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, 1997.

            [ ]  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 jurisdi                   (IRS Employer incorporation of
organization)                                         Identification No.)

1490 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)

               Class A Redeemable Common Stock Purchase Warrants
                               (Title of Class)

               Class B Redeemable Common Stock Purchase Warrants
                               (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 X No

      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 $23,770,908.

      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
September 23, 1997, was approximately $1,009,908.

      Number of shares outstanding of the Issuer's common stock, as of September
23, 1997, was 1,352,424.

                  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)") and its state
of  incorporation  from  California  to  Delaware.  Computer  Marketplace(R)  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.
      In  light of the  fact  that  the  Company  has  been  unable  to  operate
profitably  since the fiscal  year ended June 1994,  the Company  believes  that
substantial  measures  need to be  taken  to  address  the  Company's  financial
difficulties.   The  Board  of  Directors,   after  having  considered  numerous
alternatives,  has  concluded  that the Company  must  significantly  reduce its
expenses in order to reduce the Company's net losses. Therefore, the Company has
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. In
the event that the Company  determines  that these measures are  insufficient to
achieve  profitability,  the Company may reduce further its existing business or
pursue divesting the Company's computer business and/or acquiring an alternative
business. As of the date of this Annual Report, the Company has not entered into
a definitive agreement with any third party with respect to such a 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.  Since its
inception,  the business of Medical Marketplace has expanded  considerably.  The
Company intends to focus on expanding the business of Medical Marketplace in the
future.  Currently,  the Company owns  approximately 83% of the shares of Common
Stock of Medical Marketplace outstanding.

      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.


                                      1

<PAGE>



      In June 1993,  the  Company  consummated  its initial  public  offering of
690,000 units,  each unit  consisting of one (1) share of Common Stock,  one (1)
Class A Warrant and one (1) Class B Warrant (the "IPO Units").  See "Description
of Securities." The Company  received net proceeds of  approximately  $6,594,179
from its initial public offering.

      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.

      On December 31, 1996, the Company concluded a private placement of 500,000
Units (the "December 1996 Private Placement") which were placed by Biltmore on a
firm  commitment  basis.  Each Unit was offered at a price of $2.00 per Unit and
consisted o
 one (1) share of Common  Stock of Medical  Marketplace,  Inc.,  and
eighteen (18) of the Company's Class D Redeemable Common Stock Purchase Warrants
(the  "Class  D  Warrants").  An  aggregate  of six  (6)  Class D  Warrants  are
exercisable  for one (1) share of the  Company's  Common  Stock during a one (1)
year period commencing March 31, 1997 at an exercise price of $2.50 per share..

      On January 21,  1997,  the Staff of Nasdaq  advised  the Company  that the
Company failed to satisfy certain continued listing requirements with respect to
its shares of Common Stock. The Company was provided 90 days to comply with such
requirements  in order to continue the listing of its Common Stock on The Nasdaq
SmallCap  Market.  Failure  to comply  would  have  resulted  in  delisting  the
Company's shares of Common Stock. On March 21, 1997, the Company was informed by
Nasdaq that the Company complied with the continued listing requirements.

      In March 1997, the Company's Board of Directors approved a 1-for-6 reverse
stock split (the "Reverse Stock Split") with respect to each  outstanding  share
of the Company's Common Stock,  such approval to be contingent upon the approval
of a majority of the Company's  stockholders.  The Company  conducted its annual
meeting of stockholders  on April 4, 1997 (the "Annual  Meeting")  where,  among
other  things,  the  Company's  stockholders  voted to approve the Reverse Stock
Split. As of April 21, 1997, the Company  effected the Reverse Stock Split.  All
per share information included in this Annual Report gives effect to the Reserve
Stock Split.

      The Company's executive office is located at 1490 Railroad Street, Corona,
California. It's telephone number is (909) 735-2102.

                                      2

<PAGE>




The Computer Equipment Business

      Computer  Marketplace(R)  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.
Computer Marketplace's operations and primary selling efforts are conducted from
its  principal  office in Corona,  California.  Computer  Marketplace(R),  which
maintains a service and  inventory  storage  center at its Corona  headquarters,
also has  arrangements  to  inventory  its  equipment  on a  temporary  basis at
independent service centers across the country.

      During the past fiscal year, the Company has significantly  diminished 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.

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.  The Company is a member in
good standing of the Computer Dealers and Lessor's Association ("CDLA"), a trade
association  headquartered  in  Washington,  DC, as well as the  Association  of
Service and Computer Dealers International ("ASCDI").

Computer Products

      The Company  buys and resells  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
constitutes  a  significant  source of revenue for the Company,  accounting  for
virtually all revenues in fiscal years 1997 and 1996.  The Company is constantly
adjusting  its  inventory  to  respond  to shifts in  product  development,  new
technology, and shifting consumer demands.



                                      3

<PAGE>



Computer Products Sales and Marketing

      The  Company's  sales and marketing  personnel  make calls to existing and
potential  customers and the sales team solicits new business by personal visits
and advertising in trade  magazines.  In addition,  the Company also markets its
products on the  Internet.  The Company  currently  advertises  in various trade
publications. The Company's customers consist of companies of all sizes, ranging
from small companies to Fortune 500 corporations.  A substantial  portion of the
Company's  transactions are with repeat customers,  such as computer maintenance
companies, as well as computer parts suppliers.

Computer Products Distribution Operations

      The Company  conducts its primary  operations from its main office located
in  Corona,  California.  It has  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 has directly benefited
by minimizing the costs of freight, engineering and distribution.

Computer Equipment Warranty Policy

      The  Company,  like  other  competing  distributors,  does not  grant  any
warranties  on the used  products  it sells.  However,  most of the new and used
computer  equipment  which  the  Company  sells  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  sells  is  still  under
manufacturer's  warranty.  Before any  returned  merchandise  is accepted by the
Company for processing under the original manufacturer's  warranty, the customer
must call the Company and obtain a return merchandise authorization number. This
procedure  allows  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 an  although  the  Company  currently  purchases a
significant amount of products from certain suppliers,  management  believes the
Company  would  be able to  obtain  similar  products  and  pricing  from  other
suppliers.

Computer Products Competition

      The Company competes  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

                                      4

<PAGE>



equipment  produced by other computer  manufacturers.  In addition,  the Company
also competes with hundreds of competitors in the area of providing  value added
services  to  its  customers.   Certain  of  the  Company's   competitors   have
substantially  greater  financial  resources and larger staffs than the Company.
The Company's principal competitors include 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 also are
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  provide the Company  with access to  inventory  listings  from
competing companies, similar to the multiple-listing services to which most real
estate companies subscribe.

      The Company's  continued ability to compete effectively may be affected by
the  policies of the large  equipment  manufacturers.  The  Company  attempts to
provide  customers  with an unmatched  selection  of  products,  a high level of
customer service, the knowledge and competence of its employees, and competitive
pricing.

