of the Company,  its subsidiaries,
and the non-employee directors, to purchase shares of the Company's common stock
at an exercise  price equal to 100% of the market value of the Company's  common
stock on the date of grant.  The stock  options  require  future  employment  or
services to the  Company and vest one third each on January 3, 1997,  January 3,
1998, and January 3, 1999, respectively.  The stock options must be exercised by
January 3, 2006.  On January 3, 1996,  157,083  stock options were granted at an
exercise price of $1.6875 per share.

On June 11, 1996,  the  Company's  Board of  Directors  approved the issuance of
10,833  non-qualified  stock  options to seven  employees of the Company.  These
stock options  require future  employment to the Company and vest one third each
on June 11,  1997,  June 11,  1998 and June 11,  1999,  respectfully.  The stock
options  must be exercised  by June 11,  2006.  On June 11,  1996,  10,833 stock
options were granted at an exercise price of $3.375 per share.

In December 1996 the Company entered into a three [3] year consulting  agreement
with  Victoria  Holdings,  Inc.  an  affiliate  of  Biltmore  Securities,   Inc.
["Victoria Holdings" and "Biltmore",  respectively].  Pursuant to the consulting
agreement,  Victoria  Holdings  agreed to act as a consultant  to the Company in
connection  with,  among other  things,  corporate  finance and  evaluations  of
possible  business partners and will seek to find business partners suitable for
the Company. In addition,  Victoria Holdings has agreed to assist the Company in
the structuring,  negotiating and financing of such transactions.  In accordance
with the terms of the  consulting  agreement,  the  Company  issued  options  to
Victoria  Holdings [the  "Victoria  Holdings  Options"]  exercisable to purchase
1,000,000  shares of Common Stock at an exercise  price of $1.00 per share.  The
options are exercisable for a 5 year period commencing December 31, 1996. In the
event the Company  consummates  (i) an  acquisition  of a company [or companies]
introduced  to the  Company  by  Victoria  Holdings  with net assets of at least
$2,500,000  or (ii) a  divestiture  of the  Company's  assets,  or the sale of a
controlling  interest in the Company's capital stock, to a purchaser  introduced
to the Company by Victoria Holdings  resulting in net proceeds to the Company in
excess of $2,000,000, Victoria Holdings shall receive 1,000,000 shares of Common
Stock simultaneously with the closing of such transactions.

In  December  1996,  the  Company  issued to  certain  employees,  officers  and
directors  options to purchase an aggregate of 1,000,000 shares of the Company's
Common Stock during a four [4] year period  commencing  on January 1, 1997 at an
exercise price of $1.00 per share [the  "Management  Options"].  In exchange for
the  issuance  of certain of the  Management  Options,  certain  option  holders
surrendered for cancellation an aggregate of 242,250 options  previously  issued
in June 1996 for 722,500 of the Management Options. In September of 1997, 98,000
of these options were canceled and redistributed to other employees.

Performance  stock rights are granted at greater than 5% of the market price and
are normally exercisable over four years from the date of grant [See Note 5].



                                      F-14

<PAGE>




COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
------------------------------------------------------------------------------



[9] Stockholders' Equity [Continued]

Stock  Options and Other  Stock-Based  Awards  [Continued]  - The following is a
summary of transactions under the plans:
                                                                      Weighted
                                          Number of  Weighted Average  Average
                                      Common Shares  Exercise Price  Fair Value

Options Outstanding at June 30, 1996       445,917    $       4.44   $     .42

Granted                                  2,000,000            1.00         .12
Cancelled                                 (391,000)           4.81         .45
                                        ----------

Options Outstanding at June 30, 1997     2,054,917    $       1.02   $     .14
------------------------------------

Granted                                     98,000            1.00         .14
Cancelled                                 (137,917)           1.97         .15
                                        ----------

Options Outstanding at June 30, 1998     2,015,000    $       1.02   $     .14
------------------------------------    ==========

Options Exercisable at June 30, 1998     1,999,500    $       1.01   $     .14
------------------------------------    ==========

All  options  granted  during  the  years  ended  June 30,  1998 and 1997 had an
exercise price less than the market price on the grant dates.

For the performance-based  rights, the number of shares is based on a percentage
of shares outstanding on the grant date, and the exercise price is 75% of market
value at performance achievement [See Note 5].

