<PAGE>
===============================================================================
                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549

                                    -----------

                                    FORM 10-K/A

                                  AMENDMENT NO. 1

     /X/          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
                        FISCAL YEAR ENDED MARCH 31, 1998,
                                      OR
     / /    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
                    TRANSITION PERIOD FROM __________ TO _______.

                          COMMISSION FILE NUMBER 0-26924

                                  AMX CORPORATION
               (Exact name of registrant as specified in its charter)

                   TEXAS                              75-1815822
      (State or other jurisdiction of               (I.R.S. Employer
     incorporation or organization)               Identification no.)


   11995 FORESTGATE DRIVE, DALLAS, TEXAS                  75243
  (Address of principal executive offices)              (Zip Code)

<TABLE>
     <S>                                                            <C>
     Registrant's telephone number, including area code:                   (972) 644-3048
     Securities registered pursuant to Section 12(b) of the Act:                 None

Securities registered pursuant to Section 12(g) of the Act:         COMMON STOCK, $0.01 PAR VALUE
                                                                    (Title of Class)
</TABLE>

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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 Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/

     The aggregate market value of the voting stock (which consists solely of
shares of Common Stock) held by non-affiliates of the registrant as of May 31,
1998, computed by reference to the closing sales price of the registrant's
Common Stock on the Nasdaq National Market on such date, was approximately
$32,921,393.

     The number of shares of the registrant's Common Stock outstanding as of
June 22, 1998 was 8,261,700.

                     DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant's Proxy Statement for the 1998 Annual Meeting of
Shareholders are incorporated by reference into Part III of the Form 10-K to 
which this amendment relates.

                              AMENDMENT NO. 1

     The undersigned registrant hereby files this Amendment No. 1 to amend 
Item 8 -- "Financial Statements and Supplementary Data" and Item 14 -- 
Exhibits, Financial Statement Schedules, and Reports on Form 8-K" as set 
forth in the pages attached hereto.

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

<PAGE>

                                     PART II

ITEM 8. FINANCIAL STATEMENTS.

     Information called for by this item is set forth in the Company's
Consolidated Financial Statements contained in this report. The Company's
Consolidated Financial Statements begin at page F-1 hereunder.

                                                                             2
<PAGE>

                                   PART IV

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

     (a) (1)     Financial Statements.

                 The financial statements filed as a part of this Annual Report
                 on Form 10-K/A are listed in the "Index to Consolidated
                 Financial Statements" on page F-1 hereof.

         (2)     Financial Statement Schedules.

                 The financial statement schedules for which provision is made
                 in the applicable accounting regulations of the Securities and
                 Exchange Commission are not required under the related
                 instructions or are inapplicable and therefore have been
                 omitted.

         (3)     Exhibits.

                 The following exhibits are filed as a part of this Annual
                 Report on Form 10-K/A.

    2.1   Agreement of Merger and Plan of Reorganization dated as of May
          16, 1996, among Registrant, AMX Acquisition Corporation, SPS
          International, Inc. (now known as AudioEase, Inc.), John P.
          Sundquist and Sandra P. Sundquist, Donald J. Heiskell and
          Janice T. Heiskell, Bruce R. Munroe, David A. Daniels, and
          Thomas J. Gleason.  (Incorporated by reference from Exhibit 2.1
          to the Company's Form 8-K, dated as of May 16, 1996, file no.
          0-26924).

    3.1   Amended and Restated Articles of Incorporation of the Registrant.
          (Incorporated by reference from Exhibit 3.1 to the Company's Form
          S-8 filed March 11, 1996, file no. 333-2202).

    3.2   Amended and Restated Bylaws of the Registrant, as amended
          (Incorporated by reference from Exhibit 3.2 to the Company's
          Form 10-Q, for the period ending September 30, 1997, file
          no. 0-26924).

  **4.1   Specimen Certificate for Common Stock of Registrant.

  **4.2   Registration Rights Agreement dated as of March 30, 1995 by
          and among Registrant, the persons listed on Schedule 1.1
          thereto, Scott D. Miller, Peter D. York, Joe Hardt and Billie
          I. Williamson.

  **4.3   First Amendment dated September 12, 1995 to Registration
          Rights Agreement dated as of March 30, 1995 by and among
          Registrant, the persons listed on Schedule 1.1 thereto, Scott
          D. Miller, Peter D. York, Joe Hardt, and Billie I. Williamson.

    4.4   Registration Rights Agreement dated as of May 16, 1996, by and
          among Registrant, John P. Sundquist and Sandra P. Sundquist,
          Donald J. Heiskell and Janice T. Heiskell, Bruce R. Munroe,
          David A. Daniels, and Thomas J. Gleason.  (Incorporated by
          reference from Exhibit 4.4 to the Company's Form 10-K, as
          amended, for the fiscal year ended March 31, 1996, file no.
          0-26924).

    4.5   Declaration of Registration Rights made October 14, 1997,
          by the Company for the benefit of certain shareholders and
          employees of PHAST Corporation pursuant to the Stock Purchase
          Agreement (as hereinafter defined).  (Incorporated by
          reference from Exhibit 4.2 to the Company's Form 10-Q,
          for the period ending December 31, 1997, file no. 0-26924).

 **10.1   AMX Corporation 1993 Stock Option Plan, accompanied by forms
          of Incentive Stock Option and Non-qualified Stock Option
          Agreements.

 **10.2   AMX Corporation 1995 Stock Option Plan, accompanied by form of
          Stock Option Agreement and form of Exercise Notice.

 **10.3   1995 Director Stock Option Plan, accompanied by form of
          Director Stock Option Agreement and form of Exercise Notice.

 **10.4   1996 Employee Stock Purchase Plan, accompanied by forms of
          Enrollment/Change Form, Section 16b Participation Form and
          Stock Purchase Agreement.

 **10.5   Commercial Lease Agreement dated January 2, 1992 between
          Registrant and New England Mutual Life Insurance Company, as
          amended.

 **10.6   Employment Agreement dated March 30, 1995 between Registrant
          and Scott D. Miller.

 **10.7   Employment Agreement dated March 30, 1995 between Registrant
          and Joe Hardt.

 **10.8   Employment Agreement dated March 30, 1995 between Registrant
          and Peter D. York.

 **10.9   Employment Agreement dated March 30, 1995 between Registrant
          and Billie I. Williamson.

 **10.10  First Amendment dated September 12, 1995 to Employment
          Agreement dated March 30, 1995 between Registrant and Scott D.
          Miller.

 **10.11  First Amendment dated September 12, 1995 to Employment
          Agreement dated March 30, 1995 between Registrant and Joe
          Hardt.

 **10.12  First Amendment dated September 12, 1995 to Employment
          Agreement dated March 30, 1995 between Registrant and Peter D.
          York.

 **10.13  First Amendment dated September 12, 1995 to Employment
          Agreement dated March 30, 1995 between
                                                                              3
<PAGE>

          Registrant and Billie I. Williamson.

 **10.14  Promissory Note dated June 15, 1995, from Peter D. York to
          Registrant in the original principal amount of $77,298.

 **10.15  Promissory Note dated May 1, 1995, from Joe Hardt to
          Registrant in the original principal amount of $44,500.

 **10.16  Promissory Note dated August 15, 1995, from Billie I.
          Williamson to Registrant in the original principal amount of
          $52,250.

  *10.17  Second Amendment to Lease dated February 12, 1997 between the
          Registrant and Merit Industrial Properties Limited Partnership.

  *10.18  Third Amendment to Lease dated May 1, 1997 between the Registrant
          and Merit Industrial Properties Limited Partnership.

  *10.19  Promissory Note dated January 2, 1997, from Joe Hardt to Registrant
          in the original principal amount of $22,125.00.

  *10.20  Promissory Note dated July 2, 1996, from Joe Hardt to Registrant
          in the original principal amount of $22,125.00.