The Medical Equipment Business

      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. It also
has  sales   representatives  in  Northern   California,   Kansas,   Washington,
Massachusetts and North Carolina.

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

                                      5

<PAGE>



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.

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 our 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 September 30, 1997 of eleven
(11) 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

                                      6

<PAGE>



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.

Medical Equipment Competition

   Medical  Marketplace  competes  directly with the new medical equipment OEM's
like 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
only the  largest  of our  competitors  can match the  technical  ability of our
employees in the Imaging, X-ray and Ultrasound technologies and only our largest
competitors  have the  financial  strength  to  inventory  expensive  MRI, CT or
Ultrasound  equipment.  Consequently,  Medical  Marketplace  feels  that  it can
effectively  compete against the large OEM's in used equipment  transactions and
will have competitive  advantages over specialized equipment brokers on end-user
transactions.

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. Properly implemented,  New Millennium will accomplish
two  goals.  First,  to help  increase  overall  equipment  sales  by  providing
additional resources not previously  available to it, and secondly,  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 the
Company'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 Company.

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.

                                      7

<PAGE>




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

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 allows the Company to borrow up to $2,500,000 and bears interest
at a rate of 2.25%  above  the  lender's  "reference  rate"  (as  defined).  The
borrowing  capacity under the Credit  Facility is dependent upon  "eligible" (as
defined)  accounts  receivable and inventory,  and fluctuates  daily. The Credit
Facility is collateralized by substantially all of the Company's assets,  except
for real  property.  The Credit  Facility was to expire in September  1997.  The
Company and the Lender have  extended  the Credit  Facility  until  December 31,
1997.

Employees

   As a result of  management's  focus to reduce  costs  and  capitalize  on the
efficiencies  gained by administrative  improvements,  as of September 30, 1997,
the Company and Medical Marketplace  employed twenty-four (24) full-time persons
and five (5)  part-time  persons,  including  fifteen  (15)  persons  in  sales,
marketing and related activities,  three (3) persons in technical operations and
maintenance,  and six (6) persons in general  administration  and  finance.  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. Currently, the
Company is attempting to sell this property.

   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, is used
as the  Company's  headquarters.  Due to  favorable  local  real  estate  market
conditions,  in August 1996,  the Company  listed this facility for sale. On May
12,  1997,  the Company  entered  into a Standard  Offer,  Agreement  and Escrow
Instructions for Purchase of Real

                                      8

<PAGE>



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  has also
recently   closed  certain   satellite   locations  in  Michigan  and  Mariposa,
California.


   On January 21, 1994,  the Company  purchased a two-story,  6,300  square-foot
office  building  located in Mariposa,  California,  for  $215,000.  The Company
intends to sell this facility in the near future. The Company has renovated this
facility and has leased fifty percent of the unused space.

   Management  believes  that the above  properties  are  adequately  covered by
insurance.

Legal Proceedings

    The Company commenced an unfair trade name infringement action entitled
 Computer Marketplace(R), Inc. v. RK Productions/Case No. 260667 in Riverside
 County, California Superior Court on January 20, 1995.  The defendant failed
 to respond to the Company's complaint, and is  therefore, in default. 
Subsequently, the defendant (under the name National Productions, Inc.) filed
a Federal lawsuit in the Central District of California entitled National
 Productions, Inc. v. Computer Marketplace(R), Inc./Case No. 95-3225 on May 19, 
1995.  Computer Marketplace(R) has counterclaimed in the Federal action
which supersedes the earlier state court action.  In July 1997,
the Company settled all claims in this matter.

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

   On April 4, 1997, the Company held its Annual Meeting of  Stockholders  where
the stockholders of the Company elected the Board of Directors as follows:

Nominee                          Votes For         Votes Against
-------                          ---------         -------------
L. Wayne Kiley                   1,139,946         70,633
Nancy Kiley                      1,139,946         70,633
J.R. Achten                      1,139,946         70,633
Rick Garian*                     1,139,946         70,633
Thomas E. Evans, Jr.             1,139,946         70,633

The stockholders  also (i) ratified the appointment of Moore Stephens,  P.C., as
the Company's  independent  certified  public  accountants  (1,150,112  votes in
favor,  52,667 votes against,  and 7,783 votes  abstaining)  and (ii) approved a
1-for-6  reverse  stock  split of the  outstanding  Common  Stock of the Company
(1,119,308 votes in favor, 88,383 votes against and 2,888 votes abstaining).


*  Mr. Garian resigned from the Board of Directors in September 1997.

                                      9

<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. The Initial Public Offering  consisted of 2,070,000  Units,  each Unit
consisting of one (1) share of Common Stock,  one (1) Class A Redeemable  Common
Stock  Purchase  Warrant and one (1) Class B Redeemable  Common  Stock  Purchase
Warrant  (without  giving  effect to the stock split or the Reverse  Stock Split
mentioned  above).  Effective  June 22,  1993,  the  Common  Stock,  the Class A
Warrants and the Class B Warrants  comprising the Units were separated and began
trading  under the symbols  "MKPL" and "MKPLW" and  "MKPLZ",  respectively.  The
Units began  trading  under the symbol  "MKPLU".  The Common Stock is quoted and
traded on The Nasdaq SmallCap Market system. On the close of business on May 10,
1994,  at the  request  of the  Company,  the Units were  delisted.  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. As of September  30, 1997,  there
were  approximately  54  holders  of record of the  Company's  common  stock and
approximately 900 beneficial owners.

      In March 1994,  the  Company's  Board of Directors  approved a two-for-one
stock split (the "Stock  Split") with respect to each  outstanding  share of the
Company's  Common Stock,  such approval to be contingent  upon the approval of a
majority of the  stockholders of an increase of the Company's  Common Stock from
15,000,000 shares to 50,000,000 shares. In March 1994, stockholders representing
a majority of the shares  outstanding  approved by written  consent in lieu of a
special  meeting of  stockholders  an amendment to the Company's  Certificate of
Incorporation increasing the number of authorized shares of common stock. In May
1994, the Company  distributed  to its  stockholders  an  Information  Statement
summarizing these  transactions.  On June 6, 1994, each holder of an outstanding
share of the Company's common stock received an additional share of Common Stock
as a result of the Stock Split.  In March 1997, the Company's Board of Directors
approved  the  Reverse  Stock  Split  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
Stock Split,  but not 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, 1995,  through  June 30, 1997,  based
upon  information  supplied by the Nasdaq system.  Prices  represent  quotations
between   dealers  without   adjustments   for  retail  markups,   markdowns  or
commissions, and may not represent actual transactions.