The  following is a summary of the status of fixed options  outstanding  at June
30, 1998:

             Outstanding Options                        Exercisable Options     
                                    Weighted                           Weighted
                          Remaining  Average                            Average
Exercise                Contractual Exercise                 Exercise  Exercise
  Price      Number         Life      Price      Number        Price     Price

$ 1.6875      46,500    8.5 Years    1.6875        31,000     1.6875    1.6875
$ 1.0000   1,000,000    3.5 Years    1.0000     1,000,000     1.0000    1.0000
$ 1.0000     968,500    2.5 Years    1.0000       968,500     1.0000    1.0000
           ---------                           ----------

           2,015,000                 1.0159     1,999,500               1.0107
           =========                           ==========

                                               Outstanding
                                                 Options

Weighted Average Remaining Contractual Life     3.1 Years

Stock Options and Warrants - The Company  applies  Accounting  Principles  Board
Opinion  No.  25,   Accounting   for  Stock  Issued  to  Employees  and  related
interpretations,  for stock options  issued to employees in  accounting  for its
stock  option  plans.  $-0-  and  $468,000  of  compensation  expense  has  been
recognized for the Company's  stock-based  compensation plans in the years ended
June 30, 1998 and 1997,  respectively.  The exercise price for all stock options
issued to employees was $.1670,  and the market price of the Company's  stock at
the grant date was $.25.

                                      F-15

<PAGE>




COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9
------------------------------------------------------------------------------


[9] Stockholders' Equity [Continued]

Stock Options and Warrants  [Continued] - Had compensation  cost been determined
on the basis of fair value  pursuant to SFAS No. 123, for the employee  options,
net income and earnings per share would have been as follows:
                                                   For the Year Ended
                                                        June 30,
                                                  1 9 9 8      1 9 9 7
                                                  -------      -------
Net [Loss]:
  As Reported                                   $(2,207,131)$ (3,347,376)
                                                =========== ============

  Pro Forma                                     $(2,292,131)$ (3,932,492)
                                                =========== ============

[Loss] Per Share:
  As Reported                                   $    (1.63) $      (2.48)
                                                ==========  ============

  Pro Forma                                     $    (1.69) $      (2.91)
                                                ==========  ============

The fair  value  used in the pro  forma  data was  estimated  by using an option
pricing model which took into account as of the grant date,  the exercise  price
and the expected life of the option,  the current price of the underlying  stock
and its expected  volatility,  expected dividends on the stock and the risk-free
interest rate for the expected term of the option,  The following is the average
of the data used for the following items.

                 Risk-Free         Expected           Expected        Expected
               Interest Rate         Life            Volatility       Dividends

June 30, 1997      5.97%            3 Years            96.50%           None
June 30, 1998      5.80%            2 Years            90.74%           None

During the year ended June 30,  1997,  the Company  issued a total of  1,360,000
stock options to consultants, each at an exercise price of $.167, which was less
than the market prices of $.1875 and $.25. The total cost of issuing the options
to  consultants  is  approximately  $600,000.  Of this  amount,  $549,000 is for
consulting services and is being charged to paid-in capital.  This entire amount
is being amortized over the term of the consulting agreement, which is three [3]
years.  The  remaining  amount of $51,000 was charged  directly to  compensation
expense as the options vest immediately.  The total charge to operations for the
year ended June 30, 1997 is $142,452.

The fair value of these  non-employee  options  issued was estimated by using an
option  pricing model which took into account as of the grant date, the exercise
price and the expected life of the option,  the current price of the  underlying
stock  and its  expected  volatility,  expected  dividends  on the stock and the
risk-free interest rate for the expected term of the option.

[10] Concentrations of Credit Risk

The Company currently maintains cash accounts with financial  institutions which
exceed  the  maximum  amounts  insured  by  the  Federal  Depository   Insurance
Corporation.  At June 30, 1998,  these uninsured  amounts totaled  approximately
$5,100.

Generally,  the Company does not require collateral or other security to support
financial  instruments,  however the Company  routinely  assesses the  financial
strength  of its  customers  and,  as a  consequence,  believes  that its  trade
receivable credit risk exposure is limited. At June 30, 1998,  approximately 50%
of trade receivables was with one customer.  Management  believes this amount to
be fully collectible.

                                      F-16

<PAGE>




COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #10
------------------------------------------------------------------------------



[11] New Authoritative Pronouncements

The FASB has issued SFAS No. 130,  "Reporting  Comprehensive  Income." SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997. Earlier
application is permitted.  Reclassification of financial  statements for earlier
periods  provided  for  comparative  purposes is  required.  SFAS No. 130 is not
expected to have a material impact on the Company.