***10.21  Promissory Note dated January 2, 1998, from Joe Hardt to
          Registrant in the original principal amount of $22,125.

   10.22  Stock Purchase Agreement dated as of October 14, 1997, by
          and among the Company, Will West, Eric Smith, Ron Wells, Carmelo
          J. Santoro, Scott D. Miller, PHAST Corporation, and certain
          employees of PHAST (the "Stock Purchase Agreement").
          (Incorporated by reference from Exhibit 2.1 to the Company's
          Registration Statement on Form S-3, filed November 19, 1997,
          file no. 333-40557).

***21.1   Schedule of Subsidiaries.

  +23.1   Consent of Independent Auditors.

***27.1   Financial Data Schedule.

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

      +   Filed herewith.

      *  Incorporated by reference from the exhibit of the same number to the
         Company's Form 10-K for the fiscal year ending March 31, 1997 (file no.
         0-26924).

     **  Incorporated by reference from the exhibit of the same number in the
         Company's Form S-1 filed September 13, 1995, as amended, file no.
         33-96886.

    ***  Previously filed with and incorporated by reference from the exhibit
         of the same number in the Company's Annual Report on Form 10-K for 
         the fiscal year ended March 31, 1998 filed June 29, 1998 (file no. 
         0-26924) to which this Amendment No. 1 relates.

     (b) Reports on Form 8-K.

         Current report on Form 8-K dated as of November 7, 1997, and filed
         November 18, 1997, regarding the election of John F. McHale as member
         of the Company's board of directors.

                                                                             4

<PAGE>

SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amended report to
be signed on its behalf by the undersigned thereunto duly authorized.

                                      AMX CORPORATION


                                      By: /s/ Joe Hardt
                                         ------------------------------------
                                         Joe Hardt, Chief Executive Officer
                                         and President
                                         July 31, 1998


                                                                             5
<PAGE>

                                AMX CORPORATION

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
                                                                        Page
                                                                        ----
<S>                                                                     <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . .         F-2

Consolidated Balance Sheets at March 31, 1997 and 1998 . . . . .         F-3

Consolidated Statements of Operations for the years ended
     March 31, 1996, 1997 and 1998 . . . . . . . . . . . . . . .         F-5

Consolidated Statements of Shareholders' Equity (Deficit)
     for the years ended March 31, 1996, 1997 and 1998 . . . . .         F-6

Consolidated Statements of Cash Flows for the years ended
     March 31, 1996, 1997 and 1998 . . . . . . . . . . . . . . .         F-7

Notes to Consolidated Financial Statements . . . . . . . . . . .         F-8
</TABLE>



                                                                             F-1

<PAGE>

                        REPORT OF INDEPENDENT AUDITORS


Board of Directors
AMX Corporation

     We have audited the accompanying consolidated balance sheets of AMX
Corporation as of March 31, 1997 and 1998, and the related consolidated
statements of operations, shareholders' equity (deficit), and cash flows for
each of the three years in the period ended March 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of AMX Corporation at March 31, 1997 and 1998, and the consolidated results
of its operations and its cash flows for each of the three years in the
period ended March 31, 1998, in conformity with generally accepted accounting
principles.

                                       ERNST & YOUNG LLP

May 12, 1998
Dallas, Texas

                                                                             F-2

<PAGE>

                               AMX CORPORATION
                         CONSOLIDATED BALANCE SHEETS
                                    ASSETS

<TABLE>
                                                                                         March 31,
                                                                                --------------------------
                                                                                    1997           1998
                                                                                -----------    -----------
<S>                                                                             <C>            <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . .        $ 2,091,819    $   178,942
     Receivables - trade and other, less allowance for doubtful
        accounts of $94,000 for 1997 and $460,000 for 1998 (NOTE 5). . .          6,670,390     10,276,225
     Inventories (NOTES 3 AND 5) . . . . . . . . . . . . . . . . . . . .          4,960,191      9,002,737
     Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . .            471,932        768,492
     Deferred income tax (NOTE 7). . . . . . . . . . . . . . . . . . . .             97,611        136,905
     Income taxes recoverable. . . . . . . . . . . . . . . . . . . . . .             41,917           --
                                                                                -----------    -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . .         14,333,860     20,363,301
Property and equipment, at cost, net (NOTES 4 AND 5) . . . . . . . . . .          4,030,149      4,347,791
Capitalized software . . . . . . . . . . . . . . . . . . . . . . . . . .            376,162        169,274
Deposits and other . . . . . . . . . . . . . . . . . . . . . . . . . . .            802,175        433,442
Deferred income tax (NOTE 7) . . . . . . . . . . . . . . . . . . . . . .              5,987         10,058
Goodwill, less accumulated amortization of $48,000 for 1997 and
  $122,000 for 1998. . . . . . . . . . . . . . . . . . . . . . . . . . .            192,314      1,004,049
                                                                                -----------    -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        $19,740,647    $26,327,915
                                                                                -----------    -----------
                                                                                -----------    -----------
</TABLE>




                                                                             F-3

<PAGE>


                               AMX CORPORATION
                         CONSOLIDATED BALANCE SHEETS
                     LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
                                                                                        March 31,
                                                                               --------------------------
                                                                                   1997           1998
                                                                               -----------    -----------
<S>                                                                            <C>            <C>
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . .         $ 3,259,070    $ 3,866,857
     Line of credit and notes payable (NOTE 5) . . . . . . . . . . . .             187,760      2,403,437
     Accrued compensation. . . . . . . . . . . . . . . . . . . . . . .           1,035,072      1,481,770
     Accrued sales commissions . . . . . . . . . . . . . . . . . . . .             437,413        787,913
     Reserve for litigation (NOTE 8) . . . . . . . . . . . . . . . . .             750,000             --
     Accrued dealer incentives . . . . . . . . . . . . . . . . . . . .             283,904        329,416
     Other accrued expenses. . . . . . . . . . . . . . . . . . . . . .             198,811        153,449

     Income taxes payable. . . . . . . . . . . . . . . . . . . . . . .                  --        743,868
                                                                               -----------    -----------

Total current liabilities. . . . . . . . . . . . . . . . . . . . . . .           6,152,030      9,766,710

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .              91,731         45,600
Commitments and contingencies (NOTE 8)
Minority interest in subsidiary (NOTES 13 AND 15). . . . . . . . . . .           1,500,490      1,652,000
Shareholders' equity (NOTES 5, 10, 11, AND 12):
Preferred stock, $0.01 par value
     Authorized shares - 10,000,000
     Issued shares - none. . . . . . . . . . . . . . . . . . . . . . .                  --             --
     Common stock, $0.01 par value:
         Authorized shares -- 40,000,000
         Issued shares -- 7,832,791 for 1997 and 8,261,158 for 1998. .              78,328         82,612
     Additional paid-in capital. . . . . . . . . . . . . . . . . . . .           1,826,453      4,079,682
     Retained earnings . . . . . . . . . . . . . . . . . . . . . . . .          10,138,487     10,748,183
     Less treasury stock (5,208 shares). . . . . . . . . . . . . . . .             (46,872)       (46,872)
                                                                               -----------    -----------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . .          11,996,396     14,863,605
                                                                               -----------    -----------
Total liabilities and shareholders' equity . . . . . . . . . . . . . .         $19,740,647    $26,327,915
                                                                               -----------    -----------
                                                                               -----------    -----------
</TABLE>

                                          See accompanying notes.