                                      10

<PAGE>

<TABLE>


              For the Period from July 1, 1995 to March 31, 1997
                               Quoted Bid Price
<S>                 <C>             <C>              <C>           <C>   


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

</TABLE>
<TABLE>

1996                  1st Quarter                  2nd          3rd Quarter*           4th Quarter*+
----
                         (ended 9/30/95)        (ended 12/31/95)        (ended 6/30/96)
<S>                              <C>               <C>           <C>          <C>    

Common Stock:
      High                           11/16               1/2       15/32         5/8
      Low                            1/4    9/32      1/4          1/4
Class A Warrants
      High            5/32                1/8         1/8          5/32
      Low             1/32                1/32        1/16         1/32
Class B Warrants
      High            1/16                3/32        1/16         3/32
      Low                           1/16  1/16        1/16         1/32

</TABLE>

* The Class A and Class B Warrants were delisted from The Nasdaq SmallCap Market
on December 18, 1996. + Gives effect to the sellers  Stock Split  effected as of
April 17, 1997.

      On  September  30,  1997,  the  closing  bid price of the Common  Stock as
reported on The Nasdaq  SmallCap  Market was $1.00  (which  gives  effect to the
Reverse Stock  Split).  As of September  30, 1997 there were  approximately  900
beneficial owners and 54 holders of record of the Company's Common Stock.

      The  Company's  Common  Stock is  traded  on The  Nasdaq  SmallCap  Market
("Nasdaq").  Under the rules recently  adopted by Nasdaq in order to qualify for
continued  quotation of securities on The Nasdaq SmallCap  Market,  the Company,
among other things,  must have (i) either  $2,000,000 in net tangible assets, or
$35,000,000  in market  capitalization,  or  $500,000  of net  income (in latest
fiscal  year or 2 of the last 3 fiscal  years),  (ii) a public  float of 500,000
shares,  (iii) a market value of public float of $4 million,  and (iv) a minimum
bid price of $1.00 per share.


                                      11

<PAGE>



      Computer  Marketplace  has  no  dividend  policy,  is  restricted  by  its
revolving credit agreement to pay cash dividends, 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, 1997 compared to Year Ended June 30, 1996

Results of Operations

Total  revenues  for the year ended June 30, 1997 were  $23,770,908  compared to
$30,000,952  for the year ended June 30,  1996.  This  represents  a decrease of
$6,230,044 or 21%.

Revenues   from  product  sales  for  the  year  ended  June  30,  1997  totaled
$22,192,831,  a $6,177,603 or 22% decrease  compared to $28,370,434 for the year
ended June 30, 1996. Revenues from rental,  service and other for the year ended
June 30, 1997, were $1,578,077,  a $52,441 or 3% decrease compared to $1,630,518
for the year ended June 30,  1996.  While the  Company  believes  that the rapid
technological advances in computer products enhance its market resulting in many
companies purchasing used equipment at significant  discounts from new equipment
companies to handle most of their computing  needs, as most  applications do not
require the latest technology  available,  the sales decrease is reflective of a
general  industry sales decrease which results in part from price  reductions in
new computer hardware which negatively  impacts selling prices and sales of used
computer  hardware.  The Company  anticipates the lower computer  products sales
trend to continue into the next fiscal year.

Computer  product segment  revenues were $16,959,846 for the year ended June 30,
1997 compared to $27,120,944 for the year ended June 30, 1996. This represents a
decrease of $10,161,098, or 37%.

All branch  offices of the  Company  were closed down during the year ended June
30, 1997, and the sales associated with these offices  diminished.  In addition,
several salesmen at the main facility in Corona, California were let go.

Medical Marketplace,  Inc. contributed  approximately $6,811,000 in revenues for
the year ended June 30,  1997,  an increase of  $3,931,000  or 136%  compared to
approximately   $2,880,000  for  the  year  ended  June  30,  1996.   Continuing
investments   made  by  Medical   Marketplace,   Inc.   in   experienced   sales
representatives and technical staff, as well as a growing recognition within the
industry as an established  reseller of previously  owned and upgraded  magnetic
resonance imaging,  computed  tomography  scanner and ultrasound  equipment have
positively  impacted the sales of this subsidiary.  Continued revenue growth and
sustained  profitability  for this  subsidiary are expected into the next fiscal
year.


                                      12

<PAGE>



Previously  owned medical  equipment is just beginning to gain acceptance in the
health care  community as a cost effective  alternative  to new  equipment.  The
Company believes that its field representative  program,  financial strength and
support structure will provide Medical  Marketplace,  Inc. a distinct  advantage
over many of the subsidiary's competitors.

Aggregate  cost of  revenues  for the years  ended  June 30,  1997 and 1996 were
$21,077,229 or 89% of revenues and $25,386,732 or 85% of revenues, respectively.
The higher cost of revenues  percentage in the current year is reflective of the
reduced operating  leverage resulting from lower product sales and the company's
focus on liquidating  older inventory  which has a lower profit margin.  Cost of
revenue  percentages  are expected to remain  relatively  stable during the next
fiscal  year with small  decreases  anticipated.  Factors  which will  favorably
reduce the cost of revenues  percentage  include;  a company focus toward higher
margin  transactions  through a focus on our end user customer base, a change in
computer sales representative  compensation plans which includes a substantially
higher base salary and less of a commission component than prior periods and the
positive  effect  that  higher  margin  medical   equipment  sales  has  on  the
consolidated percentage.

Cost of revenues for the computer  product  segment were  $15,542,705  or 92% of
revenues  and  $23,020,942  or 85% of revenues for the years ended June 30, 1997
and 1996,  respectively.  The higher cost of revenues  percentage in the current
year is  reflective  of the  reduced  operating  leverage  resulting  from lower
computer  product sales and the Company's  focus on liquidating  older inventory
which has a lower profit margin.

Cost of revenues from Medical Marketplace, Inc. were $5,534,524 or 81% of
 revenues and $2,365,790 or 82% for the years ended June 30, 1997 and 1996,
 respectively.

Selling,  general and administrative  ["SG&A"] expenses for the years ended June
30, 1997 and 1996 were  $5,862,084  or 25% of revenues and  $5,601,670 or 19% of
revenues,  respectively.  This  represents  an  increase  of $260,414 or 5%. The
increase in SG&A  expenses  was  negatively  impacted by the increase in Medical
Marketplace Inc. personnel expense,  the change in computer sales representative
compensation plans mentioned above, write-offs of certain assets relating to the
closing of the Livonia,  Michigan  branch  office,  increased  reserves  against
accounts  receivable  and inventory as well as charges  relating to the December
1996 Private  Placement.  These  increases  were  partially  offset by personnel
cutbacks in the computer products segment during the current year.

SG&A expenses  attributed to the computer product segment were $4,873,827 or 29%
of revenues  and  $5,129,034  or 19% for the years ended June 30, 1997 and 1996.
The increase in SG&A  expenses as a percentage  of revenues is due  primarily to
the sales volume  decrease  previously  mentioned,  write-offs of certain assets
relating  to the  closing of the  Livonia,  Michigan  branch  office,  increased
reserves against  accounts  receivable and inventory as well as charges relating
to the December 1996 Private Placement.


                                      13

<PAGE>



SG&A expenses  attributed to Medical  Marketplace,  Inc. were $988,257 or 15% of
revenues  and  $472,485 or 16% of revenues for the years ended June 30, 1997 and
1996,  respectively.  The absolute dollar increase is due to increased sales for
the current year.