The FASB has  issued  SFAS  No.  131,  "Disclosures  About  Segments  of an
Enterprise and Related Information." SFAS No. 131 changes how operating segments
are  reported in annual  financial  statements  and  requires  the  reporting of
selected  information  about  operating  segments in interim  financial  reports
issued to  shareholders.  SFAS No. 131 is effective for periods  beginning after
December  15,  1997,  and  comparative  information  for earlier  years is to be
restated.  SFAS No. 131 need not be applied to interim  financial  statements in
the  initial  year of its  application.  SFAS No. 131 is not  expected to have a
material impact on the Company.

In February  1998,  the FASB issued SFAS No. 132,  "Employers  Disclosure  about
Pension and Other Postretirement  Benefits," which is effective for fiscal years
beginning after December 15, 1997. The modified disclosure  requirements are not
expected  to have a material  impact on the  Company's  results  of  operations,
financial position or cash flows.

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments  and  Hedging  Activities,"  which is  effective  for  fiscal  years
beginning  after June 15, 1999.  SFAS No. 133 is not expected to have a material
impact on the Company.

[12] Industry Segments

The Company  classifies its product lines into two segments:  Computer  Products
and Medical  Products.  Information about those segments for the year ended June
30, 1998 and 1997 is as follows:

                                                          1 9 9 8             
                                            Computer      Medical
                                            Products     Products  Consolidated

  Operating Revenue                       $ 3,555,832  $ 4,414,127  $ 7,969,959
  -----------------                       ===========  ===========  ===========

Operating [Loss]                          $(1,519,550) $  (737,411) $(2,256,961)

Interest Expense                                                       (132,638)

Other Nonoperating Revenues and [Expenses]                              (34,196)

  Loss Before Income Taxes and Minority Interest                    $(2,423,795)
  ----------------------------------------------                    ===========

  Identifiable Assets at June 30, 1998    $   662,047  $ 2,742,687  $ 3,404,734
  ------------------------------------    ===========  ===========  ===========



                                      F-17

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COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #11
------------------------------------------------------------------------------



[12] Industry Segments [Continued]

                                                         1 9 9 7              

  Operating Revenue                       $16,959,846  $ 6,811,062  $23,770,908
  -----------------                       ===========  ===========  ===========

Operating Profit [Loss]                    (3,456,686)     288,281   (3,168,405)

Interest Expense                                                       (395,555)

Other Nonoperating Revenues and [Expenses]                              213,100

  Loss Before Income Taxes and Minority Interest                    $(3,350,860)
  ----------------------------------------------                    ===========

  Identifiable Assets at June 30, 1997    $ 3,250,440  $ 1,673,972  $ 4,924,412
  ------------------------------------    ===========  ===========  ===========

Operating profit [loss] is total operating revenue less operating expenses,  and
excludes  interest  expense  and  other  nonoperating   revenues  and  expenses.
Intersegment  sales  during 1998 and 1997 were  immaterial  to the  consolidated
financial  statements.  Shared  operating  expenses  allocated  to  the  Medical
Products  segment  were  $90,000 in 1998 and 1997.  For 1998,  depreciation  and
amortization  expense for the  Computer  Products and Medical  Product  industry
segments  was $295,005 and 147,092,  respectively.  For 1997,  depreciation  and
amortization  expense  for  Computer  Products  and  Medical  Products  industry
segments was $323,999 and $13,434,  respectively.  Capital  expenditures for the
two  segments  in  1998  were  $17,897  and  $184,803,   respectively.   Capital
expenditures for the two segments in 1997 were $153,000 and $-0-, respectively.

Identifiable  assets are those used by each segment of the Company's  operations
and do not include  advances from the Computer  Products  segment to the Medical
Product  segment  totaling  $503,263  and $427,980 as of June 30, 1998 and 1997,
respectively.

[13] Leasing Agreements

Sales Type Leases - The  Company's  subsidiary  sold  certain  sales-type  lease
receivables  which  qualified as sales under  Statement of Financial  Accounting
Standards No. 125,  "Accounting for Transfers and Servicing of Financial  Assets
and  Extinguishments of Liabilities."  These sales-type leases are originated by
the Company on a non-recourse  basis.  Revenues  arising from the sales of lease
receivables were approximately  $1,800,000 and $110,000 for the years ended June
30, 1998 and 1997, respectively.

Operating  Leases - The Company  also leases its  products  to  customers  under
operating leases. These leases are generally short-term rentals, with terms less
than one year.  Equipment  on  operating  leases was $8,405 and $-0- at June 30,
1998 and 1997,  respectively.  Accumulated  depreciation on operating leases was
$2,802 and $-0- at June 30, 1998 and 1997, respectively.