                                                                             F-4

<PAGE>

                                AMX CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
                                                                             YEAR ENDED MARCH 31,
                                                                       1996         1997           1998
                                                                    -----------  -----------   -----------
<S>                                                                 <C>          <C>           <C>
System sales . . . . . . . . . . . . . . . . . . . . . . .          $30,274,007  $38,302,054   $56,290,433
OEM and custom product sales . . . . . . . . . . . . . . .            2,456,507    3,154,488     2,474,085
                                                                    -----------  -----------   -----------
     Net sales . . . . . . . . . . . . . . . . . . . . . .           32,730,514   41,456,542    58,764,518
Cost of sales. . . . . . . . . . . . . . . . . . . . . . .           12,369,272   17,243,292    26,400,787
                                                                    -----------  -----------   -----------
     Gross profit. . . . . . . . . . . . . . . . . . . . .           20,361,242   24,213,250    32,363,731
Selling and marketing expenses . . . . . . . . . . . . . .           10,945,296   15,060,987    20,295,877
Research and development expenses. . . . . . . . . . . . .            1,475,073    2,834,185     3,849,283
Acquired research and development. . . . . . . . . . . . .                   --    1,230,000            --
Costs associated with acquisition of minority interest
  and merger of subsidiaries . . . . . . . . . . . . . . .                   --           --     1,693,747

General and administrative expenses (including $896,000
   relating to litigation settled in 1997) (NOTE 8). . . .            2,716,522    4,360,605     4,599,822
                                                                    -----------  -----------   -----------
     Operating income. . . . . . . . . . . . . . . . . . .            5,224,351      727,473     1,925,002

Interest expense . . . . . . . . . . . . . . . . . . . . .             (534,655)     (13,219)     (194,189)
Other income, net. . . . . . . . . . . . . . . . . . . . .              116,872      288,238       159,307
                                                                    -----------  -----------   -----------
Income before income taxes . . . . . . . . . . . . . . . .            4,806,568    1,002,492     1,890,120
Income tax provision (NOTE 7). . . . . . . . . . . . . . .            1,792,454    1,371,046     1,086,934
                                                                    -----------  -----------   -----------
Net income (loss). . . . . . . . . . . . . . . . . . . . .            3,014,114  $  (368,554)      803,186
                                                                                 -----------
                                                                                 -----------

Preferred stock dividends, including accretion and
  redemption (NOTE 11). . . . . . . . . . . . . . . . . . .          (3,152,667)                 (177,000)
                                                                    -----------                -----------
Net income (loss) applicable to common shareholders. . . . .        $  (138,553)               $   626,186
                                                                    -----------                -----------
                                                                    -----------                -----------
Basic earnings (loss) per share (NOTE 9) . . . . . . . . .          $     (0.02) $     (0.05)  $      0.08
                                                                    -----------  -----------   -----------
                                                                    -----------  -----------   -----------
Diluted earnings (loss) per share (NOTE 9) . . . . . . . .          $     (0.02) $     (0.04)  $      0.07
                                                                    -----------  -----------   -----------
                                                                    -----------  -----------   -----------
</TABLE>

                            See accompanying notes.

                                                                            F-5
<PAGE>

                                 AMX CORPORATION

            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

<TABLE>
                                         COMMON  STOCK
                                      -------------------   ADDITIONAL
                                      NUMBER OF               PAID-IN     RETAINED
                                       SHARES     AMOUNT      CAPITAL     EARNINGS
                                      ------------------------------------------------
<S>                                   <C>         <C>       <C>          <C>
Balance at March 31, 1995. . . . .    8,071,120   $80,711   $ 2,678,203  $ 8,390,481

Net income . . . . . . . . . . . .           --        --            --    3,014,114

Equity adjustment from foreign
  currency translation . . . . . .           --        --            --      (28,830)

Exercise of stock options
  including tax benefit of
  $63,000. . . . . . . . . . . . .      221,000     2,210       280,788           --

IPO shares issued out of treasury
  stock  . . . . . . . . . . . . .           --        --       532,400           --

IPO expenses . . . . . . . . . . .           --        --      (833,893)    (241,621)
Cancellation of remaining
  treasury stock . . . . . . . . .     (740,000)   (7,400)           --           --

Release of redemption
  requirement. . . . . . . . . . .           --        --            --           --

Dividends on preferred stock
  (Note 11). . . . . . . . . . . .           --        --            --     (626,667)

Accretion and write-off
  of discount on preferred stock
  (Note 11). . . . . . . . . . . .           --        --    (2,526,000)          --
                                      ------------------------------------------------

Balance at March 31, 1996. . . . .    7,552,120    75,521       131,498   10,507,477

Net loss . . . . . . . . . . . . .           --        --            --     (368,554)

Equity adjustment from foreign
   currency translation. . . . . .           --        --            --         (436)

Purchase of treasury stock . . . .           --        --            --           --

Exercise of stock options
  including tax benefit of
  $43,660. . . . . . . . . . . . .       91,000       910       151,175           --

Stock issued to purchase
   AudioEase . . . . . . . . . . .      181,818     1,818     1,498,182

Sale of stock. . . . . . . . . . .        7,853        79        45,598           --
                                      ------------------------------------------------

Balance at March 31, 1997. . . . .    7,832,791    78,328     1,826,453   10,138,487

Net income . . . . . . . . . . . .           --        --            --      803,186

Dividends accrued on subsidiary
   preferred stock . . . . . . . .           --        --            --     (177,000)

Equity adjustment from foreign
   currency translation. . . . . .           --        --            --      (16,490)

Exercise of stock options
   including tax benefit of
   $87,705 . . . . . . . . . . . .       57,625       576       264,872           --

Stock issued to purchase 20% of
   PHAST . . . . . . . . . . . . .      350,814     3,508     1,890,887           --

Sale of stock. . . . . . . . . . .       19,928       200        97,470           --
                                      ------------------------------------------------

Balance at March 31, 1998. . . . .    8,261,158   $82,612   $ 4,079,682  $10,748,183
                                      ------------------------------------------------
                                      ------------------------------------------------

<CAPTION>
                                          COMMON            TREASURY STOCK
                                           STOCK      ---------------------------       TOTAL
                                        SUBJECT TO     NUMBER OF                    SHAREHOLDERS'
                                        REDEMPTION       SHARES         AMOUNT     EQUITY (DEFICIT)
                                      -------------------------------------------------------------
<S>                                    <C>            <C>           <C>             <C>
Balance at March 31, 1995. . . . .     $(2,676,000)   $(3,240,000)  $(20,400,000)   $(11,926,605)

Net income . . . . . . . . . . . .              --             --             --       3,014,114

Equity adjustment from foreign
  currency translation . . . . . .              --             --             --         (28,830)

Exercise of stock options
  including tax benefit of
  $63,000. . . . . . . . . . . . .              --             --             --         282,998

IPO shares issued out of treasury
  stock  . . . . . . . . . . . . .              --      2,500,000     20,392,600      20,925,000

IPO expenses . . . . . . . . . . .              --             --             --      (1,075,514)
Cancellation of remaining
  treasury stock . . . . . . . . .                        740,000          7,400             --

Release of redemption
  requirement. . . . . . . . . . .       2,676,000             --             --       2,676,000

Dividends on preferred stock
  (Note 11). . . . . . . . . . . .              --             --             --        (626,667)

Accretion and write-off
  of discount on preferred stock
  (Note 11). . . . . . . . . . . .              --             --             --      (2,526,000)
                                      -------------------------------------------------------------

Balance at March 31, 1996. . . . .              --             --             --      10,714,496

Net loss . . . . . . . . . . . . .              --             --             --        (368,554)

Equity adjustment from foreign
   currency translation. . . . . .              --             --             --            (436)

Purchase of treasury stock . . . .              --         (5,208)       (46,872)        (46,872)

Exercise of stock options
  including tax benefit of
  $43,660. . . . . . . . . . . . .              --             --             --         152,085

Stock issued to purchase
   AudioEase . . . . . . . . . . .                                                     1,500,000

Sale of stock. . . . . . . . . . .              --             --             --          45,677
                                      -------------------------------------------------------------

Balance at March 31, 1997. . . . .              --         (5,208)       (46,872)     11,996,396

Net income . . . . . . . . . . . .              --             --             --         803,186

Dividends accrued on subsidiary
   preferred stock . . . . . . . .              --             --             --        (177,000)

Equity adjustment from foreign
   currency translation. . . . . .              --             --             --         (16,490)

Exercise of stock options
   including tax benefit of
   $87,705 . . . . . . . . . . . .              --             --             --         265,448

Stock issued to purchase 20% of
   PHAST . . . . . . . . . . . . .              --             --             --       1,894,395

Sale of stock. . . . . . . . . . .              --             --             --          97,670
                                      -------------------------------------------------------------

Balance at March 31, 1998. . . . .      $       --         (5,208)  $    (46,872)   $ 14,863,605
                                      -------------------------------------------------------------
                                      -------------------------------------------------------------
</TABLE>

                             See accompanying notes.