Operating loss was $3,168,405 and $987,450 for the years ended June 30, 1997 and
1996,  respectively.  This $2,180,955 or 221% unfavorable change was a result of
the business conditions described herein.

Operating  loss for the computer  product  segment was $3,456,686 and $1,029,182
for the years ended June 30, 1997 and 1996, respectively.

Operating  income for medical  products  was  $288,281 and $41,732 for the years
ended June 30, 1997 and 1996, respectively.

Interest  expense for the year ended June 30,  1997,  was  $395,555  compared to
$371,728  for the year ended June 30, 1996.  Decreases  in interest  expense are
expected due to the success of selling the  Company's  headquarters  facility in
the year ended June 30, 1997.

The Company's net loss was $3,347,435 or $2.48 per share for the year ended June
30, 1997, versus $1,331,431 or $0.98 per share for the year ended June 30, 1996.
The net loss was a result of the business conditions described herein.

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.  Working  capital  at June 30,  1997 and 1996,  was  $1,455,083  and
$2,724,984, respectively.

During  the year  ended  June  30,  1997,  the  Company  used the June 30,  1996
available cash and cash equivalents of approximately  $595,000,  the sale of the
existing  corporate office building and property,  the availability of borrowing
under the  Company's  revolving  Credit  Facility,  vendor  extended  credit and
approximately $2,511,000 and $1,287,165 reductions in the Company's inventory an
accounts receivable levels in order to fund the operations of the Company.


                                      14

<PAGE>



Management  has  emphasized an inventory  reduction  program  encompassing  both
stored  inventory,  as well as  inventory on  short-term  rental  contracts.  In
addition,  a  program  has  been  established  to  reduce  outstanding  accounts
receivable.  Management  believes these  disciplined  strategic  reductions will
enhance the Company's operating effectiveness, provide additional liquidity, and
reduce the exposure to negative  accounts  receivable  and  inventory  valuation
adjustments caused by changing market conditions. Certain temporary increases in
inventory amounts may occur due to selected  purchases made by the Company which
are intended to be sold quickly.  Additional  inventory and accounts  receivable
increases are expected relating to Medical Marketplace, Inc.'s growth.

In addition,  management  intends to investigate  alternative  financing options
which  could be  utilized  for our  foreign  customers  in order to enhance  the
opportunities  for the Company's  medical  equipment  subsidiary's  growth.  The
Company  has  delayed  implementation  of these  financing  options  as  medical
equipment  subsidiary  has been  focused on domestic  sales.  In  addition,  the
Company  has listed for sale two  properties;  one  property  located in Corona,
California and the other in Mariposa, California.  Management intends to use the
additional  funding and  proceeds  from the  building  sale in order to pay down
related  long-term  debt and  borrowings  on the  revolving  credit  facility in
addition  to  significantly  growing  the  business  of  our  medical  equipment
subsidiary.

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.


                                      15

<PAGE>



                                   PART III

Item 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
            PERSONS, COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
            ACT
      The following persons are the current executive officers and directors:

 Name                         Age         Position

L. Wayne Kiley          54          President, Chief Executive Officer, Director
                   (Chief Accounting Officer) and President of
                                          Medical Marketplace

Nancy Kiley                   39          Secretary and Director

J. R. Achten                  54          Director

Thomas E. Evans, Jr.          57          Director

Thomas Mason                  37          Vice President

Brian Hintergardt             39          Executive Vice President of Medical
                                          Marketplace

      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.  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.

Rick C. Garian  served as Chief  Operating  Officer of the Company  from January
1997, and as a Director from April 1997, until September 1997. Prior to becoming
Chief Operating Officer, Mr.

                                      16

<PAGE>



Garian  served as an executive  consultant  to the  Company,  as part of his own
management consulting practice, which was established in 1991. He graduated from
Michigan State University with a Business Administration degree.

Carmella Hume served as Controller of the Company from January 1997 until August
1997 and  previously  served as a Senior  Accountant  from July 1995 to  January
1997. From 1993 to 1995, Ms. Hume served as a Controller of Triple M. Apparel, a
clothing  manufacturer,  and from 1991 to 1993 she was the  Controller of LeaJoy
Corporation, an artificial plant manufacturer. Ms. Hume received her Bachelor of
Science Degree in Business Administration from Chapman University.

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 has been a Vice President of the Company since September 1997.
  Mr. Mason was a sales representative 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
since March 1994. 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.


                                      17

<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, 1997, 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,
1997, 1996, and 1995:

<TABLE>

                            Annual               Compensation
                        Compensation            Awards
(a)                     (b)                 (c)           (d)         (g)              (i)
<S>                        <C>               <C>         <C>     <C>              <C> 
                                                                  Number of       All Other
Name and Principal Positon  Year              Salary      Bonus       Options     Compensation

L. Wayne Kiley, President   1997              $ 306,977   $  --          661,667          $ 6,851
Chief Executive Officer and 1996              $ 303,814   $  --          195,833          $ 1,313
Director                    1995              $ 302,500   $  --          166,667          $ 3,702

Thomas Mason                1997              $211,976    $  --           143,000         $ 2,375
Vice President              1996              $233,916    $  --            30,000            $ --
                            1995              $214,427    $  --                ---           $ --


Brian Hintergardt          1997              $119,033    $     --         33,333         $ 4,523
Executive Vice President   1996              $74,054     $     --         60,000           $  --
Medical Marketplace(3)     1995              $57,250     $     --            ---          $   --

</TABLE>

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


      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

                                      18

<PAGE>



under the plan by the named individuals in the Executive  Compensation table are
reflected under the column headed "All Other Compensation".

           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, 1997 and 1996,  was $17,359 and
$18,421, 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.

      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 of which 64,917
are currently outstanding.

                                      19

<PAGE>



      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 with 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.

      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.


            As of  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 240,833 options previously
issued in June 1996 for 722,500 of the Management Options.

   The  following  table  contains  information  concerning  the  grant of stock
options to named executive  officers of the Company during the fiscal year ended
June 30, 1997:



                                             % of Total
                                   Number of   Options
                                    Options  Granted in  Exercise    Expiration
Name                                Granted  Fiscal YearPrice ($/sh)     Date

L. Wayne  Kiley
President                             661,667     66%       $1.00      1/01/01
Chief Executive Officer and Director

Thomas Mason                          143,000   14.3%      $1.00       1/01/01
Vice President

Brian Hintergardt                       33,333   3.3%      $1.00       1/01/01
Executive President--
Medical Marketplace




                                            20

<PAGE>

<TABLE>


   The following  table contains  information  concerning the aggregated  option
exercises  during the last fiscal year and option positions at June 30, 1997, by
executive officers of the Company:

                     Aggregated Option Exercises in Last Fiscal Year
                                 and FY-End Option Values
 (a)             (b)               (c)           (d)                        (e)
                                                 Number of                  Value of
                                                 Securities                 Unexercised
                                                 Underlying                 In-the-Money
                                                 Unexercised Options        Options at
                   Number of                           at FY-End,           FY-End,
                  Shares Acquired   Dollar Value      Exercisable/          Exercisable
     Name         on Exercise       Realized        Unexercisable           Unexercisable
<S>              <C>                <C>           <C>                      <C>    

L. Wayne Kiley        -                   -            671,291/             $6,930/
                                                         19,454             $14,007
   
Thomas Mason          -                   -              143,556/           $400/
                                                             1,111          $800

Brian Hintergardt     -                   -                36,111/          $2,000/
                                                                            $3,999                        5,555
Employment Agreements
</TABLE>

      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,  President and Chief Executive Officer of
the Company.  Pursuant to such employment  agreement,  Mr. Kiley will 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  is
profitable for the preceding fiscal year. The employment agreement also provides
for the use by Mr. Kiley of a Company car, disability  insurance and for bonuses
and other incentive  compensation  as the Board of Directors deems  appropriate,
based upon the Company's operating  performance or other reasonable criteria. In
addition,  Mr. Kiley will have 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 to commence  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

                                      21

<PAGE>



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.

      Nancy Kiley  entered into a five (5) year  employment  agreement  with the
Company as Secretary, effective October 1992. This agreement provides for a base
salary  of  $18,000  for  fiscal  year 1992 with  increases  of $2,000  per year
thereafter.  The  employment  agreement  also  provided  annual  cost of  living
increases, the use of a Company car, bonuses and other incentive compensation as
the Board of Directors deemed  appropriate,  based upon the Company's  operating
performance  or other  reasonable  criteria.  As of March 1, 1997,  the  Company
suspended, indefinitely, Ms. Kiley's employment agreement.



                                      22

<PAGE>



Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

      The following  table sets forth certain  information,  as of September 30,
1997, 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)                  1,013,905  (3)                      49.6%

Nancy Kiley (2)                       342,794  (4)                      25.3%

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

J. R. Achten                          113,611  (6)                      8.3%

Thomas E. Evans, Jr.                   10,278  (8)                      .8%

Thomas Mason                            143,556(9)                     9.6%

Brian Hintergardt                       36,111(10)                      2.9%

Victoria Holdings, Inc.               1,000,000(11)                        42.5%
c/o Biltmore Securities, Inc.
6700 North Andrews Avenue
Ft. Lauderdale, FL  333094

Directors and Executive                1,224,683                           54.6%
Officers as a Group
(7 persons) (3)(4)(6)(7)(8)(9)(10)

(1)   Unless otherwise indicated, the address of the beneficial owner is:
 c/o Computer Marketplace(R), Inc., 1490 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.


                                      23

<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,  one-third  of which vested on January 3, 1997
      and (d) options issued as of December 1996  exercisable for 661,667 shares
      of Common  Stock at $1.00 per share.  See  "Executive  Compensation."  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,  one-third of which vested on January 3, 1997.
      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  one-third of which vested on January 3, 1997,  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, one-third of which vested on January
      3, 1997 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, one-third of which vested on January 3,
      1997,  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)  Includes (a) options issued in January 1996 exercisable for 8,333 shares 
      of Common Stock at $1.6875 per share and (b) options
      issued in December 1996 exercisable for 33,333 shares at $1.00 per share.

(11)  Includes 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.  See "Certain Transactions."


                                      24

<PAGE>



Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


      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  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.

      The Company  leased office space for its branch  office at Traverse  City,
Michigan,  from the Company's  President.  The rent for this approximately 2,700
square foot location was $2,700 per month. The three-year lease, which contained
an option for the Company or the  landlord to cancel with six (6) months  notice
after each full year was to expire on July 31,  1998.  The  Company  closed this
office and on April 21, 1997 and provided Mr. Kiley, the landlord,  with six (6)
months  prior  written  notice  of its  intent  to  cancel  the  lease  upon the
expiration of the six month notice period.

      In January  1996,  the Board of  Directors  of the  Company  approved  the
issuance of up to 158,083  options to certain  employees and  consultants of the
Company (the  "Options").  The Options vest over a three (3) year period of time
and are  exercisable  at $1.6875 per share (the fair market value on the date of
grant) at any time prior to January 3, 2006.

      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 with 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.

      As of 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) 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.

      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

                                      25

<PAGE>



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.

      As of December 1996, the Company  issued to certain  employees,  directors
and  consultants of the Company (the  "Management  Optionholders")  options (the
"Management  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.  In exchange  for the issuance of
certain of the  Management  Options,  certain  option  holders  surrendered  for
cancellation an aggregate of 240,832 options  previously issued in June 1996 for
722,500 of the Management Options.

      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.

      On December 31, 1996 the Company  concluded a private placement of 500,000
Units (the "December 1996 Private Placement") which were placed by Biltmore,  on
a firm commitment basis. 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.,  and
eighteen (18) Class D Redeemable  Common Stock  Purchase  Warrants (the "Class D
Warrants").  Each six (6) Class D Warrants are  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.

      The Company,  its  officers,  directors and employees and holders of 5% or
more of the outstanding  shares of Common Stock have agreed not to sell, pledge,
transfer  or  hypothecate  any  shares of  capital  stock of the  Company or any
securities  convertible  into, or exercisable  or  exchangeable  for,  shares of
capital stock of the Company for a period eighteen (18) months from December 31,
1996 without Biltmore's prior consent.

      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.


                                      26

<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


 1.01   Form of Underwriting Agreement.  (1)

 1.02   Form of Selected Dealers Agreement.  (1)

 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.  (3)

 4.01   Certificate for shares of Common Stock.  (1)

 4.02   Specimen Certificate for Class A Warrants.  (1)

 4.03   Specimen Certificate for Class B Warrants.  (1)

 4.04   Intentionally left blank.

 4.05   Form of Warrant Agreement.  (1)

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

 5.01   Opinion of Brandeis, Bernstein & Wasserman, as counsel to the
        Company.  (1)


10.01   Promissory Note dated December 28, 1993, between Computer Marketplace,
        Inc. and  Yosemite Bank.  (3)

10.02   Business Loan Agreement dated December 28, 1993, between Computer
        Marketplace, Inc. and  Yosemite Bank.  (3)

10.03   Deed of Trust dated December 28, 1993, among Computer Marketplace,
        Inc., Yosemite Bank
        and Fidelity National Title.  (3)


                                       27

<PAGE>



10.04   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.  (5)

10.05   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.  (5)

10.06   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.  (5)

10.07   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.  (5)

10.08   Amended Employment Agreement between the Company and L.Wayne Kiley. (6)

10.09   Consulting Agreement between the Company and Victoria Holdings, Inc. (6)

10.10   Option to Purchase Common Stock of the Company issued to
        Victoria Holdings, Inc. (6)

10.11   Form of Option Agreement. (6)

10.12   Standard Offer,  Agreement and Escrow  Instructions for Purchase of Real
        Estate  regarding  the  sale  of  Computer  Marketplace's   headquarters
        facility located in Corona, California. (6)

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, 1993.