Minimum future rentals on noncancelable operating leases are as follows:

Year ending
June 30,
1999                       $    17,895
2000                             4,689
Thereafter                          --
                           -----------

  Total                    $    22,584
  -----                    ===========



                                      F-18

<PAGE>




COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #12
------------------------------------------------------------------------------



[13] Leasing Agreements [Continued]

Operating  Leases - Related Party - The Company leases its  facilities  under an
operating  lease from an entity which is owned by the  president of the Company.
The term of the  lease is from  November  1,  1998 to  October  2000.  The lease
contains a renewal option which is exercisable by the Company.

Minimum future annual rental payments under the  non-cancelable  operating lease
having remaining terms in excess of one year as of June 30, 1998 for each of the
next five years and in the aggregate are:

June 30,                                    Amount

  1999                                    $  156,000
  2000                                       156,000
  2001                                        52,000
  Thereafter                                      --
                                          ----------

   Total                                  $  364,000
   -----                                  ==========

Rent expense was approximately $110,000 and $65,000 for the years ended June 30,
1998 and 1997, respectively.

[14] Going Concern

The  accompanying  financial  statements  have been prepared in conformity  with
generally accepted accounting principles, which contemplates continuation of the
Company as a going  concern.  However,  the  Company has  sustained  substantial
operating losses in recent years, has a working capital deficit at June 30, 1998
of $1,387,161,  and has used $1,106,998 in cash for operating  activities during
the fiscal year then ended. The Company has also been experiencing  difficulties
in paying its vendors on a timely basis.  These factors create uncertainty as to
whether  the Company can  continue as a going  concern.  The Company is actively
pursuing acquiring an alternative  business and/or assets which may be developed
into a business and other financing options.

The  Company's  ability  to  continue  as a going  concern is  dependent  on the
implementation  and success of these  plans.  The  financial  statements  do not
include  any  adjustments  in the event the  Company is unable to  continue as a
going concern.  There can be no assurance that management's  plans to acquire an
alternative  business  and/or  financing  will  be  successful.   The  financial
statements do not include any  adjustments  relating to the  recoverability  and
classification  of  recorded  assets,  or  the  amounts  and  classification  of
liabilities  that might be necessary in the event the Company cannot continue in
existence.

[15] Extraordinary Item

During the year ended June 30, 1998,  the Company  negotiated  payment  terms of
certain accounts  payable,  resulting in a gain of $98,225.  There was no income
tax effect on this transaction. The original debt was $248,226. The Company paid
$100,000 in October of 1997,  and the remaining  $50,000 is to be paid in twelve
monthly payments of $4,166.66 during 1998.

                                      F-19

<PAGE>



COMPUTER MARKETPLACE(R), INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #13
------------------------------------------------------------------------------



[16] Proposed Acquisition and Sale of Subsidiary

On August  27,  1998,  the  Company,  Medical  Marketplace,  and  Medley  Credit
Acceptance  Corporation  entered into a Stock  Purchase  Agreement,  pursuant to
which Medley agreed to purchase all of the shares of Medical  Marketplace  owned
by Computer,  which represents 83.3% of the total number of shares  outstanding.
Medley has agreed to pay 25,000  shares of  restricted  Medley  Common  Stock in
exchange for the 2,500,000 shares of Medical Marketplace owned by the Company so
long as Medical  has  $50,000  in net  assets at the time of the  closing of the
transaction.  The  closing of the  proposed  is subject to the  satisfaction  of
certain  conditions  including  the  approval of a majority of the shares of the
Company's common stock outstanding. The Company anticipates calling a meeting of
stockholders  in  December  1998,  to consider  approving  the sale of shares of
Medical  Marketplace.  In addition,  pending the  closing,  Medley has agreed to
assist  in the day to day  management  of  Medical  pursuant  to the terms of an
Operating Agreement between the Company and Medley.

[17] Delisting of Stock

To spite ongoing efforts,  the Company has failed to meet the continued  listing
requirements  for the  NASDAQ  Small Caps  Market.  Accordingly,  the  Company's
securities  were delisted  form the NASDAQ Small Cap Market  effective as of the
close of business on July 25, 1998. As of July 29, 1998, the Company's shares of
common stock commenced trading on the OTC Bulletin Board.





                        . . . . . . . . . . . . . . . . .

                                      F-20

<PAGE>