                                                                            F-6
<PAGE>

                                AMX CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
                                                                       YEAR ENDED MARCH 31,
                                                                1996          1997           1998
                                                            ------------   -----------    -----------
<S>                                                         <C>            <C>            <C>
OPERATING ACTIVITIES
Net income (loss). . . . . . . . . . . . . . . . . . . . .  $  3,014,114   $  (368,554)   $   803,186
Adjustments to reconcile net income (loss) to net
     cash provided by (used in) operating activities:
     Depreciation and amortization . . . . . . . . . . . .       871,066       984,780      2,148,805
     Provision (credit) for losses on receivables. . . . .        10,000       (30,708)       366,000
     Provision (credit) for inventory obsolescence . . . .        36,000       (38,698)        69,698
     Loss on sale of property and equipment. . . . . . . .         1,537            --             --
     Acquired research and development . . . . . . . . . .            --       980,000             --
     Costs associated with acquisition of minority interest           --            --      1,526,996
     Deferred income tax . . . . . . . . . . . . . . . . .        50,885        45,086        (43,365)
     Changes in operating assets and liabilities:
         Receivables . . . . . . . . . . . . . . . . . . .    (1,110,510)   (2,024,683)    (3,971,835)
         Inventories . . . . . . . . . . . . . . . . . . .      (977,425)   (1,467,749)    (4,112,244)
         Prepaid expenses. . . . . . . . . . . . . . . . .        14,135      (219,986)      (296,560)
         Other . . . . . . . . . . . . . . . . . . . . . .       156,302            --             --
         Accounts payable. . . . . . . . . . . . . . . . .       537,609     1,235,009        607,787
         Accrued expenses. . . . . . . . . . . . . . . . .       166,434       631,281         47,348
         Income taxes recoverable/payable. . . . . . . . .       498,673      (416,968)       785,785
                                                            ------------   -----------    -----------
Net cash provided by (used in) operating activities. . . .     3,268,820      (691,190)    (2,068,399)

INVESTING ACTIVITIES

Purchase of property and equipment . . . . . . . . . . . .      (840,266)   (3,150,408)    (2,091,191)
Proceeds from sale of property and equipment . . . . . . .         9,400            --             --
Investment in capitalized software . . . . . . . . . . . .      (123,101)     (253,061)       (22,500)
Increase in other assets . . . . . . . . . . . . . . . . .       (65,570)     (118,979)      (221,473)
Payment to former owner of AudioEase . . . . . . . . . . .            --      (180,000)            --
Minority interest in PHAST . . . . . . . . . . . . . . . .           490     1,500,000        (25,490)
                                                            ------------   -----------    -----------
Net cash used in investing activities. . . . . . . . . . .    (1,019,047)   (2,202,448)    (2,360,654)

FINANCING ACTIVITIES

Sale of securities -- net of expenses. . . . . . . . . . .    19,849,486        45,677         97,670
Exercise of stock options. . . . . . . . . . . . . . . . .       155,048       152,085        265,448
Purchase of treasury stock . . . . . . . . . . . . . . . .            --       (46,872)            --
Net increase in line of credit . . . . . . . . . . . . . .            --            --      2,400,000
Proceeds from long-term debt and notes payable . . . . . .     3,815,402       187,762             --
Repayments of long-term debt and notes payable . . . . . .   (11,095,304)     (211,518)      (230,454)
Redemption of preferred stock. . . . . . . . . . . . . . .   (12,000,000)           --             --
Preferred stock dividends. . . . . . . . . . . . . . . . .      (626,667)           --             --
                                                            ------------   -----------    -----------
Net cash provided by financing activities. . . . . . . . .        97,965       127,134      2,532,666

Effect of exchange rate changes on cash. . . . . . . . . .       (28,830)         (436)       (16,490)
                                                            ------------   -----------    -----------
Net increase (decrease) in cash and cash equivalents . . .     2,318,908    (2,766,940)    (1,912,877)

Cash and cash equivalents at beginning of period . . . . .     2,539,851     4,858,759      2,091,819
                                                            ------------   -----------    -----------

Cash and cash equivalents at end of period . . . . . . . .  $  4,858,759   $ 2,091,819    $   178,942
                                                            ------------   -----------    -----------
                                                            ------------   -----------    -----------
</TABLE>

                              See accompanying notes.

                                                                            F-7
<PAGE>


                               AMX CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                March 31, 1998

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

   AMX Corporation (the "Company") was organized in March 1982 and operates
in a single industry. The Company designs and manufactures integrated control
systems found in corporate boardrooms, business training centers,
teleconferencing centers, educational institutions, the television and
communications industry, amusement parks, theme parks, stadiums, and
residences. The Company sells primarily to dealers and distributors in the
United States, Europe, Australia, Middle East, and the Far East.

PRINCIPLES OF CONSOLIDATION

   The Company's financial statements include the accounts of AXCESS
Technology Ltd., a wholly owned foreign subsidiary, AMX International Sales
Corporation, a wholly owned foreign sales corporation, PHAST Corporation, a
wholly owned subsidiary, and AMX Control Systems PTE, Ltd., a wholly owned
foreign subsidiary. All significant inter-company balances have been
eliminated.

CASH EQUIVALENTS

   Cash equivalents include any temporary investments with an initial
maturity of less than three months. Cash equivalents currently include bank
repurchase obligations with maturities generally of seven days or less.

INVENTORIES

   Inventories are stated at the lower of cost (first-in, first-out method)
or market.

DEPRECIATION

   Depreciation of property and equipment is provided in amounts sufficient
to relate the cost of depreciable assets to operations over their estimated
service lives, principally using an accelerated depreciation method in early
years and switching to the straight-line method in later years. The estimated
lives used in determining depreciation range from 5 to 10 years for equipment
and 31.5 years for leasehold improvements.

CONCENTRATION OF CREDIT RISK

During the years ended March 31, 1996, 1997, and 1998, the Company realized
approximately 27%, 27%, and 28%, respectively, of total revenues from foreign
sales and had approximately 30% and 32%, respectively, of trade receivables
due from foreign customers at March 31, 1997 and 1998.  The Company has
operations outside the U.S. in the United Kingdom and Singapore.  The net
assets of these locations represented 9% and 1%, respectively, of
consolidated net assets at March 31, 1998, and 7% and 1%, respectively at
March 31, 1997.

   The Company provides credit in the normal course of business to its
dealers and distributors. The Company generally does not require collateral
or a deposit when providing credit.  The Company performs ongoing credit
evaluations of its customers and maintains allowances for possible credit
losses, which, when realized, have been within the range of management's
expectations.

     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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

                                                                            F-8
<PAGE>

REVENUE RECOGNITION

   Revenue is recognized upon shipment of the product.