(3)  Incorporated  herein by reference to the Form 10-KSB of the  Registrant for
the year ended June 30, 1994.

(4)  Incorporated  herein by reference to the Form 10-QSB of the  Registrant for
the quarterly period ended December 31, 1994.

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

(6) 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

            None.

                                       28

<PAGE>



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


                                                                         Pages


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

Consolidated Balance Sheet as of June 30, 1997.......................   F-2

Consolidated Statements of Operations for the years ended June 30, 1997 F-3 1996

Consolidated Statements of Stockholders' Equity for the years ended
June 30, 1997 and 1996...............................................   F-4

Consolidated  Statements  of Cash Flows for the years  ended June 30, 
1997 F-5 - F-6

Notes to Consolidated Financial Statements.........................   F-7 - F-18



                        .   .   .   .   .   .   .   .   .


                                       29

<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, 1997, 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,  1997.  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,
1997, and the consolidated  results of their operations and their cash flows for
each of the two fiscal years in the period ended June 30,  1997,  in  conformity
with generally accepted accounting principles.





                                          MOORE STEPHENS, P. C.
                                          Certified Public Accountants.


Cranford, New Jersey
August 14, 1997


                                       F-1

<PAGE>

<TABLE>


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


CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997.
------------------------------------------------------------------------------

<S>                                                                       <C> 

Assets:
Current Assets:
  Cash and Cash Equivalents                                             $ 1,500,540
  Accounts Receivable [Less Allowance for Doubtful Accounts of $171,810]  1,695,233
  Inventory [Net of Valuation Allowance of $132,803]                        492,423
  Other Current Assets                                                       52,592

  Total Current Assets                                                    3,740,788

Property Held for Sale - Net                                                486,534

Property and Equipment - Net                                                649,550

Other Assets                                                                 47,540

  Total Assets                                                          $ 4,924,412
                                                                        ===========

Liabilities and Stockholders' Equity:
Current Liabilities:
  Notes Payable                                                         $   443,388
  Accounts Payable                                                        1,377,038
  Accrued Payroll and Payroll Related Liabilities                           155,045
  Current Portion of Long-term Debt                                          48,929
  Other Current Liabilities                                                 261,305
                                                                        -----------

  Total Current Liabilities                                               2,285,705

Long-Term Debt                                                              158,293

Minority Interest in Net Assets of Subsidiary                               118,438
                                                                        -----------

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                                                    (457,276)

  Capital in Excess of Par Value                                          8,785,100

  Accumulated Deficit                                                     (5,965,983)

  Total Stockholders' Equity                                              2,361,976

  Total Liabilities and Stockholders' Equity                            $ 4,924,412
                                                                        ===========


See Notes to Consolidated Financial Statements.

</TABLE>

                                        F-2

<PAGE>

<TABLE>


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


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


                                                                  Years ended
                                                                   June 30,
                                                             1 9 9 7       1 9 9 6
                                                             -------       -------
<S>                                                       <C>           <C>  
Revenues:
  Product Sales, Rental, Service and Other                 $23,770,908  $30,000,952
                                                           -----------  -----------

Cost and Expenses:
  Cost of Revenues - Product Sales, Rental, Service and 
  Other                                                    21,077,229  25,386,732
  Selling, General and Administrative                       5,862,084     5,601,670

  Total Cost and Expenses                                  26,939,313    30,988,402
                                                           ----------   -----------

Operating Loss                                             (3,168,405)     (987,450)
                                                           ----------   -----------

Other Income [Expense]:
  Interest Expense                                           (395,555)     (371,728)
  Interest Income                                               5,994         3,840
  Gain on Sale of Assets                                      168,904            --
  Miscellaneous Income                                         38,202        23,907
                                                           ----------   -----------

  Total Other [Expense]                                      (182,455)     (343,981)
                                                           ----------   -----------

  Loss Before Income Taxes and Minority Interest
   in Income of Subsidiary                                 (3,350,860)   (1,331,431)

Provision for Income Taxes                                         --            --

Minority Interest in Income of Subsidiary                       3,425            --
                                                           ----------   -----------

  Net Loss                                                 $(3,347,435) $(1,331,431)
                                                           ===========  ===========

  Net Loss Per Share                                       $    (2.48)  $      (.98)
                                                           ==========   ===========

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


See Notes to Consolidated Financial Statements.

                                        F-3
</TABLE>

<PAGE>


<TABLE>

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


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



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

Balance - June 30, 1995    1,352,424  $  135  $6,907,269  $(1,287,117  $     --   $5,620,287

  Net Loss                  --       --        --          (1,331,431)      --    1,331,431
                          -------  ------- ---------  ---------- --------   ----------

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

  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

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

  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
                       ==========   ====== ========== ============    ========   ==========


See Notes to Consolidated Financial Statements.

                                        F-4
</TABLE>

<PAGE>

<TABLE>


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


CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------


                                                                  Years ended
                                                                   June 30,
                                                             1 9 9 7       1 9 9 6
                                                             -------       -------


<S>                                                        <C>          <C>  

Operating Activities:
  Net Loss                                                 $(3,347,435) $(1,331,431)
  Adjustments to Reconcile Net Loss to Net Cash
   Used in Operating Activities:
   Depreciation and Amortization                              393,356       302,062
   Provisions for Losses on Accounts Receivable               184,134       151,367
   Provisions for Losses on Inventory                         245,867       221,216
   Other Valuation Provisions                                      --        (5,004)
   Gain on Sale of Property and Equipment                    (168,904)           --
   Write-off of Goodwill                                           --       174,218
   Minority Interest in Consolidated Subsidiary                (3,425)           --
   Compensation Expense Due to Options Issued                 519,000            --
   Other                                                       20,000        (1,492)

  Changes in Assets and Liabilities:
   Accounts Receivable                                      1,166,376       173,517
   Inventory                                                2,176,980       (69,775)
   Other Current Assets                                       342,156       (86,656)
   Accounts Payable                                          (718,878)        5,261
   Accrued Payroll and Related Liabilities                   (140,148)     (171,063)
   Other Current Liabilities                                   (4,090)       28,977
                                                           ----------   -----------

  Net Cash - Operating Activities                             664,989      (608,803)
                                                           ----------   -----------

Investing Activities:
  Decrease in Loans/Notes Receivable - Related Parties         45,744        14,485
  Purchases of Property and Equipment                         (11,317)     (370,631)
  Proceeds from Sale of Property and Equipment              2,345,926        10,775
  Other                                                       (37,700)      (41,317)
                                                           ----------   -----------

  Net Cash - Investing Activities                           2,342,653      (386,688)
                                                           ----------   -----------

Financing Activities:
  Net Decrease in Notes Payable                            (1,731,453)      874,841
  Principal Payments on Long-term Debt                     (1,302,085)      (53,349)
  Net Proceeds to the Company from Sale of Common
   Stock of Subsidiary                                        894,181            --
  Proceeds from Long-term Debt                                 19,549        21,255
  Offering Costs                                               17,785            --
                                                           ----------   -----------

  Net Cash - Financing Activities                          (2,102,023)      842,747
                                                           ----------   -----------

  Increase [Decrease] in Cash and Cash Equivalents            905,619      (152,744)

Cash and Cash Equivalents - Beginning of Years                594,921       747,665
                                                           ----------   -----------

  Cash and Cash Equivalents - End of Years                 $1,500,540   $   594,921
                                                           ==========   ===========

See Notes to Consolidated Financial Statements.