CAPITALIZED SOFTWARE

   The cost (including coding and testing) of producing software is
capitalized once technological feasibility is established. Capitalized
software costs are amortized on a product-by-product basis using the greater
of the amounts computed on the straight-line method over the remaining
estimated economic life of the product or using the ratio that current gross
revenues bear to the total of current and anticipated future gross revenues
for the product. Amortization of capitalized software begins when the
products are available for general release to customers.

FOREIGN CURRENCY TRANSLATION

   In accordance with Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation," the assets and liabilities denominated in
foreign currency are translated into U.S. dollars at the current rate of
exchange existing at year-end and historical rates, as applicable, and
revenues and expenses are translated at the average monthly exchange rates.

   The following are the cumulative foreign currency translation adjustments
(recorded through retained earnings) which represent the effect of
translating the original inter-company advances made to the Company's foreign
subsidiary, as these advances are of a long-term nature:

<TABLE>
                                                                       YEAR ENDED MARCH 31
                                                                  1996        1997         1998
                                                                --------     -------     --------
<S>                                                             <C>          <C>         <C>
Balance at beginning of period . . . . . . . . . . . . . .      $ 38,835     $10,005     $  9,569
Gain (loss) on translation of inter-company advances . . .       (28,830)       (436)     (16,490)
                                                                --------     -------     --------
Balance at end of period included in retained earnings . .      $ 10,005     $ 9,569     $ (6,921)
                                                                --------     -------     --------
                                                                --------     -------     --------
</TABLE>

   The translation gains and losses included in income are immaterial and
result from translating all accounts other than the original inter-company
advances to U.S. dollars.

EARNINGS PER COMMON SHARE

   In February 1997, the Financial Accounting Standards Board issued
Statement No. 128 (FAS 128), "Earnings Per Share," which is effective for
financial statements for periods ending after December 15, 1997. The new
standard eliminates primary and fully diluted earnings per share and requires
presentation of basic and diluted earnings per share together with disclosure
of how the per share amounts were computed. Earnings per share amounts for
all periods have been restated and presented to conform to the SFAS 128
requirements.

STOCK BASED EMPLOYEE COMPENSATION

   Pursuant to Statement of Financial Accounting Standards No. 123 (SFAS 123)
"Accounting for Stock-Based Compensation," the Company accounts for
stock-based compensation utilizing the provisions of Accounting Principles
Board Opinion No. 25, because, as discussed in Note 12, the alternative fair
value accounting provided for under SFAS 123 requires use of option valuation
models that were not developed for use involving employee stock options.

ADVERTISING

   The Company expenses the costs of all advertising when incurred.
Advertising costs were $174,000, $492,000 and $440,000 for the years ended
March 31, 1996, 1997, and 1998, respectively.

                                                                            F-9
<PAGE>

RECLASSIFICATIONS

   Certain prior year amounts have been reclassified to conform to the
current year presentation.

2. INITIAL PUBLIC OFFERING

   On November 21, 1995, the Company closed its initial public offering under
the Securities Act of 1933 under which the Company registered and sold
2,500,000 shares of its common stock for $9 per share. The net proceeds (net
of underwriters' commissions) of $20,925,000 were used to repay the Company's
subordinated debentures of $3,500,000 and accrued interest thereon, bank debt
of $3,815,402 and accrued interest thereon, and redeem the Series A
Redeemable Preferred Stock for $12,000,000 and pay accrued dividends thereon.

3. INVENTORIES

   The components of inventories are as follows:

<TABLE>
                                                          March 31,
                                                     1997          1998
                                                  ----------    ----------
<S>                                               <C>           <C>
Raw materials. . . . . . . . . . . . . . . . .    $2,512,648    $4,430,081
Work in progress . . . . . . . . . . . . . .         446,976       722,593
Finished goods . . . . . . . . . . . . . . .       2,060,869     3,980,063
Reserve for obsolescence . . . . . . . . . .         (60,302)     (130,000)
                                                  ----------    ----------
                                                  $4,960,191    $9,002,737
                                                  ----------    ----------
                                                  ----------    ----------
</TABLE>

4. PROPERTY AND EQUIPMENT

   The general classes of property and equipment are as follows:

<TABLE>
                                                         March 31,
                                                     1997          1998
                                                  ----------    ----------
<S>                                               <C>           <C>
Equipment, including computers . . . . . . .      $4,948,717    $7,128,232
Furniture and fixtures . . . . . . . . . . .       1,710,282     1,384,464
Leasehold improvements . . . . . . . . . . .         194,965       404,016
Vehicles . . . . . . . . . . . . . . . . . . .       104,769       133,210
                                                  ----------    ----------
                                                   6,958,733     9,049,922
Less accumulated depreciation. . . . . . . . .     2,928,584     4,702,131
                                                  ----------    ----------
                                                  $4,030,149    $4,347,791
                                                  ----------    ----------
                                                  ----------    ----------
</TABLE>

   Depreciation expense was approximately $578,000, $816,000, and $1,774,000
for the years ended March 31, 1996, 1997, and 1998, respectively

5. DEBT

   The Company has a $5,000,000 revolving line of credit agreement expiring
July 15, 1998. At March 31, 1997 and 1998, there were no amounts outstanding
and $2,400,000 outstanding under the line of credit agreement, respectively.
At March 31, 1998, $2,600,000 was available under this agreement. The line of
credit agreement provides for a borrowing base computation based on accounts
receivable and inventories. Advances under the line bear interest at the
bank's contract rate set at the time of the borrowing, which is comparable to
prime. Collateral for the loan consists of a security interest in accounts
receivable, inventories, and property and equipment. The agreement requires
the maintenance of certain financial ratios and equity levels and restricts
payment of dividends.   Based on current market rates, management believes
the carrying value of the line of credit approximates fair value.

   Interest paid amounted to approximately $535,000, $39,000, and $194,000
for the years ended March 31, 1996, 1997, and 1998, respectively.

                                                                          F-10
<PAGE>

6. EMPLOYEE BENEFIT PLANS

   The Company has a noncontributory profit sharing plan that is available to
all U.S. employees who are at least 21 years of age and meet certain service
requirements. The amount of any contributions to the plan is determined by
the Board of Directors and is based on the level of Company earnings before
income taxes. Contributions to the plan are allocated among the eligible
participants based on the percentage each participant's salary bears to total
salaries of all participants. Contributions to the plan for the years ended
March 31, 1996, 1997, and 1998, were $240,000, $240,000 and $300,000
respectively.

   The Company has a 401(k) plan available to all U.S. employees who are at
least 21 years of age and meet certain service requirements. Employees can
contribute up to 15% of their salary subject to statutory limitations. The
Company matches the employees' contributions at $0.25 on every dollar to a
maximum of 1% of compensation. Company contributions for the years ended
March 31, 1996, 1997 and 1998, were $32,200, $39,300, and $53,500
respectively.

   The Company's 1996 Employee Stock Purchase Plan permits eligible employees
to purchase common stock through payroll deductions. The price of the common
stock purchased under the 1996 Employee Stock Purchase Plan is 85% of the
lower of the fair market value of the common stock at the beginning or at the
end of each offering period. The Plan provides for two six-month offering
periods each year beginning on the first trading day on or after January 1
and July 1, respectively. For the years ended March 31, 1997 and 1998, 7,853
and 19,928 shares were issued under this plan.

7. INCOME TAXES

   The components of the Company's income tax provision were as follows:

<TABLE>
                                                  YEAR ENDED MARCH 31,
                                            1996          1997          1998
                                         ----------    ----------    ----------
<S>                                      <C>           <C>           <C>
Federal income taxes:
     Current provision . . . . . . .     $1,450,400    $  981,085    $  654,204
     Deferred provision. . . . . . .         92,000        45,086       (43,365)
State income taxes . . . . . . . . .        153,000       126,000       189,000
Foreign income taxes . . . . . . . .         97,054       218,875       287,095
                                         ----------    ----------    ----------
                                         $1,792,454    $1,371,046    $1,086,934
                                         ----------    ----------    ----------
                                         ----------    ----------    ----------
</TABLE>

   The income of foreign operations before income taxes for the years ended
March 31, 1996, 1997, and 1998 were $373,000, $589,000, and $834,000,
respectively.

                                                                           F-11
<PAGE>

   Income tax expense differs from amounts computed by applying the U.S.
federal statutory tax rate to income before income taxes as follows:

<TABLE>
                                                           YEAR ENDED MARCH 31,
                                                     1996          1997          1998
                                                  ----------    ----------    ----------
<S>                                               <C>           <C>           <C>
Federal income tax at statutory rate . . . .      $1,634,233    $  340,848    $  642,641
State income tax, net of federal tax
 benefit . . . . . . . . . . . . . . . . . .         108,439        77,265       126,152
Benefit of income reported through Foreign
 Sales Corporation . . . . . . . . . . . . .        (183,079)     (232,078)     (467,569)
Unbenefited/(benefited) losses of foreign
 subsidiary and rate differences . . . . . .         (29,654)       21,164        (7,350)
Unbenefited losses of PHAST subsidiary . . .         151,314       785,846       305,565
Effect of non-deductible acquired research
 and development . . . . . . . . . . . . . .              --       333,200            --
Effect of non-deductible costs associated
 with acquisition of minority interest
 and merger of subsidiary. . . . . . . . . .              --            --       369,838
Other. . . . . . . . . . . . . . . . . . . .         111,201        44,801       117,657
                                                  ----------    ----------    ----------
                                                  $1,792,454    $1,371,046    $1,086,934
                                                  ----------    ----------    ----------
                                                  ----------    ----------    ----------
</TABLE>

 Significant components of deferred tax assets and liabilities are as follows:

<TABLE>
                                                           MARCH 31,
                                                      1997         1998
                                                   ----------   -----------
<S>                                                  <C>        <C>
Deferred tax assets:
Intangible assets. . . . . . . . . . . . . . .     $  87,875    $   81,708
     PHAST net operating loss carryforward . .            --     1,352,350
     Inventories . . . . . . . . . . . . . . .        91,772       160,977
     Bad debts . . . . . . . . . . . . . . . .        27,750       173,662
     Accrued expenses. . . . . . . . . . . . .        41,133        45,365
     Inter-company profit in inventory . . . .            --       175,633
     Other, net. . . . . . . . . . . . . . . .         6,959         6,959
                                                   ----------   -----------
                                                     255,489     1,996,654

Deferred tax liabilities:
     Transaction fees. . . . . . . . . . . . .       (70,300)      (70,300)
     Prepaid expenses. . . . . . . . . . . . .       (70,003)      (75,527)
     Capitalized software. . . . . . . . . . .            --       (62,631)
     Prepaid design costs. . . . . . . . . . .            --      (175,740)
     Other, net. . . . . . . . . . . . . . . .       (11,588)       (1,350)
                                                   ----------   -----------
                                                    (151,891)     (385,548)
                                                   ----------   -----------
Valuation allowance. . . . . . . . . . . . . .            --    (1,464,143)
                                                   ----------   -----------
Net deferred tax asset . . . . . . . . . . . .     $ 103,598    $  146,963
                                                   ----------   -----------
                                                   ----------   -----------
</TABLE>

   Net operating losses of totalling $3,655,000 of the Company's wholly-owned
PHAST Corporation subsidiary, can be carried forward to offset future taxable
income of PHAST through 2012.

   Cash paid for federal income taxes was approximately $1,086,000,
$1,586,000, and $548,000 for the years ended March 31, 1996, 1997, and 1998,
respectively.

8. COMMITMENTS AND CONTINGENCIES

     The Company leases various real property and equipment. Under certain
leases, the Company is required to pay costs, such as taxes, insurance, and
operating expenses in addition to the rental payments. Rental expense under
these

                                                                           F-12
<PAGE>

operating leases for the years ended March 31, 1996, 1997, and 1998, was
$287,000, $470,000, and $614,000, respectively.

   At March 31, 1998, future minimum payments for noncancelable operating
leases are as follows:

<TABLE>
                 YEAR ENDED MARCH 31:
     ------------------------------------------
<S>                                                <C>
     1999 . . . . . . . . . . . . . . . . . . .    $  711,537
     2000 . . . . . . . . . . . . . . . . . . .       292,422
     2001 . . . . . . . . . . . . . . . . . . .       148,466
     2002 . . . . . . . . . . . . . . . . . . .        77,967
     2003 . . . . . . . . . . . . . . . . . . .        66,000
     2004 and thereafter. . . . . . . . . . . .       594,000
                                                   ----------
                                                   $1,890,392
                                                   ----------
                                                   ----------
</TABLE>

   In August 1994, one of the Company's dealers filed a lawsuit against the
Company claiming fraud, breach of contract, and a violation of the Oklahoma
Deceptive Trade Practices Act. As of March 31, 1996 the Company had reserved
$200,000 related to this claim. On April 14, 1997, the Company entered into a
settlement agreement with the plaintiff to resolve all outstanding claims.
The Company reserved an additional $550,000 as of March 31, 1997 to reflect
the amount of the settlement and estimated legal costs. The settlement was
paid in full in May 1997.

   The Company is involved in certain legal activities and disputes arising
in the ordinary course of business. The Company believes that it has adequate
legal defenses and that the ultimate outcome of these matters will not have a
material adverse effect on the Company's consolidated financial position or
results of operations.

9. EARNINGS PER SHARE

   The following table sets forth the computation of basic and diluted
earnings per share:

<TABLE>
                                                                   MARCH 31,
                                                       1996           1997            1998
                                                   -----------    -----------     -----------
<S>                                                <C>            <C>             <C>
Numerator:
Net income (loss). . . . . . . . . . . . . . . .   $3,014,114     $ (368,554)     $  803,186
Preferred stock dividends, including accretion
 and redemption. . . . . . . . . . . . . . . . .    3,152,667            --          177,000
                                                   -----------    -----------     -----------
Net income (loss) applicable to common
 shareholders. . . . . . . . . . . . . . . . . .   $ (138,553)    $ (368,554)     $  626,186
                                                   -----------    -----------     -----------
                                                   -----------    -----------     -----------
Denominator:
Denominator for basic earnings per share -
 Weighted-average shares outstanding . . . . . .    5,880,930      7,768,547       8,014,097
Effect of dilutive securities:
Employee stock options . . . . . . . . . . . . .      619,519        460,510         431,021
                                                   -----------    -----------     -----------
Denominator for diluted earnings per share . . .    6,500,449      8,229,057       8,445,118
                                                   -----------    -----------     -----------
Basic (loss) earnings per share. . . . . . . . .   $    (0.02)    $    (0.05)     $     0.08
                                                   -----------    -----------     -----------
                                                   -----------    -----------     -----------
Diluted (loss) earnings per share. . . . . . . .   $    (0.02)    $    (0.04)     $     0.07
                                                   -----------    -----------     -----------
                                                   -----------    -----------     -----------
</TABLE>

   Of the total stock options outstanding at March 31, 1997 and 1998, 
approximately 48,100, and 36,200 shares of stock, respectively, were not 
included in the computation of diluted earnings (loss) per share because the 
option exercise price was greater than the average market price of the common 
shares for the period, and therefore the effect would have been anti-dilutive.