                                        F-5

<PAGE>

</TABLE>

<TABLE>

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


CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------


                                                                  Years ended
                                                                   June 30,
                                                             1 9 9 7       1 9 9 6
                                                             -------       -------
<S>                                                        <C>           <C>   

Supplemental Disclosures of Cash Flow Information:
  Cash Paid for Interest                                   $ 367,100    $   354,553
  Cash Paid for Income Taxes                               $       --   $     4,776

Supplemental Disclosure of Non-Cash Investing and
 Financing Activities:  Reclassification of Accounts
 Payable to Other Liabilities to Reflect
   Negotiated Payment Terms                                $       --   $   274,235

  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     $  236,584   $        --



See Notes to Consolidated Financial Statements.


                                        F-6

<PAGE>

</TABLE>


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  and its  subsidiaries  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.

[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 10].

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.

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.

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 30 years.

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

                                       F-7

<PAGE>



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




[2] Summary of Significant Accounting Policies [Continued]

Impairment - Certain  long-term  assets of the Company,  including  property and
equipment,  and  customer  lists,  are  reviewed at least  annually to determine
whether  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. In June 1996, the Company
charged operations $174,218 related to the write-off of goodwill. As of June 30,
1997, management expects the remaining assets which at June 30, 1997 consists of
customer lists amounting to $9,340, to be fully recoverable.

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  equivalent  shares  arising from the effect of dilutive  stock options and
warrants  using the treasury  stock method.  For fiscal years 1997 and 1996, 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.

Reclassification  -  Certain  reclassifications  have  been  made to prior  year
consolidated  financial  statements  to conform to  classifications  used in the
current year.

Advertising  Costs - Advertising  costs are expensed when incurred.  Advertising
costs  amounted  to $77,265 and  $146,355  for the years ended June 30, 1997 and
1996, 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.

Amortization  - Intangibles at June 30, 1997 consists of customer  lists,  which
amounts to $9,340, and is included in "other assets" on the consolidated balance
sheet.  It is being  amortized  using  the  straight-line  method  over 5 years.
Amortization  expense  for the year ended June 30, 1997 and 1996 was $63,992 and
$26,098, respectively.  This expense includes amortization of deferred financing
fees associated  with a related  mortgage  payable at June 30, 1996,  which were
fully amortized at June 30, 1997.




                                       F-8

<PAGE>



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




[3]  Property and Equipment

Property and equipment consists of the following as of June 30, 1997:

Machinery and Equipment                         $    674,028
Furniture and Fixtures                               135,578
Automobiles and Trucks                               103,051
Long-Term Rental Equipment                           330,000
                                                ------------

Total                                              1,242,657
Less: Accumulated Depreciation                      (593,107)

  Property and Equipment - Net                  $    649,550
  ----------------------------                  ============

Depreciation expense for the years ended June 30, 1997 and 1996 was $237,912 and
$275,964, respectively.

Property Held for Sale - Property held for sale consists of two facilities:

205 East 5th Street, Corona, California         $    226,109
5081 Highway 140, Mariposa, California               260,425

  Total Property Held for Sale                  $    486,534
  ----------------------------                  ============

Management  expects  to dispose  of these  assets  within one year from June 30,
1997.

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.

[4] Notes Payable

In September  1995,  the Company  entered into a new 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 allows the Company to borrow up to $2,500,000 and bears interest
at rate of 2.25% above "prime rate" [as defined].  The borrowing  capacity under
the  Credit  Facility  is  dependent  upon  "eligible"  [as  defined]   accounts
receivable and inventory,  and fluctuates  daily.  At June 30, 1997,  borrowings
under the Credit Facility and additional  amounts  available for borrowing under
the Credit Facility were $443,388 and $94,074, respectively. The Credit Facility
is collateralized by substantially all of the Company's assets,  except for real
property. The Credit Facility, as amended, expires in December 31, 1997. At June
30, 1997, the interest rate was 10.75%.



                                       F-9

<PAGE>



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



[5] Long-Term Debt

As of June 30, 1997, long-term debt consisted of the following:

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 $151,421 due February 2, 1999, collateralized by real
  estate deed of trust.                                              $   154,370

Note payable to a bank due January 1, 1998, interest at a variable rate, balloon
  payment of $34,395 due January 1, 1998,  collateralized  by a real estate deed
  of trust. The interest rate at June 30, 1997 is 10.5%. 39,098

Other                                                                     13,754

Total                                                                    207,222
Less: Current Portion of Long-Term Debt                                 (48,929)
                                                                     -----------

  Total Long-Term Debt                                               $   158,293
  --------------------                                               ===========

The prime rate at June 30, 1997, was 8.5%

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

Year ending
  June 30,
  1998                                                               $    48,929
  1999                                                                   157,871
  2000                                                                       422
  Thereafter                                                                  --
                                                                     -----------

  Total                                                              $   207,222
  -----                                                              ===========

[6] 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.


                                      F-10

<PAGE>



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




[7] 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.

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.

                                                    June 30, 1997
                                                  Carrying   Fair
                                                   Amount    Value

Total Long-Term Debt                             $158,293   $155,391

[8] 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 is based on a percentage of employee contributions, but is
at the  discretion  of  management.  The  charge to  operations  related  to the
Company's  contribution  to the Plan for the years ended June 30, 1997 and 1996,
was $17,359 and $18,421, respectively.

[9] Income Taxes

Deferred  income  taxes  reflect  the impact of  temporary  differences  between
amounts of assets and  liabilities  for  financial  reporting  purposes  and tax
purposes. Temporary differences are caused primarily by depreciation,  inventory
valuation allowances and accounts receivable allowance for doubtful accounts.

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 $2,015,000 at June 30, 1997. 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,  1997 was
approximately $1,015,000.



                                      F-11

<PAGE>



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




[9] Income Taxes [Continued]

No  provision  for Federal  income  taxes has been made during the fiscal  years
ended June 30, 1997 and 1996, because of the Company's net loss position.

The Company's net operating loss carryforwards of approximately $5,305,000 begin
to expire as follows:

Year ended
  June 30,                                      Amount

  2008                                       $  210,000
  2010                                          922,000
  2011                                        1,085,000
  2012                                        3,088,000
                                             ----------

   Total                                     $5,305,000

[10] 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%.



                                      F-12

<PAGE>



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




[10] Stockholders' Equity [Continued]

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.

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.



                                      F-13

<PAGE>



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


[10] Stockholders' Equity [Continued]

Stock Options and Other Stock-Based  Awards  [Continued] - 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.