                                                                           F-13
<PAGE>

10. ASSET ACQUISITIONS

   In May 1996, the Company acquired 100% of the outstanding stock of SPS
International, Inc. dba AudioEase in exchange for 181,818 shares (valued at
$1,500,000) of AMX Corporation common stock in a transaction accounted for as a
purchase. AudioEase designs, manufactures and markets hardware and software
products for upscale home theater systems, and whole-home audio/video control
and distribution systems, as well as other electronic home systems. Including
acquisition costs, the total purchase price was $1,760,000. The purchase price
was allocated to the fair market value of assets acquired based on an
independent valuation commissioned by the Company. Purchased research and
development was valued based on an analysis of AudioEase's products under
development which resulted in a charge to expense of $980,000, with no related
tax benefit. Of the remaining purchase price, $500,000 was allocated to
intangibles, including goodwill, with the remainder allocated to the tangible
net assets of AudioEase. The intangibles, including goodwill, are being
amortized on a straight-line basis over useful lives ranging from 5-15 years.
However, the unamortized balance of the intangibles was written off when
AudioEase was merged into PHAST in November 1997 and AudioEases's operations
were moved from Denver to Salt Lake City.  Pro forma earnings with the inclusion
of AudioEase for the year ended March 31, 1997, are not materially different
from the reported earnings for the same period.  The operations of AudioEase had
been consolidated since the date of acquisition.

   In June 1996, the Company purchased all of the assets of Camrobotics, Inc.
for cash in a transaction accounted for as a purchase. Of the total purchase
price of $334,000, $250,000 was allocated to purchased research and development
expense, and the remainder was allocated to the net assets of Camrobotics, Inc.

11. EQUITY TRANSACTIONS

   Effective March 31, 1995, a group of venture capital firms and an individual
(the "New Shareholders") invested $19,150,000 in the Company by purchasing (i)
120,000 shares of $100 par value 8% Series A Redeemable Preferred Stock for
$12,000,000, (ii) 3,240,000 shares of common stock for $150,000, and (iii)
$7,000,000 of subordinated debentures. For financial reporting purposes, the
proceeds of $19,150,000 from the sale of the debentures, the Series A Preferred
Stock, and the common stock to the New Shareholders were allocated based on the
relative fair market values of such securities as determined by an independent
valuation commissioned by the Company. Such fair market values were: debentures,
$7,000,000 (effective yield of 12.8%); Series A Preferred Stock, $9,474,000
(effective yield of 13%); and common stock, $2,676,000 ($0.83 per share). The
expenses associated with this transaction were $325,000 and were allocated
between the subordinated debentures and redeemable preferred stock. Under
certain conditions, as defined, or at March 31, 2002, the New Shareholders could
have required the Company to redeem their common stock at its then fair market
value. Accordingly, $2,676,000 was reclassified from shareholders' equity at
March 31, 1995. This right expired upon consummation of the Company's initial
public offering. Additionally, upon consummation of the Company's initial public
offering, the Company was required to redeem the preferred stock and retire the
subordinated debentures.

   Also, on March 31, 1995, the Company purchased 3,240,000 shares of the
existing shareholders' common stock for $20,400,000.

12. STOCK OPTIONS

   At March 31, 1998, the Company had three stock-based compensation plans
outstanding, which are described below. No compensation cost is recognized for
its fixed option plans because the exercise price of the Company's employee
stock options equals or exceeds the market price of the underlying stock on the
date of the grant.

   The 1993 Stock Option Plan, as amended, authorized the granting of options
for up to 1,452,544 shares of common stock. All options have a term of ten years
and vest over a four year period. However, all options issued prior to March 31,
1995, are fully vested due to the change of control that occurred on that date
that is more fully described in Note 11.

   In September 1995, the Company approved the 1995 Stock Option Plan and the
1995 Director Stock Option Plan. Under the 1995 Stock Option Plan, the Company
may grant options for up to 1,000,000 shares. All options have a term of ten
years and vest over a four-year period. The 1995 Director Stock Option Plan
authorized the granting of stock options for up to 250,000 shares to
non-employee directors. All options granted under this plan are fully vested and
have a term of ten years.

                                                                            F-14
<PAGE>

A summary of the status of the Company's plans as of March 31, 1996, 1997, and
1998, and changes during the years ending on those periods is presented below:

<TABLE>
                                                                  WEIGHTED
                                                                  AVERAGE
                                                                  EXERCISE
                                                     SHARES        PRICE
                                                   ---------      --------
<S>                                                <C>            <C>
   Outstanding at March 31, 1995 . . . . . .         588,880       $1.13
     Options granted . . . . . . . . . . . .         600,000        3.64
     Options exercised . . . . . . . . . . .        (221,000)       1.00
     Options canceled. . . . . . . . . . . .         (10,800)       7.00
                                                   ---------
   Outstanding at March 31, 1996 . . . . . .         957,080        2.67
     Options granted . . . . . . . . . . . .         153,250        6.58
     Options exercised . . . . . . . . . . .         (91,000)       1.19
     Options canceled. . . . . . . . . . . .        (102,300)       3.30
                                                   ---------
   Outstanding at March 31, 1997 . . . . . .         917,030        3.40
     Options granted . . . . . . . . . . . .         343,850        6.07
     Options exercised . . . . . . . . . . .         (57,625)       3.08
     Options canceled. . . . . . . . . . . .         (65,075)       6.46
                                                   ---------
   Outstanding at March 31, 1998 . . . . . .       1,138,180       $4.04
                                                   ---------
                                                   ---------
   Available for granting in future periods.       1,194,739
                                                   ---------
                                                   ---------
</TABLE>

   The following table summarizes information about stock options outstanding
under the plans as of March 31, 1998:

<TABLE>
                             OPTIONS      WEIGHTED AVERAGE                       OPTIONS
                          OUTSTANDING AT     REMAINING      WEIGHTED AVERAGE  EXERCISABLE AT  WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES     3/31/98      CONTRACTUAL LIFE   EXERCISE PRICE      3/31/98       EXERCISE PRICE
------------------------  --------------  ----------------  ----------------  --------------  ----------------
<S>                       <C>             <C>               <C>               <C>             <C>
$0.895 to $2.07. . . . .      566,880         6.4 years           $1.59           416,880           $1.49
$5.75 to $9.00 . . . . .      571,300         8.7 years            6.48           142,163            6.95
                            ---------                                             -------
$0.895 to $9.00. . . . .    1,138,180         7.6 years           $4.04           559,043           $2.88
                            ---------                                             -------
                            ---------                                             -------
</TABLE>

   At March 31, 1996 and 1997, approximately 368,000 and 450,000 options,
respectively, were exercisable with a weighted average exercise price of $1.21
and $2.36, respectively.

   Under the 1996 Employee Stock Purchase Plan (ESPP), the Company is authorized
to issue up to 250,000 shares of common stock to employees of the Company at a
price equal to 85 percent of the lower of the fair market value of the common
stock at the beginning or at the end of each offering period. Common stock
purchases are paid for through periodic payroll deductions. Participants under
the plan received 7,853 shares in 1997 at an average price of $5.82 and 19,928
shares in 1998 at an average price of $4.90.

   At March 31, 1998, the Company was obligated to issue options at $5.94 per
share covering up to 138,000 shares to certain employees, subject to
shareholder approval.  The options, if issued, are to vest over four years from
the date of grant, August 1997, but become exercisable only upon both the
Company, and its PHAST subsidiary, achieving certain operating targets, which
was considered to be remote at March 31, 1998.

   Pro forma information regarding net income (loss) and net income (loss) per
share is required by SFAS 123, and has been determined as if the Company had
accounted for its employee stock-based compensation plans and other stock
options under the fair value method of that SFAS. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes option-pricing
model. The following weighted-average assumptions were used for grants under the
fixed option plans in 1996, 1997 and 1998, respectively: dividend yield of 0%
for all periods; expected volatility of 54.2%, 54.2%, and 42.6% (except for
options granted prior to the Company's initial public offering, for which the
minimum value method was used); risk-free interest rate of 6.67%, 6.36% and
4.97%; and expected lives of 6 years for all periods.

                                                                            F-15
<PAGE>

   The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

   For purposes of pro forma disclosures the estimated fair value of stock-based
compensation and other options is amortized to expense over the vesting period.
The Company's pro forma net income (loss) and net income (loss) per share is as
follows:

<TABLE>
                                                                  YEAR ENDED
                                                                   MARCH 31,
                                                       1996          1997        1998
                                                     ----------   -----------  --------
<S>                                   <C>            <C>          <C>          <C>
Net income (loss). . . . . . . . . .  As reported    $3,014,114    $(368,554)  $803,186
                                      Pro forma      $2,792,106    $(592,966)  $421,367

Net income (loss) applicable to
 common shareholders . . . . . . . .  As reported    $ (138,553)               $626,186
                                      Pro forma      $ (360,561)               $244,367

Basic earnings (loss) per share. . .  As reported    $    (0.02)   $   (0.05)  $   0.08
                                      Pro forma      $    (0.06)   $   (0.08)  $   0.03

Diluted earnings (loss) per share. .  As reported    $    (0.02)   $   (0.04)  $   0.07
                                      Pro forma      $    (0.06)   $   (0.07)  $   0.03
</TABLE>

   The effects of applying SFAS 123 for providing pro forma disclosures during
the initial phase-in period may not be representative of the effects on reported
net income for future years.

   The weighted-average fair market value of options granted under the options
plans during 1996, 1997, and 1998 was $1.21, $3.86, and $3.07, respectively.

13. PHAST CORPORATION

   In August 1995, the Company formed its then 51% owned subsidiary, PHAST
Corporation ("PHAST"), a start-up company that designs and manufactures home
automation systems for the residential market, and provided PHAST $1,115,000 to
fund its first year of operations.

   In August 1996, the Company's chairman (a 16% shareholder) independently
purchased a 29% interest in the common stock of PHAST for $25,000 and purchased
$1,475,000 of PHAST's 8% Preferred Stock. In March 1997, at the request of the
Company's Board of Directors and as a condition precedent to further funding of
PHAST by the Company, the chairman granted the Company an option through March
1998 to purchase his PHAST securities for $2,500,000, subject to an independent
appraisal.

     In July 1997, the Company acquired 7,322 shares of common stock of PHAST
Corporation ("PHAST"), representing 29% of the stock of its subsidiary. The
Company had held 51% of the common stock of PHAST since its formation in August
1995. The shares were purchased from Scott D. Miller, the Company's chairman,
for $25,000 in cash. The Company also granted Mr. Miller the right to require
the Company to purchase his 14,750 shares of preferred stock in PHAST for a per
share purchase price of $100 (which is the liquidation preference of the
preferred stock), or an aggregate purchase price of $1,475,000, plus accrued but
unpaid dividends, at any time from April 1, 1998 through March 31, 1999. In
connection therewith, the option granted to the Company in March 1997 to
purchase such preferred stock from the chairman was terminated.  In October of
1997, the Company acquired the remaining 6,421 shares, or 20%, of the common
stock of PHAST in exchange for the issuance of 350,814 shares of its common
stock and a de minimis amount of cash. In conjuction with the purchase the
Company recorded one-time charges of $1.7 million in its third quarter operating
results, and recorded $920,000 of goodwill in its financial statements, which is
being amortized on a straight-line basis over 4 years. These charges consist
primarily of employee-related expenses associated with the

                                                                           F-16
<PAGE>
purchase, the write-off of the remaining intangibles from the purchase of
AudioEase in 1996, and costs associated with the merger and move of AudioEase
from Denver to Salt Lake City.  The Company has consolidated PHAST Corporation
since its formation.

   As a result of the financial commitment made to PHAST, the Company's
consolidated financial statements for the fiscal years ended March 31, 1996,
1997and 1998 include $445,042, $2,311,312, and $2,748,409, respectively, of net
losses from PHAST (excluding merger and acquisition-related expenses), which
represent 100% of PHAST's losses.

14. INTERNATIONAL OPERATIONS AND EXPORT SALES

   A summary of the Company's operations by geographic area follow:
<TABLE>
                                                         YEAR ENDED
                                                          MARCH 31,
                                              1996           1997           1998
                                          -----------    -----------    -----------
<S>                                       <C>            <C>            <C>
Revenue from Unaffiliated Customers:
  United States. . . . . . . . . . . .    $29,954,003    $37,567,937    $52,997,275
  Europe . . . . . . . . . . . . . . .      2,776,511      3,654,427      5,061,004
  Far East . . . . . . . . . . . . . .             --        234,178        706,239
                                          -----------    -----------    -----------
Consolidated . . . . . . . . . . . . .    $32,730,514    $41,456,542    $58,764,518
                                          -----------    -----------    -----------
                                          -----------    -----------    -----------
Inter-Company Revenue Between
 Geographic Areas:
  United States. . . . . . . . . . . .    $ 1,221,520    $ 1,526,420    $ 3,001,953
  Europe . . . . . . . . . . . . . . .             --             --             --
  Far East . . . . . . . . . . . . . .             --             --             --
  Eliminations . . . . . . . . . . . .     (1,221,520)    (1,526,420)    (3,001,953)
                                          -----------    -----------    -----------
Consolidated . . . . . . . . . . . . .    $        --    $        --    $        --
                                          -----------    -----------    -----------
                                          -----------    -----------    -----------
Operating Income (Loss)
  United States. . . . . . . . . . . .    $ 4,859,621    $   144,129    $ 1,101,326
  Europe . . . . . . . . . . . . . . .        364,730        575,993        792,748
  Far East . . . . . . . . . . . . . .             --          3,351         30,928
                                          -----------    -----------    -----------
Consolidated . . . . . . . . . . . . .    $ 5,224,351       $727,473    $ 1,925,002
                                          -----------    -----------    -----------
                                          -----------    -----------    -----------
Identifiable Assets:
  United States. . . . . . . . . . . .    $13,338,253    $17,572,249    $23,081,091
  Europe . . . . . . . . . . . . . . .      1,314,085      2,057,711      3,098,125
  Far East . . . . . . . . . . . . . .             --        110,687        148,700
                                          -----------    -----------    -----------
Consolidated . . . . . . . . . . . . .    $14,652,338    $19,740,647    $26,327,916
                                          -----------    -----------    -----------
                                          -----------    -----------    -----------
</TABLE>
The information presented above may not be indicative of results if the
geographic areas were independent organizations. Inter-company transactions are
made at established transfer prices.

   Export sales from the Company's U.S. operations to unaffiliated customers
were as follows:
<TABLE>
                                                   YEAR ENDED
                                                    MARCH 31,
                                        1996          1997           1998
                                     ----------    ----------    -----------
<S>                                  <C>           <C>           <C>
Americas . . . . . . . . . . . . .   $1,000,000    $  685,000    $ 1,720,000
Asia and the Pacific Rim . . . . .      951,000     1,437,000    $ 2,795,000
Australia. . . . . . . . . . . . .    1,346,000     1,122,000      1,333,000
Europe . . . . . . . . . . . . . .    2,705,000     4,797,000      7,980,000
Middle East. . . . . . . . . . . .           --       313,000        671,000
Other    . . . . . . . . . . . . .      153,000       295,000        133,000
                                     ----------    ----------    -----------
                                     $6,155,000    $8,649,000    $14,632,000
                                     ----------    ----------    -----------
                                     ----------    ----------    -----------
</TABLE>
                                                                           F-17
<PAGE>

   15. SUBSEQUENT EVENT

   On May 12, 1998, the Company secured a $1.5 million term loan from a
financial institution which it used to redeem the outstanding preferred stock of
PHAST Corporation from the Company's chairman. The term loan has a repayment
schedule which provides for quarterly payments from December 1998 through
December 1999, and bears interest at a fixed rate of approximately 8.25%.

                                                                           F-18