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 6].

The following is a summary of transactions under the plans:
                                                                        Weighted
                                            Number of Weighted Average   Average
                                         Common SharesExercise Price  Fair Value

Options Outstanding at June 30, 1995         295,833    $      14.40   $    3.70

Granted                                      448,417            4.43         .42
Cancelled                                   (298,333)          14.30
                                          ----------

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

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

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

Options Exercisable at June 30, 1997       2,011,639    $       1.01   $     .14
------------------------------------      ==========

All options  granted  during the year ended June 30, 1996 had an exercise  price
equal to the market price on the grant  dates.  All options  granted  during the
year ended June 30, 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 6].

The  following is a summary of the status of fixed options  outstanding  at June
30, 1997:

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

$ 1.6875      64,917    9.5 Years                  21,639         1.6875
  1.0000   1,000,000    4.5 Years               1,000,000         1.0000
  1.0000     990,000    3.5 Years                 990,000         1.0000
           ---------                           ----------

           2,054,917                            2,011,639
           =========                           ==========

                                                 Outstanding
                                                   Options

Weighted Average Remaining Contractual Life       4.2 Years

                                      F-14

<PAGE>



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




[10] Stockholders' Equity [Continued]

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.  $468,000  and  $-0-  of  compensation  expense  has  been
recognized for the Company's  stock-based  compensation plans in the years ended
June 30, 1997 and 1996,  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.

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 Years Ended
                                                        June 30,
                                                   1 9 9 7     1 9 9 6
                                                   -------     -------

Net [Loss] Income:
  As Reported                                   $(3,347,376)$ (1,331,431)
                                                =========== ============

  Pro Forma                                     $(3,932,492)$ (2,386,034)
                                                =========== ============

[Loss] Earnings Per Share:
  As Reported                                   $     (2.48)$       (.98)
                                                =========== ============

  Pro Forma                                     $     (2.91)$      (1.76)
                                                =========== ============

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

       5.97%            3 Years           96.50%               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.


                                      F-15

<PAGE>



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




[10] Stockholders' Equity [Continued]

Stock Options and Warrants  [Continued]  - The fair value of the 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.
The following is the average of the data used for the following items:

     Risk-Free
   Interest Rate     Expected Life  Expected Volatility Expected Dividends

       5.51%            1 Year            116.5%               None

[11] 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, 1997,  these uninsured  amounts totaled  approximately
$1,287,000.

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.

[12] New Authoritative Pronouncements

The Financial  Accounting Standards Board ["FASB"] issued Statement of Financial
Accounting  Standards ["SFAS"] No. 128, Earnings Per Share ["EPS"], and SFAS No.
129,  "Disclosure of Information about Capital Structure" in February 1997. SFAS
No. 128  simplifies  the earnings  per share  ["EPS"]  calculations  required by
Accounting Principles Board ["APB"] Opinion No. 15, and related interpretations,
by replacing the  presentation  of primary EPS with a presentation of basic EPS.
SFAS No. 128  requires  dual  presentation  of basic and diluted EPS by entities
with complex capital structures.  Basic EPS includes no dilution and is computed
by dividing  income  available to common  stockholders  by the  weighted-average
number of common shares  outstanding  for that period.  Diluted EPS reflects the
potential  dilution of securities that could share in the earnings of an entity,
similar  to the  fully  diluted  EPS of APB  Opinion  No.  15,  SFAS No.  128 is
effective for financial  statements issued for periods ending after December 15,
1997,  including  interim periods,  earlier  application is not permitted.  When
adopted,  SFAS No. 128 will require  restatement  of all  prior-period  EPS data
presented;  however,  the Company has not sufficiently  analyzed SFAS No. 128 to
determine  what effect SFAS No. 128 will have on its  historically  reported EPS
amounts.

SFAS No. 129 does not change any previous  disclosure  requirements,  but rather
consolidates existing disclosure requirements for ease of retrieval.

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.



                                      F-16

<PAGE>



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




[12] New Authoritative Pronouncements [Continued]

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 materialimpact on the Company.

[13] 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, 1997 and 1996 is as follows:

                                                          1 9 9 7
                                            Computer     Medical
                                            Products    Products   Consolidated

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
------------------------------------      ============  ==========  ==========

                                                          1 9 9 6
                                            Computer     Medical
                                            Products    Products   Consolidated

Operating Revenue                         $ 27,120,944  $2,880,008  $30,000,952
-----------------                         ============  ==========  ===========

Operating Profit [Loss]                   $ (1,029,182) $   41,732  $ (987,450)
                                          ============  ==========

Interest Expense                                                      (371,728)

Other Nonoperating Revenues and Expenses                                27,747

  Loss Before Income Taxes                                          $(1,331,431)

Identifiable Assets at June 30, 1996      $  9,513,177  $1,196,782  $10,709,959
------------------------------------      ============  ==========  ===========


                                      F-17

<PAGE>



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




[13] Industry Segments [Continued]

Operating profit [loss] is total operating revenue less operating expenses,  and
excludes  interest  expense  and  other  nonoperating   revenues  and  expenses.
Intersegment  sales  during 1997 and 1996 were  immaterial  to the  consolidated
financial  statements.  Shared  operating  expenses  allocated  to  the  Medical
Products   segment  were  $90,000  in  1997  and  $60,000  in  1996.  For  1997,
depreciation  and  amortization  expense for the  Computer  Products and Medical
Products  industry  segments was $323,999 and $13,434,  respectively.  For 1996,
deprecation  and  amortization  expense for the  Computer  Products  and Medical
Products  industry  segments was $264,197  and  $11,767,  respectively.  Capital
expenditures  for the two segments in 1997 were $153,000 and  $-0-,respectively.
Capital  expenditures  for the two segments in 1996 were  $224,475 and $146,156,
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
Products segment totaling  $427,980 and $1,219,628 as of June 30, 1997 and 1996,
respectively.

[14] Fourth Quarter Adjustments

There were certain  adjustments  recorded in the fourth  quarter of fiscal 1996,
and the aggregate effect of such adjustments was material to the results of that
quarter.  In June 1996, the Company charged  operations  $174,218 related to the
write-off of goodwill.

[15] Equipment Leasing and Third Party Transactions

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."  Revenues arising from these  transactions  were  approximately
$110,000 for the year ended June 30, 1997.






                      .   .   .   .   .   .   .   .   .   .



                                      F-18

<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 14th day of October, 1996.

                                        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,               October 14, 1997
---------------------------
L. Wayne Kiley                  Chief Executive
                                Officer (Chief Accounting
                                Officer) and Director

/s/ Nancy Kiley                 Secretary and Director   October 14, 1997
---------------------------
Nancy Kiley


/s/ J.R. Achten                 Director                 October 14, 1997
J. R. Achten


/s/ Thomas E. Evans, Jr.        Director                 October 14, 1997
---------------------------
Thomas E. Evans, Jr.



<PAGE>